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SETTLEMENT AGREEMENT

This Settlement Agreement (“Agreement”) is entered into by Public Service Company of 

Oklahoma (“PSO”), the Secretary of the Environment on behalf of the State of Oklahoma 

(“Secretary”), the Oklahoma Department of Environmental Quality (“ODEQ”), the United States 

Environmental Protection Agency (“EPA”), and the Sierra Club. PSO, the Secretary, ODEQ, 

EPA, and the Sierra Club are hereinafter collectively referred to as “the Parties” for purposes of 

this Agreement.

RECITALS

A. On December 28, 2011, EPA issued a final rule entitled, “Approval and Promulgation of 

Implementation Plans; Oklahoma; Federal Implementation Plan for Interstate Transport 

of Pollution Affecting Visibility and Best Available Retrofit Technology

Determinations,” 76 Fed. Reg. 81,728 (Dec. 28, 2011) (the “Final Rule”). 

B. The Final Rule partially approved and partially disapproved Oklahoma’s state 

implementation plan (“SIP”) submitted under the “visibility” and “interstate transport” 

provisions of the Clean Air Act (“CAA”), 42 U.S.C. § 7410, 7491, and 7492. The Final 

Rule included a federal implementation plan (“FIP”) establishing Best Available Retrofit 

Technology (“BART”) emission limitations on sulfur dioxide (“SO2”) for Units 3 and 4 

of PSO’s Northeastern plant (“PSO’s Units”) to address the visibility and interstate 

transport provisions of the CAA. 

C. PSO desires to develop and implement a comprehensive strategy to comply with its 

obligations with respect to the visibility and interstate transport provisions of the CAA as 

well as its other obligations with respect to the CAA in a coordinated manner. 

D. PSO intends to install low NOx combustion technologies on both of its Units, retire one 

of its Units, and install and operate on its other Unit a dry sorbent injection system and 

baghouse in order to achieve emissions rates that comply with the terms of this 

Agreement and with its obligations with respect to the visibility provisions of the CAA.

E. PSO intends to retire one of its Units and install and operate on its other Unit a dry

sorbent injection system, a baghouse, and activated carbon injection to achieve emissions 

rates that comply with the Mercury & Air Toxics Standard that became effective April 

16, 2012, 40 C.F.R. § 63.9984 (“the MATS Rule”). Properly designed and operated air 

pollution control systems consisting of dry sorbent injection system, baghouse, and 

activated carbon injection can achieve the MATS Rule emission limits. An EPA letter to 

the ODEQ and PSO dated July 18, 2012, expresses EPA’s support of PSO’s 

comprehensive strategy to use the technologies described in the Regional Haze 

Agreement referenced in Attachment A to this Agreement to achieve the emission 

limitations prescribed by the MATS Rule. The letter is attached to this Agreement as 

Attachment B. 
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F. On February 24, 2011, PSO timely filed a Petition for Review, challenging the issuance 

of the Final Rule in Public Service Company of Oklahoma v. U.S. Environmental 

Protection Agency, et al., No. 12-9524. On March 26, 2012, Sierra Club filed a timely

motion to intervene. The motion was granted March 27, 2012.

G. The CAA and EPA’s regulations require States to develop SIPs to implement the CAA’s 

provisions, including the CAA’s visibility and interstate transport provisions. See 42 

U.S.C. §§ 7410(a)(2)(D)(i)(II), (J), 7491(b)(2); 40 C.F.R. § 50.300(a). ODEQ is the 

administrative agency in the State of Oklahoma responsible for developing and proposing 

such SIPs. See 27A O.S. §§ 2-5-105(3), (20), 1-3-101(B)(8), 2-3-101(B)(2). The

Secretary, as the Governor’s designee for the State of Oklahoma, is responsible for 

submitting SIPs to EPA for review. See 40 C.F.R. Part 51, Appendix V, Section 2.1(a); 

40 C.F.R. § 51.103(a). Because this Agreement requires ODEQ to develop and propose

and the Secretary to submit SIP revisions to EPA under the visibility and interstate 

transport provisions of the CAA, and ODEQ and the Secretary prefer to regulate PSO 

under such SIP revisions rather than EPA’s FIP, ODEQ and the Secretary have an 

interest in and are essential parties to this Settlement Agreement. 

