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Item 1A. Risk Factors” in this Annual Report. Should one or more of the risks or uncertainties described occur or underlying assumptions prove incorrect, our actual results and plans could differ materially from those expressed in any forward‑looking statements.
All forward‑looking statements, expressed or implied, included in this Annual Report are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent forward-looking written or oral statements that we or persons acting on our behalf may issue. Except as otherwise required by applicable law, we disclaim any duty to update any forward‑looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date of this Annual Report.
PART I
Item 1. Business
Our Company
Charah Solutions, Inc. (together with its subsidiaries, “Charah Solutions,” the “Company,” “we,” “us,” or “our”) is a leading national service provider of mission-critical environmental services and byproduct recycling to the power generation industry. We offer a suite of remediation and compliance services, byproduct services, raw material sales and Environmental Risk Transfer (“ERT”) services. We also design and implement solutions for complex environmental projects (such as coal ash pond closures) and facilitate coal ash recycling through byproduct marketing and other beneficial use services. We believe we are a partner of choice for the power generation industry due to our quality, safety, domain experience and compliance record, all of which are key criteria for our customers. In 2022, we performed work at more than 40 coal-fired generation sites nationwide.
Charah Solutions, Inc. was incorporated in Delaware in 2018 in connection with our initial public offering in June 2018 and, together with its predecessors, has been in business since 1987. Since our founding, we have continuously worked to anticipate our customers’ evolving environmental needs, increasing the number of services we provide through our embedded presence at their power generation facilities. Our multi-service platform allows customers to efficiently source multiple required offerings from a single, trusted partner compared to service providers with a more limited scope.
We operate as a single operating segment, reflecting the suite of end-to-end services we offer our utility partners and how our chief operating decision maker reviews consolidated financial information to evaluate results of operations, assess performance and allocate resources for these services. We provide the following services through our one segment: remediation and compliance services, byproduct services, raw material sales and ERT services. Remediation and compliance services are associated with our customers’ need for multi-year environmental improvement and sustainability initiatives, whether driven by regulatory requirements, power generation customer initiatives or consumer expectations and standards. Byproduct services consist of recurring and mission-critical coal ash management and operations for coal-fired power generation facilities while also supporting both our power generation customers’ desire to recycle their recurring and legacy volumes of coal combustion residuals (“CCRs”), commonly known as coal ash, and our ultimate end customers’ need for high-quality, cost-effective supplemental cementitious materials (“SCMs”) that provide a sustainable, environmentally-friendly substitute for Portland cement in concrete. Our raw materials sales provide customers with the raw materials that are essential to their business while also providing the sourcing, logistics, and management needed to facilitate these raw materials transactions around the globe. ERT services represent an innovative solution designed to meet utility customers' evolving and increasingly complex plant closure and environmental remediation needs. These customers need to retire and decommission older or underutilized assets while maximizing the asset's value and improving the environment. Our ERT services manage the sites' environmental remediation requirements, benefiting the communities and lowering the utility customers' costs.
As a result of our comprehensive offerings, the embedded nature of our on-site presence, our domain experience, and our track record of successful execution, we have built long-term relationships with leading U.S. regulated utilities and independent power producers, including Dominion Energy, Inc., Duke Energy Corporation, Dynegy Inc., PPL Corporation, The Southern Company, and Consumers Energy, among others. These relationships have spanned more than 20 years in some cases. Our operational footprint's national scale is also a key competitive differentiator, as many competitors are localized, focusing on a single geographic area (sometimes isolated to a single plant). We operate in more than 20 states, resulting in an overall footprint and density in key markets that we believe are difficult to replicate. We believe our national reach enables us to successfully pursue new business within our existing customer base and attract new customers while providing consistent quality, safety, and compliance standards.
Our services platform is led by a senior executive team with deep industry experience and is supported by a highly skilled labor force. The nature of our work requires employees to have specialized skills, training, and certifications for them to be allowed on-site at our customers’ facilities. Collectively, our focus on human capital management enables us to maintain and develop a labor force of highly qualified, well-trained personnel capable of handling our customers’ needs.
Market Opportunity
The U.S. power generation industry is composed of critical infrastructure providing essential electric power to communities nationwide. According to the U.S. Energy Information Administration (the “EIA”), as of 2022, there were approximately 500 large-scale facilities in the United States with generation capabilities of at least 250 megawatts, including more than 150 coal-fired power plants. With near-constant demand from consumers and industry, these facilities' continuous operation is critical given potentially high economic and reputational costs of downtime. These complex facilities have specialized and recurring environmental and compliance service needs to maintain continuous operations throughout their lifecycles. These service needs are particularly significant for coal-fired plants due to the increasing demands of environmental
regulation, the aging nature of the installed base, and the feedstock characteristics required to power such facilities. Due to the breadth and scope of these service needs, power plant operators typically do not possess the necessary capabilities internally and instead outsource these mission-critical and often regulatory-driven requirements to a fragmented set of service providers. Many significant dynamics support the continuing need for these specialized services.
Coal-Fired Power Plants Have Significant and Recurring Environmental Management Needs Associated with Their Waste Byproducts
Coal-fired power plants consistently generate various waste byproducts throughout the power generation process. The primary type of these waste byproducts is CCRs. CCRs come in multiple forms, including fly ash, bottom ash, and boiler slag, and are collected throughout the coal burning process. Although not considered a hazardous waste under the Resource Conservation and Recovery Act, as amended (the “RCRA”), utilities have significant regulatory and reputational risks associated with the handling and disposal of coal ash. According to the American Coal Ash Association, approximately 77 million tons of coal ash were produced in 2021, the latest year for which data is available. Coal ash management is mission-critical to coal-fired power plants' daily operations as they generally have on-site storage capacity for only three to four days of CCR waste accumulation. This limited coal ash storage capacity requires continuous daily monitoring, handling, transportation, and disposal to enable ongoing power plant operation. The U.S. Environmental Protection Agency (the “EPA”) has estimated that coal-fired utilities spend approximately $2.9 billion per year on coal ash management. Power plant operators typically engage specialized service providers to conduct this critical recurring activity on-site alongside their plant personnel.
Large Installed Base of Legacy Coal Ash Disposal Ponds That Require Remediation
Collected coal ash is disposed of or beneficially used (recycled) in a range of applications. According to the American Coal Ash Association, utilities disposed of approximately 40% of coal ash produced in the United States during 2021. According to EPA data published, of the CCRs generated that were not beneficially used, approximately 80% were disposed in on-site disposals units, with the balance transported and disposed of off-site at third-party landfills. For many years, coal-fired power plants relied on ash ponds as the primary disposal locations for CCRs. The vast majority of these older inactive and older existing ash ponds were constructed without the design standards now mandated by regulation to prevent harm to the environment, and those ponds will require remediation or closure in the future. The EPA estimated that there are more than 1,000 active and inactive on-site landfill and surface impoundments, substantially all of which will require remediation or closure. These sites will require significant capital expenditures from their owners and specialized environmental expertise to monitor them on an ongoing basis, remediate and relocate the waste, or completely close.
Power Plant Operators Are Increasingly Focused on Environmental Stewardship and Regulatory Compliance
Power plant operators face increasing pressure from regulators, advocacy groups, and their communities to manage the environmental risks associated with their operations. Therefore, the industry is increasingly focused on environmental stewardship. Due to the potentially considerable consequences of environmental liabilities, spending on environmental liability management has increased over time and is expected to increase in the future.
Additionally, power plants are highly regulated by environmental authorities at the federal, state, and local government levels, which have recently added compliance requirements. An example is the Disposal of Coal Combustion Residuals From Electric Utilities; Final Rule (the “CCR Rule”). A recent example is the Disposal of Coal Combustion Residuals From Electric Utilities; Final Rule (the “CCR Rule”). The EPA enacted the CCR Rule in April 2015 in response to two significant coal ash spills in Kingston, Tennessee and Eden, North Carolina, that caused widespread environmental damage. The CCR Rule regulates the disposal of coal ash as a solid waste. It established new requirements for the closure and remediation of existing coal ash ponds and restrictions on the location of new ash ponds. The CCR Rule will result in significant incremental environmental management costs for many industry participants. Also, the power generation industry is proactively implementing environmental best practices across their assets, even when not yet required by law.
