State environmental regulators on Tuesday agreed to dismiss a record $25.1 million fine against Duke Energy for years of coal ash violations.
But after backing away from a courtroom showdown, the two sides spun conflicting narratives of the deal, each claiming a legal victory.
The deal was announced during a court hearing in which Duke was set to put the N.C. Department of Environmental Quality on trial for allegedly ginning up a huge financial penalty to score political points and make a public example of Duke. The power company was prepared to show videotaped depositions of 10 current and former agency employees to bolster its depiction of a rogue agency generating an unprecedented fine in March.
Duke’s lawyers were just four minutes into their case, which was expected to last several days at the N.C. Office of Administrative Hearings in Raleigh, when attorneys told Administrative Law Judge Phil Berger Jr. they had reached a settlement.
Agency spokeswoman Crystal Feldman said later that the settlement will allow both sides to focus on cleaning up the environment.
“DEQ and Duke Energy are not in complete agreement on all aspects of the case,” Feldman said. “However, we both see value in putting this case behind us so that we can turn our full attention to the coal ash cleanup and basin closure process.”
As part of Tuesday’s settlement, DEQ will drop its case involving tainted groundwater at the L.V. Sutton power plant near Wilmington. Elevated levels of boron in groundwater there prompted Duke to spend $1.8 million to pipe municipal drinking water to a low-income community. Boron is a chemical element that can cause health complications when ingested in high concentrations over time.
More important, the deal will resolve groundwater violations at all 14 Duke coal ash storage sites in the state. Duke said the settlement resolves “former, current and future” groundwater issues, in essence limiting state enforcement over coal ash violations at the 14 disposal sites.
In exchange, Duke will make a $7 million payment to the state, equivalent to $500,000 per site where Duke maintains coal ash pits and ponds.
DEQ officials stressed that the reduced amount is still a record fine for environmental damage and is the first time Duke is being held accountable for groundwater violations that date back decades. The proceeds from the fine will go to a statewide fund for public schools.
Duke was already on track to shut down and clean up seven of the tainted sites and is still assessing how to handle the other seven. The tainted groundwater at all 14 sites is the subject of lawsuits in Wake and Mecklenburg counties filed by DEQ and by the Southern Environmental Law Center, which was not a party to Tuesday’s settlement.
SELC lawyer Frank Holleman characterized the settlement as a sweetheart deal for Duke and a capitulation by the agency. By accepting an average $500,000 for each coal ash site, Holleman said, DEQ in effect slashed its Sutton fine by 98 percent.
“There’s a $7 million fine, but Duke gets amnesty at every single site in the state,” Holleman said. “Where is any new requirement on Duke to do something it wasn’t already required to do?”
Holleman said SELC remains committed to using the courts to force Duke to shut down the remaining coal ash sites. SELC is pushing to have Duke excavate the coal ash and move it to dry, lined landfills; the company has committed to doing so at half of its coal ash disposal sites, most of which have multiple ash pits and basins.
Coal ash contains heavy metals such as iron, manganese, selenium, thallium, boron, sulfate and antimony. Duke spokeswoman Paige Sheehan said the tainted groundwater at the disposal sites mostly contains trace elements of the heavy metals, and in some cases it’s not clear how much came from coal ash and how much is naturally occurring.
The public confrontation between Charlotte-based Duke and the agency was a surprise because leaders of DEQ, previously called the Department of Environment and Natural Resources, vowed a collaborative relationship between the agency and businesses it oversees when Republican Gov. Pat McCrory’s administration took over in 2013.
That was before a Duke-owned coal ash pit in Western North Carolina breached in February 2014, spewing 39,000 tons of toxic ash into the Dan River and triggering a criminal investigation.
The acrimony between DEQ and Duke, the country’s largest electric utility, spilled beyond the Raleigh courtroom immediately after the deal was announced Tuesday, as the two sides jockeyed to frame the terms of the settlement to their advantage.
DEQ said the settlement will force Duke into an accelerated cleanup schedule. Duke denied that characterization, saying it has agreed to no new terms.
Duke insisted that the $7 million payment was not a fine, while the agency claimed otherwise. The utility’s statement about the settlement said the agency “recognizes that it did not follow its own policy and procedure” when issuing the $25.1 million fine.
The company had said in earlier legal filings that DEQ Secretary Donald van der Vaart directed his staff to calculate a huge fine to allay public criticism that McCrory, a former Charlotte mayor who had worked 29 years at Duke, enjoyed a cozy relationship with his former employer.
DEQ had accused Duke, and its Raleigh-based subsidiary Duke Energy Progress, of years of evasions and delays. The agency valued the settlement at $20 million, by including up to $15 million to be spent on coal ash cleanup.
Duke said it had previously committed to the cleanup and said those costs were not related to Tuesday’s deal.