UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF NORTH CAROLINA
WESTERN DIVISION
No. 5:15-CR-67-H-2
No. 5:15-CR-68-H-2

UNITED STATES OF AMERICA        )
)
v.                )    MEMORANDUM OF PLEA AGREEMENT
)
DUKE ENERGY CAROLINAS, LLC    )

Pursuant to Rule 11(c)(1)(C) of the Federal Rules of Criminal Procedure, the
United States of America, by and through the United States Attorneys for the
Eastern District of North Carolina, the Middle District of North Carolina, and
the Western District of North Carolina as well as the Environmental Crimes
Section of the United States Department of Justice (collectively referred to
herein as “the United States” or “the Government”), and the Defendant, DUKE
ENERGY CAROLINAS, LLC (referred to herein as “the Defendant” or “DUKE ENERGY
CAROLINAS”) with the advice and concurrence of the Defendant’s counsel, Julia S.
Janson (Executive Vice-President, Secretary, and Chief Legal Officer, Duke
Energy Carolinas, LLC) and James P. Cooney, III (Womble Carlyle Sandridge & Rice
LLP) have agreed that the above-captioned case should be concluded in accordance
with this Memorandum of Plea Agreement as follows:

1.    This Memorandum constitutes the full and complete record of the Plea
Agreement for criminal conduct in each of the prosecuting districts, that is,
the Eastern District, Middle District, and Western District of North Carolina
and as alleged in the following charging documents (hereinafter referred to
collectively as the “Criminal Informations”):

United States v. Duke Energy Business Services LLC, and Duke Energy Progress,
Inc., No. 5:15-CR-62-H;

United States v. Duke Energy Business Services LLC, Duke Energy Carolinas, LLC,
and Duke Energy Progress, Inc.,
No. 5:15-CR-67-H; and

United States v. Duke Energy Business Services LLC, Duke Energy Carolinas, LLC,
and Duke Energy Progress, Inc.,
No. 5:15-CR-68-H.

There are no other agreements between the parties in addition to or different
from the terms herein.

2.    The United States and the Defendant agree:

a.
That this Plea Agreement (“Agreement”) is made pursuant to Rule 11(c)(1) (C) of
the Federal Rules of Criminal Procedure (“Fed. R. Crim. P.”) and that the
sentence set forth herein is the appropriate disposition of this case. If the
Court rejects this Agreement, it is further agreed that the Defendant may
withdraw its plea and all of the parties may withdraw from this Agreement.

b.
The parties further acknowledge that based upon the Joint Factual Statement, a
copy of which is attached hereto as Exhibit A, the Court has sufficient
information in the record to enable it to meaningfully exercise its sentencing
authority. Accordingly, if acceptable to the Court, the parties agree to waive
the presentence investigation and report pursuant to Fed. R. Crim. P. 32(c), and
to request that the Defendant be sentenced at the time the guilty plea is
entered.

c.
The parties further agree and acknowledge that the Defendant’s parent
corporation, Duke Energy Corporation, shall guarantee all monetary penalties
(criminal fine, restitution, community service, and mitigation) imposed upon the
Defendant and the funding and performance due from the Defendant in connection
with the nationwide and statewide environmental compliance plans under this
Agreement as more fully set forth in the Guaranty Agreement, a copy of which is
attached hereto at Exhibit B (without attachments) and fully incorporated herein
by reference. The parties further agree and acknowledge that Duke Energy
Corporation shall consent to the jurisdiction of the United States District
Court for the Eastern District of North Carolina for the purpose of enforcing
the Guaranty Agreement.

d.
Pursuant to Fed. R. Crim. P. 11(c)(1)(C), the parties agree that the following
sentence is warranted in this case:

i.
Criminal Fines: At the time of imposition of sentencing, the Defendant shall
make a payment of Criminal Fines totaling $53.6 million ($53,600,000) as
follows:

Dan River Violations

(1)
$38 million ($38,000,000) for the negligent Clean Water Act discharge without a
National Pollutant Discharge Elimination System (“NPDES”) permit from the
48-inch stormwater pipe at Dan River Steam Station based upon a fine of twice
the gross gain or loss

pursuant to 33 U.S.C. § 1319(c) (1) (A) and 18 U.S.C. § 3571(c) and (d).

(2)
$2 million ($2,000,000) for the negligent Clean Water Act failure to maintain
the coal ash impoundments and related appurtenances (48-inch stormwater pipe) as
required by the applicable NPDES permit for the Dan River Steam Station, a fine
within the statutory penalty range of $2,500 to $25,000 per day

of violation pursuant to 33 U.S.C.

§ 1319(c)(1)(A) and 18 U.S.C. § 3571(c) and (d).

(3)
$9.5 million ($9,500,000) for the negligent Clean Water Act discharge without a
NPDES permit from the 36-inch stormwater pipe at

Dan River Steam Station, a fine within the statutory penalty range of $2,500 to
$25,000 per day of violation pursuant to 33 U.S.C.

§ 1319(c)(1) (A) and 18 U.S.C. § 3571(c) and (d)

(4)
$2 million ($2,000,000) for negligent Clean Water Act failure to maintain the
coal ash impoundments and related appurtenances (36-inch stormwater pipe) as
required by the applicable NPDES permit for the Dan River Steam Station, a fine
within the statutory penalty range of $2,500 to $25,000 per day

of violation pursuant to 33 U.S.C.

§ 1319(c)(1) (A) and 18 U.S.C. § 3571(c) and (d).

Riverbend Violations

(5) $2.1 million ($2,100,000) for the negligent Clean Water Act discharge in
violation of

the applicable NPDES permit at Riverbend

Steam Station, a fine within the statutory penalty range of $2,500 to $25,000
per day of violation pursuant to 33 U.S.C.

§ 1319(c)(1)(A) and 18 U.S.C. § 3571(c) and (d).

ii.
Probation: A statutory-maximum term of five (5) years of probation is warranted.
18 U.S.C.

§ 3561(c)(2). Probation shall include the

standard conditions of probation and the following special conditions, pursuant
to 18 U.S.C. § 3563(a) and (b):

(1)
Compliance with the Law: The Defendant shall not commit another federal, state,
or local crime during the term of probation.

(2)
Cooperation with Probation Office: The Defendant shall fully cooperate with the
United States Probation Office. The Defendant shall answer truthfully all
inquiries by the Probation Officer; shall provide full access to any of the
Defendant’s operating locations; shall give ten (10) days’ prior notice of any
intended change in principal business or mail address; and shall provide notice
of any material change in the Defendant’s economic circumstances that might
affect the Defendant’s ability to pay the fines and other financial obligations
set forth herein.

(3)
Nationwide Environmental Compliance Plan: Under the terms of its plea agreement,
co-defendant Duke Energy Business Services LLC (“DEBS”) is required to develop,
adopt, implement, and fund a comprehensive nationwide environmental compliance
plan (“NECP”) during its term of probation, consistent with sentencing policies
set forth in USSG §801.4 and which incorporates

 

all of the agreed-upon obligations set forth in Paragraph 3(u) (v) of this
Agreement. The Defendant shall take all steps necessary or required to assist
DEBS in meeting this obligation.

(4)
Statewide Environmental Compliance Plan:

The Defendant, along with its co-defendants Duke Energy Progress, Inc. (“DEP”)
and DEBS, shall develop, adopt, implement, and fund a comprehensive statewide
environmental compliance plan (“ECP-NC”) during its term of probation,
consistent with sentencing policies set forth in USSG §8D1.4 and which
incorporates all of the agreed-upon obligations set forth in Paragraph 3(u)(vi)
of this Agreement.

(5)
Notice to Employees and Shareholders: Upon approval by the Court of the NECP and
ECP-NC, the Defendant shall notify its employees of its criminal behavior, the
NECP, and the ECP-NC. In addition, the Defendant shall cause a notice containing
the same information to be sent to the shareholders of Duke Energy Corporation.
Such notice shall be in a form prescribed by the Court-Appointed Monitor (“CAM”)
and at a time designated by the CAM.

(6)
Community Service Payment: Pursuant to USSG §8B1.3 and in furtherance of the
sentencing principles provided for under 18 U.S.C.

§ 3553(a), at the time of sentencing, the Defendant shall make a community
service payment totaling $13.5 million ($13,500,000), through the National Fish
and Wildlife Foundation (“NFWF”), to fund environmental projects, studies, and
initiatives designed to benefit, preserve, and restore the riparian environment
and ecosystems of North Carolina and Virginia affected by the Defendant’s
conduct, as set forth in Paragraph 3(aa) of this Agreement.

(7)
Mitigation: In order to compensate for impacts to wetlands and other
jurisdictional

waters of the United States impacted as a result of the Defendant’s conduct,
including temporal and secondary effects, at its facilities in North Carolina
with coal ash impoundments, the Defendant shall provide $5 million ($5,000,000)
to an authorized wetlands mitigation bank or conservation trust, approved by the
Court, for the purchase of riparian wetland and/or riparian land and/or
restoration equivalent located in the Broad River Basin, French Broad River
Basin, Cape Fear River Basin, Catawba River Basin, Dan River Basin, Yadkin-Pee
Dee River Basin, Neuse River Basin, Lumber River Basin, and Roanoke River Basin
as set forth in more detail in Paragraph 3(bb) of this Agreement.

iii.
Payment Liability/Financial Assurances: The Defendant shall be liable for and
pay all fines, restitution, community service, and mitigation payments and shall
fund the NECP and ECP-NC, all as set forth herein. The Defendant shall further
be liable for any additional restitution payments as determined by the CAM.

(1) Reservation of Funds by Defendant: The Defendant further shall record
appropriate reserves on financial statements for the purpose of recognizing the
projected obligation to retire its coal ash impoundments in North Carolina. This
obligation is currently estimated at a total of $2.0 billion ($2,000,000,000) on
the Defendant’s balance sheet. Each year during the term of probation, beginning
on the date that the Agreement is accepted by the Court and occurring by March
31 of each year thereafter, the Defendant shall cause the Chief Financial
Officer of Duke Energy Corporation, as further directed under the Guaranty
Agreement attached hereto, to certify to the United States and the CAM that the
Defendant and Duke Energy Corporation have sufficient assets reserved to meet
the obligations imposed by law or regulation or as may otherwise be necessary

to fulfill the Defendant’s obligations with respect to its coal ash impoundments
within the State of North Carolina. If the CAM has any concerns regarding the
assets available to meet obligations imposed by the Judgment in this case, the
CAM shall immediately notify the Court and the parties.

(2)
Reservation of Funds by Parent Company: The Defendant further shall cause its
parent holding company, Duke Energy Corporation, to record appropriate reserves
on its consolidated financial statements for the purpose of recognizing the
projected obligation to retire all coal ash impoundments, including those in
North Carolina. This obligation is currently estimated at a total of $3.4
billion ($3,400,000,000) on Duke Energy Corporation’s balance sheet for all coal
ash impoundments (including those owned by the Defendant and co-defendant DEP).
Each year during the term of probation, beginning on the date that the Agreement
is accepted by the Court and occurring by March 31 of each year thereafter, the
Defendant shall cause the Chief Financial Officer of Duke Energy Corporation, as
further directed under the Guaranty Agreement attached hereto, to certify to the
United States and the CAM that the Defendant and Duke Energy Corporation have
sufficient assets reserved to meet the obligations imposed by law or regulation
or as may otherwise be necessary to fulfill the Defendant’s obligations with
respect to its coal ash impoundments within the State of North Carolina. If the
CAM has any concerns regarding the assets available to meet obligations imposed
by the Judgment in this case, the CAM shall immediately notify the Court and the
parties.

(3)
Security: Through the entire term of probation, the Defendant shall further
maintain unused borrowing capacity in the amount of $250 million ($250,000,000)
under the Master Credit Facility as security to

meet its obligations under this Agreement for the closing and remediation of
coal ash impoundments, as more fully set forth in Paragraph 3(k) of this
Agreement. The Defendant shall certify this set aside to the CAM on an annual
basis, or more frequently as the CAM requires. If the CAM has any concerns
regarding the security available to meet the obligations imposed by the Judgment
in this case, the CAM shall immediately notify the Court and the parties.

iv.
Restitution for Counts of Conviction: Pursuant to 18 U.S.C. §§ 3663, 3663A, and
3563(b)(2), the Defendant shall make restitution to any victim in whatever
amount the Court may order. Said restitution shall be due and payable
immediately. Said restitution shall include at a minimum, as apportioned to this
Defendant pursuant to 18 U.S.C. § 3664(h), restitution to be paid to the Clerk
of the Court as follows:

(1)    $63,309.45 to Virginia Beach, payable to:

City of Virginia Beach
c/o Department of Public Utilities
City of Virginia Beach
2405 Courthouse Drive
Virginia Beach, Virginia 23456
ATTN: “Coal Ash Spill - Water Quality
Sampling / CIP 5-967” as a reference

(2)
$125,069.75 to City of Chesapeake, VA (Lake Gaston, sampling costs) payable to:

City of Chesapeake
c/o David Jurgens,
Director of Public Utilities
306 Cedar Rd, 2nd floor
Chesapeake, VA 23322

(3)
and $31,491.11 to the United States Army Corps of Engineers payable to:

FAO-USACE Wilmington
c/o Anita Bissette
69 Darlington Ave
Wilmington, NC 28406
(910-251-4803)

v.
Restitution for Relevant Conduct to Be Paid During Term of Probation: Pursuant
to 18 U.S.C. § 3663, the Defendant shall pay restitution as directed by the CAM
through the claims process set forth in Paragraphs 3(x)(iii)-(vi) of this
Agreement.

vi.
Special Assessment: The Defendant shall pay special assessments, totaling
$625.00, before or at the time of sentencing, and shall provide a receipt from
the Clerk of Court for the Eastern District of North Carolina to the United
States as proof of payment.

vii.
Public Apology: Consistent with USSG §8D1.4(a), the Defendant and co-defendants
DEBS and DEP shall place a full-page public apology in at least two national
newspapers and three major North Carolina newspapers (one in Raleigh, one in
Greensboro, and one in Charlotte) and on its publicly accessible company
website.

3.
The Defendant agrees:

a.
Consent to Transfers: To consent to the entry of

Rule 20 transfers for purposes of guilty pleas to the charges in the following
matters:

i.
United States v. Duke Energy Business Services LLC, Duke Energy Carolinas, LLC,
and Duke Energy Progress, Inc., No. 1:15-CR-51-1 (MDNC); and

ii.
United States v. Duke Energy Business Services LLC, Duke Energy Carolinas, LLC,
and Duke Energy Progress, Inc., No. 3:15-CR-43-FDW (WDNC).

b.
Restitution for Counts of Conviction: Pursuant to 18 U.S.C. §§ 3663, 3663A, and
3563(b) (2), to make restitution as ordered by the Court and as set forth in
this Agreement. Said restitution shall be due and payable immediately. Said
restitution shall include

additional costs associated with the Dan River response as previously set forth
in Paragraph 2(d)(iv) of this Agreement.

c.
Restitution for Relevant Conduct to be Paid During Term of Probation: In
addition to any order of restitution in connection with the counts of
conviction, to make restitution to the following entities, as determined and
directed by the CAM during the term of probation and pursuant to the agreed-upon
claims process set forth in Paragraphs 3(x)(iii)-(vi):

i.
City of Eden, North Carolina; Town of Madison, North Carolina; and other
localities impacted by bromide discharges from the Belews Creek and Cliffside
facilities

(1)
For all costs, whenever incurred, associated with water treatment system
upgrades resulting from the increase of trihalomethanes including, but not
limited to, maintenance costs.

(2)
All costs associated with investigating and responding to increased discharges
of bromide and/or the increase of trihalomethanes.

ii.
Other Local Governments with drinking water treatment systems impacted by
bromide discharges from other facilities owned by the Defendant

(1)
For all costs, whenever incurred, associated with water treatment system
upgrades resulting from the increase of trihalomethanes including, but not
limited to, maintenance costs.

(2)
All costs associated with investigating and responding to increased discharges
of bromide and/or the increase of trihalomethanes.

d.
Crime Victims’ Rights Act: Except as provided herein, at the time of the
execution of this Agreement, the parties are not aware of any other

victim as that term is defined by 18 U.S.C. §§ 3663, 3663A, and 3771. The
Defendant understands that the United States intends to fully comply with all
obligations under 18 U.S.C. § 3771, including victim notification and
restitution provisions.

e.
Appeal Waiver: To waive knowingly and expressly the right to appeal the
conviction and whatever sentence is imposed on any ground, including any appeal
pursuant to 18 U.S.C. § 3742, and further to waive any right to contest the
conviction or the sentence in any post-conviction proceeding, including any
proceeding under 28 U.S.C. § 2255, excepting an appeal or motion based upon
grounds of ineffective assistance of counsel or prosecutorial misconduct not
known to the Defendant at the time of the Defendant’s guilty plea. The foregoing
appeal waiver does not constitute or trigger a waiver by the United States of
any of its rights to appeal provided by law.

f.
Waiver of Rights to Records: To waive all rights, whether asserted directly or
through a representative, to request or receive from the United States any
records pertaining to the investigation or prosecution of this matter, except as
provided in the Fed. R. Crim. P. This waiver includes, but is not limited to,
rights conferred by the Freedom of Information Act and the Privacy Act of 1974.

g.
Special Assessment: To pay a special assessment of $125.00 for each misdemeanor
count pursuant to the provisions of 18 U.S.C. § 3013. The assessment shall be
paid by the Defendant at sentencing. The Defendant or Defendant’s counsel shall
provide a check in payment of the said assessment directly to the Clerk of
Court, U.S. District Court-EDNC.

h.
Financial Statement: To complete and submit a financial statement under oath to
the United States no later than two weeks prior to the entry of the guilty plea.
The Defendant can satisfy this condition by submitting its most recent financial
statement filed with the Securities and Exchange Commission.

i.
Reservation of Funds by Defendant: To record appropriate reserves on financial
statements for the

purpose of recognizing the projected obligation to retire its coal ash
impoundments in North Carolina, and, during each year during the term of
probation, to certify that it has sufficient assets reserved to meet the
obligations imposed by law and regulation as more fully set forth in Paragraph
2(d)(iii)(1) above. This obligation is currently estimated at a total of $2.0
billion ($2,000,000,000) on the Defendant’s balance sheet.

j.
Reservation of Funds by Parent Company: To cause its parent holding company,
Duke Energy Corporation, to record appropriate reserves on its consolidated
financial statements for the purpose of recognizing the projected obligation to
retire all coal ash impoundments, including those in North Carolina, and during
each year during the term of probation, to cause its parent holding company to
certify that it has sufficient assets reserved to meet the obligations imposed
by law and regulation as more fully set forth in Paragraph 2(d)(iii)(2) above.
This obligation is currently estimated at a total of $3.4 billion
($3,400,000,000) on Duke Energy Corporation’s balance sheet for all coal ash
impoundments (including those owned by the Defendant and co-defendant DEP).

k.
Security: Through the entire term of probation, to maintain unused borrowing
capacity in the amount of $250 million ($250,000,000) under the Master Credit
Facility as security to meet its obligations under this Agreement for the
closing and remediation of coal ash impoundments, as more fully set forth in
Paragraph 2(d)(iii)(3) of this Agreement. A copy of the certification for 2015
shall be filed with the Court at the time of entry of this Agreement.

1.
Cooperation: The Defendant shall continue to cooperate fully with the United
States, and with all other authorities and agencies designated by the United
States, and shall truthfully disclose all information with respect to the
activities of the Defendant and its present and former directors, officers,
employees, agents, consultants, contractors, and subcontractors thereof,
regarding the conduct underlying the Criminal Informations about which the
Defendant has any knowledge or about

which the United States shall inquire. This obligation of truthful disclosure
includes the obligation of the Defendant to provide to the United States, upon
request, any document, record, or other tangible evidence regarding the conduct
underlying the Criminal Informations about which the United States shall inquire
of the Defendant. Compliance with such cooperation requirements shall not be
construed as requiring or effecting a waiver of the attorney-client privilege or
work product protections.

m.
Such cooperation set forth in Paragraph (1) above shall include but not be
limited to: (a) promptly disclosing any and all related criminal or potentially
criminal conduct of which the Defendant is currently aware; (b) promptly
producing all documents requested by the federal government or by grand jury
subpoena; (c) promptly making employees available to the investigation team upon
request for interview or for testimony in any proceeding, subject to those
employees’ own legal rights; and (d) making reasonable efforts to ensure its
employees provide full and truthful information.

n.
If the Defendant, through its employees acting within the scope of their
employment, provides false, incomplete, or misleading information or testimony,
or fails to abide by any term of cooperation set forth in Paragraphs (1) and (m)
above, this would constitute a material breach of this Agreement by the
Defendant, and the Defendant shall be subject to prosecution for any federal
criminal violation not barred by the applicable statute of limitations (or as
waived pursuant to Paragraph 3(hh)) or other legal prohibition. Any information
provided by the Defendant may be used against the Defendant in that prosecution.

o.
Additionally, the Defendant agrees that in the event of the Defendant’s material
breach of this Agreement the following are admissible against the Defendant in
any prosecution of or action against the Defendant: (i) any statements made by
the Defendant, under oath, at the guilty plea hearing (before either a
Magistrate Judge or a District Judge); (ii) the Joint Factual Statement
supporting this Agreement; and

(iii) any evidence derived from such statements. This includes the prosecution
of the charges that are the subject of this Agreement or any charges that the
United States agreed to dismiss or not file as part of this Agreement, but later
pursues because of a material breach by the Defendant. Additionally, the
Defendant knowingly and voluntarily waives any argument under the United States
Constitution, any statute, Rule 410 of the Federal Rules of Evidence, Fed. R.
Crim, P. 11(f) of the Federal Rules of Criminal Procedure, and/or any other
federal rule, that the statements or any evidence derived from any statements
should be suppressed or are inadmissible.

p.
Compliance with the Law: Except as provided otherwise herein and in Paragraph
(q) below, the Defendant agrees that it shall commit no new violations of
federal, state, or local law, including those laws and regulations for which
primary enforcement has been delegated to state authorities, and shall conduct
its operations in accordance with the environmental laws of the United States
and the State of North Carolina. If the Defendant learns of any such violations
committed by its agents or employees during the term of probation, the Defendant
shall notify the United States of the violations in accordance with the terms of
the environmental compliance plans.

i.
The Defendant understands that the Government shall not consider there to be a
violation of the conditions of probation if the Defendant complies with federal
environmental laws when there is a direct conflict between the state and federal
environmental laws.

q.
The Defendant shall comply with all federal, state, and other regulations
relating to coal ash, and will have no new notices of violation, notices of
deficiency, or other criminal, civil, or administrative enforcement actions
based on conduct (including the failure to act) occurring after entry of the
guilty plea.

i.
The Defendant understands that it shall be considered a violation of the
conditions of probation if the Defendant engages in the above

conduct and such conduct or condition results in a final assessment (after
conclusion of any appeals) in an amount greater than $5,000 and imposed after
the entry of the guilty plea and which the CAM deems material. Any conduct or
conditions resulting in a final assessment in an amount greater than $15,000
shall be presumed to be material.

ii. It shall not be considered a violation of probation if the enforcement
action is based upon information disclosed by the Defendant in its 2014
Topographic Map and Discharge Assessment Plan(s) and/or its 2014 NDPES permit
renewal application(s) for its facilities in North Carolina.

r.
The Defendant shall comply with all legislative and regulatory mandates
concerning closure of the coal ash impoundments which it operates, and shall
complete full excavation and closure of all of the coal ash impoundments at its
Dan River and Riverbend facilities in accordance with federal and state laws,
including the United States Environmental Protection Agency’s (“EPA”) 2014 final
rule governing the disposal of coal combustion residuals from electric utilities
(“CCR Rule”) and North Carolina’s Coal Ash Management Act of 2014, by the dates
dictated in those laws, currently the calendar year 2019. In so doing, the
Defendant shall act diligently and in good faith to meet projected critical
milestones in its closure plans for each site as set forth in the following
documents: Duke Energy’s Dan River Steam Station Coal Ash Excavation Plan dated
November 13, 2014; and Duke Energy’s Riverbend Steam Station Coal Ash Excavation
Plan dated November 13, 2014 (collectively referred to as “Excavation Plans”),
as may be amended with the approval of the North Carolina Department of
Environment and Natural Resources (“DENR”).

i.
With respect to excavated coal ash, the removed ash shall be stored in a lined
CCR landfill space or lined impoundment meeting all requirements established by
applicable statute, law, and regulation, including but not limited to 40 CFR
Part 258 (Subtitle D of RCRA). Nothing in this Paragraph shall prohibit the
Defendant from the

disposition of ash through beneficial reuse as contemplated by the CCR Rule.

ii.
Every six months, or on a more frequent basis as determined by the CAM, the
Defendant shall provide the CAM with a detailed description of its efforts to
excavate coal ash and close all of the coal ash impoundments at Dan River and
Riverbend and whether it has met the critical milestones set forth in the
Excavation Plans in the time period since the last report. The Defendant shall
also include the status of all permits and permit applications with any
regulatory body, including but not limited to DENR. The Defendant shall also
make such reports publicly available on its website.

(1)
If the CAM has any concerns regarding whether the Defendant acted diligently or
in good faith to meet its obligations under this provision, including the
critical milestones set forth in the Excavation Plans, the CAM shall immediately
notify the Court and the parties.

iii.
The Defendant shall contemporaneously provide an executive summary of the report
in subparagraph (ii) above to the United States Attorneys’ Offices for the
Eastern, Middle, and Western Districts of North Carolina; the Department of
Justice - Environmental Crimes Section; the United States Environmental
Protection Agency Criminal Investigation Division; and the United States
Environmental Protection Agency – Legal Counsel Division.    Upon request, the
Defendant shall provide the full report for inspection and review by any of the
governmental parties.

(1) If the Government has any concerns regarding whether the Defendant acted
diligently or in good faith to meet its obligation under this provision,
including the critical milestones set forth in the Excavation Plans, the
Government may elect to notify either the CAM or the Court, and may seek
additional penalties as may be appropriate.

iv.
Six months prior to the end of the term of probation, the Defendant shall
provide the Court, the CAM, and the Government with a full report of its efforts
to excavate coal ash and to close all of the coal ash impoundments at Dan River
and Riverbend and the anticipated completion date.

v.
The Government may seek additional fines and penalties should the Defendant fail
to comply with such legislative or regulatory mandates and closure requirements
under this Paragraph unless the compliance is delayed by a “force majeure” as
that term is defined herein. The parties recognize that a change in law making
performance impossible may be raised under the “force majeure” clause herein,
but final determination shall be made by the Court.

vi.
The Defendant understands that the Government shall not consider there to be a
violation of the conditions of probation if the Defendant complies with federal
environmental laws when there is a direct conflict between the state and federal
environmental laws. The Defendant, however,

shall immediately notify the Court, the CAM, and the Government of the conflict
of laws and the impact on excavation and closure plans.

s.
Criminal Fine: The Defendant shall pay a total criminal fine in the amount of
$53.6 million ($53,600,000), allocated as set forth in Paragraph 2(d)(i) above.

t.
Stipulated Factual Basis for Fine: The Defendant stipulates that there is a
factual basis for the imposition of a criminal fine in the amount of $53.6
million ($53,600,000) pursuant to 33 U.S.C.

§§ 1319(c)(1)(A) and/or 18 U.S.C. § 3571(c) and (d) and that the payments made
pursuant to Paragraph 2(d)(i) do not together exceed the statutory maximum fine
available under each of the applicable statutes. The Defendant further waives
any right to a jury or bench trial as to those payments.

u.
Environmental Compliance Plans: As a special condition of probation, the
Defendant shall cause, assist, and otherwise take all steps necessary to

effectuate the obligation of co-defendant DEBS to develop, adopt, implement, and
fund the NECP designed to ensure compliance with applicable environmental laws
and regulations at all of the coal ash impoundments owned and operated (whether
active or inactive) by any wholly-owned subsidiary of Duke Energy
Corporation.    In addition to requirements to be applied nationwide, the
Defendant, along with co-defendants DEBS and DEP, shall develop, implement, and
enforce the ECP-NC that also incorporates all of the requirements of the NECP.
Both the NECP and the ECP-NC shall be filed with the Court as separate
documents. Components of the NECP and the ECP-NC include, but are not limited
to, the following:

i.
Timing for Submission of NECP and ECP-NC: Defendant DUKE ENERGY CAROLINAS, along
with its co-defendants DEBS and DEP, shall develop and adopt the NECP and ECP-NC
within seventy (70) days of the selection of the CAM. The final NECP and ECP-NC
shall be submitted to the Court with copies to the United States Probation
Office; the United States Attorneys’ Offices for the Eastern, Middle, and
Western Districts; the Department of Justice - Environmental Crimes Section; the
Environmental Protection Agency – Criminal Investigation Division; and the
United States Environmental Protection Agency – Legal Counsel Division. The
Court must approve both the NECP and ECP-NC.

