Federal prosecutors Friday filed nine criminal charges accusing Duke Energy of violating the Clean Water Act by polluting four of the state’s rivers with coal ash.
Four of the misdemeanor counts stem from Duke’s Dan River power plant in Eden, 130 miles northeast of Charlotte, where a spill of 39,000 tons of ash a year ago prompted a grand jury investigation.
Other violations occurred at power plants near Charlotte, Asheville, Goldsboro and Moncure in Chatham County.
As the charges were filed, Duke said it has negotiated a proposed agreement to resolve them. Duke first reported the settlement in an earnings report Wednesday.
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Duke would pay $68.2 million in fines and restitution and $34 million for community service and mitigation projects. The money would come from shareholders, not customers.
The settlement, which was not released, has to be reviewed and approved by a federal judge. Duke said it would resolve all federal investigations of its ash, including enforcement by the Environmental Protection Agency.
The fine might be the second-largest penalty ever assessed under the landmark Clean Water Act, which was enacted in 1972. The second-largest penalty now stands at $45 million. It’s not clear how much of the $68 million in Duke’s case is divided between fines and restitution.
U.S. Attorney Thomas Walker of the Eastern District, where the cases will be transferred, said he won’t comment until the charges come before a judge.
Each of the charges says Duke employees “negligently” violated provisions of the law. They repeat that employees failed to “exercise the degree of care that someone of ordinary prudence would have exercised,” and aided and abetted one another.
The wording stops well short of describing the violations as intentional.
“The difference between a misdemeanor and a felony violation is that misdemeanors involve negligence rather than a willful violation,” said Chapel Hill lawyer Robin Smith, a former state assistant environment secretary. “Just on the face of it, (the settlement) looks proportional but I don’t have all the background facts.”
Frank Holleman, a Southern Environmental Law Center attorney who is suing Duke, said the agreement is remarkable “in that it is a series of criminal charges against one group of criminal defendants for illegal pollution across an entire state.”
Duke chief executive Lynn Good, in an interview, repeated that Duke stands accountable for the Dan River spill. The company is revamping ash management across its six-state territory and is under legislative orders to close its 32 North Carolina ash ponds.
“We believe that the settlement was in the best interests of our shareholders, our customers and our employees,” Good said.
“This has had a profound impact on the company. This is a hard day for Duke Energy. I’m so proud of our team; we’ve learned so much from this experience, and I think we’ll be a better company for our customers going forward.”
Four rivers polluted
The first hint that criminal charges could be filed after the Dan River spill came two weeks later, when a federal grand jury in Raleigh started issuing subpoenas in pursuit of a “suspected felony.”
Wide-ranging subpoenas went to Duke, 18 current or former state environmental regulators and the utilities commission. They demanded inspection records, correspondence and enforcement documents for the 108 million tons of ash Duke stores at power plants scattered across the state.
Advocates had accused Duke and the administration of Gov. Pat McCrory, a former Duke employee, of working together to avoid harsh punishment for the company. The administration hotly denied those claims.
In the end, only Duke has been charged, and with criminal bills of information from prosecutors, not through grand jury indictments. The charges were simultaneously filed in U.S. District Courts in Charlotte, Greensboro and Raleigh.
They say Duke illegally drained coal ash and wastewater into four rivers: The Catawba River from the Riverbend power plant just west of Charlotte; the Neuse River from the H.F. Lee plant near Goldsboro; the French Broad River from the Asheville plant; and the Dan River.
The charges say Duke also failed to maintain treatment system equipment at the Dan River plant and the Cape Fear power plant in Chatham County. In March, state regulators cited the Cape Fear plant for violations after Duke pumped 61 million gallons from ash ponds into a stream.
Each charge is punishable by a range of potential penalties including up to five years’ probation and a fine of up to $25,000 a day, Walker’s office said.
State lawsuits remain
The federal charges and settlement sting a fast-growing company that until Feb. 2, 2014 had largely avoided public embarrassment in recent decades.
The Dan River spill happened months before the EPA issued the first national standards on coal ash. And while it was the third-largest spill of the past decade, Duke’s was the only one of the three to result in criminal charges.
Dam inspectors had repeatedly warned Duke to stay alert for signs of leakage into the 48-inch stormwater pipe that broke under an ash pond at the retired Dan River power plant in Eden, records show.
