In July 2003, the Public Service Commission of Wisconsin (PSCW) and the state's Department of Natural Resources (DNR) issued their final Environmental Impact Statement (EIS) for the Elm Road Generating Station (ERGS). The EIS was conducted under guidelines of the Wisconsin Environmental Policy Act (WEPA), which are modeled on the federal National Environmental Policy Act (NEPA) guidelines. The agencies' decision to conduct an EIS was not the result of an evaluation and conclusion that the project's potential environmental impacts are significant. Rather, it was dictated by the PSCW's rules that require an EIS for any project involving the construction of an "electric generation facility fueled by coal."

The EIS considered background and regulatory requirements, costs and financing issues, the need for baseload capacity in southeast Wisconsin, alternatives to the proposed project, fuel diversity perspectives, the proposed sites and technologies, air emissions, water resources, solid and hazardous waste disposal and remediation, land resources, and community impacts. The EIS also provided a worst-case analysis of the economic and environmental impacts that could result from the construction of a new power plant and its associated facilities. The EIS, however, was not an agency decision about the project and did not make recommendations about approval.

The EIS was just one step in the process. Public and technical hearings followed in August and September of 2003. The agencies gave careful consideration to the more than 270 individuals that provided written comments on the ERGS draft EIS.

In November 2003, the PSCW issued an order approving parts of the proposed project.
The commission:

• Determined that additional power plants were necessary to meet the continued growth in demand for electricity.
• Determined that coal was the most cost-effective, technically feasible option for the additional generation.
• Approved the two super critical pulverized coal (SCPC) units;
• Did not approve the proposed integrated gasification combined cycle (IGCC) unit due to cost and technology concerns.
• Required the company to acquire a minimum 55 megawatts (MWs) of additional conservation.
• Acknowledged our commitment to add several hundred more MWs of renewable energy sources, resulting in about 5 percent of our energy needs supplied by renewable resources. (This is two times more than the standard set forth in Wisconsin law.)
• Approved the Return on Equity on the lease agreement between Wisconsin Energy Corp., whose We Power subsidiary will construct and own the new facilities, and We Energies, will be set at 12.7 percent with a capital structure that includes 55 percent equity
• Granted mitigation payments of $2.25M per year to the City of Oak Creek, beginning at the time of construction until the plant's operation date, at which time the city will receive shared revenue payments

On Nov. 29, 2004, a Dane County Circuit Court vacated the PSCW's approval of our project and sent the case back to the commission for additional proceedings. While we were disappointed with the decision, we were encouraged that the court reaffirmed the need for the power and upheld the sufficiency of the state EIS.

The PSCW, DNR, and Wisconsin Energy Corp. filed motions for direct, expedited appeal of the decision with the Supreme Court of Wisconsin. On Jan. 5, 2005, the Supreme Court of Wisconsin granted the motion in a 5-1 vote. Briefs were filed in February and oral arguments were held on March 30, 2005.

On June 28, 2005, the Supreme Court of Wisconsin reversed the Dane County Circuit Court's November 2004 decision and reinstated the PSCW's final decision and order in all respects involving construction of the Oak Creek Power Plant expansion. It was a 4-2 decision with Justice Crooks not participating. Justice Bradley dissented and was joined by Chief Justice Abrahamson.

Air Permit
The DNR issued the Air Pollution Control and Construction Permit on January 14, 2004. After a thorough review, the DNR determined that the project meets applicable criteria for permit approval, including both the emission limits and the ambient air quality standards. The permit provides authorization for the construction and initial operation of the new units in Oak Creek.

In February 2005, a Wisconsin Administrative Law Judge issued a decision affirming the DNR’s issuance of the Air Pollution Control and Construction Permit. In the decision, the judge found that DNR did not err on any of the grounds raised by the opponents.

Summary of the findings include:

• The analysis done by the DNR complied with all applicable requirements of state law.    
• The DNR was not required to include the integrated coal gasification combined-cycle (IGCC) process in the analysis for the supercritical pulverized coal units.    
• Alternative sites, sizes, production processes and environmental control techniques were properly considered in the analysis.    
• Environmental and social costs were weighed against the benefits of the project.    
• The DNR reasonably determined that all We Energies facilities in Wisconsin were in compliance or on a schedule for compliance.

