STATE OF INDIANA

INDIANA UTILITY REGULATORY COMMISSION

VERIFIED PETITION OF INDIANAPOLIS POWER & ) LIGHT COMPANY D/B/A/ AES INDIANA FOR ) APPROVALS AND COST RECOVERY ASSOCIATED ) WITH THE RETIREMENT OF PETERSBURG UNITS 1 ) AND 2, INCLUDING: (1) APPROVAL OF IPL’S ) CREATION OF REGULATORY ASSETS FOR THE ) NET BOOK VALUE OF PETERSBURG UNITS 1 AND 2 ) CAUSE NO. 45502 UPON RETIREMENT; (2) AMORTIZATION OF THE ) REGULATORY ASSETS BASED UPON THE ) COMPANY’S DEPRECIATION RATES; AND (3) ) RECOVERY OF THE REGULATORY ASSETS ) THROUGH INCLUSION IN AES INDIANA’S RATE ) BASE AND ONGOING AMORTIZATION IN AES ) INDIANA’S FUTURE RATE CASES. )

INDIANA OFFICE OF UTILITY CONSUMER COUNSELOR

TESTIMONY OF

CYNTHIA M. ARMSTRONG - PUBLIC’S EXHIBIT NO. 2

JUNE 28, 2021

Respectfully submitted,

Lorraine Hitz Attorney No. 18006-29 Deputy Consumer Counselor Public’s Exhibit No. 2 Cause No. 45502 Page 1 of 15

TESTIMONY OF OUCC WITNESS CYNTHIA M. ARMSTRONG CAUSE NO. 45502 INDIANAPOLIS POWER & LIGHT COMPANY D/B/A AES INDIANA

I. INTRODUCTION

1 Q: Please state your name and business address. 2 A: My name is Cynthia M. Armstrong, and my business address is 115 W. Washington

3 St., Suite 1500 South, Indianapolis, IN, 46204.

4 Q: By whom are you employed and in what capacity? 5 A: I am employed as a Senior Utility Analyst in the Electric Division for the Indiana

6 Office of Utility Consumer Counselor (“OUCC”). A summary of my qualifications

7 can be found in Appendix A.

8 Q: Briefly summarize Indianapolis Power and Light Company’s request in this 9 proceeding. 10 A: Indianapolis Power and Light Company d/b/a AES Indiana (“IPL” or “AES

11 Indiana”) intends to retire Petersburg Units 1 and 2 in 2021 and 2023, respectively.

12 These dates are much earlier than the estimated retirement dates IPL identified for

13 the Petersburg Generating Station in its last depreciation study in Cause No.

14 45029.1 The updated accelerated retirement dates are based on IPL’s 2019

15 Integrated Resource Plan (“IRP”) Short-Term Action Plan. Due to earlier

16 retirement dates, Petersburg Units 1 and 2 will not be fully depreciated when

17 retired. Therefore, AES Indiana requests authority to create a regulatory asset for

1 The depreciation study in Cause No. 45029 assumed a 2042 retirement date for both Petersburg Units 1 and 2 (Cause No. 45029, Direct Testimony of IPL witness John J. Spanos, JJS Attachment 1, p. 37), and IPL’s 2016 IRP assumed a 2032 retirement date for Petersburg Unit 1 and a 2034 retirement date for Petersburg Unit 2 (IPL’s 2016 IRP, Volume 1, p. 63).

Public’s Exhibit No. 2 Cause No. 45502 Page 2 of 15

1 the remaining net book value of Petersburg Units 1 and 2 upon their retirement,

2 amortization of the regulatory assets based on the depreciation rates approved in

3 Cause No. 45029, and to recover the regulatory assets through inclusion in rate base

4 in a future AES Indiana base rate case.

5 Q: What is the purpose of your testimony in this proceeding? 6 A: I discuss the Consent Decree IPL entered into with the U.S. Department of Justice

7 (“DOJ”), U.S. Environmental Protection Agency (“EPA”), and Indiana Department

8 Environmental Management (“IDEM”) to settle alleged New Source Review

9 (“NSR”) and emission violations occurring at the Petersburg Generating Station. I

10 explain how IPL’s past management decisions regarding Petersburg’s operation

11 and compliance with environmental laws have contributed to the current decision

12 to retire Petersburg Units 1 and 2 with a significant investment remaining to be

13 recovered from ratepayers.2 I support OUCC witness Wes R. Blakley’s

14 recommendations regarding AES Indiana’s requested accounting treatment for the

15 early retirement of Petersburg Units 1 and 2.

16 Q: How did you evaluate issues presented in this Cause? 17 A: I reviewed AES Indiana’s verified petition, pre-filed direct testimony, and

18 responses to OUCC discovery requests. I reviewed the Consent Decree, the Notice

19 of Violations (“NOVs”) relevant to the Consent Decree, and other documents

20 relevant to the Consent Decree. I also reviewed past Certificate of Public

21 Convenience and Necessity (“CPCN”) cases where IPL requested Commission

2 Please note that since Indianapolis Power and Light announced its name change to AES Indiana on February 24, 2021, I use both names interchangeably as most of the activities I describe occurred prior to that date. Public’s Exhibit No. 2 Cause No. 45502 Page 3 of 15

1 authority to install pollution control equipment on the Petersburg units to comply

2 with environmental regulations.

II. IMPACTS OF THE CONSENT DECREE

3 Q: AES Indiana relies on its 2019 IRP Short-Term Action Plan as the basis for 4 changes in planned retirement dates for Petersburg Units 1 and 2 and its 5 associated request in this case. Is this the only factor contributing to its 6 decision to retire these units earlier than expected? 7 A: No. It is accurate that IPL’s preferred resource portfolio in its 2019 IRP included

8 retiring Peterburg Unit 1 in 2021 and Petersburg Unit 2 in 2023. However, the

9 Consent Decree IPL entered into with the DOJ, EPA, and IDEM to settle claims

10 IPL violated various provisions of the Clean Air Act (“CAA”) also contributes to

11 retiring these units early. Although settlement discussions were continuing with the

12 EPA and IDEM during the 2019 IRP development process, IPL included estimated

13 costs of complying with the Consent Decree in the candidate resource portfolios

14 evaluated in the IRP model.3 While the Consent Decree’s costs were not the sole

15 reason IPL selected the resource portfolio which retires Petersburg Units 1 and 2

16 by 2023, the Consent Decree burdens the Petersburg Generating Station with

17 additional costs should IPL keep these units operational. As the memorandum the

18 DOJ and State of Indiana filed on behalf of the EPA and IDEM in support of the

19 Consent Decree notes, there is no obligation for IPL to follow through with its

20 announced retirements without the Consent Decree.4

21 Q: Please describe the Consent Decree.

3 OUCC Attachment CMA-1, AES Indiana’s Response to OUCC Data Requests 1-8 through 1-11. 4 OUCC Attachment CMA-1. Public’s Exhibit No. 2 Cause No. 45502 Page 4 of 15

1 A: On August 31, 2020, the DOJ, EPA, IDEM, and IPL announced an agreement to

2 settle claims IPL violated NSR, New Source Performance Standards, Indiana’s

3 State Implementation Plan (“SIP”), and its Title V Operating Permit at the

4 Petersburg Generating Station.5 The Consent Decree acknowledges IPL denies the

5 alleged violations but agrees to the Consent Decree’s obligations to avoid litigation

6 costs and uncertainties.

7 The Consent Decree requires IPL to commit to activities at the Petersburg

8 Generating Station to reduce NOx, SO2, sulfuric acid, and particulate matter

9 (“PM”) emissions.6 IPL must take the following actions, including:

10 • Installing Selective Non-Catalytic Reduction (“SNCR”) on Petersburg Unit 11 4 or retiring Petersburg Units 1 and 2 by July 1, 2023.

12 • Continuously operating Selective Catalytic Reduction (“SCR”) systems, 13 other NOx controls, Flue Gas Desulfurization (“FGD”) systems, baghouses, 14 electrostatic precipitators, and sulfuric acid mitigation systems already 15 installed at the facility.

16 • Meeting specified unit emission rates for NOx, SO2, PM, and sulfuric acid 17 emissions by certain dates. These emission rates coincide with any 18 additional pollution controls the Consent Decree requires.

19 • Meeting plantwide annual tonnage emission limits on SO2 and NOx 20 emissions.

21 • Surrendering any excess emission allowances attributable to the compliance 22 activities the Consent Decree requires.

5 U.S. EPA Press Office. (8/31/2020) United States Agrees with Power and Light Company to Resolve Alleged Violations of the Clean Air Act. https://www.epa.gov/newsreleases/united-states-agrees-power-and- light-company-resolve-alleged-violations-clean-air-act. 6 United States v. Indianapolis Power & Light Company, Civil Action No. 3:20-cv-202-RLY-MPB. Consent Decree. https://www.epa.gov/sites/production/files/2020-09/documents/indianapolispowerlight-cd.pdf Public’s Exhibit No. 2 Cause No. 45502 Page 5 of 15

1 • Completing an environmental mitigation project to construct and operate a 2 3 MW solar facility on the Petersburg site. IPL is not obligated to spend 3 more than $5.0 million on this project.

4 • Spending $325,000 on a state-only environmentally beneficial project 5 involving the acquisition and donation of ecologically-significant land 6 bordering or contiguous to the Patoka National Wildlife Refuge.

7 • Paying a $1.525 million civil penalty. The U.S. will receive $925,000 and 8 the State of Indiana will receive $600,000 of this penalty.

9 Q: Does the Consent Decree allow for alternatives to shutting down Petersburg 10 Units 1 and 2? 11 A: Yes. As mentioned previously, AES Indiana can also comply with the Consent

12 Decree by installing SNCR on Petersburg Unit 4 by July 1, 2023. However, the

13 lead time necessary for IPL to obtain the necessary regulatory approvals, design

14 and construct the project, and complete testing to determine the reagent levels

15 necessary to meet the more stringent Consent Decree NOx limits makes executing

16 this option by July 2023 incredibly difficult.

17 Q: Please summarize the events leading to the Consent Decree. 18 A: OUCC Attachment CMA-2 provides a timeline of events relevant to the Consent

19 Decree. In 2009, the EPA issued an NOV to IPL stating it violated NSR when it

20 failed to obtain Non-attainment New Source Review (“NNSR”) and Prevention of

21 Significant Deterioration pre-construction permits prior to undertaking major

22 replacements and upgrades of equipment at the Eagle Valley, Harding Street, and

23 Petersburg Generating Stations. The EPA issued another NOV in September 2015,

24 stating both EPA and IDEM officials observed opacity emissions exceeding the

25 permitted limits for Petersburg Unit 3 in July 2015. Finally, the EPA issued another

26 NOV in February 2016, stating IPL had violated NSR when replacing various boiler Public’s Exhibit No. 2 Cause No. 45502 Page 6 of 15

1 and turbine components during the Spring 2011 and Fall 2013 outages at Petersburg

2 Units 1 and 2. The 2016 NOV also cited several instances during 2011 to 2015

3 where IPL reported excess opacity emissions for Petersburg Units 1-4 and excess

4 SO2 emissions for Units 3 and 4.

5 Q: IPL denies the EPA’s and IDEM’s claims that it committed the CAA 6 violations. What evidence is available to support the Consent Decree? 7 A: Actions IPL took in operating the Petersburg units between 2011 and 2015 give

8 some credence to the EPA’s and IDEM’s claims. First, IPL bypassed the FGD

9 system serving Petersburg Units 1 and 2 while continuing to operate the units

10 several times between 2010 and 2016. In that case, IPL maintained that an outage

11 of the FGD system did not result in a shutdown of Units 1 and 2 because the units

12 were able to run and remain within their permitted limits. Additionally, IPL

13 recorded several instances where Petersburg Units 3 and 4 exceeded their permitted

14 SO2 limits. The OUCC highlighted its concerns with these actions in Cause No.

15 44794.7

16 Regarding the alleged NSR violations, it is admittedly complex for sources

17 to comply with the NSR regulatory program. Most electric utilities have argued that

18 replacement projects the EPA indicated were “major modifications” in NSR

19 enforcement actions fell under the “routine maintenance, repair, or replacement”

20 exemption under the NSR program. However, there have been very few electric

7 Cause No. 44794, Direct Testimony of OUCC Witness Cynthia Armstrong, pp. 5-11. The OUCC and IPL ultimately reached a settlement of Cause No. 44794. Public’s Exhibit No. 2 Cause No. 45502 Page 7 of 15

1 utility victories in NSR litigation, and most have settled NSR claims through

2 Consent Decrees.

3 In IPL’s case, it had already been put on notice by the 2009 NOV that the

4 EPA might consider some projects it completed during an outage to be a “major

5 modification” that would trigger NSR by the time the 2011 and 2013 outages

6 occurred. IPL notified IDEM of the projects and activities it planned to complete

7 on Petersburg Unit 1 during the Spring 2011 outage and Petersburg Unit 2 during

8 the Fall 2013 outage. IPL indicated it did not believe NSR would apply because it

9 did not believe any of the activities would be a “major modification” and would not

10 result in a “significant emissions increase.”8 The 2016 NOV alleged IPL failed to

11 provide an adequate explanation as to why emissions excluded in its pre-project

12 notification letters could be excluded in accordance with the rules. While IPL

13 indicated it was not required to receive a response from IDEM on the matter, each

14 pre-project notification letter was sent only 2-3 days prior to the beginning of the

15 outage, which would not provide IDEM time to contact IPL if it noticed any issues

16 before IPL completed its outage activities. By not verifying its projects would not

17 qualify as “major modifications” or that its method for calculating projected

18 emissions was accurate and complete, IPL took the risk that these projects could

19 later be found to be major modifications and subject to enforcement actions. This

20 risk was heightened when Pike County was designated to be in “non-attainment”

8 OUCC Attachment CMA-4, IPL’s pre-project notification letters. Found in IDEM’s Virtual File Cabinet (“VFC”), VFC Document IDs #61806320, #67888998, and #69067803. Please note that there appear to be pages missing from the copy available in VFC. Public’s Exhibit No. 2 Cause No. 45502 Page 8 of 15

1 with the 2010 1-hour primary SO2 NAAQS, as IDEM was required to evaluate all

2 sources of SO2 in the area and determine how it could cut SO2 emissions to bring

3 the area into attainment with the standard.

4 Finally, when it comes to alleged violations in emission rates, IPL is

5 required to install and operate monitors that measure pollutants emitted from its

6 units’ stacks. This provides a clear record for IDEM and the EPA to find emission

7 violations. It is doubtful IPL would have successfully defended claims that it did

8 not violate permitted emission limits if there was actual emissions data showing

9 otherwise.

10 Q: Are there any other important factors to consider in IPL’s past operation of 11 the Petersburg units? 12 A: Yes. It is important to note that between the 2009 NOV and the 2015 and 2016

13 NOVs, IPL sought approval to install more than $600 million9 in pollution control

14 projects at the Petersburg Generating Station to continue operating Units 1-4 in

15 compliance with environmental rules. IPL tracked the projects’ costs through its

16 Environmental Compliance Cost Recovery Adjustment (“ECCRA”) mechanism,

17 and most of the projects were included in rate base in Cause No. 45029.10

18 Environmental compliance projects installed over the past decade make up a

19 significant portion of the costs AES Indiana seeks to recover in this case. IPL has

9 The $600 million figure refers to projects installed on the entire Petersburg Generating Station, not just Units 1 and 2. IPL’s compliance plans were developed on a facility-wide basis. OUCC witness Blakley’s testimony provides Petersburg Unit 1’s and Unit 2’s portion of environmental costs that will be included in the regulatory asset. 10 OUCC Attachments CMA-2 and CMA-3. Public’s Exhibit No. 2 Cause No. 45502 Page 9 of 15

1 also made significant investments to control SO2, NOx, and PM emissions since

2 1996, and many of these controls were also tracked through its ECR.

3 Q: When IPL sought approval for these pollution control projects, did it inform 4 the Indiana Utility Regulatory Commission (“Commission”) about the NOVs? 5 A: It does not appear IPL notified the Commission about the NOVs until after it made

6 several CPCN requests for pollution controls. The first time the NOVs were

7 mentioned in the context of a CPCN request was in Cause No. 44794 (IPL’s

8 NAAQS and Coal Combustion Residuals Compliance Plan).11 The requests IPL

9 made in Cause Nos. 44242 (Mercury and Air Toxics Standards Compliance Plan)

10 and 44540 (National Pollutant Discharge Elimination System Compliance Plan)

11 occurred before the 2015 and 2016 NOVs were issued.

12 Q: Why was it important for the Commission, the OUCC, and other interested 13 parties to be informed of the NOVs when IPL sought approval to install its 14 environmental compliance projects? 15 A: There is a possibility a source (i.e., an electric generating unit) could be forced to

16 shut down as a remedy for NSR violations or continued emission violations.12 The

17 risk of a sudden shutdown due to litigation is an important factor in determining the

18 longevity of the Petersburg units and deciding whether it makes sense to retrofit the

19 units to comply with environmental regulations.

