Green Daily

Score a big one for the environment, the government and public health.

American Electric Power (AEP) agreed to a settlement Oct. 9 with the Environmental Protection Agency and the Department of Justice to cut 813,000 tons of air pollution annually, at a cost of $4.6 billion. It's the largest environmental settlement in U.S. history.

Environmental groups and the government had sued the company in 1999 for violating the Clean Air Act by upgrading some of its coal-fired power plants without installing the legally required pollution controls.

In a press release, the Natural Resources Defense Council (NRDC), one of the plaintiffs, said, "As a result of its Clean Air Act violations, AEP emitted illegal amounts of harmful nitrogen oxides and deadly sulfur dioxide pollution at plants in Indiana, Kentucky, Ohio, Virginia and West Virginia for over two decades." These gases help cause smog and acid rain, respectively.

Twelve environmental groups had also signed on to the suit., as had the U.S. Public Interest Research Group and eight states, from New Hampshire south to Maryland.

AEP is based in Columbus, Ohio, and owns 25 power plants. The company "was the number one industrial emitter of carbon dioxide, nitrogen oxides and sulfur dioxide pollution in the country, based on 2004 data," according to NRDC.

NRDC noted in its press release that the new pollution controls will, reduce sulfur dioxide emissions by 79 percent and nitrogen oxide emissions by 69 percent from the 16 plants covered by the settlement.

The EPA noted in a press release that the settlement will save Americans $32 billion in health costs per year, including fewer asthma and other respiratory illnesses caused by air pollution.

In the settlement, AEP did not have to admit any wrongdoing, but in addition to installing the pollution controls, it must pay a $15 million fine and spend $60 million to mitigate the effects of its past emissions.

The deal is also the largest environmental enforcement settlement by another measure: It will result in the largest reduction ever in pollution from stationary sources.

In various news articles, AEP is playing down the size of the settlement, saying they have already budgeted money for cleanup efforts. They plan to spend $1.6 billion under the terms of the settlement.

On the face of it, this looks like a big victory for the public, because it enforces the law of the land that protects air quality, a key aspect of public health. But if AEP had already budgeted for the cost of this settlement, does it really punish them? In one report, AEP said it won't feel the financial bite until 2017 – and that the settlement won't affect their earnings for this year. I guess the lesson learned for them is that they can't get away with breaking the law, but it won't cost too much if they delay compliance by eight years.

Last year, AEP had sales of $12.6 billion and turned a profit of $1 billion. The company is one of the largest power generators and distributors in the United States and has a market capitalization of $19 billion, according to Hoovers.com. (Get AEP stock quote)