By James McNair
The Cincinnati Enquirer

Convinced that AK Steel is committed to reducing the visible discharge of metallic flakes and soot on neighborhoods adjacent to its Middletown Works, the Ohio Environmental Protection Agency said Wednesday it had agreed to drop its 4-year-old air pollution battle against the steel maker.

The settlement, in which AK admits no wrongdoing and is subject to approval in two state courts, calls for the company to pay a penalty of $1.7 million. But about three-fourths of that total, or $1.28 million, will be waived if AK succeeds in installing air pollution controls on its Middletown blast furnace by May 2005, or one year before new federal clean air rules take effect.

In the meanwhile, AK will move coke piles, plant trees and provide bus service for employees to reduce so-called "fugitive" particulates that have fallen on homes in the Oneida and Mayfield neighborhoods for years.

"This order will significantly reduce pollution in the neighboring community much faster than continued litigation in the courts," said Ohio EPA director Christopher Jones.

The settlement does not affect the U.S. EPA's lawsuit claiming water pollution and illegal solid waste disposal practices by AK. A Justice Department spokesman said that case, which seeks unspecified damages, is proceeding in U.S. District Court in Cincinnati. AK spokesman Alan McCoy said the company hopes to settle those allegations, too.

The agreement came two months after AK, the nation's third-largest steel maker, said it would spend $66 million on pollution-control equipment for its sprawling complex of furnaces and mills that employ about 4,500 people.

Ohio EPA said the controls, the last of which will be installed on a basic oxygen furnace in May 2006, will reduce AK's air pollution by about 800 tons a year, or about 56 percent.

What began in 2000 as enforcement actions by the Ohio EPA and U.S. EPA mushroomed into a wide battlefront involving environmental groups and, ultimately, Ohio Gov. Bob Taft.

For several years, AK publicly floated the notion that persistent attempts to pin it with millions of dollars in fines could force the company to shut down its furnaces and simply buy steel made by other companies. Relations between AK and Taft bottomed out last June after the governor, during a trade visit to Mexico, accompanied the representative of a rival steel maker in a visit to the factory of an AK customer.

But the discord turned into renewed dialogue after Richard Wardrop was forced out as AK's chief executive last September. His successor, James Wainscott, adopted a conciliatory approach in tackling disputes with the governor, regulators, labor unions, environmental groups and Middletown residents.

One of his first big accomplishments involved the pollution controls in Middletown. With an agreement from Taft to finance the project with tax-exempt bonds - repayable by AK, not Ohio taxpayers - the company announced plans in January to spend $66 million to install the controls. The Ohio Air Quality Development Authority is reviewing the issue and could approve it in May.

On Wednesday, Wainscott praised the settlement of the air pollution case, as well as the state's assistance in general.

"This agreement can pave the way for Middletown Works to make steel for another century while being even more responsive to the concerns of our neighbors," he said. "I want to thank Governor Bob Taft for his assistance to make tax-exempt financing available for this important manufacturing project that will help preserve good-paying manufacturing jobs in Southwestern Ohio."

Taft returned the compliment. Sierra Club project director Susan Knight joined Taft in praising Wainscott's efforts.

"He continues to meet with community members, which is more than Richard Wardrop ever did," Knight said. "He really believes AK can do better with pollution controls."

Ray Agee is one of many Oneida neighborhood residents who posted "AK, come clean" signs in their front yards and tried - but failed - to carry a large bag of AK fallout into the company's annual shareholders meeting in Delaware in 2002. Agee, a retired truck driver, said he was surprised by the settlement.

"I have not been able to see the actual agreement, so I reserve some skepticism," he said, "but we have fought long and hard to make this happen, and many never believed we could ever change AK Steel for the better. Well, I hope this agreement can prove those that doubted wrong."

In addition to installing pollution controls, AK agreed to several other measures that will reduce air pollution - and lower its fine. They include:

•  Establishing an elevated, 30-foot-wide buffer zone of trees between AK's coke plant and the Oneida perimeter. AK expects to begin preparing the green belt in mid-April and planting 225 spruce, pine and pear trees at a cost of $107,000.

•  Busing employees to their jobs, an $800,000-a-year program that will reduce the dust churned up by vehicles.

•  Washing the homes and cars of nearby residents affected by the soot fallout until the pollution controls are in operation.

Joe Koncelik, assistant director for the Ohio EPA, said the agency was willing to end its pursuit of a large monetary penalty if AK agreed to make the investments needed to reduce pollution.

"This is a massive engineering project," he said. "We're extremely pleased that, through this enforcement action, we could get a portion of those controls installed a year before they were required. That's a significant achievement."

E-mail jmcnair@enquirer.com