11 Cause No. 44794, Direct Testimony of OUCC Witness Cynthia Armstrong, p. 10. IPL also made a brief reference to the NSR litigation and the 2009 NOV in its 2014 IRP. (See IPL’s 2014 IRP, Volume 1, p. 80.) 12 In 2009, the U.S. District Court for the Southern District of Indiana ordered Duke Energy Indiana (DEI) to permanently shut down Wabash River Units 2, 3, and 5 as remedy after a jury found that the previous owner (Cinergy/PSI Energy) violated NSR when it performed replacements without first obtaining a construction permit to do so. U.S. v. Cinergy Corp, 618 F. Supp. 2d 942 (S.D. Ind. 2009). This decision was later reversed by an appellate court, but the ruling was based on a limited set of circumstances where Indiana’s approved SIP method of determining increased emissions conflicted with the federal standards, but the SIP was not th corrected until after the replacement projects occurred. U.S. v. Cinergy Corp., 623 F.3d 455 (7 Cir. 2010). Public’s Exhibit No. 2 Cause No. 45502 Page 10 of 15

1 Q: Has IPL’s operation of the Petersburg Generating Station been an issue in 2 prior cases? 3 A: Yes. IPL’s modeling of the Petersburg units was a contentious issue in CPCN cases

4 requesting approval for environmental compliance projects. In Cause No. 44242,

5 Joint Intervenors Citizens Action Coalition and Sierra Club critiqued IPL’s

6 economic analysis and indicated IPL’s initial analysis did not explore the full range

7 of resource options available, did not adequately test the sensitivity of the proposed

8 plan for uncertainties in key assumptions, and did not comport with reasonable

9 planning practice. Initially, the Joint Intervenors’ witness recommended

10 unconditional denial to retrofit Petersburg Units 1, 2, and 4.13 After IPL provided

11 an additional economic analysis, the Joint Intervenors’ witness still concluded the

12 benefits of retrofitting Petersburg Units 1 and 2 were small and recommended the

13 Commission deny the CPCN for Petersburg Units 1 and 2.14 While the Commission

14 acknowledged IPL’s updated analysis indicated the retrofit of some units was not

15 economical in several scenarios, it ultimately disagreed with the Joint Intervenors’

16 recommendation and approved IPL’s request.15

17 In Cause No. 44794, the OUCC also expressed its concerns regarding the

18 reasonableness of continuing to operate the Petersburg units. OUCC witness

19 Edward Rutter testified IPL’s modeling results did not definitively support the

20 proposed Compliance Projects because not all model runs supported the retrofit

21 option as the least-cost option. He indicated the differences in the least-cost results

13 Cause No. 44242, Final Order, p. 13. 14 Cause No. 44242, Final Order, p. 24. 15 Cause No. 44242, Final Order, pp. 31-33. Public’s Exhibit No. 2 Cause No. 45502 Page 11 of 15

1 were not significant enough to abandon any of the alternatives modeled and

2 recommended the Commission defer a decision on IPL’s proposed compliance

3 plans until after IPL filed its 2016 IRP.16 Joint Intervenors’ witness David Schlissel

4 also questioned IPL’s analysis and the Petersburg Units’ viability. He

5 recommended the Commission deny IPL’s CPCN request and require IPL to begin

6 planning for the retirement of the Petersburg Generating Station through its current

7 IRP process.17 The OUCC ultimately settled with IPL and supported approving

8 IPL’s compliance projects, and the Commission approved the settlement.18

9 Although the OUCC agreed to IPL’s Compliance Plans in Cause Nos.

10 44242 and 44540, it is unclear whether the agency would have continued to support

11 these plans had IPL made it aware of the NSR allegations against IPL, or that it

12 could result in the earlier retirement of Petersburg Units 1 and 2. Additionally,

13 although the OUCC was aware of the NOVs in Cause No. 44794 and settled with

14 IPL to allow the retrofits, IPL assured the Commission and the OUCC it did not

15 anticipate being required to install additional controls for NAAQS or NSR beyond

16 those already included in its economic analysis.19

17 Q: Does the OUCC recommend denying recovery for all remaining costs when 18 Peterburg Units 1 and 2 retire due to the Consent Decree? 19 A: No, the OUCC does not recommend complete denial of the cost recovery IPL

20 requests in this case. However, based on the events leading to the Consent Decree,

16 Cause No. 44794, Final Order, p. 6. 17 Id., pp. 8-9. 18 Id., pp. 34-35. 19 Id., p. 10. Public’s Exhibit No. 2 Cause No. 45502 Page 12 of 15

1 IPL’s past operation of Petersburg, and IPL not informing the Commission of the

2 NOVs at critical decision points regarding whether to retrofit or retire Petersburg

3 Units 1 and 2, AES Indiana should not be entitled to its full ratemaking request in

4 this proceeding. As Mr. Blakley indicates in his testimony, he is recommending

5 IPL be permitted to earn a return “of” and not a return “on” the remaining value of

6 Petersburg Units 1 and 2 when they are retired. He also recommends IPL

7 immediately credit customers, through its ECR tracker, all costs included in its

8 current base rates associated with the operation and maintenance of Petersburg

9 Units 1 and 2 as soon as the units are retired.

10 Q: Is the OUCC advocating that Petersburg Units 1 and 2 should not be retired? 11 A: No, the OUCC is not advocating Petersburg Units 1 and 2 remain operational

12 through their originally anticipated retirement dates. IPL’s 2019 IRP results,

13 combined with my earlier concern of installing SNCR on Unit 4 in time for the

14 Consent Decree’s July 2023 deadline, do not support operating Petersburg Units 1

15 and 2 until the retirement dates IPL assumed in Cause No. 45029 or its 2016 IRP.20

III. CONCLUSIONS AND RECOMMENDATION

16 Q: What do you conclude and recommend in this proceeding? 17 A: The Consent Decree and its associated costs contributed to IPL retiring Petersburg

18 Units 1 and 2 earlier than expected. Although IPL maintains it did not commit the

19 alleged violations the Consent Decree resolves, its management decisions in

20 operating the Petersburg Generating Station opened it to litigation with

20 See n. 1, p. 1. Public’s Exhibit No. 2 Cause No. 45502 Page 13 of 15

1 environmental regulatory bodies. Additionally, IPL failed to provide the

2 Commission, the OUCC, and intervening parties important information regarding

3 the NOVs at a time when they were considering significant investments to continue

4 operating Petersburg Units 1 and 2. For this reason, I recommend the Commission

5 adopt Mr. Blakley’s recommendations regarding ratemaking and accounting

6 treatment of Petersburg Unit 1’s and Unit 2’s remaining costs upon retirement.

7 Q: Does this conclude your testimony? 8 A: Yes.

Public’s Exhibit No. 2 Cause No. 45502 Page 14 of 15

APPENDIX A

1 Q: Summarize your professional background and experience. 2 A: I graduated from the University of Evansville in 2004 with a Bachelor of Science

3 degree in Environmental Administration. I graduated from Indiana University,

4 Bloomington in May 2007 with a Master of Public Affairs degree and a Master of

5 Science degree in Environmental Science. I have also completed internships with

6 the Environmental Affairs Department at Vectren in the spring of 2004, with the

7 U.S. Environmental Protection Agency in the summer of 2005, and with the U.S.

8 Department of the Interior in the summer of 2006. During my final year at Indiana

9 University, I served as a research and teaching assistant for a Capstone course

10 offered at the School of Public and Environmental Affairs. I also have obtained my

11 OSHA Hazardous Operations and Emergency Response (“HAZWOPER”)

12 Certification. I have been employed by the OUCC since May 2007. As part of my

13 continuing education at the OUCC, I have attended both weeks of the National

14 Association of Regulatory Utility Commissioners’ (“NARUC”) seminar in East

15 Lansing, Michigan, completed three 8-hour OSHA HAZWOPER refresher courses

16 to maintain my certification, and attended the Indiana Chamber of Commerce’s

17 Environmental Permitting Conference.

18 Q: Describe some of your duties at the OUCC. 19 A: I review and analyze utilities’ requests and file recommendations on behalf of

20 consumers in utility proceedings. Depending on the case at hand, my duties may

21 also include analyzing state and federal regulations, evaluating rate design and

22 tariffs, examining books and records, inspecting facilities, and preparing various Public’s Exhibit No. 2 Cause No. 45502 Page 15 of 15

1 studies. Since my expertise lies in environmental science and policy, I assist in

2 many cases where environmental compliance is an issue.

3 Q: Have you previously provided testimony to the Indiana Utility Regulatory 4 Commission (“Commission”)? 5 A: Yes. AFFIRMATION

I affirm, under the penalties for perjury, that the foregoing representations are true.

Senior Utility Analyst Indiana Office of Utility Consumer Counselor

Cause No. 45502 Indianapolis Power & Light d/b/a AES Indiana June 28, 2021 Cause No. 45502 OUCC Attachment CMA-1 Page 1 of 99 Indianapolis Power & Light Company d/b/a AES Indiana Cause No. 45502 AES Indiana Responses to OUCC DR Set 1 Data Request OUCC DR 1 - 8

Please provide any Notice of Violations (“NOVs”) issued from the U.S. Environmental Protection Agency (“EPA”) or the Indiana Department of Environmental Management (“IDEM”) related to the August 2020 Consent Decree imposing requirements to retrofit or retire Petersburg generating units.

Objection:

Response:

See documents compiled in OUCC DR 1-8 Attachment 1.

12 Cause No. 45502 OUCC Attachment CMA-1 Page 2 of 99 Indianapolis Power & Light Company d/b/a AES Indiana Cause No. 45502 AES Indiana Responses to OUCC DR Set 1 Data Request OUCC DR 1 - 9

If AES Indiana objects to providing the information in the previous question (OUCC Data Request 1-7), please provide specific references where the OUCC can obtain copies of the NOVs, including the IDEM Virtual Filing Cabinet (“VFC”) document numbers.

Objection:

Response:

See response to OUCC DR 1-8.

13 Cause No. 45502 OUCC Attachment CMA-1 Page 3 of 99 Indianapolis Power & Light Company d/b/a AES Indiana Cause No. 45502 AES Indiana Responses to OUCC DR Set 1 Data Request OUCC DR 1 - 10

Regarding AES Indiana’s 2019 Integrated Resource Plan: a. How heavily did the Consent Decree influence AES Indiana’s modeling in its 2019 Integrated Resource Plan? b. Were Consent Decree costs modeled in the IRP? c. If Consent Decree costs were modeled in the IRP, please provide the amount that was included in the modeling inputs by unit. Please also provide a breakdown of these costs, indicating the amount each project or compliance activity contributed to the total inputs for the Consent Decree. d. If Consent Decree costs were modeled in the IRP, did they change the outcome of the short- term action plan? Please explain. e. If the response to (d) indicates that the Consent Decree did not change the outcome of the short- term action plan, did AES Indiana inform other parties involved in the Consent Decree that it intended to retire Petersburg Units 1 and 2 regardless of the Consent Decree?

Objection: AES Indiana objects to the request on the grounds and to the extent the request exceeds the scope of this proceeding and is not reasonably calculated to lead to the discovery of relevant or admissible evidence. AES Indiana further objects to the request on the grounds and to the extent the request solicits confidential settlement communications protected from admissibility by Indiana Rule of Evidence 408 and Federal Rule of Evidence 408. AES Indiana further objects to the Request on the grounds and to the extent it is vague and ambiguous. Subject to and without waiver of the foregoing objections, AES Indiana provides the following response.

Response:

a. As an initial matter, AES Indiana clarifies that the Consent Decree was lodged with the federal district court of the Southern District of Indiana on August 31, 2020, which was after the filing of the 2019 IRP. The negotiations with U.S. Environmental Protection Agency (“EPA”), Indiana Department of Environmental Management, and the U.S. Department of Justice (“DOJ”) were separate from the Company’s 2019 IRP modeling.

The Company’s 2019 IRP modeling team was aware of the potential for additional environmental compliance costs to be incurred, including costs that could arise to resolve allegations made in the Notices of Violation (“NOV”) and Finding of Violation (“FOV”) issued by EPA to IPL in 2009, 2015 and 2016. This potential cost was part of the Company’s consideration of other potential future environmental compliance costs.

More specifically, in October 2009, IPL received an NOV and FOV from the EPA pursuant to Section 113(a) of the CAA. The NOV alleged violations of the CAA at IPL’s Eagle Valley, Harding Street, and Petersburg electric generating facilities, dating back to 1986. The alleged violations primarily pertained to the Prevention of Significant Deterioration (“PSD”) and nonattainment NSR requirements under the CAA. Since receiving the letter, IPL had retired or converted seven of the eleven coal-fired generating units at these

14 Cause No. 45502 OUCC Attachment CMA-1 Page 4 of 99 Indianapolis Power & Light Company d/b/a AES Indiana Cause No. 45502 AES Indiana Responses to OUCC DR Set 1 generating facilities and had installed additional pollution controls on the remaining coal- fired units in response to environmental regulations. In October 2015, IPL received an NOV and FOV from the EPA pursuant to Section 113(a) of the CAA alleging violations of opacity limitations on Pete-3. In February 2016, IPL Petersburg received an NOV and FOV from EPA pursuant to Section 113(a) of the CAA alleging violations of NSR and other CAA regulations, the Indiana SIP, and the Title V Operating Permit. Although the Company could not predict the ultimate resolution of the NOVs, the Company was aware that the Pete units were already equipped with several air pollution controls and reduction measures. It was possible that existing controls and those required by proposed rules or future requirements might satisfy NSR requirements. It was also possible that IPL would be required to install additional pollution control technology, improve the efficiency of existing pollution control technology, and/or take other compliance actions. For example, it was possible that in addition to potential compliance measures required for NAAQS or associated requirements, IPL would be required to install Selective Non-Catalytic Reduction (“SNCR”) at Petersburg to reduce NOx emissions. To capture the potential cost impact of the NOV and FOV, AES Indiana’s 2019 IRP modeling included the cost of adding an SNCR at Petersburg. AES Indiana added $18 million as a capital expenditure to Petersburg Unit 4 in 2020 and approximately $2 million of fixed O&M per year starting in 2020. These additional costs were included in Portfolios 1 and 2.

b. See response to subpart a.

c. See response to subpart a.

d. No. The Preferred Resource Portfolio in the 2019 IRP is Portfolio 3b. Excluding the costs identified in subpart a from Portfolios 1 and 2 would have lowered the PVRR results for Portfolio 1 (no retirements) and Portfolio 2 (only Petersburg 1 retires in 2021) but not to a level that would make either of these portfolios the Preferred Resource Portfolio.

e. See objection. For information on the position of US EPA and IDEM see OUCC DR 1-10 Attachment 1 (Plaintiff’s Memorandum in Support of Plaintiff’s Motion for Entry of Proposed Consent Decree and attachments filed January 14, 2021 in the United States District Court for the Southern District of Indiana, Civil Action No. 3:20-cv-202-RLY- MPB). See: Memorandum page 9: “The Decree provides an incentive for IPL to permanently retire the two Units, which would reduce pollutant emissions from the Facility even more than if IPL installed the new control device.”

Memorandum pages 12-13:

Wisconsin DNR’s comments also suggest that the Decree’s recognition that IPL may retire two of its Units early (allowing IPL to forego installation of the SNCR) is meaningless, because IPL already announced its intention to retire Units 1 and 2

15 Cause No. 45502 OUCC Attachment CMA-1 Page 5 of 99 Indianapolis Power & Light Company d/b/a AES Indiana Cause No. 45502 AES Indiana Responses to OUCC DR Set 1 by 2023. U.S. Resp., Comment No 2. While the United States agrees that IPL officially announced its intention in December 2019 to retire the two Units early, nothing in its announcement compels IPL to retire either or both of those Units early. In contrast, by concretizing IPL’s intention in the Decree to retire Units 1 and 2 by 2023 and tying such early retirement to IPL’s obligation to install an SNCR on Unit 4 by that date, the proposed Decree creates a strong incentive for IPL to follow through with its expressed intention to retire the two units by 2023, even if circumstances should change. Further, the retirement must be permanent (i.e., IPL cannot ever restart the Units) and must comply with all relevant federal and state requirements. U.S. Resp., Response No. 2.

Memorandum, Exhibit 2, Comment 2 (footnotes omitted): Wisconsin DNR is correct that the Decree is not the first and only forum in which IPL signified its intention to retire Petersburg Units 1 and 2 early. In December 2019, IPL filed its triennial Integrated Resource Plan (IRP) with the Indiana Utility Regulatory Commission, officially announcing its intention to retire Petersburg Unit 1 by 2021 and Petersburg Unit 2 by 2023, and to make a transition to cleaner resources.

As IPL explained in the IRP:

Based on extensive modeling, IPL has determined that the cost of operating Petersburg Units 1 and 2 exceeds the value customers receive compared to alternative resources. Retirement of these units allows the company to cost effectively diversify the portfolio and transition to cleaner, more affordable resources while maintaining a reliable system.

IPL’s 2019 IRP’s Non-Technical Summary, at 6.

As Wisconsin DNR pointed out, the Energy Information Administration (part of the U.S. Department of Energy), in a report filed the first quarter of 2020, noted IPL’s intention to retire the two units early, relying on information provided by IPL based on IPL’s 2019 IRP.

Significantly, the IRP is only an expression of intention regarding the company’s future. IPL retains the authority to decide to keep one or both of the Units, because the 2019 IRP and other filings do not compel IPL to retire either or both of them. As IPL, in the IRP, put it:

The Integrated Resource Plan is viewed as a guide for future resource decisions made at a snapshot in time. Resource decisions, particularly those beyond the five-year horizon, are subject to change based on future analyses and regulatory filings.

IPL’s 2019 IRP’s Non-Technical Summary, at 2….

16 Cause No. 45502 OUCC Attachment CMA-1 Page 6 of 99 Indianapolis Power & Light Company d/b/a AES Indiana Cause No. 45502 AES Indiana Responses to OUCC DR Set 1

17 Cause No. 45502 OUCC Attachment CMA-1 Page 7 of 99 Indianapolis Power & Light Company d/b/a AES Indiana Cause No. 45502 AES Indiana Responses to OUCC DR Set 1 Data Request OUCC DR 1 - 11

Does AES Indiana plan or is currently considering retiring the remaining Petersburg units within the next five years?

Objection:

Response:

The Company gives consideration to its resource mix on an ongoing basis. The Company anticipates this item will be addressed in the next IRP.