(1)
The United States acknowledges that two (2) wholly-owned subsidiaries of Duke
Energy Corporation, Duke Energy Commercial Enterprises, Inc. (an indirect
wholly-owned subsidiary) and Duke Energy SAM, LLC (a direct wholly-owned
subsidiary) have entered into a purchase and sale agreement with a subsidiary of
Dynegy Inc. in which Dynegy Inc. will acquire Duke Energy Ohio’s unregulated
Midwest generation business (which has been classified as Discontinued
Operations on the Condensed Consolidated Statement of Operations). Approval is
pending before the Federal Energy Regulatory Commission. Both of the
subsidiaries handle coal ash.

(2)
If the sale above has not been closed at the time of the submission of the NECP
to the Court for approval, it is expressly understood and agreed that these
assets need not be included within the NECP with the following exception: if the
sale is not closed within ninety (90) days of the approval of the NECP by the
Court, the CAM may, at his/her option, require the NECP to be amended to include
these subsidiaries.

ii.
Best Efforts: Defendant DUKE ENERGY CAROLINAS, along with its co-defendants DEBS
and DEP, shall use best efforts to comply with each and all of the obligations
under both the NECP and ECP-NC.

(1)
The requirement that the Defendant exercise “best efforts” to fulfill the
obligation includes using commercially reasonable efforts to anticipate any
potential “force majeure” event (as defined herein at Paragraph 3(y)) and to
address the effects of any potential “force majeure” event: (a) as it is
occurring, and (b) following the potential “force majeure” event, such that the
delay is minimized to the greatest extent possible.

(2)
If the CAM believes that the Defendant has not used “best efforts” to fulfill
its obligations, the CAM shall provide written notice immediately to the Court
and the parties.

(3)
The final determination of whether the Defendant used “best efforts” shall be
made by the Court with the advice of and recommendations from the CAM.

(4)
If the Court concludes that the Defendant failed to exercise “best efforts” to
fulfill an obligation of this Agreement, the Court may impose and the Government
will be entitled to seek additional monetary penalties.

iii.
Selection and Funding of CAM:

(1)
Funding: As part of the NECP and the ECP-NC, Defendant DUKE ENERGY CAROLINAS,
along with its co-defendants DEBS and DEP, shall pay for a CAM who will be
appointed by and report to the Court during the full period of probation.

(2)
Qualifications: The object of the selection process for the CAM is to select the
most qualified candidate to oversee implementation of the NECP, the ECP-NC, and
the bromide claims process. Therefore, the CAM must have staff, or be able to
retain staff, with the following experience: (a) expertise and competence in the
regulatory programs under the United States and State of North Carolina
environmental laws; (b) sufficient expertise and competence to assess whether
the Defendant, DEBS, and DEP have adequate management systems in place to ensure
regulatory compliance, document such noncompliance, and prevent future
noncompliance; and (c) sufficient expertise and competence to review claims for
reimbursement under the process for identifying, verifying, and providing
restitution for claims relating to bromide discharges described herein.

(3)
Nomination and Veto by Government: Within thirty (30) days of the entry of the
Judgment, Defendant DUKE ENERGY CAROLINAS, along with its co-defendants DEBS and
DEP, shall submit a list of three qualified candidates for the position of CAM
from which the Court will select and appoint one of the candidates.    Any
nomination will include a detailed curriculum vitae or similar documentation
setting forth the qualifications of the candidate. The Government shall have
fifteen (15) days from the receipt of the nominations to file any reasonable
objection to any or all of the proposed candidates. If the Government lodges an
objection, then Defendant DUKE

ENERGY CAROLINAS, along with its co-defendants DEBS and DEP, must nominate a
replacement candidate(s). The Government again shall have the right to lodge any
reasonable objection to any replacement candidate; and the Court may adjust the
time frame for the nominations of the CAM as necessary to ensure that the best
possible candidates are nominated.

(4)
Court Selection: Upon receipt of a final list of candidates, the Court shall
select one candidate as CAM by written order. In the event that the Court does
not find any of the candidates satisfactory or if, during any point in the term
of probation, the Court does not find the work of the selected CAM satisfactory,
the Court may request Defendant DUKE ENERGY CAROLINAS, along with its
co-defendants DEBS and DEP, to nominate additional candidates. The Court may
adjust the time frame for the selection of the CAM as necessary to ensure that
the best possible candidate is selected.

iv.
Reporting by CAM: On an annual basis, or more often as the Court directs, the
CAM shall provide reports in writing to the Court, through the United States
Probation Office, demonstrating compliance with the NECP and the ECP-NC by DUKE
ENERGY CAROLINAS, DEBS and DEP. The report shall include, among other things, a
detailed description of: (1) all excavation, closure, and/or proper remediation
of the coal ash impoundments located in North Carolina and addressed in the
ECP-NC; and (2) all three codefendants’ compliance with all appropriate
environmental laws and regulations in connection with the management of their
coal ash impoundments in North Carolina and elsewhere.

(1)
Public Access to Information: The CAM shall ensure, and the Defendant shall
facilitate, the posting of copies of any environmental compliance audits, annual
reports, and/or any other reports prepared pursuant to the

NECP or ECP-NC on a company web page with public access.

•
Subject to the approval of the CAM, the Defendant may redact confidential
business information or any information it reasonably believes could impair the
security of its operations before such audits or reports are posted for public
access.

•
The CAM shall inspect such proposed redactions to determine the propriety of the
redactions.

•
Notwithstanding the foregoing, unredacted copies shall be provided to the Court.

The Defendant may seek to have the filings placed under seal to protect any
information that the CAM has deemed to warrant redaction.

(2)
The CAM will contemporaneously provide copies of the reports (as posted) to the
United States Attorneys’ Offices for the Eastern, Middle, and Western Districts
of North Carolina; the Department of Justice - Environmental Crimes Section; the
United States Environmental Protection Agency - Criminal Investigation Division;
and the United States Environmental Protection Agency - Legal Counsel Division.
If the reports contain redactions, any of these parties may inspect the
redactions and challenge the propriety of the redactions. The Court shall be the
final arbiter of any challenge.

v.
Nationwide ECP: The NECP shall include, among other things:

(1)
Organizational Funding: Co-Defendant DEBS shall maintain and fund the operation
of all of the company compliance organizations created in the wake of the Dan
River release, including: ABSAT, the Coal Combustion Products organization, and
the

National Ash Management Advisory Board. Subject to the approval of the CAM, DEBS
may transfer operations and responsibilities, between internal organizations or
adjust funding of such organizations as appropriate, as long as the obligations
of this Agreement are being met. To the extent necessary or required, the
Defendant shall fund or otherwise pay for its proportionate share of the
continued maintenance and operations of these compliance organizations.

(2)
Compliance Officer (“CO”): The Defendant, and its co-defendants DEBS and DEP,
each shall identify or establish a position at the Vice President level or
higher who will liaise directly with the CAM. The Defendant’s designated CO
shall have, among other duties, the primary responsibility for ensuring
compliance with applicable environmental requirements and requirements of the
NECP and ECP-NC.

•
The COs shall submit detailed reports discussing the development,
implementa-tion, and enforcement of the NECP and ECP- NC at intervals deemed
necessary by the CAM. The first report shall also include an explanation of the
current corporate structure responsible for the operation and control of the
coal ash impoundments and the names of the individuals filling the relevant
positions. With the concurrence of the CAM, the COs may elect to submit a joint
report detailing the required information for all three co-defendants. Any
changes to the corporate coal ash oversight structure shall be immediately
forwarded to the CAM and included in the next regular report.

•
Subject to the approval of the CAM, the Defendant may redact confidential
business information or any information it reasonably believes could impair the

security of its operations before such reports are posted for public access.

•
The CAM shall inspect such proposed redactions to determine the propriety of the
redactions.

•
Notwithstanding the foregoing, unredacted copies shall be provided to the Court.

The Defendant may seek to have the filings placed under seal to protect any
information that the CAM has deemed to warrant redaction.

•
The CAM will contemporaneously provide copies of the reports (as posted) to the
United States Attorneys’ Offices for the Eastern, Middle, and Western Districts
of North Carolina; the Department of Justice - Environmental Crimes Section; the
United States Environmental Protection Agency - Criminal Investigation Division;
and the United States Environmental Protection Agency - Legal Counsel Division.
If the reports contain redactions, any of these parties may inspect the
redactions and challenge the propriety of the redactions. The Court shall be the
final arbiter of any challenge.

(3)
Environmental Audits: Within the first ninety (90) days of his or her
appointment, the CAM shall establish a schedule for conducting environmental
audits of each of Duke Energy Corporation’s and its affiliates’ wholly-owned or
operated domestic facilities with Duke Energy Corporation or affiliate-managed
or affiliate-controlled coal ash impoundments outside North Carolina on an
annual basis.

•
Each year the Defendant can request that the CAM accept any full environmental
audit prepared by ABSAT or a similar organization in that same calendar year for
its facilities subject to the audits under the NECP.

•
The CAM can reject any such request by the Defendant if the CAM concludes that
the proposed environmental audit is not sufficiently comprehensive or not
prepared by a competent organization.

•
Copies of the environmental audit reports shall be posted on the Defendant’s
company webpage accessible to the public.

•
Subject to the approval of the CAM, the Defendant may redact confidential
business information or any information it reasonably believes could impair the
security of its operations before such audits or reports are posted for public
access.

•
The CAM shall inspect such proposed redactions to determine the propriety of the
redactions.

•
Notwithstanding the foregoing, unredacted copies shall be provided to the Court
and the United States Probation Officer. The Defendant may seek to have the
filings placed under seal to protect any information that the CAM has deemed to
warrant redaction.

•
The CAM will contemporaneously provide copies of the reports (as posted) to the
United States Attorneys’ Offices for the Eastern, Middle, and Western Districts
of North Carolina; the Department of Justice - Environmental Crimes Section; the
United States Environmental Protection Agency - Criminal Investigation Division;
and the United States Environmental Protection Agency - Legal Counsel Division.
If the reports contain redactions, any of these parties may inspect the
redactions to determine the propriety of the redactions. The Court shall be the
final arbiter of any challenge.

(4)
Toll-Free Hotline/Electronic Mail Inbox:

The Defendant, along with co-defendants DEBS and DEP, will establish and
maintain a toll-free hotline that will be answered twenty-four (24) hours a day,
seven (7) days a week, through which any person may report suspected violations
of applicable environmental laws or regulations, or violations of the NECP or
ECP-NC. The Defendant may utilize existing toll-free hotlines subject to
approval by the CAM. In addition, the Defendant, along with co-defendants DEBS
and DEP, shall create an electronic mail inbox accessible from its webpages and
accessible through a share link, through which any employee of Duke Energy
Corporation, its subsidiaries, or its affiliates, or any other person may report
suspected violations of applicable environmental laws or regulations or
violations of the NECP or ECP-NC.

•
Co-defendant DEBS shall periodically apprise employees and the public of the
availability of the toll-free hotline and electronic mail inbox by posting
notices on the Internet, Intranet (known within Duke Energy Corporation as the
“Portal”), by distributing notice via its electronic mail system, by providing
notices in appropriate employee work areas, and by publication in community
outlets.

•
All reports to the toll-free hotline or electronic mail inbox of suspected
violations of applicable environmental requirements, the NECP, or the ECP-NC
shall promptly be provided to the appropriate CO for further action, and the
appropriate CO shall maintain a record of the investigation and disposition of
each such matter and disclose such matters in reports to the CAM.

(5)
Environmental Training Program: The Defendant, along with co-defendants DEBS and

DEP, shall adopt, implement, and enforce a comprehensive training program to
educate all domestic employees of Duke Energy Corporation and its wholly-owned
or operated affiliates on the environmental impact of coal ash impoundment
operations and to be aware of the procedures and policies that form the basis of
the NECP and ECP-NC.

•
The goal of this training program is to ensure that every domestic employee of
Duke Energy Corporation and its wholly-owned or operated affiliates understands
applicable compliance policies and is able to integrate the compliance
objectives in the performance of his/her job. The training shall include
applicable notice and reporting requirements in the event of a release or
discharge. Subject to the approval of the CAM, the Defendant may develop
different training programs that are tailored to the employee’s specific job
description and responsibilities as long as the overall goal of the training
requirement is met.

•
Additionally, the Defendant and co-defendants DEBS and DEP shall provide
training and written materials describing the safe and proper handling of
pollutants, hazardous substances, and/or wastes.

•
Copies of all written materials and training curricula shall be provided to the
CAM.

vi.
Statewide ECP: The ECP-NC, in addition to incorporating all of the requirements
of the NECP, shall include, among other things, the following conditions:

(1)
Point of Contact (“POC”):    With respect to each of its facilities with coal
ash impoundments in North Carolina, the Defendant and co-defendant DEBS shall
identify or establish a POC for the CAM

within each of the following three business services: (1) ABSAT; (2)
Environmental, Health & Safety; and (3) Coal Combustion Products.

(2)
Environmental Audits: Within the first ninety (90) days of his/her appointment,
the CAM shall establish a schedule for conducting environmental audits of each
of the Defendant’s facilities with coal ash impoundments in North Carolina on an
annual basis.

•
Each year the Defendant can request that the CAM accept any full environmental
audit prepared by ABSAT or a similar organization in that same calendar year for
two of its facilities subject to the audits. The Defendant cannot make the
request for the same facilities in consecutive years.

•
The CAM can reject any such request by the Defendant if the CAM concludes that
the proposed environmental audit is not sufficiently comprehensive or not
prepared by a competent organization.

•
Copies of the environmental audit reports shall be posted on the Defendant’s
company webpage accessible to the public.

•
Subject to the approval of the CAM, the Defendant may redact confidential
business information or any information it reasonably believes could impair the
security of its operations before such audits or reports are posted for public
access.

•
The CAM shall inspect such proposed redactions to determine the propriety of the
redactions.

•
Notwithstanding the foregoing, unredacted copies shall be provided to the Court
and

the United States Probation Officer. The Defendant may seek to have the filings
placed under seal to protect any information that the CAM has deemed to warrant
redaction.

•
The CAM will contemporaneously provide copies of the reports (as posted) to the
United States Attorneys’ Offices for the Eastern, Middle, and Western Districts
of North Carolina; the Department of Justice - Environmental Crimes Section; the
United States Environmental Protection Agency Criminal Investigation Division;
and the United States Environmental Protection Agency - Legal Counsel Division.
If the reports contain redactions, any of these parties may inspect the
redactions to determine the propriety of the redactions. The Court shall be the
final arbiter of any challenge.

v.
The Defendant shall ensure that any new, expanded, or reopened coal ash or coal
ash wastewater impoundment facilities are lined to ensure no unpermitted
discharges of coal ash or coal ash wastewater to any water of the United States.
This includes all engineered, channelized, or naturally occurring seeps.

w.
Recordkeeping of Coal Ash Impoundment Volumes: Every six months, the Defendant
shall determine the volume of wastewater and coal ash in each of its wet-storage
coal ash impoundments in North Carolina. Additional determinations shall be made
following the conclusion of activities that significantly change the volumes of
materials in the impoundments, including but not limited to temporary rerouting
of waste streams other than sluiced coal ash to the ash impoundment, dredging,
and dewatering. Written or electronic records of the volumes shall be maintained
by the Defendant in a location(s) accessible to facility staff and to any of the
Defendant’s employees responsible for making environmental or emergency reports.

x.
Bromide Remediation Claims and Costs:

i.
Identification: Within the first year of probation, or within ninety (90) days
of the installation of a new Flue Gas Desulfurization (“FGD”) scrubber system
thereafter, the Defendant shall identify:

(1)
all facilities operated by it in North Carolina that utilize or will utilize FGD
scrubbers that will result in an increase in bromide discharge into surface
waters; and

(2)
all local governments that are downstream from such FGD scrubbers and draw water
into water treatment facilities.

ii.
Notification:    Within the first year of probation, or within ninety (90) days
of the installation of a new FGD scrubber system thereafter, the Defendant
shall: (1) notify in writing the identified local governments of the increase or
potential increase in bromide discharge; and (2) cooperate in studies of whether
there has been or will be an impact on these water treatment facilities. The
Defendant shall further advise the local government of the claims process
established by the CAM, as described below. The Defendant will further note that
the local government is not obligated to submit a claim through the process, is
not bound by any recommendation of the CAM, and may pursue any civil and/or
administrative remedies available to it.    Copies of such correspondence shall
be provided to the CAM, United States Probation Officer, and each of the
prosecuting districts.

iii.
Claims Process: The CAM shall establish a procedure by which local governments
that are downstream of the Defendant’s facilities with FGD scrubbers and
experience increases in trihalomethanes at their water treatment facilities
related to increases in bromide released by those facilities may submit evidence
of these impacts and claims for restitution stemming from these impacts.

(1)
In these claims, the local governments bear the burden of proving by a
preponderance of the evidence to the CAM that trihalomethanes have increased and
that the Defendant’s facility’s discharge of bromide substantially contributed
to the increase.

(2)
The Defendant shall be permitted an opportunity to respond to any evidence or
material submitted by local governments in this process.

(3)
The CAM shall review proposed remediation actions and costs or anticipated costs
associated with investigating, responding to, and remediating increased bromides
and trihalomethanes for reasonableness in determining the correct amount of
restitution. The CAM shall issue a written decision on every claim submitted. If
the CAM determines that restitution to a local government in any amount is
appropriate, the Defendant shall also reimburse the local government for costs
associated with investigating and preparing its submission to the CAM, including
reasonable attorneys’ fees.

iv.
Appeals Process: Once the written decision is issued, the Defendant or the local
government may appeal the decision to the United States District Court. In such
an appeal, the decision of the CAM shall be subject to a rebuttable presumption
of correctness. If the Defendant unsuccessfully appeals a written decision of
the CAM, the Defendant shall bear all of the costs of the appeal, including the
costs of the CAM and the reasonable attorneys’ fees of the local government,
with the Court making the final determination of the reasonableness of such
fees. If the Defendant is successful on appeal, the Defendant shall bear the
costs of the CAM and the local government shall bear the costs of its attorneys’
fees.

v.
Payment of Claims: Once the CAM has issued its written, opinion, the Defendant
shall pay the approved costs to the claimant within thirty (30) days of the
opinion, unless it files an appeal to the United States District Court as
provided above. If, after appeal, the Court concurs with the CAM’s opinion
approving such costs, the Defendant shall pay the approved costs to the claimant
and submit proof of payment to the Court within thirty (30) days of the Court’s
opinion. Nothing in this subparagraph will bar the CAM or the Court from
ordering a different payment schedule as appropriate.

vi.
Deadline for Filing Claims: Local governments shall have until sixty (60) days
prior to the end of the five-year (5-year) probationary term to submit a claim.

y.
Force Majeure. For purposes of this Agreement, a “force majeure” is defined as
any event arising from causes beyond the reasonable control of the Defendant,
any entity controlled by the Defendant, or its contractors that delays or
prevents performance of any obligation despite the best efforts to fulfill the
obligation and includes but is not limited to war, terrorism, civil unrest,
labor dispute, act of God, change in law making performance impossible, or act
of a governmental or regulatory body delaying performance or making performance
impossible, including, without limitation, any appeal or decision remanding,
overturning, modifying, or otherwise acting (or failing to act) on a permit or
similar permission or action that prevents or delays an action needed for the
performance of any work such that it prevents or substantially interferes with
the Defendant’s ability to perform. Force majeure does not include financial
inability to complete the work, increased cost of performance, or changes in
business or economic circumstances.

i.
If the Defendant seeks to rely on “force majeure” to excuse performance or
timely performance with any term of this Agreement, the Defendant must apply to
the CAM with copies of such application provided to the Government and the
United States Probation Officer.

ii.
The final determination of “force majeure” shall be made by the Court with the
advice and recommendation from the CAM.

iii.
If the Court concludes that the Defendant’s failure to fulfill an obligation of
this Agreement was not excused by a “force majeure,” the Court may impose and
the Government will be entitled to seek additional monetary penalties.

z.
Funding of NECP and ECP-NC: A failure to fund or implement the NECP or ECP-NC
during its term of probation would constitute a breach of this Agreement by the
Defendant, and the Defendant shall be subject to prosecution for any federal
criminal violation not barred by the applicable statute of limitations (or as
waived pursuant to Paragraph 3(hh)) or other legal prohibition. Any information
provided by the Defendant may be used against the Defendant in such a
prosecution.

aa. Community Service Payment: In addition to the community service payment made
by co-defendant DEP, the Defendant, as guaranteed by Duke Energy Corporation and
set forth in the Guaranty attached to this Agreement, shall pay $13.5 million
($13,500,000) to the National Fish and Wildlife Foundation (“NFWF”), a nonprofit
organization established pursuant to 16 U.S.C. §§ 3701-3710, as community
service by an organization. With respect to the work described in this Paragraph
below, the Defendant shall assume no responsibilities or obligations other than
making the payments described in Paragraph 3(aa)(i) below. The Defendant shall
not seek any reduction in its tax obligations as a result of these community
service payments nor shall the Defendant characterize, publicize, or refer to
these payments as voluntary donations or contributions. Additionally, the
Defendant shall not seek or take credit for any project performed using funds
disbursed by NFWF pursuant to this Agreement in any related civil or
administrative proceeding, including but not limited to, the Natural Resources
Damages Assessment process.

i.
The Defendant will make the $13.5 million ($13,500,000) payment within sixty
(60) days of entry of Judgment. Payments shall be made by certified check
payable to the National Fish and Wildlife Foundation and mailed to the attention
of its Chief Financial Officer at 1133 15th Street, NW, Suite 1100, Washington,
DC 20005, and include a reference to the case number in this proceeding; or by
electronic funds transfer in accordance with written instructions to be provided
to the Defendant by NFWF at the time of transfer.

ii. NFWF shall use the money it receives from the Defendant pursuant to this
Agreement for the benefit, preservation, restoration, and improvement of the
water resources of North Carolina and Virginia that have been impacted by the
operation of coal ash storage ponds owned by the Defendant. NFWF shall conduct
or fund projects in the following federal districts, in the following amounts:

(1)
Eastern District of North Carolina: $3.5 million ($3,500,000);

(2)
Middle District of North Carolina: $3.5 million ($3,500,000);

(3)
Western District of North Carolina: $3.5 million ($3,500,000); and

(4)
Eastern District of Virginia and Western District of Virginia: $3 million
($3,000,000).

iii.
The projects and initiatives considered by NFWF should include, but not be
limited to: monitoring, study, restoration, and preservation of fish, wildlife,
and plant resources; monitoring, study, clean up, remediation, sampling, and
analysis of pollution and other threats to the riparian environment and
ecosystem; research, study, planning, repair, maintenance, education, and public
outreach relating to the riparian environment and ecosystem; environmental
education and training

relating to the protection and preservation of riparian resources; and the
protection and support of public drinking water systems.

iv.
The projects and initiatives considered by NFWF should be focused on the
following river basins or watersheds:    Broad River, Cape Fear River, Catawba
River, Dan River, French Broad River, Lumber River, Roanoke River, Neuse River,
and Yadkin River.    NFWF shall make every effort to fund at least one project
and/or initiative in each of the river basins or watersheds.

v.
NFWF shall consult with appropriate state resource managers in North Carolina
and Virginia, as well as federal resource managers, that have statutory
authority for coordination or cooperation with private entities to help identify
projects and maximize the environmental benefits of such projects. Specifically,
NFWF should consult with the United States Environmental Protection Agency, the
United States Fish and Wildlife Service, the United States Army Corps of
Engineers, the North Carolina Department of Environment and Natural Resources,
the North Carolina Wildlife Resources Commission, the Virginia Department of
Environmental Quality, the Virginia Department of Conservation and Recreation,
and the Virginia Department of Game and Inland Fisheries. NFWF shall further
consult with localities as appropriate. NFWF is not bound by any recommendations
from any of the state or federal agencies, resource managers, or localities
consulted.

vi.
Projects shall be identified and funding obligated within five (5) years of the
date of entry of Judgment in this case.

vii.
In identifying and selecting projects to receive funding pursuant to this
Agreement and related Judgment, NFWF shall not incur liability of any nature in
connection with any act or omission, made in good faith, in the administration
of the funds or otherwise pursuant to this Agreement, excepting, however,
liability resulting from

NFWF’s gross negligence or willful misconduct.

In addition, if and to the extent NFWF grants funds to or contracts with any
governmental entity to implement any project under this Agreement and related
Judgment: (a) NFWF shall be deemed to act solely as an administrative agent in
contracting for, granting to, and disbursing funds for any such project; and (b)
NFWF shall not be deemed to incur liability of any nature in connection with the
design, engineering, construction, operation, or maintenance of any such
project, including, without limitation, any impact or consequences of any such
project on fish, wildlife, plant, or other natural resources, personal injury,
or property damage.

viii.NFWF’s use of funds received pursuant to this Agreement and related
Judgment shall be subject to the reporting requirements of 16 U.S.C.

