EDE » Topics » Section 5.18 Environmental Matters.

This excerpt taken from the EDE 10-Q filed May 7, 2009.

Environmental Matters

 

We are subject to various federal, state, and local laws and regulations with respect to air and water quality and with respect to hazardous and toxic materials and wastes, including their identification, transportation, disposal, record-keeping and reporting, as well as other environmental matters. We believe that our operations are in compliance with present laws and regulations.

 

This excerpt taken from the EDE 10-Q filed Nov 6, 2008.

Environmental Matters

 

We are subject to various federal, state, and local laws and regulations with respect to air and water quality and with respect to hazardous and toxic materials and wastes, including their identification, transportation, disposal, record-keeping and reporting, as well as other environmental matters. We believe that our operations are in compliance with present laws and regulations.

 

This excerpt taken from the EDE 10-Q filed Aug 7, 2008.

Environmental Matters

 

We are subject to various federal, state, and local laws and regulations with respect to air and water quality and with respect to hazardous and toxic materials and wastes, including their identification, transportation, disposal, record-keeping and reporting, as well as other environmental matters. We believe that our operations are in compliance with present laws and regulations.

 

This excerpt taken from the EDE 10-Q filed May 9, 2008.

Environmental Matters

 

We are subject to various federal, state, and local laws and regulations with respect to air and water quality and with respect to hazardous and toxic materials and wastes, including their identification, transportation, disposal, record-keeping and reporting, as well as other environmental matters. We believe that our operations are in compliance with present laws and regulations.

 

This excerpt taken from the EDE 10-Q filed Nov 7, 2007.

Environmental Matters

 

We are subject to various federal, state, and local laws and regulations with respect to air and water quality and with respect to hazardous and toxic materials and wastes, including their identification, transportation, disposal, record-keeping and reporting, including asbestos, as well as other environmental matters. We believe that our operations are in compliance with present laws and regulations.

 

This excerpt taken from the EDE 10-Q filed Aug 9, 2007.

Environmental Matters

We are subject to various federal, state, and local laws and regulations with respect to air and water quality and with respect to hazardous and toxic materials and wastes, including their identification, transportation, disposal, record-keeping and reporting, including asbestos, as well as other environmental matters. We believe that our operations are in compliance with present laws and regulations.

This excerpt taken from the EDE 10-Q filed May 9, 2007.

Environmental Matters

We are subject to various federal, state, and local laws and regulations with respect to air and water quality and with respect to hazardous and toxic materials and wastes, including their identification, transportation, disposal, record-keeping and reporting, including asbestos, as well as other environmental matters. We believe that our operations are in compliance with present laws and regulations.

This excerpt taken from the EDE 10-K filed Mar 6, 2007.

Environmental Matters

We are subject to various federal, state, and local laws and regulations with respect to air and water quality and with respect to hazardous and toxic materials and wastes, including their identification, transportation, disposal, record-keeping and reporting, including asbestos, as well as other environmental matters. We believe that our operations are in compliance with present laws and regulations.

Electric Segment

Air.   The 1990 Amendments to the Clean Air Act, referred to as the 1990 Amendments, affect the Asbury, Riverton, State Line and Iatan Power Plants and Units 3 and 4 (the FT8 peaking units) at the Empire Energy Center. The 1990 Amendments require affected plants to meet certain emission standards, including maximum emission levels for sulfur dioxide (SO2) and nitrogen oxides (NOx). The Asbury Plant became an affected unit under the 1990 Amendments for SO2 on January 1, 1995 and for NOx as a Group 2 cyclone-fired boiler on January 1, 2000. The Iatan Plant became an affected unit for both SO2 and NOx on January 1, 2000. The Riverton Plant became an affected unit for NOx in November 1996 and for SO2 on January 1, 2000. The State Line Plant became an affected unit for SO2 and NOx on January 1, 2000. Units 3 and 4 at the Empire Energy Center became affected units for both SO2 and NOx in April 2003. The new Riverton Unit 12 became an affected unit in January 2007.

SO2 Emissions.   Under the 1990 Amendments, the amount of SO2 an affected unit can emit is regulated. Each existing affected unit has been awarded a specific number of emission allowances, each of which allows the holder to emit one ton of SO2. Utilities covered by the 1990 Amendments must have emission allowances equal to the number of tons of SO2 emitted during a given year by each of their affected units. Allowances may be traded between plants or utilities or “banked” for future use. A market for the trading of emission allowances exists on the Chicago Board of Trade. The Environmental Protection Agency (EPA) withholds annually a percentage of the emission allowances awarded to each affected unit and sells those emission allowances through a direct auction. We receive compensation from the EPA for the sale of these withheld allowances.

In 2006, our Asbury, Riverton and Iatan plants burned a blend of low sulfur Western coal (Powder River Basin) and higher sulfur blend coal and petroleum coke, or burned 100% low sulfur Western coal. In addition, TDF was used as a supplemental fuel at the Asbury Plant. The Riverton Plant can also burn natural gas as its primary fuel. The State Line Plant, the Energy Center Units 3 and 4 and the new Riverton Unit 12 are gas-fired facilities and do not receive SO2 allowances. In the near term, annual allowance requirements for the State Line Plant, the Energy Center Units 3 and 4 and Riverton Unit 12, which are not expected to exceed 20 allowances per year, will be transferred from our inventoried bank of allowances. In 2006, the combined actual SO2 allowance need for all affected plant facilities exceeded the number of allowances awarded to us by the EPA, therefore, as of December 31, 2006, we had 31,000 banked SO2 allowances as compared to 41,000 at December 31, 2005. Based on current SO2 usage projections, we will need to construct a scrubber at Asbury or purchase additional SO2 allowances sometime before 2011.

