Summary of North Carolina Coal Ash Settlement Agreements and Their Implications for Indiana Activities

August 21, 2015

(595MW)

Duke Energy Indiana At A Glance

Coverage: 69 of 92 counties 800,000 Customers Capacity by fuel type

Coal 64% Syngas/Gas 8% Gas 25% Oil 2% Hydro <1%

Joint Transmission System: 5,815 miles of transmission lines*

* Including IMPA’s and WVPA’s ownership

Summer installed capacity (ICAP) ratings shown

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Proactive Measures in Indiana Prior to North Carolina Settlements

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• Gibson Station Groundwater Issues 2005: Ash pond groundwater monitoring wells voluntarily installed 2007:

o July-August: Linear transport model identified potential for constituents moving off site

o August: Sampled neighbors’ wells. Slightly elevated boron levels. No exceedances of primary MCLs. Results were provided to the residents, IDEM, and County Health Department.

o September: Informed residents of results and, out of an abundance of caution, began providing bottled water; municipal water supply line extended to residents (2009) at Duke Energy’s cost.

2008: Submitted Proposed Closure Plan for East Ash Pond 2009: IDEM approved Closure Plan; began dewatering Cell 3 for capping 2013: Cell 3 capping complete; Cell 1 capping complete and awaiting certification. Between 2017 to 2020: Cell 2 capping and closure 2050: Complete 30 year post closure period

Proactive Measures in Indiana Prior to North Carolina Settlements

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• Gibson Station Relief Wells• Gibson Station has 270 Relief Wells to reduce hydrostatic pressure for the

Cooling Pond’s dike. They discharge to a perimeter ditch system that eventually flows to the Wabash River

• In 1998, IDEM determined that a NPDES permit was not required.• February 2015: Investigation and testing resulted in the voluntary disclosure

to IDEM of the potential discharges of pollutants from the Cooling Pond’s relief wells.

• May 2015: Agreed Order requiring relief well discharges to be eliminated or permitted.

• June 2015: Interim pumping system installed to eliminate any discharges.• Continued engineering study and evaluation of options to determine if the

relief wells may be removed or long term permitting will be pursued. The engineering study will conclude by the end of 2015.

• A proposed Implementation Plan will be submitted by April 1, 2016.

Proactive Measures in Indiana Prior to North Carolina Settlements

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• Cayuga Station Groundwater Issues September 2007: Ash pond groundwater monitoring wells were voluntarily installed August 2009: Sampling conducted for three residences with drinking water wells and

nearby paper facility production wells after linear groundwater modeling indicated they could be impacted by the ash pond system

September 2009: Notified residents and paper facility of elevated concentrations. Boron was the main constituent of concern, but other coal ash related constituents present. No exceedances of primary MCLs. Results provided to the residents, IDEM, and the County Health Department. Provided bottled water to residents.

November 2011: Two residents connected to municipal water supply at Duke Energy’s cost. The third home was no longer occupied and has since been demolished.

December 2011: Submitted Voluntary Ash Pond Proposed Closure and Post Closure Plan for Ash Disposal Area #1.

Proactive Measures in Indiana Prior to North Carolina Settlements

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• Cayuga Station Groundwater Issues June 2012: IDEM approved Closure Plan for Ash Disposal Area #1 Ash Pond Closure Schedule

o January 2015: Stopped sluicing ash to Ash Disposal Area #1 o August 2015: Begin placement of structural fill to establish ash pond covero May 2017: Begin construction of final ash pond cover system o November 2023: Complete structural fill to establish final cover slope o November 2024: Complete construction of final cover systemo March 2025: Submittal of closure certification for Ash Disposal Area #1 o 2055: Complete 30 year post closure period

Proactive Measures in Indiana Prior to North Carolina Settlements

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• Cayuga Seeps and Permitting 2009: Seeps identified as a potential regulatory issue 2009-2010: Areas of channelized seep flow were cataloged, flow was measured, and

representative samples were collected for analysis 2010: Duke met with IDEM and proposed to:

o monitor and report flow rate of all seep discharges and water quality at three representative discharges quarterly

o complete RPE analyses using the flow and water quality data obtained o include results of seep monitoring in permit renewal application due in January

