Tuesday, Duke Energy Corp. (DUK) said that it has reached a settlement agreement with the U.S. Environmental Protection Agency or EPA, the U.S. Department of Justice and others on a lawsuit involving one of the company's southern Indiana power plants.
The company said that as part of the settlement, it can continue to operate its 560-megawatt Gallagher Station and has the option to either convert two of the units from coal to natural gas or retire the units. Duke Energy currently expects that it will convert the units to gas, but no final decision is required to be made until January 1, 2012. The company said that it will also install additional pollution controls on the station's other two units and switch to using lower sulfur fuel at the plant.
The Charlotte, North Carolina-headquartered company said that it estimates the cost to convert the units to gas and install additional pollution controls will be approximately $80 million. In addition to resolving litigation, the steps will help it comply with future federal rules that are anticipated to further limit power plant emissions.
The settlement earmarks approximately $6 million for other environmental projects.
Duke Energy said that it will invest $5 million of those funds in an upgrade to expand the power output of the company's 81-megawatt Markland Dam hydroelectric power plant near Vevay, Indiana. The company had been exploring a 20% expansion of the Markland facility, and this settlement facilitates that effort. The expansion will need Indiana Utility Regulatory Commission approval.
"This is a reasonable settlement that resolves some long-standing issues, advances our two-decades long effort to improve air quality in the region, and positions us to comply with increasingly stringent environmental regulations" said Jim Turner, president and chief operating officer of Duke Energy's Franchised Electric and Gas business.
The company said that it can continue to operate the units during the natural gas conversion, which will preserve power generation for customers and employee jobs. The natural gas pipeline will be sized to support a combined-cycle gas plant should the company need to add new power generation in 10 or 15 years.
According to Duke Energy, the settlement includes civil penalties of $1.75 million and the surrendering of sulfur dioxide emission allowances during the conversion period of the units from coal to gas. The value of the emission allowances and fuel switch will depend on market prices. As part of the settlement, the government agreed not to pursue further litigation for past Gallagher maintenance projects.
The company said that the litigation stems from an effort that began in 1999 when the EPA filed a number of environmental enforcement actions across the utility industry. In this case, the EPA alleged that Cinergy, which merged with Duke Energy in 2006, undertook six power plant upgrades in Indiana and Ohio without obtaining new permits. The government alleged that the company's work did not qualify as routine maintenance and that Cinergy should have predicted that the projects would increase emissions at the plants.
The company said that in May, a jury found in favor of the company for one project at its Gibson plant near Princeton, Indiana, two projects at its Beckjord Station in New Richmond, Ohio, and one project at its Gallagher Station in New Albany, Indiana. The jury ruled against two other Gallagher projects, which prompted the settlement announced today. A trial to determine what remedies the company should take at Gallagher had been scheduled for January.
DUK is currently trading on the New York Stock Exchange at $17.22, down $0.15 or 0.86%.
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June 12, 2026 17:14 ET Major central bank action was the focus this week in economic news. The European Central Bank became the first major central bank to move in response to the rising inflationary pressures in the backdrop of the conflict in the Middle East. In North America, the U.S. inflation and trade data as well as Canada’s central bank decision gained attention. The Chinese trade data was the main news in Asia.