18 Cause No. 45502 AES Indiana OUCC Attachment CMA-1 Cause No. 45502 Page 8 of 99 OUCC DR 1-8 Attachment 1 Page 1 of 37 Cause No. 45502 AES Indiana OUCC Attachment CMA-1 Cause No. 45502 Page 9 of 99 OUCC DR 1-8 Attachment 1 Page 2 of 37 Cause No. 45502 AES Indiana OUCC Attachment CMA-1 Cause No. 45502 Page 10 of 99 OUCC DR 1-8 Attachment 1 Page 3 of 37 Cause No. 45502 AES Indiana OUCC Attachment CMA-1 Cause No. 45502 Page 11 of 99 OUCC DR 1-8 Attachment 1 Page 4 of 37 Cause No. 45502 AES Indiana OUCC Attachment CMA-1 Cause No. 45502 Page 12 of 99 OUCC DR 1-8 Attachment 1 Page 5 of 37 Cause No. 45502 AES Indiana OUCC Attachment CMA-1 Cause No. 45502 Page 13 of 99 OUCC DR 1-8 Attachment 1 Page 6 of 37 Cause No. 45502 AES Indiana OUCC Attachment CMA-1 Cause No. 45502 Page 14 of 99 OUCC DR 1-8 Attachment 1 Page 7 of 37 Cause No. 45502 AES Indiana OUCC Attachment CMA-1 Cause No. 45502 Page 15 of 99 OUCC DR 1-8 Attachment 1 Page 8 of 37 Cause No. 45502 AES Indiana OUCC Attachment CMA-1 Cause No. 45502 Page 16 of 99 OUCC DR 1-8 Attachment 1 Page 9 of 37 Cause No. 45502 AES Indiana OUCC Attachment CMA-1 Cause No. 45502 Page 17 of 99 OUCC DR 1-8 Attachment 1 Page 10 of 37 Cause No. 45502 AES Indiana OUCC Attachment CMA-1 Cause No. 45502 Page 18 of 99 OUCC DR 1-8 Attachment 1 Page 11 of 37 Cause No. 45502 AES Indiana OUCC Attachment CMA-1 Cause No. 45502 Page 19 of 99 OUCC DR 1-8 Attachment 1 Page 12 of 37 Cause No. 45502 AES Indiana OUCC Attachment CMA-1 Cause No. 45502 Page 20 of 99 OUCC DR 1-8 Attachment 1 Page 13 of 37 Cause No. 45502 AES Indiana OUCC Attachment CMA-1 Cause No. 45502 Page 21 of 99 OUCC DR 1-8 Attachment 1 Page 14 of 37 Cause No. 45502 AES Indiana OUCC Attachment CMA-1 Cause No. 45502 Page 22 of 99 OUCC DR 1-8 Attachment 1 Page 15 of 37 Cause No. 45502 AES Indiana OUCC Attachment CMA-1 Cause No. 45502 Page 23 of 99 OUCC DR 1-8 Attachment 1 Page 16 of 37 Cause No. 45502 AES Indiana OUCC Attachment CMA-1 Cause No. 45502 Page 24 of 99 OUCC DR 1-8 Attachment 1 Page 17 of 37 Cause No. 45502 AES Indiana OUCC Attachment CMA-1 Cause No. 45502 Page 25 of 99 OUCC DR 1-8 Attachment 1 Page 18 of 37 Cause No. 45502 AES Indiana OUCC Attachment CMA-1 Cause No. 45502 Page 26 of 99 OUCC DR 1-8 Attachment 1 Page 19 of 37 Cause No. 45502 AES Indiana OUCC Attachment CMA-1 Cause No. 45502 Page 27 of 99 OUCC DR 1-8 Attachment 1 Page 20 of 37 Cause No. 45502 AES Indiana OUCC Attachment CMA-1 Cause No. 45502 Page 28 of 99 OUCC DR 1-8 Attachment 1 Page 21 of 37 Cause No. 45502 AES Indiana OUCC Attachment CMA-1 Cause No. 45502 Page 29 of 99 OUCC DR 1-8 Attachment 1 Page 22 of 37 Cause No. 45502 AES Indiana OUCC Attachment CMA-1 Cause No. 45502 Page 30 of 99 OUCC DR 1-8 Attachment 1 Page 23 of 37 Cause No. 45502 AES Indiana OUCC Attachment CMA-1 Cause No. 45502 Page 31 of 99 OUCC DR 1-8 Attachment 1 Page 24 of 37 Cause No. 45502 AES Indiana OUCC Attachment CMA-1 Cause No. 45502 Page 32 of 99 OUCC DR 1-8 Attachment 1 Page 25 of 37 Cause No. 45502 AES Indiana OUCC Attachment CMA-1 Cause No. 45502 Page 33 of 99 OUCC DR 1-8 Attachment 1 Page 26 of 37 Cause No. 45502 AES Indiana OUCC Attachment CMA-1 Cause No. 45502 Page 34 of 99 OUCC DR 1-8 Attachment 1 Page 27 of 37 Cause No. 45502 AES Indiana OUCC Attachment CMA-1 Cause No. 45502 Page 35 of 99 OUCC DR 1-8 Attachment 1 Page 28 of 37 Cause No. 45502 AES Indiana OUCC Attachment CMA-1 Cause No. 45502 Page 36 of 99 OUCC DR 1-8 Attachment 1 Page 29 of 37 Cause No. 45502 AES Indiana OUCC Attachment CMA-1 Cause No. 45502 Page 37 of 99 OUCC DR 1-8 Attachment 1 Page 30 of 37 Cause No. 45502 AES Indiana OUCC Attachment CMA-1 Cause No. 45502 Page 38 of 99 OUCC DR 1-8 Attachment 1 Page 31 of 37 Cause No. 45502 AES Indiana OUCC Attachment CMA-1 Cause No. 45502 Page 39 of 99 OUCC DR 1-8 Attachment 1 Page 32 of 37 Cause No. 45502 AES Indiana OUCC Attachment CMA-1 Cause No. 45502 Page 40 of 99 OUCC DR 1-8 Attachment 1 Page 33 of 37 Cause No. 45502 AES Indiana OUCC Attachment CMA-1 Cause No. 45502 Page 41 of 99 OUCC DR 1-8 Attachment 1 Page 34 of 37 Cause No. 45502 AES Indiana OUCC Attachment CMA-1 Cause No. 45502 Page 42 of 99 OUCC DR 1-8 Attachment 1 Page 35 of 37 Cause No. 45502 AES Indiana OUCC Attachment CMA-1 Cause No. 45502 Page 43 of 99 OUCC DR 1-8 Attachment 1 Page 36 of 37 Cause No. 45502 AES Indiana OUCC Attachment CMA-1 Cause No. 45502 Page 44 of 99 OUCC DR 1-8 Attachment 1 Page 37 of 37 CaseCause 3:20-cv-00202-RLY-MPB No. 45502 Document 17 Filed 01/14/21 Page 1 of 18 PageID #: 214 AES Indiana OUCC Attachment CMA-1 Cause No. 45502 Page 45 of 99 OUCC DR 1-10 Attachment 1 Page 1 of 55

IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF INDIANA

______) UNITED STATES OF AMERICA, ) ) and ) ) THE STATE OF INDIANA, ) ) Plaintiffs ) ) v. ) Civil Action No. 3:20-cv-202-RLY-MPB ) INDIANAPOLIS POWER & LIGHT ) COMPANY, ) ) Defendant. ) ______)

MEMORANDUM IN SUPPORT OF PLAINTIFFS’ MOTION FOR ENTRY OF PROPOSED CONSENT DECREE

The United States, on behalf of the U.S. Environmental Protection Agency (EPA), and the

State of Indiana (Indiana or State), on behalf of the Indiana Department of Environmental

Management (collectively, the Plaintiffs or Governments), jointly file this Memorandum

(Memorandum) in Support of Plaintiffs’ Motion For Entry (Motion) of Proposed Consent Decree

(Consent Decree or Decree) with Indianapolis Power & Light Company (IPL).

Plaintiffs jointly filed a Notice of Lodging of Proposed Decree with the Court on August 31,

2020 (ECF No. 3), after which the proposed Decree was published in the Federal Register for a 30-

day notice and comment period. Simultaneously with the lodging of the proposed Decree, the

Plaintiffs filed a Complaint in this action against IPL, alleging violations of the Clean Air Ac t and

related state claims at IPL’s Petersburg Generating Station (Facility), located in Pike County,

Indiana. See Complaint, ECF No. 1. The Complaint seeks injunctive relief and civil penalties. CaseCause 3:20-cv-00202-RLY-MPB No. 45502 Document 17 Filed 01/14/21 Page 2 of 18 PageID #: 215 AES Indiana OUCC Attachment CMA-1 Cause No. 45502 Page 46 of 99 OUCC DR 1-10 Attachment 1 Page 2 of 55

The proposed Consent Decree, for which Plaintiffs now seek entry, will remedy the

Complaint’s alleged violations. Under the proposed Decree, as explained more fully below, IPL will

reduce pollutant emissions by 1) installing a new pollutant control system, although IPL is released

from that obligation if it retires two of its fossil fuel-fired units prior to the scheduled installation

date; and 2) continuously operate the Facility’s existing pollutant control systems to meet reduced

emission rates. Also, IPL will pay a civil penalty to the United States and to Indiana; perform an on-

site Environmental Mitigation Project; and perform a State-Only Environmentally Beneficial Project.

At the time of lodging the proposed Consent Decree, the Governments asked the Court to

defer action on the Decree while the United States submitted the proposed settlement for public

review and comment pursuant to 28 C.F.R. § 50.7. On September 8, 2020, the Department of Justice

published notice of the proposed Consent Decree in the Federal Register. 85 Fed. Reg. 55,497

(September 8, 2020). The United States received two sets of public comments on the Decree.

The first set of comments, an October 8, 2020, letter submitted by the State of Wisconsin

Department of Natural Resources (Wisconsin DNR), assert that the Decree should not be finalized as

proposed until an alternative agreement is developed that addresses the several concerns – mostly of

a technical nature – in the letter. The second set of comments, an October 8, 2020, letter jointly

submitted by the Sierra Club, the Environmental Law & Policy Center, the Hoosier Environmental

Council and the Citizens Action Coalition of Indiana (hereinafter, Sierra Club), object to the

Environmental Mitigation Project and/or propose revisions to it. Also, while welcoming the State-

Only Environmentally Beneficial Project, Sierra Club requests that the agreed-upon funding for such

project be increased. The two sets of comments and the United States’ responses to such comments

are discussed in Part II.E., below. The comments themselves are attached as Exhibit 1 hereto, and

the United States’ Response to Comments (U.S. Resp.), along with a declaration from EPA engineer

Ethan Chatfield, are attached as Exhibit 2.

2

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The United States, in consultation with Indiana, has carefully considered the public

comments received on the proposed Consent Decree. Plaintiffs believe the proposed Consent Decree

to be fair, reasonable, consistent with the Clean Air Act (Act) and applicable state laws, and in the

public interest. The comments do not disclose facts or considerations leading the Governments to

believe that the Consent Decree is inappropriate, improper, or inadequate. See Decree ¶ 130.

Accordingly, the Governments respectfully request approval, signature and entry of the proposed

Consent Decree by this Court. IPL has agreed to entry of the proposed Consent Decree by virtue of

signing the Decree, id., and therefore does not oppose the Motion.

I. BACKGROUND

A. The Facility and the Alleged Violations

IPL, a subsidiary of AES Corporation, owns the Petersburg Station, a fossil fuel-fired

steam electric plant consisting of four coal-fired boilers and corresponding turbines (hereinafter,

Units) for electricity generation. Units 1 through 4 are “electric steam generating units” with net

generating capacities of 229, 412, 540, and 530 megawatts, respectively. The Facility has in

place various pollution control equipment designed to reduce pollutant emissions. All four Units

contain wet flue gas desulfurization (FGD) for sulfur dioxide (SO2) control and three of the four

Units have low-nitrogen oxide burners with over-fire air systems for nitrogen oxides (NOx)

control. Also, Units 2 and 3 have Selective Catalytic Reduction (SCR) Systems for NOx control.

For particulate matter (PM) controls, Units 1 and 4 have electrostatic precipitators (ESPs), Unit 2

has a baghouse, and Unit 3 has an ESP with a baghouse. All four Units have sulfuric acid

(H2SO4) mist controls. Historically, the Facility’s pollutant exceedances have been caused by

IPL’s failure to continuously run the Facility’s FGDs, SCRs and H2SO4 systems.

The Complaint alleges that IPL modified several Units at the Facility, failed to obtain the

necessary permits and failed to install the controls necessary under the Act to sufficiently reduce

3

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SO2, NOX, PM and/or H2SO4 emissions, in violation of the Prevention of Significant

Deterioration and the Nonattainment New Source Review provisions of the Act. The Complaint

also alleges that IPL violated and continues to violate the Indiana State Implementation Plan, the

Act’s New Source Performance Standards and/or the Facility’s Title V Permit by exceeding

opacity limitations and emitting SO2 and/or PM (including in some cases bypassing its SO2

controls) in excess of the applicable opacity limits.

B. The Proposed Consent Decree

The proposed Consent Decree requires IPL to reduce its Facility’s emissions of NOx,

SO2, PM and H2SO4. IPL will install a pollution control device known as a Selective Non-

Catalytic Reduction System (SNCR) on one of the plant’s coal-fired Units, improve its sulfuric

acid mitigation system, and continuously operate all of its pollution control equipment to meet

levels that will achieve reductions in NOx, SO2, PM and H2SO4 emissions. Decree ¶¶ 6, 8, 14,

18-19, and 25-27. Also, the agreement recognizes that IPL may permanently retire two of its

four Petersburg coal-fired Units (Units 1 and 2). IPL may forego installing the SNCR if it in fact

permanently retires the two coal-fired Units prior to July 1, 2023, the deadline under the Decree

by which IPL must install the SNCR. Decree ¶ 7.

Further, IPL will pay a total civil penalty of $1.525 million, of which $925,000 will go to

the United States and $600,000 to the State of Indiana. Decree ¶ 58. IPL will also undertake an

Environmental Mitigation Project costing $5 million to mitigate some of the harm to the

environment caused by the Facility’s excess emissions over the years. IPL will submit a

proposal to EPA and the State to construct and operate a system that will provide a new, non-

emitting source of power at an on-site location known as the auxiliary electrical system. The

new source of power is expected over time to reduce emissions of SO2, NOx and PM in the

4

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vicinity of the Facility. Decree ¶¶ 50 and 57, and Appendix A. In addition, at the request of

Indiana, IPL agrees to expend $325,000 to undertake a State-Only Environmentally Beneficial

Project designed to acquire, restore and preserve some ecologically significant parcels of land

near the Facility. Decree ¶¶ 61-62, and Appendix B.

The proposed Consent Decree also contains detailed record-keeping, reporting and notice

requirements, as well as multiple enforcement mechanisms and incentives for compliance,

including stipulated penalties for non-compliance, force majeure and dispute resolution

provisions, and provisions for resolution of claims. Decree, e.g., ¶¶ 68-69, 74-76, 79, 81, 83-84,

89-90, 93, and 98.

As explained more fully below, none of the public comments received on the proposed

Decree discloses facts or considerations indicating that the proposed Decree is inappropriate,

improper, or inadequate. The Court should therefore enter the Decree, so that the settlement’s

environmental and community benefits can be realized without delay.

II. ARGUMENT

A. Standard of Review

As the Seventh Circuit and this Court (and other courts) have emphasized, in considering

an environmental settlement proposed by the government, a court “must defer to the expertise of

the agency and to the federal policy encouraging settlement” and “must approve a consent decree

if it is reasonable, consistent with [the statute]’s goals, and substantively and procedurally fair.”

United States v. George A. Whiting Paper Co., 644 F.3d 368, 372 (7th Cir. 2011); United States

v. Akzo Coatings of Am., Inc., 949 F.2d 1409, 1424, 1426 (6th Cir. 1991); United States v. City of

Evansville, Ind., No. 09-128, 2011 WL 2470670, at *4 (S.D. Ind. June 20, 2011). Both the

Seventh Circuit and this Court have cautioned that a district court should be “chary of

5

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disapproving a consent decree,” and may not deny approval unless the decree “is unfair,

unreasonable, or inadequate.” EEOC v. Hiram Walker & Sons, Inc., 768 F.2d 884, 889-90 (7th

Cir. 1985); United States v. First Merchants Bank, No. 19-2365, 2019 WL 3779768, at *2 (S.D.

Ind. Aug. 12, 2019). Put another way, a court should approve a consent decree if it is “fair,

adequate, reasonable, and appropriate under the particular facts and that there has been valid

consent by the concerned parties.” Duncanson v. Wine and Canvas IP Holdings, LLC, No. 16-

788, 2020 WL 2840010, at *2 (S.D. Ind. May 29, 2020) (quoting Bass v. Fed. Sav. & Loan Ins.

Corp., 698 F.2d 328, 330 (7th Cir. 1983).

In its review, the Court must keep in mind the “strong policy favoring voluntary

settlement of litigation,” and “[t]his presumption is particularly strong where a consent decree

[sic] has been negotiated by the Department of Justice on behalf of a federal agency, like the

[EPA], which enjoys substantial expertise in the environmental field.” Evansville, 2011 WL

2470670, at *4 (quoting from United States v. BP Expl. & Oil Co., 167 F. Supp. 2d 1045, 1049-

50 (N.D. Ind. 2001) (omitting citations); see also Whiting Paper, 644 F.3d at 372. This Court

further summarized the standard:

The underlying purpose of this review is to determine whether the decree adequately protects and is consistent with the public interest. In other words, a consent decree will not be approved where the agreement is illegal, a product of collusion, inequitable, or contrary to the public good. In reviewing a consent decree, this Court need not inquire into the precise legal rights of the parties, nor reach and resolve the merits of the parties' claims. Rather, it is ordinarily sufficient if this Court determines whether the consent decree is appropriate under the particular facts of the case.

Evansville, 2011 WL 2470670, at *4 (quoting from BP Expl. & Oil Co., 167 F. Supp. 2d at 1049-

50) (omitting citations), noting also that “the test is not whether this Court would have fashioned

the same remedy nor whether it is the best possible settlement.” Nor should the Court “substitute

6

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its judgment for that of the parties nor conduct the type of detailed investigation required if the

parties were actually trying the case.” Id.

B. The Consent Decree is Procedurally and Substantively Fair

In assessing the “fairness” of a proposed Consent Decree, courts examine whether a

decree is both procedurally and substantively fair. Whiting Paper, 644 F.3d at 372; United States

v. Cannons Eng’g Corp., 899 F.2d 79, 86-87 (1st Cir. 1990); Evansville, 2011 WL 2470670, at

*4. To determine whether a proposed settlement is procedurally and substantively fair, courts

look to factors such as “the strength of plaintiff’s case, the good faith efforts of the negotiators,

the opinions of counsel, and the possible risks involved in the litigation if the settlement is not

approved.” Akzo Coatings, 949 F.2d at 1435 (citation omitted).