Recycling Waste Byproducts Is a Critical Component of the Coal Ash Value Chain
Coal ash can be recycled to produce positive environmental, economic, and performance benefits, such as lower greenhouse gas (“GHG”) emissions, reduced use of other natural resources and improved strength and durability of materials. According to the American Coal Ash Association, approximately 47 million tons, or 60%, of coal ash produced in the United States was beneficially used in 2021. The leading beneficial use of coal ash is as a direct and more economical substitute for cement during the production of concrete (12.6 million tons of CCRs production and use in 2021). There are many good reasons to view coal combustion residuals as a resource rather than a waste. Recycling them conserves natural resources and saves energy.
In many cases, products made with CCRs perform better than products made without them. For instance, coal fly ash makes concrete stronger and more durable. It also reduces the need to manufacture Portland cement, resulting in approximately 12 million tons of greenhouse gas emissions reductions each year. An economic analysis by the American Road and
Transportation Builders Association estimates that coal fly ash used in roads and bridges saves approximately $5.2 billion per year in U.S. construction costs. Additionally, technologies currently available, including our EnviroSourceTM multi-process ash beneficiation technology, improve the characteristics of certain types of coal ash, making them more viable for recycling purposes and ultimately increasing the addressable market of recyclable coal ash.
Coal Power Generation Remains an Important Energy Source
According to the EIA, while renewable energy and natural gas sources are expected to provide an increasing share of U.S. domestic energy production, coal-fired power generation is expected to remain a key baseload energy source for decades, providing at least 0.9 trillion kilowatt-hours of energy production annually through 2050. In 2022, coal power generation accounted for approximately 20% of domestic U.S. energy generation. Coal power generation is projected to decrease to 18% between 2022 and 2023, due to increases in solar and wind projects coming online this year. Although these other energy generation sources are expected to make moderate gains on a percentage contribution basis, we believe the aggregate demand for coal power generation will remain consistent as the installed base of coal plants is deeply entrenched throughout the U.S. national power grid.
The Power Generation Industry Increasingly Requires Larger Scale Environmental Service Providers
The mounting burden of environmental compliance, the constant need to maintain aging facilities, and the focus on continuous and safe plant operations have the power generation industry, particularly the coal-fired energy producers, increasingly seeking to partner with outsourced service providers having a larger and broader scale that can provide a range of services on their behalf. Most prospective service providers either have narrow service offerings or a highly localized geographic focus (sometimes limited to a single plant). Few service providers can offer broad service capabilities with a track record of quality service, exceptional safety, exacting environmental standards, and a reliable labor force like Charah Solutions.
According to the EIA, after substantial retirements of U.S. coal-fired electric generating capacity from 2015 to 2020 that averaged 11.0 GW a year, coal capacity retirement slowed to less than 5.0 GW in 2021. However, the retirement of coal-fired generators increased in 2022 and operators plan to retire 8.9 GW of coal capacity in 2023, or 4.5% of the coal-fired generating capacity.
U.S. coal plants are retiring as the coal fleet ages and as coal-fired generators face increasing competition from natural gas and renewables. According to the EIA, power plant owners and operators have reported that they plan to retire 28%, or approximately 59.0 GW, of the coal-fired capacity currently operating in the United States by 2035. Since 2002, around 100 GW of coal capacity has retired in the United States, and the capacity-weighted average age at retirement was 50 years. As of September 2021, 212 GW of utility-scale coal-fired electric-generating capacity was operating in the United States, most of which was built in the 1970s and 1980s.
After a coal-fired plant is retired, the site will undergo a multi-year decommissioning, remediation and closure process. Remediation of CCRs is the main focus of coal plant decommissioning. Depending on the facility, CCRs are disposed of in on-site landfills or coal ash ponds or are beneficially reused in other products.
Many utilities are experiencing an increased need to retire and decommission older or less economically viable generating assets while minimizing costs and maximizing the asset's value and improving the environment. Our ERT services allow these partners to remove the environmental risk and insurance obligations and place control and oversight with a company specializing in these complex remediation and reclamation projects. We believe our broad set of service capabilities, track record of quality service and safety, exacting environmental standards, and a dependable and experienced labor force is a significant competitive advantage. Our work, mission and culture are directly aligned with meeting environmental, social, and governance (“ESG”) standards and providing innovative services to solve our utility customers’ most complex environmental challenges. Our work, mission and culture are directly aligned with meeting environmental, sustainability, and governance (“ESG”) standards and providing innovative services to solve our utility customers’ most complex environmental challenges. We have a proven track record of quality, safety, and compliance, and we are committed to reducing greenhouse gas emissions and preserving our environment for a cleaner energy future. We believe that we are an industry leader in quality, safety, and compliance, and we are committed to reducing greenhouse gas emissions and preserving our environment for a cleaner energy future.
Our Strengths
We believe our company has become a leader in providing mission-critical environmental services to the power generation industry. Our strengths that support our leading position include:
Outstanding Quality, Safety, and Compliance
We believe we are a partner of choice for our customers due to our reputation as a leader in quality, safety, and compliance. Utilities and independent power producers are generally risk-averse and focus on environmental and safety considerations as crucial factors for awarding on-site service provider contracts. We believe our reputation for and dedication to quality, outstanding safety record, and adherence to environmental compliance standards provide a distinct competitive advantage and differentiate us from many of our competitors. We believe our reputation for and dedication to quality, industry-leading safety record, and adherence to environmental compliance standards provide a distinct competitive advantage and differentiate us from many of our competitors. We believe we have developed trusted relationships and
credibility with regulatory agencies supported by our team of in-house compliance experts. We pride ourselves on being a reliable partner to our customers, consistently delivering high-quality, efficient, and on-time service.
These attributes are vital contributors to our leading market share positions. Our leading capabilities position us well for potential new business as customers recognize the value of engaging a proven service partner.
Broad Platform of Mission-Critical Environmental Services
Our broad platform of essential environmental services has enabled us to become a leading service provider to our power generation customers. In our end markets, we are a leading national service provider offering a suite of remediation and compliance services, byproduct services, raw material sales and ERT services. Our multi-service platform allows customers to gain efficiencies from sourcing multiple required offerings from a single, trusted partner compared to service providers with a more limited scope.
The national scale of our operational footprint is also a key differentiator, as many of our competitors are localized, focusing on a single geographic area (sometimes isolated to a single plant). We operate in more than 20 states across the country, resulting in an overall footprint and density in key markets that we believe are difficult to replicate. Our national reach enables us to successfully pursue new business within our existing customer base and attract new customers while providing consistent quality, safety, and compliance standards.
Long-Term Partnerships with Leading Power Generators
Our customers are some of the largest power generation companies in the United States, including Dominion Energy, Inc., Duke Energy Corporation, Dynegy Inc., PPL Corporation, The Southern Company and Consumers Energy. Given our services' essential nature, our on-site personnel becomes integrated into each facility's daily procedures, seamlessly working with utility employees to provide uninterrupted continuous operations. Our co-location and integration into our customers’ daily operations result in direct relationships with key decision-makers at every level of our customers’ organizations. We believe this embedded partnership deepens customer connectivity and drives longer customer tenure. In some cases, these relationships have spanned more than 20 years. For example, LG&E and KU Energy LLC, which PPL Corporation currently owns, have been customers for more than 20 years. We have also demonstrated the ability to grow our service offerings with a single customer. We first provided Duke Energy Corporation with byproduct services in 2001 at two plants, and we now provide all of our coal-related services across seven of their plants. We believe these long-term relationships are critical for renewing existing contracts, winning incremental business from existing customers at new sites, and adding new customers.
