GREENVILLE — Duke Energy confessed Thursday to a pattern of negligence in handling coal ash that spanned 35 years and included disregarding several warnings from its own employees that could have prevented last year’s spill into the Dan River.
U.S. District Judge Malcolm J. Howard imposed $102 million in fines and restitution as he accepted the utility’s guilty plea to nine criminal misdemeanors linked to the spill in February 2014 and to less-overt misdeeds at four other plants with leaking or improperly maintained coal ash storage ponds.
Howard said the fine against Duke was “the largest criminal fine ever imposed” in North Carolina’s federal court history.
“That’s 225 years,” he said of the court system that dates back to 1790.
Coupled with the $3.4 billion Howard required the utility to set aside to meet all its other obligations under the plea deal, the case also ranks as the second all-time highest criminal settlement in the annals of the U.S. Environmental Protection agency, federal officials said.
That amount is second only to fines against oil company BP for its 2010 spill in the Gulf of Mexico, they said.
Thursday’s plea also included a “joint factual statement” from Duke and federal prosecutors that traced back to 1979 the first leaks in a partly metal, storm water system under the Dan River Steam Station’s main ash pond — the same network that failed spectacularly last year and flushed up to 39,000 tons of potentially harmful ash into the retired plant’s namesake river.
Duke also admitted in the document obtained by the News & Record that several years before the spill, senior management rejected repeated requests from personnel at the Eden-area plant to perform inspections of the pipe by robotic cameras likely to have prevented the spill.
“The estimated total cost for the camera inspection of the four pipes, including the 48-inch stormwater pipe, within the primary and secondary coal ash basins was $20,000,” federal prosecutors and Duke executives said in their statement. “If a camera inspection had been performed as requested, the interior corrosion of the elbow joint in the 48-inch pipe would likely have been visible. ...
“The (Dan River) station manager told the vice president that Dan River needed the camera inspection, that the station did not know the conditions of the pipes, and that if one of the pipes failed, there would be environmental harm. The request was still denied.”
Millions in fines
Judge Howard approved a 42-page plea bargain that requires Duke Energy to conduct yearly environmental audits of all its coal ash ponds, not only in North Carolina but also in four other states where it uses ponds to store the wet residue of pulverized coal that has been burned to produce electric power.
On top of a $68 million fine for violating the Clean Water Act, Duke’s costs in the plea bargain include a $24 million payment to the National Fish and Wildlife Foundation to improve river systems in North Carolina and Virginia, the two states affected by the Dan River spill, and another $10 million to purchase wetlands that can offset environmental harm inflicted by coal ash.
This deal mandates that Duke tell company employees about its criminal misconduct and conviction; train them to increase the level of care they use in handling and disposing of coal ash; and equip both the employees and the general public with a telephone and Internet “hotline” through which they can report environmental threats.
Duke also agreed to publish a public apology in a “full-page advertisement in at least two national newspapers and three major North Carolina newspapers” in Greensboro, Charlotte and Raleigh.
Under penalty of further criminal prosecution, the utility also agreed to meet requirements of North Carolina state government’s new Coal Ash Management Act and, specifically, to comply with that part of the law calling for complete closure of the ash ponds at Duke’s Dan River, Asheville, Riverbend and Sutton plants in 4 years.
In their joint statement accompanying the plea bargain, Duke and the federal government also agreed that a series of internal and external engineering reports, dating back to the early 1980s, flagged the Dan River pipe system as problematic and urged closer inspection than the utility ever provided.
The agreement noted that the utility did not correct an early-1990s error by an outside engineering consultant that resulted in official maps depicting the metal section of the pipe that failed as being made of sturdier reinforced concrete.
Dan River plant personnel knew the correct make-up of the doomed pipe but never effectively conveyed that to “engineers and employees making budget decisions” at Duke’s headquarters in Charlotte who instead relied upon the erroneous map, according to the 60-page statement of facts. North Carolina dam-safety officials also have said that the mapping error influenced them in deciding against inspecting the stormwater pipe under the basin as part of their examination of the Dan River plant’s 2-pond ash basin before the spill.
No customer cost
On top of four charges stemming from negligence at the Dan River plant, Howard also accepted guilty pleas to two counts of wrongdoing at coal ash ponds near the utility’s Cape Fear plant in Moncure and one count of criminal misconduct each at the H.F. Lee Steam Electric Plant in Goldsboro, the Riverbend Steam Station in Mount Holly and the Asheville Steam Electric Generating Plant in Buncombe County.
Duke CEO Lynn Good signed the plea agreement for the company, accepting a probationary period of five years during which the company’s actions on coal ash and general compliance with the law will be supervised by a court-appointed monitor.
Howard will appoint a monitor to receive and review various reports about Duke Energy’s coal ash operations, as required by the settlement.
For example, its plea agreement requires that Duke update accurately every 6 months the volume of coal ash remaining in each of its North Carolina ponds and to submit twice yearly reports on the progress it has made toward efforts “to facilitate the excavation of coal ash and the closure of all of the coal ash impoundments at Dan River, Riverbend, Sutton, and Asheville and whether the Defendants have met the critical milestones.”
Duke promises in the plea deal to keep up with its obligations while on probation by hiring, or appointing from within, a compliance officer “at the vice president level or higher” to keep track of its commitments and see that they are met.