§ 3706. In addition, NFWF shall report to the United States Probation Office and
to the parties regarding the status and disposition of money it has received
pursuant to this Agreement and related Judgment, on at least an annual basis,
until all such money has been spent.

bb.
Mitigation: Within ninety (90) days of sentencing, in order to mitigate impacts
to wetlands and other jurisdictional waters of the United States impacted as a
result of the Defendant’s operation of coal ash impoundments and any relevant
criminal conduct, including temporal and secondary effects, at its facilities in
North Carolina with coal ash impoundments, and in addition to the mitigation
payment made by its co-defendant DEP, the Defendant shall provide $5 million
($5,000,000), which represents its share after apportionment of a total $10
million ($10,000,000) payment, to an authorized wetlands mitigation bank for the
purchase of wetland and/or riparian land and/or restoration equivalent located
in the Broad River Basin, French Broad River Basin, Cape Fear River Basin,
Catawba River Basin, Dan River Basin, Yadkin-Pee Dee River Basin, Neuse River
Basin, Lumber River Basin, and Roanoke River Basin. This mitigation payment is
in addition to, and does not replace, Duke Energy Corporation’s public
commitment to fund its $10 million

($10,000,000) Water Resources Fund for environmental and other philanthropic
projects along lakes and rivers in the Southeast.

i.
Such wetland restoration shall be made through an authorized wetlands mitigation
bank with no affiliation to any current or former employee of the North Carolina
Department of Environment and Natural Resources in that employee’s individual
capacity.

ii.
The Defendant, along with its co-defendants DEBS and DEP, shall provide a list
of three (3) proposed mitigation banks from which the Court will select the
mitigation bank to receive the funds. If the Defendant is unable after
reasonable efforts to identify one or more mitigation banks, the Defendant may
substitute one or more conservation trust funds within the State of North
Carolina in its proposal as long as all other conditions of this section are
being met.

iii.
Such property must be purchased in the State of North Carolina by the selected
authorized wetlands mitigation bank or conservation trust within four (4) years
from the date of entry of Judgment.

iv.
Such property shall be held by and titled in the name of a third-party (with no
affiliation to the Defendant or any of the Defendant’s sister or parent
corporations).

v.
Such property shall be held in permanent conservation status for the benefit of
the citizens of North Carolina.

vi.
The Defendant shall ensure that the selected authorized wetlands mitigation bank
or conservation trust provides a full accounting of all mitigation property
purchased to the Court and the CAM, and documentary evidence that the property
has been placed in permanent conservation status.

cc.
No Credit in Civil or Administrative Proceedings:

The Defendant shall not seek or take credit for any fine, restitution, community
service payment, mitigation payment, or funding of the environmental compliance
plan (including the costs associated with the hiring or payment of staff or
consultants needed to assist the CAM) under this Agreement in any related civil
or administrative proceeding, including, but not limited to, the Natural
Resources Damages Assessment process.

dd.
No Capitalization or Tax Deduction: The Defendant shall agree that:    (1) it
shall not capitalize into inventory or basis or take as a tax deduction, in the
United States or elsewhere, any portion of the monetary payments (fine,
restitution, community service, mitigation, or funding of the environmental
compliance plans) made pursuant to this Agreement. Provided, however, that
nothing in this Agreement shall bar or prevent the Defendant from appropriately
capitalizing or seeking an appropriate tax deduction for restitution in
connection with the remediation of bromide claims set forth in this Agreement or
for costs which would have been incurred by the Defendant irrespective of the
environmental compliance plans. Costs that would have been incurred irrespective
of the environmental compliance plans include, by way of example only, costs for
staffing and operating Central Engineering Services, ABSAT, Coal Combustion
Products, or other similar organizations.

ee.
No Rate Increase Based Upon Monetary Penalties: The Defendant shall not
reference the burden of, or the cost associated with, compliance with the
criminal fines, the restitution related to counts of conviction, the community
service payments, the mitigation obligation, the costs of the clean-up in
response to the February 2, 2014, release at Dan River Steam Station, and/or the
funding of the environmental compliance plans in any request or application for
a rate increase on customers. Provided, however, that nothing in this Agreement
shall bar or prevent the Defendant from seeking appropriate recovery for
restitution in connection with the remediation of bromide claims set forth in
this Agreement or for costs which would have been incurred by the Defendant
irrespective of the

 

environmental compliance plans. Costs that would have been incurred irrespective
of the environmental compliance plans include, by way of example only, costs for
staffing and operating Central Engineering Services, ABSAT, Coal Combustion
Products, or other similar organizations.

ff.
Public Apology: Consistent with USSG §8D1.4(a), and in conjunction with its
co-defendants DEBS and DEP, the Defendant shall place a full-page advertisement
in at least two national newspapers and three major North Carolina newspapers
(one in Raleigh, one in Greensboro, and one in Charlotte) and on its publicly
accessible company website. The full page advertisement shall run within five
(5) days of entry of the plea. The language of the public apology must be agreed
upon by each of the federal districts and is appended to this Agreement as
Exhibit C.

gg.
The Defendant shall not reference this Agreement, any payments pursuant hereto,
or other compliance herewith in any public relations, marketing, or
advertising.    The Defendant shall be permitted to make required disclosures
under applicable securities laws.

hh.
Tolling of Statute of Limitations: To ensure compliance with the terms of the
Agreement, the Defendant waives any statute of limitations as of the date of
this Agreement through the full term of Defendant’s probation and until all of
the Defendant’s obligations under this Agreement have been satisfied with regard
to any conduct relating to or arising out of the conduct set forth in the
Criminal Informations.

ii.
The Defendant waives any claim under the Hyde Amendment, 18 U.S.C. § 3006A
(Statutory Note), for attorneys’ fees and other litigation expenses arising out
of the investigation or prosecution of this matter.

jj.
The Defendant agrees to withdraw from and not to participate in any joint
defense agreement, informal or formal, in connection with the defense by any
person designated as a “target” or “subject” of, or indicted for, any potential
criminal charges relating

to the Clean Water Act violations in North Carolina that are the subject of this
Agreement and any allegations of violations of Title 18 of which the Defendant
is aware or becomes aware. The Defendant agrees to submit a written statement,
signed by counsel and the appropriate corporate officer, reflecting this
commitment to the United States prior to entry of this Agreement.

kk.
Term of Supervised Probation: The Defendant and the Government agree that the
Defendant shall be placed on organizational supervised probation for a period of
five (5) years from the date of sentencing pursuant to 18 U.S.C. § 3561(c)(2)
and USSG §§8D1.1 and 8D1.2.

4.    The Defendant represents and/or acknowledges:

a.
That the Defendant has had the assistance of an attorney in connection with the
charges against it. That the attorney has carefully reviewed this Agreement with
those persons designated by law and its bylaws to act on behalf of the Defendant
(hereinafter referred to as “Designated Corporate Representative”) and that this
Agreement has been signed by a person authorized by law and the bylaws of the
Defendant to execute agreements on behalf of the Defendant.

b.
That its Designated Corporate Representative has reviewed and discussed the
Criminal Informations filed in each of the federal districts involved in this
matter with the Defendant’s attorney and that the attorney has explained the
Government’s evidence to that Designated Corporate Representative.

c.
That as a corporation, it is vicariously liable for the criminal acts of its
employees acting within the scope of their employment for the benefit of the
corporation.

d.
That it understands that this Agreement does not provide or promise any waiver
of any civil or administrative actions, sanctions, or penalties that may apply,
including but not limited to fines; penalties; claims for damages to natural
resources; suspension, debarment, listing to restrict rights and

opportunities of the Defendant to contract with or receive assistance, loans,
and benefits from United States agencies; licensing; injunctive relief; or
remedial action to comply with any applicable regulatory requirement. The
Defendant understands that this Agreement has no effect on any proceedings
against any party not expressly mentioned herein, including the actual or
potential criminal liability of any individuals.

e.
Guaranty: That it has sought and obtained a guarantee of its obligations under
this Agreement from its parent holding company, Duke Energy Corporation, a copy
of which is attached hereto as Exhibit B and incorporated herein by reference.
Duke Energy Corporation further consents to the jurisdiction of the United
States District Court for the Eastern District of North Carolina for the purpose
of enforcing the Guaranty Agreement.

f.
Resolution: That it has filed with the Court prior to entry of this Agreement
the original resolution from the board of directors (or equivalent written
authorization as recognized by law) that gives the authority described in
Paragraph 4(a) above to the Designated Corporate Representative and that
authorizes such employee to execute this Agreement on behalf of the Defendant. A
copy of the Resolution, attached hereto as Exhibit D, provides as follows:

i.
The Defendant is a legally viable entity, authorized to plead guilty to the
charges set forth in the Criminal Informations;

ii.
The Defendant shall be bound by the specific terms of this Agreement;

iii.
The parent corporation, Duke Energy Corporation, is authorized to guarantee all
payments (criminal fine, restitution, community service, and mitigation), and
funding and performance due from the Defendant in connection with its
obligations under the NECP and ECP-NC under this Agreement, as set forth in the
Guaranty Agreement.

iv.
Any legal successor or assignee of Duke Energy Corporation shall remain liable,
as the case may

be, for the guarantee of the Defendant’s payment obligations and the funding and
performance of both the NECP and ECP-NC hereunder, and an agreement to so remain
liable shall be included by Duke Energy Corporation in the terms of any sale,
acquisition, or merger.

v.
Any legal successor or assignee of the Defendant shall remain liable for the
Defendant’s obligations in this Agreement, and an agreement to so remain liable
shall be included by the Defendant in the terms of any sale, acquisition, or
merger of the Defendant with or by any other entity.    Subject to the
requirements of this subparagraph, nothing shall prevent the Defendant from
undergoing a corporate reorganization or change in form. The Defendant shall
record a copy of the Judgment with the Register of Deeds in each of the counties
in North Carolina in which it owns and operates facilities with coal ash
impoundments. Upon written request from the Defendant made only after
fulfillment of all of the conditions of this Agreement and related Judgment, the
Government shall take the necessary steps through the Register of Deeds to
facilitate the removal of the notice of the Judgment.

5.    The Defendant understands, agrees, and admits:

a.
That as to each Count of the Criminal Informations to which the Defendant is
pleading guilty, the charge, code section, elements, and applicable penalties
are as follows:

(SPACE LEFT BLANK INTENTIONALLY)

United States v. Duke Energy Business Services LLC,
Duke Energy Carolinas, LLC, and Duke Energy Progress, Inc.,
No. 5:15-CR-67-H-21

Violations at Dan River Steam Station

COUNT ONE

(1)
Clean Water Act violation for the unpermitted discharge through the 48-inch
stormwater pipe at

the Dan River Steam Station and aiding and

abetting

(2)
Code Sections

violated:            33 U.S.C. § 1311, 1319(c) (1) (A),
and 1342; and
18 U.S.C. § 2

(3)
Offense date:    No later than February 2, 2014,

through February 8, 2014

(4)
Elements of the Offense:

First:    The Defendant did discharge a pollutant,
to wit, coal ash and coal ash
wastewater;

Second:    from a point source;

Third:    into a water of the United States;

Four:    the Defendant did so without a permit;

Five:    the Defendant acted negligently in so
doing; and

Six:        the Defendant aided and abetted another
in so doing.

(5)
Maximum term of probation for a corporation:

5 years pursuant to 18 U.S.C. § 3561(c)(2) and
USSG §8D1.2(a)(2)
______________________
1Counts Five and Six are captured by the Plea Agreement in United States v. Duke
Energy Progress, Inc., No. 5:15-CR-62-H-2; No. 5:15-CR-67-H-3; and No.
5:15-CR-68-H-3.

(6)
Minimum term of probation for a corporation:

0 years pursuant to 18 U.S.C. § 3561(c)(2) and
USSG §8D1.2(a)(2)

(7)
Maximum fine: Pursuant to 18 U.S.C. § 3571(c)

and (d), the greater of: not less than $2,500 nor
more than $25,000 per day of violation (33 U.S.C.
§ 1319(c)(1)(A)); $200,000.00; or twice the gross gain or loss.

(8)
Restitution pursuant to 18 U.S.C. §§ 3663, 3663A,

and 3563(b)(2) as agreed to in Paragraphs 2(iv)-
(v) and 3(b)-(c) above.

(9)
Special assessment: $ 125.00

(10)
Other penalties: Public Notice of Violation; Development of a Compliance
Program; Community Service; and Remediation

COUNT TWO

(1)
Clean Water Act violation for the failure to

maintain the 48-inch stormwater pipe at the Dan
River Steam Station and aiding and abetting

(2)
Code Sections

violated:        33 U.S.C. §§ 1319(c)(1)(A),
and 1342; and
18 U.S.C. § 2

(3)
Offense date:    No later than January 2012,

through February 2, 2014

(4)
Elements of the Offense:

First:
The Defendant did violate a condition of

its NDPES permit issued by the State of North Carolina pursuant to the Clean

Water Act; to wit, the requirement to properly maintain its equipment as more
fully described in the Criminal Information;

Second:
the Defendant acted negligently in so

doing; and

Third:
the Defendant aided and abetted another

in so doing.

(5)
Maximum term of probation for a corporation:

5 years pursuant to 18 U.S.C. § 3561(c)(2) and

USSG §801.2(a)(2)

(6)
Minimum term of probation for a corporation:

0 years pursuant to 18 U.S.C. § 3561(c)(2) and

USSG §801.2(a)(2)

(7)
Maximum fine: Pursuant to 18 U.S.C. § 3571(c)

and (d), the greater of not less than $2,500 nor

more than $25,000 per day of violation (33 U.S.C.

§ 1319(c)(1)(A)); $ 200,000.00; or twice the

gross gain or loss.

(8)
Restitution pursuant to 18 U.S.C. §§ 3663, 3663A,

and 3563(b)(2) as agreed to in Paragraphs 2(iv) -

v) and 3(b)-(c) above.

(9)
Special assessment: $ 125.00

(10)
Other penalties: Public Notice of Violation; Development of a Compliance
Program; Community Service; and Remediation

COUNT THREE

(1)
Clean Water Act violation for the unpermitted discharge through the 36-inch
stormwater pipe

at the Dan River Steam Station and aiding and

abetting

(2)
Code Sections

violated:        33 U.S.C. §§ 1311, 1319(c) (1) (A)
and 1342; and
18 U.S.C. § 2

(3)
Offense date:     No later than January 2012

through February 21, 2014

(4)
Elements of the Offense:

First:    The Defendant did discharge a pollutant,
to wit, coal ash and coal ash
wastewater;

Second:    from a point source;

Third:    into a water of the United States;

Four:    the Defendant did so without a permit;

Five:    the Defendant acted negligently in so
doing; and

Six:        the Defendant aided and abetted another
in so doing.

(5)
Maximum term of probation for a corporation:

5 years pursuant to 18 U.S.C. § 3561(c)(2) and

USSG §8D1.2(a)(2)

(6)
Minimum term of probation for a corporation:

0 years pursuant to 18 U.S.C. § 3561(c)(2) and

USSG §8D1.2(a)(2)

(7)
Maximum fine: Pursuant to 18 U.S.C. § 3571(c)

and (d), the greater of: not less than $2,500 nor

more than $25,000 per day of violation (33 U.S.C.

§ 1319(c)(1)(A)); $200,000.00; or twice the gross

gain or loss.

(8)
Restitution pursuant to 18 U.S.C. §§ 3663, 3663A,

and 3563(b)(2) as agreed to in Paragraphs 2(iv) -

(v) and 3(b)-(c) above.

(9)
Special assessment: $ 125.00

(10)
Other penalties: Public Notice of ‘Violation; Development of a Compliance
Program; Community Service; and Remediation

COUNT FOUR

(1)
Clean Water Act violation for the failure to

maintain the 36-inch stormwater pipe at the Dan

River Steam Station and aiding and abetting

(2)
Code Sections

violated:        33 U.S.C. § 1319(c)(1)(A),
and 1342; and
18 U.S.C. § 2

(3)
Offense date:    No later than January 2012,

through February 6, 2014

(4)
Elements of the Offense:

First:
The Defendant did violate a condition of

its NDPES permit issued by the State of

North Carolina pursuant to the Clean

Water Act; to wit, the requirement to

properly maintain its equipment as more fully described in the Criminal

Information;

Second:
the Defendant acted negligently in so

doing; and

Third:
the Defendant aided and abetted another

in so doing.

(5)
Maximum term of probation for a corporation:

5 years pursuant to 18 U.S.C. § 3561(c)(2) and

USSG §8D1.2(a)(2)

(6)
Minimum term of probation for a corporation:

0 years pursuant to 18 U.S.C. § 3561(c)(2) and

USSG §8D1.2(a)(2)

(7)
Maximum fine: Pursuant to 18 U.S.C. § 3571(c)

and (d), the greater of: not less than $2,500 nor

more than $25,000 per day of violation (33 U.S.C.

§ 1319(c)(1)(A)); $200,000.00; or twice the gross gain or loss.

(8)
Restitution pursuant to 18 U.S.C. § 3663, 3663A,

and 3563(b)(2) as agreed to in Paragraphs 2(iv)-

v) and 3(b)-(c) above.

(9)
Special assessment: $ 125.00

(10)
Other penalties: Public Notice of Violation;

Development of a Compliance Program; Community

Service; and Remediation

United States v. Duke Energy Business Services LLC,
Duke Energy Carolinas, LLC, and Duke Energy Progress, Inc.,
No. 5:15-CR-68-H-22 

VIOLATIONS AT RIVERBEND STEAM STAITON

COUNT ONE

(1)
Clean Water Act violation for the unpermitted

discharge from a toe drain at the ash impoundment

at Riverbend Steam Station and aiding and

abetting

(2)
Code Sections

violated:        33 U.S.C. §§ 1311, 1319(c)(1)(A),
and 1342; and
18 U.S.C. § 2

(3)
Offense date:     No later than November 8, 2012,

through December 30, 2014

(4)
Elements of the Offense:

First:
The Defendant did discharge a pollutant,

to wit, coal ash and coal ash
wastewater;
        
Second:
from a point source;

Third:
into a water of the United States;

Four:
the Defendant did so in violation of a

permit;

             
2 Count Two is captured by the Plea Agreement in United States v. Duke Energy
Progress, Inc., No. 5:15-CR-62-H-2; No. 5:15-CR-67-H-3; and No. 5:15-CR-68-H-3.

Five:
the Defendant acted negligently in so

doing; and

Six:
the Defendant aided and abetted another

in so doing.

(5)
Maximum term of probation for a corporation:

5 years pursuant to 18 U.S.C. § 3561(c)(2) and

USSG §8D1.2(a)(2)

(6)
Minimum term of probation for a corporation:

0 years pursuant to 18 U.S.C. § 3561(c)(2) and

USSG §8D1.2(a)(2)

(7)
Maximum fine: Pursuant to 18 U.S.C. § 3571(c) and (d), the greater of: not less
than $2,500 nor more than $25,000 per day of violation (33 U.S.C. §
1319(c)(1)(A)); $200,000.00; or twice the gross gain or loss.

(8)
Restitution pursuant to 18 U.S.C. §§ 3663, 3663A, and 3563(b)(2) as agreed to in
Paragraphs 2(iv) -

(v) and 3(b)-(c) above.

(9)    Special assessment: $ 125.00

(10)
Other penalties: Public Notice of Violation; Development of a Compliance
Program; Community Service; and Remediation

Total Statutory Penalties: 5 years of probation; a minimum fine of $45,740,000;
a maximum fine of $115,375,000; and $625.00 special assessment.]

6. The United States agrees:

a.
That pursuant to Fed. R. Crim. P. 11(c)(1nC), the

sentence set forth in Paragraph 2 above is warranted.

b.
That it reserves the right at sentencing to present

any evidence and information pursuant to 18 U.S.C.

§ 3661, to offer argument or rebuttal, to recommend

imposition of restitution, and to respond to any

motions or objections filed by the Defendant.

c.
That, subject to the reservations within this

Agreement, the United States shall not further
 

prosecute the Defendant, including all predecessors, successors, and assignees
of the Defendant, for conduct constituting the basis for the Criminal
Informations covered by this Agreement as set forth

in the Joint Factual Statement or about which the United States Attorneys’
Offices for the Eastern, Middle, and Western Districts and the Department of
Justice - Environmental Crimes Section were otherwise

aware of as of the date of this Agreement. This

Agreement shall not apply to individuals. Should the Court determine that the
Defendant has breached this Agreement, the Defendant will not be entitled to
withdraw its plea of guilty, and the United States

may prosecute the Defendant, and any predecessors, successors, and assignees of
the Defendant for

conduct constituting the basis for the Criminal

Informations covered by this Agreement,

notwithstanding the expiration of any applicable statutes of limitations
following the signing of this

Agreement. In any such prosecution, the United

States may use the Defendant’s admissions of guilt as admissible evidence
against the Defendant.

d.
That it will make known to the Court at sentencing

the full extent of the Defendant’s cooperation.

e.
Pursuant to USSG §131.8, that self-incriminating information provided by the
Defendant pursuant to

this Agreement shall not be used against the

Defendant in determining the applicable advisory Guideline range, except as
provided by USSG §1B1.8

and except as stated in this Agreement. The United States may provide to the
United States Probation Office any evidence concerning relevant conduct.

f.
Notwithstanding the foregoing, the United States Attorneys’ Offices for the
Eastern, Middle, and Western Districts of North Carolina and the

Department of Justice - Environmental Crimes Section further recognize that this
Agreement does not

provide or promise any waiver of any civil or administrative actions, sanctions,
or penalties that may apply, including but not limited to: fines; penalties;
claims for damages to natural resources; suspension, debarment, listing to
restrict rights and opportunities of the Defendant to contract with or receive
assistance, loans, and benefits from United
 

States agencies; licensing; injunctive relief; or remedial action to comply with
any applicable regulatory requirement.

(SPACE LEFT BLANK INTENTIONALLY)

[a103decpleaagreement5_image1.gif]

[a103decpleaagreement5_image2.gif]

The undersigned, Lynn J. Good, President and Chief Executive Office of Duke
Energy Corporation, the Guarantor, hereby acknowledges the terms and conditions
of the foregoing Plea Agreement as they apply to the Guaranty set forth in
Exhibit B.

[a103decpleaagreement5_image3.gif]

EXHIBIT A
Copy of Joint Factual Statement

UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF NORTH CAROLINA
WESTERN DIVISION
No.    5:15-CR-62-H
No.    5:15-CR-67-H
No.    5:15-CR-68-H

UNITED STATES OF AMERICA            )
)
v.                    )    JOINT FACTUAL STATEMENT
DUKE ENERGY BUSINESS SERVICES LLC    )
DUKE ENERGY CAROLINAS, LLC         )
DUKE ENERGY PROGRESS, INC.        )

I.    INTRODUCTION

Defendants Duke Energy Business Services .LLC (“DUKE ENERGY BUSINESS SERVICES”),
Duke Energy Carolinas, LLC (“DUKE ENERGY CAROLINAS”), and Duke Energy Progress,
Inc. (“DUKE ENERGY PROGRESS”),(collectively referred to as “Defendants”) and the
United States of America, by and through the United States Attorneys for the
Eastern District of North Carolina, the Middle District of North Carolina and
the Western District of North Carolina and the Environmental Crimes ‘Section of
the United States Department of Justice (collectively referred to herein as “the
United States” or “the government”), hereby agree that this Joint Factual
Statement is a true and accurate statement of the Defendants’ criminal conduct
and that it provides a sufficient basis for the Defendants’ pleas of guilty to
the following charging documents and the terms of the Plea Agreements:

United States v. Duke Energy Business Services, LLC, and
Duke Energy Progress, Inc., No. 5:15-CR-62-H;

United States v. Duke Energy Business Services, LLC, Duke Energy Carolinas, LLC,
and Duke Energy Progress, Inc.,

No. 5:15-CR-67-H; and

United States v. Duke Energy Business Services, LLC, Duke Energy Carolinas, LLC,
and Duke Energy Progress, Inc.,

No. 5:15-CR-68-H.

The charges from the Middle District of North Carolina and the Western District
of North Carolina have been transferred to the Eastern District of North
Carolina for purposes of plea pursuant to Fed. R. Crim. P. 20. The Defendants’
guilty pleas are to be entered pursuant to the Plea Agreements signed and dated
this same day.
II. OVERVIEW AND BACKGROUND

Dan River Steam Station -
Middle District of North Carolina

1.    From at least January 1, 2012, DUKE ENERGY CAROLINAS and DUKE ENERGY
BUSINESS SERVICES failed to properly maintain and inspect the two stormwater
pipes underneath the primary coal ash basin at the Dan River Steam Station in
Eden, North Carolina. On February 2, 2014, one of those pipes failed, resulting
in the discharge of approximately 27 million gallons of coal ash wastewater and
between 30,000 and 39,000 tons of coal ash into the Dan River. The coal ash
travelled more than
62 miles downriver to the Kerr Lake Reservoir on the border of
2

North Carolina and Virginia. Video camera inspections of the other pipe,
conducted in the aftermath of the spill, revealed that the other pipe had also
deteriorated, allowing coal ash wastewater to leak into the pipe, and that DUKE
ENERGY CAROLINAS and DUKE ENERGY BUSINESS SERVICES had not taken appropriate
action to prevent unauthorized discharges from the pipe.
Cape Fear Steam Electric Plant -
Middle District of North Carolina

2.    DUKE ENERGY PROGRESS and DUKE ENERGY BUSINESS SERVICES also failed to
maintain the riser structures in two of the coal ash basins at the Cape Fear
Steam Electric Plant, resulting in the unauthorized discharges of leaking coal
ash wastewater into the Cape Fear River.
Asheville, Riverbend, & Lee Steam Stations -
Eastern and Western Districts of North Carolina

3.    Additionally, DUKE ENERGY CAROLINAS’ and DUKE ENERGY PROGRESS’s coal
combustion facilities throughout North Carolina allowed unauthorized discharges
of pollutants from coal ash basins via “seeps” into adjacent waters of the
United States. Three of those facilities include the Asheville Steam Electric
Generating Plant, the H.F. Lee Steam Electric Plant, and the Riverbend Steam
Station. At those facilities, discharges from naturally occurring seeps were
channeled by DUKE ENERGY CAROLINAS and DUKE ENERGY BUSINESS SERVICES to flow
through
 

3

engineered drains and ditches into waters of the United States without obtaining
or maintaining the necessary permits.
4.    The Defendants’ conduct violated the Federal Water Pollution Control Act
(commonly referred to as the “Clean Water Act,” or “CWA”). 33 U.S.C. §§ 1251 et
seq. More specifically, the criminal investigation, conducted out of the Eastern
District of North Carolina, revealed the following:
DEFENDANTS AND CORPORATE STRUCTURE
5.    Duke Energy Corporation is an energy company headquartered in Charlotte,
North Carolina.
6.    Duke Energy Corporation is a holding company whose direct and indirect
subsidiaries operate in the United States and Latin America. Duke Energy
Corporation’s wholly-owned subsidiaries include: DUKE ENERGY CAROLINAS; Progress
Energy, Inc. (“Progress Energy”); DUKE ENERGY PROGRESS; and DUKE ENERGY BUSINESS
SERVICES.
7.    DUKE ENERGY CAROLINAS, a North Carolina limited liability company, is a
regulated public utility primarily engaged in the generation, transmission,
distribution and sale of electricity in portions of North Carolina and South
Carolina.
8.    Progress Energy, a North Carolina corporation headquartered in Raleigh,
North Carolina, is a holding company which holds, among other entities, DUKE
ENERGY PROGRESS.

4

9.    DUKE ENERGY PROGRESS, a North Carolina corporation, is a regulated public
utility primarily engaged in the generation, transmission, distribution and sale
of electricity in portions of North Carolina and South Carolina.    Prior to the
July 2, 2012, merger between Duke Energy Corporation and Progress Energy, Inc.,
DUKE ENERGY PROGRESS was known as Carolina Power & Light, Inc., d/b/a Progress
Energy Carolinas.
10.    “Progress Energy Carolinas” will refer to DUKE ENERGY PROGRESS before the
merger.
11.    DUKE ENERGY BUSINESS SERVICES provides shared services to all of Duke
Energy Corporation’s operating utilities

nationwide, including: Legal Counsel; Central Engineering & Services;
Environmental, Health & Safety; Ethics and Compliance; and Coal Combustion
Products.
12.During the time period relevant to the charges, within the State of North
Carolina, the Defendants and/or their predecessors owned and operated the
following facilities with coal ash basins:
FACILITY
OWNER/
OPERATOR
NUMBER OF COAL ASH BASINS
ADJACENT
WATERS OF THE UNITED STATES
FEDERAL JUDICIAL DISTRICT
Allen Steam Station (Gaston County)
Duke Energy Carolinas
2
Lake Wylie & Catawba River
WDNC
Asheville Steam Electric Generating Plant
(Buncombe County)
Duke Energy Progress
2
French Broad River
WDNC

5

Belews Creek Steam Station
(Stokes County)
Duke Energy Carolinas
1
Belews Lake & Dan River
MDNC
Buck Steam Station (Rowan County)
Duke Energy Carolinas
3
Yadkin River & High Rock Lake
MDNC
Cape Fear Steam Electric Plant (Chatham County)
Duke Energy Progress
5
Cape Fear River
MDNC
Cliffside Steam Station
(Rutherford & Cleveland Counties)
Duke Energy Carolinas
3
Broad River
WDNC
Dan River Steam Station
(Rockingham County)
Duke Energy Carolinas
2
Dan River
MDNC
H.F. Lee Steam Electric Plant (Wayne County)
Duke Energy Progress
5
Neuse River
EDNC
L.V. Sutton Electric Plant
(New Hanover County)
Duke Energy Progress
2
Cape Fear River & Sutton Lake1
EDNC
Marshall Steam Station
(Catawba County)
Duke Energy Carolinas
1
Lake Norman
WDNC
Mayo Steam Electric Plant
(Person County)
Duke Energy Progress
1
Mayo Lake
MDNC
Riverbend Steam Station
(Gaston County)
Duke Energy Carolinas
2
Catawba River
WDNC
Roxboro Steam Electric Plant (Person County)
Duke Energy Progress
2
Hyco River
MDNC
Weatherspoon Steam Electric Plant (Robeson County)
Duke Energy Progress
1
Lumber River
EDNC

________________________
1 While the parties agree that Sutton Lake receives wastewater from the L.V.
Sutton Electric Plant, the status of Sutton Lake as a “water of the State” or
“water of the United States” is part of ongoing federal civil litigation. See
Cape Fear River Watch, Inc. v. Duke Energy Progress, Inc., 25 F.Supp.3d 798,
808-809 (2014). The Defendants do not concede that Sutton Lake is a
jurisdictional water in this Joint Factual Statement.