H. The Parties have negotiated in good faith and have determined that the settlement 

reflected in this Agreement is in the public interest. If approved and implemented as set 

forth herein, this Agreement will resolve PSO’s Petition for Review.

I. This Agreement will not impact any other provisions of the Final Rule, and/or any other 

applicable federal, state, and local laws and regulations. No other claims will be affected 

by the resolution of the issues related to PSO’s Units as set forth herein.

AGREEMENT

1. PSO, Sierra Club, and EPA agree that within ten (10) days after this Agreement is 

executed by the Parties (i.e., signed), but before finalization pursuant to Paragraph 16 of 

this Agreement, they will jointly move the Court for an order holding in abeyance PSO’s 

Petition for Review pending implementation of the terms of the Agreement.

2. Within thirty (30) days of the effective date of this Agreement, PSO shall submit to 

ODEQ final and complete versions of all information and documentation (including 

technical supporting documentation for PSO’s Units) necessary for the development of 

the SIP revisions referenced in Paragraphs 3 and 4. 

3. No later than one hundred-twenty (120) days after PSO provides ODEQ with the 

information and documentation required in Paragraph 2, ODEQ will develop and propose 

a SIP revision under the visibility provisions of the CAA, 42 U.S.C. § 7491, and EPA’s 

regional haze regulations, 40 C.F.R. § 51.308, that addresses PSO’s Units (“Regional 

Haze SIP revision”) in accordance with the provisions of Attachment A.

4. No later than one hundred-twenty (120) days after PSO provides ODEQ with the 

information and documentation required in Paragraph 2, ODEQ will develop and propose 
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a SIP revision under the interstate transport provisions of the CAA, 42 U.S.C. 

§ 7410(a)(2)(D)(i)(II), that addresses PSO’s Units (“Interstate Transport SIP revision”) in 

accordance with the provisions of Attachment A.

5. No later than one hundred-twenty (120) days after PSO provides ODEQ with the 

information and documentation required in Paragraph 2, the Secretary shall provide the 

proposed SIP revisions required in Paragraphs 3 and 4 to EPA and request parallel 

processing of the SIP revisions from EPA pursuant to 40 C.F.R. Part 51, App. V, Section 

2.3. 

6. If ODEQ determines, at any time subsequent to PSO’s submittal of all information and 

documentation for PSO’s Units as required in Paragraph 2, that additional information 

and/or documentation is necessary in order to develop the SIP revisions referenced in 

Paragraphs 3 and 4, ODEQ shall provide PSO with a written request for such additional 

information and/or documentation with a copy to all Parties. The deadlines associated 

with the obligations under Paragraphs 3-5 of this Agreement shall be tolled during the 

period of time between the issuance of the written request and ODEQ’s receipt of the 

requested information and/or documentation. 

7. After the opportunity for public hearing and the close of Oklahoma’s notice-andcomment period for the Regional Haze and Interstate Transport SIP revisions, but no later 

than ninety (90) days after the Secretary submits the request for parallel processing 

referenced in Paragraph 5, ODEQ will consider and if appropriate adopt the Regional 

Haze and Interstate Transport SIP revisions referred to in Paragraphs 3 and 4. If adopted, 

the Secretary will submit to EPA those SIP revisions. 

8. The Regional Haze and Interstate Transport SIP revisions adopted and submitted to EPA 

under Paragraph 7 will include the provisions described in Attachment A to this 

Agreement unless the Parties, by written mutual agreement, amend the provisions 

described in Attachment A. If the Regional Haze and Interstate Transport SIP revisions 

adopted and submitted to EPA by the Secretary do not include the provisions described in 

Attachment A to this Agreement, PSO may file a motion to dissolve the stay of PSO’s 

petition for review and request that a briefing schedule be set. PSO may also pursue any 

opportunities for administrative or judicial review of the Regional Haze and Interstate 

Transport SIP revisions adopted by ODEQ and submitted by the Secretary.

