The trial isn’t getting global attention. But it is capturing utility executives and specifically those in the jurisdiction where the Tennessee Valley Authority serves. The drama is over the 2008 coal ash spill, with phase one now underway and phase two that will determine any damages to begin in November.

TVA is standing trial to discern if it is liable for financial damages beyond the cost of the clean up and if so, how much. The outcome, though, will ripple far beyond the federal wholesaler of electricity and extend into the upper echelons of utility corporate offices. At issue is how those companies with coal-based operations will protect their publics from coal ash that has been walled off.

“They were trying to build the dikes with coal ash because they were producing so much of it,” says Dan Marks, an expert witness for the plaintiffs. It should have been held in place with “compacted earth,” he adds.

The civil and geotechnical engineer went on to testify that the accident was the result of TVA’s failure to monitor and to control water quality pressure in the dikes that restrained the coal ash, which is a byproduct of burning coal-fired electricity. A subsequent witness for the plaintiffs, Tennessee Inspector General Richard Moore, faulted TVA’s management and “poor engineering practices.”

On December 22, 2008, a dam burst that enabled the escape of 5.4 million cubic yards of coal ash about 40 miles west of Knoxville, Tenn. The case is now being heard in U.S. District Court in a bench trial that is decided by a judge.

TVA is choosing a bench trial because it obviously it feels that a judge would be more impartial than a jury. As such, it arguing that the ground soil holding the collapsed retention walls simply eroded and that it is only liable for compensatory damages, which have totaled $1.2 billion to date. The plaintiffs maintain they are entitled to punitive damages for their pain and suffering.

TVA’s defense pointed out that expert witness Marks did not validate his findings by having other engineers review them nor did he consider that TVA had a network of lateral pipes that were designed to relieve water pressure issues. That system, however, failed at the time of the collapse, meaning it was not a function of managerial negligence.

“What grade would you give yourself,” asks TVA lawyer Mark Anstoetter, in question to expert witness Marks, who replied that he, too, “failed.” Marks maintains that his conclusions are correct but acknowledges shoddy workmanship.

Ruling Pending

The Environmental Protection Agency has singled out the spill, calling it an unequaled disaster that must be remedied with new regulations. While the EPA would prefer to regulate coal ash that contains arsenic, mercury and lead under federal hazardous waste laws, the utility sector wants it to remain classified as a solid waste that the states now oversee.

The current regulation allows coal ash to participate in a secondary market whereby it can be recycled and used for such things as cement and dry wall. But if the material is reclassified as a hazardous waste, coal groups say it would be irreversibly stigmatized and any ancillary use of it would evaporate.

The Obama administration is unlikely to expend the necessary political capital to overhaul the categorization. With the Republicans in charge of the House of Representatives, the president's team will extend an olive branch and instead choose to make more incremental changes -- to toughen disposal standards and to let the states maintain their leadership role.

Coal ash is disposed of either as a liquid that goes into large surface impoundments or as a solid that is placed into landfills. TVA, which had used the liquid disposal method at its Kingston Fossil Plant where the retention walls failed, has stop impounding "wet ash." Instead, it is converting it to dry ash and burying it in places with liners while also monitoring the ground water -- something to which the EPA says would become mandatory for all such sites.

Right now, EPA says that power plants create annually 136 million tons of coal ash. That number, though, is expected to rise to 175 million tons by 2015.

The verdict is still out on TVA’s potential liabilities. But no matter what the decision will be, the utility industry knows that at least some changes are coming as to how coal ash is regulated.

EnergyBiz Insider has been been nominated in 2010 and 2011 for Best Online Column by Media Industry News, MIN. Ken Silverstein has also been named one of the Top Economics Journalists by Wall Street Economists.

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