OG&E 2015 Annual Report Download - page 16
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Please find page 16 of the 2015 OG&E annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.OGE Energy Corp. 29
intervenedinthisproceeding.OnAugust30,2013,thegovernment
filedaMotion orSummaryJudgmentandonSeptember6,2013,
OG&EfiledaMotiontoDismissthecas .OnJanuary15,2015,U.S.
DistrictJudgeTimothyDeGuistidismissedthecomplaintsfiled ythe
EPAandtheSierraClub.TheCourtheldthatitlackedsubjectmatter
jurisdictionoverplaintiffs’claimsbecauseplaintiffsfailedtopresentan
actual“caseorcontroversy”asrequiredbyArticleIIIoftheConstitution.
Thecourtalsoruledinthealternativethat,evenifplaintiffshad
presentedacaseorcontroversy,itwouldhavenonetheless“decline[d]
toexercisejurisdiction.”TheEPAandtheSierraClubdidnotfilea
appealoftheCourt’sruling.
OnAugust12,2013,theSierraClubfiledasepa atecomplaint
againstOG&EintheUnitedStatesDistrictCourtfortheEastern
DistrictofOklahomaallegingthatOG&EprojectsatMuskogeeUnit6
in2008weremadewithoutobtainingapreventionofsignificant
deteriorationpermitandthattheplanthadexceededemissionslimits
foropacityandparticulatematter.TheSierraClubseeksapermanent
injunctionpreventingOG&EfromoperatingtheMuskogeegenerating
plant.OnMarch4,2014,theEasternDistrictdismissedtheprevention
ofsignificantdete iorationpermitclaimbasedonthestatuteof
limitations,butallowedtheopacityandparticulatematterclaimsto
proceed.Toobtaintherighttoappealthisdecision,theSierraClub
subsequentlywithdrewaNoticeofIntenttoSueforadditionalClean
AirActviolationsandaskedtheEasternDistricttodismissits
remainingclaimswithprejudice.OnAugust27,2014,theEastern
DistrictgrantedtheSierraClub’srequest.TheSierraClubhasfileda
NoticeofAppealwiththe10thCircuitwhereoralargumentwasheld
onMarch18,2015.
Atthistime,OG&Econtinuestobelievethatithasactedin
compliancewiththeFederalCleanAirAct,andOG&Eexpectsto
vigorouslydefendagainsttheclaimsthathavebeenasserted.IfOG&E
doesnotprevailintheremainderoftheproceedings,theEPAandthe
SierraClubcouldseektorequireOG&Etoinstalladditionalpollution
controlequipment,includingdryscrubbers,baghousesandselective
catalyticreductionsystemswithcapitalcostsinexcessof$1.1billion
andpayfinesandsignificantpenaltiesasaresultoftheallegationsi
thenoticeofviolation.Section113oftheFederalCleanAirAct(along
withtheFederalCivilPenaltiesInflationAdjustmentActof1996)
providesforcivilpenaltiesasmuchas$37,500perdayforeach
violation.Duetotheuncertainandpreliminarynatureofthislitigation,
OG&Ecannotprovidearangeofreasonablypossiblelossinthiscase.
NationalAmbientAirQualityStandards
TheEPAisrequiredtosetNAAQSforcertainpollutantsconsidered
tobeharmfultopublichealthortheenvironment.TheCleanAirAct
requirestheEPAtorevieweachNAAQSeveryfi eyears.Asaresult
ofthesereviews,theEPAperiodicallyhastakenactiontoadoptmore
stringentNAAQSforthosepollutants.IfanyareasofOklahomawere
tobedesignatedasnotattainingtheNAAQSforaparticularpollutant,
theCompanycouldberequiredtoinstalladditionalemissioncontrols
onitsfacilitiestohelpthestateachieveattainmentwiththeNAAQS.
Asoftheendof2015,noareasofOklahomahadbeendesignated
asnon-attainmentforpollutantsthatarelikelytoaffecttheCompany’s
operations.Severalprocessesareunderwaytodesignateareasin
OklahomaasattainingornotattainingrevisedNAAQS.TheCompany
ismonitoringthoseprocessesandtheirpossibleimpactonits
operationsbut,atthistime,cannotdeterminewithanycertainty
whethertheywillcauseamaterialimpacttotheCompany’s
financialresult .