Federal prosecutors sought to stick Duke’s business accounts and its shareholders with the fine and assorted other costs of the criminal prosecution – not the average customer or the taxpayer.
The plea deal prohibits the utility from using any of its court-imposed costs as a business expense for tax purposes or from invoking them in any other way as a tax deduction.
Another part of the agreement bans Duke Energy from offsetting court costs linked to coal ash misdeeds with “a request or application for a rate increase on customers.”
Submerged in a pond
The plea deal focuses mainly on Duke Energy’s 32 ash ponds in North Carolina that hold 108 million tons of burned coal residue.
But it also calls on the company to conduct annual “environmental audits” of 34 storage ponds in four other states where Duke owns coal-fired plants –— South Carolina, Kentucky, Indiana and Ohio.
Those ponds hold a combined total of 49.5 million tons, according to the utility.
Although this plea agreement and joint statement addressed shortcomings at five North Carolina plants in communities from Wilmington to Asheville, they dealt most intensively with the retired Dan River plant near Eden that began operation in 1949 and was shuttered 63 years later, in 2012.
The agreement notes that Duke Energy began working on plans to close the ash ponds under state supervision after the plant was shuttered, about two years before the spill.
But by February 2014, little headway had been made in a plan that envisioned eliminating the ponds and digging up the pipes below by an unspecified date in 2016, Duke and federal officials said in their statement.
The spill 15 months ago galvanized environmentalists nationwide with resolve to end the electric power industry’s tradition of storing ash submerged for decades in unlined ponds, usually held back by massive dams with earthen walls that often leak and hold out the possibility of catastrophic collapse.
Such a collapse occurred in Kingston, Tenn., in late 2008 at a riverside TVA plant, drawing the first nationwide attention to the problem.
Dan River kicked in six years later as a lesser calamity but served as an equally unwelcome reminder that the problem remained unsolved and was ripe to inflict more harm on aquatic ecosystems and, potentially, human health.
“Coal ash contains various heavy metals and potentially hazardous constituents, including arsenic, barium, cadmium, chromium, lead, manganese, mercury, nitrates, sulfates, selenium and thallium,” federal prosecutors and Duke officials said in their joint statement.
“Coal ash has not been defined, itself, as a ‘hazardous substance’ or ‘hazardous waste’ under federal law, although some constituents of coal ash may be hazardous in sufficient quantities or concentrations.”
Traced to 1979
The joint statement traced in excruciating detail the retired Dan River plant’s slow-motion rendezvous with misfortune beginning in 1979.
That’s when the company’s own engineers spotted problems with the two stormwater pipes that extended under the ash ponds, supposedly to carry uncontaminated rainwater from other parts of the steam-station property under the storage ponds to the river on the other side of the ponds.
“Although no major leaks were identified, engineers noted water leaking into the pipe,” the joint statement said of the pipe doomed to collapse 35 years later. “Repairs to the 48-inch stormwater pipe were undertaken in response to this inspection.”
Also at that time, according to the court statement, engineers found 22 leaks in a second, smaller pipe that also carried stormwater under another part of the storage basin.
“Company employees recommended that the company repair the leaks or reroute the drainage lines, noting that the discharges could be violations of EPA regulations,” Duke and the federal government said.
The smaller pipe did not rupture when the other one gave way last year, but soon after it was found to be riddled with leaks, when, as a precaution, Duke performed the robotic-camera inspection that company employees had recommended earlier. Both leaking pipes were sealed off to protect the river shortly after the February 2014 spill.
The joint statement also recounted a series of engineering reports by outside consultants who, starting in 1981, flagged the Dan River stormwater pipes for concern and urged close monitoring in reports to the N.C. Utilities Commission that have been the subject of previous news reports.
Duke admitted in Thursday’s court statement to long gaps in living up to recommendations in those reports.
Last chance missed
The utility acknowledged complete, months-long lapses in monitoring the pipe that eventually caused the spill, gaps that went from every May through every September between 1999 and 2008 “because it was too difficult to access the end of the pipe from land as the result of vegetative growth and the presence of snakes.”
And the court statement shined new light on debate within Duke’s ranks over the amount of attention the utility was paying to the Dan River storage basin, beginning nearly three years before the spill.
“In May 2011, a senior program engineer and a program engineer with responsibilities covering Dan River, recommended that the budget for Dan River include camera inspections of the pipes,” officials said in the formal statement.
The intracompany debate continued for a year before another senior official “indicated his intention to eliminate the camera survey budget line item” because Duke was planning to close the ash ponds anyway in the foreseeable future.
“I would think with the basin closing, you would want to do the camera survey,” another Duke Energy official responded, according to the joint statement. “I don’t think the drains have ever been checked and since they go under the basin, I would like to ensure that we are eliminating any risk before closing the basin.”
The joint statement notes that the utility missed one last opportunity to catch the spill on Jan. 31, 2014, just three days before the pipe ruptured.
The company inspector who checked that day made no observations of the pipe itself, noting only that “she did not observe any turbidity in the water flowing from the 48-inch stormwater pipe,” officials said in their joint statement.
“Ultimately, the combination of the corrosion and the weight of the coal ash basin over the elbow joint caused it to buckle, fail and be pushed through the end of the 48-inch storm water pipe into the Dan River.”
Contact Taft Wireback at (336) 373-7100, and follow @TaftWirebackNR on Twitter.