6

COAL COMBUSTION PLANTS AND COAL ASH BASINS

13.    Power plants that generate electricity through the combustion of coal
create a number of waste byproducts. Among those waste byproducts are “coal
combustion residuals” or “CCRs.” CCRs include fly ash, bottom ash, coal slag,
and flue, gas desulfurized gypsum. Fly ash and bottom ash are both commonly
referred to as “coal ash.” Coal ash contains various heavy metals and
potentially hazardous constituents, including arsenic, barium, cadmium,
chromium, lead, manganese, mercury, nitrates, sulfates, selenium, and thallium.
Coal ash has not been defined, itself, as a “hazardous substance” or “hazardous
waste” under federal law, although some constituents of coal ash may be
hazardous in sufficient quantities or concentrations.
14.    Coal ash basins (also known as “coal ash ponds,” “coal ash impoundments,”
or “ash dikes”) may be part of the waste treatment system at coal-fired power
plants. Historically, the Defendants’ coal ash basins were unlined earthen
impoundments and typically operated as follows: Coal ash was mixed with water to
form slurry. The coal ash slurry was carried through sluice pipe lines to the
coal ash basin. Settling occurred in the coal ash basin, in which particulate
matter and free chemical components separated from the slurry and settled at the
bottom of the basin. Less contaminated water remained at the surface of the
basin, from which it could eventually be
7

discharged if authorized under relevant law and permits. In some instances, such
as the Dan River Steam Station, water at the surface of the primary basin,
flowed into a secondary basin, where further settling and treatment occurred
before its discharge into a water of the United States.
15.    Coal ash basins generally continued to store settled ash and particulate
material for years or decades. From time to time, the Defendants dredged settled
coal ash from the basins, storing the ash in dry stacks on plant property.
16.    A total of approximately 108 million tons of coal ash are currently held
in coal ash basins owned and operated by the Defendants in North Carolina. Duke
Energy Corporation subsidiaries also operate facilities with coal ash basins in
South Carolina (approximately 5.99 million tons of coal ash), Kentucky
(approximately 1.5 million tons of coal ash), Indiana (approximately 35.6
million tons of coal ash), and Ohio (approximately 5.9 million tons of coal
ash).
17.    Each of the Defendants’ facilities in North Carolina with coal ash basins
sought and received permits to discharge treated coal ash wastewater through
specified permitted outfalls into waters of the United States, including those
listed in paragraph 12.

8

III. LEGAL AND REGULATORY BACKGROUND

CLEAN WATER ACT

18.    The Clean Water Act is a federal law enacted to “restore and maintain the
chemical, physical, and biological integrity of the Nation’s waters.” 33 U.S.C.
§ 1251(a).
19.    The Act prohibits the discharge of any pollutant into waters of the
United States except in compliance with a permit issued pursuant to the CWA
under the National Pollutant Discharge Elimination System (“NPDES”) by the
United States Environmental Protection Agency (“EPA”) or by a state with an
approved permit program. 33 U.S.C. §§ 1311(a) and 1342.
20.    The Act defines “discharge of a pollutant” as “the addition of any
pollutant to navigable waters from any point source.” 33 U.S.C. § 1362(12). The
term “pollutant” includes a wide range of materials, including solid waste and
industrial waste. 33 U.S.C. § 1362(6). Coal ash and coal ash wastewater are
pollutants.
21.    A “point source” is a “confined and discrete conveyance, including . . .
any pipe . . . from which pollutants are or may be discharged.” 33 U.S.C. §
1362(14). Pipes and channelized ditches conveying stormwater or wastewater to
surface waters are point sources.

9

22.    ”Navigable waters” are defined in the Act as “waters of the United
States.” 33 U.S.C. § 1362(7). “Waters of the United States” include rivers and
streams “which would affect or could affect interstate or foreign commerce
including any such waters . . . [w]hich are or could be used by interstate or
foreign travelers for recreational or other purposes . . . [and the]
[t]ributaries of [such] waters.” 40 C.F.R. § 122.2. The following rivers are
“waters of the United States”: (1) Broad River; (2) French Broad River; (3) Cape
Fear River; (4) Catawba River; (5) Dan River; (6) Yadkin-Pee Dee River; (7)
Neuse River; (8) Lumber River; (9) Roanoke River; (10) Hyco River; (11) all
tributaries of those rivers, including the South Fork of the Catawba River and
Crutchfield Branch; and (12) all lakes and reservoirs exchanging water with
those rivers, including, but not limited to, Belews Lake, Lake Norman, Mayo
Lake, High Rock Lake, Sutton Lake,2 and Kerr Reservoir.
23.    Permits regulating discharges of pollutants (other than dredge and fill
material) to waters of the United States are issued under the NPDES permit
program. See 33 U.S.C. § 1342. Under the NPDES permit program, persons or
entities who wish to discharge one or more pollutants must apply for an permit
from the proper state or federal agency. See 40 C.F.R. § 122.21. A “permit” is
“an authorization, license, or equivalent
_______________________________ 
2 See note 1, supra.
10

control document issued by EPA or an ‘approved State’ to implement the
requirements of [the CWA].” “Permit” does not include a “draft permit” or a
“proposed permit” which has not yet been the subject of final agency action. 40
C.F.R. § 122.2 (emphasis added). Thus, an application for a permit does not
provide the applicant with authority or permission to discharge under the Act.
24.    States can seek approval from EPA to administer and enforce the CWA NPDES
permit program. 33 U.S.C. § 1342(b). EPA’s approval of a state program does not
affect the United States’ ability to enforce the Act’s provisions. 33 U.S.C. §
1342(i).
25.    On October 19, 1975, EPA approved the State of North Carolina’s
application to administer the NPDES Program. 40

Fed. Reg. 51493-05 (Nov. 5, 1975).
26.    NPDES permits typically contain, among other things, effluent
limitations; water quality standards; monitoring and reporting requirements;
standard conditions applicable to all permits; and special conditions where
appropriate. See 33 U.S.C. § 1342; 40 C.F.R. §§ 122.41-122.50.
27.    All of DUKE ENERGY CAROLINAS’ and DUKE ENERGY PROGRESS’s facilities with
coal ash basins in North Carolina are required to comply with the following
Standard Conditions,

11

incorporated into their NPDES permit. See also 40 C.F.R. § 122.41.
a.
The Permittee shall take all reasonable steps to minimize or prevent any
discharge or sludge use or disposal in violation of this permit with a
reasonable likelihood of adversely affecting human health or the environment.
Standard Conditions, Section B(2) (“General Conditions”).

b.
The Permittee shall at all times properly operate and maintain all facilities
and systems of treatment and control (and related appurtenances) which are
installed or used by the Permittee to achieve compliance with the conditions of
this permit. Standard Conditions, Section C(2) (“Operation and Maintenance of
Pollution Controls”).

IV. FACTUAL BASIS FOR PLEA AND RELEVANT CONDUCT

DAN RIVER STEAM STATION

28.    DUKE ENERGY CAROLINAS owns and operates the Dan River Steam Station (“DAN
RIVER”), located on the Dan River in the Roanoke River Basin near Eden, North
Carolina. DAN RIVER began operating in 1949 as a coal combustion plant. The coal
combustion unit at DAN RIVER was retired in 2012. DUKE ENERGY CAROLINAS now
operates a combined cycle natural gas facility to generate steam and electricity
at DAN RIVER.
29.    In 1956, the first coal ash basin at DAN RIVER was constructed to store
existing and future coal ash. This basin is commonly referred to as the “Primary
Ash Basin.”
30.    Two stormwater pipes run under the Primary Ash Basin: a 48-inch
stormwater pipe and a 36-inch stormwater pipe. Both
12

were designed to carry stormwater from the site to the Dan River.
31.    The 48-inch stormwater pipe predates the Primary Ash Basin. As installed
in 1954, the 48-inch stormwater pipe was composed of galvanized corrugated metal
pipe (“CMP”).
32.    From 1968 to 1969, the Primary Ash Basin was expanded over the original
outfall of the 48-inch stormwater pipe. When the Primary Ash Basin was expanded,
the 48-inch stormwater pipe was extended using reinforced concrete. After the
expansion, the 48-inch stormwater pipe was a total of 1130 feet in length, of
which approximately 786 feet was corrugated metal pipe and approximately 344
feet was reinforced concrete pipe (“RCP”).
33.    The 36-inch stormwater pipe is composed of reinforced concrete pipe that
is approximately 600 feet in length.
34.    Between 1976 and 1977, the expanded Primary Ash Basin was divided to form
a second basin, commonly referred to as the “Secondary Ash Basin.”
35.    The Primary Ash Basin has a surface area of approximately 27 acres and a
total storage capacity of approximately 477 acre-feet (or 155,431,132 gallons).
The Secondary Ash Basin has a surface area of approximately 12 acres and a total
storage capacity of approximately 187 acre-feet (or 60,934,277 gallons). In
2013, the basins contained a total of

13

approximately 1,150,000 cubic yards (or 232,270,130 gallons) of coal ash.
36. In a 2009 EPA Dam Safety Assessment, it was noted that the Primary and
Secondary coal ash basins were:
Classified as a significant hazard potential structure due to the environmental
damage that would be caused by misoperation or failure of the structure.

DAN RIVER STEAM STATION NPDES PERMIT
37.    On January 31, 2013, the State of North Carolina, through its Department
of Environment and Natural Resources (“DENR”) - Division of Water Resources
(“DWR”), issued a new NDPES permit to DUKE ENERGY CAROLINAS. Effective March
2013, NPDES Permit NC0003468 (“the Dan River Permit”), and authorized the
discharge of wastewater from specified outfalls at DAN RIVER.
38.    The Dan River Permit required, among other things, that the facility meet
the dam design and dam safety requirements set forth in North Carolina
regulations at 15A NCAC 2K.
39.    Pursuant to 15A NCAC 2K.0301, dams such as the Primary Ash Basin at DAN
RIVER are subject to annual safety inspections by state authorities.

14

40.    In 2006, DUKE ENERGY CAROLINAS, with the assistance of DUKE ENERGY
BUSINESS SERVICES, applied for a NDPES stormwater permit for the 48-inch and the
36-inch pipes. As of February 2, 2014, DENR had not issued DUKE ENERGY CAROLINAS
an individual or general NDPES stormwater permit for either the 48-inch or
36-inch pipe.
41.    A NPDES stormwater permit is different than the NPDES permit issued for
the discharge of wastewater from a treatment system. Stormwater permits
generally do not allow the discharge of wastewater or particulates from coal ash
basins or other industrial processes.
42.    Neither the 48-inch nor the 36-inch stormwater pipe was a permitted
outfall under the Dan River permit for wastewater.    Neither DUKE ENERGY
CAROLINAS nor any predecessor received authorization pursuant to the CWA and
NPDES program to discharge wastewater from the coal ash basins or coal ash
stored in those basins from either the 48-inch or 36-inch stormwater pipe under
the Primary Coal Ash Basin at DAN RIVER.
1979 DOCUMENTED PROBLEMS WITH STORMWATER PIPES
43.    In 1979, DUKE ENERGY CAROLINAS (at that time called Duke Power Company)
inspected the 48-inch stormwater pipe through its Design Engineering and Station
Support group. Although no major leaks were identified, engineers noted water

15
leaking into the pipe. Repairs to the 48-inch stormwater pipe were undertaken in
response to this inspection.
44.    Also in 1979, the- Design Engineering and Station Support group inspected
the 36-inch stormwater pipe. Twenty-two joints in the 36-inch pipe were noted
for major leaks. DUKE ENERGY CAROLINAS/Duke Power Company employees recommended
that the company repair the leaks or reroute the drain lines, noting that the
discharges could be violations of EPA regulations. Repairs to the 36-inch
stormwater pipe were undertaken in response to this inspection.
INSPECTIONS OF DAN RIVER COAL ASH BASINS AND DUKE ENERGY’S
RESPONSE TO RECOMMENDATIONS

45.    Pursuant to the requirements of North Carolina’s dam safety laws, from
1981 through 2007, DUKE ENERGY CAROLINAS/Duke Power Company hired consultants to
perform inspections of the coal ash basins at DAN RIVER every five years. The
consultants generated reports containing their observations and recommendations
that were provided to and reviewed by DUKE ENERGY CAROLINAS/Duke Power
Company.    In the same time period and pursuant to the same laws, DUKE ENERGY
CAROLINAS/Duke Power Company performed its own annual inspections of the coal
ash basins. DUKE ENERGY CAROLINAS/Duke Power Company also performed
less-detailed monthly inspections of the coal ash basins.

16

46.    In 1981, Engineering Firm #1 conducted the first of five independent
inspections of DAN RIVER’S ash basins. The report clearly identified the 48-inch
pipe as part CMP/part RCP and the 36-inch pipe as RCP. (See Appendix, Diagram
1).
47.    The 1981 report made the following recommendation, among others:
The culverts which pass beneath the primary basin may become potential sources
of problems, particularly as they age. As noted previously, there seemed to be
more water leaving the 52/36-inch culvert than entering it. It is recommended
that within the next several months the flow rate at each of the culverts be
established, then checked at 6-month intervals thereafter. If there is a
significantly greater flow of water leaving the pipes than entering them, the
pipes should be inspected for leakage, as was done in 1979, and any needed
repairs implemented.

48.    The original schematic drawings in the 1981 report were maintained on
site at DAN RIVER.
49.    A 1984 Annual Inspection report prepared by DUKE ENERGY CAROLINAS/Duke
Power Company recommended that “[f]low in the culverts beneath the primary basin
should continue to be monitored at six month intervals” and that “[t]he
corrugated metal pipe at the west end of the basin should be monitored in future
inspections for further damage from seepage flow.”
50.    A 1985 Annual Inspection report prepared by DUKE ENERGY CAROLINAS/Duke
Power Company clearly identified the 48-inch stormwater pipe as CMP. At least
one of the engineers who participated in the 1985 annual inspection continues to
work for
17

DUKE ENERGY BUSINESS SERVICES, although currently in a different capacity, and,
in fact, conducted two inspections of the Primary and Secondary Ash Basins in
2008.
51.    In 1986, Engineering Firm #1 conducted the “Second Five-Year Independent
Consultant Inspection of the Ash Dikes” at DAN RIVER. The report clearly
identified the 48-inch pipe as part CMP/part RCP and the 36-inch pipe as RCP.
Employees of DUKE ENERGY CAROLINAS/Duke Power Company accompanied the consultant
during field inspections.
52.    The 1986 report repeated the recommendation noted in 1981:
The monitoring program appears adequate, except it would be desirable to
quantitatively (rather than qualitatively) monitor the inflow and outflow at the
52/36-inch diameter culvert, as recommended in the 1981 inspection report, to
check for joint leakage.

It would also be desirable to do quantitative monitoring of inflow and outflow
of the 48-inch diameter culvert that also passes beneath the ash basin; part of
this culvert is constructed of corrugated metal pipe which would be expected to
have less longevity of satisfactory service than the reinforced concrete pipes.

* * *

It is recommended that quantitative monitoring of inflow and outflow be done at
the culverts which pass under the ash basin to check for potential leakage. It
is recommended that this monitoring be done at 6-

month intervals. If there is a significant difference between inflow and
outflow, or whenever there is some cause to suspect leakage, the inside of the
culverts should be inspected for leakage.

18

53.    In the 1986 Annual Inspection report, engineers for DUKE ENERGY
CAROLINAS/Duke Power Company asked the DAN RIVER personnel to perform the
following tasks:
Quantitatively monitor the inflow and outflow at the two culverts that pass
under the ash basin. Instructions are provided on the attached form and tables.
Monitoring should begin within thirty days after the installation of V-notched
weirs at the inlets and continue at six-month intervals. Random tests at various
depths of flow should be made using a bucket and stop watch to verify flow rates
given in the attached tables before beginning the monitoring schedule. Results
of these tests should be transmitted to Design Engineering.

54.    DUKE ENERGY CAROLINAS did not install V-notched weirs at the
inlets.    Flow monitoring, while apparently performed between 1991 and 1998,
was not reported on the requested forms.
55.    In 1991, Engineering Firm #2 performed the Third Five-Year Independent
Consultant Inspection of the ash basins at DAN RIVER. The report noted that the
two stormwater pipes passed under the Primary Ash Basin, but incorrectly
identified the entire length of the 48-inch pipe as RCP. During the review
process and prior to submission to the North Carolina Utilities Commission,
engineers for DUKE ENERGY CAROLINAS/Duke Power Company did not correct the
error.    This erroneous description

of the 48-inch stormwater pipe was repeated in the 1998, 2001 and 2007 Five-Year
Independent Consultant Inspection reports produced by Engineering Firms #1 and
#3 and not corrected by DUKE ENERGY CAROLINAS/Duke Power Company.
19

56.    The 1991 report repeated the prior monitoring recommendations:
As was previously recommended, the inflow and outflow of the drainage pipes
extending under the ash basins should be monitored for the quantity flowing in
versus that flowing out and the turbidity of the discharge. If a disparity
becomes evident or if there is evidence of turbidity, the pipes should be
checked for leaks.

57.    The 1998 Fourth Independent Consultant Inspection report prepared by
Engineering Firm #1 made the following recommendation for monitoring of the
stormwater pipes:
The outflow of the drainage pipes extending under the primary ash basins to the
river should be monitored for turbidity of the discharge, which would be
indicative of soil entrance into the pipes through leaks under the basin.    The
appearance of turbidity would make it advisable to perform a TV camera
inspection of the pipe to help determine if the leak or leaks are a threat.

58.    The recommendation in the 1998 report was repeated in identical language
in the 2001 and 2007 Five-Year Inspection reports prepared by Engineering Firm
#1 and #3, respectively.
59.    In the 2007 Sixth Five-Year Independent Consultant Inspection report,
Engineering Firm #3 noted that DUKE ENERGY CAROLINAS engineers had not performed
annual inspections since 2001, and also had not performed monthly inspections in
2003. The firm expressed concern over the qualifications of the DUKE ENERGY
CAROLINAS employees assigned to perform monitoring. Engineering Firm #3
recommended “that Duke reinstitute more

20
clearly defined engineering responsibility for the receiving and plotting of
data from the dikes at the individual stations.”
60.    After 2008, DUKE ENERGY CAROLINAS installed a metal platform over rip rap
(large rocks) along the outer wall of the coal ash basin to better enable
employees to access the river bank near the outfalls of the 48-inch and 36-inch
stormwater pipes. However, DUKE ENERGY CAROLINAS employees were still unable to
view the 36-inch stormwater pipe outfall.
61.    A 2009 EPA Dam Safety Assessment, prepared for EPA by an engineering
contractor, restated the recommendations of the Sixth Five-Year Independent
Consultant Inspection report and recommended that DUKE ENERGY CAROLINAS complete
the implementation of those recommendations as described in the Sixth Five-Year
Independent Consultant Inspection Report. Based on information received from
DUKE ENERGY CAROLINAS, the EPA Dam Safety Assessment reported that “[v]isual
monitoring of the outflow from the drainage pipes that go under the Primary
Basin is performed on a monthly basis.” EPA’s contractor observed

that during its field inspection in May 2009, the outflow from the 48-inch and
36-inch pipes was clear.
62.    The last monthly inspection of the stormwater pipes occurred on January
31, 2014. The form created by DUKE ENERGY CAROLINAS for recording observations
during the monthly inspections did not provide any specific space for reporting
21

observations of the stormwater pipes and the DUKE ENERGY CAROLINAS employee who
performed the inspection did not independently record any observations of the
pipes on the form for the January 31, 2014, inspection.    According to the DUKE
ENERGY CAROLINAS employee who performed the January 31, 2014, she did not
observe turbidity in the water flowing from the 48-inch stormwater pipe. She
could not see the discharge from the 36-inch stormwater pipe due to the location
of the outfall in relation to her observation point on the scaffolding.
63.    Between 1999 and 2008, and again from January 2013 through January 31,
2014, DUKE ENERGY CAROLINAS employees did not perform any visual inspections of
the 36-inch stormwater pipe.
64.    Between 1999 and 2008, during the months from May to September, DUKE
ENERGY CAROLINAS employees were generally not able to conduct visual inspections
of the flow from the 48-inch pipe because it was too difficult to access the end
of the pipe from land as the result of vegetative growth and the presence of
snakes.
65.    Each of the DUKE ENERGY CAROLINAS employees, responsible for monitoring
the flow from the stormwater pipes from 1991 to December 2012 was aware that the
48-inch stormwater pipe was composed of, corrugated metal.

22

ADDITIONAL DUKE ENERGY DOCUMENTATION THAT
THE 48-INCH STORMWATER PIPE WAS CMP

66.    On or about January 22, 2014, Engineering Firm #4 finished a draft
document titled “Design Report - DRAFT Ash Basin Closure - Conceptual Design for
Dan River Steam Station.” Appendix 4 of the Report identifies the 48-inch
stormwater pipe as “CMP,” although that information was not separately stated in
the body of the report. In preparing the report, Engineering Firm #4 engineers
relied on .documentation provided by DUKE ENERGY CAROLINAS and DUKE ENERGY
BUSINESS SERVICES, including a 2008 schematic of the Primary Ash Basin that
correctly identified the 48-inch stormwater pipe as CMP. Engineers with DUKE
ENERGY BUSINESS SERVICES’ Central Engineering office worked with Engineering
Firm #4 in the preparation of the conceptual design and reviewed the draft
documents but did not notice the labeling of the 48-inch stormwater pipe in
Appendix 4.
67.    A 2009 schematic entitled “Rough Grading - Overall Grading Plan for Dan
River Combined Cycle” provided to DUKE ENERGY CAROLINAS by one of its
contractors also identified the 48-inch stormwater pipe as CMP.
68.    As of the date of the Dan River spill, record-keeping and
information-sharing practices at DUKE ENERGY CAROLINAS and DUKE ENERGY BUSINESS
SERVICES did not ensure that information such as the actual composition of the
48-inch pipe was
23

communicated from employees with knowledge to engineers and employees making
budget decisions.    Additionally, engineers in DUKE ENERGY BUSINESS SERVICES,
with responsibility for DAN RIVER, had not sufficiently reviewed the records
available to them and, therefore, continued to operate under the erroneous
belief that the 48-inch pipe was made entirely of RCP.
RECOMMENDATION FOR CAMERA INSPECTIONS
BY DUKE ENERGY PROGRAM ENGINEERING

69.    From at least 2011 through February 2014, DUKE ENERGY BUSINESS SERVICES
had a group of engineers assigned to support fossil impoundment and dam
inspections. The group was known as “Program Engineering.”
70.    In May 2011, a Senior Program Engineer and a Program Engineer with
responsibilities covering DAN RIVER, recommended that the budget for DAN RIVER
include camera inspections of the pipes within the Primary and Secondary Ash
Basins. The estimated total cost for the camera inspection of four pipes,
including the 48-inch stormwater pipe, within the Primary and Secondary Coal Ash
Basins was $20,000.
71.    DUKE ENERGY CAROLINAS did not provide funding for the camera inspection.
72.    Upon learning that the camera inspection was not funded, the DAN RIVER
Station Manager called the Vice-President

24

of Transitional Plants and Merger Integration, who was in charge of approving
the budget at DAN RIVER and other facilities. The Station Manager told the
Vice-President that DAN RIVER needed the camera inspections, that the station
did not know the conditions of the pipes, and that if one of the pipes failed,
there would be environmental harm.    The request was still denied.
73.    In May 2012, the Senior Program Engineer and the Program Engineer again
recommended that the budget for DAN RIVER include camera inspections of the
48-inch and 36-inch stormwater pipes underneath the Primary Ash Basin, along
with two additional pipes within the Primary and Secondary Ash Basins. The
estimated total costs for the camera inspection was $20,000. The reason noted on
the budget request form was “internal recommendation due to age of piping
system.”
74.    By e-mail dated May 30, 2012, the Senior Program Engineer indicated his
intention to eliminate the camera survey budget line item for stormwater pipes
at DAN RIVER in light of the anticipated closure of the basins.
75.    In response to the Senior Program Engineer’s May 30, 2012, email, the DAN
RIVER Equipment Owner, employed by DUKE ENERGY BUSINESS SERVICES and responsible
for monitoring the Primary Ash Basin wrote, in part:
 
25

I would think with the basin closing you would want to do the camera survey. I
don’t think the drains have ever been checked and since they go under the basin
I would like to ensure that we are eliminating any risk before closing the
basins.

76.    In response to the Senior Program Engineer’s May 30, 2012, email, another
DUKE ENERGY BUSINESS SERVICES employee advised:
I don’t know if this changes your opinion, but [it] isn’t likely that the ash
basin will close in 2013. We have to submit a plan to the state at least one
Year prior to closure and we haven’t even begun to prepare that.

