American utility company agrees to cut air pollutants, pay $15m penalty and spend $60m to mitigate emissions

American Electric Power (AEP) has agreed to cut 813,000 tons of air pollutants annually, pay a $15m penalty, and spend $60m on projects to mitigate the adverse effects of its past excess emissions.

AEP reached the settlement agreement with the U.S. Environmental Protection Agency (EPA), bringing an end to almost eight years of litigation regarding alleged violations of the New Source Review (NSR) provisions of the Clean Air Act.

The EPA estimated the total cost of the penalty at more than $4.6bn and said it was the single largest environmental enforcement settlement in history.

Granta Nakayama, assistant administrator for EPA’s enforcement and compliance assurance program, said: “Today’s settlement will save $32 billion in health costs per year for Americans. Less air pollution from power plants means fewer cases of asthma and other respiratory illnesses.”

The AEP will install pollution control equipment to reduce and cap sulfur dioxide and nitrogen oxide emissions by more than 813,000 tons per year when fully implemented.

The EPA said by installing these pollution control measures, the plants will emit 79 percent less sulfur dioxide and 69 percent less nitrogen oxides, as compared to 2006 emissions.

Michael G. Morris, AEP’s chairman, president and chief executive officer, said: “The mitigation projects included in the agreement are the types of activities that we have often undertaken on our own. And most importantly, this agreement enables us to make much-needed efficiency improvements at our plants without fear of additional NSR allegations.

“While we would have preferred that the agreement not include a civil penalty – a position we argued vigorously during our discussions with the plaintiffs – this settlement is an excellent outcome for our shareholders. It eliminates the potentially significant financial risk of pursuing the litigation to its conclusion while still achieving the environmental improvements that both we and the government want.”

The claims, initially filed on Nov. 3, 1999, by the U.S. Department of Justice on behalf of the EPA, eventually included allegations involving nine AEP plants.

AEP admits no violations of law, and all claims against AEP were released.