On Feb. 22, 2005, Clean Wisconsin and S.C. Johnson filed a lawsuit with the Dane County Circuit Court seeking judicial review of that decision.

The Dane County Circuit Court dismissed on Sept.16, 2005, the appeal of an administrative law judge's decision, affirming the DNR’s issuance of the Air Pollution Control and Construction Permit for the Oak Creek expansion. All parties to this action agreed to the dismissal, including Clean Wisconsin and the Sierra Club. This dismissal is the final resolution of the legal challenges to the WDNR air construction permit.

Chapter 30 Permit
In November 2004, the DNR issued a Chapter 30 permit for the proposed project. The issuance of this permit followed a contested case hearing held Aug. 23-25, 2004. The Chapter 30 permit provides authorization for:

• Placing fill on the bed of Lake Michigan for the purposes of dock extension.
• Placement of an intake and discharge structure.
• Dredging material from the bed of Lake Michigan.
• Placing bridges and culverts over navigable streams for the purposes of railroad expansion and road construction.
• Mitigating wetland impacts.

In March 2005, the Dane County Circuit Court dismissed an appeal of the Chapter 30 permit based on improper filing procedures by S.C. Johnson and Sierra Club.

The opponents appealed the dismissal. In February 2006, the state Court of Appeals affirmed the lower court’s dismissal of the case.

Wisconsin Pollutant Discharge Elimination System (WPDES) Permit
On March 30, 2005, the DNR reissued a WPDES permit for the project. The DNR has determined that the proposed cooling water intake structure and water discharge meet regulatory requirements, including the new federal Clean Water Act 316(b) rules, and that the WPDES permit should be reissued for the expanded facility subject to specific limitations and conditions. This determination was reached following extensive consultation among the DNR, EPA headquarters and EPA Region 5.

On April 26, 2005, Clean Wisconsin and SC Johnson filed a lawsuit with the Dane County Circuit Court challenging the DNR’s decision to reissue a WPDES permit. Also, on May 12, 2005, DNR granted the request for a contested case hearing filed by Clean Wisconsin, Sierra Club, and several individuals.

In September 2005, the challenge filed with Dane County Circuit Court was dismissed. The DNR’s contested case hearing regarding the permit was held in March 2006. In July 2006, the Administrative Law Judge upheld DNR’s issuance of the WPDES permit. The parties opposing the permit can appeal that decision.

The Dane County Circuit Court issued a ruling on March 5, 2007, concerning our WPDES permit. The court did not vacate the permit we received from the DNR.

The court affirmed – in important respects – the decision by the DNR to issue the permit and a later decision by a Wisconsin Administrative Law Judge (ALJ), upholding the DNR’s issuance of the permit. The court also remanded certain aspects of the ALJ’s decision for further consideration. The WPDES permit for the Oak Creek site authorizes the operation of the cooling water intake structure for both the existing and added units, using the best technology available to minimize adverse environmental impact.

In separate litigation, the Second Circuit Court of Appeals issued a ruling on Jan. 25 remanding to the Environmental Protection Agency (EPA) its rule regarding cooling water intake systems for large utility plants. The suit was brought by several states and environmental groups, including Riverkeeper, an environmental advocacy group.

In its March 5 ruling, the Dane County Circuit Court remanded certain parts of the ALJ’s decision so they could be re-evaluated and decided based upon the Jan. 25 federal decision by the Second Circuit Court of Appeals. The Riverkeeper II case, as it is referred to, came out long after the ALJ issued a decision upholding the DNR’s WPDES permit for Oak Creek. 

On Nov. 29, 2007, the ALJ of the State Division of Hearings and Appeals ruled that the expansion units being built at the Oak Creek site qualify technically as a new facility under the federal Clean Water Act. However, the judge did not vacate the permit for our water intake system nor did he vacate any other permit necessary for the ongoing construction of the Oak Creek units.

