1. Air Quality Settlement with Tennessee Valley Authority
Before the
Environmental Management Commission
Presentation by
James C. Gulick, Senior Deputy Attorney General
May 12, 2011

2. Agreement Announced April 14, 2011 Parties: EPA TVA
North Carolina, Alabama, Tennessee and Kentucky
The National Parks Conservation Association, Sierra Club and Our Children’s Earth Foundation

3. Format of Agreement Federal Facilities Compliance Agreement (“FFCA”)
TVA and EPA
Federal Consent Decree
Plaintiffs: NC, AL, KY, TN, National Parks Conservation Association, Sierra Club and Our Children’s Earth Foundation
Defendant: TVA

4. Public Comment Comment period ends May 20, 2011
If comments do not warrant change in FFCA, parties will ask Court to enter Decree as is
If Court enters Decree, Decree is final and effective

5. TVA’s Plants

6. Background
1999: EPA alleged numerous violations by TVA of CAA New Source Review (NSR) program
Ordered TVA to comply with NSR requirements
Pollutants at issue: SO2, NOX and particulates
2004: U.S. Court of Appeals dismissed EPA’s orders on procedural grounds
Effectively barred EPA from pursuing case any further

7. NC Clean Smokestacks Act
2002: NC enacted the Clean Smokestacks Act
Requires Duke and Progress to reduce SO2 and NOX emissions
SO2: 130,000 ton combined cap by 2013
NOX: 56,000 ton combined cap by 2009
§10: Directs State to use “all available resources” to effect similar reductions from sources in other States, “including the Tennessee Valley Authority”

8. Carrying Out Section 10 Negotiation
CAA §126 Petition (and associated law suits)
Challenge to EPA’s Clean Air Interstate Rule
EPA is poised to significantly strengthen its regional interstate SO2/NOX pollution program next month
Clean Air Transport Rule

9. Public Nuisance Action Against TVA
Jan. 2006: AG sued TVA alleging that emissions of SO2 and NOX from TVA’s coal-fired power plants were a public nuisance
Jan. 2009: U.S. District Court found that TVA’s four power plants located within 100 miles of NC were creating a nuisance in NC
Kingston, John Sevier, Bull Run and Widows Creek
Established schedule for TVA to install state-of-the-art controls and set emission limits

10. Appeal & Negotiations Dec. 2009
NC, TVA, EPA and other parties began negotiations to reach a global settlement of a variety of air quality claims against TVA
Appeal of nuisance judgment pending
July 2010: U.S. Appeals Court reverses District Court ruling
Feb. 2011: NC seeks Supreme Court review
Negotiations continue throughout

11. The Agreement Structure: Scope: Agreement will resolve the claims of:
The FFCA and the Decree are interrelated
Contain virtually identical substantive terms
Scope: Agreement will resolve the claims of:
NC (public nuisance action, NSR claims and the §126 Petition with respect to TVA)
NSR claims of EPA, regulating States and NGOs

12. Emission Limits
Cap emissions of SO2 and NOX from all eleven TVA facilities in the aggregate
Caps would decline annually until reaching the final cap in 2019

13. 2019, and each year thereafter 110,000
Calendar Year
Tons of NOx
Tons of SO2
2011
100,600
285,000
2012
2013
90,791
235,518
2014
86,842
228,107
2015
83,042
220,631
2016
70,667
175,626
2017
64,951
164,257
2018
52,000
121,699
2019, and each year thereafter
110,000

14. Control Requirements
Every coal-fired unit (except some at Shawnee in SW KY) must:
Be controlled with SCR and scrubber;
Be repowered to burn biomass; or
Be retired
Unlikely that TVA would repower more than 1 or 2 units to biomass
Agreement establishes specific dates for control of each unit

15. “100-Mile Plants”
TVA’s John Sevier, Bull Run, Kingston and Widows Creek plants are within 100 miles of NC
Were focus of Judgment in nuisance case
Under the Agreement, the 100-mile plants would be among the first to be controlled or retired

16. Kingston & Bull Run
Since the trial of the nuisance suit, TVA has completed pollution controls (SCRs and scrubbers) on all 10 units at Kingston and Bull Run
Agreement would require those controls (and all other existing or new controls) to be operated at all times that the unit’s boiler is operating

17. John Sevier Idle all 4 units by 12/31/2012
TVA would be allowed to bring 2 units online if they are controlled (by SCRs and scrubbers) or repowered by 12/31/2015.
The other 2 units to be retired permanently
Nuisance judgment required controls on all four units by the end of 2011
TVA is constructing a natural gas plant at John Sevier site to replace lost power generation

