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AK appears unlikely to avoid civil penalties

By Thomas Gnau, Journal Business Writer

Ohio government is ready to resolve a lawsuit against AK Steel Corp. before the case goes to trial - but not without a "civil penalty," said Frank Reed, chief of Attorney General Betty Montgomery's environmental section.

But AK Vice President of Public Affairs Alan McCoy said the state has settled enforcement cases without civil penalties, although he called that the "exception rather than the rule."

Still, AK holds that it has done nothing to deserve fines. McCoy said his company has the "best environmental compliance record in the country among integrated steel producers by a wide, wide margin."

Yet, said Reed on Friday, "A civil penalty is a part of every one of these cases."

Meanwhile, U.S. District Judge Herman J. Weber released in writing this week his order denying the Middletown steelmaker a temporary restraining order against an Ohio Environmental Protection Agency order. The order, issued in October, tells AK to submit a plan to control what the agency says are dust emissions from Middletown Works.

Representing state and federal environmental protection agencies, Ohio government is an intervening plaintiff in the U.S. Department of Justice's lawsuit against AK, alleging violations of the Clean Air, Clean Water and Resource Recovery and Conservation acts. AK has aggressively defended itself since the suit was filed in June 2000.

Reed said civil penalties, or fines, are necessary in cases when his office thinks companies save money by stalling on compliance with the law.

"Otherwise, companies will get the impression this (a lawsuit) is a cost of doing business," he said.

The lawsuit deals with complaints against AK that date back to March 1991, Reed said. Not extracting a fine from a company on successful resolution of the case "would be almost unheard of," said Eric Hardgrove, a Montgomery spokesman.

"We're not looking to put anybody out of business," Hardgrove said.

AK went public in 1994. Its predecessor company was a partnership between Armco and Kawasaki Steel Corp. formed in 1989. AK's leaders have said since March that fines and compliance costs could force them to reconsider making steel in Middletown.

Installing new "maximum achievable (pollution) control technology" on Middletown Works' blast furnace and basic oxygen furnace will cost about $80 million, McCoy said. AK will have to shut down its 1950s-era blast furnace to install the controls - a difficult engineering feat, he said. And one that means a couple of months of lost production.

"And then you throw in this idea of civil penalties," McCoy said.

The technology could be required in two years, he said.

FEDERAL ATTORNEYS sought to take the lead in the lawsuit, but not because they doubted Ohio's diligence, Reed said. He said state and federal agencies are partners "through and through."

Said McCoy, "We've done nothing to deserve the duplicative efforts of state and federal agencies."

Robert Darnell, an attorney with the Department of Justice's Environmental and Natural Resources Division, declined comment.

A Dec. 19 hearing in U.S. District Judge Herman J. Weber's court is set to hear motions by the Sierra Club and the National Resources Defense Council to join the suit as intervening plaintiffs. Beyond that, Reed said, what's next is "anybody's guess."

He said his office resolves 40 to 50 cases before trial each year. "A couple," he said, go to trial. If the lawsuit against AK goes to trial, there would be no jury, he said.

"We're prepared to go to trial, if necessary," he said.

McCoy said AK is, as well.

"We've done nothing to deserve civil penalties," he said.



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