NIPSCO settles with EPA

The Northern Indiana Public Service Co. will permanently shut down its power plant in Gary, invest about $600 million in pollution controls and pay $13 million in environmental mitigation and penalties as a result of a settlement with the federal government.

The legal agreement will create jobs and result in reductions in air pollution, specifically of a pollutant that can lead to asthma attacks and cause premature death, one that can aggravate respiratory and heart disease and smells like rotten eggs, and one that contributes to ozone and acid rain.

Here's approximately how much air pollution will be reduced from NIPSCO's power plants in Northwest Indiana as a result of the settlement. The numbers are compared to 2008 emission levels:

• Sulfur dioxide smells like rotten eggs and contributes to acid rain, smog and haze: 46,000 tons per year

• Nitrogen oxides contribute to ozone: 18,000 tons per year

• Particulate matter contributes to asthma attacks: 4,500 tons per year.

When all the settlement requirements are complete in 2018, NIPSCO's nitrogen oxide emissions will be 35 percent below current rates and sulfur dioxide emissions will be 80 percent below current rates, according to NIPSCO.

"The pollution reductions achieved in this settlement will ensure that the people of Indiana and neighboring states have cleaner, healthier air to breathe," said Cynthia Giles, assistant administrator for the U.S. Environmental Protection Agency's Office of Enforcement and Compliance Assurance. "EPA is committed to advancing its national enforcement initiative to reduce air pollution from the largest sources of emissions."

At the peak of investment into environmental controls, NIPSCO said as many as 1,000 jobs could be created for local contractors and within the company over the next eight years.

"The installations are staged in. We're hoping on the skilled craft, we can bring it and hold it for five to eight years. So it's not that you bring in 1,000 people for six months and then done," said Kelly Carmichael, director of environmental health and safety for NiSource. "This is an extended period of time, which always helps with the labor force because then people can relocate."

The agreement comes after the EPA accused NIPSCO in 2004 of installing equipment at its coal-fired power plants in Chesterton Bailly Station, Michigan City and Wheatfield R.N. Schahfer in the 1980s and 1990s without first obtaining the required permits. The equipment was supposed to be the best available to remove pollutants, but was not, EPA said.

The Bailly station at the time was located in an area that had not attained EPA's air quality standard for ozone or sulfur dioxide — both of which NIPSCO was contributing to by overpolluting. Both are supposed to be reduced as part of the settlement.

The agreement covers all NIPSCO's plants. As part of the agreement, NIPSCO will install pollution control requirements at the three operating plants and permanently close the Gary plant Dean H. Mitchell on North Clark Road, which has been out of operation since an economic downturn in 2002.

"It's our plan to decommission it. In terms of future plans for that site, it's not been decided. We're looking at a wide array of options," said NIPSCO spokesman Nick Meyer. "The airport is looking to expand.... It could include building a new generating facility on top of that site. Nothing's been finalized."

NIPSCO said it would not initiate another rate case to cover the $600 million, but gradually apply small amounts to customer bills as the investments are made, as allowed by the Indiana Utility Regulatory Commission. One new unit, for instance, could be paid for over an 18-year period.

"In terms of actual impact on customer bills, that only occurs after we spend the money to do it. It's not like we come in and say we need $600 million today. As we spend it, we're going to go to the commission for coverage," Meyer said. "We are running calculations on when these investments would likely be made and how that will impact bills over time. We're talking small percentage points each year over the next eight years and beyond. I'm hesitant to say 4 percent, 2 percent, 1 percent. All we can say is, these will be gradual over time."

NIPSCO has invested more than $350 million in environmental controls since 1990 and reduced certain emissions by 70 percent. That investment is almost entirely paid off. With the additional upgrades, NIPSCO's plants will be ready to meet even stricter air pollution standards expected from EPA in the coming years.

As part of the settlement, NIPSCO has to spend $1.5 million to $2 million to acquire and restore environmentally sensitive lands adjacent to the Indiana Dunes National Lakeshore and donate it to the park. The company would like a partner to match its money. A stakeholder work group would be established to lay out a plan by the first quarter of 2012.

NIPSCO will also invest $9.5 million in various environmental improvement projects, including replacing diesel engines in its fleet with hybrid or electric cars, and sponsoring a rebate program to replace wood-burning stoves and outdoor boilers.

When an area has not attained standards, companies face much tougher requirements to start or relocate there. State Rep. Mara Candelaria Reardon, D-Munster, said the settlement will benefit the environment while creating new opportunities for economic development.

"The new investments will create hundreds of needed jobs in northern Indiana as we try to emerge from the state's deep economic recession," she said in a statement. "The significant reductions in emissions also will improve the air quality for families who live in neighborhoods near the NIPSCO electric generating stations."

The agreement between NIPSCO, EPA, the Department of Justice and the Indiana Department of Environmental Management is subject to a 30-day public comment period and court approval. It's the 21st settlement under a federal effort to enforce against power plants that allegedly violated the Clean Air Act.