Innovative Solutions to Our Customers’ Environmental Challenges
Our customers regularly face complex, large-scale environmental challenges that require bespoke, technical solutions. We believe we have a proactive and differentiated approach to solving these challenges. Our internal technical and engineering experts have developed in-depth domain knowledge and capabilities in environmental remediation and the beneficial use of coal ash due to our long-term and significant experience in the sector. We believe this credibility, combined with an entrepreneurial mindset, enables us to source market opportunities not readily available to our competitors.
For example, we demonstrated this innovative approach for a major reclamation project at the Asheville Regional Airport in North Carolina. In the course of remediating an on-site ash pond at a nearby coal power plant, we had the vision to beneficially use that ash as structural fill to support a newly constructed taxiway at the airport. Our engineers designed a state-of-the-art, highly engineered structural fill system to capture the ash in an environmentally sound way. Asheville Regional Airport saved approximately $12 million by using coal ash instead of traditional materials, and approximately 4 million cubic yards of coal ash from an ash pond were beneficially used. We believe this innovative approach, coupled with new technologies and processes, generates additional value for our customers and stockholders.
Furthermore, our ERT turnkey project for Consumers Energy in Michigan is another example of our creative solutions to a complex problem. Remediating the existing ash ponds at the B.C. Cobb facility was part of the site's post-closure regulation requirements and sustainability objectives. Additionally, the utility and the community wished to further advance the wetlands along the eastern shore of Lake Michigan. We provided Consumers with a cost-effective proposal to meet these goals, provide remediation of the ponds and repurpose the site to natural wetlands.
We further demonstrated our innovative approach to customer’s environmental challenges through our turnkey ERT services in acquiring the Texas Municipal Power Agency's Gibbons Creek Steam Electric Station and Reservoir in Grimes County, Texas. As part of the asset purchase agreement, the Company, through one of its subsidiaries, acquired the 6,166-acre area that included the closed power station and adjacent property, the 3,500-acre reservoir, dam and spillway and assumed responsibility for the shutdown and decommissioning of the coal power plant as well as the performance of all environmental remediation work for the site landfills and ash ponds. As a sustainability leader in utility services, the Company is redeveloping the property in an environmentally conscious manner designed to expand economic activity and benefit the surrounding
communities through job creation, promotion of industry, support of the tax base, as well as restoring the property to a state that will enable it to be put to its best potential use.
Entrepreneurial Management Team Supported by Highly Skilled Labor Force
We are led by an experienced management team with an entrepreneurial mindset and a keen focus on safety and customer service. Our senior executive team consists of industry veterans with deep industry experience, helping us provide high-quality operational execution and solidify long-term customer relationships. In addition to a commitment to developing internal talent, we have made key strategic external hires to deepen our expertise further. Our entrepreneurial mindset drives us to continually search for new ways to maximize customer relevance and develop innovative solutions.
Our customers have unique certification and training requirements for the service providers they allow on-site. Our ability to hire, develop, and retain a highly-skilled labor force with specialized skills, training, and certifications is a critical differentiator in the sector. We also have a dedicated team of in-house professionals that focus exclusively on training, certification, and mentorship. As part of our commitment to safety and compliance, each of our on-site employees must complete a unique, rigorous training program. We train our managers to lead from the front line and share, involve, and support their teams. Our ability to staff large-scale projects rapidly is also critical. Collectively, our human capital management allows us to maintain and develop a labor force of highly qualified, well-trained personnel capable of handling our customers’ needs.
Our Growth Strategy
Expand Market Share by Capitalizing on the Significant Needs of Power Generation Customers
We have a substantial growth opportunity in the near term as U.S. coal-fired power generation facilities continue to remediate and close coal ash ponds and landfills. These projects are triggered as coal power plant operators preemptively manage environmental liabilities, comply with regulatory requirements (at the local, state, and federal levels), and work to meet consumer standards for environmental sustainability. We believe there are $75 billion in coal ash remediation opportunities in the United States, driving a need for creative remediation solutions, including the beneficiation of ash. We estimate there are more than 1,000 active and inactive landfills and surface impoundments, substantially all of which will require remediation or closure. We expect that customer spending for our core services, including ash pond and landfill remediation, will increase significantly over the next three to five years in response to these remediation requirements. We believe spending on coal ash management will increase due to our customers’ increased focus on environmental stewardship.
Continue to Grow On-Site Services Revenue by Expanding Our Offerings
We believe our broad platform of services is a competitive differentiator and, therefore, continuing to enhance the breadth of services offered to our existing customers is a key growth opportunity. We are a trusted partner and our team is embedded with the customer on-site to handle its most critical operational needs. As a result, we are well-positioned to identify relevant, attractive service offerings to add to our portfolio. We believe significant opportunities exist in remediation and compliance services and byproduct services across our platform. We believe significant opportunities exist in remediation and compliance services and byproduct services across our platform. We have earned our reputation as the premier one-stop solution to the power generation industry for ash pond remediation and compliance, environmentally friendly ash recycling and daily ash operations. We believe our customers will continue to find value in a full-service platform and source incremental services from us as an existing, on-site, trusted partner.
Leverage New and Existing Customer Relationships to Maximize Fleet-Wide Opportunities
The trend among our customers is to consolidate service providers. Given the breadth of our service offerings and our access to our customers’ senior decision-makers, we believe we are well-positioned to deepen our relationship with current customers by providing our services to other coal-fired power plants within their fleets. We see an opportunity to increase this percentage meaningfully. We will also seek to generate business with new utility customers and compete fleet-wide across their power plant footprints. We see similar opportunities in international geographies.
Invest in Innovative Technologies, Processes, and Solutions
We believe investments in new technology and processes present opportunities to provide higher-margin offerings while improving the environment. Our operations' embedded nature gives us a superior understanding of unique customer problems allowing us to deploy innovative solutions. We believe there are opportunities for technological innovation in environmental compliance and stewardship. For example, our EnviroSourceTM ash beneficiation technology provides an innovative new proprietary thermal process for fly ash beneficiation. This technology converts previously unusable coal ash into consistent, high-quality fly ash that meets industry specifications, increasing marketable fly ash supply to concrete producers nationwide. We expect these innovative technologies will allow us to optimize our traditional fly ash sales and distribution, enter new markets for our products, and provide cleaner, environmentally friendly solutions to our customers. We intend to continue to invest in new technologies and other processes that expand our portfolio of solutions and further establish us as an innovator in our industry.
Our Services
We deliver services and solutions to the power generation industry through one reportable segment. We have over 30 years of experience constructing, operating, and managing structural fill projects for coal-fired utilities and assisting coal-fired utilities in beneficially using waste byproducts. We offer a suite of end-to-end services providing remediation and compliance services, byproduct services, raw material sales and ERT services. Our remediation and compliance services primarily include environmental management of landfills for coal-fired power generation facilities and new and existing active pond management, including closure by removal, cap-in-place, and design and construction of new ponds. Additional service offerings include all aspects of landfill development, construction, and management. Our remediation and compliance services teams can also provide site evaluation and characterization; preliminary design and cost estimates with life-cycle analysis; hydrogeological assessments; groundwater and containment modeling; permit application and processing for expansions and greenfield sites; design engineering; construction of landfills and cap and cover systems; conversion of impoundments to landfill sites; quality assurance and quality control and documentation; engineered fills (off-site) and other related services.