Generally speaking, courts find procedural fairness where the settlement was negotiated

at arm’s length among experienced counsel. In re Tutu Water Wells CERCLA Litig., 326 F.3d

201, 207, 209 (3d Cir. 2003). See also United States v. BP Prods. N. Am., Inc., No. 12-207, 2012

WL 5411713, at *2 (N.D. Ind. Nov. 6, 2012). If the decree was the product of good faith, arms’

length negotiations, it is presumptively valid. United States v. Oregon, 913 F.2d 576, 581 (9th

Cir. 1990); see also United States v. Comunidades Unidas Contra La Contaminacion

(“CUCCo”), 204 F.3d 275, 281 (1st Cir. 2000); Evansville, 2011 WL 2470670, at *5 (noting

that there is “absolutely no indication that the negotiations were anything other than arms-

length…”). Here, the Consent Decree is the result of good faith and arm’s length bargaining

between experienced environmental counsel over the course of several years. As was the case in

7

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Evansville, there is absolutely no indication in this matter that the negotiations were anything

other than arms’ length, and nothing in the public comments suggests otherwise. 1

A decree’s substantive fairness has been characterized as involving “concepts of

corrective justice and accountability: a party should bear the cost of the harm for which it is

legally responsible.” Evansville, 2011 WL 2470670, at *7 (quoting from CUCCo, 204 F.3d at

281). As this Court further noted, “[i]n environmental cases, EPA's expertise must be given the

benefit of the doubt when weighing substantive fairness.” Id (quoting from CUCCo at 281). As

discussed above, included as part of the United States’ Response to Comments is a declaration

by Ethan Chatfield, EPA Environmental Engineer with the EPA Region 5 office (Chatfield

Decl.), explaining how the relief provided by the proposed Decree -- in particular the provisions

for the new control device, reduced emission rates, emission tonnage caps and requirement to

continuously operate the pollutant controls -- as well as the Environmental Mitigation Project

will result in reduced pollutant emissions and will benefit the environment. Chatfield Decl. ¶¶

10, 13-15, and 20-22. The Court should defer to EPA’s expertise to conclude that the Decree’s

compliance measures, as well as the Environmental Mitigation Project and State-Only

Environmentally Beneficial Project, are substantively fair and appropriate resolutions of IPL’s

liabilit y for the violations alleged in the Complaint.2

1 The Governments’ willingness to thoroughly consider and respond to all public comments further demonstrates procedural fairness. See United States v. Lexington–Fayette Urban Cty. Gov’t, 591 F.3d 484, 489 (6th Cir. 2010) (“The United States’ good faith is further evidenced by its manifested willingness . . . to thoroughly consider all oral and written comments made with regard to the proposed decree” (internal quotation marks and citation omitted)).

2 The Court should similarly defer to EPA’s and DOJ’s expertise in determining the appropriate penalty amount in this matter, which is not challenged by the commenters. 8

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C. The Consent Decree is Reasonable.

The reasonableness of a consent decree is basically “a question of technical adequacy,

primarily concerned with the probable effectiveness of proposed remedial responses.” Cannons

Eng’g, 899 F.2d at 89-90; see also Akzo Coatings, 949 F.2d at 1436. A proposed Consent

Decree is reasonable if it includes stringent and detailed requirements related to the operation

and maintenance of the Facility, as well as extensive reporting requirements, which will

accomplish the goal of cleaning the environment. See CUCCo 204 F.3d at 281. See also First

Merchants Bank, 2019 WL 3779768, at *2 (upholding a settlement agreement as reasonable

because, among other things, “[i]t details specific policies that address the allegations contained

in the complaint and provides for extensive review and reporting to assure any future problems

are promptly discovered and remedied”).

Based on a consideration of the above-referenced factors, the proposed Consent Decree is

reasonable. The comprehensive injunctive relief that IPL will perform will improve air quality,

protect the environment, and address the hazards of its alleged non-compliance. The Decree

requires that IPL install a new control device (unless it permanently retires two of its four coal-

fired Units beforehand) and continuously operate its existing control devices to meet reduced

emission rates, all of which will improve compliance and help eliminate excess pollution. See

U.S. Resp., Response Nos. 1-3. The Decree provides an incentive for IPL to permanently retire

the two Units, which would reduce pollutant emissions from the Facility even more than if IPL

installed the new control device. Id., Response No. 2; Chatfield Decl. ¶ 15.

Following entry and/or improvements at the Facility, IPL will be responsible for strict

compliance, at the risk of stipulated penalties, with the applicable standards set forth in the

agreement. In addition, the extensive reporting requirements will improve the accuracy of

9

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information about the nature and extent of the company’s compliance with the Clean Air Act and

other applicable state laws and permits. All of these measures will help clean the environment

and help assure that any future problems are promptly discovered and remedied.

D. The Consent Decree is Consistent with the Goals of the Clean Air Act and Applicable State Laws, and Serves the Public Interest

In evaluating a proposed consent decree's consistency with the Clean Air Act, courts

consider the extent to which it comports with the goals of Congress. See BP Expl. & Oil, 167

F.Supp.2d at 1054. “Of necessity, consideration of the extent to which consent decrees are

consistent with Congress' discerned intent involves matters implicating fairness and

reasonableness” and “cannot be viewed in majestic isolation.” Cannons Eng'g, 899 F.2d at 90.

The injunctive relief required by the proposed Consent Decree, including installation of a

new pollution control device (unless Units 1 and 2 are permanently shut down beforehand) and

continuous operation of the existing pollution control systems to meet reduced pollutant rates, is

anticipated to result in significant emissions reductions of SO2, NOx, PM and H2SO4. See U.S.

Resp., Response Nos.1-3; Chatfield Decl. ¶¶ 13-15, and 20-21. As such, the relief will “protect

and enhance the quality of the Nation's air resources so as to promote the public health and

welfare and the productive capacity of its population” -- the Clean Air Act's primary purpose.

See 42 U.S.C. § 7401(b)(1); Chatfield Decl. ¶ 21.

IPL will take further steps to improve the environment by undertaking an Environmental

Mitigation Project (Project) to help mitigate the harm to the environment in the close proximity

of the Facility. Within six months following entry of the Decree, IPL will submit a proposal for

EPA’s and the State’s approval to install and operate a new, non-emitting source of energy on a

portion of the site that would serve the Facility’s internal load. Such new energy source, which

IPL must maintain for at least 10 years and up to 25 years, is anticipated to reduce hazardous

10

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emissions on site. See Decree, Appendix A, Parts I.C and G and II.B; U.S. Resp., Response Nos.

5-6; Chatfield Decl. ¶ 22.

In addition, IPL will pay a substantial penalty for its non-compliance, which will further

deter future Clean Air Act (and applicable state law) violations at the Facility, as well as at other

regulated facilities across the nation. See Decree, Section XVIII (Stipulated Penalties).

Finally, IPL will conduct a State-Only Environmentally Beneficial Project in which IPL

will acquire lands near the Facility that will result in much needed ecological preservation and

restoration of such lands. See Decree ¶¶ 61-67, and Appendix B, Part I.A. Among other

benefits, the State-Only project will help ameliorate and restore past detrimental effects to plant

life and vegetation in the vicinity of the electric plant that can be attributed to high levels of SO2,

ozone and PM 2.5 emissions. Decree, Appendix B, Part I.B. Given that Indiana proposed such a

project in response to concerns raised over the years by residents in the proximity of the IPL

Facility about potential deforestation and the lack of restoration and/or preservation of

ecologically significant parcels of land in the area, the State-Only project is expected not only to

ameliorate environmental hazards but also to benefit the local community and promote the public

interest. See Decree ¶ 61, and Appendix B, Part I.A and B.

Entry of the proposed Consent Decree would further serve the public interest by

providing environmental benefits more quickly and at less cost than could be achieved through

litigation. “The only likely alternative to the Consent Decree would be complex and potentially

protracted litigation that would expend limited governmental and judicial resources -- a risky

proposition with uncertain results.” BP Prods. N. Am., Inc., 2012 WL 5411713, at *4.

Accordingly, the proposed Consent Decree is in the public interest, as well as a reasonable

settlement. See First Merchants Bank, 2019 WL 3779768, at *2.

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In short, the proposed Consent Decree accomplishes the goal of cleaning the

environment, provides significant environmental benefits, furthers the goals of the Clean Air Act

and applicable state laws, and is in the public interest. See BP Prods. N. Am., Inc., 2012 WL

5411713, at *3-4; BP Expl. & Oil Co., 167 F. Supp. 2d at 1053.

E. Public Comments have not Disclosed Facts or Considerations Indicating that the Proposed Consent Decree is Inappropriate, Improper or Inadequate

1. Comments submitted by the Wisconsin DNR do not warrant rejection of the Decree

No comments submitted by the Wisconsin DNR suggest that the proposed Decree should

not be approved. One of Wisconsin DNR’s comments opines that the Decree should have

required IPL to install on Unit 4 an SCR rather than an SNCR to reduce NOx emissions.

Wisconsin DNR asserts that an SCR is more widely used and effective in reducing pollution

emissions than an SNCR. U.S. Resp., Comment No. 1. The United States’ Response, while

acknowledging that an SCR is a common and effective control device to limit NOx emissions,

explains that an SNCR, like an SCR, is also designed to result in significant NOx emission

reductions. U.S. Resp., Response No. 1. Based on good faith negotiations, the parties agreed

that an SNCR is an appropriate device to control emissions at Unit 4. EPA anticipates that an

SNCR-controlled Unit 4 will contribute to a substantial reduction in NOx emissions at the

Facility. The Response also notes that the Decree requires the NOx controls on all four Units to

be operated continuously, and that compliance with those requirements, along with the Decree’s

NOx tonnage limits, is expected to substantially reduce IPL’s NOx emissions at the Facility. Id.

Wisconsin DNR’s comments also suggest that the Decree’s recognition that IPL may

retire two of its Units early (allowing IPL to forego installation of the SNCR) is meaningless,

because IPL already announced its intention to retire Units 1 and 2 by 2023. U.S. Resp.,

Comment No 2. While the United States agrees that IPL officially announced its intention in

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December 2019 to retire the two Units early, nothing in its announcement compels IPL to retire

either or both of those Units early. In contrast, by concretizing IPL’s intention in the Decree to

retire Units 1 and 2 by 2023 and tying such early retirement to IPL’s obligation to install an

SNCR on Unit 4 by that date, the proposed Decree creates a strong incentive for IPL to follow

through with its expressed intention to retire the two units by 2023, even if circumstances should

change. Further, the retirement must be permanent (i.e., IPL cannot ever restart the Units) and

must comply with all relevant federal and state requirements. U.S. Resp., Response No. 2.

Finally, Wisconsin DNR asserts that the 30-day rolling average NOx emission rates in the

proposed Consent Decree are too high and do not reflect the emission rates that can actually be

achieved with proper operation of available control technologies. U.S. Resp., Comment No. 3.

The United States’ Response explains that the negotiated NOx rates for the controls at Units 1

through 4, which are based on a more stringent averaging basis (30-day rolling) than the current

averaging basis (annual), are consistent with rates expected to be practically achievable by those

controls. Coupled with the Decree’s requirements to operate all controls continuously, and the

Decree’s annual NOx tonnage limitations, the United States avers that the negotiated NOx rates

for all four Units are anticipated to substantially reduce NOx emissions at the Facility. U.S.

Resp., Response No. 3.

Plaintiffs concede that the negotiated NOx rates are not the lowest rates achievable. The

Governments, however, cannot impose such rates unilaterally. Were the Decree disapproved on

that basis and the parties forced to go back to the drawing board, Plaintiffs would not be assured

of obtaining IPL’s agreement to lower rates. Further, any effort to renegotiate the rates would

take time and delay the deadlines for IPL’s compliance with the many other significant Decree

requirements intended to reduce pollutant emissions at the Facility. And, of course, there is no

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guarantee of success, which in the end could lead not to a negotiated agreement but rather to

lengthy and uncertain litigation. U.S. Resp., Response No. 3.

2. Comments submitted by the Sierra Club do not warrant rejection of the Decree

Appendix A of the Decree, which requires IPL to propose for approval an Environmental

Mitigation Project involving a new, non-emitting source of energy to power the internal load at

the Petersburg Facility, was negotiated in good faith by the Governments and IPL as part of the

overall comprehensive relief package of the proposed Decree. As mentioned above, such Project

is expected to provide meaningful environmental benefits that are tailored to redressing a portion

of the harm caused by IPL’s alleged violations. Sierra Club requests that the parties cancel the

Project in exchange for setting up a Community Environmental Action Committee (Committee)

to assist IPL in selecting and implementing other projects providing certain benefits to the local

community, and redirect IPL’s $5 million obligation for the Project to fund other projects

recommended in the future by the Committee. U.S. Resp., Comment No. 4.

In response, the United States explains that Sierra Club’s proposal, among other things,

lacks specificity and substantive criteria for any hypothetical future projects, and stands in stark

contrast to the detailed terms and requirements set forth in Appendix A for the negotiated

Environmental Mitigation Project. That project is specifically tailored to redressing a portion of

the harm caused by the alleged violations in this matter, and will benefit the local community.

U.S. Resp., Response Nos. 4 and 5; Chatfield Decl. ¶ 22. In contrast, Sierra Club’s vague, open-

ended process, that may or may not produce valuable and mutually agreed-upon projects in the

future, is neither practical nor in the public interest. U.S. Resp., Response No. 4; See United

States v. Deaton, 332 F.3d 698, 714 (4th Cir. 2003) (in evaluating equitable relief such as

remediation or restoration proposals in a Clean Water Act case, courts consider three factors:

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“(1) whether the proposal ‘would confer maximum environmental benefits,’ (2) whether it is

‘achievable as a practical matter,’ and (3) whether it bears ‘an equitable relationship to the

degree and kind of wrong it is intended to remedy,’” (citations omitted)). See also United States

v. Cinergy Corp., 582 F. Supp. 2d 1055, 1060-61 (S.D. Ind. 2008) (asserting relevance of the

Deaton holding to the Clean Air Act).

In a second comment, Sierra Club argues that the Project will increase, not decrease,

pollution, because the new source of power will allow the Facility’s coal-fired boilers to operate

more frequently than they otherwise would and therefore would increase the pollution in the

local community, as well as enrich IPL. U.S. Resp., Comment No. 5. In response, the United

States notes that Sierra Club has not provided any substantiation for its position. Rather, the

new, non-emitting source of power would consist of a renewable energy source, such as solar or

wind energy, free of generating pollutants (including SO2 and NOx) that are currently being

emitted from the burning of fossil fuels. Energy produced from such a “clean” source would

likely offset energy that otherwise would be generated by the coal-fired boilers to serve IPL’s

internal load, thereby reducing pollutant emissions at the Facility and benefitting the local

community. U.S. Resp., Response No. 5.

Sierra Club’s third comment recommends that the Project should be modified in two

ways: 1) instead of providing power to the Facility’s internal load, the on-site non-emitting

resources should be connected to the local grid, so that the Project would provide power to the

local communities and not IPL’s customers in Indianapolis; and 2) the language should be

revised to state that IPL will operate and maintain the non-emitting source only as long as the

Facility’s coal units remain in operation, as opposed to being maintained for a full ten-year

period as mandated by Appendix A. U.S. Resp., Comment No. 6. In response to the

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commenter’s first concern, the United States explains that if the power were provided to the local

grid, which is operated by Duke Energy, the plant’s internal load would not be reduced; further,

it is not known what emission reductions would result, if any, or where they might occur. U.S.

Resp., Response No. 6. In response to the comment’s second concern, although it is true that

Appendix A provides for the Project to be operated for at least ten years, should IPL decide to

retire its entire Facility prior to the ten-year period (which is not its current intention), the parties

can make alternative arrangements within the parameters of the agreement, including via the

Modification provisions in Section XXVI of the Decree. Id

When crafting any negotiated agreement, no side has a crystal ball and can possibly

foresee all potential scenarios that may arise in the future. Thus, no agreement, including this

one, is prescient and can possibly address all future potentialities. Appendix A addresses the

current, real need (and the Governments’ claims) for mitigating a portion of the harm caused by

IPL’s violations, and, once the Decree is entered and the Project implemented, will provide

environmental benefits to the local community for years to come. And as mentioned above, the

Decree contains mechanisms that can be utilized to address, if necessary, changed circumstances

should they arise in the future. U.S. Resp., Response No. 6.

In a final comment, Sierra Club welcomes the State-Only Environmentally Beneficial

Project, in which IPL will acquire lands near the Facility, resulting in much needed ecological

preservation and restoration of such lands. Sierra Club, however, requests that IPL expend at

least $500,000 on the State-only project, to address several other ecological needs that Sierra

Club identifies in the way of additional proposals. U.S. Resp., Comment No. 7. In response, the

United States explains that the agreed-upon amount of $325,000 for the State-only project was

the result of good-faith negotiations, which took into account the “big picture” of the settlement

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package in resolving the Governments’ claims. While Indiana does not agree that the negotiated

amount for the State-only project amount needs to be increased, it acknowledges that there

remain additional needs to conserve and restore ecologically significant land in the area, and for

other important, related projects. Indiana appreciates Sierra Club’s helpful suggestions for

additional proposals and will keep them in mind when considering similar projects in the future.

U.S. Resp., Response No. 7.

* * * * * *

In short, none of the public comments discloses facts or considerations indicating that the

proposed Consent Decree is inappropriate, improper or inadequate. Withholding approval of the

Decree based on the commenters’ objections and/or proposed revisions would require the parties

to go back to the drawing board, with no certainty that an improved project, or any amended

agreement for that matter, would result. At the very least, any effort to renegotiate the Decree’s

compliance provisions, the Environmental Mitigation Project and/or the State-Only

Environmentally Beneficial Project would take significant time and delay the deadlines for IPL’s

compliance with the Decree provisions intended to reduce pollutant emissions at the Facility and

benefit the local community. As such, the proposed Decree should be entered without delay.

III. CONCLUSION

For the reasons outlined above, under the judicial standards applicable to approving

consent decrees, the Court should determine that the proposed Consent Decree is fair,

reasonable, consistent with the goals of the Clean Air Act and applicable state laws, and is in the

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public interest. Accordingly, the Court should grant Plaintiffs’ Motion and approve, sign and

enter the proposed Decree as a judgment of the Court.