2012 2012: Duke met with IDEM and proposed addressing seeps through the already

approved ash pond closure plan 2013: Effective date of NPDES permit that includes the seeps and calls for quarterly

flow monitoring as well as analysis of representative seeps

Proactive Measures in Indiana Prior to North Carolina Settlements

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• Wabash River Station 84-Inch CMP Slip Lining Project 2010: CMP inspected 2/7/14: IDEM informed of the existence of the 84-inch CMP 2/11 and 2/12 2014: Additional inspection of CMP 3/4/14: IDEM notified of potential infiltration at certain joints 3/5/14: Met with IDEM to discuss status 3/11/14: Analysis performed to determine best path forward for CMP repairs 3/12/14: 24” pipe into the CMP was grouted 3/14/14: Permit requests submitted 4/29/14: Received required permitting for the slip lining project May and June 2014: Cofferdam installation at discharge point; internal pipe cleaning 6/2-6/19/2014: 1600 foot of 54” HDPE pipe slipped into the CMP 6/19/14: Discharge bulkhead installation 6/20/14: Inlet bulkhead installation 7/7/14: Annulus grouted

Proactive Measures in Indiana Prior to North Carolina Settlements

Environmental Investigation and Compliance Activity Identify Current Impoundments Subject to the CCR Rule Closure of Former Surface Impoundments not Subject to the CCR Rule Identify, Investigate, and Address Historic Ash Management Areas

Dresser, Noblesville, Edwardsport, and Kokomo Sites Identify, Investigate, and Address all Discharge and Conveyance Pipes Investigate and Address Issues at all Dams and Surface Impoundment Berms

Development of Environmental Compliance Plans Program to identify and address seeps, surface water discharges, and areas of wetness (AOWs) Program to investigate and address impacts to groundwater

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Duke Energy Service Area Map

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North Carolina Settlement Proceedings

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• February 10, 2014: Government commenced an investigation into Dan River event• Scope of investigation expanded to all 14 coal-burning facilities in NC

• February 20, 2015: Proposed settlement agreements were filed to resolve criminal investigation

• Nine Misdemeanors• 6 regarding maintenance issues at North Carolina stations• 3 involving impacted seeps at North Carolina stations

• Payments• $68 million fines and restitution• $24 million community service (National Fish & Wildlife Foundation)• $10 million wetlands mitigation

• Probation – 5 years• Financial Assurances• Public Apology

Key Elements of North Carolina Settlement Proceedings

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• Court Appointed Monitor (“CAM”) – Appointed August 6, 2015• Intermediary between Duke Energy and Probation Office• Significant Oversight of Environmental Activities• Conducts annual audits of all coal ash impoundments fleet-wide (including Indiana)• Audits reported to government and publicly posted

• Appointment of an “Independent Monitor” • Annual certification of compliance with Interim Administrative Agreement with the Gov’t.• Annual review of ethics and environmental compliance programs

• Compliance Officer Position Created for Duke Energy• Primary responsibility is to interact with the CAM and IM

• Duke Energy shall develop fleet-wide environmental compliance programs• Approved by the CAM and filed with the Court

• Stringent reporting obligations for environmental violations

Key Terms of Probation

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• No illegal activity• Includes federal, state, and local crimes• Includes crimes committed by employees or agents within the scope of employment• Violation of ordinances (traffic citations) • Report all violations to the Probation Officer within 5 business days

• Comply with regulations relating to coal ash• No new NOVs, NODs, other criminal, civil or administrative enforcement actions

• Conduct or conditions arising after May 14, 2015• Does not include enforcement action based upon information disclosed in permit renewal

applications• Assessments greater than $5,000 are “material”

• $15,000 penalty is deemed material and violation of probation• Must be final assessments, after all appeals• Federal laws pre-empt state laws if direct conflict

Specific Provisions and Discussion – Terms of Probation

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• Compliance Officers • Lead Compliance Officer: Jim Wells• Primary role of Compliance Officer (CO) to interact with CAM

• Court Appointed Monitor (CAM) • Intermediary between Duke Energy & Probation Office• On August 6, Ben Wilson (Beveridge & Diamond) was appointed as the CAM• Initial meeting was conducted with the CAM last week• Significant oversight of environmental activities• Receives semi-annual reports on:

• Excavation progress at 4 High Priority North Carolina Sites• Volume of wastewater and coal ash at all NC impoundments

• Conducts annual audits of all coal ash impoundments, fleet wide (includes Indiana facilities)

• Audits reported to government and publicly posted

Specific Provisions and Discussion – Terms of Probation

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• Development of Environmental Compliance Plans (ECPs)• Goal: ensure compliance with applicable environmental laws and regulations at all coal ash

impoundments, fleet-wide• Approved by CAM; filed with the court• Best efforts required; force majeure provision