Our byproduct services offerings include recycling recurring and contracted volumes of coal-fired power generation waste byproducts, such as bottom ash, fly ash, and gypsum byproducts, as sustainable and environmentally-friendly construction materials. These byproducts can be used for various industrial purposes, including producing concrete products as a replacement for Portland cement. Our dedicated sales and marketing team has a national presence, and it works with many of the nation’s largest power generators to identify opportunities to improve each customer’s long-term position in the market while providing concrete producers with the consistent fly ash sourcing they need. With various coal sources being utilized across the power generation industry, we evaluate, process, and market the different bottom ash products to achieve the highest value for a given market area. Our byproduct services offerings also include coal ash management, which is mission-critical to the daily operations of power plants as they generally only have on-site storage capacity for three to four days of CCR waste accumulation. These services offerings focus on recurring and daily onsite management operations for coal-fired power generation facilities to fulfill our customers' environmental service needs in handling their waste byproducts. These services include silo management, on-site ash transportation and capture and disposal of ash byproducts from coal power operations. Our operations cover the management of a wide variety of combustion byproducts, including bottom ash, flue gas desulfurization ("FGD") gypsum disposal, Pozatec/fixated scrubber sludge disposal, and fluidized bed combustion fly ash disposal. We coordinate all aspects of the ash management operation, from processing and screening for sales to facilitating economical disposal.
Our raw materials sales provide customers with the raw materials that are essential to their business while also providing the sourcing, logistics, and management needed to facilitate these raw materials transactions around the globe.
Our ERT services represent an innovative solution designed to meet the utility customers' evolving and increasingly complex plant closure and environmental remediation needs. These customers need to retire and decommission older or underutilized assets while maximizing the asset's value and improving the environment. Our ERT services manage the sites' environmental remediation requirements benefiting the communities and lowering utility customers' costs. We provide a custom, environmentally-friendly approach to these large-scale projects that removes the liability from the utility through the acquisition of the property. We then provide environmental remediation of the ash ponds and landfills to meet all local, state and federal regulations. We will then redevelop the property upon project completion for public use, which typically includes natural habitat restoration for marine and other wildlife.
Safety Record
Utilities and independent power producers are focused on environmental and safety considerations as crucial factors for awarding on-site service provider contracts. We believe our strong safety record provides a distinct competitive advantage. We believe we have developed trusted relationships and credibility with regulatory agencies and utilities over the past 30 years due to our long-standing safety record supported by an experienced team of in-house safety and regulatory compliance professionals.
Safety is integral to our culture and our results, and it is one of our core values. We believe we operate under the strictest safety standards, and we are committed to maintaining a safe working environment. Our dedicated in-house team of safety professionals develops and trains our employees and subcontractors to perform their jobs safely and proactively contribute to a safe workplace. This expert team includes highly trained professionals who are accredited Occupational Safety and Health Administration trainers, along with full-time transportation specialists in both over-the-road and rail operations.
We recognize the unique safety issues related to working with our utility industry partners. Our Engineering, Environmental, and Quality Group has the expertise and experience to ensure our operations are compliant with local, state, and federal regulations and exceed our industry's customary safety standards.
Sales and Marketing
Our MultiSource® materials network is a unique distribution system of nearly 40 locations serving the United States, Mexico, and Canada with sourcing, transportation modes, and distribution options that ensure a steady and reliable supply of supplementary cementitious materials (“SCMs”). The MultiSource® materials network provides SCMs to markets where they are needed and sufficient storage to level out seasonal supply and demand fluctuations. Logistics support must include an established network of transportation options, including truck, rail, and barge, as well as sufficient storage and supply capabilities to meet the on-time delivery requirements of customers. By combining the strengths of our EnviroSourceTM ash beneficiation technology, the proven MultiSource® network, and strategic investment in logistics infrastructure, we can meet demand in regions not previously attainable while maintaining a competitive price, consistent quality and supply for concrete producers.
Our dedicated sales and marketing team has built successful and long-term relationships with the nation’s largest power generators. We think we can leverage the deep connections and strong operational track record we have built to broaden our on-site presence and deepen client partnerships. We also seek to grow our business with new power generation customers and compete enterprise-wide across their power plant footprints. Through close connections with utility management and personal relationships developed daily by our network of embedded field teams of regional managers and site managers, we believe we understand our customers’ needs and that we can quickly respond to their project requirements and provide creative solutions. Our team includes professional engineers, experienced site managers, and seasoned estimators who strive to be detailed, accurate, and upfront, enabling us to minimize contract modifications after the work begins. We employ what we refer to as a “zippered” organizational approach to customer service and marketing, leveraging relationships up and down the organization. By structuring our organization around our customers’ needs through this unique network of regional field operations managers, we ensure that projects are completed on time and within budget. Additionally, we can quickly recognize opportunities to cross-sell and market our services.
Customers
We have developed our long-term, committed relationships to become a preferred provider to many of the largest power generation companies in the United States. In 2022, we performed work at more than 40 plants for more than 20 “blue-chip” entities, including Ameren Corporation, Big Rivers Electric Corporation, Consumers Energy, Dominion Energy, Inc., Duke Energy Corporation, Hoosier Energy Rural Electric Cooperative, Inc., NRG Energy, Inc., PPL Corporation, The Southern Company and Vistra Corp. The majority of our power generation clients have investment-grade credit ratings. During the year ended December 31, 2022, one customer accounted for $64,484 of total consolidated revenue. During the year ended December 31, 2021, three customers accounted for 36% of total consolidated revenue. As of December 31, 2022, this customer accounted for 28.9% of total consolidated trade accounts receivable, net. As of December 31, 2021, these three customers accounted for 18% of total consolidated trade accounts receivable, net. If a major customer decided to stop purchasing our services, revenue could decline, and our operating results and financial condition could be adversely affected.
Award Status
In 2022, we won $247 million in contracted new awards, as compared to $840 million and $715 million in 2021 and 2020, respectively. Though the timing of future awards is difficult to determine, we believe we are well-positioned to capture a significant portion of a large and growing addressable market.
Joint Ventures and Contractual Arrangements
A portion of our byproduct services was provided through the following two joint ventures:
Ash Venture Joint Venture
In December 2013, we formed Ash Venture LLC, a North Carolina limited liability company (“Ash Venture”), which provided ash management and marketing services to the utility industry. Ash Venture was a joint venture between Charah, LLC, a Kentucky limited liability company and our wholly-owned subsidiary (“Charah”), and Titan America, LLC, an unrelated third party. Ash Venture is a joint venture between Charah, LLC, a Kentucky limited liability company and our wholly-owned subsidiary (“Charah”), and Titan America, LLC, an unrelated third party. Charah owned 67% of Ash Venture, and the third party owned 33%. Charah owns 67% of Ash Venture, and the third party owns 33%. During the year ended December 31, 2021, the agreement to provide ash management and marketing services with the third-party utility partner came to its conclusion, and the joint venture began settling its remaining current assets and liabilities through the normal course of business. The joint venture was dissolved during the year ended December 31, 2022.
Equity Method Investment
In January 2016, we formed CV Ash, a joint venture with VHSC Holdings, LLC, an unrelated third party, which marketed and sold fly ash to the ready-mix concrete market. We accounted for the joint venture under the equity method. We account for the joint venture under the equity method. Charah and the third party each owned 50% of the joint venture. Charah and the third party each own 50% of the joint venture. During the first quarter of 2021, the CV Ash joint venture relationship ended, and the joint venture began settling its remaining current assets and liabilities through the normal course of business. The joint venture was dissolved during the year ended December 31, 2022.
Competition
The power and environmental services industries are highly fragmented across regional competitors. A limited subset of competitors provides a national presence, few of which offer the same spectrum of services we provide. Our competitors consist of a mix of large environmental and waste management businesses that do not specialize in ash management services and hundreds of regional and local companies with limited-service areas, typically servicing only one to three sites each. The highly fragmented and regional nature of our industry has produced a limited number of competitors with a national scope.
We are a leading national service provider offering a suite of coal ash management and recycling services to the power generation industry. While some competitors are significantly engaged in one of the core areas in the power or environmental services value chain, many have limited or no engagement in most of our core areas.
Seasonality
Based on historical trends, we expect our operating results to vary seasonally due to demand within our industry as well as weather conditions. For additional information on the effects of seasonality on our operating results, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Factors Affecting Our Business and Financial Statements—Seasonality of Business.”