9. Within sixty (60) days of EPA’s receipt of the final Regional Haze and Interstate 

Transport SIP revisions EPA will determine whether the revisions meet the requirements 

of the CAA consistent with 42 U.S.C. § 7410(k)(1)(B) (“completeness finding”).

10. EPA will take final action on the Regional Haze and the Interstate Transport SIP 

revisions as soon as possible, but no later than six (6) months from the date of the 

completeness finding referred to in Paragraph 9 consistent with 42 U.S.C. § 7410(k)(2).

11. If EPA promulgates a final action approving the provisions of the Regional Haze and 

Interstate Transport SIP revisions included in Attachment A, as adopted and submitted to 
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EPA by Oklahoma, PSO, the Sierra Club, and EPA will promptly file a joint stipulation 

of dismissal of PSO’s Petition for Review. The Parties agree that they will not challenge 

that portion of any final action issued by EPA that fully approves the Regional Haze and 

Interstate Transport SIP revisions as adopted and submitted to EPA by the Secretary that 

contain the provisions in Attachment A affecting PSO’s Units.

12. Separately from the SIP process, PSO will report biannually to EPA (beginning in 2017 

for the period 2015-2016, and every second year thereafter through the end of 2025 or 

2026, whenever the last Northeastern unit is retired) on the energy produced by PSO’s 

units and the sources of energy secured under PSO’s long-term purchased power 

contracts. The initial report will include similar information for calendar years 2013-

2014. Requests for proposals (“RFPs”) for long-term purchase power contracts issued 

between 2013 and the date the reporting obligation ends will specifically seek bids for 

energy supplied by natural gas and renewable resources. The biannual reports will 

include copies of any RFPs issued during the reporting period, and a summary of the 

capacity or energy secured through any long-term power purchase agreements executed 

during the reporting period, including the unit(s) providing the purchased power, the 

amount of capacity or energy secured under the agreement, and the term of each 

agreement.

13. The Parties may, by written mutual agreement, extend the dates in Paragraphs 2-5, 7, and 

9-10 by which actions must be taken to fulfill the Parties’ respective obligations under 

this Agreement.

14. Nothing in the Regional Haze and Interstate Transport SIP revisions as adopted and 

submitted to EPA by Oklahoma or in this Agreement shall relieve PSO from its 

obligations to comply with all applicable federal, state, and local laws and regulations, 

including laws, regulations, and compliance deadlines that become applicable after the 

date of any revisions to Oklahoma’s Regional Haze SIP that may be approved by EPA. 

Such laws and regulations include, but are not limited to, any EPA rule imposing 

requirements relevant to interstate transport under 42 U.S.C. § 7410(a)(2)(D) and the 

MATS Rule. Nothing in Oklahoma’s Regional Haze SIP revision, including the BART 

determination for PSO’s Units, should be construed to provide any relief from the 

emissions limits or deadlines specified in such regulations, including, but not limited to, 

deadlines for the installation of pollution controls required by any such regulations. 

15. If EPA does not take final action approving those aspects of the Regional Haze and 

Interstate Transport SIP revisions that contain the provisions of Attachment A, as adopted 

and submitted to EPA by Oklahoma, PSO may file a motion to dissolve the stay of PSO’s 

Petition for Review, and to request that a briefing schedule be set. EPA does not waive 

or limit any defense relating to such litigation. This shall be the only remedy for EPA’s 

failure to fulfill its obligations under this Agreement. PSO and Sierra Club agree that 

contempt of court is not an available remedy under this Agreement.

16. The Parties agree and acknowledge that before this Agreement is final, EPA must provide 

notice in the Federal Register and an opportunity for public comment pursuant to CAA
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section 113(g), 42 U.S.C. § 7413(g). EPA shall promptly submit said notice of this 

Agreement to the Federal Register after this Agreement is executed by the Parties (i.e., 

signed). After this Agreement has undergone an opportunity for notice and comment, the 

Administrator or the Attorney General, as appropriate, shall promptly consider any such 

written comments in determining whether to withdraw or withhold their consent to the 

Agreement, in accordance with section 113(g) of the CAA. 