On July 14, 2004, we filed an application with the MPSC seeking an order authorizing us to implement a plan for the management, sale, exchange, transfer or other disposition of our SO2 emission allowances issued by the EPA. On March 1, 2005, the MPSC approved a Stipulation and Agreement granting us authority to manage our SO2 allowance inventory in accordance with our SO2 Allowance Management Policy (SAMP). The SAMP allows us to swap banked allowances for future vintage allowances and/or

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THE EMPIRE DISTRICT ELECTRIC COMPANY
Notes to Consolidated Financial Statements (Continued)

monetary value and, in extreme market conditions, to sell SO2 allowances outright for monetary value. The Stipulation and Agreement became effective March 11, 2005, although we have not yet swapped or sold any allowances.

SO2 emissions will be further regulated as described in the Clean Air Interstate Rule section below.

NOx Emissions.   The Asbury, Iatan, State Line, Energy Center and Riverton Plants are each in compliance with the NOx limits applicable to them under the 1990 Amendments as currently operated.

The Asbury Plant received permission from the Missouri Department of Natural Resources (MDNR) to burn TDF at a maximum rate of 2% of total fuel input. During 2006, approximately 5,794 tons of TDF were burned. This is equivalent to 579,400 discarded passenger car tires.

Under the MDNR’s Missouri NOx Rule, our Iatan, Asbury, State Line and Energy Center facilities, like other facilities in Western Missouri, are generally subject to a maximum NOx emission rate of 0.35 lbs/mmBtu. However, facilities which burn at least 100,000 passenger tire equivalents of TDF per year, including our Asbury Plant, are only subject to a higher NOx emission limit of 0.68 lbs/mmBtu. All of our plants currently meet the required emission limits and additional NOx controls are not required.

NOx is further regulated as described in the Clean Air Interstate Rule below.

Clean Air Interstate Rule 

The EPA issued its final CAIR on March 10, 2005. CAIR governs NOx and SO2 emissions from fossil fueled units greater than 25 megawatts and will affect 28 states, including Missouri, where our Asbury, Energy Center, State Line and Iatan Plants are located and Arkansas where the future Plum Point Energy Station will be located.

The CAIR is not directed to specific generation units, but instead, require the states (including Missouri and Arkansas) to develop State Implementation Plans (SIPs) to comply with specific NOx and SO2 state-wide annual budgets. Until these plans are finalized, we cannot determine the allowed emissions of NOx and SO2 for the Asbury, Energy Center, State Line and Iatan Plants in Missouri or the Plum Point Energy Station in Arkansas.

In order to help meet anticipated CAIR requirements and to meet air permit requirements for Iatan Unit 2, we are installing pollution control equipment on Iatan Unit 1 which will be completed around the end of 2008. This equipment includes a Selective Catalytic Reduction (SCR) system, a Flue Gas Desulphurization (FGD) system and a baghouse, with our share of the capital cost estimated at $45 million, excluding AFUDC. Of this amount, approximately $3.9 million was incurred in 2006. Approximately $15.9 million in 2007 and $24.6 million in 2008 are included in our current capital expenditures budget. These projects were included as part of our Experimental Regulatory Plan approved by the MPSC.

Also to help meet anticipated CAIR requirements, we are constructing an SCR at Asbury. We expect the SCR to be in service around January of 2008. We have awarded the contract to Enerfab, Inc. and the SCR is under construction and will be tied into the existing unit during our scheduled 2007 fall outage. Our current cost estimate for the SCR at Asbury is $30 million, which is also included in our current capital expenditures budget. This project was also included as part of our Experimental Regulatory Plan approved by the MPSC.

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THE EMPIRE DISTRICT ELECTRIC COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

We also expect that additional pollution control equipment to comply with CAIR may become economically justified at the Asbury Plant sometime prior to 2015 and may include a FGD and a baghouse at an estimated capital cost of $100 million. At this time, we do not anticipate the installation of additional pollution control equipment at the Riverton Plant.

Clean Air Mercury Rule

On March 15, 2005, the EPA issued the CAMR regulations for mercury emissions by power plants under the requirements of the 1990 Amendments to the Clean Air Act. The new mercury emission limits will go into effect January 1, 2010.

The CAMR is not directed to specific generation units, but instead, requires the states (including Missouri, Kansas and Arkansas) to develop State Implementation Plans (SIP) to comply with a specific mercury state-wide annual budgets. Until these state plans are finalized, we cannot determine the allowed emissions for mercury for the Asbury, Energy Center, State Line and Iatan Plants in Missouri, the Plum Point Energy Station in Arkansas or the Riverton Plant in Kansas. The proposed SIPs for all states include allowance trading programs for mercury that could allow compliance without additional capital expenditures.

Based on initial testing and anticipated SIPs, we believe we will be granted enough mercury allowances on January 1, 2010 in aggregate to meet our anticipated mercury emissions. We are adding mercury analyzers at Asbury and Riverton during 2007 to get more specific data on our mercury emissions and to meet the compliance date of January 1, 2009 for mercury analyzers and the mercury emission compliance date of January 1, 2010.

Water.   We operate under the Kansas and Missouri Water Pollution Plans that were implemented in response to the Federal Water Pollution Control Act Amendments of 1972. The Asbury, Iatan, Riverton, Energy Center and State Line plants are in compliance with applicable regulations and have received discharge permits and subsequent renewals as required. The renewal for the State Line permit is under draft review with public notice expected in the first half of 2007. The Energy Center permit was renewed in September 2005 and the Asbury Plant permit was renewed in December 2005.

