OG&E 2009 Annual Report Download - page 98

Environmental regulation can increase the cost of planning, design, initial installation and operation of the Company’s
facilities. Historically, the Company’s total expenditures for environmental control facilities and for remediation have not been
significant in relation to its financial position or results of operations. The Company believes, however, that it is reasonably likely that
the trend in environmental legislation and regulations will continue towards more restrictive standards. Compliance with these
standards may increase the cost of conducting business.
Air
Sulfur Dioxide
The 1990 Federal Clean Air Act includes an acid rain program to reduce sulfur dioxide (“SO2”) emissions. Reductions were
obtained through a program of emission (release) allowances issued by the U.S. Environmental Protection Agency (“EPA”) to power
plants covered by the acid rain program. Each allowance is worth one ton of SO2 released from the chimney. Plants may only release
as much SO2 as they have allowances. Allowances may be banked and traded or sold nationwide. Beginning in 2000, the Company
became subject to more stringent SO2 emission requirements in Phase II of the acid rain program. These lower limits had no
significant financial impact due to the Company’s earlier decision to burn low sulfur coal. In 2009, the Company’s SO2 emissions
were below the allowable limits.
The EPA allocated SO2 allowances to the Company starting in 2000 and the Company started banking allowances in
2001. The Company sold 10,000 banked allowances in 2009 for approximately $0.8 million. Also, during 2009, the Company
received proceeds of approximately $0.1 million from the annual EPA spot (year 2009) and seven-year advance (year 2016) allowance
auctions that were held in March 2009.
Nitrogen Oxides
On January 25, 2010, the EPA released a rule strengthening the National Ambient Air Quality Standards (“NAAQS”) for
oxides of nitrogen as measured by nitrogen dioxide (“NO2”) which is effective March 26, 2011. The rule establishes a new one-hour
standard and monitoring requirements, as well as an approach for implementing the new standard. Oklahoma is currently in
attainment with the new standard and it is anticipated that Oklahoma will be designated “unclassifiable” in 2012 because the new
monitoring requirements will not yet be fully implemented. After the new monitoring network is deployed and has collected three
years of air quality data, the EPA will re-designate areas in 2016 or 2017 based on the new data. It is currently anticipated that
Oklahoma will be designated “attainment” at that time.
With respect to the nitrogen oxide (“NOX”) regulations of the acid rain program, the Company committed to meeting a 0.45
lbs/MMBtu NOX emission level in 1997 on all coal-fired boilers. As a result, the Company was eligible to exercise its option to
extend the effective date of the lower emission requirements from the year 2000 until 2008. The regulations required that the
Company achieve a NOX emission level of 0.40 lbs/MMBtu for these boilers which began in 2008. The Company’s average NOX
emissions from its coal-fired boilers for 2009 were approximately 0.319 lbs/MMBtu.
Particulate Matter
On September 21, 2006, the EPA lowered the 24-hour fine particulate ambient standard while retaining the annual standard at
its current level and promulgated a new standard for inhalable coarse particulates. Based on past monitoring data, it appears that
Oklahoma may be able to remain in attainment with these standards. However if parts of Oklahoma do become “non-attainment”,
reductions in emissions from the Company’s coal-fired boilers could be required which may result in significant capital and operating
expenditures.
Ozone
Currently, the EPA has designated Oklahoma “in attainment” with the ambient standard for ozone of 0.08 parts per million
(“PPM”). In March 2008, the EPA lowered the ambient primary and secondary standards to 0.075 PPM. Oklahoma had until March
2009 to designate any areas of non-attainment within the state, based on ozone levels in 2006 through 2008. Following the state’s
designation, the EPA was expected to determine a final designation by March 2010. States were to be required to meet the ambient
standards between 2013 and 2030, with deadlines depending on the severity of their ozone level. Oklahoma City and Tulsa were the
most likely areas to be designated non-attainment in Oklahoma. On September 16, 2009, the EPA announced that they would
reconsider the 2008 national primary and secondary ozone standards to ensure they are scientifically sound and protective of human
health. The EPA also proposed to keep the 2008 standards unchanged for the purpose of attainment and non-attainment area
designations. On January 19, 2010, the EPA published a decision to extend by
92