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Progress Energy Annual Report 2007
55
with environmental laws and regulations are subject to
periodic review and revision and may vary significantly.
The timing and extent of the costs for future projects will
depend upon final compliance strategies.
To date, under the first phase of Clean Smokestacks
Act emission reductions, all environmental compliance
projects at our Asheville Plant and several projects at our
Roxboro Plant have been placed in service. The remaining
projects at our two largest plants, Roxboro and Mayo, are
under construction and are expected to be completed in
2008 and 2009, respectively. The remaining projects to
comply with the second phase of emission reductions,
which are smaller in scope, have not yet begun. These
estimates are currently under review and are conceptual
in nature and subject to change.
To date, expenditures at PEF for CAIR/CAVR/mercury
regulation primarily relate to environmental compliance
projects under construction at CR5 and CR4, which
are expected to be placed in service in 2009 and 2010,
respectively. See discussion of projects for Crystal
River Units No. 1 and No. 2 to meet CAVR beyond-BART
requirements below.
New Source Review
The EPA is conducting an enforcement initiative related
to a number of coal-fired utility power plants in an effort
to determine whether changes at those facilities were
subject to New Source Review (NSR) requirements or
New Source Performance Standards under the Clean Air
Act. We were asked to provide information to the EPA
as part of this initiative and cooperated in supplying the
requested information. The EPA has undertaken civil
enforcement actions against unaffiliated utilities as
part of this initiative. Some of these actions resulted in
settlement agreements requiring expenditures by these
unaffiliated utilities, several of which were in excess of
$1.0 billion. These settlement agreements have generally
called for expenditures to be made over extended time
periods, and some of the companies may seek recovery
of the related costs through rate adjustments or similar
mechanisms. On April 2, 2007, the U.S. Supreme Court
issued a ruling on an appeal of a decision of the U.S. Court
of Appeals for the Fourth Circuit, in a case involving an
unaffiliated utility. The Fourth Circuit held that NSR applies
to projects that result in an increase in maximum hourly
emissions. The U.S. Supreme Court rejected the lower
court decision and held that the EPA is not required to
adopt the maximum hourly emissions test but may use
an actual annual emissions test to determine whether
NSR applies.
On March 17, 2006, the U.S. Court of Appeals for the District
of Columbia Circuit (D.C. Court of Appeals) set aside the
EPA’s 2003 NSR equipment replacement rule. The rule
would have provided a more uniform definition of routine
equipment replacement, which is excluded from NSR
applicability. The D.C. Court of Appeals denied a request
by the EPA for a re-hearing regarding this matter on
June 30, 2006. On November 27, 2006, the EPA filed a
petition for a writ of certiorari requesting that the U.S.
Supreme Court review the decision of the D.C. Court of
Appeals. On April 30, 2007, the U.S. Supreme Court denied
the EPA’s petition. In a previous case decided in late 2005,
the D.C. Court of Appeals had also set aside a provision
in the NSR rule that had exempted the installation of
pollution control projects from review. These projects are
now subject to NSR requirements, adding time and cost
to the installation process.
Clean Smokestacks Act
In June 2002, the Clean Smokestacks Act was enacted
in North Carolina requiring the state’s electric utilities to
reduce the emissions of NO
x
and SO
2
from their North
Carolina coal-fired power plants in phases by 2013. PEC
currently has approximately 5,000 MW of coal-fired
generation capacity in North Carolina that is affected by the
Clean Smokestacks Act. In March 2007, PEC filed its annual
estimate with the NCUC of the total capital expenditures
to meet emission targets under the Clean Smokestacks
Act by the end of 2013, which were approximately
Air and Water Quality Estimated Required
Environmental Expenditures (in millions) Estimated Timetable Total Estimated Expenditures
Cumulative Spent
through December 31, 2007
Clean Smokestacks Act 2002–2013 $1,100 – 1,400 $892
CAIR/CAVR/mercury regulation 2005–2018 1,500 – 2,600 333
Total air quality 2,600 – 4,000 1,225
Clean Water Act Section 316(b) (a) – –
Total air and water quality $2,600 – 4,000 $1,225
(a)
Compliance plans to meet the requirements of a revised or new implementing rule under Section 316(b) of the Clean Water Act will be determined upon
finalization of the rule. See discussion under “Water Quality.”