LITTLE ROCK — Southwestern Electric Power Co. and environmental groups have settled their legal dispute over the $2.1 billion John W. Turk Jr. coal-fired power plant under construction near Texarkana.
The 600-megawatt plant, more than 80 percent complete, will start operation in late 2012, according to SWEPCO.
SWEPCO and the environmental groups - the Sierra Club, the National Audubon Society and Audubon Arkansas - announced the settlement Thursday morning.
A consent decree containing the terms was signed by Judge Richard Kopf for the U.S. District Court for the Western District of Arkansas on Thursday afternoon, SWEPCO spokesman Peter Main said.
All legal challenges to certificates or permits to build and operate the plant will be withdrawn. That includes those related to air and waste water permits, as well as a wetlands-related permit from the Corps of Engineers, which was a matter before the District Court.
Main said the deal will allow SWEPCO to move past risks including legal costs and potential outcomes in multiple courts and regulatory agencies.
“Our objective all along has been to bring that plant on line,” Main said. “We’ve got a significant investment and a large amount of economic activity that will benefit southwest Arkansas, and power that will serve our customers in three states,” as well as the customers of electric cooperatives that own portions of the plant.
Glen Hooks, a Sierra Club official in Little Rock, said the settlement meets his group’s goal of offset-ting environmental damage from the Turk plant and “creating opportunities for environmental progress in Arkansas.”
A preliminary injunction in the District Court will be lifted so SWEPCO can complete work on a water-intake structure and transmission lines.
American Electric Power, which is SWEPCO’s parent and provides electricity in 11 states, agreed to build no new generating units at the Turk site and no coal-fired units within 30 miles of the site in the state.
SWEPCO has agreed to build or secure 400 megawatts of renewable energy.
The company also will retire by Dec. 31, 2014, an older coal-fired plant - the so-called Welsh Unit 2, which is one of a group of three 528-megawatt plants in northeastern Texas.
“We certainly would prefer the [Turk] plant not be built, but we’ve been fighting this four years,” Hooks said. “We had to look at the possibility that this thing was going to get built, and if it was ... how we could get the best deal for Arkansas.”
SWEPCO will reimburse the environmental groups $2 million for legal costs, make an $8 million contribution for land conservation to The Nature Conservancy and give $2 million to the Arkansas Community Foundation to fund grants that support policy initiatives for clean energy and energy efficiency.
Hooks said the settlement was the result of “very long, grueling negotiations” for three to four months.
Shutting down an “earlier, dirtier plant” and obtaining more renewable energy was “a better deal for Arkansas” than risking continued litigation, he said.
As early as June, SWEPCO had said that Welsh 2 would be retired if multiple rules from the U.S. Environmental Protection Agency were adopted as proposed.
But Hooks said utility companies have “a fairly good pattern over the past year or two” of saying they’re going to close plants when the EPA announces stricter rules.
“There’s a big difference between mentioning it and having it locked into a consent decree that’s enforceable by federal court,” Hooks said.
Main said the settlement makes the decision to close Welsh 2 concrete and establishes a time frame.
SWEPCO owns 73 percent of the Turk plant. The Arkansas Electric Cooperative Corp. owns 12 percent, while East Texas Electric Cooperative has an 8 percent stake and Oklahoma Municipal Power Authority owns 7 percent.
SWEPCO has more than 520,000 retail customers in three states, including almost 114,000 in western Arkansas.
Parties in the settlement will make filings in addition to the consent decree to end numerous proceedings, including an appeal of an Arkansas Department of Environmental Quality air permit in the Arkansas Court of Appeals.
SWEPCO also agreed that transmission lines built in the future for the plant won’t cross numerous environmentally sensitive areas including the Nacatoches Ravines Natural Area and property of the Hempstead County Hunting Club, including the Grassy Lake area.
Also as part of the deal, SWEPCO each year will test total particulate matter emissions from the plant, as well as perform other environmental monitoring.
Besides the environmental groups, the Turk plant had been opposed by nearby landowners, including the hunting club. A lawsuit brought by the hunting club was settled in July.
Environmentalists have had various successes in opposing power plants. The Sierra Club said this month that it reached a deal with LS Power Group to delay for at least five years a second power plant near Osceola.
Shares of American Electric Power on Thursday closed at $41.37 on the New York Stock Exchange, up 52 cents, or 1.3 percent.
The Turk plant hasn’t been a focus for American Electric Power shareholders in the past year-and-a-half, said a utilities financial analyst on Thursday who asked not to be named.
That’s because in June 2010, SWEPCO announced it would convert the facility to a “merchant” plan, a change that will remain even with the settlement. The merchant status meant the company would sell the electricity to its customers in Louisiana and Texas, but none to its retail customers in Arkansas. By doing so, SWEPCO argued, it avoided the need for Arkansas approval of the plant.
Before that, investors were concerned that American Electric Power would have a half-built plant, the analyst said. That would have been an issue, he said, because the company couldn’t have recouped its building costs. “That’s a billion dollars. That’s a decent number,” he said.
By contrast, the settlement’s $12 million for legal costs and environment contributions is insignificant, he said.
“When [analysts] see $12 million, we take $12 million divided by the number of outstanding shares. And AEP has 482 million outstanding shares.”
Overall, he said the deal was good for American Electric Power.
“Anytime you resolve a regulatory overhang it’s a good deal,” he said.
Front Section, Pages 1 on 12/23/2011