The Riverton Plant is affected by final regulations for Cooling Water Intake Structures issued under the Clean Water Act Section 316(b) Phase II. The regulations became final on February 16, 2004 and require the submission of a Comprehensive Demonstration Study with the permit renewal in 2008. A Proposal for Information Collection (PIC) has been approved by the Kansas Department of Health and Environment. Aquatic sampling commenced in April 2006 in accordance with the PIC and will be completed in March 2007. On January 25, 2007, the United States Court of Appeals for the Second Circuit remanded key sections of the EPA’s February 16, 2004 regulations. At this time, the schedule for reconsideration and revisions is not known. We will be engaged with the EPA in its reconsideration and revision process. Data collection will continue under the PIC and will be expanded as needed to limit increased costs, if any, due to the EPA’s reconsiderations. At this time, we do not expect costs associated with compliance to be material.

Other.   Under Title V of the 1990 Amendments, we must obtain site operating permits for each of our plants from the authorities in the state in which the plant is located. These permits, which are valid for five years, regulate the plant site’s total emissions; including emissions from stacks, individual pieces of equipment, road dust, coal dust and other emissions. We have been issued permits for Asbury, Iatan, Riverton, State Line and the Energy Center Plants. We submitted the required renewal applications for

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THE EMPIRE DISTRICT ELECTRIC COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

the State Line and Energy Center Title V permits in 2003 and the Asbury Title V permit in 2004 and will operate under the existing permits until the MDNR issues the renewed permits. A Compliance Assurance Monitoring (CAM) plan is required by the renewed permit for Asbury. We estimate that the capital costs associated with the CAM plan will not exceed $2 million.

A new air permit was issued for the Iatan Generating Station on January 31, 2006. The new permit covers the entire Iatan Generating Station and includes the existing Unit No. 1 and the to-be-constructed Iatan Unit No. 2. The new permit limits Unit No. 1 to a maximum of 6,600 MMBtu per hour of heat input. This heat input limit only allows Unit No. 1 to produce a total of 652 net megawatts and, as a result, our share decreased from 80 megawatts to 78 megawatts. The 6,600 MMBtu per hour heat input limit is in effect until the new SCR, scrubber, and baghouse are completed, currently estimated to be late in the fourth quarter of 2008.

Gas Segment

The acquisition of Missouri Gas involved the property transfer of two former manufactured gas plant (MGP) sites previously owned by Aquila, Inc. and its predecessors. Site #1 is listed in the MDNR Registry of Confirmed Abandoned or Uncontrolled Hazardous Waste Disposal Sites in Missouri (the MDNR Registry). Site #2 has received a letter of no further action from the MDNR. We are reviewing various actions that may be undertaken to reduce environmental and health risks associated with the MDNR Registry site.

This excerpt taken from the EDE 10-K filed Mar 2, 2007.

Environmental Matters

We are subject to various federal, state, and local laws and regulations with respect to air and water quality and with respect to hazardous and toxic materials and wastes, including their identification, transportation, disposal, record-keeping and reporting, including asbestos, as well as other environmental matters. We believe that our operations are in compliance with present laws and regulations.

Electric Segment

Air.   The 1990 Amendments to the Clean Air Act, referred to as the 1990 Amendments, affect the Asbury, Riverton, State Line and Iatan Power Plants and Units 3 and 4 (the FT8 peaking units) at the Empire Energy Center. The 1990 Amendments require affected plants to meet certain emission standards, including maximum emission levels for sulfur dioxide (SO2) and nitrogen oxides (NOx). The Asbury Plant became an affected unit under the 1990 Amendments for SO2 on January 1, 1995 and for NOx as a Group 2 cyclone-fired boiler on January 1, 2000. The Iatan Plant became an affected unit for both SO2 and NOx on January 1, 2000. The Riverton Plant became an affected unit for NOx in November 1996 and for SO2 on January 1, 2000. The State Line Plant became an affected unit for SO2 and NOx on January 1, 2000. Units 3 and 4 at the Empire Energy Center became affected units for both SO2 and NOx in April 2003. The new Riverton Unit 12 became an affected unit in January 2007.

SO2 Emissions.   Under the 1990 Amendments, the amount of SO2 an affected unit can emit is regulated. Each existing affected unit has been awarded a specific number of emission allowances, each of which allows the holder to emit one ton of SO2. Utilities covered by the 1990 Amendments must have emission allowances equal to the number of tons of SO2 emitted during a given year by each of their affected units. Allowances may be traded between plants or utilities or “banked” for future use. A market for the trading of emission allowances exists on the Chicago Board of Trade. The Environmental Protection Agency (EPA) withholds annually a percentage of the emission allowances awarded to each affected unit and sells those emission allowances through a direct auction. We receive compensation from the EPA for the sale of these withheld allowances.

In 2006, our Asbury, Riverton and Iatan plants burned a blend of low sulfur Western coal (Powder River Basin) and higher sulfur blend coal and petroleum coke, or burned 100% low sulfur Western coal. In addition, TDF was used as a supplemental fuel at the Asbury Plant. The Riverton Plant can also burn natural gas as its primary fuel. The State Line Plant, the Energy Center Units 3 and 4 and the new Riverton Unit 12 are gas-fired facilities and do not receive SO2 allowances. In the near term, annual allowance requirements for the State Line Plant, the Energy Center Units 3 and 4 and Riverton Unit 12, which are not expected to exceed 20 allowances per year, will be transferred from our inventoried bank of allowances. In 2006, the combined actual SO2 allowance need for all affected plant facilities exceeded the number of allowances awarded to us by the EPA, therefore, as of December 31, 2006, we had 31,000 banked SO2 allowances as compared to 41,000 at December 31, 2005. Based on current SO2 usage projections, we will need to construct a scrubber at Asbury or purchase additional SO2 allowances sometime before 2011.

