Vectren 2012 Annual Report Download - page 46

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44
Environmental Matters
The Company's utility operations and properties are subject to extensive environmental regulation pursuant to a variety of
federal, state and municipal laws and regulations. These environmental regulations impose, among other things, restrictions,
liabilities, and obligations in connection with the storage, transportation, treatment, and disposal of hazardous substances and
limit airborne emissions from electric generating facilities including particulate matter, sulfur dioxide (SO2), nitrogen oxide (NOx),
and mercury, among others. Environmental legislation/regulation also requires that facilities, sites, and other properties
associated with the Company's operations be operated, maintained, abandoned, and reclaimed to the satisfaction of applicable
regulatory authorities. The Company's current costs to comply with these laws and regulations are significant to its results of
operations and financial condition.
With the trend toward stricter standards, greater regulation, and more extensive permit requirements, the Company's investment
in compliant infrastructure, and the associated operating costs have increased and are expected to increase in the future.
Similar to the costs associated with federal mandates in the Pipeline Safety Law, Indiana Senate Bill 251 is also applicable to
federal environmental mandates impacting Vectren South's electric operations. The Company is currently evaluating the impact
Senate Bill 251 may have on its operations, including applicability to the stricter regulations the EPA is currently considering
involving air quality, fly ash disposal, cooling tower intake facilities, waste water discharges, and greenhouse gases. These
issues are further discussed below.
Air Quality
Clean Air Interstate Rule / Cross-State Air Pollution Rule
In July 2011, the EPA finalized the Cross-State Air Pollution Rule (CSAPR). CSAPR was the EPA’s response to the US Court of
Appeals for the District of Columbia’s (the Court) remand of the Clean Air Interstate Rule (CAIR). CAIR was originally
established in 2005 as an allowance cap and trade program that required reductions from coal-burning power plants for NOx
emissions beginning January 1, 2009 and SO2 emissions beginning January 1, 2010, with a second phase of reductions in
2015. In an effort to address the Court’s finding that CAIR did not adequately ensure attainment of pollutants in certain
downwind states due to unlimited trading of SO2 and NOx allowances, CSAPR reduced the ability of facilities to meet emission
reduction targets through allowance trading. Like CAIR, CSAPR set individual state caps for SO2 and NOx
emissions. However, unlike CAIR in which states allocated allowances to generating units through state implementation plans,
CSAPR allowances were allocated to individual units directly through the federal rule. CSAPR reductions were to be achieved
with initial step reductions beginning January 1, 2012, and final compliance to be achieved in 2014. Multiple administrative and
judicial challenges were filed. On December 30, 2011, the Court granted a stay of CSAPR and left CAIR in place pending its
review. On August 21, 2012, the Court vacated CSAPR and directed the EPA to continue to administer CAIR. In October 2012,
the EPA filed its request for a hearing before the full federal appeals court that struck down the CSAPR. EPA's request for
rehearing was denied by the Court on January 24, 2013. The Company remains in full compliance with CAIR (see additional
information below "Conclusions Regarding Air Regulations").
Mercury and Air Toxics (MATS) Rule
On December 21, 2011, the EPA finalized the Utility MATS Rule. The MATS Rule is the EPA’s response to the US Court of
Appeals for the District of Columbia vacating the Clean Air Mercury Rule (CAMR) in 2008. CAMR was originally established in
2005 as a nation-wide mercury emission allowance cap and trade system which sought to reduce utility emissions of mercury
starting in 2010.
The MATS Rule sets emission limits for hazardous air pollutants for existing and new coal-fired power plants and identifies the
following broad categories of hazardous air pollutants: mercury, non-mercury hazardous air pollutants (primarily arsenic,
chromium, cobalt, and selenium), and acid gases (hydrogen cyanide, hydrogen chloride, and hydrogen fluoride). The rule
imposes mercury emission limits for two sub-categories of coal, and proposed surrogate limits for non-mercury and acid gas
hazardous air pollutants. The EPA did not grant blanket compliance extensions, but asserted that states have broad authority to
grant one year extensions for individual units where potential reliability impacts have been demonstrated. Reductions are to be
achieved within three years of publication of the final rule in the Federal register (April 2015). Initiatives to suspend CSAPR’s
implementation by the Congress also apply to the implementation of the MATS rule. Multiple judicial challenges were filed and
briefing is proceeding. The EPA also recently announced it will reconsider MATS requirements for new construction. Such