InAugustof2013,theSierraClubandtheNaturalResources
DefenseCouncilfiledacomplaintundertheciti ensuitprovisionofthe
CleanAirActbasedontheEPA’sfailuretopromulgateandpublish
designationsforthe2010revisedprimarySO2NAAQS.OnMarch2,
2015,theU.S.DistrictCourtfortheNorthernDistrictofCalifornia
issuedanordergrantingtheEPAandtheSierraClub’sjointmotionto
approveandenteraconsentdecreethatsetforthmandatorydeadlines
fortheEPAtoissuedesignationsforallareasofthecountrythat
remainedundesignated.OnSeptember18,2015theOklahoma
DepartmentofEnvironmentalQualityreportedtotheEPAthatno
areasinOklahomashouldbedesignatedasnon-attainmentforthe
2010SO2standard.Thisnon-attainmentdesignationissubjecttothe
EPA’sapproval.InaletterdatedFebruary11,2016,EPARegion6
notifiedOklahomaoftheirintenttodesignatepa tofMuskogeeCounty
inwhichOG&E’sMuskogeePowerPlantislocated,asnon-attainment
forthe2010SO2NAAQS.TheEPAisexpectedtofinali ethis
designationinJuly2016followingpubliccomment.Thiscouldrequire
additionalcontrols(dryscrubbers)ontheaffectedunits.OnAugust21,
2015,theEPAfinali edadatarequirementsruleforimplementingthe
2010SO2standardrequiringairagenciestocharacterizeairquality
aroundsourcesthatemit2,000tonsperyearormoreofSO2viaair
qualitymodelingorambientairmonitoring.InJuly2016,airagencies
willberequiredtoidentifyeitherambientmonitoringorairquality
modelingasamethodforcharacterizingairqualityfor2,000tonsper
yearorlargersources.Atthistime,OG&Ecannotdeterminewithany
certaintywhetherthisdeterminationwillcauseamaterialimpacttothe
Company’sfinancia results.
OnSeptember30,2015theEPAfinali edanewambientstandard
forozoneat70ppbwhichismorestringentthanthecurrentstandard
of75ppb,setin2008.Statesmustsubmitnon-attainmentdesignations
asappropriatebasedonexistingambientdatabeforeOctober2016for
theEPA’sapproval.Compliancewiththenewstandardbeginsin2020
orlaterdependingonthedegreeofthearea’snon-attainment
designation.AllareasinOklahomacurrentlymeetthenewstandard.
TheCompanyismonitoringthoseprocessesandtheirpossible
impactonitsoperationsbut,atthistime,cannotdeterminewithany
certaintywhethertheywillcauseamaterialimpacttotheCompany’s
financialresult .
CleanPowerPlan
OnOctober23,2015,theEPApublishedthefinalClean owerPlan
thatestablishedstandardsofperformanceforCO2emissionsfrom
existingfossil-fuel-firedp werplantsalongwithstate-specificC 2
reductionstandardsexpressedasbothrate-based(lbs/MWh)and
mass-based(tons/yr)goals.The2030rate-basedreduction
requirementforallexistinggeneratingunitsinOklahomahas
decreasedfromaproposed43percentreductionto32percentin
thefinal ule.Themass-basedapproachforexistingunitscallsfora
24percentreductionby2030inOklahoma.TheCleanPowerPlan
requiresthatstatessubmittotheEPAplansforachievingthe
state-specificC 2reductiongoalsbySeptember6,2016orsubmit
28 OGE Energy Corp.
ALJ’srecommendationtopre-approvecertainestimatedcostsofthe
environmentalrecoveryplan,andtheALJ’srecommendationtodefer
allothercostrecoveryissuesuntilthenextgeneralratecase.
OnDecember2,2015,OG&EreceivedanorderfromtheOCC
denying,byatwotoonevote,itsplantocomplywiththeenvironmental
mandatesoftheFederalCleanAirAct,RegionalHazeandMATS.
TheOCCalsodeniedOG&E’srequestforpre-approvalofitsMustang
ModernizationPlan,reviseddepreciationratesforboththeretirement
oftheMustangunitsandthereplacementcombustionturbinesand
pre-approvalofearlyretirementandreplacementofgeneratingunits
atitsMustangsite,includingcostrecoverythrougharider.
OnDecember11,2015,OG&Efiledamotionrequesting
modificationoftheOCCorder orthepurposesofapprovingonlythe
ECP.OG&Edidnotseekmodificationtoa yotherprovisionsofthe
OCCorder,includingcostrecovery.OG&Ealsoagreedthatitwould
notimplementariderforrecoveryofthecostsoftheECPuntiland
unlessauthorizedbytheOCCinasubsequentproceeding.
OnDecember23,2015,theOCCrejected,byatwotoonevote,
aproposalbyCommissionerDanaMurphytograntOG&E’s
December11,2015motion.
OnFebruary12,2016,OG&Efiledanapplicationrequestingthe
OCCtoissueanorderapprovingtheinstallationofdryscrubbersat
theSoonerfacility,onorbeforeMay2,2016.Theapplicationstates
thatiftheapplicationisnotapprovedbyMay2,2016,OG&Ewill
decideatthattimewhethertocancelthedryscrubberequipment
andinstallationcontractsandmakeplanstoconverttheSoonercoal
unitstonaturalgas.AsofDecember31,2015,OG&Ehadincurred
$94.8millionofconstructionworkinprogressonthedryscrubbers.
OG&Eestimatesanother$35.0millionofin-processexpenditureswill
beincurredpriortoMay1,2016.Additionally,iftherequestisnot
approved,OG&Eexpectstoseekrecoveryinsubsequentproceedings
fortheexpendituresincurredforthedryscrubberprojectand
reasonablestrandedcostsassociatedwiththediscontinuance
oftheSoonercoalunits.