If the United States elects not to withdraw or withhold its consent to this Agreement, 

EPA shall provide written notice to the Parties as expeditiously as possible. This 

Agreement shall become final and effective on the date that EPA provides such written 

notice to the Parties. If EPA does not provide such written notice within sixty (60) days 

after the notice of the Agreement is published in the Federal Register, the sole remedy

shall be the right to file a motion to dissolve the stay of the Petition for Review, and to 

request that a briefing schedule be set. EPA does not waive or limit any defense relating 

to such litigation. PSO and Sierra Club agree that contempt of court is not an available 

remedy under this Agreement.

17. No provision of this Agreement shall be interpreted as or constitute a commitment or 

requirement that the United States or any of its departments or agencies obligate or pay

funds in contravention of the Anti-Deficiency Act, 31 U.S.C. § 1341 et seq., or in 

violation of any other statue, law, or regulation.

18. Nothing in this Agreement shall be construed to limit or modify the discretion accorded 

to EPA, ODEQ, or the Secretary by statute, or by general principles of administrative 

law.

19. Nothing in this Agreement shall be construed to limit or modify the rights of PSO or 

Sierra Club to seek reconsideration or judicial review of any altered, amended or revised 

provisions of any final action that ODEQ or EPA may take that differ in any material 

respect from the provisions described in Attachment A (or as amended by mutual written 

agreement of the Parties pursuant to Paragraph 8).

20. The undersigned hereby certify that they are duly authorized to bind the Party on whose 

behalf this Agreement is executed to the terms of this Agreement.

21. The provisions of this Agreement shall apply to and be binding on the Parties, their 

successors and assigns.

22. This Agreement may be signed in counterparts, and such counterpart signatures shall be 

given full force and effect.
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FOR PETITIONER PSO:

Dated:__________ __________________________________________
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FOR STATE OF OKLAHOMA:

SECRETARY OF THE ENVIRONMENT FOR 

THE STATE OF OKLAHOMA

Dated:__________ __________________________________________

FOR OKLAHOMA DEPARTMENT OF 

ENVIRONMENTAL QUALITY:

Dated:___________ __________________________________________
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FOR U.S. ENVIRONMENTAL PROTECTION 

AGENCY:

IGNACIA S. MORENO

Assistant Attorney General

Environment and Natural Resources Division

Dated:__________ By: __________________________________________

STEPHANIE J. TALBERT

Environmental Defense Section

Environment and Natural Resources Division

U.S. Department of Justice

P.O. BOX 7611

Washington, DC 20044

(202) 514-2617

Fax: (202) 514-8865

Stephanie.Talbert@usdoj.gov
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FOR INTERVENOR SIERRA CLUB:

Dated:__________ __________________________________________
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ATTACHMENT A

1. Oklahoma, through the Secretary, will submit to EPA a Regional Haze SIP revision that 

addresses PSO’s Units and includes, among other things, the following elements:

a. Oklahoma’s SIP revision will include a Regional Haze Agreement (“RHA”) 

entered into by ODEQ and PSO to effectuate the BART determination.

b. The RHA will require that by no later than December 31, 2013, PSO will 

complete installation of low NOx combustion technologies and achieve a nitrogen 

oxide (“NOx”) emission rate of 0.23 lb/MMBtu on a 30-day rolling average at 

each of PSO’s Units.

c. The RHA will require that beginning on January 31, 2014, PSO will comply with 

a new SO2 emission rate at each of PSO’s Units of 0.65 lb/MMBtu on a 30-day

rolling average, and beginning on December 31, 2014, PSO will comply with a 

new SO2 emission rate of 0.60 lb/MMBtu on a 12-month rolling average at each 

of PSO’s Units. PSO will maintain those emission rates until controls are 

installed at one unit as provided in subparagraph (e), and the other unit is retired 

as provided in subparagraph (d). The RHA will include an alternative operating 

scenario that addresses potential service disruption of coal supplies during the 

time period between January 31, 2014 through April 16, 2016.

