APS 2012 Annual Report Download - page 46

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New Source Review. On April 6, 2009, APS received a request from EPA under Section 114
of the Clean Air Act seeking detailed information regarding projects at and operations of Four Corners.
This request is part of an enforcement initiative that EPA has undertaken under the Clean Air Act.
EPA has taken the position that many utilities have made certain physical or operational changes at
their plants that should have triggered additional regulatory requirements under the New Source
Review provisions of the Clean Air Act. Other electric utilities have received and responded to similar
Section 114 requests, and several of them have been the subject of notices of violation and lawsuits by
EPA. APS responded to EPA’s request in August 2009 and is currently unable to predict the timing or
content of EPA’s response, if any, or any resulting actions.
Clean Air Act Lawsuit. On October 4, 2011, Earthjustice, on behalf of several environmental
organizations, filed a lawsuit in the United States District Court for the District of New Mexico against
APS and the other Four Corners participants alleging violations of the New Source Review provisions
of the Clean Air Act. Subsequent to filing its original Complaint, on January 6, 2012, Earthjustice
filed a First Amended Complaint adding claims for violations of the Clean Air Act’s NSPS program.
Among other things, the plaintiffs seek to have the court enjoin operations at Four Corners until APS
applies for and obtains any required NSR permits and complies with the NSPS. The plaintiffs further
request the court to order the payment of civil penalties, including a beneficial mitigation project. On
April 2, 2012, APS and the other Four Corners participants filed motions to dismiss, which are
pending. We are unable to determine a range of potential losses that are reasonably possible of
occurring.
Endangered Species Act. On January 30, 2011, the Center for Biological Diversity, Diné
Citizens Against Ruining Our Environment, and San Juan Citizens Alliance filed a lawsuit in the
United States District Court for the District of Colorado against OSM and DOI, alleging that OSM
failed to engage in mandatory ESA consultation with the Fish and Wildlife Service prior to authorizing
the renewal of an operating permit for the mine that serves Four Corners. The lawsuit alleged that
activities at the mine, including mining and the disposal of coal combustion residuals, would adversely
affect several endangered species and their critical habitats. APS is not a party to the lawsuit but is
monitoring it to determine its potential impact on APS’s operations. On March 14, 2012, the district
court entered an order dismissing the plaintiffs’ lawsuit without prejudice. On May 14, 2012, the
plaintiffs appealed the court’s order to the United States Court of Appeals for the Tenth Circuit.
Superfund. The Comprehensive Environmental Response, Compensation and Liability Act
(“Superfund”) establishes liability for the cleanup of hazardous substances found contaminating the
soil, water or air. Those who generated, transported or disposed of hazardous substances at a
contaminated site are among those who are potentially responsible parties (“PRPs”). PRPs may be
strictly, and often are jointly and severally, liable for clean-up. On September 3, 2003, EPA advised
APS that EPA considers APS to be a PRP in the Motorola 52nd Street Superfund Site, Operable Unit 3
(“OU3”) in Phoenix, Arizona. APS has facilities that are within this Superfund site. APS and Pinnacle
West have agreed with EPA to perform certain investigative activities of the APS facilities within
OU3. In addition, on September 23, 2009, APS agreed with EPA and one other PRP to voluntarily
assist with the funding and management of the site-wide groundwater remedial investigation and
feasibility study work plan. We estimate that our costs related to this investigation and study will be
approximately $2 million. We anticipate incurring additional expenditures in the future, but because
the overall investigation is not complete and ultimate remediation requirements are not yet finalized, at
the present time expenditures related to this matter cannot be reasonably estimated.