On July 14, 2004, we filed an application with the MPSC seeking an order authorizing us to implement a plan for the management, sale, exchange, transfer or other disposition of our SO2 emission allowances issued by the EPA. On March 1, 2005, the MPSC approved a Stipulation and Agreement granting us authority to manage our SO2 allowance inventory in accordance with our SO2 Allowance Management Policy (SAMP). The SAMP allows us to swap banked allowances for future vintage allowances and/or

112




THE EMPIRE DISTRICT ELECTRIC COMPANY
Notes to Consolidated Financial Statements (Continued)

monetary value and, in extreme market conditions, to sell SO2 allowances outright for monetary value. The Stipulation and Agreement became effective March 11, 2005, although we have not yet swapped or sold any allowances.

SO2 emissions will be further regulated as described in the Clean Air Interstate Rule section below.

NOx Emissions.   The Asbury, Iatan, State Line, Energy Center and Riverton Plants are each in compliance with the NOx limits applicable to them under the 1990 Amendments as currently operated.

The Asbury Plant received permission from the Missouri Department of Natural Resources (MDNR) to burn TDF at a maximum rate of 2% of total fuel input. During 2006, approximately 5,794 tons of TDF were burned. This is equivalent to 579,400 discarded passenger car tires.

Under the MDNR’s Missouri NOx Rule, our Iatan, Asbury, State Line and Energy Center facilities, like other facilities in Western Missouri, are generally subject to a maximum NOx emission rate of 0.35 lbs/mmBtu. However, facilities which burn at least 100,000 passenger tire equivalents of TDF per year, including our Asbury Plant, are only subject to a higher NOx emission limit of 0.68 lbs/mmBtu. All of our plants currently meet the required emission limits and additional NOx controls are not required.

NOx is further regulated as described in the Clean Air Interstate Rule below.

Clean Air Interstate Rule 

The EPA issued its final CAIR on March 10, 2005. CAIR governs NOx and SO2 emissions from fossil fueled units greater than 25 megawatts and will affect 28 states, including Missouri, where our Asbury, Energy Center, State Line and Iatan Plants are located and Arkansas where the future Plum Point Energy Station will be located.

The CAIR is not directed to specific generation units, but instead, require the states (including Missouri and Arkansas) to develop State Implementation Plans (SIPs) to comply with specific NOx and SO2 state-wide annual budgets. Until these plans are finalized, we cannot determine the allowed emissions of NOx and SO2 for the Asbury, Energy Center, State Line and Iatan Plants in Missouri or the Plum Point Energy Station in Arkansas.

In order to help meet anticipated CAIR requirements and to meet air permit requirements for Iatan Unit 2, we are installing pollution control equipment on Iatan Unit 1 which will be completed around the end of 2008. This equipment includes a Selective Catalytic Reduction (SCR) system, a Flue Gas Desulphurization (FGD) system and a baghouse, with our share of the capital cost estimated at $45 million, excluding AFUDC. Of this amount, approximately $3.9 million was incurred in 2006. Approximately $15.9 million in 2007 and $24.6 million in 2008 are included in our current capital expenditures budget. These projects were included as part of our Experimental Regulatory Plan approved by the MPSC.

Also to help meet anticipated CAIR requirements, we are constructing an SCR at Asbury. We expect the SCR to be in service around January of 2008. We have awarded the contract to Enerfab, Inc. and the SCR is under construction and will be tied into the existing unit during our scheduled 2007 fall outage. Our current cost estimate for the SCR at Asbury is $30 million, which is also included in our current capital expenditures budget. This project was also included as part of our Experimental Regulatory Plan approved by the MPSC.

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THE EMPIRE DISTRICT ELECTRIC COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

We also expect that additional pollution control equipment to comply with CAIR may become economically justified at the Asbury Plant sometime prior to 2015 and may include a FGD and a baghouse at an estimated capital cost of $100 million. At this time, we do not anticipate the installation of additional pollution control equipment at the Riverton Plant.

Clean Air Mercury Rule

On March 15, 2005, the EPA issued the CAMR regulations for mercury emissions by power plants under the requirements of the 1990 Amendments to the Clean Air Act. The new mercury emission limits will go into effect January 1, 2010.

The CAMR is not directed to specific generation units, but instead, requires the states (including Missouri, Kansas and Arkansas) to develop State Implementation Plans (SIP) to comply with a specific mercury state-wide annual budgets. Until these state plans are finalized, we cannot determine the allowed emissions for mercury for the Asbury, Energy Center, State Line and Iatan Plants in Missouri, the Plum Point Energy Station in Arkansas or the Riverton Plant in Kansas. The proposed SIPs for all states include allowance trading programs for mercury that could allow compliance without additional capital expenditures.

Based on initial testing and anticipated SIPs, we believe we will be granted enough mercury allowances on January 1, 2010 in aggregate to meet our anticipated mercury emissions. We are adding mercury analyzers at Asbury and Riverton during 2007 to get more specific data on our mercury emissions and to meet the compliance date of January 1, 2009 for mercury analyzers and the mercury emission compliance date of January 1, 2010.