 

d. The RHA will require that PSO seek all necessary regulatory approvals, and will 

retire one of the coal-fired generating units at Northeastern Station by April 16, 

2016.

e. The RHA will require that PSO seek all necessary regulatory approvals, and 

install and operate a dry-sorbent injection system, activated carbon injection 

system, and a fabric filter baghouse, and secure further NOx emission reductions 

by April 16, 2016 on the coal-fired generating unit at Northeastern Station that 

will continue to operate. After completion of the installation of the pollution 

controls required by this subparagraph, PSO will achieve a 0.15 lb/MMBtu 

emission rate for NOx on a 30-day rolling average basis, and a 0.40 lb/MMBtu 

emission rate for SO2 on a 30-day rolling average basis.

f. The RHA will require that during the first year of operation of the controls 

required under the RHA, PSO will develop and propose a monitoring program to 

test various operating profiles and other measures, to determine whether increased 

SO2 removal efficiencies can be achieved during normal operations. Pursuant to 

the terms of the RHA, PSO will submit the monitoring program to EPA and 

ODEQ for review and will implement the monitoring program during the second 

and third years of operation of the dry sorbent injection system. PSO will 

evaluate and report the results of the monitoring program to EPA and ODEQ, and 

if that evaluation demonstrates that the technology is capable of sustainably 
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achieving an emission rate of less than 0.37 lbs/MMBtu on a 30-day rolling 

average basis without (i) altering the unit’s fuel supply, (ii) incurring additional 

capital costs, (iii) increasing operating expenses by more than a negligible 

amount, and/or (iv) adversely impacting overall unit operations, ODEQ will 

propose to revise the emission rate in the RHA by 60 percent of the difference 

between 0.40 and the demonstrated emission rate. Upon adoption after notice and 

opportunity for hearing, Oklahoma, through the Secretary, will submit a Regional 

Haze SIP revision to EPA for approval. If the demonstrated emission rate is 0.37 

lbs/MMBtu or greater, no adjustment will be made to the RHA, and the emission 

rate from the operating Northeastern coal-fired generating unit in the RHA will 

remain 0.40 lbs/MMBtu. 

g. The RHA will require that beginning in calendar year 2021, the Annual Capacity 

Factor (calculated for each calendar year as a percentage of MWH based on a 

rated capacity of 470 MW times 8760 hours) for the operating coal-fired 

generating unit at Northeastern Station will be reduced as follows:

i. to no more than 70 percent in calendar years 2021 and 2022;

ii. to no more than 60 percent in calendar years 2023 and 2024; and

iii. to no more than 50 percent in calendar years 2025 and 2026.

h. The RHA will require that no later than December 31, 2026, PSO will retire the 

remaining operating coal-fired generating unit at Northeastern Station. However, 

in calendar year 2021, the RHA will require PSO to evaluate whether the 

projected generation from that unit can be replaced at lower or equal total 

projected costs from natural gas or renewable resources. Pursuant to the RHA, 

PSO will provide a copy of the evaluation to EPA and ODEQ. If power is 

available from such resources at a lower projected total cost (including 

consideration of PSO’s need to recover its remaining investment in the units), 

then the operating unit will retire no later than December 31, 2025.

2. Oklahoma, through the Secretary, will submit to EPA an Interstate Transport SIP 

revision that addresses PSO’s Units and includes, among other things, the following 

elements:

a. An enforceable mechanism that addresses SO2 reductions from sources other than 

those operated by PSO, to the extent necessary to achieve the anticipated visibility

benefits from the 2018 regional modeling; and 

b. A provision requiring that the enforceable mechanism referred to in Paragraph 

2(a) of this Attachment A be implemented if the SO2 emission rate for the 

controlled unit at Northeastern is not reduced to 0.30 lbs/MMBtu or less as a 

result of the Paragraph 1(f) of this Attachment A.