Duke Energy Pleads Guilty, Agrees To $102 Million Fine

May 15, 2015

The US Attorney launched an investigation after the Dan River coal ash spill last year.
Credit Steven Alexander, USFWS

In the fall of 2013, some Duke Energy middle managers had a choice to make. Follow the recommendation of an inspector and spend $5,000 on a video camera inspection of a stormwater pipe underneath its Dan River coal ash basin.

Or don’t.

Duke Energy, of course, chose the latter, figuring the pipes would be removed soon, so why waste the money?

A few months later, the corrugated middle-section of the pipe burst, sending 39,000 tons of coal ash into the river.

And now, that $5,000 gamble will cost Duke Energy $102 million, a cost it cannot legally pass on to customers.

In a Greenville federal courthouse Thursday, Duke Energy pleaded guilty to nine misdemeanor counts of criminal negligence for violating the Clean Water Act. As part of the negotiated settlement, Duke Energy will pay a $68 million criminal fine and $34 million on environmental and conservation projects. The company will also be placed on probation for five years.

“Today is a significant day in the state of North Carolina,” said Thomas Walker, the U.S. Attorney for Eastern District of North Carolina. “Today is a win for our water. Today is a win for our land.”

The U.S. Department of Justice started an investigation almost immediately after the Dan River spill last year. They soon found other problems at five other Duke facilities. That led to a grand jury, protracted negotiations, and finally to Thursday’s plea hearing in a Greenville federal court.

During the sentencing phase, Duke Energy attorneys highlighted the company’s cooperation and enumerated its multi-million-dollar efforts to contain the spill.

“I think you’ve seen over the last year that Duke has done everything possible to make this right,” said Jim Cooney, the lead attorney for Duke Energy. “And today was about accepting responsibility and moving forward as a very different company. The Dan River spill has changed this company forever. It’s a better company, but it’s also a different company.”

Cooney and other Duke attorneys expressed remorse frequently during their presentation to the court, but they also stated there was no harm to humans or wildlife after the spill.

U.S. District Judge Malcolm Howard listened intently, took a 15-minute recess, and then spent almost an hour reciting the many penalties to which Duke Energy had agreed.

Among the most important is that Duke Energy agrees to set aside enough money to assure the company can move the coal ash in all of its facilities across the country to lined landfills.

That cost: $3.4 billion.

“So this agreement today not only affects those facilities at Duke that were the subject the criminal hearing today and the plea agreement, but because of the monitors it will affect all of Duke’s operating facilities,” said John Cruden, the Assistant Attorney General in the Department of Justice’s Environment and Natural Resources Division.

Cruden was one of a half-dozen attorneys, EPA officials, and investigators who strode to the microphones to address the media following the hearing.

In various ways, they all cited the plea deal as a new day for a company that had repeatedly failed to live up to its responsibilities.  

“Duke is a massive energy monopoly here in this state,” said Stephen Inman with the U.S. Attorney’s Office in the Middle District of North Carolina. “And they don’t do anything without a profit motive. And unless it hits them in the bottom line, they are not going to take action.”

As strong as this punishment was for Duke Energy, it could get much worse. Fifteen separate lawsuits have been filed by the state and other groups. Duke Energy is appealing a $25 million fine levied in March by the Department of Environment and Natural Resources. And the EPA hinted that civil actions could be coming.