77.    On a date unknown but sometime between May 2012 and July 2012, at an
in-person meeting, a DUKE ENERGY BUSINESS SERVICES Program Engineer asked the
Vice-President of Transitional Plants and Merger Integration whether camera
inspections of the stormwater pipes would be funded. The Vice-President said no.
78.    In June 2012, preliminary engineering plans for closing the. DAN RIVER
coal ash basins called for the removal of both the 48-inch and 36-inch pipes.
However, between 2012 and 2014, there was no set date for closing and no formal
closure plan had been submitted to DENR. In December 2012, the DAN RIVER ash
basin closure was not projected to be completed until 2016.
79.    DUKE ENERGY CAROLINAS did not provide funding for the camera inspections
of the stormwater pipes and no camera
26

inspections were performed prior to February 2, 2014. If a camera inspection had
been performed as requested, the interior corrosion of the elbow joint in the
48-inch pipe would likely have been visible.
80.    From at least January 1, 2012, through February 2, 2014, DUKE ENERGY
CAROLINAS and DUKE ENERGY BUSINESS SERVICES failed to take reasonable steps to
minimize or prevent discharge of coal ash to the Dan River that would adversely
affect the environment and failed to properly operate and maintain the DAN RIVER
coal ash basins and the related stormwater pipes located berieath the Primary
Coal Ash Basin, thus, negligently violating the DAN RIVER NPDES permit.
FEBRUARY 2014 DISCHARGES INTO THE DAN RIVER

81.    On February 2, 2014, a five-foot long elbow joint within the
sixty-year-old corrugated metal section of the 48-inch pipe under the Primary
Ash Basin at DAN RIVER failed, resulting in the release of coal ash wastewater
and coal ash into the Dan River.
82.    Later inspection of the elbow joint, after its retrieval from the Dan
River, revealed extensive corrosion of the metal of the elbow joint initiating
at the bottom center of the elbow. The parties disagree about some of the
factors that contributed to the extensive corrosion.    Nevertheless, the age

of the pipe was at or beyond the reasonably expected serviceable
27

life for CMP under similar conditions. Ultimately, the combination of the
corrosion and the weight of the coal ash basin over the elbow joint caused it to
buckle, fail, and be pushed through the end of the 48-inch stormwater pipe into
the Dan River.
83.    Between approximately 1:30 p.m. and approximately 2:00 p.m. on February
2, 2014, a security guard at DAN RIVER noticed that the level of the wastewater
in the Primary Ash Basin had dropped significantly.
84.    The security guard immediately notified DUKE ENERGY CAROLINAS employees
in the control room for the adjacent natural gas-powered combined cycle plant.
The DUKE ENERGY CAROLINAS Shift Supervisor on duty went to the Primary Ash Basin
and observed a large sinkhole. The Shift Supervisor saw only residual water and
mud left in the basin. The Shift Supervisor alerted other DUKE ENERGY CAROLINAS
and DUKE ENERGY BUSINESS SERVICES employees in order to begin response efforts.
85.    After the initial discovery of the sinkhole in the Primary Ash Basin on
February 2, 2014, an employee who responded to the site circulated photographs
of the Primary Ash Basin to other DUKE ENERGY CAROLINAS and DUKE ENERGY BUSINESS
SERVICES employees via e-mail at approximately 3:49 p.m.
86.    Photographs attached to the 3:49 p.m. e-mail reflected

the status of the basin. (See Appendix, Photographs 1 - 4).
28

87.    From on or about February 2, 2014, through February 8, 2014, the
unpermitted discharge of approximately 27 million gallons of coal ash wastewater
and between 30,000 and 39,000 tons of coal ash into the Dan River occurred
through the 48-inch pipe from the Primary Coal Ash Basin.
88.    According to the U.S. Fish and Wildlife Service, coal ash from the
release traveled more than 62 miles down the Dan River, from the Middle District
of North Carolina, through the Western District of Virginia, and into the John
H. Kerr Reservoir in the Eastern District of North Carolina and Eastern District
of Virginia.
89.    On or about February 8, 2014, DUKE ENERGY CAROLINAS sealed the outfall of
the 48-inch pipe, halting the discharge of coal ash wastewater and coal ash into
the Dan River.
DISCHARGES FROM THE 36-INCH STORMWATER PIPE

90.    On February 6, 2014, an interior video inspection of the 36-inch
stormwater pipe revealed: (1) infiltration of wastewater occurring through a
number of joints; (2) water jets from pressurized infiltration at three joints;
(3) separation in one joint near the outfall point; (4) cracks running
lengthwise through several pipe segments; and (5) sections of ponding water
indicating irregular vertical alignment.
91.    Analysis of water samples from the 36-inch pipe revealed that the line
was releasing wastewater that contained
29

elevated levels of arsenic. On February 14, 2014, the arsenic concentration in
the effluent at the outfall of the 36-inch pipe was 140 ug/L. On February 17,
2014, the arsenic concentration in the effluent at the same point was 180 ug/L.
The North

Carolina water quality standard for the protection of human health for arsenic
is 10 ug/L and the water quality standard for the protection of freshwater
aquatic life is 50 ug/L.
92.    Discharge of contaminated wastewater continued from the 36-inch pipe
between February 6, 2014, and February 21, 2014. The nature of the wastewater
infiltration into the 36- inch stormwater pipe and DUKE ENERGY CAROLINAS
employees’ visual and auditory confirmation of flow from the 36-inch pipe
indicates that discharge from the 36-inch pipe began a significant period of
time before February 6, 2014. The discharge began at least as early as January
1, 2012, continued until February 21, 2014, and was not authorized by a NPDES
permit.
93.    On February 21, 2014, DUKE ENERGY CAROLINAS sealed the 36-inch stormwater
pipe.
RESPONSE COSTS FOR DAN RIVER RELEASE
94.    Thus far, DUKE ENERGY CAROLINAS and federal, state, and local governments
have spent over $19 million responding to the spill.
30

95.    Drinking water intakes in the Dan River watershed, including those for
the Cities of Danville, Virginia Beach, and Chesapeake and for the Halifax
County Service Authority in Virginia were temporarily closed and were required
to undertake additional monitoring for contamination. Monitoring results
indicated that the water treatment plants along the Dan River were able to
adequately treat and remove the coal ash and related contaminants from the
spill.
96.    The North Carolina Department of Health and Human Services issued an
advisory against consuming fish from or recreational contact with the Dan River
from the point of the spill to the North Carolina - Virginia border from
February 12, 2014, to July 22, 2014.
97.    DUKE ENERGY CAROLINAS has reimbursed many entities for their expenditures
in the aftermath of the spill. Nonetheless, at least two localities and one
federal agency have not yet been fully reimbursed. Those entities and their
expenditures are: (1) Virginia Beach, $63,309.45; (2) Chesapeake, Virginia,
$125,069.75; and (3) the United States Army Corps of Engineers, $31,491.11.
CAPE FEAR STEAM ELECTRIC PLANT

98.    DUKE ENERGY PROGRESS (formerly “Progress Energy Carolinas”) owns the Cape
Fear Steam Electric Plant (“CAPE
31

FEAR”), located adjacent to the Cape Fear River, just south of the confluence of
the Haw and Deep Rivers and approximately two miles southeast of Moncure, North
Carolina.
99.    CAPE FEAR has a total of five coal ash basins. Three of the basins,
constructed in 1956, 1963, and 1970 have been inactive for many years. Two of
the basins, constructed in 1978 and 1985 continued to receive coal ash slurry
and other forms of wastewater through at least November 2011.
100.    The 1978 ash basin had a storage capacity of 880 acre-
feet (approximately 286,749,258 gallons), a surface area of 43 acres, and a
maximum structural height of 27 feet. The 1978 ash basin included a “riser,”
also known as a “stand pipe,” used under normal operation to allow the passive
and permitted discharge of wastewater treated by settlement from the basin. The
riser was constructed of vertically stacked 18-inch diameter concrete pipe
sections.
101.    The 1985 ash basin had a storage capacity of 1764 acre-feet
(approximately 574,801,921 gallons), a surface area of 65 acres, and a maximum
structural height of 28 feet. The 1985 ash basin included a riser constructed of
vertically stacked 48-inch diameter concrete pipe sections.
102.    In a 2009 EPA Dam Safety Assessment, both the 1978 and 1985 coal ash
basins at CAPE FEAR were classified as having “significant hazard potential,” as
previously defined.
32

103.    By December 2011, DUKE ENERGY PROGRESS/Progress Energy Carolinas ceased
electric power generation at CAPE FEAR. As a result of the cessation of
operation, coal ash slurry was no longer received by the 1978 or 1985 coal ash
basin, although each basin continued to receive rainwater or stormwater.
INSPECTIONS OF CAPE FEAR ASH BASINS, MONITORING RECOMMENDATIONS,
AND DETECTION OF LEAKING RISERS

104.    DUKE ENERGY PROGRESS/Progress Energy Carolinas engaged outside firms to
perform annual and five-year inspections of the coal ash basins at CAPE FEAR, as
required by state law.
105.    On or about May 1, 2008, Engineering Firm #3, hired by DUKE ENERGY
PROGRESS/Progress Energy Carolinas, conducted an annual inspection of the CAPE
FEAR coal ash basins and generated a report of its observations, conclusions,
and recommendations. The report was submitted to DUKE ENERGY PROGRESS/Progress
Energy Carolinas and reviewed by the plant manager and environmental coordinator
for CAPE FEAR.
106.    The 2008 annual inspection report described the condition of the risers
in the 1978 and 1985 coal ash basins as “marginal” and estimated that the risers
were “likely to develop problems” in two to five years from the date of the
report. The report further recommended that DUKE ENERGY PROGRESS/Progress Energy
Carolinas perform its own inspections of the risers in

33

the 1978 and 1985 ash basins by boat, in order to better assess the condition of
the risers.
107.    The recommendation to inspect the risers using a boat was repeated in
annual reports produced by engineering firms and submitted to DUKE ENERGY
PROGRESS/Progress Energy Carolinas in 2009 and 2010, and to DUKE ENERGY PROGRESS
in 2012 and 2013.
108.    At no time from May 1, 2008, until March 2014 did DUKE ENERGY
PROGRESS/Progress Energy Carolinas perform inspections of the risers in the 1978
or 1985 ash basins by boat.
109.    At some time during the summer of 2011, but on a date unknown, the DUKE
ENERGY PROGRESS/Progress Energy Carolinas Environmental Coordinator and the
NPDES Subject Matter Expert responsible for CAPE FEAR visited the site. During
their visit, they became aware that the risers in the 1978 and 1985 coal ash
basins were leaking. During the fall of 2011, but on a date unknown, they
informed DUKE ENERGY PROGRESS/Progress Energy Carolinas management that repairs
were needed on the risers.

No additional inspection or monitoring of the risers was undertaken by DUKE
ENERGY PROGRESS/Progress Energy Carolinas as a result of their observations
prior to March 2014.
110.    The 2012 Five-Year Independent Consultant Report, produced on January
26, 2012, by Engineering Firm #4, noted that the skimmer located at the top of
the riser in the 1978 ash basin was corroded and tilted. The skimmer was
designed to
34

prevent debris from being discharged from the basin or clogging the riser.
111.    Photographs included with the 2012 Five-Year Independent Consultant
Report show the skimmer on the riser in the 1978 coal ash basin sitting askew.
(See Appendix, Photographs 5 & 6).
112.    Photographs included with the 2012 Five-Year Independent Consultant
Report show the skimmer on the riser in the 1985 coal ash basin. (See Appendix,
Photograph 7).
113.    Annual inspection reports for 2012 and 2013 also reported that the riser
in the 1978 ash basin was damaged, deteriorated, and tilted. The annual reports
recommended that DUKE ENERGY PROGRESS/Progress Energy Carolinas replace or
repair the skimmer on the riser in the 1978 ash basin.
114.    At no time from January 26, 2012, through March 2014 did DUKE ENERGY
PROGRESS/Progress Energy Carolinas repair or replace the skimmer on the riser in
the 1978 coal ash basin.
115.    The annual inspection report produced on or about June 24, 2013, by
Engineering Firm #4 and submitted to DUKE ENERGY PROGRESS noted that a “trickle
of flow” was observed at the outfalls leading from the risers in the 1978 and
1985 ash basins which the report concluded indicated possible leakage.

35

DEWATERING OF THE ASH BASINS AND REPAIR OF RISERS
116.    During the summer of 2013, on a date unknown, an employee of DUKE ENERGY
BUSINESS SERVICES contacted a contractor specializing in diving and underwater
pipe repair and mentioned the possible need for riser repair at CAPE FEAR. The
contractor was not engaged at that time and no schedule for the potential work
was discussed.
117.    Also during the summer of 2013, DUKE ENERGY PROGRESS and DUKE ENERGY
BUSINESS SERVICES were engaged in planning for the closure of the coal ash
basins at CAPE FEAR. On or about July 11, 2013, consulting engineers assisting
DUKE ENERGY PROGRESS and DUKE ENERGY BUSINESS SERVICES in planning for ash basin
closure produced and provided to DUKE ENERGY PROGRESS and DUKE ENERGY BUSINESS
SERVICES a “site investigation plan” that included plans for locating,
inspecting, and determining the composition of risers and discharge pipes for
each ash basin.
118.    As part of the ongoing planning for ash basin closure, DUKE ENERGY
PROGRESS and DUKE ENERGY BUSINESS SERVICES sought to eliminate the need for
NPDES permits for CAPE FEAR, in keeping with its “Ash Basin Closure Strategy.”
This strategy would reduce continuing operation and maintenance costs at the
plant while ash basin closure was pending. DUKE ENERGY PROGRESS and DUKE ENERGY
BUSINESS SERVICES knew that in order to eliminate
36

the NPDES permits, the coal ash basins would have to be in a “no
flow” state. To reach that state, DUKE ENERGY PROGRESS needed to eliminate the
riser leaks at the 1978 and 1985 coal ash basins as well as lower the level of
the contents of the ash basins to prevent water from overtopping the risers
during a 25-year rain event. These requirements were discussed by a number of
DUKE ENERGY PROGRESS and DUKE ENERGY BUSINESS SERVICES employees during the
summer of 2013, including the DUKE ENERGY BUSINESS SERVICES NPDES Subject Matter
Expert and the DUKE ENERGY BUSINESS SERVICES Director of Plant Demolition and
Retirement.
119.    Also as part of the ongoing planning for ash basin closure at CAPE FEAR,
DUKE ENERGY PROGRESS and DUKE ENERGY BUSINESS SERVICES recognized that
dewatering the ash basins was a necessary and time-consuming part of the process
of closing an ash basin. DUKE ENERGY PROGRESS and DUKE ENERGY BUSINESS SERVICES
further believed that dewatering the coal ash basins would “lessen hydrostatic
pressure” and “over a relatively brief time reduce and/or eliminate seepage.” At
the time, seepage was the subject of threatened citizen law suits, a series of
state-filed civil complaints, and significant public concern.
120.    DUKE ENERGY PROGRESS and DUKE ENERGY BUSINESS SERVICES also believed
that dewatering the 1978 and 1985 coal ash basins prior to repairing the risers
would provide a safer environment
37

for contractors performing repair work. DUKE ENERGY PROGRESS and DUKE ENERGY
BUSINESS SERVICES employees knew that the leaks in the risers were likely being
caused by cracks or failures in the grout between the concrete pipe sections
that were underwater. The employees did not know how far underwater the leaks or
grout failures were or how many sections of the pipe would need repair. Because
the risers were filled with air but surrounded by water, underwater repair of
the risers could be hazardous to the divers due to a phenomenon known as
“differential pressure.” DUKE ENERGY PROGRESS and DUKE ENERGY BUSINESS SERVICES
employees believed that removing the standing water from the 1978 and 1985
basins to at or below the level of the leaking portions of the risers would
eliminate the risk from differential pressure.
121.    Beginning on or about August 16, 2013, and continuing through on or
about September 30, 2013, employees and contractors for DUKE ENERGY PROGRESS and
DUKE ENERGY BUSINESS SERVICES began developing a work plan for pumping water
from the 1985 ash basin at CAPE FEAR.
122.    On or about September 30, 2013, DUKE ENERGY PROGRESS employees began
pumping water from the 1985 ash basin at CAPE FEAR, using a Godwin pump and
hoses.
123.    On or about October 2, 2013, two days after pumping began at the 1985
ash basin, a DUKE ENERGY BUSINESS SERVICES
38

engineer assigned to the plant retirement program emailed a representative of a
contracting company specializing in underwater pipe repair. In the email, the
engineer indicated that there were “several potential opportunities at [the]
Cape Fear plant that we would like you to look at.” The engineer went on to
describe one of the opportunities as:
Ash pond riser repairs. Two ponds’ risers leak. There is a slow trickle out of
the discharge of the concrete riser pipes at two ash ponds.    We may elect to
stop the leak. Could you provide a ballpark for providing the investigation and
repair services? Could you also describe what the process would be?

124.    On or about October 22, 2013, the underwater pipe repair contractor
submitted to DUKE ENERGY PROGRESS and DUKE ENERGY BUSINESS SERVICES a project
estimate titled “Abandonment of Intakes and Leak Sealing” that included four
tasks, including “Ash Pond Riser Repairs.”
125.    On or about January 13, 2014, DUKE ENERGY PROGRESS began dewatering
operations at the 1978 coal ash basin at CAPE FEAR, using a Godwin pump and
hoses similar to those used at the 1985 coal ash basin, as well as the same work
plan.
126.    On or about January 24, 2014, DUKE ENERGY PROGRESS signed a contract,
through DUKE ENERGY BUSINESS SERVICES, acting as its agent, with the underwater
pipe repair contractor for various projects at CAPE FEAR relating to plant
decommissioning and coal ash basin closure, as addressed in the October 22,
39

2014, project estimate. One of the projects was repair work on the risers in the
1978 and 1985 coal ash basins. The contract specified that work under the
contract would “start on or about January 27, 2014 and shall be completed no
later than December 31, 2014.” The contract did not identify specifically when
the work would begin on the risers.
127.    On or about March 11, 2014, DENR officials from both the DWR and the
Division of Mineral and Land Resources visited CAPE FEAR to perform an
inspection. The DENR officials were accompanied by several DUKE ENERGY PROGRESS
and DUKE ENERGY BUSINESS SERVICES employees during their inspection. DENR
observed the Godwin pumps at the 1985 and 1978 ash basins along with obvious
signs of a significant drop in the water level in the coal ash basins and
disturbances in the surface of the coal ash in the basins. (See Appendix,
Photographs 8 - 10).
128.    At the conclusion of the DENR inspection on March 11, 2014, a dispute
arose between DENR officials and DUKE ENERGY PROGRESS and DUKE ENERGY BUSINESS
SERVICES employees over whether DUKE ENERGY PROGRESS had been authorized by
DENR-DWR to discharge water from the coal ash basins using Godwin pumps.
129.    On or about March 19 and 20, 2014, an employee of the underwater pipe
repair contractor performed video inspections of the risers in the 1978 and 1985
coal ash basins. The contractor observed that in the discharge pipe leading from
the riser in
40

the 1985 coal ash basin, the visibility in one area was “next to nothing.” The
visibility was negatively impacted by turbidity and debris in the pipe. The
contractor observed a “slow trickle” of water intruding into the riser in the
1978 coal ash basin. At the time of the camera inspections, the water level in
both coal ash basins had already been lowered below the uppermost joints of the
risers and, thus, below the level of some of the leaks.
130.    No other camera inspections were conducted of the risers between 2008
and March 19, 2014.
131.    On or about March 19 and 20, 2014, employees and agents of the
underwater pipe repair contractor replaced and resealed the grout between the
concrete pipe sections of the risers in the 1978 and 1985 coal ash basins. (See
Appendix, Photographs 11 through 14).
132.    Between at least January 1, 2012, and January 24, 2014, DUKE ENERGY
PROGRESS and DUKE ENERGY BUSINESS SERVICES failed to properly maintain the
risers in the 1978 and 1985 coal ash basins at CAPE FEAR in violation of the
applicable NPDES permit.
HISTORICAL SEEPS AND DISCHARGES FROM COAL ASH BASINS
133.    DUKE ENERGY CAROLINAS’ and DUKE ENERGY PROGRESS’s coal ash basins are
comprised of earthen dams. Over time, “seeps” developed in the dam walls.
“Seeps” occur when water, often
41
carrying dissolved chemical constituents, moves through porous soil and emerges
at the surface. Seeps are common in earthen dams. The Defendants have identified
nearly 200 distinct seeps at the Defendants’ coal ash basins throughout North
Carolina in permit modification applications filed in 2014. Not all seeps
necessarily reach waters of the United States. However, some of the discharge
from seeps is collected and moved through engineered drains or channels to
waters of the United States. Other seeps are simply allowed to flow across land
surfaces to waters of the United States. Each of the facilities listed in the
table at paragraph 12 had seeps of some form.
134.    Water from seeps may transport pollutants. Wastewater sampled from
various seep locations at DUKE ENERGY CAROLINAS and DUKE ENERGY PROGRESS coal
ash basins in 2014 was found to contain constituents including aluminum,
arsenic, barium, boron, chloride, chromium, copper, fluoride, lead, manganese,
nickel, selenium, thallium, and zinc, and was additionally found to be acidic.
135.    On June 7, 2010, EPA issued interim guidance to assist NPDES permitting
authorities with establishing appropriate permit requirements for wastewater
discharges from coal ash basins at power plants. In the guidance, EPA advised
with respect to point source discharges of seepage:

42
If the seepage is directly discharged to waters of the United States, it is
likely discharged via a discrete conveyance and thus is a point source
discharge. Seepage discharges are expected to be relatively minor in volume
compared to other discharges at the facility and could be inadvertently
overlooked by permitting authorities. Although little data are available,
seepage consists of [coal combustion residuals] including fly ash and bottom ash
and fly ash transport water and [flue-gas desulfurization] wastewater. If
seepage is discharged directly via a point source to a water of the U.S., the
discharge must be addressed under the NPDES permit for the facility.

136.    Since at least 2010, seepage from DUKE ENERGY CAROLINAS’ and DUKE ENERGY
PROGRESS’S coal ash basins at certain of their 14 coal-fired power plants in
North Carolina entered waters of the United States through discrete conveyances.
137.    Wetlands may also suffer impacts from the operation of coal-fired
plants. Coal ash basins were historically sited near rivers and are, therefore,
often located in or near riparian wetlands and some coal ash basins have
hydrologic connections to wetlands via groundwater or seeps.
138.    Since 2010, as part of the NPDES permitting process in North Carolina,
coal-fired plants are required to monitor groundwater to assure natural
resources are protected in accordance with federal and state water quality
standards. Monitoring of groundwater at coal ash basins owned by DUKE ENERGY
CAROLINAS and DUKE ENERGY PROGRESS has shown exceedances of groundwater water
quality standards for pollutants under and near the basins including arsenic,
boron, cadmium, chromium,
43
iron, manganese, nickel, nitrate, selenium, sulfate, thallium, and total
dissolved solids.
139.    At various times between 2010 and 2014 the Defendants included general
references to seeps in correspondence and permit applications with DENR and
disclosed more detailed information concerning certain seeps, including
engineered seeps (i.e., man-made channels). The Defendants did not begin
gathering and providing detailed, specific, and comprehensive data concerning
seeps, and particularly seeps discharging to waters of the United States, at
each of the North Carolina coal ash basins to DENR until after the DAN RIVER
spill in 2014.
140.    After the coal ash spill at DAN RIVER in 2014, DUKE ENERGY CAROLINAS and
DUKE ENERGY PROGRESS, with the assistance of DUKE ENERGY BUSINESS SERVICES,
filed NPDES permit renewal and/or modification applications seeking
authorization for certain seeps that discharged, via a point source, directly to
a water of the United States.    These applications are currently pending as
DENR considers the impacts of the seeps and discharges on the receiving waters
of the United States.
H.F. LEE STEAM ELECTRIC PLANT
141.    DUKE ENERGY PROGRESS owns the H. F. Lee Steam Electric Plant (“LEE”),
which is located in Goldsboro, North Carolina. LEE (formerly known as the
“Goldsboro Plant”) began operation
44
 
shortly after World War II and added additional coal-fired combustion units in
1952 and 1962. The plant retired the coal-fired units in September of 2012.
142.    LEE used several coal ash basins in the past. Only one of the remaining
coal ash basins still contains water and ash sluiced from LEE (the “active coal
ash basin”). The active ash basin sits on the north side of the Neuse River.
(See Appendix, Photograph 15).
143.    The active coal ash basin is triangle-shaped and includes a primary
basin and a small secondary settling basin. The treatment system is designed so
that water discharges from the primary basin into the secondary basin and from
the secondary basin into the Neuse River.
144.    The NPDES permit No. NC0003417 for LEE, effective November 1, 2009,
authorized two discharges into the Neuse River — one from the active coal ash
basin (“Outfall 001”) and one from the cooling water pond (“Outfall 002”). A
2010 modification of the 2009 permit also authorized a third outfall (“Outfall
003”) from a combined cycle generation facility. Water does not currently
discharge from the active coal ash basin into the Neuse River via Outfall 001.
145.    Beginning at a time unknown but no later than October 2010, DUKE ENERGY
PROGRESS/Progress Energy Carolinas identified a seep on the eastern embankment
of the active coal ash basin.
45
This seep was adjacent to an area of seepage that was identified and repaired in
2009 and 2010. This seep in 2010 collected and flowed to a “flowing ditch”
outside of the active coal ash basin. This seep was repaired in May of 2011.
146.    Additional seeps on the eastern side of the active coal ash basin also
flowed into the same drainage ditch as the seep identified in October 2010. The
drainage ditch discharged into the Neuse River at latitude 35.379183, longitude
- 78.067533. The drainage ditch was not an authorized outfall under the NPDES
permit. In 2014, DUKE ENERGY PROGRESS identified the GPS coordinates of four
seeps on the eastern side of the coal ash basin as: latitude 35.380510,
longitude -78.068532; latitude 35.382767, longitude -78.069655; latitude
35.386968, longitude -78.071942; and latitude 35.379492, longitude -78.067718.
147.    On February 20, 2013, DENR personnel sampled water in three locations
from the drainage ditch. This sampling occurred after DENR personnel from the
Land Quality Section observed a seep near the southeast corner of the ash pond
dike. The seep collected in the unpermitted discharge ditch and flowed into the
Neuse River. Water quality analysis of samples from the drainage ditch showed
exceedances of state water quality standards for chloride, arsenic, boron,
barium, iron, and manganese. This discharge of wastewater into the Neuse River
46
from the drainage ditch at LEE was not authorized under the NPDES permit.
148.    On March 11, 2014, DENR personnel again sampled wastewater from the
drainage ditch referenced previously. The ditch showed exceedances for iron and
manganese.
149.    Unpermitted discharges, in violation of the applicable NPDES permit,
occurred at LEE from at least October 1, 2010, through December 30, 2014.
RIVERBEND STEAM STATION
150.    DUKE ENERGY CAROLINAS owns and operates the Riverbend Steam Station
(“RIVERBEND”), located in Gaston County, North Carolina, approximately 10 miles
from the city of Charlotte and immediately-adjacent to Mountain Island Lake, on
a bend in the Catawba River. Mountain Island Lake is the primary source of
drinking water for residents of Gaston and Mecklenburg Counties.
151.    RIVERBEND began commercial operation in 1929 and its combustion units
were retired in April 2013, with plans to demolish it after 2016. It has two
unlined coal ash basins along Mountain Island Lake, with dams reaching up to 80
feet in height. The RIVERBEND dams are designated in a 2009 EPA Dam Safety
Assessment as “Significant Hazard Potential,” as previously defined. RIVERBEND
contains approximately 2,730,000 million tons of stored coal ash.
47

152.    The RIVERBEND NPDES permit, No. NC0004961, was issued on March 3, 1976,
and has been renewed subsequently, with the current NPDES Permit expiring on
February 28, 2015. The RIVERBEND NPDES permit allows the facility to discharge
wastewater to the Catawba River from three “permitted outfalls” in accordance
with the effluent limitations and monitoring requirements regarding flow,
suspended solids, oil and grease, fecal coliform, copper, iron, arsenic,
selenium, mercury, phosphorus, nitrogen, pH, and chronic toxicity, as well as
other conditions set forth therein. Wastewater from the coal ash basin was to be
discharged, after treatment by settling, through one of the monitored and
permitted outfalls.
153.    On December 4 through December 6, 2012, DENR conducted inspections of
RIVERBEND and discovered unpermitted discharges of wastewater from the coal ash
basin into the Catawba River. Among the unpermitted discharges at RIVERBEND is a
seep identified in a 2014 permit modification application as Seep 12, an
engineered drain to discharge coal ash contaminated wastewater into the river.
RIVERBEND Seep 12 is located at latitude 35.36796809, longitude -80.95935079.
(See Appendix, Photographs 16 through 18). At some time unknown, but prior to
December 2012, one or more individuals at RIVERBEND created the unpermitted
channel that allowed contaminated water from the coal ash basin to be discharged
into the river.
48
154.    The unpermitted seep resulted in documented unpermitted discharges from
2011 through 2013 containing elevated levels of arsenic, chromium, cobalt,
boron, barium, nickel, strontium, sulfate, iron, manganese, and zinc into the
Catawba River.
155.    Unpermitted discharges, in violation of the applicable NPDES permit,
occurred at RIVERBEND from at least November 8, 2012, through December 30, 2014.
ASHEVILLE STEAM ELECTRIC GENERATING PLANT
156.    DUKE ENERGY PROGRESS owns and operates the Asheville Steam Electric
Generating Plant (“ASHEVILLE”), in Buncombe County, North Carolina.
157.    ASHEVILLE is a coal-powered electricity-generating facility in the
Western District of North Carolina. It has two unlined coal ash basins, one
constructed in 1964 and the other constructed in 1982. The basins, each
approximately 45 acres in size, hold a total of approximately 3,000,000 tons of
coal ash waste. (See Appendix, Photograph 19). The basins were each
characterized in the 2009 EPA Dam Safety Assessment as “High Hazard Potential,”
meaning that “failure or mis-operation results will probably cause loss of human
life.”
158.    The ASHEVILLE NPDES permit, number NC0000396, was issued in 2005 and
expired in 2010. Progress Energy Carolinas (now DUKE ENERGY PROGRESS) filed a
timely permit renewal
49
application on June 11, 2010. DENR has not yet issued a new permit and ASHEVILLE
continues to operate under the terms of the 2005 NPDES permit.
159.    On May 13, 2011, DUKE ENERGY PROGRESS/Progress Energy Carolinas sought
authority to relocate the settling basin and permitted discharge outfall at
ASHEVILLE from its original location near the 1964 coal ash basin to a location
approximately 3,000 feet away, latitude 35.47367 and longitude - 82.504, in
order to allow “stabilization work” on the 1964 ash pond impoundment.
160.    On March 11, 2013, DENR staff inspected ASHEVILLE and identified seeps
flowing from toe drains at the 1964 coal ash basins. The engineered seep from
the 1964 coal ash basin has continued to discharge pollutants. This engineered
seep is not authorized under the applicable NPDES permit. Engineered seeps from
the 1964 coal ash basin are located at latitude 35.468319, longitude -82.549104
and latitude 35.466943, longitude -82.548502. These engineered seeps discharge
through the toe drain to the French Broad River.
161.    Unpermitted discharges, in violation of the applicable NPDES permit,
occurred at ASHEVILLE from at least May 31, 2011, through December 30, 2014.