• Final determination of best efforts is made by Court, with advice of CAM• CAM approves ECPs and reports annually on compliance with ECPs

• Reports must be publicly posted• Nationwide ECP

• Organizational funding (ABSAT, CCP)• Environmental Audits• Hotline & Training Program

Specific Provisions and Discussion – Terms of Probation

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• Environmental Training Program• All domestic employees• Topics:

• Environmental impact of coal ash impoundment operations• Procedures and policies that form the basis of the ECPs• Notice and reporting requirements for releases• Safe handling of pollutants and hazardous substances/wastes

• May be tailored to employees’ job descriptions• Requires approval by CAM

• Environmental Hotline• 24/7 confidential hotline• Report suspected violations of environmental laws or regulations, and violations of ECPs• Also requires email reporting feature, available from company website• Notification requirements to employees and public• All reports promptly provided to CO for further action

• CO informs CAM of report, investigation, and disposition

Specific Provisions and Discussion – Debarment Agreement

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• What is Debarment?• Upon conviction of a CWA crime, facilities involved in the conviction are automatically

ineligible to enter into new contracts with governmental agencies• Such ineligibility can be expanded to the entities involved in the conviction, as well as

affiliate companies• Interim Administrative Agreement

• Executed May 14, 2015• Waives debarment at all active generating facilities• Five-year term, during which Duke Energy must demonstrate “present responsibility”• Appointment of an “Independent Monitor” (IM)• Significant requirements that must be satisfied throughout the term of the agreement

• HR requirements• Ethics audits and reporting• Reporting of certain violations

Interim Administrative Agreement on Debarment

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• Stringent Requirements to Suspend Debarment• Contained in Interim Administrative Agreement• Strict time limitations• Overseen by Independent Monitor

• Reports to EPA Authorized Representative• Imposes Broader Requirements than Plea Agreement

• Corporate ethics & environmental requirements• Not limited to coal ash

• Independent Monitor (IM)• Chris Bell, Greenberg Traurig• Annual certification of compliance with Interim Administrative Agreement• Annual review and report of Ethics & Environmental Compliance Programs

• Action plan for implementing changes recommended by IM• Designation of “Respondents’ Authorized Representative(s)”

• Duke representative responsible for coordinating communications with EPA related to the agreement

• Same person as CCP Lead Compliance Officer under the plea – Jim Wells, VP & Lead Compliance Officer EHS CCP

Avoiding Debarment

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• Legal Reporting• Initiation or development of criminal or civil investigations relating to Applicable Requirements

• Applicable Requirements: • Environmental laws (state or federal) • FCPA or other false statements or claims to government entities• Antitrust or conflict-of-interest violations• Other violations so serious or compelling that may affect “Present Responsibility”

• Initiation of legal action relating to Applicable Requirements or citizen suits• Criminal charges, civil law suits, or administrative proceedings brought by any governmental

entity in a matter relating to compliance with Applicable Requirements• Conviction or guilty pleas, civil judgments or civil consent decrees relating to compliance with

Applicable Requirements• Must report for ALL Duke Energy entities• Must report within 15 calendar days of becoming aware

Avoiding Debarment

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• Reporting Misconduct• Within 15 calendar days• Suspected misconduct that may violate:

• Criminal or civil law• State or federal administrative action or agreement• Involves Applicable Requirement

• May include any Duke Energy entity, employees, or contractors• Must relate to business with a governmental entity• Must investigate all reports of misconduct

• Notify EPA Authorized Representative of the outcome of such investigation and its impact on business with government entities

• Reporting Violations of Criminal Settlement Agreements• Must be reported to EPA Authorized Representative within 10 calendar days

Avoiding Debarment

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• Coordination with Audit Group• Provide EPA Authorized Representative with schedule of internal and external audit

reports relating to:• Environmental compliance• Health & safety compliance• Corporate integrity & business ethics

• Provide schedule semi-annually, including:• Description of audit• Name and contact of auditor• Proposed dates of audit, if available

EHS Organization

• A Director of CCP Compliance and EHS Field Support has been added so as to report to the CCP Lead Compliance Officer; two CCP Compliance Leads also report to the Director

• Developing, implementing and tracking environmental compliance plans and station specific requirements/documents

• Coordinating with CCP, ABSAT, and EHS functions to ensure and demonstrate compliance• Six new environmental compliance field rover positions have been added (two for the

Indiana/Midwest region)• Assist with implementing plans and station specific requirements

• EHS Risk, Governance and Change Management group providing EHS governance, training, audit and other support

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Questions?

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