Respectfully submitted,

FOR THE UNITED STATES

s/Arnold S. Rosenthal ARNOLD S. ROSENTHAL Senior Attorney Environmental Enforcement Section Environment and Natural Resources Division U.S. Department of Justice

SHELESE EMMONS WOODS Civil Chief Office of the United States Attorney U.S. District Court for the Southern District of Indiana

OF COUNSEL:

SABRINA ARGENTIERI Attorney-Advisor U.S. Environmental Protection Agency

LOUISE GROSS Associate Regional Counsel U.S. Environmental Protection Agency, Region 5

FOR THE STATE OF INDIANA OFFICE OF THE INDIANA ATTORNEY GENERAL

s/Zachary D. Price ZACHARY D. PRICE KELLY S. EARLS Deputy Attorneys General Office of the Indiana Attorney General 302 W. Washington Street, IGCS 5th Floor Indianapolis, IN 46204

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Exhibit 1 CaseCause 3:20-cv-00202-RLY-MPB No. 45502 Document 17-1 Filed 01/14/21 Page 1 of 21 PageID #: 232AES Indiana OUCC Attachment CMA-1 Exhibit 1 Cause No. 45502 State of Wisconsin OUCC DR 1-10 Attachment 1 DEPARTMENTPage 64 of OF99 NATURAL RESOURCES Tony Evers, Governor Page 20 of 55 101 S. Webster Street Preston D. Cole, Secretary Box 7921 Madison WI 53707-7921 Telephone 608-266-2621 Toll Free 1-888-936-7463 TTY Access via relay - 711

October 8, 2020

Mr. Jeffrey Clark Assistant Attorney General Environment and Natural Resources Division U.S. Department of Justice P.O. Box 7611 Washington, D.C. 20044–7611

Subject: Proposed Consent Decree in United States and State of Indiana v. Indianapolis Power & Light Company, D.J. Ref. No. 90–5–2–1–09897/1

Dear Mr. Clark:

This letter is in reference to the proposed consent decree in U.S. and State of Indiana v. Indianapolis Power & Light Company. For reasons described below, this consent decree should not be finalized in its present form.

The consent decree is being proposed to resolve complaints that Indianapolis Power & Light (IPL) modified units at its Petersburg Station and failed to obtain the necessary permits and install the controls necessary under the Clean Air Act to reduce sulfur dioxide (SO2), nitrogen oxides (NOx) and particulate matter (PM) emissions. The proposed consent decree requires IPL to install selective non-catalytic reduction (SNCR) controls at Petersburg Unit 4 by July 1, 2023. However, IPL is released from this obligation if IPL retires Petersburg Units 1 and 2 before the SNCR is installed in Unit 4.

Air quality in Wisconsin is heavily impacted by emissions originating from out of state. Specifically, modeling has long demonstrated how the elevated ozone concentrations measured in Wisconsin are the direct result of emissions of NOx and VOCs in states located to the south, including Indiana. Therefore, Wisconsin has a direct interest in ensuring emissions for Indiana sources are properly controlled, and in the matters covered by this proposed consent decree.

Wisconsin has identified several significant problems with this proposed consent decree:

1. Petersburg Units 1 and 2 are already scheduled to be retired, in 2021 and 2023, respectfully. This can be confirmed by Energy Information Administration information. These retirements have also been included by Indiana in the Eastern Regional Technical Advisory Committee (ERTAC) electricity generating unit (EGU) emission projection tool that used to forecast future emissions for regional ozone modeling purposes. This consent decree, therefore, does not involve or require the early retirement of any units. 2. The proposed consent decree requires only an SNCR to be installed on Unit 4, rather than selective catalytic reduction (SCR), which is widely used and more effective at reducing emissions. 3. The 30-day rolling average emission rates for NOx for all units at Petersburg are too high and do not reflect the emission rates that can be achieved with proper operation of available control technologies. CaseCause 3:20-cv-00202-RLY-MPB No. 45502 Document 17-1 Filed 01/14/21 Page 2 of 21 PageID #: 233AES Indiana OUCC Attachment CMA-1 Cause No. 45502 Page 65 of 99 OUCC DR 1-10 Attachment 1 PagePage 2 21 of 55

For these reasons, this consent decree should not be finalized as written. Instead, parties should develop an alternate agreement that addresses the problems identified above, ensures meaningful emissions reductions beyond a business-as-usual scenario, and fully meets Clean Air Act requirements.

Sincerely,

Gail Good Director Air Management Program cc: Cheryl Heilman, LS/8 James Bridges, LS/8 David Bizot, AM/7 CaseCause 3:20-cv-00202-RLY-MPB No. 45502 Document 17-1 Filed 01/14/21 Page 3 of 21 PageID #: 234AES Indiana OUCC Attachment CMA-1 Cause No. 45502 Page 66 of 99 OUCC DR 1-10 Attachment 1 Page 22 of 55

October 8, 2020

Via Email

Assistant Attorney General U.S. DOJ-ENRD P.O. Box 7611 Washington, D.C. 20044-7611 [email protected]

Re: Notice of Lodging of Proposed Consent Decree under the Clean Air Act in United States and State of Indiana v. Indianapolis Power & Light Company, D.J. Ref. No. 90– 5–2–1–09897/1.

To Whom It May Concern:

On behalf of Sierra Club, Environmental Law & Policy Center, Hoosier Environmental Council, and Citizens Action Coalition of Indiana, we submit these comments1 on the proposed Consent Decree lodged on August 31, 2020 in the United States District Court for the Southern District of Indiana in United States and State of Indiana v. Indianapolis Power & Light Company, Civil Action No. 3:20–cv–202 (D.J. Ref. No. 90–5–2–1–09897/1).2 On the same day as they lodged the proposed Consent Decree, the United States and State of Indiana filed a complaint against Indianapolis Power & Light Company (“IPL”) alleging 1) violations of the Clean Air Act’s New Source Review provisions triggering new permit requirements for major modification at two boilers of the Petersburg plant and 2) violations of the plant’s Title V permit 3 limitations for opacity and sulfur dioxide (SO2) emissions.

1 These comments are timely filed within 30 days of publication of notice in the Federal Register. See 85 Fed. Reg. 55,497 (Sept. 8, 2020). 2 See United States and State of Indiana v. Indianapolis Power & Light Company, Civil Action No. 3:20–cv–202 (S.D. Ind. filed Aug. 31, 2020) (ECF Doc. No. 3) (proposed Consent Decree), available at https://www.epa.gov/enforcement/indianapolis-power-light-company-consent- decree. 3 See United States and State of Indiana v. Indianapolis Power & Light Company, Civil Action No. 3:20–cv–202 (S.D. Ind. filed Aug. 31, 2020) (ECF Doc. No. 1) (Complaint). 1 CaseCause 3:20-cv-00202-RLY-MPB No. 45502 Document 17-1 Filed 01/14/21 Page 4 of 21 PageID #: 235AES Indiana OUCC Attachment CMA-1 Cause No. 45502 Page 67 of 99 OUCC DR 1-10 Attachment 1 Page 23 of 55

We suggest revisions to the proposed Consent Decree that would improve the settlement from the perspective of the local communities that continue to suffer under pollution from the Petersburg coal-burning power plant. The Petersburg plant is one of the worst polluters in the State of Indiana.

The proposed Consent Decree currently offers paltry benefits for the community. Unless IPL abandons its current plan of retiring units 1 and 2 in 2021 and 2023, respectively, the Consent Decree does not require the installation of any new pollution control technologies. Nor is there any program to ensure that the funds IPL will pay under the proposed Consent Decree are directed to benefit the community.

I. The Consent Decree Should Be Revised to Include the Creation of a Community Environmental Action Committee to Assure Community Benefits.

We ask that the Consent Decree be revised to include the creation of a Community Environmental Action Committee tasked with ensuring that the Consent Decree’s funds and projects benefit the local community impacted by pollution from the plant. The charge of the Community Environmental Action Committee should be to assist IPL in selecting and implementing projects that provide real benefits to the local community near the Petersburg plant.

As has been done under at least one other Clean Air Act settlement,4 we ask that the Community Environmental Action Committee be staffed by one representative of the utility, one representative from an academic institution with a focus on public health and/or the environment, and three community members who reside in Pike County, Indiana, the location of the power plant. The projects recommended by the Committee should seek to maximize public health and environmental benefits in Pike County and might include, without limitation:

• Community solar arrays; • Installation of air filtration systems in public schools and homes; • Creation of new public parks; • Health and safety retrofits for low-income customers; • Reducing energy use and overall energy cost burden; • Replacing school buses and municipal vehicles with electric-powered vehicles; and, • Replacing outdoor wood boilers with renewable energy systems, such as solar heating or geothermal systems.

All of these projected would mitigate air pollution in the vicinity of Petersburg, Indiana. The Committee should be tasked with recommending projects on a rolling basis, and should recommend projects totaling at least $5 million no later than December 31, 2021 or some other pre-determined reasonable, near-term date certain. To provide funding for these Committee projects, we ask that, as explained further below, the “environmental mitigation project”

4 See Settlement Agreement Between Sierra Club and DTE Energy Company and Detroit Edison Company, Civil Action No. 2:10-cv-13101-BAF-RSW (E.D. Mich. filed May 22, 2020) (provided as Attachment A). 2

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currently included in the proposed Consent Decree be cancelled and that the associated funds be directed to the Committee instead.

II. The “Environmental Mitigation Project” Should Be Removed From the Consent Decree Because It Primarily Benefits IPL—Not the Community.

We ask that the “environmental mitigation project” be removed from the Consent Decree so as to focus benefits on the local community—and not to IPL, the polluter. Under the proposed Consent Decree’s “environmental mitigation project,” IPL is required to spend $5 million to build a “non-emitting source of power” on the property of the Petersburg plant with a nameplate capacity of 3 megawatts “to provide power for the internal Petersburg Station load.”5 This proposal does not provide sufficient benefits to the local community and actually will increase air pollution, while enriching IPL. This project should be cancelled and the funds directed to purposes that provide benefits to the community. The “non-emitting source of power,” likely solar panels, will reduce the parasitic load of the Petersburg power plant, i.e., the power required to operate the plant. By reducing the operating cost of the coal-fired boilers at Petersburg, the “non-emitting source of power,” would have the effect of increasing the competitiveness of the Petersburg coal boilers in the regional electric energy market. Simply put, adding a power source that only provides power for the plant will allow the coal boilers to operate more frequently than they otherwise would and therefore would increase the pollution in the local community compared to the status quo at the power plant. This mitigation project does not serve the community but will solely benefit IPL.6 On days when the Petersburg plants’ coal boilers are not operating, the non-emitting resource on site would provide no benefits to the public as it is only meant to serve the plant and IPL does not intend to connect it to the local electric grid. More fundamentally, to mitigate air pollution negatively impacting the community—some of the SO2 violations at issue in the Complaint occurred when Pike County was designated nonattainment under the SO2 NAAQS—it is inappropriate to allow the polluter to build a “mitigation” project that solely benefits itself by making its power plant more competitive while doing nothing to actually mitigate community harm.

III. If the United States Retains the Proposed “Environmental Mitigation Project”— Which It Should Not—It Should At Least Modify the Project to Minimize Harm to the Environment.

As explained above, instead of allowing IPL to spend $5 million to benefit itself under the guise of an environmental mitigation project, these funds should instead be directed toward the community most impacted by the pollution. Alternatively, if the United States goes forward

5 Proposed Consent Decree at pp. 26-28 and Appendix A. 6 If the United States intended to provide a benefit to IPL’s customers, it should have required a solar project in Indianapolis, where IPL’s electric load is. But we are not recommending this change because the Consent Decree should seek to benefit the community most impacted by the pollution from the Petersburg plant. 3

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with allowing IPL to build itself a generation resource as a mitigation project, then, at a minimum, the project should be modified in two fundamental ways. First, instead of providing power to the internal load of the Petersburg power plant, the on-site non-emitting resources should be connected to the local grid, so that it would provide power to the local communities and not IPL’s customers in distant Indianapolis. Second, the terms of the project should be aligned with the operational life of the coal- burning plant. In the proposed Consent Decree, IPL is directed to “own, operate and maintain the [non-emitting generation] System to serve the internal load at the Petersburg Station for not less than 10 years (as measured from the day that power is first provided from the [non-emitting generation]).”7 We ask that this language be revised to account for the possibility that the Petersburg power plant may be retired within the next ten years, as IPL is already planning to retire two of the four units in the next few years. If this System is retained in the final Consent Decree—though, again, we urge its removal and the re-direction of these funds to the community—the language should be revised to state that IPL should operate and maintain the non-emitting generation so long as the Petersburg coal units remain in operation (unless the project is revised to serve the local grid, and not the power plant). IPL should not be required to operate this System for ten years or any defined period of time and instead should retire the System when it retires the coal boilers. For one thing, the United States does not have the legal authority to require IPL to operate its coal-burning plant longer than it otherwise intends to.

IV. The State-Only Environmentally-Beneficial Project Funding Should Be Increased.

As the only provision that provides direct benefits to the community, the proposed Consent Decree includes a provision that requires IPL to spend up to $325,000 on the acquisition of ecologically significant land near the Petersburg plant for the benefit of the public.8 We welcome this provision and ask that the funded amount be increased to at least $500,000. Acquisition and restoration of ecologically significant land in the Petersburg area could include floodplain lands along the East Fork White River, and wetlands or upland forests in the area, which could be added to the Patoka River National Wildlife Refuge, Pike State Forest, or a new state outdoor property. Expanding tree cover in the vicinity of the Petersburg area would enable the absorption of more local air pollution and therefore provide direct benefits to the community. Another project idea for consideration is the removal or modification of the Williams Dam, to allow the endangered Lake Sturgeon to expand its range farther upstream in the East Fork. * * * If you have any questions or would otherwise like to discuss this letter, please do not hesitate to contact us. Thank you for your consideration.

7 Proposed Consent Decree at Appendix A. 8 Proposed Consent Decree at pp. 30-32 and Appendix B. 4

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Sincerely,

Tony Mendoza Wendy Bredhold Senior Attorney, Sierra Club Senior Campaign Representative, Indiana and 415-977-5589 Kentucky, Sierra Club [email protected] 812-604-1723 [email protected]

Jeffrey Hammons Kerwin Olson Staff Attorney, Environmental Law & Policy Executive Director, Citizens Action Coalition Center of Indiana 785-217-5722 317-735-7727 [email protected] [email protected]

Jesse Kharbanda Tim Maloney Executive Director, Hoosier Environmental Senior Policy Director, Hoosier Council Environmental Council (317) 685-8800, ext. 1005 (317) 685-8800, ext. 1006 [email protected] [email protected]

5

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Attachment A Cause No. 45502 CaseCase 2:10-cv-13101-BAF-RSW3:20-cv-00202-RLY-MPB DocumentECF No. 267-1 17-1 filedFiled 05/22/20 01/14/21 PageID.7972Page 9 of 21 PageID Page 1#: of 240 13AES Indiana OUCC Attachment CMA-1 Exhibit 1 Cause No. 45502 Page 72 of 99 OUCC DR 1-10 Attachment 1 Page 28 of 55

AGREEMENT BETWEEN SIERRA CLUB AND DTE ENERGY COMPANY AND DETROIT EDISON COMPANY

The Parties to this Agreement (“Agreement”) are Sierra Club on the one hand and DTE

Energy Company and Detroit Edison Company (collectively, “Detroit Edison”) on the other.

RECITALS

WHEREAS, the United States of America (“United States”), on behalf of the United

States Environmental Protection Agency (“EPA”), filed a complaint against Detroit Edison on

August 5, 2010, and Sierra Club subsequently intervened. United States, et al. v. DTE Energy

Company, et al., No. 2:10-cv-13101-BAF-RSW (E.D. Mich.).

WHEREAS, the United States and Sierra Club were later granted leave to amend their

complaints (“Complaints”) and thereafter filed amended complaints (“Amended Complaints”),

which alleged violations of the Clean Air Act (”CAA” or “the Act”) against Detroit Edison.

Sierra Club, however, was denied leave to assert certain additional claims in its Amended

Complaint.

WHEREAS, Detroit Edison does not admit any liability arising out of the transactions or

occurrences alleged in the Complaints.

WHEREAS, the United States, Sierra Club, and Detroit Edison have executed and are

lodging a Consent Decree (hereinafter “US Consent Decree”).

WHEREAS, in light of this and other ongoing matters in which Sierra Club and Detroit

Edison have been involved, they desire to foster a spirit of cooperation and to work together for

the benefit of the local community by undertaking the projects as described in Appendix A to the

Agreement. They therefore have separately agreed to the terms of this Agreement as further

consideration to resolve certain disputes between Sierra Club and Detroit Edison under federal

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law, including but not limited to claims that the Court denied Sierra Club leave to assert in its

Amended Complaint, as described further herein.

WHEREAS, the Parties recognize that this Agreement has been negotiated in good faith

and that their settlement will avoid the expense and uncertainty of continued or potential

litigation.

NOW, THEREFORE, without admission of any violation of law or liability by Detroit

Edison, the Parties agree to the following:

APPLICABILITY

1. The provisions of this Agreement shall apply to and be binding upon the Sierra

Club and upon Detroit Edison and their respective successors, assigns, or other entities or

persons otherwise bound by law. This Agreement may be assigned by Detroit Edison to another

entity in connection with the sale or transfer of the River Rouge, Trenton Channel, or St. Clair

power plants, and Detroit Edison shall be relieved of its obligations hereunder with respect to

River Rouge, Trenton Channel, or St. Clair power plants if any of those plants are sold,

transferred, or assigned, on and after such sale, transfer, or assignment provided that the

purchaser, transferee, or assignee executes an assignment agreement as a condition of the sale,

transfer, or assignment and agrees in writing to be bound by and liable for all of Detroit Edison’s

requirements in this Agreement being assumed. This Agreement is not assignable by the Sierra

Club.

2. Detroit Edison shall expressly condition the sale or transfer of its River Rouge,

Trenton Channel, or St. Clair power plants on any current or future buyer’s or transferee’s

express acceptance of the retirement requirements set forth in this Agreement.

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ENVIRONMENTAL MITIGATION PROJECTS

7. Detroit Edison shall implement the Environmental Mitigation Projects

(“Projects”) described in Appendix A to this Agreement.