Only after the pipe broke did Duke learn that it was made of metal, not the much stronger concrete that the utility had assumed.
Groundwater contamination apparently from coal ash has been found at each of Duke’s 14 North Carolina coal-fired plants. Duke has reported leaks that drain more than 3 million gallons a day.
The state Department of Environment and Natural Resources says the federal settlement won’t affect state lawsuits over Duke’s ash ponds – filed after pressure from advocacy groups – or investigation of groundwater contamination.
In a statement, DENR said it is pleased “that several of the criminal counts against Duke Energy are consistent with the allegations contained in DENR’s civil lawsuits filed against the utility in 2013.”
About a dozen environmental groups have been allowed to join the state’s four lawsuits, giving them a say in any settlements regarding 12 of the 14 power plants. The groups have also filed federal lawsuits against several Duke power plants, all still before the courts.
Environmental advocate Amy Adams, a former DENR official who’s now at Appalachian Voices, said she remains troubled by “the currently unanswered question of whether DENR was aware of negligence and failed to act, or was unable to recognize the magnitude of the situation in the first place.”
7.2 million electric customers in the Carolinas, Florida, Ohio, Kentucky and Indiana
104,000-square-mile service area
$50.5 billion market capitalization ( as of February 2014)
$23.9 billion in 2014 revenues
$1.9 billion in 2014 profit
57,500-megawatt generating capacity
Duke’s enforcement history
The largest penalty the Environmental Protection Agency has levied under the Clean Water Act is $1 billion. It went against Transocean Deepwater Inc. in 2013 for the Deepwater Horizon oil spill into the Gulf of Mexico.
Because coal-fired power plants are among the nation’s biggest source of air pollution, electric utilities are most heavily fined for violating the Clean Air Act. Such agreements aim to get companies back in compliance with the environmental laws they broke. They often include commitments to improve operations – with costs that can dwarf the fine itself.
The South Carolina utility Santee Cooper paid a $1.3 million EPA fine in 2004, but in settling the case agreed to spend $400 million to install pollution controls. In a 2007 case, American Electric Power paid a $6.2 million EPA fine but $1.9 billion to come into compliance. The Tennessee Valley Authority agreed to spend $5 billion on pollution controls in 2011.
Duke has mostly escaped big penalties until now.
EPA sued Duke in 2000, claiming it upgraded eight power plants without improving pollution controls. The case could have cost Duke hundreds of millions of dollars, but the Bush administration dropped the case in 2005 after unfavorable court rulings.
Last year, Duke committed to EPA to clean up the Dan River at a total cost the agency put at $17.5 million. Duke said it has spent $20 million on the cleanup. It also agreed to pay $12 million last year for air-pollution upgrades at an Indiana power plant.
In 2013, subsidiary Duke Energy Renewables settled federal misdemeanor charges stemming from the deaths of golden eagles at wind farms in Wyoming. Duke paid $1 million fines and restitution.
In 2009, Duke settled an air quality case over an Indiana power plant by paying a $1.75 million fine and $6.25 million in environmental projects.
A 2002 audit in a whistleblower case found that Duke Power under-reported $124 million in profits.
Duke did not acknowledge wrongdoing but agreed with Carolinas regulators to pay $25 million to reduce the amount customers pay for the utility’s fuel. A federal probe found no criminal wrongdoing.
Duke has paid about $750,000 in fines and compliance costs to resolve 22 other cases, EPA records show. Bruce Henderson
The Dan River spill
The EPA declared the cleanup of the Dan River finished in July, after Duke vacuumed up 3,000 tons of ash and sediment. More than 90 percent of the spilled ash was left in the river. EPA said removing it would do more harm than good.
The U.S. Fish and Wildlife Service, working with North Carolina, Virginia and Duke, is leading an assessment of the environmental damage. It’s likely to end with Duke paying for restoration projects in the Dan River basin.
A Duke-commissioned study in November found freshwater mussels are thriving in the Dan. North Carolina’s Department of Environment and Natural Resources reported that the river-bottom bugs and worms at the base of the food chain are also healthy.
Other experts say one year is far too short a time to gauge the long-term effects of the potentially toxic metals in ash on the river. Metals in the river bottom may recirculate into the water. Bruce Henderson