Cross-StateAirPollutionRule
InAugust2011,theEPAfinali editsCSAPRthatrequired27statesin
theeasternhalfoftheUnitedStatestoreducepowerplantemissions
thatcontributetoozoneandparticulatematterpollutioninotherstates.
InDecember2011,theEPApublishedasupplementalCSAPR,which
wouldmakesixadditionalstates,includingOklahoma,subjecttothe
CSAPRforNOXemissionsduringtheozone-seasonfromMay1
throughSeptember30.Undertherule,OG&Ewouldhavebeen
requiredtoreduceozone-seasonNOXemissionsfromitselectrical
generatingunitswithinthestatebeginningin2012.Inresponsetolegal
challengesofthefinal uleonDecember30,2011,theU.S.Courtof
Appealsissuedastayoftherule,whichincludesthesupplemental
rule,pendingadecisiononthemerits.ByorderdatedAugust21,
2012,theCourtofAppealsvacatedtheCSAPRandorderedtheEPA
topromulgateareplacementrule.OnApril29,2014,theU.S.Supreme
CourtreversedthedecisionbytheCourtofAppeals.OnOctober23,
2014,theCourtofAppealsfortheDistrictofColumbiaCircuitgranted
theEPA’srequestthatthecourtliftthestayoftheCSAPR.TheEPA
subsequentlyclarifiedthatcompliancewiththeCSAPR ouldbegin
in2015usingtheamountofallowancesoriginallyscheduledtobe
availablein2012.AsofDecember31,2015,OG&Ehasinstalled
fi elowNOXburnersystemsontwoMuskogeeunits,twoSoonerunits
andoneSeminoleunitandisincompliancewiththefinal ule.Inthe
meantime,thepetitionsforreviewofthesupplementalruleremain
pendingbeforetheD.C.CircuitCourtofAppealsforconsiderationof
issuesthatarenotaddressedbytheSupremeCourt’sdecision.
OnDecember3,2015,theEPAproposedanupdatetoCSAPR
findingthato one-seasonNOXemissionsin23easternstatesincluding
Oklahomaaffecttheabilityofdownwindstatestoattainandmaintain
ozonestandardsandproposingtoissueFIPstoupdatetheexisting
NOXozone-seasonemissionbudgetsforelectricalgeneratingunits.
TheproposedrulereducesOG&E’sNOXemissionsrequirementsunder
thecurrentCSAPRby25percent.Complianceisproposedtobegin
inMay2017.OG&Econtinuestoevaluatewhatadditionalmeasures,
ifany,willbeneededforcompliancewiththenewrule.
HazardousAirPollutantsEmissionStandards
OnFebruary16,2012,theEPApublishedthefinalM TSrule
regulatingtheemissionsofcertainhazardousairpollutantsfrom
electricgeneratingunits,whichbecameeffectiveApril16,2012.The
final uleusesanumericalstandardtoestablishlimitsforparticulate
matter(asasurrogatefortoxicmetals),hydrogenchlorideandmercury
emissionsfromcoal-firedboiler .Compliancewasrequiredwithin
threeyearsoftherule’seffectivedate.BasedonOG&E’srequestfor
aone-yearextension,thedeadlineforcompliancewasextendedto
April16,2016.Tocomplywiththisrule,OG&Eutilizedactivatedcarbon
injectionsateachofitsfi ecoal-firedunitsdu ing2015.
ThefinalM TSrulewasappealedbyseveralparties,butOG&Ewas
notapartytotheappeals.Afterwithstandingjudicialscrutinyatthe
DistrictofColumbiaCircuitCourtofAppeals,theMATSrulewas
challengedattheU.S.SupremeCourt.OnJune29,2015,theU.S.
SupremeCourtfoundthattheEPAshouldhaveconsideredthe
compliancecostsimposedonutilitiesatthefirststageoftheE A’s
regulatoryanalysis.TheU.S.SupremeCourtdidnotvacatetherule,but
reversedtheD.C.Circuit’sdecisionandremandedtotheD.C.Circuitfor
furtherproceedings.TheMATSrulecurrentlyremainsineffectand
OG&EisstillrequiredtomeettheApril2016compliancedeadline.
FederalCleanAirActNewSourceReviewLitigation
Aspreviouslyreported,inJuly2008,OG&Ereceivedarequestfor
informationfromtheEPAregardingFederalCleanAirActcompliance
atOG&E’sMuskogeeandSoonergeneratingplants.
OnJuly8,2013,theU.S.DepartmentofJusticefiledacomplaint
againstOG&EinUnitedStatesDistrictCourtfortheWesternDistrictof
OklahomaallegingthatOG&EdidnotfollowtheFederalCleanAirAct
proceduresforprojectingemissionincreasesattributabletoeight
projectsthatoccurredbetween2003and2006.Thiscomplaintseeks
tohaveOG&Esubmitanewassessmentofwhethertheprojectswere
likelytoresultinasignificantemissionsincreas .TheSierraClub