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Posted on Wed, Nov. 26, 2008
By KAREN DILLON
The Kansas City Star

Clean-Air Dispute Could Cost BPU Millions

The troubled Kansas City, Kan., Board of Public Utilities is facing millions of dollars in fines for allegedly spewing pollution from two aging coal plants.

BPU violated federal clean-air laws by failing to install pollution controls on one of those plants since at least 1994 and on the other since 2001, the Environmental Protection Agency said in a notice of violation this week.

Penalties can reach $25,000 per day or more, EPA Region 7 spokesman David Bryan said Wednesday.

“We can penalize them until they actually make the improvements to the plants,” he said. “Our big emphasis, we want to make sure they upgrade their technologies and their emissions are decreased.”

The problem: It could cost the utility hundreds of millions of dollars to install state-of-the-art pollution controls on the Quindaro Power Station and Nearman Creek Power Station, both the EPA and BPU have said.

BPU officials disagree with the government’s findings, said Joe Dick, acting information officer for the utility.

“We believe we have operated in compliance with the law,” Dick said, adding that the utility is evaluating the government’s allegations and would have no further comment.

Fines and the anti-pollution steps that BPU will need to take will be determined during negotiations in coming months, EPA officials said.

One state legislator from Kansas City, Kan., said Wednesday that BPU has become too expensive to maintain as a municipal utility.

“BPU has at least a decade of mismanagement and bad judgment,” said Chris Steineger, a Democratic senator. “Financially, BPU is unsustainable.”

The city needs to get out of the business of generating electricity and “leave that to companies that have the capital and management expertise to do it properly.”

Mayor Joe Reardon could not be reached for comment. EPA cited the Unified Government of Wyandotte County/Kansas City, Kan., in the notice of violation.

Concerns that BPU had violated the Clean Air Act first surfaced last year when The Kansas City Star and another media outlet obtained an internal document showing the utility suspected it had problems dating back at least two decades but chose not to notify the EPA.

The utility’s analysis was prompted by an EPA crackdown in the late 1990s. Since 1977, federal law requires utilities to report upgrades they plan at power plants. If the upgrades increase emissions, the utility must obtain a permit from the government and may be forced to install anti-pollution controls.

The BPU analysis, prepared in 2004, looked at 73 projects to determine if they followed the law and found that 15 projects were “probably not defensible.”

After stories were published about the legal analysis, a judge ruled EPA investigators could not use the document as evidence in their investigation because of BPU’s attorney-client privilege.

The allegations this week are administrative charges, Bryan said. He would neither confirm nor deny whether a criminal investigation was continuing. But he said the EPA still has the option to pursue further charges under administrative, civil or criminal enforcement actions.

EPA investigators this week listed several major capital projects undertaken by BPU that would have required the utility to install state-of-the-art pollution controls. But the utility failed to obtain permits before undertaking projects, the EPA report noted.

Instead, it said, the BPU plants put “significant illegal quantities” of pollutants into the environment.

The EPA notice listed several pollutants, including nitrogen oxide, which is a major contributor to ozone; sulfur dioxide, which is a major contributor to acid rain; and particulate matter.

For violations of the Clean Air Act, BPU faces a penalty of $25,000 to $32,500 per day back to as far as 1994, the date when the first violation occurred, Bryan said. The penalty also can be assessed each day until BPU installs the pollution controls.

EPA settlements have proved costly for some utilities. For example:

-Last summer, the Salt River Project Agriculture Improvement and Power District in Arizona agreed to install new pollution controls at a cost of $400 million. It agreed to pay a $950,000 civil penalty and spend $4 million on environmentally beneficial projects to reduce emissions.

-Last year, American Electric Power Service Corp., based in Ohio, agreed to spend more than $4.6 billion on pollution controls, paid a $15 million penalty and agreed to spend $60 million on projects to mitigate the adverse effects of its excess emissions.

The BPU violations are the most recent in a series of setbacks for the utility.

Last month chief administrative officer Marc Conklin and Kansas City, Kan., lawyer Rod Turner were charged in state court with stealing nearly $400,000 from BPU.

Earlier this year, BPU’s ethics commission found “significant failures” in the way top administrators spent more than $15,000 in meal and entertainment expenses.

BPU also has had to put on hold its plans to build a new coal plant because of concerns that EPA’s investigation could lead to big costs.

But one prominent environmentalist saw this week’s violations as an opportunity for the area to invest in more green energy.

“That is a great day for clean air and Kansas City,” said Bruce Nilles, director of the Sierra Club’s National Coal Campaign in Washington, D.C. “This now presents an opportunity for retiring these very old coal plants and investing in clean-air energy that doesn’t threaten public health like coal does.”

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