Editor’s note: Duke Energy entered a guilty plea Thursday, May 14th to misdemeanor violations of the Clean Water Act in connection with coal ash contamination at several of its plants here, agreeing to pay a record $102 million dollar fine. A copy of the plea agreement can be found here.
If all goes according to plan, Duke Energy will take its first step toward closure in the coal ash morass when it appears tomorrow morning before U.S. District Judge Malcom Howard in Greenville, pleads guilty to misdemeanor violations of the Clean Water Act and agrees to pay more than a hundred million in fines and penalties.
The court must accept the plea and approve the sentencing terms, of course, and the U.S. Attorneys involved in the criminal cases relating to the company’s coal ash spill at its Dan River plant and contamination at other plants have remained mum on the deal.
But the company first hinted at a guilty plea in a February court filing and then disclosed specifics of its proposed agreement in a later Securities and Exchange Commission report.
As detailed there, Duke Energy’s North Carolina subsidiaries would plead guilty to four misdemeanors related to violations at Duke Energy Progress’ H.F. Lee, Cape Fear and Asheville plants and five misdemeanors related to violations at Duke Energy Carolinas’ Dan River and Riverbend Steam Stations.
Together the companies would pay a total of $102 million in fines and penalties for community service and mitigation expenses, and serve five years of probation – during which time they would establish environmental compliance plans subject to the oversight of a court-appointed monitor.
The company anticipated closing the deal in court in April, but then received a one-month extension to wrap up administrative negotiations with the U.S. Environmental Protection Agency relating to the criminal pleas.
With the criminal investigation behind it, though, the company will still have plenty to navigate before it can move past the coal ash debacle here.
Reports of higher than expected contamination levels in areas around coal ash plants are increasing.
More penalties and fines are looming – this time from the state.
And then there are the lawsuits – at least 15 now – filed by the state, environmental groups and shareholders, most of which are years away from resolution.
Cleaning up the mess
Efforts to get Duke Energy to clean up contamination at its coal ash plants were already percolating by the time 39,000 tons of coal ash spilled into the Dan River in February 2014.
Environmental groups had asked the state Environmental Management Commission in late 2012 for an interpretation of groundwater rules as applied to coal ash ponds, contending that the rules required Duke Energy to immediately eliminate any contamination – once identified — at its source.
Duke said that it needed time, though, and read the law to allow them to develop a clean-up plan before actually having to stop the pollution.
The commission agreed with the company, but in March 2014 Superior Court Judge Paul C. Ridgeway sided with the groups, holding that the law meant what it said: immediate elimination of contamination at the source.
That ruling is now pending before the state Supreme Court with a decision expected over the next several months.
The groups had also been pushing the Department of Environment and Natural Resources to bring enforcement actions against the company to expedite clean-up at its coal ash sites – finally sending 60-day notices of their intent to sue Duke Energy should the state fail to do so.
Regulators finally relented and filed the first enforcement action in March 2013, alleging violations of state groundwater standards at the plant in Asheville, followed by another suit in May 2013 concerning the Mountain Lake plant.
Over the next several months, Duke Energy and DENR negotiated what many called a sweetheart deal to settle the cases for a minimal fine and without a clean-up plan.
Despite widespread public objection, Duke and DENR then submitted the proposed settlement to the court for approval in October 2013.
In the meantime the state filed two more enforcement actions in August 2013 – one in Wake County and another one in Mecklenburg County — concerning the company’s other 12 plants here.
The deal settling the Asheville and Mountain Lake lawsuits was still awaiting court approval when the Dan River spill occurred.
Nine days later, U.S. Attorneys across the state launched the criminal investigation, examining what happened at the Dan River site and also questioning the extent to which relationships between the company and state regulators had influenced enforcement.
The company then withdrew the Asheville – Mountain Lake settlement deal from court consideration.
Those four state actions, all now pending before Judge Ridgeway in Wake County, are separate and apart from five lawsuits filed by environmental organizations in federal courts across North Carolina alleging violations of the Clean Water Act at the company’s Lee, Sutton, Cape Fear, Buck and Riverbend plants.
Paying the fines
In the first of what could be several penalty assessments arising from contamination at the company’s coal ash sites around the state, DENR fined Duke Energy $25 million in March for violations of state groundwater standards at its Sutton Plant near Wilmington.
It was the state’s largest-ever penalty for environmental damages, according to DENR, and likely a precursor of penalties to come for violations at other company plants.
“State groundwater violations at other Duke Energy facilities could result in additional fines against the utility,” the agency said in its press release.
Duke Energy responded by calling the fine excessive, unreasonable and contrary to law.
“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,” the company said in its papers appealing the fine.
“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 … so as to monitor the safety of coal ash ponds.”
Facing the shareholders
To date, Duke Energy shareholders have filed six lawsuits – five in Delaware Chancery Court and one in North Carolina Business Court – alleging that the company knew about the clean water act violations at its coal ash plants but failed to take action and exposed the company to potentially billions of dollars in liability. All seek changes in corporate governance and damages from losses resulting from clean-up and fines.
The North Carolina action, filed under seal in March by Philadelphia investor Judy Mesirov, raised more than a few eyebrows because of the mystery over its underlying allegations.
Duke Energy disclosed the gist of those allegations in SEC filings last week, revealing that in addition to the claims made by other shareholders, Mesirov alleged that the company curried favor with state regulators in order to avoid enforcement actions and tried to block environmental groups from seeking such action.