Water.   We operate under the Kansas and Missouri Water Pollution Plans that were implemented in response to the Federal Water Pollution Control Act Amendments of 1972. The Asbury, Iatan, Riverton, Energy Center and State Line plants are in compliance with applicable regulations and have received discharge permits and subsequent renewals as required. The renewal for the State Line permit is under draft review with public notice expected in the first half of 2007. The Energy Center permit was renewed in September 2005 and the Asbury Plant permit was renewed in December 2005.

The Riverton Plant is affected by final regulations for Cooling Water Intake Structures issued under the Clean Water Act Section 316(b) Phase II. The regulations became final on February 16, 2004 and require the submission of a Comprehensive Demonstration Study with the permit renewal in 2008. A Proposal for Information Collection (PIC) has been approved by the Kansas Department of Health and Environment. Aquatic sampling commenced in April 2006 in accordance with the PIC and will be completed in March 2007. On January 25, 2007, the United States Court of Appeals for the Second Circuit remanded key sections of the EPA’s February 16, 2004 regulations. At this time, the schedule for reconsideration and revisions is not known. We will be engaged with the EPA in its reconsideration and revision process. Data collection will continue under the PIC and will be expanded as needed to limit increased costs, if any, due to the EPA’s reconsiderations. At this time, we do not expect costs associated with compliance to be material.

Other.   Under Title V of the 1990 Amendments, we must obtain site operating permits for each of our plants from the authorities in the state in which the plant is located. These permits, which are valid for five years, regulate the plant site’s total emissions; including emissions from stacks, individual pieces of equipment, road dust, coal dust and other emissions. We have been issued permits for Asbury, Iatan, Riverton, State Line and the Energy Center Plants. We submitted the required renewal applications for

114




THE EMPIRE DISTRICT ELECTRIC COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

the State Line and Energy Center Title V permits in 2003 and the Asbury Title V permit in 2004 and will operate under the existing permits until the MDNR issues the renewed permits. A Compliance Assurance Monitoring (CAM) plan is required by the renewed permit for Asbury. We estimate that the capital costs associated with the CAM plan will not exceed $2 million.

A new air permit was issued for the Iatan Generating Station on January 31, 2006. The new permit covers the entire Iatan Generating Station and includes the existing Unit No. 1 and the to-be-constructed Iatan Unit No. 2. The new permit limits Unit No. 1 to a maximum of 6,600 MMBtu per hour of heat input. This heat input limit only allows Unit No. 1 to produce a total of 652 net megawatts and, as a result, our share decreased from 80 megawatts to 78 megawatts. The 6,600 MMBtu per hour heat input limit is in effect until the new SCR, scrubber, and baghouse are completed, currently estimated to be late in the fourth quarter of 2008.

Gas Segment

The acquisition of Missouri Gas involved the property transfer of two former manufactured gas plant (MGP) sites previously owned by Aquila, Inc. and its predecessors. Site #1 is listed in the MDNR Registry of Confirmed Abandoned or Uncontrolled Hazardous Waste Disposal Sites in Missouri (the MDNR Registry). Site #2 has received a letter of no further action from the MDNR. We are reviewing various actions that may be undertaken to reduce environmental and health risks associated with the MDNR Registry site.

This excerpt taken from the EDE 8-K filed Jun 6, 2006.
Section 5.18         Environmental Matters. With respect to the assets, Business, properties and operations to be acquired by the Company in the Acquisition:

(a)           The Company has no knowledge of any claim nor has it received any notice of any claim, and no proceeding has been instituted raising any claim against the Seller, the Company or any real properties now or formerly owned, leased or operated by Seller as part of the Business or such assets, alleging any damage to the environment or violation of any Environmental Laws, except, in each case, such as could not reasonably be expected to result in a Material Adverse Effect and except with respect to liabilities not being transferred to the Company in the Acquisition.

(b)                           The Company has no knowledge of any facts which would give rise to any claim, public or private, of violation of Environmental Laws or damage to the environment emanating from, occurring on or in any way related to such real properties now or formerly owned, leased or operated by Seller as part of the Business or to such assets or their use, except, in each case, such as could not reasonably be expected to result in a Material Adverse Effect and except with respect to liabilities not being transferred to the Company in the Acquisition; and

(c)                           To the knowledge of the Company, Seller as part of such business has not stored any Hazardous Materials on the real properties now or formerly owned, leased or operated by Seller as part of the Business and has not disposed of any Hazardous Materials in a manner contrary to any Environmental Laws in each case in any manner that could reasonably be expected to result in a Material Adverse Effect and except with respect to liabilities not being transferred to the Company in the Acquisition.

11




This excerpt taken from the EDE 10-K filed Mar 10, 2006.
Environmental Matters

We are subject to various federal, state, and local laws and regulations with respect to air and water quality as well as other environmental matters. We believe that our operations are in compliance with present laws and regulations.

Air.   The 1990 Amendments to the Clean Air Act, referred to as the 1990 Amendments, affect the Asbury, Riverton, State Line and Iatan Power Plants and Units 3 and 4, the FT8 peaking units, at the Empire Energy Center. The 1990 Amendments require affected plants to meet certain emission standards, including maximum emission levels for sulfur dioxide (SO2) and nitrogen oxides (NOx). When a plant becomes an affected unit for a particular emission, it locks in the then current emission standards. The Asbury Plant became an affected unit under the 1990 Amendments for SO2 on January 1, 1995 and for NOx as a Group 2 cyclone-fired boiler on January 1, 2000. The Iatan Plant became an affected unit for both SO2 and NOx on January 1, 2000. The Riverton Plant became an affected unit for NOx in November 1996 and for SO2 on January 1, 2000. The State Line Plant became an affected unit for SO2 and NOx on January 1, 2000. Units 3 and 4 at the Empire Energy Center became affected units for both SO2 and NOx in April 2003.