Risk Management and Insurance
The nature of our business exposes us to liabilities arising out of our operations, including possible damages to the environment. Such potential liabilities could involve, for example, claims for remediation costs, personal injury, property damage, and damage to the environment, including natural resources, claims of employees, customers, or third parties for personal injury or property damage occurring in the course of our operations, or claims alleging negligence or other wrongdoing in the planning or performance of work. We could also be subject to fines, civil and criminal penalties and other sanctions in connection with alleged violations of regulatory requirements that could be significant. We maintain general liability, contractor’s pollution liability policies (as well as additional pollution and remediation policies as needed), vehicle liability, employment practices liability, fiduciary liability, directors’ and officers’ liability, workers’ compensation, property, and employer’s liability coverages. We also maintain umbrella liability policies to provide excess coverage over the underlying limits contained in these primary policies.
Regulation
Our coal-based generation utility customers are subject to various federal, state, and local environmental laws and regulations. Our operations and services for these utility customers are subject to many of the same environmental laws and regulations that govern the host utility site. These environmental laws and regulations, among other things, impose limits on the discharge of pollutants into the air and water, and they establish requirements for the treatment, storage, and disposal of solid and hazardous materials, remediation of releases of hazardous substances, and reclamation of land. Compliance with applicable environmental laws and regulations adds to the cost of doing business. Moreover, to establish and operate power plants and collect, transport, and manage CCRs, our customers and we have obtained various federal, state, and local environmental permits. We must comply with these permits or processes and procedures approved by regulatory authorities. Any failure to comply with these laws or regulations, permits, or processes and procedures could result in the issuance of substantial fines and penalties or other sanctions and may cause us (or our customers) to incur environmental or reclamation liabilities or subject us (or our customers) to third-party claims.
We generally perform our remediation and compliance and byproduct service offerings on-site at the host utility power plant. As such, the utility holds permits for our operational activities performed on-site. We secure any necessary permits at facilities that we own or lease.
Despite the safeguards we follow, our operations entail risks of regulatory noncompliance or releases of hazardous substances that could create an environmental liability.
Regulations Affecting the Company
Our service offerings are subject to environmental laws and regulations that can increase operating costs and give rise to increased risk of regulatory noncompliance and environmental liabilities.
• Resource Conservation and Recovery Act. RCRA Subtitle C regulates the handling, transporting, and disposing of hazardous waste. RCRA Subtitle D regulates non-hazardous wastes and delegates authority to states to develop solid waste programs. In 1991, the EPA issued final regulations under RCRA Subtitle D, which set forth minimum federal performance and design criteria for municipal solid waste garbage landfills. In 2015, the EPA published regulations under RCRA Subtitle D for CCRs generated by the electric utility industry. Subtitle D municipal solid waste regulations are implemented by the states, although states can impose more stringent
requirements than the Subtitle D standards. The CCR Rule regulates the disposal of CCRs under RCRA Subtitle D as non-hazardous wastes, as discussed below.
• EPA CCRs Rule. As a CCR, coal ash had previously mainly been exempted from regulation under the RCRA by the “Bevill amendment” and, therefore, was subject to state-level solid waste regulations. However, after a major spill at a Tennessee Valley Authority site in Tennessee in 2008, the EPA began a rulemaking process to regulate CCRs. That process ended with the publication in April 2015 of the CCR Rule to regulate the disposal of CCRs, including fly ash, bottom ash, and flue gas desulfurization products generated at coal-fired power plants. The CCR Rule (which became effective October 17, 2015), among other things, regulates CCRs as non-hazardous waste and imposes new standards for location, groundwater monitoring, and dam stability on surface impoundments and requires long-term monitoring of existing and new surface impoundments and landfill facilities. The CCR Rule, among other things, regulates CCRs as non-hazardous waste and imposes new standards for location, groundwater monitoring, and dam stability on surface impoundments and requires long-term monitoring of existing and new surface impoundments and landfill facilities. The CCR Rule also preserves an exemption for CCRs when used for beneficial purposes.
•CCR Rule Litigation and Amendments. In March 2018, the EPA issued proposed “Phase 1” rules to reconsider certain sections of the CCR Rule (including provisions remanded back to EPA by the D.C. Circuit Court of Appeals in June 2016). In July 2018, the EPA issued a final “Phase 1, Part 1” rule that modified the CCR Rule to allow the application of certain alternative performance standards by states with EPA-approved CCR permit programs under the Water Infrastructure Improvements for the Nation Act (the “WIIN Act”). In July 2018, the EPA issued a final Phase-1 1-Part rule to modify the CCR Rule to establish the program to grant states authorization with approved CCR permit programs under the Water Infrastructure Improvements for the Nation Act (the “WIIN Act”). The Phase 1, Part 1 rule also established Groundwater Protection Standards for certain chemical constituents under the CCR Rule and provided additional time (until October 31, 2020) for certain non-compliant CCR surface impoundments to cease receipt of waste and begin closure. (EPA has stated its intent to issue a Phase 1, Part 2 rule in the future to address elements of the Phase 1 proposal not finalized in the Part 1 rule.) In August 2018, the U.S. Court of Appeals for the D.C. Circuit vacated and remanded portions of the CCR Rule to EPA for further rulemaking, including a finding that unlined (including clay-lined) CCR surface impoundments must be closed under the rule. In August 2020, EPA finalized its Holistic Approach to Closure Part A regulation, which, among other things, requires: the closure of unlined CCR surface impoundments (including clay-lined impoundments) (pursuant to the D.C. Circuit decision of August 2018); established a deadline of April 11, 2021 for such unlined CCR surface impoundments to cease receipt of waste and commence closure; established a process whereby affected owners/operators could request additional time to cease receipt of waste and commence closure based on the unavailability of alternative CCR disposal capacity; and amended and expanded the annual Groundwater Monitoring and Corrective Action reporting requirements under the CCR Rule. EPA also finalized part of its Holistic Approach to Closure Part B regulation in November 2020, which established an option for certain CCR surface impoundments to continue operation based on an alternative liner demonstration.
• WIIN Act. In December 2016, Congress passed the WIIN Act, which, among other things, establishes an option for states to assume primacy in permitting and enforcement of the CCR Rule. The WIIN Act directed the EPA to provide guidance to states on issuing state regulations to manage the CCR program. The EPA published the Coal Combustion Residuals State Permit Program Guidance Document (Interim Final) in August 2017. States may now submit their CCR regulatory programs to the EPA and receive EPA approval provided they are equivalent to or more stringent than federal guidelines. The EPA published the Coal Combustion Residuals State Permit Program Guidance Document (Interim Final) in August 2017. States may now submit their regulatory programs for CCRs and receive EPA approval provided they are equivalent to or more stringent than federal guidelines. As noted above, the rule finalized by the EPA in July 2018 further implements the WIIN Act's objectives by allowing states or the EPA to incorporate flexibilities into their coal ash permit programs. On February 20, 2020, EPA published a proposed rule in the Federal Register that would establish a federal CCR permit program administered by EPA (in the absence of an approved state permitting program), pursuant to its authority under the WIIN Act. EPA has stated that it intends to issue a final federal CCR permitting rule in July 2023. In February 2023, the EPA announced a $2 billion infrastructure law grant for participating states and territories to address contaminants in drinking water under the WIIN Act.