50

BROMIDE IMPACTS FROM FGD SYSTEMS
162.    As described above, DUKE ENERGY CAROLINAS owns and operates Belews Creek
Steam Station (“BELEWS”) in Stokes County, North Carolina, and Cliffside Steam
Station (“CLIFFSIDE”) in Rutherford and Cleveland Counties, North Carolina.
163.    As part of its efforts to comply with the Clean Air Act and North
Carolina Clean Smokestacks Act, DUKE ENERGY CAROLINAS installed Flue Gas
Desulfurization (“FGD”) “scrubbers” to significantly reduce or eliminate certain
air pollutants, such as sulfur dioxide and nitrogen oxide at several coal-fired
facilities. FGD scrubbers isolate certain pollutants from coal combustion
emissions into the air and ultimately divert those pollutants, including
bromides, into a gypsum slurry that is eventually routed to the facility’s coal
ash basins. At times, portions of the slurry may be diverted for reuse in
products such as wall board.
164.    FGD installation was completed and the scrubbers at BELEWS became fully
operational at the end of 2008.
165.    When bromide comes into contact with chlorine-based water treatment
systems, it can contribute to the formation of compounds known as
trihalomethanes (“THMs”). There are no general federal or state water limits for
the discharge of bromides to surface water. However, there are state and federal
limits for total trihalomethanes (“total THMs”) under the Safe
51
Drinking Water Act. If ingested in excess of the regulatory limits over many
years, THMs may cause adverse health effects, including cancer.
DISCHARGE OF BROMIDES AT BELEWS
166.    Beginning in 2008 or 2009, the City of Eden (“Eden”), downstream from
BELEWS, noted an increase in total THMs in its drinking water.
167.    Prior to the installation of the FGD scrubbers, DUKE ENERGY CAROLINAS
reported to DENR in its BELEWS NPDES permit applications that bromide occurred
in its waste stream at a level too low to detect. When BELEWS applied for a
NPDES permit modification in 2009, it made no new disclosures concerning bromide
levels because the modification did not relate to bromide and there were no
federal or state limitations for bromide discharge.
168.    DUKE ENERGY CAROLINAS tested for bromides, as well a number of other
potential pollutants, at BELEWS in 2008-2009 to evaluate the effects of the FGD
wastewater treatment system. Those test results showed that bromides were
discharged from BELEWS into the Dan River. This did not violate the NDPES permit
for the facility.
169.    In consultation with an outside contractor, in January 2011, Eden
determined that an increase in bromides contributed

52
to the increase in total THMs it had witnessed beginning in 2008-2009.
170.    In early 2011, Eden tested the water entering its water treatment
facility from the Dan River and performed water tests upstream to determine the
source of the bromides.
171.    On May 10, 2011, Eden notified DUKE ENERGY CAROLINAS that it was having
difficulty with increasing levels of total THMs in its treated drinking water
and requested DUKE ENERGY CAROLINAS’ bromide sampling data from the outflow of
BELEWS. An impending reduction in the threshold for total THMs (required by an
EPA rule promulgated under the Safe Drinking Water Act) triggered Eden’s
particular interest in the pollutant, especially given that Eden was at the
upper limit of the then-permissible total THM range.
172.    As a result of the water testing, Eden identified the source of the
increased bromides as BELEWS, which discharges into the Dan River. Eden shared
this information and its test results with DUKE ENERGY CAROLINAS on June 7,
2011.
173.    Shortly thereafter, DUKE ENERGY CAROLINAS and DUKE ENERGY BUSINESS
SERVICES internally agreed that the increased bromides very likely came from
BELEWS and, combined with a number of other factors, had likely caused the THM
increase at Eden. DUKE ENERGY CAROLINAS and DUKE ENERGY BUSINESS SERVICES

53
also agreed internally that the increased bromides were likely the result of the
FGD scrubber system.
174.    In mid-June 2011, DUKE ENERGY CAROLINAS contacted the Town of Madison
(“Madison”), which also draws water from the Dan River and processes that water
for drinking and which is closer to BELEWS than Eden. DUKE ENERGY CAROLINAS
informed Madison of its findings and Madison asked to be part of the discussions
with Eden about reducing bromide levels. DUKE ENERGY CAROLINAS and DUKE ENERGY
BUSINESS SERVICES employees met with Eden and Madison several times between June
2011 and April 2012 to discuss reducing total THMs in their drinking water.
175.    DUKE ENERGY CAROLINAS informed DENR of the increase in bromide levels in
its effluent when it filed its NPDES permit renewal application for BELEWS on
August 29, 2011. In the application, DUKE ENERGY CAROLINAS listed bromide as a
pollutant present in outfalls 001 (into Belews Lake) and 003 (into Dan River).
The largest concentration of bromide was listed as 6.9 mg/L from Outfall 003,
which translates to 6.9 parts per million (ppm) or 6907 parts per billion (ppb).
This bromide result appears to have been taken from a sample of water collected
in January 2011 and analyzed after Eden had brought the issue to DUKE ENERGY
CAROLINAS’ attention.

54

176.    At the time DUKE ENERGY CAROLINAS filed its NPDES permit renewal
application for BELEWS, none of the previous permits had placed any restrictions
or limits on bromides.
177.    In mid-October 2011, Eden informed DUKE ENERGY CAROLINAS that Madison
had violated its limit on total THMs. DUKE ENERGY CAROLINAS was also informed
that Henry County, Virginia, (which purchases Eden’s water) violated its total
THM limit. Dan River Water (another purchaser Of Eden’s water) also violated its
total THM limit.
178.    On November 16, 2011, DENR’s Winston-Salem Regional Office held a
meeting with DUKE ENERGY CAROLINAS, DUKE ENERGY BUSINESS SERVICES, Eden, and
Madison regarding the bromide issue. All participants agreed that the total THM
problem was caused by bromides entering the Dan River from BELEWS. DUKE ENERGY
CAROLINAS was not aware of the relationship between bromides and THMs until Eden
brought the matter to DUKE ENERGY CAROLINAS’ attention in 2011.
179.    Since the November 2011 meeting, DUKE ENERGY CAROLINAS has entered into
written agreements with Eden and Madison to assist them with a portion of the
costs of modifying and modernizing their water treatment systems.
DISCHARGE OF BROMIDES AT CLIFFSIDE
180.    Beginning at about the time DUKE ENERGY CAROLINAS responded to Eden’s
initial complaints regarding the bromide
55
discharge at BELEWS, DUKE ENERGY CAROLINAS conducted an initiative to monitor
bromide discharge at other locations employing FGD scrubbers.
181.    As a result of this initiative, in or about early August 2011, DUKE
ENERGY CAROLINAS also internally identified the CLIFFSIDE facility in western
North Carolina as one that could pose a potential THM problem in light of the
relatively shallow river (the Broad River) into which CLIFFSIDE discharged and
the presence of relatively close downstream facilities that drew drinking water
from the Broad River.
182.    The last CLIFFSIDE NPDES permit was issued in January 2011 and did not
reference bromide.
183.    DUKE ENERGY CAROLINAS AND DUKE ENERGY BUSINESS SERVICES informed neither
downstream communities nor DENR regarding this discharge from CLIFFSIDE. As of
the date of this joint factual statement, the parties are not aware of a
community downstream from CLIFFSIDE that has reported elevated levels of total
THMs due to an increase in bromide discharge from the facility, but acknowledge
the possibility that one or more communities may have been affected.
184.    In 2013, DUKE ENERGY CAROLINAS installed a spray dry absorber for one of
the two FGD scrubber units at the CLIFFSIDE facility which reduced the bromide
discharge from CLIFFSIDE.

56
The other FGD scrubber unit at CLIFFSIDE operates only intermittently.
SUTTON FACILITY
185.    DUKE ENERGY PROGRESS owns and operates the L.V. Sutton Steam Station
(“SUTTON”) in New Hanover County, North Carolina. SUTTON houses two coal ash
basins, one constructed in 1971 and one constructed in 1984.
186.    Located near SUTTON is the community of Flemington. Flemington’s water
supply has a history of water-quality problems. In 1978, an adjacent landfill,
designated as a “Superfund” site, contaminated Flemington’s drinking water and
caused authorities to construct new wells.
187.    Flemington’s new wells are located near SUTTON’s coal ash basins. They
are located down-gradient from the SUTTON coal ash basins, meaning groundwater
ultimately flows from the coal ash basins toward the Flemington wells.
188.    DUKE ENERGY PROGRESS/Progress Energy Carolinas has monitored groundwater
around SUTTON since 1990. Monitoring particularly focused on a boron plume
emanating from the coal ash ponds.
189.    From at least 2010 through 2013, the groundwater monitoring wells at
SUTTON reported unnaturally elevated levels of some constituents, including
manganese, boron, sulfate, and total dissolved solids.
57
190.    Flemington’s public utility also tested its water quality. Those tests
showed exceedances of barium, manganese, sodium, and sulfate in 2013.
191.    In June and July 2013, Flemington’s public utility concluded that boron
from SUTTON’s ash ponds was entering its water supply. Tests of water from
various wells at and near SUTTON from that period showed elevated levels of
boron, iron, manganese, thallium, selenium, cadmium, and total dissolved solids.
192.    In October 2013, DUKE ENERGY PROGRESS entered into an agreement with the
Cape Fear Public Utility Authority to share costs for extending a municipal
water line to the Flemington community.

(SPACE LEFT BLANK INTENTIONALLY)

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59

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60

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61

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62

United States v. Duke Energy Business
Services LLC, et al.

APPENDIX

TO JOINT FACTUAL STATEMENT

February 20, 2015

Diagram 1. Engineering Firm #1, Report of Safety Inspection - Duke Power Dan
River Steam Station Ash Dikes, at Fig. 4 (1981).
[a103decpleaagreement5_image8.gif]

Photograph 1. Photograph of DAN RIVER coal ash basin during spill, attached to
2/2/2014, 3:49 p.m. e-mail from Duke Energy Business Services
employee.[a103decpleaagreement5_image9.gif]
Photograph 2. Photograph of DAN RIVER coal ash basin during spill, attached to
2/2/2014, 3:49 p.m. e-mail from Duke Energy Business Services employee.
[a103decpleaagreement_image10.gif]

Photograph 3. Photograph of DAN RIVER coal ash basin during spill, attached to
2/2/2014, 3:49 p.m. e-mail from Duke Energy Business Service employee.
[a103decpleaagreement_image11.gif]
Photograph 4. Photograph of DAN RIVER coal ash basin during spill, attached to
2/2/2014, 3:49 p.m. e-mail from Duke Energy Business Service employee.
[a103decpleaagreement_image12.gif]

Photograph 5. Riser in CAPE FEAR 1978 coal ash basin from 2012 Five Year
Independent Consultant Report.
[a103decpleaagreement_image13.gif]

Photograph 6. Riser in CAPE FEAR 1978 coal ash basin from 2012 Five Year
Independent Consultant Report.
[a103decpleaagreement_image14.gif]

Photograph 7. Riser in CAPE FEAR 1985 coal ash basin from 2012 Five Year
Independent Consultant Report.
[a103decpleaagreement_image15.gif]
Photograph 8. 3/11/14 aerial photograph of CAPE FEAR 1978 coal ash basin with
Godwin pump and truck.
[a103decpleaagreement_image16.gif]

Photograph 9. 3/11/14 aerial photograph of CAPE FEAR 1985 coal ash basin with
Godwin pump and truck.
[a103decpleaagreement_image17.gif]

Photograph 10. 3/11/14 aerial photograph of CAPE FEAR 1985 coal ash basin with
Godwin pump and truck.
[a103decpleaagreement_image18.gif]

Photograph 11. 3/19/14 photograph of CAPE FEAR 1978 coal ash basin riser, prior
to repair work.
[a103decpleaagreement_image19.gif]

Photograph 12. 3/19/14 photograph of CAPE FEAR 1985 coal ash basin riser, prior
to repair work.
[a103decpleaagreement_image20.gif]

Photograph 13. 3/19/14 photograph of old grout on CAPE FEAR coal ash basin
riser.
[a103decpleaagreement_image21.gif]

Photograph 14. 3/19/14 photograph of new grout on CAPE FEAR coal ash basin
riser.
[a103decpleaagreement_image22.gif]

Photograph 15. Aerial Photograph of LEE from 2011 EPA Dam Safety Assessment
report.
[a103decpleaagreement_image23.gif]

Photograph 16. Aerial photograph depicting location of RIVERBEND Seep 12.
[a103decpleaagreement_image24.gif]

Photograph 17. Photograph of RIVERBEND Seep 12.
[a103decpleaagreement_image25.gif]

Photograph 18. Photograph of RIVERBEND Seep 12.
[a103decpleaagreement_image26.gif]

Photograph 19. Aerial photograph of ASHEVILLE.
[a103decpleaagreement_image27.gif]

EXHIBIT B
A Copy of the Guaranty Agreement
(Without attachments)

[a103decpleaagreement_image28.gif]
[a103decpleaagreement_image29.gif]
[a103decpleaagreement_image30.gif]
[a103decpleaagreement_image31.gif]
[a103decpleaagreement_image32.gif]
[a103decpleaagreement_image33.gif]
[a103decpleaagreement_image34.gif]
[a103decpleaagreement_image35.gif]
[a103decpleaagreement_image36.gif]

[a103decpleaagreement_image37.gif]

GUARANTY AGREEMENT

EXHIBIT C
United States v. Duke Energy Progress, Inc.
Plea Agreement (without Exhibits)

UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF NORTH CAROLINA
WESTERN DIVISION
No. 5:15-CR-62-H-2
No. 5:15-CR-67-H-3
No. 5:15-CR-68-H-3

UNITED STATES OF AMERICA
)
 
 
)
 
      v.
)
MEMORANDUM OF PLEA AGREEMENT
 
)
 
DUKE ENERGY BUSINESS SERVICES LLC
)
 

Pursuant to Rule 11(c)(1)(C) of the Federal Rules of Criminal Procedure, the
United States of America, by and through the United States Attorneys for the
Eastern District of North Carolina, the Middle District of North Carolina, and
the Western District of North Carolina as well as the Environmental Crimes
Section of the United States Department of Justice (collectively referred to
herein as “the United States” or “the Government”), and the Defendant, DUKE
ENERGY PROCESS, INC., (referred to herein as “the Defendant” or “DUKE ENERGY
PROCESS”) with the advice and concurrence of the Defendant’s counsel, Julia S.
Janson (Executive Vice-President, Secretary, and Chief Legal Officer, DUKE
ENERGY PROCESS) and James P. Cooney, III (Womble Carlyle Sandridge & Rice LLP)
have agreed that the above-captioned case should be concluded in accordance with
this Memorandum of Plea Agreement as follows:
This Memorandum constitutes the full and complete record

of the Plea Agreement for criminal conduct in each of the prosecuting districts,
that is, the Eastern District, Middle District, and Western District of North
Carolina and as alleged in the following charging documents (hereinafter
referred to collectively as the “Criminal Informations”):
United States v. Duke Energy Business Services LLC, and Duke Energy Progress,
Inc., No. 5:15-CR-62-H;
United States v. Duke Energy Business Services LLC, Duke Energy Carolinas, LLC,
and Duke Energy Progress, Inc.,

No. 5:15-CR-67-H; and
United States v. Duke Energy Business Services LLC, Duke Energy Carolinas, LLC,
and Duke Energy Progress, Inc., No.

5:15-CR-68-H.

There are no other agreements between the parties in addition to or different
from the terms herein.
The United States and the Defendant agree:
a.
That this Plea Agreement (“Agreement”) is made pursuant to Rule 11(c)(1)(C) of
the Federal Rules of Criminal Procedure (“Fed. R. Crim. P.”) and that the
sentence set forth herein is the appropriate disposition of this case. If the
Court rejects this Agreement, it is further agreed that the Defendant may
withdraw its plea and all of the parties may withdraw from this Agreement.

b.
The parties further acknowledge that based upon the Joint Factual Statement, a
copy of which is attached hereto as Exhibit A, the Court has sufficient
information in the record to enable it to meaningfully exercise its sentencing
authority. Accordingly, if acceptable to the Court, the parties agree to waive
the presentence investigation and report pursuant to Fed. R. Crim. P. 32(c), and
to request that the Defendant be sentenced at the time the guilty plea is
entered.

c.
The parties further agree and acknowledge that the Defendant’s parent
corporation, Duke Energy Corporation, shall guarantee all monetary penalties
(criminal fine, restitution, community service, and mitigation) imposed upon the
Defendant and the funding and performance due from the Defendant in connection
with the nationwide and statewide environmental compliance plans under this
Agreement as more fully set forth in the Guaranty Agreement, a copy of which
attached hereto at Exhibit B

(without attachments) and fully incorporated herein by reference. The parties
further agree and acknowledge that Duke Energy Corporation shall consent to the
jurisdiction of the United States District Court for the Eastern District of
North Carolina for the purpose of enforcing the Guaranty Agreement.
d.
Pursuant to Fed. R. Crim. P. 11(c)(1)(C), the parties agree that the following
sentence is warranted in this case:

Criminal Fines: At the time of imposition of sentencing, the Defendant shall
make a payment of Criminal Fines totaling $14.4 million ($14,400,000) as
follows:
H.F. Lee Violations
(1)
$3.9 million ($3,900,000) for the negligent Clean Water Act discharge in
violation of the applicable NPDES permit at H.F. Lee Steam Electric Plant, a
fine within the statutory penalty range of $2,500 to $25,000 per day of
violation pursuant to 33 U.S.C. § 1319(c)(1)(A) and 18 U.S.C. § 3571(c) and (d).

Cape Fear Violations
(2)
$3.5 million ($3,500,000) for negligent Clean Water Act failure to maintain the
coal ash impoundments and related appurtenances (the riser in the 1978 coal ash
impoundment) as required by the applicable NPDES permit for the Cape Fear Steam
Electric Plant, a fine within the statutory penalty range of $2,500 to $25,000
per day of violation pursuant to 33 U.S.C. § 1319(c) (1) (A) and 18 U.S.C. §
3571(c) and (d).

(3)
$3.5 million ($3,500,000) for negligent Clean Water Act failure to maintain the
coal ash impoundments and related appurtenances (the riser in the 1985 coal ash
impoundment) as required by the applicable NPDES permit for the Cape Fear Steam
Electric Plant, a fine within the statutory penalty range of $2,500 to $25,000
per day of violation pursuant to 33 U.S.C. § 1319(c) (1) (A) and 18 U.S.C. §
3571(c) and (d).

Asheville Violations
(4)
$3.5 million ($3,500,000) for the negligent Clean Water Act discharge in
violation of the applicable NPDES permit at Asheville Steam Electric Generating
Plant, a fine within the statutory penalty range of $2,500

to $25,000 per day of violation pursuant to 33 U.S.C. § 1319(c)(1)(A) and 18
U.S.C.

§ 3571 (c) and (d).
ii.
Probation: A statutory-maximum term of five (5) years of probation is warranted.
18 U.S.C.

§ 3561(c)(2). Probation shall include the standard conditions of probation and
the following special conditions, pursuant to 18 U.S.C. § 3563(a) and (b):
(1)
Compliance with the Law: The Defendant shall not commit another federal, state,
or local crime during the term of probation.

(2)
Cooperation with Probation Office: The Defendant shall fully cooperate with the
United States Probation Office. The Defendant shall answer truthfully all
inquiries by the Probation Officer; shall provide full access to any of the
Defendant’s operating locations; shall give ten (10) days’ prior notice of any
intended change in principal business or mail address; and shall provide notice
of any material change in the Defendant’s economic circumstances that might
affect the Defendant’s ability to pay the fines and other financial obligations
set forth herein.

(3)
Nationwide Environmental Compliance Plan: Under the terms of its plea agreement,
co-defendant Duke Energy Business Services LLC (“DEBS”) is required to develop,
adopt, implement, and fund a comprehensive nationwide environmental compliance
plan (“NECP”) during its term of probation, consistent with sentencing policies
set forth in USSG §8D1.4 and which incorporates all of the agreed-upon
obligations set forth in Paragraph 3(u)(v) of this Agreement. The Defendant
shall take all steps necessary or required to assist DEBS in meeting this
obligation.

(4)
Statewide Environmental Compliance Plan:

The Defendant, along with its co-defendants Duke Energy Carolinas, LLC (“DEC”)
and DEBS, shall develop, adopt, implement, and fund a comprehensive statewide
environmental compliance plan (“ECP-NC”) during its term of probation,
consistent with sentencing policies set forth in USSG §8D1.4 and which
incorporates all of the agreed-upon obligations set forth in Paragraph 3(u)(vi)
of this Agreement.
(5)
Notice to Employees and Shareholders: Upon approval by the Court of the NECP and
ECP-NC, the Defendant shall notify its employees of its criminal behavior, the
NECP, and the ECP-NC. In addition, the Defendant shall cause a notice containing
the same information to be sent to the shareholders of Duke Energy Corporation.
Such notice shall be in a form prescribed by the Court-Appointed Monitor (“CAM”)
and at a time designated by the CAM.

(6)
Community Service Payment: Pursuant to USSG §8B1.3 and in furtherance of the
sentencing principles provided for under 18 U.S.C.

§ 3553(a), at the time of sentencing, the Defendant shall make a community
service payment totaling $10.5 million ($10,500,000), through the National Fish
and Wildlife Foundation (“NFWF”), to fund environmental projects, studies, and
initiatives designed to benefit, preserve, and restore the riparian environment
and ecosystems of North Carolina and Virginia affected by the Defendant’s
conduct, as set forth in Paragraph 3 (aa) of this Agreement.
(7)
Mitigation: In order to compensate for impacts to wetlands and other
jurisdictional waters of the United States impacted as a result of the
Defendant’s conduct, including temporal and secondary effects, at its facilities
in North Carolina with coal ash impoundments, the Defendant shall provide $5
million ($5,000,000) to an authorized

wetlands mitigation bank or conservation trust, approved by the Court, for the
purchase of riparian wetland and/or riparian land and/or restoration equivalent
located in the Broad River Basin, French Broad River Basin, Cape Fear River
Basin, Catawba River Basin, Dan River Basin, Yadkin-Pee Dee River Basin, Neuse
River Basin, Lumber River Basin, and Roanoke River Basin as set forth in more
detail in Paragraph 3(bb) of this Agreement.
iii.
Payment Liability/Financial Assurances: The Defendant shall be liable for and
pay all fines, restitution, community service, and mitigation payments and shall
fund the NECP and ECP-NC, all as set forth herein. The Defendant shall further
be liable for any additional restitution payments as determined by the CAM.

(1)
Reservation of Funds by Defendant: The Defendant further shall record
appropriate reserves on financial statements for the purpose of recognizing the
projected obligation to retire its coal ash impoundments in North Carolina. This
obligation is currently estimated at a total of $1.4 billion ($1,400,000,000) on
the Defendant’s balance sheet. Each year during the term of probation, beginning
on the date that the Agreement is accepted by the Court and occurring by March
31 of each year thereafter, the Defendant shall cause the Chief Financial
Officer of Duke Energy Corporation, as further directed under the Guaranty
Agreement attached hereto, to certify to the United States and the CAM that the
Defendant and Duke Energy Corporation have sufficient assets reserved to meet
the obligations imposed by law or regulation or as may otherwise be necessary to
fulfill the Defendant’s obligations with respect to its coal ash impoundments
within the State of North Carolina. If the CAM has any concerns regarding the
assets available to meet obligations imposed by the Judgment

in this case, the CAM shall immediately notify the Court and the parties.
(2)
Reservation of Funds by Parent Company: The Defendant further shall cause its
parent holding company, Duke Energy Corporation, to record appropriate reserves
on its consolidated financial statements for the purpose of recognizing the
projected obligation to retire all coal ash impoundments, including those in
North Carolina. This obligation is currently estimated at a total of $3.4
billion ($3,400,000,000) on Duke Energy Corporation’s balance sheet for all coal
ash impoundments (including those owned by the Defendant and co-defendant DEC).
Each year during the term of probation, beginning on the date that the Agreement
is accepted by the Court and occurring by March 31 of each year thereafter, the
Defendant shall cause the Chief Financial Officer of Duke Energy Corporation, as
further directed under the Guaranty Agreement attached hereto, to certify to the
United States and the CAM that the Defendant and Duke Energy Corporation have
sufficient assets reserved to meet the obligations imposed by law or regulation
or as may otherwise be necessary to fulfill the Defendant’s obligations with
respect to its coal ash impoundments within the State of North Carolina. If the
CAM has any concerns regarding the assets available to meet obligations imposed
by the Judgment in this case, the CAM shall immediately notify the Court and the
parties.

(3)
Security: Through the entire term of probation, the Defendant shall further
maintain unused borrowing capacity in the amount of $250 million ($250,000,000)
under the Master Credit Facility as security to meet its obligations under this
Agreement for the closing and remediation of coal ash impoundments, as more
fully set forth in Paragraph 3(k) of this Agreement. The Defendant shall certify
this set aside to

the CAM on an annual basis, or more frequently as the CAM requires. If the CAM
has any concerns regarding the security available to meet the obligations
imposed by the Judgment in this case, the CAM immediately notify the Court and
the parties.
iv.
Restitution for Counts of Conviction: Pursuant

to 18 U.S.C. §§ 3663, 3663A, and 3563(b)(2), the Defendant shall make
restitution to any victim in whatever amount the Court may order. Said
restitution shall be due and payable immediately.
v.
Restitution for Relevant Conduct to Be Paid During Term of Probation: Pursuant
to 18 U.S.C. § 3663, the Defendant shall pay restitution as directed by the CAM
through the claims process set forth in Paragraphs 3(x)(iii)-(vi) of this
Agreement. Said restitution shall also include payment to the Cape Fear Public
Utility Authority for all costs, whenever incurred, associated with the
extension of the Flemington water line, which was necessary to ensure that the
community had clean drinking water.

vi.
Special Assessment: The Defendant shall pay special assessments, totaling
$500.00, before or at the time of sentencing, and shall provide a receipt from
the Clerk of Court for the Eastern District of North Carolina to the United
States as proof of payment.

vii.
Public Apology: Consistent with USSG §8D1.4(a), the Defendant and co-defendants
DEBS and DEC shall place a full-page public apology in at least two national
newspapers and three major North Carolina newspapers (one in Raleigh, one in
Greensboro, and one in Charlotte) and on its publicly accessible company
website.

The Defendant agrees:
a.
Consent to Transfer: To consent to Rule 20 transfers for purposes of the entry
of guilty pleas to the charges in the following matters:

i.
United States v. Duke Energy Business Services LLC, Duke Energy Carolinas, LLC,
and Duke Energy Progress, Inc., No. 1:15-CR-51-1 (MDNC); and

ii.
United States v. Duke Energy Business Services LLC, Duke Energy Carolinas, LLC,
and Duke Energy Progress, Inc., No. 3:15-CR-43-FDW(WDNC).

b.
Restitution for Counts of Conviction: Pursuant to 18 U.S.C. §§ 3663, 3663A, and
3562(b)(2), to make restitution in any amount as ordered by the Court and as set
forth in this Agreement. Said restitution shall be due and payable immediately.

c.
Restitution for Relevant Conduct to Be Paid During Term of Probation: In
addition to any order of restitution in connection with the counts of
conviction, to make restitution to the following entities, as determined and
directed by the CAM during the term of probation and pursuant to the agreed-upon
claims process set forth in Paragraphs 3(x)(iii)-(vi):

i.
Local Governments with drinking water treatment systems impacted by bromide
discharges from other facilities owned by the Defendant:

(1)
For all costs, whenever incurred, associated with water treatment system
upgrades resulting from the increase of trihalomethanes including, but not
limited to, maintenance costs.

