Duke Energy appeals $25.1m coal ash-related water fine in North Carolina

As expected, Duke Energy (NYSE:DUK) said early April 9 that it is appealing an ‘unprecedented’ $25.1m fine assessed by North Carolina regulators for groundwater violations at its Sutton power plant.

The company had previously said that it would appeal the fine.

Duke is asking that the penalty assessed by the North Carolina Department of Environment and Natural Resources (NC DENR) be dismissed. On March 10, 2015, the environmental regulator fined the company $25.1m for groundwater violations at the L.V. Sutton Steam Electric Plant in Wilmington.

The appeal, filed with the North Carolina Office of Administrative Hearings, describes a number of instances where the company believes NC DENR’s actions violated state law, the regulator’s own rules and procedures, public policy and the longstanding interpretation of the regulations, according to Duke.

The 166-page appeal document was filed against the state department and its Division of Water Resources. The appeal is filed by Duke subsidiary Duke Energy Progress. Duke is being represented by attorneys from the McGuireWoods law firm.

Among other things, Duke claims the state is wrong to fine the company 1,822 days of alleged groundwater violations despite having sample results for just 27 days. Duke also says the state has created an entirely new methodology to calculate the fine, which is about $24m more than similar fines issued by the department. Duke also says that DENR failed to consider naturally occurring substances and other potential sources of groundwater contamination.

Duke: There was no ‘disaster’ involved in this case

“This penalty was not assessed for an environmental disaster, an intentional act, a spill, breach of a coal ash dam, discharge into a stream or river or similar events which, though more serious, have resulted in assessed penalties that have been a small fraction of the penalty at issue here,” Duke says in the filing.

“Instead, this penalty arises from the identification of certain substances within monitoring wells, located exclusively on Duke Energy property, which for more than a decade have been fully reported by Duke Energy (and its predecessors) to DENR so as to monitor the safety of coal ash ponds located at the L.V. Sutton Steam Plant (the “Sutton Plant”) in New Hanover County,” Duke said in the filing.

In December of 2011 DENR renewed the appropriate permit “with full knowledge of groundwater monitoring results,” Duke said.

The state also approved the groundwater sampling plan and was advised of Duke’s plan to convert the power operations to natural gas and subsequently close the coal ash ponds, according to Duke.

“The Sutton plant generated electricity for millions of customers and operated in compliance with North Carolina law and environmental regulations,” said Paul Newton, state president – North Carolina. “We closely monitored groundwater, shared the data with the state for decades, and voluntarily acted to ensure residents near the Sutton plant continue to have a high-quality water supply.”

“There are important legal issues here that must be resolved for the sake of everyone in North Carolina,” Newton said. “At the same time, we remain focused on closing ash basins as quickly as the state process will allow, which ultimately addresses groundwater concerns.”

Duke has spent much time wrestling with the legal and regulatory impact of coal ash storage since the February 2014 Dan River coal ash spill. In that situation, a storm water pipe under an ash basin at the retired Dan River coal plant failed and released up to 39,000 tons of coal ash into the Dan River waters in parts of North Carolina and Virginia.

“We are close to an agreement with the government to resolve the ongoing grand jury investigation into our coal ash basin management,” Duke CEO Lynn Good said in a February earnings conference call. The CEO said during the February call there was little more she could say about the potential settlement agreement.

More recently, the Virginia Department of Environmental Quality (DEQ) has proposed a $2.5m settlement against Duke Energy Carolinas as a result of the Dan River spill.

Duke is closing four “high priority” sites in North Carolina and is looking at addressing another major site in South Carolina.

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.