Environmental Regulations

John Amos Plant Ash Pond Closure

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Evolving U.S. environmental policy considerations have not changed our plans for complying with all applicable environmental regulations. While some regulations, such as the Disposal of Coal Combustion Residuals from Electric Utilities rule or the Steam Electric Effluent Guidelines, have an unclear path forward, there are many more regulations 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, including uncertainties with timing, scope and magnitude of future environmental regulations, influence our decisions to upgrade or retire generating units. They also affect the planning process for new generation and transmission projects across our industry.

AEP’s active participation in the development of regulations helps to ensure that new requirements are achievable, based on sound science, consistent with statutory authority, balanced with other rulemakings, weigh the cost of compliance for customers and can be implemented in a rational time frame. Compliance is important to us, but we also have a responsibility to our investors, who fund the required capital investment and to our customers, who will ultimately pay for the implementation of compliance strategies.

For a complete update on environmental regulations, please reference pages 9 through 12 in our 2017 Annual 10-K filing.

Coal Combustion Residuals

The issue of coal ash disposal and handling came to the forefront nearly a decade ago and has since been subjected to a new federal rule covering the handling, disposal and storage of coal combustion residuals (CCR).

AEP is committed to closing coal ash basins in a way that puts safety first while protecting the environment, minimizing impacts to the communities and managing our customers’ costs.

CCRs are the solid material left over after coal is burned to generate electricity. For decades, many state environmental agencies regulated landfills and surface impoundments where CCRs are placed. In 2015, the U.S. Environmental Protection Agency (EPA) established minimum federal rules for storage and disposal of these materials. These minimum requirements were designed to be self-implementing and enforced by the public.

Since the rule became final, AEP has put several programs in place to ensure compliance and established a new leadership role to oversee these efforts. AEP has a formal ash basin inspection program based on federal dam safety guidelines and applicable state dam safety regulations. Our maintenance program for fly ash ponds and other impoundments remains vigorous and is continuously monitored.

AEP is in the midst of a multiyear plan to address the company’s use of coal ash disposal areas. Currently, AEP has responsibility for 31 CCR ponds and landfills that fall under the CCR Rule. We have posted a large number of documents, including structural stability assessments, initial closure plans, inspection reports and, most recently, groundwater monitoring reports for all ponds and landfills covered by the CCR Rule on our website.

In March 2018, EPA proposed revisions to the CCR rule in order to address provisions of the April 2015 final rule that were remanded back to EPA and to provide States with approved CCR permit programs the ability to set certain alternative performance standards. The final rule is expected in June 2019.

In March 2018, we met a major milestone of posting the first annual groundwater monitoring reports on our website for each CCR pond and landfill. The primary focus of the reports is raw data based on background sampling completed in late 2017. The initial data at most sites show potential groundwater impacts. One or more samples showing a higher concentration of a substance, even above a standard, does not mean that there is any impact from the ash storage site or that local drinking water is unsafe.

In advance of report publication, we proactively reached out to plant neighbors and community leaders to answer questions about the data collected and to discuss next steps. We will do additional sampling and analysis over the next year to determine if there are groundwater impacts from our storage sites farther from the immediate area.

AEP is committed to handling coal ash disposal areas in a way that puts safety first while protecting the environment, minimizing impacts to the communities and managing our customers’ costs. All of our reports and required documentation are available online at our dedicated CCR Rule Compliance site.

Beneficial Reuse

CCRs have long been used in concrete, wallboard and a wide variety of construction materials. While this benefits other industries, it also provides a source of financial and environmental benefits to AEP. In February 2014, the EPA completed a risk evaluation of the beneficial uses of coal fly ash in concrete and flue gas desulfurization (FGD) gypsum in wallboard and its conclusions will support these beneficial uses. Currently, approximately 41 percent of the coal ash and other residual products from AEP’s generating facilities are used in the production of concrete and wallboard, as structural fill or soil additives, as abrasives or road treatment materials and for other beneficial uses. By diverting the coal ash to beneficial uses, we are reducing the need for waste disposal sites.

In 2017, AEP generated approximately 6.2 million tons of CCRs and was able to beneficially use more than 2.5 million tons, or nearly 41 percent of the total produced. Beneficial use of CCRs (considered to be products if they are beneficially used) avoided approximately $36 million in disposal costs in 2017 and generated more than $8.8 million in revenues.