18. Widows Creek
TVA to be required to shutdown the 6 smaller, uncontrolled units on a staggered schedule beginning 7/31/2013 and ending 7/31/2015
Controls on the 2 larger units have been upgraded
Nuisance judgment required controls on all units by the end of 2013

19. Other Plants Johnsonville
Huge, old, uncontrolled
After the 100-mile plants, Johnsonville has greatest impact on NC among other TVA plants
Will be required to be shutdown entirely on a staggered schedule beginning 12/31/2015 and ending 12/31/2017
Colbert, Gallatin, Paradise, Allen and Cumberland: SCR/scrubber, repower or retire

20. Comparison to Clean Smokestacks
Nature of Remedy: Systemwide cap – same as Clean Smokestacks Act (CSA)
Level of Control and Timing: The TVA remedy takes longer to achieve but:
Level of TVA cap is lower than CSA (adjusted for system size)
TVA is required to control or shutdown virtually all units
TVA remedy is substantially equivalent to CSA

21. Comparison to Nuisance Judgment
Judgment would likely have resulted in lower emissions of SO2 and NOX for only a few years
By no later than 2015 and continuously thereafter, emissions under the Agreement lower than under the Judgment
Cumulative emissions are particularly important for ecological impacts
Agreement’s SO2 and NOX caps even lower than those NC requested at trial

22. Mitigation
TVA to spend $290 million on environmental mitigation projects to address emissions impacts
Most of the money to be spent on energy efficiency and renewable energy projects
TVA to pay $60 million to NC, AL, KY and TN to implement projects of the States’ choosing from broad categories of energy efficiency and renewable energy projects listed in the Decree
NC to receive $11.2 million

23. Emissions Allowances
TVA required to retire all SO2 and NOX marketable pollution credits, whether under the Acid Rain Program, the NOX SIP Call or any other program, that result from emission reductions required by the Agreement
Similar to Clean Smokestacks
Goes beyond Judgment in nuisance case

24. Relinquishment of Claims
All plaintiffs (incl. NC) release all NSR, New Source Performance Standard (NSPS) and minor NSR claims (including follow-on Title V claims) that pre-date the Agreement
All plaintiffs (incl. NC) release NSR, NSPS, minor NSR and follow-on Title V claims that post-date the Agreement only if those claims are based on specific actions required by the Decree (e.g., installation of a scrubber)

25. Relinquishment of Claims (cont’d)
Because the Agreement fully meets NC’s objectives, upon final entry of the Consent Decree, NC to:
withdraw its petition for Supreme Court review of the nuisance case
withdraw its §126 Petition with respect to TVA’s facilities

26. Benefits of the Agreement
The air quality benefits of the Agreement to NC will be very great by the time it is fully implemented. These include:
Substantial health benefits
Environmental benefits of reduced acid deposition and improved visibility
Economic benefits

27. Estimating Benefits
NC did not estimate the benefits of the emission reductions under the Agreement specifically, but
Reductions under the Agreement exceed the reductions that NC sought in the nuisance case and that NC’s experts modeled for trial
Benefits from reductions sought at trial meticulously estimated

29. Area with at Least 40 Days Perceptible Visibility Improvements with Additional TVA Controls (Modeled for Trial)

30. Acid Deposition
At high concentrations, dissolved inorganic aluminum hinders the uptake of water and nutrients by tree roots
Documented at NC Class 1 areas and at Mt. Mitchell
Likely occurring in other State parks and natural areas in NC mountains
Alters high-elevation forest soils
Accelerates leaching losses of calcium and magnesium
Increases concentrations of dissolved inorganic aluminum in soil waters

31. Acid Deposition (cont’d)
NC’s trial experts demonstrated that reductions in emissions will benefit mountain soils and vegetation
Because reductions under the Agreement exceed NC’s proposed remedy in the nuisance case, significant benefits are expected
TVA required to give $1 million each to National Park Service and Forest Service to improve, protect, or rehabilitate park and forest lands that have been injured by emissions from TVA's plants

32. Economic Benefits
Direct payment of $11.2 million over five years for projects in NC
Significant health care costs avoided
Benefits to tourism industry from improved visibility in NC Mountains

33. Summary Comprehensive settlement of claims against TVA
Not final until after public comment period
Fully implements CSA §10 regarding TVA
Significant benefits to NC public health, environment and economy