In his ruling, he also pointed out that, based on the present record, the water intake system may be permittable under the standards that apply for new facilities.

The judge directed the DNR to reissue or modify our permit to reflect “best technology available” for complying with the standards applicable to new facilities under state law.

We submitted additional information to the DNR that supports the use of our water intake system under these standards. While the process for modifying our water permit proceeded, we continued construction of the Oak Creek units.

On Dec. 27, 2007, We Energies filed a petition for review by the Milwaukee Circuit Court of the Nov. 29 decision issued by the ALJ. We Energies is not certain that the ALJ’s decision is final and therefore may be appealed because we must preserve our right to appeal what we believe is an erroneous decision by the ALJ. Subsequently, the city of Oak Creek and the DNR have joined in the proceeding by filing similar petitions in support of preserving our right to appeal the ALJ’s decision.

On Feb. 11, 2008, the three petitions for judicial review were consolidated by the Milwaukee County Circuit Court. The court also granted We Energies' motion to dismiss on the grounds that the ALJ’s decision was not a final order; the court also ruled that all issues decided by the ALJ may be judicially reviewed when there is a final agency decision.

In May, the WDNR issued a new, draft permit that concluded the new water intake system is the best technology available for both the existing and expansion units at the Oak Creek site. A public hearing was held in June to obtain public comments on the newly proposed modified WPDES permit for the operation of the cooling system. The federal Environmental Protection Agency notified WDNR that it would not object to issuance of the new permit. 

In August, the WDNR issued a final modified WPDES permit for the existing and expansion units.

In addition to the issuance of the permit, We Energies and the owners (WPPI and MGE) of the expansion units at Oak Creek reached an agreement with Clean Wisconsin and Sierra Club—the groups that have been opposing the water intake permit. Under the settlement agreement, the environmental groups will withdraw their opposition to the permit and cooling system. The agreement should bring to a close the ongoing litigation and administrative challenges to the WPDES permit by these groups. The provisions of the agreement include reductions in greenhouse gases, investments in additional renewable energy resources, funding to protect Lake Michigan’s ecosystem and the retirement of older, less-efficient generation.

The commitments of the formal agreement include:

• Greenhouse gas emission reductions – Support legislation to increase Wisconsin’s Renewable Energy Standard to 10 percent by 2013 and 25 percent by 2025, as found in the Final Report of the Governor’s Global Warming Task Force
• Long-term reduction of greenhouse gas emissions – invest $5 million to implement projects consistent with the Final Report of the Governor’s Global Warming Task Force
• Biomass generation – seek regulatory approval to construct 50 megawatts (MW) of non-food crop biomass generation in Wisconsin
• Solar generation – seek regulatory approval for 15 MW of new solar generation which would be developed by providing incentives for customers to install solar capacity, purchasing solar energy output from other generators or constructing solar generation facilities
• Protect Lake Michigan – seek regulatory approval to dedicate $4 million annually for 25 years toward projects that will address water quality issues in Lake Michigan such as invasive species, polluted runoff, toxic loadings and habitat destruction
• Retire older less-efficient coal – retire an additional 116 MW of coal capacity from two generating units at the Presque Isle Power Plant in the Upper Peninsula of Michigan by no later than the end of 2012
• Conservation and energy efficiency for public buildings – invest in energy efficiency projects for public buildings that are consistent with the recommendations of the Governor’s Global Warming Task Force
• Reporting of greenhouse emissions – provide useful information to customers and the public regarding annual greenhouse gas emissions

These environmental initiatives are the key elements of the settlement agreement with Clean Wisconsin and Sierra Club. Under the settlement agreement, the groups will withdraw all legal opposition to the permit.

Army Corps of Engineers Permit
The Army Corps of Engineers issued its permit on May 18, 2005. This permit authorizes construction of facilities that impact wetlands and waterways. The corps conducted an environmental assessment (EA), and concluded that an Environmental Impact Statement (EIS) is not required, determined that the project complies with its Clean Water Act 404(b)(1) guidelines, and determined that the project is not contrary to the public interest.