(2)
All costs associated with investigating and responding to increased discharges
of bromide and/or the increase of trihalomethanes.

ii. Cape Fear Public Utility Authority:
(1) For all costs, whenever incurred, associated with the extension of the
Flemington water line, which was necessary to ensure that the community had
clean drinking water.
d.
Crime Victims’ Rights Act: Except as provided herein, at the time of the
execution of this

Agreement, the parties are not aware of any other victim as that term is defined
by 18 U.S.C. § 3663, 3663A, and 3771. The Defendant understands that the United
States intends to fully comply with all obligations under 18 U.S.C. § 3771,
including victim notification and restitution provisions.
e.
Appeal Waiver: To waive knowingly and expressly the right to appeal the
conviction and whatever sentence is imposed on any ground, including any appeal
pursuant to 18 U.S.C. § 3742, and further to waive any right to contest the
conviction or the sentence in any post-conviction proceeding, including any
proceeding under 28 U.S.C. § 2255, excepting an appeal or motion based upon
grounds of ineffective assistance of counsel or prosecutorial misconduct not
known to the Defendant at the time of the Defendant’s guilty plea. The foregoing
appeal waiver does not constitute or trigger a waiver by the United States of
any of its rights to appeal provided by law.

f.
Waiver of Rights to Records: To waive all rights, whether asserted directly or
through a representative, to request or receive from the United States any
records pertaining to the investigation or prosecution of this matter, except as
provided in the Fed. R. Crim. P. This waiver includes, but is not limited to,
rights conferred by the Freedom of Information Act and the Privacy Act of 1974.

g
Special Assessment: To pay a special assessment of $125.00 for each misdemeanor
count pursuant to the provisions of 18 U.S.C. § 3013. The assessment shall be
paid by the Defendant at sentencing. The Defendant or Defendant’s counsel shall
provide a check in payment of the said assessment directly to the Clerk of
Court, U.S. District Court-EDNC.

h.
Financial Statement: To complete and submit a financial statement under oath to
the United States no later than two weeks prior to the entry of the guilty plea.
The Defendant can satisfy this condition by submitting its most recent financial
statement filed with the Securities and Exchange Commission.

i.
Reservation of Funds by Defendant: To record appropriate reserves on financial
statements for the purpose of recognizing the projected obligation to retire its
coal ash impoundments in North Carolina, and, during each year during the term
of probation, to certify that it has sufficient assets reserved to meet the
obligations imposed by law and regulation as more fully set forth in Paragraph
2(d)(iii)(1) above. This obligation is currently estimated at a total of $1.4
billion ($1,400,000,000) on the Defendant’s balance sheet.

j.
Reservation of Funds by Parent Company: To cause its parent holding company,
Duke Energy Corporation, to record appropriate reserves on its consolidated
financial statements for the purpose of recognizing the projected obligation to
retire all coal ash impoundments, including those in North Carolina, and during
each year during the term of probation, to cause its parent holding company to
certify that it has sufficient assets reserved to meet the obligations imposed
by law and regulation as more fully set forth in Paragraph 2(d)(iii)(2) above.
This obligation is currently estimated at a total of $3.4 billion
($3,400,000,000) on Duke Energy Corporation’s balance sheet for all coal ash
impoundments (including those owned by the Defendant and co-defendant DEC).

k.
Security: Through the entire term of probation, to maintain unused borrowing
capacity in the amount of $250 million ($250,000,000) under the Master Credit
Facility as security to meet its obligations under this Agreement for the
closing and remediation of coal ash impoundments, as more fully set forth in
Paragraph 2(iii) (3) of this Agreement. A copy of the certification for 2015
shall be filed with the Court at the time of entry of this Agreement.

1.
Cooperation: The Defendant shall continue to cooperate fully with the United
States, and with all other authorities and agencies designated by the United
States, and shall truthfully disclose all information with respect to the
activities of the Defendant and its present and former directors, officers,
employees, agents, consultants, contractors, and subcontractors thereof,
regarding

the conduct underlying the Criminal Informations about which the Defendant has
any knowledge or about which the United States shall inquire. This obligation of
truthful disclosure includes the obligation of the Defendant to provide to the
United States, upon request, any document, record, or other tangible evidence
regarding the conduct underlying the Criminal Informations about which the
United States shall inquire of the Defendant. Compliance with such cooperation
requirements shall not be construed as requiring or effecting a waiver of the
attorney-client privilege or work product protections.
m.
Such cooperation set forth in Paragraph (1) above shall include but not be
limited to: (a) promptly disclosing any and all related criminal or potentially
criminal conduct of which the Defendant is currently aware; (b) promptly
producing all documents requested by the federal government or by grand jury
subpoena; (c) promptly making employees available to the investigation team upon
request for interview or for testimony in any proceeding, subject to those
employees’ own legal rights; and (d) making reasonable efforts to ensure its
employees provide full and truthful information.

n.
If the Defendant, through its employees acting within the scope of their
employment, provides false, incomplete, or misleading information or testimony,
or fails to abide by any term of cooperation set forth in Paragraphs (1) and (m)
above, this would constitute a material breach of this Agreement by the
Defendant, and the Defendant shall be subject to prosecution for any federal
criminal violation not barred by the applicable statute of limitations (or as
waived pursuant to Paragraph 3(hh)) or other legal prohibition. Any information
provided by the Defendant may be used against the Defendant in that prosecution.

o.
Additionally, the Defendant agrees that in the event of the Defendant’s material
breach of this Agreement, the following are admissible against the Defendant in
any prosecution or action against the Defendant: (i) any statements made by the
Defendant, under oath, at the guilty plea hearing (before either a Magistrate

Judge or a District Judge); (ii) the Joint Factual Statement supporting this
Agreement; and (iii) any evidence derived from such statements. This includes
the prosecution of the charges that are the subject of this Agreement or any
charges that the United States agreed to dismiss or not file as part of this
Agreement, but later pursues because of a material breach by the Defendant.
Additionally, the Defendant knowingly and voluntarily waives any argument under
the United States Constitution, any statute, Rule 410 of the Federal Rules of
Evidence, Fed. R. Crim. P. 11(f), and/or any other federal rule, that the
statements or any evidence derived from any statements should be suppressed or
are inadmissible.
p.
Compliance with the Law: Except as provided otherwise herein and in Paragraph
(q) below, the Defendant agrees that it shall commit no new violations of
federal, state, or local law, including those laws and regulations for which
primary enforcement has been delegated to state authorities, and shall conduct
its operations in accordance with the environmental laws of the United States
and the State of North Carolina. If the Defendant learns of any such violations
committed by its agents or employees during the term of probation, the Defendant
shall notify the United States of the violations in accordance with the terms of
the environmental compliance plans.

i.
The Defendant understands that the Government shall not consider there to be a
violation of the conditions of probation if the Defendant complies with federal
environmental laws when there is a direct conflict between the state and federal
environmental laws.

q.
The Defendant shall comply with all federal, state, and other regulations
relating to coal ash, and will have no new notices of violation, notices of
deficiency, or other criminal, civil, or administrative enforcement actions
based on conduct (including the failure to act) occurring after entry of the
guilty plea.

i.
The Defendant understands that it shall be considered a violation of the
conditions of

probation if the Defendant engages in the above conduct and such conduct or
condition results in a final assessment (after conclusion of any appeals) in an
amount greater than $5,000 and imposed after the entry of the guilty plea and
which the CAM deems material. Any conduct or conditions resulting in a final
assessment in an amount greater than $15,000 shall be presumed to be material.
ii.
It shall not be considered a violation of probation if the enforcement action is
based upon information disclosed by the Defendant in its 2014 Topographic Map
and Discharge Assessment Plan(s) and/or its 2014 NDPES permit renewal
application(s) for its facilities in North Carolina.

r.
The Defendant shall comply with all legislative and regulatory mandates
concerning closure of the coal ash impoundments which it operates, and shall
complete full excavation and closure of all of the coal ash impoundments at its
Sutton and Asheville facilities in accordance with federal and state laws,
including the United States Environmental Protection Agency’s (“EPA”) 2014 final
rule governing the disposal of coal combustion residuals from electric utilities
(“CCR Rule”) and North Carolina’s Coal Ash Management Act of 2014, by the dates
dictated in those laws, currently the calendar year 2019. In so doing, the
Defendant shall act diligently and in good faith to meet projected critical
milestones in its closure plans for each site as set forth in the following
documents: Duke Energy’s L.V. Sutton Electric Plant Coal Ash Excavation Plan
dated November 13, 2014; and Duke Energy’s Asheville Steam Electric Generating
Plant Coal Ash Excavation Plan dated November 13, 2014 (collectively referred to
as “Excavation Plans”), as may be amended with the approval of the North
Carolina Department of Environment and Natural Resources (“DENR”).

i.
With respect to excavated coal ash, the removed ash shall be stored in a lined
CCR landfill space or lined impoundment meeting all requirements established by
applicable statute, law, and regulation, including but not limited to 40 CFR

Part 258 (Subtitle D of RCRA). Nothing in this Paragraph shall prohibit the
Defendant from the disposition of ash through beneficial reuse as contemplated
by the CCR Rule.
ii.
Every six months, or on a more frequent basis as determined by the CAM, the
Defendant shall provide the CAM with a detailed description of its efforts to
excavate coal ash and close all of the coal ash impoundments at Sutton and
Asheville and whether it has met the critical milestones set forth in the
Excavation Plans in the time period since the last report. The Defendant shall
also include the status of all permits and permit applications with any
regulatory body, including but not limited to DENR. The Defendant shall also
make such reports publicly available on its website.

(1)
If the CAM has any concerns regarding whether the Defendant acted diligently or
in good faith to meet its obligations under this provision, including the
critical milestones set forth in the Excavation Plans, the CAM shall immediately
notify the Court and the parties.

iii
The Defendant shall contemporaneously provide an executive summary of the report
in subparagraph (ii) above to the United States Attorneys’ Offices for the
Eastern, Middle, and Western Districts of North Carolina; the Department of
Justice - Environmental Crimes Section; the United States Environmental
Protection Agency -Criminal Investigation Division; and the United States
Environmental Protection Agency – Legal Counsel Division. Upon request, the
Defendant shall provide the full report for inspection and review by any of the
governmental parties.

(1)
If the Government has any concerns regarding whether the Defendant acted
diligently or in good faith to meet its obligation under this provision,
including the critical milestones set forth in the Excavation Plans, the
Government may elect to notify either the

CAM or the Court, and may seek additional penalties as may be appropriate.
iv.
Six months prior to the end of the term of probation, the Defendant shall
provide the Court, the CAM, and the Government with a full report of its efforts
to excavate coal ash and to close all of the coal ash impoundments at Sutton and
Asheville and the anticipated completion date.

v.
The Government may seek additional fines and penalties should the Defendant fail
to comply with such legislative or regulatory mandates and closure requirements
under this Paragraph unless the compliance is delayed by a “force majeure” as
that term is defined herein. The parties recognize that a change in law making
performance impossible may be raised under the “force majeure” clause herein,
but final determination shall be made by the Court.

vi.
The Defendant understands that the Government shall not consider there to be a
violation of the conditions of probation if the Defendant complies with federal
environmental laws when there is a direct conflict between the state and federal
environmental laws. The Defendant, however, shall immediately notify the Court,
the CAM, and the Government of the conflict of laws and the impact on any
excavation and closure plans.

s.
Criminal Fine: The Defendant shall pay a total criminal fine in the amount of
$14.4 million ($14,400,000), allocated as set forth in Paragraph 2(d)(i) above.

t.
Stipulated Factual Basis for Fine: The Defendant stipulates that there is a
factual basis for the imposition of a criminal fine in the amount of $14.4
million ($14,400,000) pursuant to 33 U.S.C.

§§ 1319(c)(1)(A) and/or 18 U.S.C. § 3571(c) and (d) and that the payments made
pursuant to Paragraph 2(d)(i) do not together exceed the statutory maximum fine
available under each of the applicable statutes. The Defendant further waives
any right to a jury or bench trial as to those payments.

u.
Environmental Compliance Plans: As a special condition of probation, the
Defendant shall cause, assist, and otherwise take all steps necessary to
effectuate the obligation of co-defendant DEBS to develop, adopt, implement, and
fund the NECP designed to ensure compliance with applicable environmental laws
and regulations at all of the coal ash impoundments owned and operated (whether
active or inactive) by any wholly-owned subsidiary of Duke Energy Corporation.
In addition to requirements to be applied nationwide, the Defendant, along with
co-defendants DEBS and DEC, shall develop, implement, and enforce the ECP-NC
that also incorporates all of the requirements of the NECP. Both the NECP and
the ECP-NC shall be filed with the Court as separate documents. Components of
the NECP and the ECP-NC include, but are not limited to, the following:

i.
Timing for Submission of NECP and ECP-NC: Defendant DUKE ENERGY PROGRESS, along
with its co-defendants DEBS and DEC, shall develop and adopt the NECP and ECP-NC
within seventy (70) days of the selection of the CAM. The final NECP and ECP-NC
shall be submitted to the Court with copies to the United States Probation
Office; the United States Attorneys’ Offices for the Eastern, Middle, and
Western Districts; the Department of Justice - Environmental Crimes Section; the
Environmental Protection Agency - Criminal Investigation Division; and the
United States Environmental Protection Agency - Legal Counsel Division. The
Court must approve both the NECP and ECP-NC.

(1)
The United States acknowledges that two (2) wholly-owned subsidiaries of Duke
Energy Corporation, Duke Energy Commercial Enterprises, Inc. (an indirect
wholly-owned subsidiary) and Duke Energy SAM, LLC (a

direct wholly-owned subsidiary) have entered into a purchase and sale agreement
with a subsidiary of Dynegy Inc. in which Dynegy Inc. will acquire Duke Energy
Ohio’s unregulated Midwest generation business (which has been classified as
Discontinued Operations on the Condensed Consolidated Statement of Operations).
Approval is

pending before the Federal Energy Regulatory Commission. Both of the
subsidiaries handle coal ash.
(2)
If the sale above has not been closed at the time of the submission of the NECP
to the Court for approval, it is expressly

understood and agreed that these assets need not be included within the NECP
with the following exception: if the sale is not closed within ninety (90) days
of the approval of the NECP by the Court, the CAM may, at his/her option,
require the NECP to be amended to include these subsidiaries.
ii.
Best Efforts: Defendant DUKE ENERGY PROGRESS, along with its co-defendants DEBS
and DEC, shall use best efforts to comply with each and all of the obligations
under both the NECP and ECP-NC.

(1)
The requirement that the Defendant exercise “best efforts” to fulfill the
obligation includes using commercially reasonable efforts to anticipate any
potential “force majeure” event (as defined herein at Paragraph 3(y)) and to
address the effects of any potential “force majeure” event: (a) as it is
occurring, and (b) following the potential “force majeure” event, such that the
delay is minimized to the greatest extent possible.

(2)
If the CAM believes that the Defendant has not used “best efforts” to fulfill
its obligations, the CAM shall provide written notice immediately to the Court
and the parties.

(3)
The final determination of whether the Defendant used “best efforts” shall be
made by the Court with the advice of and recommendations from the CAM.

(4)
If the Court concludes that the Defendant failed to exercise “best efforts” to
fulfill an obligation of this Agreement, the Court may impose and the Government
will be

entitled to seek additional monetary penalties.
iii.
Selection and Funding of CAM:

(1)
Funding: As part of the NECP and the ECP- NC, Defendant DUKE ENERGY PROGRESS,
along with its co-defendants DEBS and DEC, shall pay for a CAM who will be
appointed by and report to the Court during the full period of probation.

(2)
Qualifications: The object of the selection process for the CAM is to select the
most qualified candidate to oversee implementation of the NECP, the ECP-NC, and
the bromide claims process. Therefore, the CAM must have staff, or be able to
retain staff, with the following experience: (a) expertise and competence in the
regulatory programs under the United States and State of North Carolina
environmental laws; (b) sufficient expertise and competence to assess whether
the Defendant, DEBS, and DEC have adequate management systems in place to ensure
regulatory compliance, document such noncompliance, and prevent future
noncompliance; and (c) sufficient expertise and competence to review claims for
reimbursement under the process for identifying, verifying, and providing
restitution for claims relating to bromide discharges described herein.

(3)
Nomination and Veto by Government: Within thirty (30) days of the entry of the
Judgment, Defendant DUKE ENERGY PROGRESS, along with its co-defendants DEBS and
DEC, shall submit a list of three qualified candidates for the position of CAM
from which the Court will select and appoint one of the candidates. Any
nomination will include a detailed curriculum vitae or similar documentation
setting forth the qualifications of the candidate. The Government shall have
fifteen (15) days from the receipt of the nominations to file any

reasonable objection to any or all of the proposed candidates. If the Government
lodges an objection, then Defendant DUKE ENERGY PROGRESS, along with its
co-defendants DEBS and DEC, must nominate a replacement candidate(s). The
Government again shall have the right to lodge any reasonable objection to any
replacement candidate; and the Court may adjust the time frame for the selection
of the CAM as necessary to ensure that the best possible candidate is selected.
(4)
Court Selection: Upon receipt of a final list of candidates, the Court shall
select one candidate as CAM by written order. In the event that the Court does
not find any of the candidates satisfactory or if, during any point in the term
of probation, the Court does not find the work of the selected CAM satisfactory,
the Court may request Defendant DUKE ENERGY PROGRESS, along with its
co-defendants DEBS and DEC, to nominate additional candidates. The Court may
adjust the time frame for the nominations of the CAM as necessary to ensure that
the best possible candidates are nominated.

iv.
Reporting by CAM: On an annual basis, or more often as the Court directs, the
CAM shall provide reports in writing to the Court, through the United States
Probation Office, demonstrating compliance with the NECP and the ECP-NC by DUKE
ENERGY PROGRESS and its co-defendants, DEBS and DEC. The report shall include,
among other things, a detailed description of: (1) all excavation, closure,
and/or proper remediation of the coal ash impoundments located in North Carolina
and addressed in the ECP-NC; and (2) all three co-defendants’ compliance with
all appropriate environmental laws and regulations in connection with the
management of their coal ash impoundments in North Carolina and elsewhere.

(1)
Public Access to Information: The CAM shall ensure, and the Defendant shall
facilitate, the posting of copies of any environmental

compliance audits, annual reports, and/or any other reports prepared pursuant to
the NECP or ECP-NC on a company web page with public access.
•
Subject to the approval of the CAM, the Defendant may redact confidential
business information or any information it reasonably believes could impair the
security of its operations before such audits or reports are posted for public
access.

•
The CAM shall inspect such proposed redactions to determine the propriety of the
redactions.

•
Notwithstanding the foregoing, unredacted copies shall be provided to the Court.
The Defendant may seek to have the filings placed under seal to protect any
information that the CAM has deemed to warrant redaction.

(2)
The CAM will contemporaneously provide copies of the reports (as posted) to the
United States Attorneys’ Offices for the Eastern, Middle, and Western Districts
of North Carolina; the Department of Justice -Environmental Crimes Section; the
United States Environmental Protection Agency -Criminal Investigation Division;
and the United States Environmental Protection Agency - Legal Counsel Division.
If the reports contain redactions, any of these parties may inspect the
redactions and challenge the propriety of the redactions. The Court shall be the
final arbiter of any challenge.

v.
Nationwide ECP: The NECP shall include, among other things:

(1)
Organizational Funding: Co-Defendant DEBS shall maintain and fund the operation
of all of the company compliance organizations created in the wake of the Dan
River

release, including: ABSAT, the Coal Combustion Products organization, and the
National Ash Management Advisory Board. Subject to the approval of the CAM, DEBS
may transfer operations and responsibilities between internal organizations or
adjust funding of such organizations as appropriate, as long as the obligations
of this Agreement are being met. To the extent necessary or required, the
Defendant shall fund or otherwise pay for its proportionate share of the
continued maintenance and operations of these compliance organizations.
(2)
Compliance Officer (“CO”): The Defendant, and its co-defendants DEBS and DEC,
each shall identify or establish a position at the Vice President level or
higher who will liaise directly with the CAM. The Defendant’s designated CO
shall have, among other duties, the primary responsibility for ensuring
compliance with applicable environmental requirements and requirements of the
NECP and ECP-NC.

•
The COs shall submit detailed reports discussing the development,
implementa-tion, and enforcement of the NECP and ECP-

NC at intervals deemed necessary by the CAM. The first report shall also include

an explanation of the current corporate structure responsible for the operation
and control of the coal ash impoundments and the names of the individuals
filling the relevant positions. With the concurrence of the CAM, the COs may
elect

to submit a joint report detailing the required information for all three
co-defendants. Any changes to the corporate coal ash oversight structure shall
be immediately forwarded to the CAM and included in the next regular report.
•
Subject to the approval of the CAM, the Defendant may redact confidential
business information or any information it

reasonably believes could impair the security of its operations before such
reports are posted for public access.
•
The CAM shall inspect such proposed redactions to determine the propriety of the
redactions.

•
Notwithstanding the foregoing, unredacted copies shall be provided to the Court.
The Defendant may seek to have the filings placed under seal to protect any
information that the CAM has deemed to warrant redaction.

•
The CAM will contemporaneously provide copies of the reports (as posted) to the
United States Attorneys’ Offices for the Eastern, Middle, and Western Districts
of North Carolina; the Department of Justice

- Environmental Crimes Section; the United States Environmental Protection
Agency -Criminal Investigation Division; and the United States Environmental
Protection Agency - Legal Counsel Division. If the reports contain redactions,
any of these parties may inspect the redactions and challenge the propriety of
the redactions. The Court shall be the final arbiter of any challenge.
(3)
Environmental Audits: Within the first ninety (90) days of his or her
appointment, the CAM shall establish a schedule for conducting environmental
audits of each of Duke Energy Corporation’s and its affiliates’ wholly-owned or
operated domestic facilities with Duke Energy Corporation or affiliate-managed
or affiliate-controlled coal ash impoundments outside North Carolina on an
annual basis.

•
Each year the Defendant can request that the CAM accept any full environmental
audit prepared by ABSAT or a similar organization in that same calendar year

for its facilities subject to the audits under the NECP.
•
The CAM can reject any such request by the Defendant if the CAM concludes that
the proposed environmental audit is not sufficiently comprehensive or not
prepared by a competent organization.

•
Copies of the environmental audit reports shall be posted on the Defendant’s
company webpage accessible to the public.

•
Subject to the approval of the CAM, the Defendant may redact confidential
business information or any information it reasonably believes could impair the
security of its operations before such audits or reports are posted for public
access.

•
The CAM shall inspect such proposed redactions to determine the propriety of the
redactions.

•
Notwithstanding the foregoing, unredacted copies shall be provided to the Court
and the United States Probation Officer. The Defendant may seek to have the
filings placed under seal to protect any information that the CAM has deemed to
warrant redaction.

•
The CAM will contemporaneously provide copies of the reports (as posted) to the
United States Attorneys’ Offices for the Eastern, Middle, and Western Districts
of North Carolina; the Department of Justice - Environmental Crimes Section; the
United States Environmental Protection Agency -Criminal Investigation Division;
and the United States Environmental Protection Agency - Legal Counsel Division.
If the reports contain redactions, any of these parties may inspect the
redactions to determine the propriety of the redactions.

The Court shall be the final arbiter of any challenge.
(4)
Toll-Free Hotline/Electronic Mail Inbox: The Defendant, along with co-defendants
DEBS and DEC, will establish and maintain a toll-free hotline that will be
answered twenty-four (24) hours a day, seven (7) days a week, through which any
person may report suspected violations of applicable environmental laws or
regulations, or violations of the NECP or ECP-NC. The Defendant may utilize
existing toll-free hotlines subject to approval by the CAM. In addition, the
Defendant, along with co-defendants DEBS and DEC, shall create an electronic
mail inbox accessible from its webpages and accessible through a share link,
through which any employee of Duke Energy Corporation, its subsidiaries, or its
affiliates, or any other person may report suspected violations of applicable
environmental laws or regulations or violations of the NECP or ECP-NC.

•
Co-defendant DEBS shall periodically apprise employees and the public of the
availability of the toll-free hotline and electronic mail inbox by posting
notices on the Internet, Intranet (known within Duke Energy Corporation as the
“Portal”), by distributing notice via its electronic mail system, by providing
notices in appropriate employee work areas, and by publication in community
outlets.

•
All reports to the toll-free hotline or electronic mail inbox of suspected
violations of applicable environmental requirements, the NECP, or the ECP-NC
shall promptly be provided to the appropriate CO for further action, and the
appropriate CO shall maintain a record of the investigation and disposition of
each such matter and disclose such matters in reports to the CAM.

(5)
Environmental Training Program: The Defendant, along with co-defendants DEBS and
DEC, shall adopt, implement, and enforce a comprehensive training program to
educate all domestic employees of Duke Energy Corporation and its wholly-owned
or operated affiliates on the environmental impact of coal ash impoundment
operations and to be aware of the procedures and policies that form the basis of
the NECP and ECP-NC.

•
The goal of this training program is to ensure that every domestic employee of
Duke Energy Corporation and its wholly-owned or operated affiliates understands
applicable compliance policies and is able to integrate the compliance
objectives in the performance of his/her job. The training shall include
applicable notice and reporting requirements in the event of a release or
discharge. Subject to the approval of the CAM, the Defendant may develop
different training programs that are tailored to the employee’s specific job
description and responsibilities as long as the overall goal of the training
requirement is met.

•
Additionally, the Defendant and co-defendants DEBS and DEC shall provide
training and written materials describing the safe and proper handling of
pollutants, hazardous substances, and/or wastes.

•
Copies of all written materials and training curricula shall be provided to the
CAM.

vi.
Statewide ECP: The ECP-NC, in addition to incorporating all of the requirements
of the NECP, shall include, among other things, the following conditions:

(1)
Point of Contact (“POC”): With respect to each of its facilities with coal ash
impoundments in North Carolina, the

Defendant and co-defendant DEBS shall identify or establish a POC for the CAM
within each of the following three business services: (1) ABSAT; (2)
Environmental, Health & Safety; and (3) Coal Combustion Products.
(2)
Environmental Audits: Within the first ninety (90) days of his/her appointment,
the CAM shall establish a schedule for conducting environmental audits of each
of the Defendant’s facilities with coal ash impoundments in North Carolina on an
annual basis.

•
Each year the Defendant can request that the CAM accept any full environmental
audit prepared by ABSAT or a similar organization in that same calendar year for
two of its facilities subject to the audits. The Defendant cannot make the
request for the same facilities in consecutive years.

•
The CAM can reject any such request by the Defendant if the CAM concludes that
the proposed environmental audit is not sufficiently comprehensive or not
prepared by a competent organization.

•
Copies of the environmental audit reports shall be posted on the Defendant’s
company webpage accessible to the public.

•
Subject to the approval of the CAM, the Defendant may redact confidential
business information or any information it

reasonably believes could impair the security of its operations before such
audits or reports are posted for public access.
•
The CAM shall inspect such proposed redactions to determine the propriety of the
redactions.

•
Notwithstanding the foregoing, unredacted copies shall be provided to the Court
and the United States Probation Officer. The Defendant may seek to have the
filings placed under seal to protect any information that the CAM has deemed to
warrant redaction.

•
The CAM will contemporaneously provide copies of the reports (as posted) to the
United States Attorneys’ Offices for the Eastern, Middle, and Western Districts
of North Carolina; the Department of Justice - Environmental Crimes Section; the
United States Environmental Protection Agency - Criminal Investigation Division;
and the United States Environmental Protection Agency - Legal Counsel Division.
If the reports contain redactions, any of these parties may inspect the
redactions to determine the propriety of the redactions. The Court shall be the
final arbiter of any challenge.

v.
The Defendant shall ensure that any new, expanded, or reopened coal ash or coal
ash wastewater impoundment facilities are lined to ensure no unpermitted
discharges of coal ash or coal ash wastewater to any water of the United
States.    This includes all engineered, channelized, or naturally occurring
seeps.

w.
Recordkeeping of Coal Ash Impoundment Volumes: Every six months, the Defendant
shall determine the volume of wastewater and coal ash in each of its wet-storage
coal ash impoundments in North Carolina. Additional determinations shall be made
following the conclusion of activities that significantly change the volumes of
materials in the impoundments, including but not limited to temporary rerouting
of waste streams other than sluiced coal ash to the ash impoundment, dredging,
and dewatering.    Written or electronic records of the volumes shall be
maintained by the Defendant in a location(s) accessible to facility staff and to
any of the Defendant’s employees responsible for making environmental or
emergency reports.

x.
Bromide Remediation Claims and Costs:

i.
Identification: Within the first year of probation, or within ninety (90) days
of the installation of a new Flue Gas Desulfurization (“FGD”) scrubber system
thereafter, the Defendant shall identify:

(1)
all facilities operated by it in North Carolina that utilize or will utilize FGD
scrubbers that will result in an increase in bromide discharge into surface
waters; and

(2)
all local governments that are downstream from such FGD scrubbers and draw water
into water treatment facilities.

ii.
Notification: Within the first year of probation, or within ninety (90) days of
the installation of a new FGD scrubber system thereafter, the Defendant shall:
(1) notify in writing the identified local governments of the increase or
potential increase in bromide discharge; and (2) cooperate in studies of whether
there has been or will be an impact on these water treatment facilities. The
Defendant shall further advise the local government of the claims process
established by the CAM, as described below. The Defendant will further note that
the local government is not obligated to submit a claim through the process, is
not bound by any recommendation of the CAM, and may pursue any civil and/or
administrative remedies available to it. Copies of such correspondence shall be
provided to the CAM, United States Probation Officer, and each of the
prosecuting districts.

iii.
Claims Process: The CAM shall establish a procedure by which local governments
that are downstream of the Defendant’s facilities with FGD scrubbers and
experience increases in trihalomethanes at their water treatment facilities
related to increases in bromide released by those facilities may submit evidence

of these impacts and claims for restitution stemming from these impacts.
(1)
In these claims, the local governments bear the burden of proving by a
preponderance of the evidence to the CAM that trihalomethanes have increased and
that the Defendant’s facility’s discharge of bromide substantially contributed
to the increase.