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THE EMPIRE DISTRICT ELECTRIC COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SO2 Emissions.   Under the 1990 Amendments, the amount of SO2 an affected unit can emit is regulated. Each existing affected unit has been awarded a specific number of emission allowances, each of which allows the holder to emit one ton of SO2. Utilities covered by the 1990 Amendments must have emission allowances equal to the number of tons of SO2 emitted during a given year by each of their affected units. Allowances may be traded between plants or utilities or “banked” for future use. A market for the trading of emission allowances exists on the Chicago Board of Trade. The Environmental Protection Agency (EPA) withholds annually a percentage of the emission allowances awarded to each affected unit and sells those emission allowances through a direct auction. We receive compensation from the EPA for the sale of these withheld allowances.

In 2005, our Asbury, Riverton and Iatan plants burned a blend of low sulfur Western coal (Powder River Basin) and higher sulfur local coal or burned 100% low sulfur Western coal. In addition, tire derived fuel (TDF) was used as a supplemental fuel at the Asbury Plant. The Riverton Plant can also burn natural gas as its primary fuel. The State Line Plant and the Energy Center Units 3 and 4 are gas-fired facilities and do not receive SO2 allowances. Annual allowance requirements for the State Line Plant and the Energy Center Units 3 and 4, which are not expected to exceed 20 allowances per year, will be transferred from our inventoried bank of allowances. In 2005, the combined actual SO2 allowance need for all affected plant facilities exceeded the number of allowances awarded to us by the EPA. As of December 31, 2005, we had 41,000 banked SO2 allowances as compared to 48,000 at December 31, 2004. Based on current SO2 usage projections, we will need to construct a scrubber at Asbury or purchase additional SO2 allowances sometime before 2015.

On July 14, 2004, we filed an application with the Missouri Public Service Commission seeking an order authorizing us to implement a plan for the management, sale, exchange, transfer or other disposition of our SO2 emission allowances issued by the EPA. On March 1, 2005, the Missouri Public Service Commission approved a Stipulation and Agreement granting us authority to manage our SO2 allowance inventory in accordance with our SO2 Allowance Management Policy (SAMP). The SAMP allows us to swap banked allowances for future vintage allowances and/or monetary value and, in extreme market conditions, to sell SO2 allowances outright for monetary value. The Stipulation and Agreement became effective March 11, 2005, although we have not yet swapped or sold any allowances.

NOx Emissions.   The Asbury, Iatan, State Line, Energy Center and Riverton Plants are each in compliance with the NOx limits applicable to them under the 1990 Amendments as currently operated.

The Asbury Plant received permission from the Missouri Department of Natural Resources (MDNR) to burn TDF at a maximum rate of 2% of total fuel input. During 2005, approximately 6,600 tons of TDF were burned.

In April 2000, the MDNR promulgated a final rule addressing the ozone moderate non-attainment classification of the St. Louis area. The final regulation, known as the Missouri NOx Rule, set a maximum NOx emission rate of 0.25 lbs/mmBtu for Eastern Missouri and a maximum NOx emission rate of 0.35 lbs/mmBtu for Western Missouri. The Iatan, Asbury, State Line and Energy Center facilities are affected by the Western Missouri regulation. In April 2003 the MDNR approved amendments to the Missouri NOx Rule. Included were amendments to delay the effective date of the rule until May 1, 2004 and to establish a NOx emission limit of 0.68 lbs/mmBtu for plants burning tire derived fuel with a minimum annual burn of 100,000 passenger tire equivalents. The Asbury Plant qualified for the 0.68 lbs/mmBtu emission rate. All of our plants currently meet the required emission limits and additional NOx controls are not required.

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THE EMPIRE DISTRICT ELECTRIC COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Water.   We operate under the Kansas and Missouri Water Pollution Plans that were implemented in response to the Federal Water Pollution Control Act Amendments of 1972. The Asbury, Iatan, Riverton, Energy Center and State Line plants are in compliance with applicable regulations and have received discharge permits and subsequent renewals as required. The Energy Center permit was renewed in September 2005 and the Asbury Plant permit was renewed in December 2005. The Riverton Plant is affected by final regulations for Cooling Water Intake Structures issued under the Clean Water Act Section 316(b) Phase II. The regulations became final on February 16, 2004 and require the submission of a Comprehensive Demonstration Study with the permit renewal in 2008. A draft Proposal for Information Collection was submitted to the Kansas Department of Health and Environmental in December 2005. The costs associated with compliance with these regulations are not expected to be material.

Other.   Under Title V of the 1990 Amendments, we must obtain site operating permits for each of our plants from the authorities in the state in which the plant is located. These permits, which are valid for five years, regulate the plant site’s total emissions; including emissions from stacks, individual pieces of equipment, road dust, coal dust and other emissions. We have been issued permits for Asbury, Iatan, Riverton, State Line and the Energy Center Power Plants. We submitted the required renewal applications for the State Line and Energy Center Title V permits in 2003 and the Asbury Title V permit in 2004 and will operate under the existing permits until the MDNR issues the renewed permits. A Compliance Assurance Monitoring (CAM) plan is expected to be required by the renewed permit for Asbury. We estimate that the capital costs associated with the CAM plan will not exceed $2 million.

