FRANKFORT - East Kentucky Power Cooperative has agreed to spend $650 million on equipment to reduce emissions and pay a $750,000 fine to settle a lawsuit over pollution, federal officials announced Monday.

The Winchester-based power company would install high-tech anti-pollution equipment at three plants in eastern Kentucky under the proposed agreement, according to a joint statement from the Department of Justice and Environmental Protection Agency. The company would pay the fine to resolve alleged violations of the federal Clean Air Act at the plants, the statement said.

“The emissions reductions from this settlement are substantial, and we are pleased that East Kentucky has agreed to bring its facilities into compliance with important provisions of the Clean Air Act,” Ronald J. Tenpas, acting assistant attorney general for the Justice Department's Environment and Natural Resources Division, said in the statement.

The federal government filed a lawsuit against East Kentucky Power in 2004, alleging the company made illegal modifications that led to increased pollution at its coal-fired power plants in Clark and Mason counties. The company allegedly did not have the proper permits for making the changes and did not install proper pollution control equipment.

Federal officials claimed that the not-for-profit company increased air pollution when it modified the plants to create more power by burning more coal. The increased pollution allegedly occurred at its William C. Dale Plant near Winchester and at its H.L. Spurlock plant in Maysville.

“We have worked diligently to bring about a settlement that allows our cooperative to continue to meet our members' future power needs while bolstering our commitment to the environment,” Bob Marshall, president and CEO of East Kentucky Power, said in a statement.

Despite agreeing to the settlement, the company maintained it has been and remains in compliance with the Clean Air Act.

Installing the new anti-pollution equipment will reduce emissions of chemicals that cause smog and acid rain by more than 60,000 tons per year, according to the federal agencies.

“The combined reductions in sulfur dioxide, nitrogen oxides, and particulate matter mandated by this settlement will greatly improve the air quality for the citizens of Kentucky,” Jimmy Palmer, the EPA regional administrator in Atlanta, said in the agencies' statement. “This settlement has tremendous significance for our ongoing effort to ensure cleaner air for our citizens.”

The proposed settlement was filed in U.S. District Court for the Eastern District of Kentucky. There will be a 30-day public comment period, and the agreement needs court approval before taking effect.

Eric Schaeffer, director of the Washington-based Environmental Integrity Project, called the company's penalty “frustrating” because it did not cover the full cost of damage done to the environment. Each ton of sulfur dioxide released into the air costs about $7,300 in terms of the impact on public health, Schaeffer said.

“These guys never pay enough - $750,000 for a big power plant is pretty minimal,” Schaeffer said. “At that price, it pays to pollute.”