8. Detroit Edison shall maintain, and present to Sierra Club upon request, documents

to substantiate the completion of the Project described in Appendix A, and shall provide these

documents to Sierra Club within 30 Days following such request.

9. Detroit Edison shall use good faith efforts to secure as much environmental

benefit as possible for each of the Projects, consistent with the applicable requirements and limits

of this Agreement.

10. Within 60 Days following the completion of each Project required under this

Agreement (including any applicable periods of demonstration or testing), Detroit Edison shall

submit to Sierra Club a report that documents the date that the Project was completed and the

Project Dollars expended by Detroit Edison in implementing the Project.

11. In connection with any communication to the public or to shareholders regarding

Detroit Edison’ actions or expenditures relating in any way to the Environmental Mitigation

Projects set forth in Appendix A, Detroit Edison shall include prominently in the communication

the information that the actions and expenditures were required by this Agreement.

REMEDIES

12. The Parties agree that neither Party will be responsible or liable for monetary

damages (direct, indirect, consequential, etc.) as a result of any breach of this Agreement. The

Parties acknowledge and agree that monetary damages are not available as a remedy in the event

the obligations of this Agreement are breached. The Parties agree that monetary damages would

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not be an adequate remedy for material breach of this Agreement, and that no adequate remedy

at law exists for noncompliance with the terms of this Agreement.

13. Accordingly, the Parties expressly agree that an award of injunctive relief is the

appropriate remedy for a material breach of the obligations under this Agreement, provided the

reviewing court has followed appropriate procedures for issuing injunctive relief. The Parties

also agree that should either Party commence any legal action to enforce this Agreement, that

neither Party will seek any remedy except specific performance.

RELEASE

14. In consideration of the terms of this Agreement and other good and valuable

consideration, receipt of which is hereby acknowledged, Sierra Club hereby remises, releases,

and forever discharges Detroit Edison, its successors, assigns, subsidiaries, and affiliates, and

each of their respective employees, representatives, officers, directors and shareholders of and

from any and all claims that Sierra Club made or could have made against Detroit Edison that

arose, directly or indirectly, from any modifications commenced at any System Unit prior to the

Effective Date of this Agreement, including but not limited to those set forth in its Amended

Complaint and related to the System Units and those that the Court denied Sierra Club leave to

include in its Amended Complaint, under any or all of the following federal CAA provisions: (a)

Part C or D of Subchapter I of the CAA, 42 U.S.C. §§ 7470-7492, 7501-7515, and the

implementing PSD and Nonattainment NSR provisions of the Michigan SIP; (b) Section 111 of

the CAA, 42 U.S.C. § 7411, and 40 C.F.R. Section 60.14; and (c) Title V of the CAA, 42 U.S.C.

§§ 7661-7661f. Notwithstanding any foregoing provisions to the contrary, Sierra Club reserves

its rights to enforce Detroit Edison’s obligations under this Agreement pursuant to paragraphs

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12, 13, 15, and 21 of this Agreement, and under the US Consent Decree pursuant to the terms of

that Consent Decree.

DISPUTE RESOLUTION

15. Before commencing any legal action to enforce this Agreement for a Party’s

material breach of this Agreement, a Party must: i) notify the other Party in writing of such

material breach providing details regarding the nature of the breach, so that the other Party could

explore whether it could cure such material breach through diligence and ii) take at least 30 days

before filing any such action, during which period the Parties will undertake all reasonable

efforts to resolve the matter, provided, further, if the non-performing Party is working to

diligently cure the material breach, and the non-performing Party cannot reasonably cure in 30

days, such Party, provided it exercises diligence to cure the breach, will be given more time to

cure the breach before an action is filed.

SALES OR TRANSFERS OF OPERATIONAL OR OWNERSHIP INTERESTS

16. At least 60 Days prior to any transfer of ownership or operation of any System

Unit, Detroit Edison shall provide a copy of this Agreement to the proposed transferee and shall

simultaneously provide written notice of the prospective transfer to Sierra Club. No transfer of

ownership or operation of a System Unit, whether in compliance with the procedures of this

Paragraph or otherwise, shall relieve Detroit Edison of the obligation to ensure that the terms of

this Agreement are implemented, unless and until:

a. the transferee agrees, in writing, to undertake the obligations required by

this Agreement with respect to that System Unit(s);

b. Sierra Club consents, in writing, to relieve Detroit Edison of its Consent

Decree obligations applicable to such System Unit(s); and

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c. the transferee becomes a party to this Agreement with respect to the

System Unit(s), pursuant to Paragraph 20 below (Modification).

17. Any attempt to transfer ownership or operation of any of the System Units or any

portion thereof, without complying with Paragraph 16 above constitutes a breach of this

Agreement.

NOTICES

18. Notices to Sierra Club or Detroit Edison related to this Agreement shall be made

as follows:

As to the Sierra Club:

Shannon Fisk Earthjustice 1617 John F. Kennedy Blvd. Suite 1130 Philadelphia, PA 19103 [email protected]

As to Detroit Edison:

DTE Energy Company Office of the General Counsel One Energy Plaza Detroit, MI 48226

Attn: DTE Electric General Counsel

With copy to:

DTE Energy Company Environmental Management & Resources One Energy Plaza 2455 WCB Detroit, MI 48226

Attn: Vice President

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EFFECTIVE DATE

19. The effective date of this Agreement shall be the date following the date on which

the District Court for the Eastern District of Michigan enters the US Consent Decree and

dismisses the Amended Complaints filed by the United States and Sierra Club.

MODIFICATION

20. The terms of this Agreement may be modified only by a subsequent written

agreement signed by the Parties to this Agreement.

CHOICE OF LAW

21. This Agreement will be construed and governed in all respects by the laws of the

State of Michigan, without regard to the principles of conflicts of law. A Party seeking to

resolve a dispute arising over the terms and conditions contained in this Agreement must seek

relief from a court of competent jurisdiction located in Wayne County, Michigan.

SIGNATORIES AND SERVICE

22. The undersigned representative of Detroit Edison and Sierra Club certifies that he

or she is fully authorized to enter into the terms and conditions of this Agreement and to execute

and legally bind to this document the Party he or she represents.

23. This Agreement may be signed in counterparts, and such counterpart signature

pages shall be given full force and effect.

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APPENDIX A

ENVIRONMENTAL MITIGATION PROJECTS FOR AGREEMENT BETWEEN PLAINTIFF SIERRA CLUB AND DEFENDANTS DTE ENERGY COMPANY AND DETROIT EDISON COMPANY

1. Defendants shall comply with the requirements of this Appendix and Paragraphs

7 through 11 (Environmental Mitigation Projects) of the Agreement to implement and secure the

benefits of each of the projects described in this Appendix.

A. Bus Replacement Project - Electrification

2. For purposes of carrying out the Bus Replacement Project set forth in Appendix A

to the US Consent Decree, Defendants shall propose and implement a plan to replace school

buses and/or municipal transit buses with electric buses and related electrification infrastructure.

Defendants shall seek and prioritize making such bus replacements in Ecorse, River Rouge, the

48217 zip code, and/or other non-attainment and/or environmental justice areas within Wayne

County.

B. Community Based Environmental Projects (no less than $ 2 million)

3. DTE will establish, within 120 days of the effective date of the Agreement, a

Community Environmental Action Committee (“Committee”) that will assist DTE in selecting

and implementing projects within Ecorse, River Rouge, and the 48217 zip code.

4. The Committee will be made up of five members: One DTE representative; one

representative from an academic institution with a focus on public health and/or the

environment; and three community members who reside in Ecorse, River Rouge, or the 48217 Cause No. 45502 CaseCase 3:20-cv-00202-RLY-MPB 2:10-cv-13101-BAF-RSW Document ECF No. 17-1267-1 Filed filed 01/14/2105/22/20 Page PageID.7983 20 of 21 PageID Page 12#: 251ofAES Indiana OUCC Attachment CMA-1 Cause No. 45502 Page 83 of 99 13 OUCC DR 1-10 Attachment 1 Page 39 of 55

zip code. DTE shall consult with Sierra Club to identify a list of community members to serve

on the Committee.

5. DTE is responsible for convening the committee as necessary, but no less than

once a quarter for the first year after its establishment, to consider and recommend community

based environmental projects. The projects recommended by the Committee will seek to

maximize public health and environmental benefits in Ecorse, River Rouge, and/or the 48217 zip

code, and may include urban solar arrays, installation of air filtration systems in public schools

and homes, urban forestation, health and safety retrofits for low-income customers, and reducing

energy use and overall energy cost burden. The Committee will make project recommendations

by majority vote of all members. The Committee may recommend projects on a rolling basis,

and shall recommend projects totaling at least $2 million no later than June 30, 2021.

6. The Committee shall not propose, and DTE will not fund, any project that would

provide a direct financial benefit to any Committee member, or for which the entity or entities

that selected such members would be the primary beneficiary of a project. DTE will not be

deemed the primary beneficiary of a project solely because it is the owner, operator, seller, or

purchaser of electricity or renewable energy credits from projects recommended by the

committee, or because of good will generated as a result of DTE funding such projects.

7. Committee members filling the three “community member” seats on the

committee will be eligible for a per-meeting stipend of $300 for all in-person meetings, and a

$100 stipend for all meetings conducted through remote participation. DTE will pay the stipends

from funds outside the settlement. The stipend does not create a legal, financial, or fiduciary

relationship between DTE and the community members of the Committee, and should not be

used as any evidence of a conflict of interest.

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8. DTE shall fund and/or implement one or more of the projects recommended by

the Committee and complete such project or projects no later than June 30, 2023. DTE shall

spend no less than $2 million on these projects.

9. DTE will inform the Committee of progress on the projects on a semi-annual

basis after each project is selected.

10. In all communications to the public or shareholders about the projects

recommended by the Committee and formally selected by DTE, Defendants shall include

prominently in the communication that the projects were required by the Agreement and the

Committee’s role in selecting the project.

C. Energy Efficiency Improvement Project at Kemeny Recreation Center

11. DTE will work with Kemeny Recreation Center, located at 2260 S. Fort St., in the

Boynton community in Detroit, Michigan, to improve energy efficiency and reduce overall

energy use at the facility, DTE will fund at least one project to advance such energy efficiency

and use goals at the Center.

12. DTE will inform Sierra Club when DTE selects a project and when it has

completed the project. Such project shall be selected within one year, and completed within three

years, of the effective date of the Agreement.

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EXHIBIT 2 UNITED STATES’ RESPONSE TO COMMENTS 1. Comment: The Wisconsin Department of Natural Resources (Wisconsin DNR) opines that the Decree should have required that IPL install on Unit 4 a Selective Catalytic Reduction (SCR) device as opposed to a Selective Non-Catalytic Reduction (SNCR) device, because it asserts that an SCR is more widely used and more effective at reducing emissions than an SNCR. Response: The commenter is correct that an SCR is a common, effective control device to limit NOx emissions. In fact, emissions from Petersburg Units 2 and 3, two of the four boiler units comprising IPL’s Petersburg Facility (Facility), are currently controlled with an SCR. Declaration of Ethan Chatfield (Chatfield Decl.), at ¶ 13 (attached). An SNCR, however, which the Consent Decree (Decree) requires IPL to install on Petersburg Unit 4, is also designed to result in significant NOx emission reductions. Id. Based on good-faith negotiations, the parties agreed, as one of the comprehensive compliance measures in the Decree, that IPL would install an SNCR on Petersburg Unit 4. EPA anticipates that an SNCR-controlled Unit 4 will contribute to a substantial reduction in NOx emissions at the Facility. 1 Id.

Further, the proposed Decree requires that all NOx controls on all four of the Petersburg Units be operated continuously, as defined in Paragraph 5(g) of the Decree, at emission rates reduced from current permitted levels, and sets forth annual NOx tonnage limitations. Compliance with those requirements is expected to substantially reduce IPL’s NOx emissions at the Facility. Chatfield Decl. ¶ 14. 2. Comment: Wisconsin DNR asserts that the Decree does not involve or require the early retirement of any of the Facility’s Units because Units 1 and 2 are already scheduled to be retired in 2021 and 2023, respectively – suggesting that the Decree’s provision acknowledging IPL’s intention to retire the two Units early is meaningless. In support of its comment, Wisconsin DNR cites Energy Information Administration information and Indiana’s Eastern Regional Technical Advisory Committee electricity generating unit emission projection tool, noting IPL’s intention to voluntarily retire Unit 1 in 2021 and Unit 2 in 2023. Response: Wisconsin DNR is correct that the Decree is not the first and only forum in which IPL signified its intention to retire Petersburg Units 1 and 2 early. In December 2019, IPL filed its triennial Integrated Resource Plan (IRP) with the Indiana Utility Regulatory Commission,

1 As noted in the Decree at Paragraph 7 and discussed further below, if IPL permanently retires Petersburg Units 1 and 2 prior to the deadline for installing the SNCR, IPL is relieved of the requirement to install the SNCR on Petersburg Unit 4. CaseCause 3:20-cv-00202-RLY-MPB No. 45502 Document 17-2 Filed 01/14/21 Page 2 of 8 PageID #: 254AES Indiana OUCC Attachment CMA-1 Cause No. 45502 Page 87 of 99 OUCC DR 1-10 Attachment 1 Page 43 of 55

officially announcing its intention to retire Petersburg Unit 1 by 2021 and Petersburg Unit 2 by 2023, and to make a transition to cleaner resources.2 As IPL explained in the IRP: Based on extensive modeling, IPL has determined that the cost of operating Petersburg Units 1 and 2 exceeds the value customers receive compared to alternative resources. Retirement of these units allows the company to cost- effectively diversify the portfolio and transition to cleaner, more affordable resources while maintaining a reliable system. IPL’s 2019 IRP’s Non-Technical Summary, at 6. As Wisconsin DNR pointed out, the Energy Information Administration (part of the U.S. Department of Energy), in a report filed the first quarter of 2020, noted IPL’s intention to retire the two units early, relying on information provided by IPL based on IPL’s 2019 IRP. Significantly, the IRP is only an expression of intention regarding the company’s future. IPL retains the authority to decide to keep one or both of the Units, because the 2019 IRP and other filings do not compel IPL to retire either or both of them. As IPL, in the IRP, put it: The Integrated Resource Plan is viewed as a guide for future resource decisions made at a snapshot in time. Resource decisions, particularly those beyond the five-year horizon, are subject to change based on future analyses and regulatory filings. IPL’s 2019 IRP’s Non-Technical Summary, at 2. In contrast, by concretizing IPL’s intention in the Consent Decree to retire Petersburg Units 1 and 2 by 2023 and tying it to IPL’s obligation to install an SNCR on Unit 4 by that date, the proposed Decree creates a strong incentive for IPL to follow through with its expressed intention, even if circumstances should change. Knowing that the deadline for complying with the Decree’s requirement to install an SNCR is approaching relatively soon, and that the company will be excused from such obligation should it retire Petersburg Units 1 and 2 prior to that deadline, IPL is less likely than otherwise to revise its stated plans to retire those Units by

2 According to the Indiana Utility Regulatory Commission website, jurisdictional electric utilities, including IPL, are required to submit IRPs every three years in accordance with Indiana Code § 8-1-8.5- 3(e)(2). As explained on the website:

The IRPs are subject to a rigorous stakeholder process. IRPs describe how the utility plans to deliver safe, reliable, and efficient electricity at just and reasonable rates. Further, these plans must be in the public interest and consistent with state energy and environmental policies. Each utility’s IRP explains how it will use existing and future resources to meet customer demand. When selecting these resources, the utility must consider a broad range of potential future conditions and variables and select a combination that would provide reliable service in an efficient and cost-effective manner.

https://www.in.gov/iurc/2630.htm. 2

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2023. Retirement of Petersburg Units 1 and 2 by 2023 is expected to result in a much larger decrease in pollutant emissions, especially NOx, than would be expected from installing an SNCR on Unit 4. Chatfield Decl. ¶ 15. Further, under the Decree, “retire” means to “permanently shut down and cease to operate the Unit, and to comply with applicable state and federal requirements for permanently ceasing operation of the Unit, including removing the Unit from Indiana’s air emissions inventory, and amending all applicable permits so as to reflect the permanent shutdown status of such Unit.” Decree ¶ 5(mm). Thus, if the Consent Decree is approved and IPL retires Petersburg Units 1 and 2 prior to the deadline for installing the SNCR, the retirement must be permanent and comply with all relevant federal and state requirements. By way of contrast, even if IPL stops operating the two Units, the IRP, in itself, does not prohibit IPL from restarting either Unit. Plaintiffs’ ability to enforce IPL’s decision to permanently retire those Units in accordance with the terms of the Consent Decree further highlights the benefits of concretizing IPL’s plans in the context of an enforceable agreement. 3. Comment: Wisconsin DNR asserts that the 30-day rolling average NOx emission rates in the proposed Consent Decree are too high and do not reflect the emission rates that can actually be achieved with proper operation of available control technologies. Response: Wisconsin DNR does not provide any clarity as to what it means by “NOx emission rates in the proposed Consent Decree are too high” -- for example, which NOx emission rates in the proposed Decree are too high, and what is meant by “too high” (as opposed to what the commenter believes the rate should be). For that matter, the commenter does not identify which Units it is concerned about, and which “available control technologies” it believes will result in lower rates. Finally, the commenter does not explain what it means by “proper” operation. All such gaps make a thoughtful response to the comment difficult. Nevertheless, the United States’ best effort to answer these concerns follows. IPL has SCRs on Petersburg Units 2 and 3, installed in 2004. EPA, however, determined that IPL, prior to receiving EPA’s Notice of Violation in February 2016, was operating those SCRs inconsistently. In the Complaint, the Governments alleged that IPL, at Petersburg Units 1 and 2, was out of compliance with the Prevention of Significant Deterioration (PSD) and/or Non- Attainment New Source Review (NSR) requirements of the Clean Air Act and the Indiana State Implementation Plan. Complaint ¶ 64. As a result, among other things, IPL should have obtained a PSD and/or Non-Attainment NSR permit for each of those two Units from the State. Complaint ¶ 65. A PSD or Non-Attainment NSR permit would have likely required IPL to operate each of the control devices on those Units continuously. Chatfield Decl. ¶ 16. Thus, as part of the overall relief in settlement of this matter, the proposed Decree requires that IPL