In mid-December 2003, the EPA issued proposed regulations with respect to SO2 and NOx from coal-fired power plants in a proposed rulemaking known as the Clean Air Interstate Rule (CAIR). The final CAIR was issued by the EPA on March 10, 2005 and will affect 28 states, including Missouri, where our Asbury, Energy Center, State Line and Iatan Plants are located, but excluding Kansas, where our Riverton Plant is located. Also in mid-December 2003, the EPA issued the proposed Clean Air Mercury Rule (CAMR) regulations for mercury emissions by power plants under the requirements of the 1990 Amendments. The final CAMR was issued March 15, 2005. It is possible that we may need to make some expenditures as early as 2007 in order to meet the compliance date of January 1, 2009 for mercury analyzers and the mercury emission compliance date of January 1, 2010. The CAIR and the CAMR are not directed to specific generation units, but instead, require the states (including Missouri and Kansas) to develop State Implementation Plans (SIP) by September 2006 in order to comply with specific NOx, SO2 and/or mercury state-wide annual budgets (although Kansas is not covered by the NOx or SO2 requirements). Until these plans are finalized, we cannot determine the required emission rates of NOx, SO2 and mercury for the Asbury or Iatan Plants in Missouri or the required mercury emission rate for the Riverton Plant in Kansas. Also, the SIP will likely include allowance trading programs for NOx, SO2 and/or mercury that could allow compliance without additional capital expenditures.

As part of our Experimental Regulatory Plan filed with the MPSC, we have committed to install pollution control equipment required at the Iatan Plant by 2008 which will include a Selective Catalytic Reduction (SCR) system, a Flue Gas Desulphurization (FGD) system and a Bag House, with our share of the capital cost estimated at $29 million. Of this amount, approximately $3 million is expected to be incurred in 2006, approximately $14 million in 2007 and approximately $11 million in 2008 each of which is included in our current capital expenditures budget. We have also committed to add an SCR at Asbury which we expect to be in service before January 2009. We are currently developing a schedule to perform the tie-ins with the existing plant during our scheduled 2007 fall outage. Our current cost estimate for an SCR at Asbury is $30 million which is also included in our current capital expenditures budget. We also

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expect that additional pollution control equipment will be economically justified at the Asbury Plant sometime prior to 2015 and may include a FGD and a Bag House at an estimated capital cost of $75 million. At this time, we do not anticipate the installation of additional pollution control equipment at the Riverton Plant.

A new air permit was issued for the Iatan Generating Station on January 31, 2006. The new permit covers the entire Iatan Generating Station and includes the existing Unit No. 1 and the to-be-constructed Iatan Unit No. 2. The new permit limits Unit No. 1 to a maximum of 6,600 MMBtu per hour of heat input. This heat input limit only allows Unit No. 1 to produce a total of 652 net megawatts. Our share will decrease from 80 megawatts to 78 megawatts. The 6,600 MMBtu per hour heat input limit is in effect until the new SCR, scrubber, and Bag House are completed, currently estimated to be late in the fourth quarter of 2008.

This excerpt taken from the EDE 10-K filed Mar 15, 2005.

Environmental Matters

We are subject to various federal, state, and local laws and regulations with respect to air and water quality as well as other environmental matters. We believe that our operations are in compliance with present laws and regulations.

Air.  The 1990 Amendments to the Clean Air Act, referred to as the 1990 Amendments, affect the Asbury, Riverton, State Line and Iatan Power Plants and Units 3 and 4, the FT8 peaking units, at the Empire Energy Center. The 1990 Amendments require affected plants to meet certain emission standards, including maximum emission levels for sulfur dioxide (SO2) and nitrogen oxides (NOx). When a plant becomes an affected unit for a particular emission, it locks in the then current emission standards. The Asbury Plant became an affected unit under the 1990 Amendments for SO2 on January 1, 1995 and for NOx as a Group 2 cyclone-fired boiler on January 1, 2000. The Iatan Plant became an affected unit for both SO2 and NOx on January 1, 2000. The Riverton Plant became an affected unit for NOx in November 1996 and for SO2 on January 1, 2000. The State Line Plant became an affected unit for SO2 and NOx on January 1, 2000. Units 3 and 4 at the Empire Energy Center became affected units for both SO2 and NOx in April 2003.

SO2 Emissions.  Under the 1990 Amendments, the amount of SO2 an affected unit can emit is regulated. Each existing affected unit has been awarded a specific number of emission allowances, each of which allows the holder to emit one ton of SO2. Utilities covered by the 1990 Amendments must have emission allowances equal to the number of tons of SO2 emitted during a given year by each of their affected units. Allowances may be traded between plants or utilities or “banked” for future use. A market for the trading of emission allowances exists on the Chicago Board of Trade. The Environmental Protection Agency (EPA) withholds annually a percentage of the emission allowances awarded to each affected unit and sells those emission allowances through a direct auction. We receive compensation from the EPA for the sale of these allowances.

In 2004, our Asbury, Riverton and Iatan plants burned a blend of low sulfur Western coal (Powder River Basin) and higher sulfur local coal or burned 100% low sulfur Western coal. In addition, tire derived fuel (TDF) was used as a supplemental fuel at the Asbury plant. The Riverton plant can also burn natural gas as its primary fuel. The State Line Plant and the Energy Center Units 3 and 4 are gas-fired facilities and do not receive SO2 allowances. Annual allowance requirements for the State Line Plant and the Energy Center Units 3 and 4, which are not expected to exceed 20 allowances per year, will be transferred from our inventoried bank of allowances. Based on current operations, the combined actual SO2 allowance need for all affected plant facilities is approximately equal to the number of allowances awarded to us annually by the EPA. As of December 31, 2004, we currently have 48,000 banked allowances.