•Groundwater Protection. On January 11, 2022, the EPA made a series of announcements concerning the agency’s interpretation and enforcement of the CCR Rule, which EPA said were designed to expand and strengthen the regulation of coal ash and groundwater protection at regulated CCR surface impoundments and landfills. First, EPA announced proposed decisions (three denials and one conditional approval) for four of the 57 “Part A Demonstrations” submitted to EPA pursuant to the Holistic Approach to Closure Part A rule. In those proposed decisions, EPA stated, among other things, that CCR surface impoundments and landfills cannot be closed with coal ash in contact with groundwater. EPA has subsequently issued additional proposed decisions on Part A Demonstrations and has finalized several of those decisions. In those decisions, EPA has provided its interpretations on a number of regulatory issues, including remediation and closure criteria for leaking ash ponds, all of which are likely to increase environmental management costs for many industry participants. In recent years, federal and state environmental regulations have imposed more stringent requirements regarding the emission of air pollutants and other toxic chemicals, reduction of GHG emissions, and water quality impacts from coal operations. Several legal actions are pending that challenge EPA’s Part A interpretations. In EPA’s January 2022 announcements, the agency also stated that it had sent letters to certain other facilities noting concerns with their CCR Rule
compliance and that it intended to move forward with rulemaking for a federal CCR permit program and a CCR “legacy impoundment” rule (see below).
•Legacy Impoundments. On October 14, 2020, EPA issued an advanced notice of proposed rulemaking seeking input on inactive CCR surface impoundments at inactive electric utilities, referred to as “legacy CCR surface impoundments.” The notice was in response to an August 21, 2018 court decision that vacated and remanded the provision that exempted inactive impoundments at inactive electric utilities from the 2015 CCR rule. EPA has stated its intent to publish a proposed rule to regulate “legacy CCR surface impoundments” in June 2023. This rule has the potential to require investigation, remediation and/or closure activities at numerous additional former CCR surface impoundments.
The CCR Rule affirms that beneficial uses of CCRs remain exempt from federal waste regulation under the RCRA’s “Bevill amendment.” The regulation defines beneficial use as where CCRs provide a functional benefit, substitute for the use of virgin material, meet the product specifications, follow established specifications for use, and are environmentally equivalent to the material that they substitute for or are below all thresholds for safety and environmental impact. In February 2014, the EPA released a report determining that the use of fly ash in concrete constitutes a beneficial use, and the CCR Rule notes explicitly that the incorporation of fly ash in concrete, as a replacement for Portland cement, is one of “the most widely recognized beneficial applications” of CCRs. The CCR Rule indicates that the use of CCRs in applications such as road base generally would qualify as beneficial use, so long as relevant regulations and guidelines are followed.
In September 2016, the U.S. Commission on Civil Rights (the “Civil Rights Commission”) issued a report which determined that CCR disposal facilities can negatively impact environmental justice communities. While the Civil Rights Commission cannot require changes to EPA regulations, environmental organizations may seek to use the Civil Rights Commission’s report to spur the EPA to make regulatory changes.
Regulations Affecting the Coal Industry
The services offerings are dependent upon managing CCRs produced by our customers, typically coal-fired power plants. Coal-fired power plants and the coal industry are generally highly regulated under federal and state law. Regulation affecting this industry is ever-evolving, including the following:
• Clean Air Act. The federal Clean Air Act of 1970 and subsequent amendments, particularly the Clean Air Act Amendments of 1990 (as amended, the "CAA"), and corresponding state laws and EPA regulations (discussed below), regulate the emission of air pollutants such as SOx, NOx, particulate matter (“PM”), and ozone. The EPA finalized more stringent ambient air quality standards for fine PM in January 2013 and ozone in October 2015 and issued a final policy assessment for NOx in April 2017 and a draft policy assessment for SOx in August 2017. The EPA concluded that the current primary NOx standard is adequate, but has not taken additional steps concerning the SOx standards. Utilities have been required to make changes, such as changing fuel sources, installing expensive pollution control equipment, and, in some cases, shutting down plants to meet EPA emissions limits. On January 20, 2021, the current administration issued an executive order directing all federal agencies to review and take action to address any federal regulations, orders, guidance documents, policies and any similar agency actions promulgated during the prior administration that may be inconsistent with the administration’s policies. As a result, the degree to which certain recent regulatory developments may be modified or rescinded is unclear. The executive order also established an Interagency Working Group on the Social Cost of Greenhouse Gases (“Working Group”), which is called on to, among other things, develop methodologies for calculating the “social cost of carbon,” “social cost of nitrous oxide” and “social cost of methane.” The Working Group filed its final recommendations on January 25, 2022. with the public comment period ending on February 15, 2022. The recommendations are currently undergoing external scientific peer review managed by a contractor of the EPA. A meeting of the expert panel peer reviewing EPA's "Report on the Social Cost of Greenhouse Gases: Estimates Incorporating Recent Scientific Advances" occurred on March 29, 2023. Further regulation of air emissions and uncertainty regarding the future course of regulation could eventually reduce the coal demand.
•National Ambient Air Quality Standards. The CAA requires the EPA to set National Ambient Air Quality Standards (“NAAQS”) for six pollutants considered harmful to public health and the environment (“criteria pollutants”). Areas that are not in compliance with these standards are considered “non-attainment areas.” In recent years, the EPA has adopted more stringent NAAQS for these criteria pollutants that could directly or indirectly impact coal plants by designing new non-attainment areas. This could prompt local changes to permitting or emissions control requirements, as prescribed by federally mandated state implementation plans that require emission source identification and emission reduction plans. Final rules may require significant investment in emissions control technologies by our customers in the electric power generation industry and could affect coal demand. For example, in 2015, the EPA finalized the NAAQS for ozone pollution and reduced the limit to 70
parts per billion (ppb) from the previous 75 ppb standard. The final rule was challenged in the D.C. Circuit. On April 7, 2017, the EPA advised the D.C. Circuit that it intended to reconsider the final rule, and the Court subsequently stayed the litigation pending further action by the EPA. In August 2018, the EPA ultimately decided not to revisit the rule. As a result, the D.C. Circuit lifted its stay of the 2015 ozone NAAQS rule imposing the 70 ppb ambient air quality standard while the EPA reviews the standards under an expedited review process. On October 31, 2019, the EPA published a draft policy assessment recommending that the 70 ppb ozone NAAQS be retained. In December 2020, the EPA retained without changes these current NAAQS standards. However, as noted above, on January 20, 2021, the current administration issued an executive order directing federal agencies to review and take action to address any federal regulations or similar agency actions promulgated during the prior administration that may be inconsistent with the current administration’s stated priorities. On October 29, 2020, the EPA determined that California, Connecticut, New York, Pennsylvania, and Texas did not submit a State Implementation Plan (SIP) revision which satisfied the CAA’s reasonably available control technology (RACT) requirements with regard to ozone standards. The EPA’s findings trigger a 24-month deadline for the EPA approve the respective SIP or finalize a Federal Implementation plan which addresses the deficiencies. In January 2023, EPA issued a proposed reconsideration for the PM2.5 NAAQS, proposing to lower the current annual standard from 12 ug/m3 to a level between 9 and 10 ug/m3. EPA is expected to issue a final PM NAAQS rule in the summer 2023. In March 2023, EPA’s Clean Air Scientific Advisory Committee discussed an ozone NAAQS in the range of 55 ppb to 60 ppb, in addition to a more stringent secondary ozone standard. EPA is expected to issue a proposed ozone NAAQS rule in spring 2024. In January 2023, EPA issued a proposed reconsideration for the PM2.5 NAAQS, proposing to lower the current annual standard from 12ug/m3 to a level between 9 and 10 ug/m3. EPA is expected to issue a final PM NAAQS rule in the summer of 2023. In March 2023, EPA's Clean Air Scientific Advisory Committee discussed an ozone NAAQS in the range of 55 ppb to 60 ppb, in addition to a more stringent secondary ozone standard. EPA is expected to issue a proposed ozone NAAQS rule in spring 2024.
