With huge coal ash fines, Feds put coal industry on notice

Editor's note: This article is part a series of stories by InsideClimate News reporters exploring the future of the coal industry, Coal's Long Goodbye: Dispatches From the War on Carbon.

The U.S. Justice Department's recent prosecution of three Duke Energy subsidiaries for improper handling of toxic coal ash marked the most significant federal crackdown on coal ash in history and sends a clear signal to other operators that they could face criminal charges if there's an ash spill or major damage, experts say.

The plea agreement included a $102 million fine for the 2014 Dan River coal ash spill and other criminal violations of the Clean Water Act. It also requires the companies to make $3.4 billion available for cleanup costs and issue public apologies in newspapers. In addition, it places 18 Duke facilities under a court-ordered environmental compliance program.

The Department of Justice didn't hold back, said Vermont Law School professor Patrick Parenteau. "They brought down the biggest utility in the country...It should terrify other utilities. If Duke's not safe, nobody's safe."

DOJ's prosecution drew praise from environmental advocates, who said it was more effective than the coal ash regulations released last December by the Environmental Protection Agency.

The messages from DOJ and EPA "conflict more than coincide," said Lisa Evans, senior administrative counsel at Earthjustice, a nonprofit environmental law center. DOJ's conviction "confirms the widespread mismanagement of coal ash...[while] the EPA went forward with the weakest option for regulating the waste."

Although the EPA rules established the first federal standards for coal ash disposal, it gives the agency little enforcement authority, and leaves the door open for continued regulation through a patchwork of state laws.

Green groups were disappointed by the EPA's decision, and warn that many coal ash facilities are at risk given the weak—and sometimes nonexistent—state regulations that govern how the toxic industrial waste is stored.

For instance, the EPA will continue to allow utilities to store coal ash as a liquid slurry in enormous man-made ponds or lagoons. These lagoons can contaminate groundwater and wreak havoc when they're breached. In 2008, a broken dike at a Kingston, Tenn., lagoon sent 5.4 billion cubic yards of coal ash into nearby rivers and homes. Cleanup of the Kingston site remains ongoing.

"I think the EPA got boxed in politically," Parenteau said. "We all know the Obama administration is schizophrenic as hell on energy, and has a blind spot on coal. On the other hand, the DOJ was completely free to throw the book at [Duke], and they did."

Frank Holleman, senior attorney at the Southern Environmental Law Center, said the DOJ prosecution was important because it focused on more than just the attention-grabbing coal ash spill from February 2014, when a leaking lagoon sent 82,000 tons of the industrial waste product into North Carolina's Dan River.

The Duke subsidiaries pled guilty to nine violations of the Clean Water Act. Only four of the charges are about the Dan River, while the remaining five are related to the "routine operation of old, leaking, antiquated, unlined coal ash lagoons that are used across the country," Holleman said. "So it should send a signal to all utilities that own and operate these lagoons...that they may not be only incurring civil liabilities, but exposing themselves to criminal liability" if they don't manage them properly.

"Any time you have a big enforcement action, it can have what EPA and DOJ call 'deterrent value,'" said Eric Schaeffer, executive director of the Environmental Integrity Project, a Washington, D.C.-based advocacy group. If other utilities "aren't looking now at their own sites and thinking, 'uh oh, let's make sure we don't step into this [mess],' then that would be foolish."

According to Earthjustice, coal ash is the second largest industrial waste stream in the country. The term "coal ash" refers to the solid waste left behind when coal is burned. The product, which looks like gray dust, contains toxic compounds such as heavy metals that can cause cancer and other health problems.

Some utilities bury the dry ash in landfills. But the cheaper, and more dangerous disposal method involves sluicing the ash with water and placing the resulting slurry in lagoons. These impoundments can cover hundreds of acres and be up to 400 feet deep, said Evans, the Earthjustice attorney.

During the Kingston, Tenn., disaster, the volume of coal ash released was larger than the amount of oil spilled during the BP Deepwater Horizon spill in the Gulf of Mexico. Although the Kingston spill remains the largest coal ash accident in U.S. history, no criminal charges were filed.

What's striking about the Duke case is that the DOJ worked to ensure the three subsidiaries—Duke Energy Business Services LLC, Duke Energy Carolinas LLC and Duke Energy Progress Inc.—won't be able to wriggle out of paying penalties, said Robert Percival, a law professor at the University of Maryland.

It's often difficult to apply criminal sanctions to corporations, because they can be creative in how they structure relationships between parents and subsidiaries, Percival said. "You can impose a fine, and if it's some fly-by-night operation, it might not be paid" if the parent company closes the subsidiary and isn't forced to take over its obligations.

In this case, Duke Energy Corporation, the parent company, would be on the hook for the $102 million fine and the $3.4 billion cleanup cost even if the three subsidiaries shut down or went bankrupt, said Parenteau, the Vermont Law professor. "DOJ has wired this thing all around."

"It certainly reflects excellent lawyering on behalf of the Justice Department," Percival said.

Parenteau and Percival were also impressed that DOJ forced the subsidiaries to undergo environmental audits. Eighteen of the companies' facilities will have to implement environmental compliance programs, which will be reviewed by a court-appointed independent monitor.

"So Duke is now under court supervision for how it manages these facilities," Parenteau said. "I've never seen anything like this. For a company of this size … My goodness, it's breathtaking."

Another stipulation required the companies to take out a full-page apology ad in two national newspapers and three major North Carolina papers.

Duke's ad explains the terms of the DOJ penalties and says, "We are accountable for the spill and its aftermath and take responsibility for all of the violations contained in the Plea Agreement. We apologize to the communities that have been affected by these actions. We hope that others will learn from our experience."

Parenteau said he gives Duke credit for its "remarkable" apology. "There's no qualifiers, there's no excuses, there's no spin. It's a from-the-heart apology."

The DOJ hasn't finished its probe of the Dan River spill. It's investigating North Carolina's Department of Environment and Natural Resources for its enforcement of state coal ash regulations.

Meanwhile, a bill in the U.S. House of Representatives seeks to change the EPA coal ash rules even before they're implemented. Environmentalists say the bill, sponsored by Rep. David McKinley (R-W.Va.), would weaken the regulations.

Schaeffer, the Environmental Integrity Project director, said the DOJ prosecution has shown that even a weakened EPA rule can't prevent coal ash producers from being penalized by the federal government. "You can try to squash the EPA rules...But it won't save them if they have a spill."

Reporters Naveena Sadasivam and Sabrina Shankman contributed to this report.

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