On July 14, 2004, we filed an application with the Missouri Public Service Commission seeking an order authorizing us to implement a plan for the management, sale, exchange, transfer or other disposition of our SO2 emission allowances. Subsequently, we, the Missouri Public Service Commission Staff (Staff) and the Office of Public Counsel (OPC) engaged in discussions to determine an agreeable manner for us to implement an SO2

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Allowance Management Policy (SAMP). As a result of these discussions, the parties entered into a Unanimous Stipulation and Agreement on January 18, 2005, stating that we should be granted authority by the Commission to manage our SO2 allowance inventory in accordance with the terms in our SAMP document, which would provide us the authority to swap banked allowances for future vintage allowances and/or monetary value and, in extreme market conditions, provides us with the authority to sell SO2 allowances outright for monetary value. On March 1, 2005, the Missouri Public Service Commission approved the Stipulation and Agreement to become effective March 11, 2005.

NOx Emissions.  The Asbury, Iatan, State Line, Energy Center and Riverton Plants are each in compliance with the NOx limits applicable to them under the 1990 Amendments as currently operated.

The Asbury Plant received permission from the Missouri Department of Natural Resources (MDNR) to burn TDF at a maximum rate of 2% of total fuel input. During 2004, approximately 9,550 tons of TDF were burned.

In April 2000 the MDNR promulgated a final rule addressing the ozone moderate non-attainment classification of the St. Louis area. The final regulation, known as the Missouri NOx Rule, set a maximum NOx emission rate of 0.25 lbs/mmBtu for Eastern Missouri and a maximum NOx emission rate of 0.35 lbs/mmBtu for Western Missouri. The Iatan, Asbury, State Line and Energy Center facilities are affected by the Western Missouri regulation. In April 2003 the MDNR approved amendments to the Missouri NOx Rule. Included were amendments to delay the effective date of the rule until May 1, 2004 and to establish a NOx emission limit of 0.68 lbs/mmBtu for plants burning tire derived fuel with a minimum annual burn of 100,000 passenger tire equivalents. The Asbury Plant qualified for the 0.68 lbs/mmBtu emission rate. All of our plants currently meet the required emission limits and additional NOx controls are not required.

Water.  We operate under the Kansas and Missouri Water Pollution Plans that were implemented in response to the Federal Water Pollution Control Act Amendments of 1972. The Asbury, Iatan, Riverton, Energy Center and State Line facilities are in compliance with applicable regulations and have received discharge permits and subsequent renewals as required. The Energy Center permit was revised in 2004. The Riverton Plant is affected by final regulations for Cooling Water Intake Structures issued under the CWA 316 (b) Phase II. The regulations became final on February 16, 2004 and require the submission of a Comprehensive Demonstration Study with the permit renewal in 2008. The costs associated with compliance with these regulations are not expected to be material.

Other.  Under Title V of the 1990 Amendments, we must obtain site operating permits for each of our plants from the authorities in the state in which the plant is located. These permits, which are valid for five years, regulate the plant site’s total emissions; including emissions from stacks, individual pieces of equipment, road dust, coal dust and other emissions. We have been issued permits for Asbury, Iatan, Riverton, State Line and the Energy Center Power Plants. We submitted the required renewal application for the Asbury Title V permit in 2004 and will operate under the existing permit until the MDNR issues the renewed permit. A Compliance Assurance Monitoring (CAM) plan is expected to be required by the renewed permit. We estimate that the capital costs associated with the CAM plan will not exceed $2 million.

In mid-December 2003, the EPA issued proposed regulations with respect to SO2, NOx and mercury emissions from coal-fired power plants in a proposed rulemaking known as the Clean Air Interstate Rule (CAIR). The final CAIR was issued by the EPA on March 10, 2005 and will affect 28 states, including Missouri, where our Asbury plant is located, but excluding Kansas, where our Riverton plant is located. Also in mid-December 2003, the EPA issued proposed regulations for mercury emissions by power plants under the requirements of the 1990 Amendments. These proposed regulations are currently expected to be finalized in March 2005. It is possible that we may need to make some expenditures as early as 2005 in order to meet a proposed December 15, 2007 requirement for anticipated mercury reduction requirements under the proposed clean air mercury regulations. The CAIR was issued, and the clean air mercury regulations are expected to be issued, as a result of delays and setbacks in the legislative process for the President’s Clear Skies Act legislation, which would have imposed different restrictions on SO2, NOx and mercury emissions. The CAIR is not directed to specific generation units, but instead,

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requires the state of Missouri to develop a State Implementation Plan (SIP) within the next 18 months in order to comply with specific NOx and SO2 state-wide annual budgets. Until that plan is finalized, we cannot determine the required emission rate of NOx and SO2 for the Asbury or Iatan plants. Also, the SIP will likely include an allowance trading program for NOx and SO2 that could provide compliance without additional capital expenditures. Until the proposed mercury regulations are finalized and additional testing for mercury emissions is completed at Iatan, Asbury and Riverton, we cannot determine if additional investments are required. It is possible that compliance with the proposed mercury regulations will not require additional capital expenditures. However, we expect that pollution control equipment required at the Iatan plant by 2015 may include a Selective Catalytic Reduction (SCR) system and a Flue Gas Desulphurization (FGD) system and a Bag House, with our share of the capital cost estimated at $30 million. We expect that pollution control equipment needed at the Asbury plant by 2015 may include a SCR, a FGD and a Bag House at an estimated capital cost of $80 million.

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