American Electric Power reached a settlement agreement with the U.S. Environmental Protection Agency, eight states and 14 environmental organizations, bringing an end to almost eight years of litigation regarding alleged violations of the New Source Review provisions of the Clean Air Act.

AEP admitted no violations of law and all claims against AEP were released.

The court assessed that AEP would spend about $4.6 billion in what is being called the largest environmental settlement in U.S. history.

"It is the cost of doing business, so that gets all rolled into production costs of electricity, but I think it's a good price to pay for cleaner air," said AEP attorney Mike Miller.

Under terms of the settlement agreement, filed in October but made official on Monday, AEP agreed to annual sulfur dioxide and nitrogen oxides emissions limits for its fleet of 16 coal-fueled power plants in Indiana, Kentucky, Ohio, Virginia and West Virginia.

Additionally, the company agreed to install additional emissions control equipment on two plants.

AEP also will provide $36 million for environmental projects coordinated with the federal government and $24 million to the states that were parties to the agreement for environmental mitigation.

AEP will also pay a civil penalty of $15 million.

"While we would have preferred that the agreement not include a civil penalty -- a position we argued vigorously during our discussions with the plaintiffs --this settlement is an excellent outcome for our shareholders. It eliminates the potentially significant financial risk of pursuing the litigation to its conclusion while still achieving the environmental improvements that both we and the government want," Michael G. Morris, AEP's chairman, president and chief executive officer, said back in October.

The complaint alleged that AEP made major modifications at some of its coal-fueled generating units without obtaining the necessary permits and without installing controls required by the Clean Air Act to reduce sulfur dioxide, nitrogen oxide and particulate matter emissions.

In the settlement, AEP agreed to annual sulfur dioxide and nitrogen oxides emissions limits for its fleet of 16 coal-fueled power plants in Indiana, Kentucky, Ohio, Virginia and West Virginia. AEP also agreed to install scrubbers on both generating units at its Rockport Plant in Rockport, Ind.

To reduce sulfur dioxide emissions, AEP committed to complete the previously announced scrubbers for its Big Sandy and Muskingum River plants by Dec. 31, 2015. AEP also agreed to plant-specific sulfur dioxide emission limits for its Clinch River Plant and its Kammer Plant near Moundsville.

Since 2004, AEP has spent nearly $2.6 billion on installation of emissions control equipment on its coal-fueled plants in Kentucky, Ohio, Virginia and West Virginia as part of a larger plan to invest more than $5.1 billion by 2010 to reduce the emissions of its generating fleet.