Our commitment to operational excellence includes complying with all applicable environmental regulations and being good stewards of natural resources. To help us achieve the level of excellence we strive for, we push ourselves toward prevention, accountability, engagement and continuous improvement.
The primary federal statutes we are subject to include the Clean Air Act, Clean Water Act, Resource Conservation and Recovery Act, Endangered Species Act and Safe Drinking Water Act. Environmental regulations developed under these laws are periodically revised and it is critical that we stay current with changes to them to ensure we remain in compliance. While some regulations have an unclear path forward, there are many others that we must comply with and new ones that are still being finalized.
As the scope and stringency of environmental regulations evolve, we are faced with technical, operational and financial challenges that are common for our industry. These challenges include uncertainties with timing, scope and magnitude of future environmental regulations, which influences our decisions to upgrade or retire generating units. They also impact the planning process for new generation and transmission projects across our industry.
Our facilities are subject to a variety of environmental, regulatory and permitting requirements at the federal, state and local levels with which we must comply. Our goal is zero – zero violations of environmental regulations or laws and zero enforcement actions. We are subject to routine environmental inspections of our facilities through scheduled and unannounced visits. During these visits, regulators inspect physical facilities and monitor our compliance with regulatory requirements, permit limits and record-keeping obligations.
Whenever agencies identify concerns, we work with them to address those issues in a timely fashion. This could include identifying and implementing any corrective measures that may be needed to mitigate future risks.
Mercury and Air Toxics Standards (MATS)
The final MATS Rule became effective on April 16, 2012, and required compliance by April 16, 2015. This rule currently regulates emissions of hazardous air pollutants (HAPs) from coal- and oil-fired electric generating units through emission rate limits. The rule has been subject to both judicial and regulatory review since it was finalized; AEP has been complying with the rule for several years. One of the key questions raised in the review process is how compliance costs are factored into the need for the rule.
In December 2018, the U.S. Environmental Protection Agency (EPA) released a proposed finding that the costs of reducing HAP emissions to the level in the current rule exceed the benefits of those emission reductions. The EPA also determined that there are no significant changes in control technologies and that the remaining risks associated with HAP emissions do not justify any more stringent standards. However, the agency also proposed that it would not remove the source category or alter MATS and no further reductions are necessary. AEP is generally supportive of these proposed findings as our units are in compliance and we made significant investments in emission controls to achieve compliance.
Effluent Limitation Guidelines
In November 2015, the U.S. EPA issued a final rule revising effluent limitation guidelines for electricity generating facilities. The rule establishes limits on flue gas desulfurization (FGD) wastewater, fly ash and bottom ash transport water and flue gas mercury control wastewater, to be imposed as soon as possible after November 2018 and no later than December 2023. The rule was challenged in the U.S. Court of Appeals for the Fifth Circuit and in March 2017 by industry associations, including groups AEP is part of, who filed petitions for reconsideration of the rule with EPA. The agency granted those petitions and is actively working on revisions to the requirements for FGD wastewater and bottom ash transport water.
In the interim, a final rule revising the compliance deadlines for FGD wastewater and bottom ash transport water to be no earlier than 2020 was issued in September 2017. A draft rule regarding FGD wastewater and bottom ash transport water is anticipated by May or June 2019, with a final rule to be issued by December 2019. We have actively engaged with the EPA during this rulemaking to ensure the agency has the best technical and cost information as it makes decisions on possible changes.
Waters of the United States
In December 2018, the EPA and U.S. Army Corp of Engineers released a proposed rule revising the definition of “Waters of the United States” (WOTUS), which would replace the previously revised definition finalized in a 2015 rule. The term WOTUS is used in a number of environmental regulations to determine when certain federally mandated permits or activities involving waterbodies are required. Examples that are commonly applicable to AEP’s facilities and projects are:
- Wastewater and/or stormwater discharge permits that are required under the National Pollutant Discharge Elimination System (NPDES) permit program,
- A permit and any associated mitigation as required from the Corps of Engineers for impacts to wetlands and other waterbodies; and
- When an oil spill prevention plan is required to be written and implemented under the federal spill prevention program.
The delineation of jurisdiction between federal and state responsibilities in maintaining the integrity of waterbodies is a core issue in this rulemaking. The outcome of this rulemaking will directly affect the level of permitting required for AEP projects.
Our responsibility to environmental compliance will continue for requirements that remain effective at AEP-owned properties where generating units have been retired. This includes many existing state environmental requirements, in particular those related to the management of water and coal-combustion byproducts. We continue to work closely with regulators and our local communities as we move through the decommissioning process.
We actively participate in the development of regulations at the federal, state and local levels to ensure that new requirements are achievable, based on sound science, consistent with statutory authority and balanced with other rulemakings. New requirements should also consider the cost of compliance for customers and allow sufficient time for compliance. For full disclosure on other regulations affecting AEP, please read our 10-K.
Checks and Balances
One way we check on our own compliance is through internal audits. Audits provide additional focus on controlling risks and providing assurance that robust compliance processes are developed and implemented system-wide. In 2018, we conducted internal audits of environmental programs at 49 locations.
Environmental audits reveal areas where performance related to regulatory requirements and company policies may be improved, such as recordkeeping details, inspection criteria, training topics and equipment configuration. Auditors also work to recognize practices that go beyond requirements to bring about robust and sustained compliance. Although reports are site-specific, results – including best practices – are aggregated and shared systemwide to improve performance throughout AEP.
Driving Continuous Improvement
AEP’s Generation business unit has long used metrics to encourage self-reporting of events and to improve environmental performance. An Environmental Performance Index (EPI) was established to set annual goals related to opacity, water discharge permits and oil and chemical spills at our generating facilities. In the past, the EPI tracked only events where we had immediate and significant control. Our incentive compensation within the Generation group is also tied to EPI performance.
In 2017, we expanded the EPI to include all reported events specific to National Pollutant Discharge Elimination System (NPDES) permit expectations and spill events. By expanding the focus to all events, we are increasing awareness on prevention, which encourages sharing as we learn and drives us to be more proactive in protecting the environment.
We set annual targets focusing on continuous improvement as we strive for zero enforcement actions and zero events. In addition, AEP’s Generation organization instituted an Environmental Good Catch program, similar in manner to our safety and health Good Catch program. “Good Catch” is an observation or recognition of a condition that could lead to a reportable environmental event and the subsequent actions taken by employees to correct the situation to prevent the event from occurring. This demonstrates AEP’s commitment to an engaging and accountable culture – using knowledge-sharing and lessons learned to prevent future non-compliance events.
Environmental compliance is a high priority for the lifecycle of every project we undertake. In our Transmission business, where a great deal of construction work is taking place, project teams must complete a mandatory environmental compliance training program. Our environmental specialists and engineers also provide support to ensure we achieve full compliance with environmental permit requirements. This is important to us as we invest approximately $3 billion annually to modernize transmission infrastructure across the country.