The settlement, the group said, resolved two enforcement lawsuits it filed in federal court against ARPA and the Lamar Utilities Board for violations of the federal Clean Air Act at the 44-megawatt Lamar Repower Project.
The facility was constructed in 2009 after the authority converted its natural gas-powered plant to coal.
WildEarth Guardians said that it was informed of numerous air-quality violations at the plant once it went online, at the rate of one or more every day.
“The plant is now offline due to the failure of the Arkansas River Power Authority to meet its air quality permit and because it costs more to operate than to purchase power from outside sources,” officials said.
The two signed a consent decree in federal court Tuesday, but the documents are not set to be signed off by a judge until the middle of next month.
Under the Clean Air Act, settlements of citizen enforcement suits are subject to US Department of Justice reviews for 45 days, and once signed the deal will be binding.
The group said that the decree will commit the Arkansas River Power Authority to keep the plant offline until 2022. However, the plant could potentially be shut down indefinitely.
The authority must also secure an additional long-term power supply contract by 2018 or pay additional penalties.
WildEarth said the $125,000 penalty will be directed toward clean energy projects in southeastern Colorado that directly benefit low income families or housing facilities, schools or child-care facilities.
As the utility also is responsible for legal fees and other costs, it will pay a total $450,000 as part of the settlement.
“The energy future of southeastern Colorado is a lot brighter with this agreement,” climate and energy program director Jeremy Nichols said.
“Not only does it free the Arkansas River Power Authority to move beyond coal and find more affordable, less polluting means of providing power, it directs funds to projects that will directly benefit communities by making them more efficient and less dependent on fossil fuels.”
ARPA did not release public comment on the decision.