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CASPER, Wyo. — One million tons of Powder River Basin coal help fuel the Johnsonville electrical power plant in Tennessee each year.

But in a legal settlement announced April 14 with several states over air quality concerns, plant owner and utility Tennessee Valley Authority agreed to shutter all 10 coal-fired units at the facility, as well as eight units at two other plants, over the next five years.

“It’s a disappointment. It’s shortsighted of some of the proponents of doing away with coal,” said Marion Loomis, executive director of the Wyoming Mining Association, which represents mining firms in the state.

It’s a dent in the demand for coal from the basin, which produced 428 million tons last year from mines in Wyoming. Powder River Basin coal is low in sulfur, which means it’s in demand for power plants which must burn coal more cleanly because of federal emissions standards.

Civil penalty

The settlement among the nation’s largest public utility, four states, environmental groups and the Environmental Protection Agency includes a $10 million civil penalty, said Tennessee Valley Authority chief executive Tom Kilgore.

The moves will phase out 2,700 megawatts of Tennessee Valley Authority’s 17,000 megawatts of coal-fired capacity by 2017, and cost 300 to 400 jobs, he said. The agreement also calls for Tennessee Valley Authority to spend $350 million on environmental projects over the next five years.

Private talks

Environmental activists commended Tennessee Valley Authority — which provides electricity for 9 million customers in the South — for initiating the private talks that settled court fights between the nation’s largest public utility and the states of Tennessee, Kentucky, Alabama and North Carolina.

“This is the largest coal retirement agreement the nation has ever seen,” said Bruce Niles, deputy conservation director of the Sierra Club, one of the groups to bring a complaint against Tennessee Valley Authority.

“We have been battling TVA for more than a decade to get them to address their aging coal fleet, and this provides a framework. We are commending TVA for moving in a different direction.”

The EPA said in a media release that the settlement resolved alleged Clean Air Act violations at 11 coal-fired plants in Tennessee, Kentucky and Alabama.

It requires Tennessee Valley Authority to invest up to $5 billion on new and upgraded state-of-the-art pollution controls that will prevent approximately 1,200 to 3,000 premature deaths, 2,000 heart attacks and 21,000 cases of asthma attacks each year, the EPA said.

“Investments in pollution control equipment will keep hundreds of thousands of tons of harmful pollutants out of the air we breathe, and help create green job opportunities that will reduce pollution and improve energy efficiency,” EPA Administrator Lisa P. Jackson said.

Loomis said the settlement is a sign of the ongoing trend in coal demand in which tightening restrictions, a shift to natural gas, mounting opposition to coal and old coal-fired plants are taking their toll.

“Older plants are certainly going to have a tougher time justifying the significant cost to keep them going, and I think we’ll see more of that,” he said. “It would be my hope that they’ll be able to justify the retrofits and the new technology that is coming on line, to justify keeping those plants open.”

While Wyoming provides almost 40 percent of coal used by U.S. power plants, producers with mines in the state have begun to look at booming demand in Asia as a way to supplement existing sales from the Powder River Basin.

Alhough U.S. coal demand isn’t expected to slump in the short term, the cheap fuel is facing increasing competition from cleaner-burning and cheap natural gas, as well as renewable energy, as states fix requirements for renewables in their energy consumption portfolios.

Underlining the shift, the Tennessee Valley Authority board approved a long-range plan on April 14 that calls for decreasing the utility’s reliance on coal and increasing use of nuclear power, renewable energy, natural gas, hydroelectric and conservation.