(2)
The Defendant shall be permitted an opportunity to respond to any evidence or
material submitted by local governments in this process.

(3)
The CAM shall review proposed remediation actions and costs or anticipated costs
associated with investigating, responding to, and remediating increased bromides
and trihalomethanes for reasonableness in determining the correct amount of
restitution. The CAM shall issue a written decision on every claim submitted. If
the CAM determines that restitution to a local government in any amount is
appropriate, the Defendant shall also reimburse the local government for costs
associated with investigating and preparing its submission to the CAM, including
reasonable attorneys’ fees.

iv.
Appeals Process: Once the written decision is issued, the Defendant or the local
government may appeal the decision to the United States District Court. In such
an appeal, the decision of the CAM shall be subject to a rebuttable presumption
of correctness. If the Defendant unsuccessfully appeals a written decision of
the CAM, the Defendant shall bear all of the costs of the appeal, including the
costs of the CAM and the reasonable attorneys’ fees of the local government,
with the Court making the final determination of the reasonableness of such
fees. If the Defendant is successful on appeal, the Defendant shall bear the
costs of the CAM and the local government shall bear the costs of its attorneys’
fees.

v.
Payment of Claims: Once the CAM has issued its written opinion, the Defendant
shall pay the approved costs to the claimant within thirty (30) days of the
opinion, unless it files an appeal to the United States District Court as
provided above. If, after appeal, the Court concurs with the CAM’s opinion
approving such costs, the Defendant shall pay the approved costs to the claimant
and submit proof of payment to the Court within thirty (30) days of the Court’s
opinion. Nothing in this subparagraph will bar the CAM or the Court from
ordering a different payment schedule as appropriate.

vi.
Deadline for Filing Claims: Local governments shall have until sixty (60) days
prior to the end of the five-year probationary term to submit a claim.

y
Force Majeure. For purposes of this Agreement, a ”force majeure” is defined as
any event arising from causes beyond the reasonable control of the Defendant,
any entity controlled by the Defendant, or its contractors that delays or
prevents performance of any obligation despite the best efforts to fulfill the
obligation and includes but is not limited to war, terrorism, civil unrest,
labor dispute, act of God, change in law making performance impossible, or act
of a governmental or regulatory body delaying performance or making performance
impossible, including, without limitation, any appeal or decision remanding,
overturning, modifying, or otherwise acting (or failing to act) on a permit or
similar permission or action that prevents or delays an action needed for the
performance of any work such that it prevents or substantially interferes with
the Defendant’s ability to perform. Force majeure does not include financial
inability to complete the work, increased cost of performance, or changes in
business or economic circumstances.

i.
If the Defendant seeks to rely on “force majeure” to excuse performance or
timely performance with any term of this Agreement, the Defendant must apply to
the CAM with copies of such application

provided to the Government and the United States Probation Officer.
ii.
The final determination of “force majeure” shall be made by the Court with the
advice and recommendation from the CAM.

iii.
If the Court concludes that the Defendant’s failure to fulfill an obligation of
this

Agreement was not excused by a “force majeure,” the Court may impose and the
Government will be entitled to seek additional monetary penalties.
z.
Funding of NECP and ECP-NC: A failure to fund or implement the NECP or ECP-NC
during its term of probation would constitute a breach of this Agreement by the
Defendant, and the Defendant shall be subject to prosecution for any federal
criminal violation not barred by the applicable statute of limitations (or

as waived pursuant to Paragraph 3(hh)) or other legal prohibition. Any
information provided by the

Defendant may be used against the Defendant in such a prosecution.
aa.
Community Service Payment: In addition to the community service payment made by
co-defendant DEC, the Defendant, as guaranteed by Duke Energy Corporation and
set forth in the Guaranty attached to this Agreement, shall pay $10.5 million
($10,500,000) to the National Fish and Wildlife Foundation (“NFWF”), a nonprofit
organization established pursuant to 16 U.S.C. §§ 3701-3710, as community
service by an organization. With respect to the work described in this Paragraph
below, the Defendant shall assume no responsibilities or obligations other than
making the payments described in Paragraph 3(aa)(i) below. The Defendant shall
not seek any reduction in its tax obligations as a result of these community
service payments nor shall the Defendant characterize, publicize, or refer to
these payments as voluntary donations or contributions. Additionally, the
Defendant shall not seek or take credit for any project performed using funds
disbursed by NFWF pursuant to this Agreement in any related civil or
administrative proceeding, including but not limited to, the Natural Resources
Damages Assessment process.

i. The Defendant will make the $10.5 million ($10,500,000) payment within sixty
(60) days of entry of Judgment. Payments shall be made by certified check
payable to the National Fish and Wildlife Foundation and mailed to the attention

of its Chief Financial Officer at 1133 15th Street, NW, Suite 1100, Washington,
DC 20005, and include a reference to the case number in this proceeding; or by
electronic funds transfer in accordance with written instructions to be provided
to the Defendant by NFWF at the time of transfer.
ii. NFWF shall use the money it receives from the Defendant pursuant to this
Agreement for the benefit, preservation, restoration, and improvement of the
water resources of North Carolina and Virginia that have been impacted by the
operation of coal ash storage ponds owned by the Defendant. NFWF shall conduct
or fund

projects in the following federal districts, in the following amounts:
(1)
Eastern District of North Carolina: $3.5 million ($3,500,000);

(2)
Middle District of North Carolina: $3.5

million ($3,500,000); and
(3)
Western District of North Carolina: $3.5 million ($3,500,000).

iii. The projects and initiatives considered by NFWF should include, but not be
limited to:

monitoring, study, restoration, and preservation of fish, wildlife, and plant
resources; monitoring, study, clean up, remediation, sampling, and analysis of
pollution and other threats to the riparian environment and

ecosystem; research, study, planning, repair, maintenance, education, and public
outreach relating to the riparian environment and ecosystem; environmental
education and training relating to the protection and preservation of riparian
resources; and the protection and

support of public drinking water systems.

iv.
The projects and initiatives considered by NFWF should be focused on the
following river basins

or watersheds:
Broad River, Cape Fear River, Catawba River, Dan River, French Broad River,
Lumber River, Roanoke River, Neuse River, and Yadkin River. NFWF shall make
every effort to

fund at least one project and/or initiative in each of the river basins or
watersheds.
v.
NFWF shall consult with appropriate state

resource managers in North Carolina and Virginia, as well as federal resource
managers, that have statutory authority for coordination or cooperation with
private entities to help

identify projects and maximize the environmental benefits of such projects.
Specifically, NFWF should consult with the United States Environmental
Protection Agency, the United

States Fish and Wildlife Service, the United States Army Corps of Engineers, the
North

Carolina Department of Environment and Natural Resources, the North Carolina
Wildlife Resources Commission, the Virginia Department of Environmental Quality,
the Virginia Department of Conservation and Recreation, and the Virginia
Department of Game and Inland Fisheries. NFWF shall further consult with
localities as appropriate. NFWF is not bound by any recommendations from any of
the state or federal agencies, resource managers, or localities consulted.
vi.
Projects shall be identified and funding

obligated within five (5) years of the date of entry of Judgment in this case.
vii. In identifying and selecting projects to receive funding pursuant to this
Agreement and related Judgment, NFWF shall not incur liability of any nature in
connection with any act or omission, made in good faith, in the administration
of the funds or otherwise pursuant to this Agreement, excepting, however,
liability resulting from NFWF’s gross negligence or willful misconduct.

In addition, if and to the extent NFWF grants funds to or contracts with any
governmental

entity to implement any project under this Agreement and related Judgment: (a)
NFWF shall be deemed to act solely as an administrative agent

in contracting for, granting to, and disbursing funds for any such project; and
(b) NFWF shall

not be deemed to incur liability of any nature in connection with the design,
engineering, construction, operation, or maintenance of any such project,
including, without limitation, any impact or consequences any of any such
project on fish, wildlife, plant, or other natural

resources, personal injury, or property damage.
viii. NFWF’s use of funds received pursuant to this Agreement and related
Judgment shall be subject

to the reporting requirements of 16 U.S.C.

§ 3706. In addition, NFWF shall report to the United States Probation Office and
to the parties regarding the status and disposition of money it has received
pursuant to this Agreement and related Judgment, on at least an annual basis,
until all such money has been spent.
bb.
Mitigation:    Within ninety (90) days of sentencing, in order to mitigate
impacts to wetlands and other jurisdictional waters of the United States
impacted as a result of the Defendant’s operation of coal ash impoundments and
any relevant criminal conduct, including temporal and secondary effects, at its
facilities in North Carolina with coal ash impoundments, and in addition to the
mitigation payment made by its co-defendant DEC, the Defendant shall provide $5
million ($5,000,000), which represents its share after apportionment of a total
$10 million ($10,000,000) payment, to an authorized wetlands mitigation bank for
the purchase of wetland and/or riparian land and/or restoration equivalent
located in the Broad River Basin, French Broad River Basin, Cape Fear River
Basin, Catawba River Basin, Dan River Basin, Yadkin-Pee Dee River Basin, Neuse
River Basin, Lumber River Basin, and Roanoke River Basin.    This mitigation
payment is in addition. to, and does not replace, Duke Energy Corporation’s
public commitment to fund its $10 million ($10,000,000) Water Resources Fund for
environmental and other philanthropic projects along lakes and rivers in the
Southeast.

i.
Such wetland restoration shall be made through an authorized wetlands mitigation
bank with no affiliation to any current or former employee of the North Carolina
Department of Environment and Natural Resources in that employee’s individual
capacity.

ii.
The Defendant, along with its co-defendants DEBS and DEC, shall provide a list
of three (3) proposed mitigation banks from which the Court will select the
mitigation bank to receive the funds. If the Defendant is unable after

reasonable efforts to identify one or more mitigation banks, the Defendant may
substitute

one or more conservation trust funds within the State of North Carolina in its
proposal as long

as all other conditions of this section are being met.
iii. Such property must be purchased in the State of North Carolina by the
selected authorized

wetlands mitigation bank or conservation trust within four (4) years from the
date of entry of Judgment.
iv.
Such property shall be held by and titled in the name of a third-party (with no
affiliation to the Defendant or any of the Defendant’s sister or parent
corporations).

v.
Such property shall be held in permanent conservation status for the benefit of
the citizens of North Carolina.

vi.
The Defendant shall ensure that the selected authorized wetlands mitigation bank
or conservation trust provides a full accounting of all mitigation property
purchased to the Court

and the CAM and documentary evidence that the property has been placed in
permanent

conservation status.
cc.
No Credit in Civil or Administrative Proceedings:

The Defendant shall not seek or take credit for any fine, restitution, community
service payment, mitigation payment, or funding of the environmental

compliance plan (including the costs associated with the hiring or payment of
staff or consultants needed to assist the CAM) under this Agreement in any
related civil or administrative proceeding, including, but not limited to, the
Natural Resources Damages Assessment process.
dd. No Capitalization or Tax Deduction: The Defendant shall agree that:
(1) it shall not capitalize into inventory or basis or take as a tax deduction,
in the United States or elsewhere, any portion of the monetary payments (fine,
restitution, community service, mitigation, or funding of the environmental
compliance plans) made pursuant to this Agreement. Provided, however, that
nothing in this Agreement shall bar or prevent the Defendant from appropriately
capitalizing or seeking an appropriate tax deduction for restitution in
connection with the remediation of bromide claims set forth in this Agreement or
for costs which would have been incurred by the Defendant irrespective of the
environmental compliance plans. Costs that would have been incurred irrespective
of the environmental compliance plans include, by way of example only, costs for
staffing and operating Central Engineering Services, ABSAT, Coal Combustion
Products, or other similar organizations.

ee
No Rate Increase Based Upon Monetary Penalties: The Defendant shall not
reference the burden of, or the cost associated with, compliance with the
criminal fines, the restitution related to counts of conviction, the community
service payments, the mitigation obligation, the costs of the clean-up in
response to the February 2, 2014, release at Dan River Steam Station, and/or the
funding of the environmental compliance plans in any request or application for
a rate increase on customers. Provided, however, that nothing in this Agreement
shall bar or prevent the Defendant from seeking appropriate recovery for
restitution in connection with the remediation of bromide claims set forth in
this Agreement or for costs which would have been incurred by the Defendant
irrespective of the environmental compliance plans. Costs that would

have been incurred irrespective of the environmental compliance plans include,
by way of example only, costs for staffing and operating Central Engineering

Services, ABSAT, Coal Combustion Products, or other similar organizations.
ff. Public Apology: Consistent with USSG §8D1.4(a), and in conjunction with its
co-defendants DEBS and DEC, the Defendant shall place a full-page advertisement
in at least two national newspapers and three major North Carolina newspapers
(one in Raleigh, one in Greensboro, and one in Charlotte) and on its publicly
accessible company website. The full page advertisement shall run within five
(5) days of entry of the plea. The language of the public apology must be agreed
upon by each of the federal districts and is appended to this Agreement as
Exhibit C.
gg. The Defendant shall not reference this Agreement, any payments pursuant
hereto, or other compliance herewith in any public relations, marketing, or
advertising. The Defendant shall be permitted to make required disclosures under
applicable securities laws.
hh. Tolling of Statute of Limitations: To ensure compliance with the terms of
the Agreement, the Defendant waives any statute of limitations as of the the
date of this Agreement through the full term of Defendant’s probation and until
all of the Defendant’s obligations under this Agreement have been satisfied with
regard to any conduct relating to or arising out of the conduct set forth in the
Criminal Informations.
ii. The Defendant waives any claim under the Hyde Amendment, 18 U.S.C. § 3006A
(Statutory Note), for attorneys’ fees and other litigation expenses arising out
of the investigation or prosecution of this matter.
jj. The Defendant agrees to withdraw from and not to participate in any joint
defense agreement, informal or formal, in connection with the defense by any
person designated as a “target” or “subject” of, or indicted for, any potential
criminal charges relating to the Clean Water Act violations in North Carolina
that are the subject of this Agreement and any allegations of violations of
Title 18 of which the Defendant is aware or becomes aware. The Defendant

agrees to submit a written statement, signed by counsel and the appropriate
corporate officer, reflecting this commitment to the United States prior to
entry of this Agreement.
kk. Term of Supervised Probation: The Defendant and the Government agree that
the Defendant shall be placed on organizational supervised probation for a
period of five (5) years from the date of sentencing pursuant to 18 U.S.C. §
3561(c)(2) and USSG §§8D1.1 and 8D1.2.
The Defendant represents and/or acknowledges:
a.
That the Defendant has had the assistance of an attorney in connection with the
charges against it. That the attorney has carefully reviewed this Agreement with
those persons designated by law and its bylaws to act on behalf of the Defendant
(hereinafter referred to as “Designated Corporate Representative”) and that this
Agreement has been signed by a person authorized by law and the bylaws of the
Defendant to execute agreements on behalf of the Defendant.

b.
That its Designated Corporate Representative has reviewed and discussed the
Criminal Informations filed in each of the federal districts involved in this
matter with the Defendant’s attorney and that the attorney has explained the
Government’s evidence to that Designated Corporate Representative.

c.
That as a corporation, it is vicariously liable for the criminal acts of its
employees acting within the scope of their employment for the benefit of the
corporation.

d.
That it understands that this Agreement does not provide or promise any waiver
of any civil or administrative actions, sanctions, or penalties that may apply,
including but not limited to: fines; penalties; claims for damages to natural
resources; suspension, debarment, listing to restrict rights and opportunities
of the Defendant to contract with or receive assistance, loans, and benefits
from United States agencies; licensing; injunctive relief; or remedial action to
comply with any applicable

regulatory requirement. The Defendant understands that this Agreement has no
effect on any proceedings against any party not expressly mentioned herein,
including the actual or potential criminal liability of any individuals.
e.
Guaranty:    That it has sought and obtained a guarantee of its obligations
under this Agreement from its parent holding company, Duke Energy Corporation, a
copy of which is attached hereto as Exhibit B and incorporated herein by
reference. Duke Energy Corporation further consents to the jurisdiction of the
United States District Court for the Eastern District of North Carolina for the
purpose of enforcing the Guaranty Agreement.

f.
Resolution:    That it has filed with the Court prior to entry of this-Agreement
the original resolution from the board of directors (or equivalent written
authorization as recognized by law) that gives the authority described in
Paragraph 4(a) above to the Designated Corporate Representative and that
authorizes such employee to execute this Agreement on behalf of the Defendant. A
copy of the Resolution, attached hereto as Exhibit D, provides as follows:

i.
The Defendant is a legally viable entity, authorized to plead guilty to the
charges set forth in the Criminal Informations;

ii.
The Defendant shall be bound by the specific

terms of this Agreement;
iii. The parent corporation, Duke Energy Corporation, is authorized to guarantee
all payments (criminal fine, restitution, community service, and mitigation),
and funding and performance due from the Defendant in connection with its
obligations under the NECP and ECP-NC under this Agreement,

as set forth in the Guaranty Agreement.
iv.
Any legal successor or assignee of Duke Energy Corporation shall remain liable,
as the case may be, for the guarantee of the Defendant’s payment obligations and
the funding and performance of both the NECP and ECP-NC hereunder, and an
agreement to so remain liable shall be included

by Duke Energy Corporation in the terms of any sale, acquisition, or merger.
v. Any legal successor or assignee of the Defendant shall remain liable for the
Defendant’s obligations in this Agreement, and an agreement

to so remain liable shall be included by the Defendant in the terms of any sale,
acquisition, or merger of the Defendant with or by any other entity. Subject to
the requirements of this subparagraph, nothing shall prevent the Defendant from
undergoing a corporate reorganization or change in form. The Defendant shall
record a

copy of the Judgment with the Register of Deeds

in each of the counties in North Carolina in

which it owns and operates facilities with coal ash impoundments. Upon written
request from the Defendant made only after fulfillment of all of the conditions
of this Agreement and related Judgment, the Government shall take the necessary
steps through the Register of Deeds to facilitate the removal of the notice of
the Judgment.
The Defendant understands, agrees, and admits:
a.
That as to each Count of the Criminal Informations to which the Defendant is
pleading guilty, the charge, code section, elements, and applicable penalties
are as follows:

United States v. Duke Energy Business Services LLC, and
Duke Energy Progress, Inc.,
No. 5:15-CR-62-H-2
Violations at H.F. Lee Steam Electric Plant
COUNT ONE
(1)
Clean Water Act violation for the unpermitted discharge from a drainage ditch at
the coal ash impoundment at the H.F. Lee Steam Electric Plant

and aiding and abetting
(2)
Code Sections

violated:        33 U.S.C. §§ 1311, 1319(c)(1)(A),
and 1342; and
18 U.S.C. § 2

(3)
Offense date: No later than October 1, 2010, through December 30, 2014

(4)
Elements of the Offense:

First:
The Defendant did discharge a pollutant,

to wit, coal ash and coal ash wastewater;
Second:
from a point source;

Third:
into a water of the United States;

Four:
the Defendant did so in violation of a permit;

Five:
the Defendant acted negligently in so

doing; and
Six:
the Defendant aided and abetted another

in so doing.
(5)
Maximum term of probation for a corporation:

5 years pursuant to 18 U.S.C. § 3561(c)(2) and

USSG §8D1.2(a)(2)
(6)
Minimum term of probation for a corporation:

0 years pursuant to 18 U.S.C. § 3561(c) (2) and

USSG §8D1.2(a) (2)
(7)
Maximum fine: Pursuant to 18 U.S.C. § 3571(c)

and (d), the greater of: not less than $2,500 nor

more than $25,000 per day of violation (33 U.S.C.

§ 1319(c)(1)(A)); $200,000.00; or twice the

gross gain or loss.
(8)
Restitution pursuant to 18 U.S.C. § 3663, 3663A,

and 3563(b)(2), and as agreed to in Paragraphs

2(iv)-(v) and 3(b)-(c) above.
(9)
Special assessment: $ 125.00

(10)
Other penalties: Public Notice of Violation; Development of a Compliance
Program; Community Service; and Remediation

United States v. Duke Energy Business Services LLC, Duke Energy
Carolinas, LLC, and Duke Energy Progress, Inc.,
No. 5:15-CR-67-H-3
Violations at Cape Fear Steam Electric Plant
COUNT FIVE
(1)
Clean Water Act violation for the failure to

properly maintain the riser within the 1978 coal

ash impoundment at the Cape Fear Steam Electric

Plant and aiding and abetting
(2)
Code Sections
violated:        33 U.S.C. §§ 1319(c)(1)(A)
            and 1342; and
            18 U.S.C. § 2

(3)
Offense date:    No later than January 1, 2012,

through January 24, 2014

(4)
Elements of the Offense:

First:
The Defendant did violate a condition of

its NDPES permit issued by the State of North Carolina pursuant to the Clean

Water Act; to wit, the requirement to properly maintain its equipment as more
fully described in the Criminal

Information;
Second:
the Defendant acted negligently in so

doing; and
Third:
the Defendant aided and abetted another

in so doing.
(5)
Maximum term of probation for a corporation:

5 years pursuant to 18 U.S.C. § 3561(c)(2) and

USSG §8D1.2(a)(2)
(6)
Minimum term of probation for a corporation:

0 years pursuant to 18 U.S.C. § 3561(c)(2) and

USSG .58D1.2(a)(2)
(7)
Maximum fine: Pursuant to 18 U.S.C. § 3571(c)

and (d), the greater of: not less than $2,500 nor

more than $25,000 per day of violation (33 U.S.C.

§ 1319(c)(1)(A)); $200,000.00; or twice the

gross gain or loss.
(8)
Restitution pursuant to 18 U.S.C. §§ 3663, 3663A,

and 3563(b)(2), and as agreed to in Paragraphs

2(iv)-(v) and 3(b)-(c) above.
(9)
Special assessment: $ 125.00

(10)
Other penalties: Public Notice of Violation; Development of a Compliance
Program; Community Service; and Remediation

COUNT SIX
(1)
Clean Water Act violation for the failure to

properly maintain the riser within the 1985 coal a

sh impoundment at the Cape Fear Steam Electric

Plant and aiding and abetting
(2)
Code Sections
violated:        33 U.S.C. §§ 1319(c)(1)(A) and
            1342; and
            18 U.S.C. § 2

(3)
Offense date:    No later than January 1,    2012,

through January 24,    2014

(4)Elements of the Offense:
First:
The Defendant did violate a condition of

its NDPES permit issued by the State of North Carolina pursuant to the Clean

Water Act; to wit, the requirement to properly maintain its equipment as more
fully described in the Criminal

Information;
Second:
the Defendant acted negligently in so

doing; and

Third:
the Defendant aided and abetted another in so doing.

(5)
Maximum term of probation for a corporation:

5 years pursuant to 18 U.S.C. § 3561(c)(2) and

USSG §8D1.2(a)(2)
(6)
Minimum term of probation for a corporation:

0 years pursuant to 18 U.S.C. 3561(c)(2) and

USSG §8D1.2(a)(2)
(7)
Maximum fine: Pursuant to 18 U.S.C. § 3571(c)

and (d), the greater of: not less than $2,500 nor

more than $25,000 per day of violation (33 U.S.C. 1319(c)(1)); $ 200,000.00; or
twice the gross

gain or loss.
(8)
Restitution pursuant to 18 U.S.C. §§ 3663, 3663A,

and 3563(b)(2), and as agreed to in Paragraphs

2(iv)-(v) and 3(b)-(c) above.
(9)
Special assessment: $ 125.00

(10)
Other penalties: Public Notice of Violation; Development of a Compliance
Program; Community Service; and Remediation

United States v. Duke Energy Business Services LLC,
Duke Energy Carolinas, LLC, and Duke Energy Progress, Inc.,
No. 5:15-CR-68-1-1-3
Violations at Asheville Steam Electric Generating Plant
COUNT TWO
(1)
Clean Water Act violation for the unpermitted discharge from a toe drain at the
coal ash

impoundment at the Asheville Steam Electric

Generating Plant and aiding and abetting
(2)
Code Sections
violated:            33 U.S.C. §§ 1311, 1319(c)(1)(A),                     and
1342; and
                18 U.S.C. § 2

(3)
Offense date:    No later than May 31, 2011,

through December 30, 2014

(4)
Elements of the Offense:

First:
The Defendant did discharge a pollutant,

to wit, coal ash and coal ash wastewater;
Second:
from a point source;

Third:
into a water of the United States;

Four:
the Defendant did so in violation of a permit;

Five:
the Defendant acted negligently in so

doing; and
Six:
the Defendant aided and abetted another

in so doing.
(5)
Maximum term of probation for a corporation:

5 years pursuant to 18 U.S.C. § 3561(c) (2) and

USSG §8D1.2(a)(2)
(6)
Minimum term of probation for a corporation:

0 years pursuant to 18 U.S.C. § 3561(c) (2) and

USSG §8D1.2(a) (2)
(7)
Maximum fine: Pursuant to 18 U.S.C. § 3571(c)

and (d), the greater of: not less than $2,500 nor

more than $25,000 per day of violation (33 U.S.C.

§ 1319(c)(1)(A)); $200,000.00; or twice the gross gain or loss.
(8)
Restitution pursuant to 18 U.S.C. §§ 3663, 3663A,

and 3563(b)(2), and as agreed to in Paragraphs

2(iv)-(v) and 3(b)-(c) above.
(9)
Special assessment: $ 125.00

(10)
Other penalties: Public Notice of Violation; Development of a Compliance
Program; Community Service; and Remediation

Total Statutory Penalties: a maximum of 5 years of probation; a minimum fine of
$10,850,000; a maximum fine of $108,500,000; and a $500.00 special assessment.
6.    The United States agrees:
a.
That pursuant to Fed. R. Crim. P. 11(c)(1)(C), the sentence set forth in
Paragraph 2 above is warranted.

b.
That it reserves the right at sentencing to present any evidence and information
pursuant to 18 U.S.C. § 3661, to offer argument or rebuttal, to recommend
imposition of restitution, and to respond to any motions or objections filed by
the Defendant.

c.
That, subject to the reservations within this Agreement, the United States shall
not further prosecute the Defendant, including all predecessors, successors, and
assignees of the Defendant, for conduct constituting the basis for the Criminal
Informations covered by this Agreement as set forth

in the Joint Factual Statement or about which the United States Attorneys’
Offices for the Eastern, Middle, and Western Districts and the Department of
Justice - Environmental Crimes Section were otherwise aware of as of the date of
this Agreement. This Agreement shall not apply to individuals. Should the Court
determine that the Defendant has breached this Agreement, the Defendant will not
be entitled to withdraw its plea of guilty, and the United States

may prosecute the Defendant, and any predecessors, successors, and assignees of
the Defendant for

conduct constituting the basis for the Criminal Informations covered by the
Agreement, notwithstanding the expiration of any applicable statutes of
limitations following the signing of this Agreement. In any such prosecution,
the United

States may use the Defendant’s admissions of guilt as admissible evidence
against the Defendant.
d.
That it will make known to the Court at sentencing the full extent of the
Defendant’s cooperation.

e.
Pursuant to USSG §1B1.8, that self-incriminating information provided by the
Defendant pursuant to

this Agreement shall not be used against the

Defendant in determining the applicable advisory Guideline range, except as
provided by USSG §1B1.8 and except as stated in this Agreement. The United
States may provide to the United States Probation Office any evidence concerning
relevant conduct.
F.
Notwithstanding the foregoing, the United States Attorneys’ Offices for the
Eastern, Middle, and Western Districts of North Carolina and the

Department of Justice - Environmental Crimes Section further recognize that this
Agreement does not

provide or promise any waiver of any civil or administrative actions, sanctions,
or penalties that may apply, including but not limited to: fines; penalties;
claims for damages to natural resources; suspension, debarment, listing to
restrict rights and opportunities of the Defendant to contract with or receive
assistance, loans, and benefits from United States agencies; licensing;
injunctive relief; or remedial action to comply with any applicable regulatory
requirement.

(SPACE LEFT BLANK INTENTIONALLY)

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GUARANTY AGREEMENT

EXHIBIT D
Copy of Board of Directors’ Resolution
Duke Energy Corporation

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EXHIBIT D
Duke Energy Carolinas, LLC
Copy of Board of Directors’ Resolution

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Case 5:15-cr-00067-H Document 58 Filed 05/14/15 Page 1 of 54