• Cross-State Air Pollution Rule. In July 2011, the EPA adopted the Cross-State Air Pollution Rule (the “CSAPR”), a cap-and-trade type program requiring utilities to make substantial reductions in SO2 and NOx and emissions that contribute to ozone and in fine PM emissions to reduce interstate transport of such pollution. The CSAPR was challenged and vacated by the D.C. Circuit Court of Appeals in August 2012, but the U.S. Supreme Court reversed that decision in April 2014. The D.C. Circuit has since lifted its stay on the CSAPR and ruled in favor of the EPA on the remaining significant issues. In January 2016, the EPA filed a brief with the D.C. Circuit addressing the remaining legal challenges left undecided by the U.S. Supreme Court’s 2014 decision. Conforming with a court-ordered schedule, the EPA implemented the first phase of the CSAPR in 2015 and 2016 and the second phase in 2017. In November 2014 and January 2015, the EPA issued notices of data availability outlining emission allowance allocations for existing generating units that began operating before and after 2010. In September 2016, the EPA finalized a rule updating the CSAPR to maintain 2008 ozone emission limitations in downwind states by addressing summertime (May-September) transport of ozone pollution (the "CSAPR Update"). The CSAPR Update, which commenced in May 2017, sets stricter NOx ozone season emission budgets in 22 states and could affect up to 886 coal-fired facilities. For both NOx and SO2, these emission control requirements can impact the quantity and quality of CCRs produced at a power plant, add to the costs of operating a power plant, and make coal a less attractive fuel alternative in the planning and building of utility power plants. On December 6, 2018, the EPA issued the CSAPR “Close-Out” Rule, a final determination that the CSAPR achieves concerning the 2008 ground-level ozone NAAQS in 20 states. Accordingly, those states will not be required to impose requirements for further reduction in transported ozone pollution. The covered states do not need to submit state implementation plans to establish additional requirements beyond the existing CSAPR Update. Several states and other entities challenged the CSAPR Close-Out Rule in the D.C. Circuit. In a September 13, 2019 ruling, the D.C. Circuit remanded the CSAPR Update to the EPA, finding that rule is inconsistent with the CAA. In a subsequent October 1, 2019 ruling, the CSAPR Close-Out Rule was vacated. On March 15, 2021, the EPA finalized its Revised CSAPR Update Rule to address 21 states’ outstanding interstate pollution transport obligations for the 2008 NAAQS. Starting in the 2021 ozone season, the rule requires additional emissions reductions of NOx from power plants in 12 states. In March 2023, EPA finalized the Good Neighbor Plan for 2015 ozone NAAQS, which requires significant reductions of NOx from power plants and industrial sources in 23 states. The CSAPR Update Rule and Good Neighbor Plan will affect the demand for coal. The CSAPR Update Rule will affect the demand for coal.
• Comprehensive Environmental Response, Compensation and Liability Act. Certain environmental laws, including the Comprehensive Environmental Response, Compensation and Liability Act (the “CERCLA”) and similar state laws, impose strict, joint and several liability on responsible parties for the investigation and remediation of regulated materials at contaminated sites, including our sites, customer sites, and sites to which we sent wastes,
including CCRs. CCRs may contain materials such as metals that are regulated materials under these laws. Management of CCRs can give rise to liability under the CERCLA and similar laws.
• Mercury and Air Toxics Standards for Power Plants. In February 2012, under its Mercury and Air Toxics Standards ("MATS") for Power Plants rule, the EPA promulgated final limits on mercury and other toxic chemicals from new and modified power plants. In February 2012, under its Mercury and Air Toxics Standards for Power Plants rule, the EPA promulgated final limits on mercury and other toxic chemicals from new and modified power plants. In June 2015, the U.S. Supreme Court ordered the EPA to undertake a cost-benefit analysis when promulgating mercury and air toxics standards. In April 2016, the EPA published a supplemental finding pursuant to the U.S. Supreme Court’s directive, that was challenged in the D.C. Circuit. In April 2017, the D.C. Circuit granted the EPA’s motion to stay the litigation while the EPA reconsiders its finding that the rule is “appropriate and necessary” as required under the Clean Air Act. In March 2023, EPA issued a final rule reaffirming that it remains appropriate and necessary to regulate mercury and other hazardous air pollutants from power plants, revoking a 2020 finding that it was not appropriate and necessary. In April 2023, EPA issued a new proposed MATS rule to strengthen and update the standards. If finalized and upheld, requirements to control mercury emissions could result in the implementation of additional technologies at power plants that could negatively affect fly ash quality. If upheld, requirements to control mercury emissions could result in the implementation of additional technologies at power plants that could negatively affect fly ash quality.
• GHG Emissions. Some states and regions have adopted legislation and regulatory programs to reduce GHG emissions, either directly or through mechanisms such as renewable portfolio standards for electric utilities. These programs require electric utilities to increase their use of renewable energy, such as solar and wind power. Federal GHG legislation appears unlikely in the near term. The EPA has initiated a review of rules finalized in August 2015 for GHG emissions from new and existing fossil fuel-fired electric power plants and for carbon emissions from existing sources in the power sector (the latter being known as the “Clean Power Plan”). The Clean Power Plan establishes state-specific, rate-based reduction goals for carbon emissions and calls on the power sector to reduce carbon emissions to 32% below 2005 levels by 2030.
On June 19, 2019, the EPA finalized the Affordable Clean Energy ("ACE") rule to replace the Clean Power Plan. The ACE rule establishes emission guidelines for states to develop plans to address greenhouse gas emissions from existing coal-fired power plants. The ACE rule has several components: a determination of the best system of emission reduction for greenhouse gas emissions from coal-fired power plants, a list of “candidate technologies” states can use when developing their plans, a new preliminary applicability test for determining whether a physical or operational change made to a power plant may be a “major modification” triggering New Source Review, and new implementing regulations for emission guidelines under Clean Air Act section 111(d). In January 2021, the ACE rule was vacated by the D. In January 2016, the EPA filed a brief with the D. C. Circuit. In June 2022, the U.S. Supreme Court in West Virginia v. EPA held that "generation shifting" represents a "major question" where Congress must give clear authority, and that the EPA lacked that authority. EPA intends to issue a new GHG power plant rule in 2023.
In December 2015, 195 nations (including the United States) signed the Paris Agreement, a long-term, international framework convention designed to address climate change over the next several decades. This agreement entered into force in November 2016 after more than 70 countries, including the United States, ratified or otherwise agreed to be bound by the agreement. The United States was among the countries that submitted its declaration of intended greenhouse gas reductions in early 2015, stating its intention to reduce U.S. greenhouse gas emissions by 26-28% by 2025 compared to 2005 levels. Whether and to what extent the United States meets its stated intention likely depends on several factors, including whether the ACE rule is implemented. In June 2017, the Trump administration announced the United States' intention to withdraw from the Paris Agreement. In November 2019, the Trump administration formally initiated the withdrawal process and formally exited the Agreement on November 4, 2020. In January 2021, the current administration issued an executive order commencing the process to reenter the Paris Agreement, although the emissions pledges connected with that effort have not yet been updated. Regardless of the extent to which the United States ultimately participates in these reductions, participation in the Paris Agreement framework could reduce the overall demand for coal over the long term. On February 19, 2021, the current administration rejoined the Paris Agreement. Regardless of the extent to which the United States ultimately participates in these reductions, participation in the Paris Agreement framework could reduce the overall demand for coal over the long term.
Several U.S. states have enacted legislation establishing greenhouse gas emissions reduction goals or requirements or joined regional greenhouse gas reduction initiatives. Some states have also enacted legislation or regulations requiring electricity suppliers to use renewable energy sources to generate a certain percentage of power or that provide financial incentives to electricity suppliers to use renewable energy sources. For example, eleven northeastern states are current members of the Regional Greenhouse Gas Initiative, a mandatory cap-and-trade program established in 2005 to cap regional carbon dioxide emissions from power plants. Six Midwestern states and one Canadian province entered into the Midwestern Regional Greenhouse Gas Reduction Accord to establish
voluntary regional greenhouse gas reduction targets and develop a voluntary multi-sector cap-and-trade system to help meet the targets. However, it has been reported that the members no longer are actively pursuing the group’s activities. Lastly, California and Quebec remain members of the Western Climate Initiative, formed in 2008 to establish a voluntary regional greenhouse gas reduction goal and develop market-based strategies to achieve emissions reductions. Those two jurisdictions have adopted their own greenhouse gas cap-and-trade regulations. Several states and provinces that initially were members of these organizations and some current members have joined the new North America 2050 initiative, which seeks to reduce greenhouse gas emissions and create economic opportunities aside from cap-and-trade programs. Any particular state, or any of these or other regional groups, may have or adopt future rules or policies that cause some coal users to switch from coal to a lower carbon fuel. There can be no assurance at this time that a carbon dioxide cap-and-trade-program, a carbon tax or other regulatory or policy regime, if implemented by any one or more states or regions in which our customers operate or at the federal level, will not affect the future market for coal in those states or regions and lower the overall demand for coal.
