Vectren 2010 Annual Report Download - page 101

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In April of 2007, the US Supreme Court determined that greenhouse gases meet the definition of "air pollutant" under the Clean
Air Act and ordered the EPA to determine whether greenhouse gas emissions from motor vehicles cause or contribute to air
pollution that may reasonably be anticipated to endanger public health or welfare. In April of 2009, the EPA published its
proposed endangerment finding for public comment. The proposed endangerment finding concludes that carbon emissions
from mobile sources pose an endangerment to public health and the environment. The endangerment finding was finalized in
December of 2009, and is the first step toward EPA regulating carbon emissions through the existing Clean Air Act in the
absence of specific carbon legislation from Congress. Therefore, any new regulations would likely also impact major stationary
sources of greenhouse gases. The EPA has promulgated two greenhouse gas regulations that apply to SIGECO’s generating
facilities. In 2009, the EPA finalized a mandatory greenhouse gas emissions registry which will require reporting of emissions
beginning in 2011 (for the emission year 2010). The EPA has also recently finalized a revision to the Prevention of Significant
Deterioration (PSD) and Title V permitting rules which would require facilities that emit 75,000 tons or more of greenhouse
gases a year to obtain a PSD permit for new construction or a significant modification of an existing facility.
Impact of Legislative Actions & Other Initiatives is Unknown
If regulations are enacted by the EPA or other agencies or if legislation requiring reductions in CO2 and other greenhouse gases
or legislation mandating a renewable energy portfolio standard is adopted, such regulation could substantially affect both the
costs and operating characteristics of the Company’s fossil fuel generating plants, nonutility coal mining operations, and natural
gas distribution businesses. Further, any legislation or regulatory actions taken by the EPA or other agencies would likely
impact the Company’s generation resource planning decisions. At this time and in the absence of final legislation, compliance
costs and other effects associated with reductions in greenhouse gas emissions or obtaining renewable energy sources remain
uncertain. The Company has gathered preliminary estimates of the costs to control greenhouse gas emissions. A preliminary
investigation demonstrated costs to comply would be significant, first with regard to operating expenses and later for capital
expenditures as technology becomes available to control greenhouse gas emissions. However, these compliance cost
estimates are based on highly uncertain assumptions, including allowance prices if a cap and trade approach were employed,
and energy efficiency targets. Costs to purchase allowances that cap greenhouse gas emissions or expenditures made to
control emissions should be considered a cost of providing electricity, and as such, the Company believes recovery should be
timely reflected in rates charged to customers. Customer rates may also be impacted should decisions be made to reduce the
level of sales to municipal and other wholesale customers in order to meet emission targets.
Ash Ponds & Coal Ash Disposal Regulations
In June 2010, the EPA issued proposed regulations affecting the management and disposal of coal combustion products, such
as ash generated by the Company’s coal-fired power plants. The proposed rules more stringently regulate these byproducts
and would likely increase the cost of operating or expanding existing ash ponds and the development of new ash ponds. The
EPA did not offer a preferred alternative, but is taking public comment on multiple alternative regulations. The alternatives
include regulating coal combustion by-products as hazardous waste. At this time, the majority of the Company’s ash is being
beneficially reused. The proposals offered by EPA allow for the beneficial reuse of ash in certain circumstances. The Company
estimates capital expenditures to comply could be as much as $30 million, and such expenditures could exceed $100 million if
the most stringent of the alternatives is selected. Annual compliance costs could increase slightly or be impacted by as much
as $5 million.
Clean Water Act
Section 316(b) of the Clean Water Act requires that generating facilities use the “best technology available” to minimize adverse
environmental impacts. More specifically, Section 316(b) is concerned with impingement and entrainment of aquatic species in
once-through cooling water intake structures. In April of 2009, the U.S. Supreme Court affirmed that the EPA could, but was not
required to, consider costs and benefits in making the evaluation as to the best technology available for existing facilities. The
regulation was remanded back to the EPA for further consideration. Depending upon the approaches taken by the EPA when it
reissues the regulation, capital investments could be in the $40 million range if new infrastructure, such as new cooling water
towers, is required.
Jacobsville Superfund Site
On July 22, 2004, the EPA listed the Jacobsville Neighborhood Soil Contamination site in Evansville, Indiana, on the National
Priorities List under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA). The EPA has
identified four sources of historic lead contamination. These four sources shut down manufacturing operations years ago.
When drawing up the boundaries for the listing, the EPA included a 250 acre block of properties surrounding the Jacobsville
neighborhood, including Vectren's Wagner Operations Center. Vectren's property has not been named as a source of the lead