3

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operate the SCR at Petersburg Unit 2 on a continuous basis, as if Unit 2 were operating under a PSD or Non-Attainment NSR permit.3 Further, although during the last several years (2017 through 2019) Petersburg Unit 2 was achieving a reported NOx annual emission rate of between 0.08 to 0.09 lb/mmBtu, the proposed Decree’s requirement for a 0.100 lb/mmBtu NOx emission rate is based on a 30-day rolling average basis -- a more stringent averaging period. Chatfield Decl. ¶ 17. Thus, given the Decree’s requirement that IPL meet a NOx limit at Petersburg Unit 2 based on a 30-day rolling average, the negotiated rate of 0.100 lb/mmBtu is in effect an equivalent if not lower NOx emission rate than IPL’s current .08-.09 lb/mmBtu rate based on an annual averaging period. Id. Coupled with the Decree’s requirement to operate the SCR continuously, and the Decree’s annual NOx tonnage limitation for Petersburg Unit 2, the Decree’s 0.100 lb/mmBtu NOx rate based on a 30-day rolling averaging period is a reasonable resolution of the alleged claim related to increased NOx emissions at Unit 2. The negotiated NOx rate for Unit 4 of 0.190 lb/mmBtu once IPL installs the SNCR, and the negotiated NOx rate for the current Low NOx Burner/Overfired Air (LNB/OFA) at Petersburg Unit 4 of 0.260 lb/mmBtu – both rates based on a 30-day rolling average basis – are consistent with rates expected to be practically achievable by those controls. Id. at ¶ 18. Similarly, the negotiated NOx rates for Petersburg Units 1 and 3, for which the Governments have made no claims related to increased NOx emissions, are appropriate. Specifically, the negotiated NOx rate of 0.100 lb/mmBTU for the SCR at Petersburg Unit 3, and the negotiated NOx rate of 0.220 for the LNB/OFA at Petersburg Unit 1 -- both based on a 30-day rolling average -- are consistent with rates expected to be practically achievable by those controls. Id. at ¶ 19. Coupled with the Decree’s requirements to operate all controls continuously, and the Decree’s annual NOx tonnage limitations, the negotiated NOx rates for Units 1, 3 and 4 are anticipated to substantially reduce NOx emissions at the Facility. Id. at ¶ 20. Wisconsin DNR’s comment suggests that the Consent Decree should not be approved because the negotiated NOx rates are not the lowest possible rates. The Governments concede that the negotiated NOx rates are not the lowest rates achievable, but the Governments cannot impose such rates unilaterally. Were the Decree disapproved on that basis and the parties forced to go back to the drawing board, the Governments are not assured of obtaining IPL’s agreement to lower rates. Further, any effort to renegotiate the rates would take time and delay the deadlines for IPL’s compliance with the many other significant Decree requirements intended to

3 “’Continuous Operation’” and “’Continuously Operate’” in the Decree mean that when a pollution control technology or combustion control is required to be used at a Unit pursuant to this Consent Decree (including, but not limited to, a Baghouse, ESP, FGD system, LNB, OFA, Selective Catalytic Reduction device, Selective Non-Catalytic Reduction device and Sulfuric Acid Mitigation System), it shall be operated at all times that the Unit it serves is in operation, consistent with the technological limitations, manufacturers’ specifications, good engineering and maintenance practices, and good air pollution control practices for minimizing emissions (as defined in 40 C.F.R. § 60.11(d)) for such equipment and the Unit.” Decree, ¶ 5(g).

4

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reduce pollutant emissions at the Facility. And, of course, there is no guarantee of success, which in the end could lead to lengthy and uncertain litigation rather than a negotiated agreement. In any event, as explained in the Memorandum in Support of Plaintiffs’ Motion for Entry, the standard for approval of a consent decree is not whether the settlement produces the best possible result, but rather whether the settlement overall is fair, reasonable, consistent with the underlying statutes and in the public interest. 4. Comment: Comments provided by a coalition of citizen groups including the Sierra Club, the Environmental Law & Policy Center, the Hoosier Environmental Council and the Citizens Action Coalition of Indiana (hereinafter, Sierra Club) request that the Decree be revised to include the creation of what it calls a Community Environmental Action Committee (Committee) to assure community benefits. Sierra Club asserts that the Committee’s charge would be to assist IPL in selecting and implementing projects that provide certain benefits to the local community near the Petersburg plant. Seven examples of such projects are enumerated. Sierra Club asks that the current Environmental Mitigation Project described in Appendix A of the Decree be cancelled, and that funds intended to be spent on that project be redirected to fund new projects to be recommended by the Committee in the amount of at least $5 million. Response: The Environmental Mitigation Project described in the Decree’s Appendix A, in which IPL will propose for approval a project involving a new, non-emitting source of energy to power the internal load at the Petersburg Facility, was negotiated in good faith by the Governments and IPL as part of the overall comprehensive relief package of the proposed Decree. During the negotiations, a number of different proposals for a mitigation project were discussed. Ultimately, the parties determined that the one agreed to in Appendix A, discussed in more detail below, would provide meaningful environmental benefits that are tailored to redressing a portion of the harm caused by the alleged violations, and was the preferred choice of the parties. Sierra Club’s request to cancel this well-thought out, diligently-negotiated project in exchange for a vague, open-ended process that may or not produce a mutually-agreed upon, valuable mitigation project (or projects) in the future is not acceptable.

Specifically, Sierra Club’s proposal to form the Committee, which contemplates a plurality of community members who may well represent special interests and harbor possible conflicts of interest, does little to ensure that IPL’s money is not spent on wasteful or inefficient projects designed more to generate good will than to achieve meaningful improvements in the environment. In particular, the proposal’s absence of specificity or substantive criteria for the hypothetical future projects stands in stark contrast to the detailed terms and requirements set forth in Appendix A for the negotiated Environmental Mitigation Project. At the very least, Sierra Club’s proposal would do away with a known, agreed-upon mitigation project redressing a portion of the harm caused by the alleged violations, benefiting the public and enforceable by the Governments, in favor of a set of unknown, to-be-determined projects -- assuming any agreement on them can ever be reached -- for which the Governments will have little or no input.

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In short, the Governments reject Sierra Club’s proposal as neither practical nor in the public interest. 4 In any event, the comment does not disclose facts or considerations indicating that the proposed Consent Decree is inappropriate, improper, or inadequate. Decree ¶ 130. 5. Comment:

Sierra Club argues that Environmental Mitigation Project (Project) should be removed from the Consent Decree on the grounds that it does not directly benefit the community. Specifically, Sierra Club opines that the Project will increase, not decrease, pollution, because the new source of power will allow the Facility’s coal-fired boilers to operate more frequently than they otherwise would and therefore would increase the pollution in the local community. Sierra Club further argues that the project will enrich IPL, because the new source will reduce the operating cost of the coal-fired boilers and therefore have the effect of increasing the competitiveness of those boilers in the regional electric energy market.

Response: The proposed Project mandated by Appendix A is designed to address the need to mitigate the harm over the years caused by IPL’s alleged excess pollutant emissions in a way that will environmentally benefit the local community. The Project requires IPL to submit for EPA’s and the State’s approval a new, non-emitting (i.e., “clean”) source of power with a rated nameplate capacity of 3.0 MW, to be connected into the Petersburg Station auxiliary electrical system in order to provide power for the internal station load. Decree, Appendix A, Parts I.B. and II.A.

Sierra Club does not provide any substantiation for its statement that, if IPL implements the Project by installing a new, non-emitting source of power to fuel the plant’s internal load, IPL would operate its boilers more frequently than it otherwise would and therefore increase pollutant emissions and enrich IPL. The facts suggest otherwise. Currently, the energy that is generated for the Facility’s internal load is derived from burning fossil fuels, which emits pollutants including SO2 and NOx. Complaint ¶ 57. The new, non-emitting source of power for this load would consist of a renewable energy source, such as solar or wind energy, which does not generate such pollutants. Energy produced from such a “clean” source would likely offset energy that otherwise would be generated by the coal-fired boilers to serve the internal load, thereby reducing pollutant emissions at the Facility and benefitting the local community. Chatfield Decl. ¶ 22. Such environmental benefits are expected to accrue and be realized primarily over an extended length of time, which is why the proposed Decree requires that IPL operate the new, clean energy source for at least 10 years. Id.

4 In its comment, Sierra Club states that a similar proposal was made in another Clean Air Ac t settlement, referencing “Settlement Agreement Between Sierra Club and DTE Energy Company and Detroit Edison Company, Civil Action No. 2:10-cv-13101-BAF-RSW (E.D. Mich.), filed May 22, 2020.” That settlement agreement is a separate matter reached between Sierra Club and DTE Energy Co., to which the United States was not a party (and to which the United States objected). 6

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6. Comment:

Sierra Club asserts that, if the Governments keep the Environmental Mitigation Project as part of the settlement, the Project should be modified in two ways. First, Sierra Club suggests that, instead of providing power to the plant’s internal load, the on-site non-emitting resources should be connected to the local grid, so that the Project would provide power to the local communities and not IPL’s customers in Indianapolis. Second, Sierra Club avers that the language should be revised to state that IPL will operate and maintain the non-emitting generation only as long as the plant’s coal Units remain in operation, as opposed to being maintained for a full ten-year period as mandated by Appendix A. Sierra Club argues that its second suggested revision accounts for the possibility that the Facility may be retired within the next ten years, given that IPL is already planning to retire half of its Units, i.e., Petersburg Units 1 and 2, by 2023. In the absence of making this change, Sierra Club suggests that the language of Appendix A actually requires IPL to continue operating the Facility for at least ten years.

Response:

Given the pollutant emission reductions expected to result from replacing 3 MW of the current, coal-produced energy with the new, non-emitting power source, it is the local community, not IPL’s customers in Indianapolis, who will benefit over time from the decreased emissions and cleaner air. If, as recommended by Sierra Club, the power were provided to the local grid, which is operated by Duke Energy, the Facility’s internal load would not be reduced, and it is not known what emission reductions would result, if any, or where they might occur.

Sierra Club’s additional suggestion, that the Project should be amended to remove the requirement that IPL operate the new, clean power source for at least 10 years, is based on a speculative scenario that IPL may retire its entire Facility before the end of that time period. Though IPL, as discussed above, has made public via its 2019 IRP its intention to retire Units 1 and 2 by 2023, the IRP gives no indication that IPL intends to retire the entire plant within the next ten years. In the event that IPL alters its current intention and decides to retire the entire Facility within the next ten years, the parties can make alternative arrangements within the parameters of the Decree. In particular, the parties could seek to modify the settlement under the Modification Section of the Decree, in ways that are mutually agreeable to all parties. See Decree ¶ 119. For example, the potential modification could include acceleration of Appendix A’s requirement that is meant to take effect between the 10-year and 25-year operation period, namely, obligating IPL to “use good faith efforts to ensure that the [new, clean energy source] is connected to the grid and that ownership is transferred to a third party who would thereafter assume sole responsibility to operate and maintain the [new, clean energy source] to provide energy for the remainder of the 25 year period.” Decree, Appendix A, Part II.B.

In any event, Sierra Club’s implication that the language in Appendix A actually requires IPL to operate the coal-burning Units at the Facility for at least ten years has no basis in the terms and/or conditions of the settlement. As Sierra Club correctly notes, the Governments do not have the legal authority to require IPL to operate the Facility longer than it intends to, and nothing in the language of Appendix A or the Decree as a whole so requires.

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When crafting any negotiated agreement, no side has a crystal ball and can possibly foresee all potential scenarios that may arise in the future. Thus, no agreement, including this one, is prescient and can possibly address all future potentialities. Appendix A addresses the current, real need (and the Governments’ claims) for mitigating a portion of the harm caused by IPL’s violations, and, once the Decree is entered and the Project implemented, will provide environmental benefits to the local community for years to come. See Chatfield Decl. ¶ 22. And as discussed above, both Appendix A and the Decree as a whole provide mechanisms that can be utilized to address, if necessary, changed circumstances should they arise in the future.

In short, none of the Sierra Club’s comments discloses facts or considerations indicating that the proposed Consent Decree is inappropriate, improper, or inadequate. Decree ¶ 130. Sierra Club’s requests to remove the Project entirely and/or modify it would require the parties to go back to the drawing board, with no certainty that an improved project, or any amended agreement for that matter, would result. And any effort to renegotiate the Project or any other aspect of the settlement would take time and delay the deadlines for IPL’s compliance with the many significant Decree provisions intended to reduce pollutant emissions at the Facility and benefit the local community.

7. Comment:

Sierra Club does not challenge, but rather welcomes, the State-Only Environmentally Beneficial Project described in Appendix B, requiring IPL to acquire and restore ecologically significant land near the Facility. Sierra Club, however, asks that the negotiated sum of $325,000 for the State-only project be increased to at least $500,000, and suggests a number of other types of lands that could be acquired and donated to the Patoka River National Wildlife Refuge and other public areas. The commenter also suggests additional, related projects that IPL could undertake if the negotiated amount is increased to $500,000.

Response:

The State-Only Environmentally Beneficial Project is designed, among other things, to “help ameliorate and restore past detrimental effects to plant life and vegetation in the vicinity that can be attributed to high levels of sulfur dioxide, ozone and PM 2.5 emissions.” Decree, Appendix B, Part I.B. Like all components of the settlement, the agreed-upon amount of $325,000 for the State-only project was the result of good-faith negotiations, which took into account the “big picture” of the settlement package in resolving the Governments’ claims, including the Decree’s comprehensive compliance measures, civil penalty amount shared between the United States and the State, and amount for the Environmental Mitigation Project. Indiana believes that IPL’s agreement to fund the State-only project in the amount of $325,000 is very favorable and will benefit the local public and the environment to a considerable degree.

At the same time, Indiana acknowledges that there remain additional needs to conserve and restore ecologically significant land in the area, and for other important, related projects. Indiana appreciates Sierra Club’s suggestions for other proposals in this regard, and will keep them in mind when considering similar projects in the future.

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Affidavit CaseCause 3:20-cv-00202-RLY-MPB No. 45502 Document 17-3 Filed 01/14/21 Page 1 of 5 PageID #: 261AES Indiana OUCC Attachment CMA-1 Cause No. 45502 Page 95 of 99 OUCC DR 1-10 Attachment 1 Page 51 of 55

ATTACHMENT TO UNITED STATES’ RESPONSE TO COMMENTS DECLARATION OF ETHAN CHATFIELD

I, Ethan Chatfield, hereby declare that:

1. The statements in this Declaration are based upon my 17 years of experience working at the U.S. Environmental Protection Agency (EPA) Region 5 office.

2. For the past 13 years I have worked as an Environmental Engineer in the Air Enforcement and Compliance Assurance Branch in Region 5 where my primary responsibilities include conducting Clean Air Act (CAA) inspections, sending CAA information requests, performing compliance monitoring, drafting and issuing Notices and Findings of Violations and assessing the compliance of stationary emission sources (such as power plants) with various CAA requirements. Prior to my work at EPA, I worked as an environmental engineer with an environmental consulting company in Virginia.

3. I received a Bachelor of Science Degree from the University of Michigan School of Natural Resource and Environment in December 1997 and a Master of Science in Civil Engineering from the University of Colorado at Boulder in August 2000.

4. I am one of EPA Region 5’s senior engineers responsible for inspecting and investigating coal-fired utilities for CAA compliance. My additional duties in this role consist of identifying sources of potential violations at coal-fired power plants; reviewing and analyzing case files, including information obtained from CAA Section 114 information requests; and calculating emission increases from various construction projects (or major modifications) using data obtained from Generation Availability Data System (GADS)1 and Clean Air Markets Acid Rain Program continuous emissions monitoring system (CEMS), among other information. I have either conducted or participated in the investigation, development, and settlement of over 10 major investigations/cases against coal-fired electric utilities, including but not limited to DTE Energy Company, Dominion Energy, Hoosier Energy, Minnesota Power, SIGECO, Wisconsin Power & Light Company, Wisconsin Public Service Corporation, and the instant matter with Indianapolis Power & Light Co. (IPL).

5. I am very familiar with the New Source Review (NSR) permitting program. 2 Generally, NSR is a preconstruction permitting program that requires an owner or operator of a Major Stationary Source to, among other things, obtain a construction permit and install appropriate pollution controls known as best available control technology (BACT) prior to commencing construction of a Major Modification. A Major Modification is defined as “any physical change in or change in the method of operation of a major stationary source that would

1 GADS is a collection of operating information reported by utilities with the purpose of improving the performance of electric generating units. 2 NSR consists of two programs, Prevention of Significant Deterioration (“PSD”) and Non-attainment New Source Review, depending on whether the area is in attainment with the applicable National Ambient Air Quality Standard. Both programs are applicable here. For the purposes of this Declaration, the programs are similar enough that I cite only to the PSD requirements. CaseCause 3:20-cv-00202-RLY-MPB No. 45502 Document 17-3 Filed 01/14/21 Page 2 of 5 PageID #: 262AES Indiana OUCC Attachment CMA-1 Cause No. 45502 Page 96 of 99 OUCC DR 1-10 Attachment 1 Page 52 of 55

result in: a significant emissions increase . . . of a regulated NSR pollutant . . .; and a significant net emissions increase of that pollutant from the major stationary source.” See 40 C.F.R. § 52.21(b)(2)(i). Basically, for electric steam generating units, an emission increase is determined by comparing the selected 24-month baseline period from the five years prior to the commencement of a physical change with the post-project projected actual emissions. If the difference in the emissions for an individual pollutant exceeds the significance thresholds listed in the regulations, there is a significant emissions increase.

6. I am familiar with the Petersburg Generating Station fossil fuel-fired steam electric plant (plant or Facility) owned and operated by IPL. The Facility consists of four fossil fuel-fired boilers and corresponding turbines (hereinafter, Units) for electricity generation. Units 1 through 4 are “electric steam generating units” with net generating capacities of approximately 229, 412, 540, and 530 megawatts, respectively. The Facility has in place various equipment designed to reduce pollutant emissions. All four Units contain wet flue gas desulfurization (FGD) for sulfur dioxide (SO2) control and three of the four units have low-nitrogen oxide burners with over-fire air systems for nitrogen oxides (NOx) control. Additionally, Units 2 and 3 have Selective Catalytic Reduction (SCR) Systems for NOx control. For particulate matter (PM) controls, Units 1 and 4 have electrostatic precipitators (ESPs), Unit 2 has a baghouse, and Unit 3 has an ESP with a baghouse. All four Units also have sulfuric acid mist (H2SO4) controls. Historically, the Facility’s pollutant exceedances have been caused by IPL’s failure to continuously run the Facility’s FGDs, SCRs and the H2SO4 mitigation systems.

