Minnesota Power, the Duluth-based utility that has long relied on coal-fired generating plants to power the Iron Range, agreed Wednesday to pay a $1.4 million penalty and to invest in cleaner technologies to settle allegations that it violated the U.S. Clean Air Act.

The settlement filed in U.S. District Court in Minnesota resolves allegations by the U.S. Environmental Protection Agency that Minnesota Power violated federal law by upgrading two of its coal-burning power generators in 1994 and 1997 without adding the best-available smokestack emissions controls at the same time. Minnesota Power didn't admit wrongdoing in the proposed consent decree, which still must be approved by a federal judge.

Federal law requires installation of modern pollution-control equipment when making other major improvements to keep power plants operating. The EPA, in court papers filed Wednesday with the settlement, said Minnesota Power upgraded equipment at one unit at its Boswell Energy Center in Cohasset and a unit at its Laskin Energy Center in Aurora without improving the emissions controls.

"When a utility decides to make major changes to a power plant so that they can extend the life of the plant, they don't get to perpetuate the pollution levels of the old plant," said Beth Goodpaster, an attorney for the Minnesota Center for Environmental Advocacy, a St. Paul nonprofit that was not involved in the settlement.

Under the proposed consent decree, Minnesota Power agreed to more-stringent smokestack emissions limits at the two coal-burning power plants and at a third plant in Grand Rapids that also supplies steam to a paper mill. The agreement calls for less coal, and more biomass, to be burned at that plant.

Although the settlement requires $500 million to $600 million in power plant investment, almost all of that already was planned or is underway. The only entirely new pollution-control commitment is that Minnesota Power agreed by 2018 to retire, further clean up emissions or switch fuel in two older, smaller coal units at the Boswell plant, utility officials said.

The utility also agreed to invest $4.2 million over the next five years in conservation and clean-energy projects. The projects include forest restoration, wetland restoration at Voyageurs National Park, an electric car charging station, and a 1-megawatt solar installation on Fond du Lac Band of Lake Superior Chippewa property.

Minnesota Power has made major investments in wind power, is upgrading pollution controls on its largest Boswell unit and has announced plans to replace the two Laskin coal-burning units with natural gas generators and to retire one of three coal-fired units at its Taconite Harbor power plant in Schroeder in 2015.

The company, which a decade ago relied almost entirely on coal, expects to get 75 percent of its power from coal and 25 percent from wind and hydropower by the end of this year. Ultimately, the utility expects to generate power with one-third coal, one-third natural gas and one-third renewable energy, a strategy it calls Energy Forward.

Al Rudeck, vice president of strategy and planning for Minnesota Power, said the decisions behind the Energy Forward plan happened during the six years that the utility was in discussion with the EPA to settle the emissions case.

"I wouldn't necessarily say this [settlement] was driving those decisions," he said, but the deal is consistent with the company's overall strategy and "was the most appropriate path forward."

Sam Hirsch, acting assistant attorney general for the U.S. Justice Department's Environment and Natural Resources Division, said in a statement that the agreement "will require systemwide controls to reduce harmful air pollution" while funding renewable energy projects and wetland restoration.