Minnesota Power Finalizes Environmental Agreement with EPA

Minnesota Power is one of many utility companies in the U.S. whose investments in electric generation facilities were reviewed as part of the EPA’s Coal-Fired Power Plant Enforcement Initiative that began in 1999. The initiative has resulted in more than 25 related settlements nationwide.

Since 2006, the company has invested or will invest more than $600 million to reduce sulfur dioxide, nitrogen oxide, mercury and particulate matter emissions at its thermal generation facilities. Retrofits to comply with state and federal regulations at its two largest units – Boswell 3 and Boswell 4 – will result in a 90 percent reduction in mercury emissions. Many of the emission control measures were implemented during the six year discussions to resolve the Notice of Violation (NOV).

“As a regulated utility providing an essential service, we must always take a long-range planning view to meet our electric customers’ needs in the most cost-competitive and reliable manner,” said Al Rudeck, Minnesota Power Vice President of Strategy and Planning.

The settlement agreement covers Minnesota Power’s Boswell, Laskin, Taconite Harbor and Rapids Energy Centers and includes more stringent emissions limits than in current air permits at all affected units, and the option of refueling, retrofits and retirements at some units. It also includes the addition of 200 megawatts of wind energy. Minnesota Power will also spend $4.2 million over the next five years in conservation and clean energy projects benefitting local communities, which could potentially include a forest restoration project, an electric car charging station in northeastern Minnesota and a 1 megawatt solar installation on Fond du Lac Band of Lake Superior Chippewa property. Under the terms of the settlement, the company will also pay a $1.4 million civil penalty. In the second quarter of 2014, ALLETE recorded an after-tax expense of $2.5 million, or $0.06 per share, to reflecta liability associated with the conservation and clean energy projects. Due to its non-recurring nature, the expense will be excluded from 2014 earnings guidance. A liability for the civil penalty was recognized in 2013.

In August 2008, and April 2011, Minnesota Power received NOVs from the EPA alleging that Minnesota Power made past modifications at its Boswell, Laskin and Rapids Energy Centers between 1981 and 2005 without following appropriate pre-construction review and permitting (New Source Review) requirements.

While Minnesota Power believes the projects specified in the NOVs were in full compliance with the Clean Air Act, NSR requirements and applicable permits, it entered into the settlement agreement to avoid unnecessary costs and delays associated with litigation. Settlement negotiations resulted in a consent decree filed with the U.S. District Court for the District of Minnesota. Before it will be effective, the settlement must be approved by the Court after a 30-day public comment period.