• EPA Water Quality Regulations. The EPA is addressing water quality impacts from coal-fired power plants and coal mining operations. To obtain a permit for certain coal mining activities, including the construction of coal refuse areas and slurry impoundments that may result in impacts to “waters of the United States,” an operator may need to obtain a permit for the discharge of fill material from the U.S. Army Corps of Engineers (“ACOE”) under Section 404 of the Clean Water Act (CWA), as well as a corresponding permit (“water quality certification”) from the state regulatory authority under Section 401 of the CWA. All permits associated with the placement of dredged or fill material that meet certain minimum thresholds require appropriate mitigation. All permits associated with the placement of dredged or fill material subject to minimum thresholds require appropriate mitigation. Permit holders must receive explicit authorization from the ACOE before proceeding with mining activities. The definition of waters of the United States (“WOTUS”) has been in flux for many years, with the Obama Administration adopting the so-called Clean Water Rule in 2015, with the effect of dramatically increasing the scope of waters considered to be WOTUS and therefore expanding the reach of the CWA permitting program. On February 28, 2017, President Trump issued an executive order prompting the EPA and ACOE to consider replacing the Clean Water Rule. Pursuant to that direction, EPA and the ACOE subsequently stated their intent to propose a new regulation, known as the Navigable Waters Protection Rule (“NWPR”), that again reduced the scope of waterbodies subject to federal jurisdiction. A final rule repealing the 2015 definition of “waters of the United States” became effective in late 2019. The Trump Administration subsequently issued and finalized the NWPR in 2020, which substantially reduced the scope of waters that fell within the Clean Water Act’s jurisdiction, in part by excluding ephemeral streams, which potentially qualified as “waters of the United States” under the 2015 Clean Water Rule. The Biden Administration subsequently revoked the Trump NWPR, reinstating the WOTUS regulatory regime that existed prior to the 2015 Obama rule (effective March 2023) and promising to update the WOTUS regulations in a subsequent rulemaking. The Biden rule reinstating the previous regulatory regime has been challenged in numerous courts and has been suspended in over 25 states. The outcome of these rulemakings and litigation is in doubt and will continue to create uncertainty in the permitting of coal mining activities in the coming years.
In September 2015, the EPA finalized new effluent limitations guidelines (the "Steam Electric ELGs") under the Clean Water Act for steam electric power generating facilities. The ELGs place minimum standards on discharges of pollutants in wastewater from steam electric power plants. The final rule generally required coal plant operators with a generating capacity of over 50 megawatts to cease discharging wastewater containing pollutants from fly ash and bottom ash, resulting in the need to cease transporting CCR via water and to dispose of CCR in dry landfills rather than containment ponds/surface impoundments. Approximately 12% of coal plants were estimated to be affected, and some marginal operations may shut down rather than face the expense of complying with the Steam Electric ELGs. Approximately 12% of coal plants will be affected, and some marginal operations may shut down rather than face the expense of complying with the Clean Water Rule. The EPA finalized amendments to the Steam Electric ELGs in October 2020, which revised the requirements for two waste streams (flue gas desulfurization (FGD) wastewater and bottom ash (BA) transport water); revised the voluntary incentives program for FGD wastewater; added subcategories; and established new compliance dates. And in March 2023, EPA issued a Notice of Proposed Rulemaking to update the Steam Electric ELGs again to make certain discharge limits applicable to BA transport water, FGD wastewater, legacy wastewater, and combustion residual leachate more stringent, and to update the deadline for utilities to opt into a voluntary retirement provision under the Steam Electric ELGs. These updates to the ELGs continue to place more stringent limits on electric utilities who burn coal, thereby potentially making the combustion of coal to generate electricity more costly and less desirable.
In April 2020, the U.S. Supreme Court issued a decision finding that point source discharges to navigable waters through groundwater are subject to regulation under the Clean Water Act. The U.S. Supreme Court specifically
held that the Clean Water Act requires a permit if the addition of the pollutants through groundwater is the “functional equivalent” of a direct discharge from the point source into navigable waters.
As a result of such recent developments, substantial uncertainty exists regarding the scope of waters protected under the Clean Water Act and the discharges to such waters that are subject to permit requirements. As a result of such recent developments, substantial uncertainty exists regarding the scope of waters protected under the Clean Water Act and the discharges to such waters that are subject to permit requirements. These more stringent regulations of coal-fired power plants and coal mining operations could increase the costs for utilities and, thus, indirectly impact the availability and cost of fly ash for our CCR activities.
Increasingly strict requirements, such as those described above, will generally increase the cost of doing business and may make burning coal less attractive for utilities. Faced with the prospect of more stringent regulations, litigation by environmental groups, and the relatively low cost of natural gas, an increasing number of electric utilities are reducing their portfolio of coal-fired power plants. For example, in recent years, multiple companies have closed coal-fired power plant units or plants or dropped plans to open new coal-fired plants, citing the cost of compliance with pending or new environmental regulations and the relatively low cost of natural gas. The potential negative impact on job prospects in the utility and mining industries has prompted considerable concern in Congress, leading to calls to restrict the EPA’s regulatory authority and prompting the EPA to reconsider the same. The outcome of these developments cannot be predicted. If the rate of coal-fired power plant closures increases, our business, financial condition and results of operations may be adversely affected. Nevertheless, we believe that reliance on coal for a substantial amount of power generation in the United States is likely to continue for the foreseeable future.
Motor Carrier Operations
Through the services we provide, we operate as a motor carrier and are subject to regulation by the U.S. Department of Transportation (the “DOT”) and various state agencies. These regulatory authorities exercise broad powers governing activities, such as the authorization to engage in motor carrier operations; regulatory safety; hazardous materials labeling, placarding, and marking; financial reporting; and certain mergers, consolidations, and acquisitions. Additional regulations specifically relate to the trucking industry, including testing and specification of equipment and product handling requirements. The trucking industry is subject to possible regulatory and legislative changes that may affect the industry's economics by requiring changes in operating practices or by changing the demand for common or contract carrier services or the cost of providing truckload services. Some of these possible changes include increasingly stringent environmental regulations, changes in the hours of service regulations that govern the amount of time a driver may drive in any specific period, and requiring onboard black box recorder devices or limits on vehicle weight and size.
Interstate motor carrier operations are subject to safety requirements prescribed by the DOT. Intrastate motor carrier operations are subject to safety requirements that often mirror federal regulations. Such matters as weight and dimension of equipment are also subject to federal and state regulations. DOT regulations also mandate drug testing of drivers. From time to time, various legislative proposals are introduced, including proposals to increase federal, state, or local taxes, including taxes on motor fuels, which may increase our costs or adversely impact the recruitment of drivers. We cannot predict whether, or in what form, any increase in such taxes applicable to us will be enacted.
Human Capital Resources
As of December 31, 2022, we had 599 total employees, of which 593 were full-time employees, of which 88 of our employees were covered by collective bargaining agreements. We believe we have good relations with our employees. We have 47 employees (7.8% of all employees) with ten or more years of seniority working at the Company. We have 56 employees (more than 8.0% of all employees) with ten or more years of seniority working at the Company.
The Company is an Equal Opportunity Employer. We will consider all qualified applicants for employment without regard to race, color, religion, sex, sexual orientation, gender identity, nati