7. On July 14, 2015, I conducted a CAA inspection of the Facility (Inspection). During the Inspection, I conducted EPA Method 9 Visible Emissions Observations at the Facility.

8. On August 13, 2015, I assisted with drafting and sending a CAA Section 114 information request (Request) to the Facility.

9. Based on information obtained during the Inspection and from the IPL’s response to the Request, EPA sent a Notice and Finding of Violation (NOV) to IPL on September 23, 2015, and a second one on February 5, 2016. Allegations in these NOVs form the bases of the violations alleged in the Complaint. The Complaint alleges that IPL modified several Units at the Facility, failed to obtain the necessary permits and failed to install BACT controls necessary to sufficiently reduce SO2, NOX, PM and/or H2SO4 emissions, in violation of the NSR provisions of the Act. The Complaint also alleges that IPL violated and continues to violate the Indiana State Implementation Plan, the CAA’s New Source Performance Standards and/or the Facility’s Title V Permit by exceeding opacity limitations and emitting SO2 and/or PM (including in some cases bypassing its SO2 controls) in excess of the applicable emission limits.

10. The proposed Consent Decree requires IPL to reduce its Facility’s emissions of NOx, SO2, PM and H2SO4. In order to do so, IPL will install a pollution control device known as a Selective Non-Catalytic Reduction System (SNCR) on one of the Facility’s Units (Unit 4), improve its sulfuric acid mitigation system, and continuously operate all of its pollution control

2

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equipment to meet levels that will achieve reductions in NOx, SO2, PM and H2SO4 emissions. Also, the agreement recognizes that IPL may permanently retire Petersburg Units 1 and 2. IPL may forego installing the SNCR device on Unit 4 if it in fact retires the two coal-fired Units 1 and 2 prior to July 1, 2023, the deadline under the Consent Decree by which IPL must install the SNCR.

11. As discussed further below, other Decree compliance measures require IPL to propose and fund a mitigation project to redress some of the harm caused by IPL’s excess emissions in order to benefit the local community, and a State-only environmentally beneficial project designed to acquire, restore and preserve some ecologically significant parcels of land near the plant.

12. I reviewed the public comments received regarding the proposed Consent Decree, which question several of the Decree’s compliance measures and, in some cases, recommend changes to them. Below I discuss the technical concerns raised by the commenters regarding those compliance measures.

13. An SCR is a common, effective control device to limit NOx emissions, and, in fact, emissions from Units 2 and 3 are currently controlled with an SCR. An SNCR, which the Decree requires IPL to install on Unit 4, is also designed to result in significant NOx emission reductions. Based on good-faith negotiations, the parties agreed, as one of the many comprehensive compliance measures in the Decree, that IPL would install an SNCR on Unit 4. EPA anticipates that an SNCR-controlled Unit 4 will contribute to a substantial reduction in NOx emissions at the Facility.

14. The Decree requires that all NOx controls on all four units be operated continuously (as defined in the Decree), at emission rates reduced from current permitted levels, and sets forth annual NOx tonnage limitations. Compliance with these requirements is expected to substantially reduce IPL’s NOx emissions at the plant.

15. The Decree notes that, if IPL permanently retires Units 1 and 2 prior to the deadline for installing the SNCR (July 1, 2023), IPL is relieved of the requirement to install the SNCR on Unit 4. Permanent retirement of those two units is expected to result in a much greater reduction of pollutant emissions, especially NOx, at the plant than emission reductions expected from installing an SNCR on Unit 4. (Even were IPL to install an SCR, rather than an SNCR, on Unit 4, permanent retirement of Units 1 and 2 prior to July 1, 2023 is expected to result in a larger reduction of NOx emissions at the Facility than emission reductions anticipated from installing an SCR on Unit 4.)

16. If IPL were to have applied for and obtained an NSR permit for each of Units 1 and 2, the permits would have likely required IPL to operate the control devices on those units continuously.

3

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17. During the last several years (2017 through 2019), Unit 2 was achieving a reported NOx annual emission rate of between 0.08 to 0.09 lb/mmBtu. The proposed Decree’s requirement that IPL meet a 0.100 lb/mmBtu NOx emission rate for Unit 2 is based on a 30-day rolling average basis, a more stringent averaging period than an annual averaging period. Thus, given the Decree’s requirement that IPL meet a NOx limit at Unit 2 based on a 30-day rolling average, the negotiated rate of 0.100 lb/mmBtu is, in effect, equivalent to, if not lower than, IPL’s current NOx emission rate of .08-.09 lb/mmBtu rate based on an annual averaging period.

18. The Decree’s negotiated NOx rate for Unit 4 of 0.190 lb/mmBtu once IPL installs the SNCR, and the negotiated NOx rate for the current Low NOx Burner/Overfired Air (LNB/OFA) at Unit 4 of 0.260 lb/mmBtu, are based on a 30-day rolling average basis. Both rates are consistent with rates expected to be practically achievable by those controls.

19. The Decree’s negotiated NOx rate of 0.100 lb/mmBTU for the SCR at Unit 3, and the negotiated NOx rate of 0.220 for the LNB/OFA at Unit 1, are based on a 30-day rolling average basis. Both rates are consistent with rates expected to be practically achievable by those controls.

20. Coupled with the Decree requirements to operate all controls continuously, and the Decree’s annual NOx tonnage limitations, the negotiated NOx rates for Units 1, 3 and 4 are anticipated to substantially reduce NOx emissions at the plant.

21. In sum, the injunctive relief required by the proposed Decree, including installation of a new pollution control device (unless Units 1 and 2 are permanently shut down beforehand) and continuous operation of the existing pollution control systems to meet reduced pollutant rates, is anticipated to result in significant emissions reductions of SO2, NOx, PM and H2SO4. As such, the relief will “protect and enhance the quality of the Nation's air resources so as to promote the public health and welfare and the productive capacity of its population” -- the Clean Air Act's primary purpose. 42 U.S.C. § 7401(b)(1).

22. One of the commenters raised several concerns regarding the proposed mitigation project in Appendix A, which requires IPL to submit for EPA and State approval a new, non- emitting (i.e., “clean”) source of power with a rated nameplate capacity of 3.0 MW, to be connected into the Facility’s auxiliary electrical system in order to provide power for the internal station load. That new, non-emitting source of power is likely to offset the current, coal-burning source of energy and therefore reduce pollutant emissions at the plant, benefitting the local community. Such environmental benefits are expected to accrue and be realized primarily over an extended length of time, which is why the proposed Decree requires that IPL operate the new, clean energy source for at least 10 years.

4

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I hereby declare nndrcr Foalty of perjury that the foregoing is tnre and correct. Dated this 12 day of January,202l.

Environmental U.S. EPA 5

5 Cause No. 45502 OUCC Attachment CMA-2 Page 1 of 3 Timeframe Event Description 1986 - 2005 IPL completes several replacements and upgrades of equipment at the Eagle Valley, Harding Street, and Petersburg stations.i September 2009 The EPA issues a Notice of Violation stating that the replacements and upgrades completed at Eagle Valley, Harding Street, and Petersburg constituted “major modifications.” Since IPL did not seek either a Non-attainment New Source Review or Prevention of Significant Deterioration NSR pre-construction permit, these facilities violated NSR.ii June 2010 EPA sets a new primary National Ambient Air Quality Standard iii (“NAAQS”) for SO2. March 2011 IPL replaces equipment during an outage on Petersburg Unit 1. It notifies IDEM of its activities and states that it does not believe NSR will apply as it does not anticipate a significant net emissions increase from the activities. It notifies IDEM three days before the outage starts.iv May 2011 IDEM uses ambient air quality data from 2008-2010 to determine preliminary NAAQS designations for each Indiana county. It recommends the areas of Pike County, IN, where the Petersburg Generating plant is located be designated as “non-attainment” for the 2010 SO2 primary NAAQS. The Petersburg and Ratts Generating Stations are listed as the primary sources of SO2 emissions in the county.v 2011-2016 IPL bypasses Petersburg Unit 1 and 2 Flue Gas Desulfurization (FGD) units several times. It also records several SO2 exceedances on Petersburg Units 3 and 4 and opacity exceedances for Petersburg Units 1-2.vi August 2012 Cause No. 44242: IPL files a CPCN request for its Mercury and Air Toxics Standards (“MATS”) compliance plan. The compliance plan involves $606.1 million in pollution controls at the Petersburg and Harding Street Stations.vii February 2013 The EPA accepts IDEM’s 2011 recommendation and proposes Pike County be partially designated as non-attainment of the 2010 viii primary SO2 NAAQS. March 2013 IPL conducts several repairs and replacements during the Petersburg Unit 1 outage. It notifies IDEM of its activities and states that it does not believe NSR will apply as it does not anticipate a significant net emissions increase from the activities. It notifies IDEM three days before the outage starts.ix July 2013 The EPA issues a final partial non-attainment designation for Pike x County for the primary SO2 NAAQS. August 2013 The Commission approves IPL’s MATS compliance plan for $510.983 million based on the settlement between IPL, the OUCC, and the IPL Industrial Group. (Cause No. 44242)xi October 2013 IPL conducts several repairs and replacements during the Petersburg Unit 2 outage. It notifies IDEM of its activities and states that it does not believe NSR will apply as it does not anticipate significant net emissions increase from the activities. It notifies IDEM two days before the outage starts.xii Cause No. 45502 OUCC Attachment CMA-2 Page 2 of 3 October 2014 – Cause No. 44540: IPL files a CPCN request for its National July 2015 Pollutant Discharge Elimination System (“NPDES”) compliance plan for the Petersburg and Harding Street Stations, which total $325.683 million. It also requests to convert Harding Street Unit 7 to natural gas. The Commission approves IPL’s CPCN request for the NPDES project.xiii September 2015 The EPA issues a NOV stating that EPA and IDEM observed opacity emissions in July 2015 exceeding the New Source Performance Standards (NSPS), Indiana State Implementation Plan (SIP), Petersburg’s Title V Operating Permit limits on Petersburg Unit 3.xiv February 2016 The EPA issues a NOV to IPL stating that Petersburg Units 1 and 2 violated NSR when it undertook projects during the 2011 and 2013 outages without seeking an NNSR or PSD pre-construction permit. The NOV also stated that Units 1-4 recorded opacity emission exceedances and Units 3-4 recorded excess SO2 emissions from 2011-2015.xv May 2016 – Cause No. 44794: IPL files a CPCN request for its NAAQS April 2017 Compliance Plan and its Coal Combustion Residuals (“CCR”) Compliance Plan for Petersburg. It estimated its NAAQS compliance plan at approximately $48 million and its CCR compliance plan at $46.9 million. IPL, the OUCC, and the IPL Industrial Group entered into a settlement agreement which allowed $29.213 million for the NAAQS compliance plan and $46.9 million for the CCR compliance plan. The Commission approves the settlement.xvi August 31, 2020 The DOJ, EPA, IDEM, and IPL announces they have entered into a Consent Decree to resolve claims of NSR and other emissions violations at the Petersburg plant. To enforce the Consent Decree, the U.S. and State of Indiana simultaneously file a suit against IPL and the Consent Decree in the U.S. District Court for the Southern District of Indiana.xvii

i OUCC Attachment CMA-1, pp. 8-26. ii Id. iii 75 Federal Register 35520-35603. (Tuesday, June 22, 2010) https://www.govinfo.gov/content/pkg/FR-2010-06- 22/pdf/2010-13947.pdf iv OUCC Attachment CMA-4, pp. 1-8. v Indiana Preliminary Round 1 Designation Recommendations (May 11, 2011) https://www.in.gov/idem/airquality/files/nonattainment_so2_prelim_designation.pdf vi Cause No. 44794, Direct Testimony of OUCC Witness Cynthia Armstrong, pp. 5-11. vii Cause No. 44242, Direct Testimony of IPL witness Kevin W. Crawford, p. 13, lines 2-13, and Petitioner’s Exhibit KWC-4. viii U.S. EPA Proposed Designation Recommendations for the 2010 Revision to the primary NAAQS for SO2. (February 6, 2013) https://www.in.gov/idem/airquality/files/nonattainment_so2_proposed_designation.pdf. ix OUCC Attachment CMA-4, pp.8-11. x U.S. EPA Round 1 Nonattainment Boundaries for the 2010 SO2 1-hour Standard. (July 25, 2013) https://www.in.gov/idem/airquality/files/nonattainment_so2_epa_boundaries_20130725.pdf. xi Cause No. 44242, Final Order, pp. 38-39. xii OUCC Attachment CMA-4, pp. 12-15. xiii Cause No. 44540, Final Order. Cause No. 45502 OUCC Attachment CMA-2 Page 3 of 3 xiv OUCC Attachment CMA-1, pp. 38-44. xv OUCC Attachment CMA-1, pp. 25-37. xvi Cause No. 44794, Final Order. xvii U.S. EPA. Indianapolis Power & Light Settlement Information Sheet. https://www.epa.gov/enforcement/indianapolis-power-light-settlement-information-sheet. See also, Unites States and Indiana v. IP&L, Civil Action No. 3:20-cv-202-RLY-MPB (S.D. In. Aug. 31, 2020). https://www.justice.gov/enrd/consent-decree/file/1311316/download. Cause No. 45502 OUCC Attachment CMA-3 Page 1 of 1

Petersburg Station Environmental Project Costs Unit (s) Equipment Cost In-Service Approved in Cause Date No. 1 Neural Net and Boiler Tuning $414,000 6/2004 42170 1, 2 Flue Gas Desulfurization $203,630,000 6/1996 39938 (FGD) 1 Electrostatic Precipitator $16,251,000 10/2014 44242 (ESP) Equipment 1 ESP Enhancement $15,909,000 3/2015 44242 1 NAAQS FGD Pump $574,000 8/2018 44794 Vibration Monitor 2 Selective Catalytic Reduction $73,351,000 5/2004 42170 (SCR) 2 Sodium Based Solution $4,950,000 6/2009 42170 ECR-8 (SBS) Injection System 2 Baghouse $152,932,000 3/2015 44242 2 Booster Fans, Transformers, $35,860,000 12/2013 44242 Water Tanks (Related to Baghouse) 2 NAAQS FGD Pump $602,000 8/2018 44794 Vibration Monitor 1-2 FGD Backup Switchgear $9,105,000 8/2019 44794 3 SCR $71,693,000 5/2004 42170 3 SBS Injection System $6,050,000 6/2009 42170 ECR-8 3 ESP & Baghouse Equipment $31,840,000 6/2015 44242 3 ESP & Baghouse $127,364,000 2/2016 44242 3 FGD System Enhancement $29,500,000 6/2006 42700 3 Ash Silo Upgrades $1,641,000 5/2015 44540 3 NAAQS Recycle Pump $9,717,000 3/2019 44794 Backup 4 FGD System Enhancement $130,985,000 11/2011 43403/42170 ECR- 19/45029 4 ESP Equipment $23,045,000 11/2014 44242 4 ESP $14,630,000 3/2015 44242 4 Ash Silo Upgrades $1,770,000 10/2014 44540 4 Dewatering Crossover Pipe $47,000 3/2019 44794 1-4 Ash Pond Chemical Feed $1,368,000 11/2015 44540 System 1-4 Waste Water Treatment $203,377,000 9/2017 44540 System 1-4 NAAQS DBA System $2,808,000 12/2016 44794 1-4 Bottom Ash Handling $41,097,000 9/2017 44794 1-4 NAAQS Emergency $718,000 5/2018 44794 Limestone Conveyance 1-4 NAAQS Limestone $2,179,000 3/2019 44794 Conveyor Fire Suppression Note: Costs above reflect actual expenditures tracked through the ECCRA and may differ from the overall CPCN requested amount. (See Cause Nos. 42170 ECRs 1-34) Cause No. 45502 OUCC Attachment CMA-4 Page 1 of 15 Cause No. 45502 OUCC Attachment CMA-4 Page 2 of 15 Cause No. 45502 OUCC Attachment CMA-4 Page 3 of 15 Cause No. 45502 OUCC Attachment CMA-4 Page 4 of 15 Cause No. 45502 OUCC Attachment CMA-4 Page 5 of 15 Cause No. 45502 OUCC Attachment CMA-4 Page 6 of 15 Cause No. 45502 OUCC Attachment CMA-4 Page 7 of 15 Cause No. 45502 OUCC Attachment CMA-4 Page 8 of 15 Cause No. 45502 OUCC Attachment CMA-4 Page 9 of 15 Cause No. 45502 OUCC Attachment CMA-4 Page 10 of 15 Cause No. 45502 OUCC Attachment CMA-4 Page 11 of 15 Cause No. 45502 OUCC Attachment CMA-4 Page 12 of 15 Cause No. 45502 OUCC Attachment CMA-4 Page 13 of 15 Cause No. 45502 OUCC Attachment CMA-4 Page 14 of 15 Cause No. 45502 OUCC Attachment CMA-4 Page 15 of 15 CERTIFICATE OF SERVICE

This is to certify that a copy of the Indiana Office of Utility Consumer Counselor’s

Testimony of Cynthia M. Armstrong has been served upon the following parties of record in the captioned proceeding by electronic service on June 28, 2021.

Teresa Morton Nyhart Joseph P. Rompala T. Joseph Wendt Anne E. Becker Jeffrey M. Peabody Aaron A. Schmoll Janet Nichols Amanda Tyler Barnes & Thornburg Lewis & Kappes P.C. [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected]

Jennifer A. Washburn Reagan Kurtz Citizens Action Coalition [email protected] [email protected]

Lorraine Hitz Deputy Consumer Counselor

INDIANA OFFICE OF UTILITY CONSUMER COUNSELOR PNC Center 115 West Washington Street Suite 1500 South Indianapolis, IN 46204 [email protected] [email protected] 317.232.2494 – Telephone 317.232.2775 - Direct 317.232.5923 – Facsimile