Atmos Energy 1997 Annual Report Download - page 37

32 ATMOS ENERGY CORPORATION
the LIG settlement, plus accrued interest, to its customers in the form of credits to cus-
tomers bills for the months November 1997 through March 1998. The remaining
$550,000 will be credited one half to TLIG with the other half credited to the Trans La
Division for legal fees. The Order became final on June 2, 1997 when no appeals had been
filed during the appeal period which ended June 1, 1997.
As a result of the settlements reached in the Louisiana proceedings, a Joint Motion was
filed in the Court on July 29, 1997, requesting the Court to lift the stay of the proceedings
entered by the Court on January 19, 1993 to permit the consummation of the proposed
settlement, certify a class for purposes of settlement and to preliminarily approve the set-
tlement between the plaintiff class and all defendants. On July 30, 1997, the Court
entered its order lifting the stay of the proceedings, certifying a class of current Trans La
Division ratepayers for purposes of settlement and receipt of proceeds of settlement,
preliminarily approving the proposed settlement between the plaintiff class and the defen-
dants, approving the form of notice to potential class members, and setting a fairness
hearing regarding the proposed settlement and disbursement of proceeds. At the fairness
hearing, which is set for December 15, 1997, final approval of the settlement by the Court
will be sought. If final approval of the Court is granted, the suit will be dismissed.
In Colorado, Greeley Gas Company (“Greeley Gas Division”) is a defendant in several
lawsuits filed as a result of a fire in a building in Steamboat Springs, Colorado on
February 3, 1994. The plaintiffs claim that the fire resulted from a leak in a severed gas
service line owned by the Greeley Gas Division. On January 12, 1996, the jury awarded
the plaintiffs approximately $2.5 million in compensatory damages and approximately
$2.5 million in punitive damages. The jury assessed the Company with liability for all of
the damages awarded. The Company has appealed the judgement to the Colorado Court
of Appeals. The Company believes it has meritorious issues for such appeal but cannot
assess, at this time, the likelihood of success in the appeal. The Company has adequate
insurance to cover the compensatory damages awarded. The Company’s insurance carri-
er has also recently informed the Company that any punitive damages which may be
awarded against the Company would be covered by the Company’s insurance policy.
In March 1997, Western Kentucky Gas Company (“Western Kentucky Division”) was
named as a defendant in a lawsuit in the District Court in Danville, Kentucky, as a result
of an explosion and fire at a residence in Danville, Kentucky on March 4, 1997. The
plaintiffs, Lisa Benedict, et al, who were leasing the residence, suffered serious burns in
the accident and have alleged that Western Kentucky Division was negligent in installing
and servicing gas lines at the residence. The plaintiffs, who are also suing the
landlord/owner of the house, have asked for punitive damages and compensatory dam-
ages in the case. Discovery has just begun; accordingly, the Company cannot assess, at this
time, the likelihood of success in this case. However, the Company has adequate insur-
ance and reserves to cover any damages that may be awarded.
In November 1997, a jury in Plaquemine, Louisiana awarded Brian L. Heard General
Contractor, Inc., (“Heard”) a total of $177,929 in actual damages and $15 million in
punitive damages resulting from a lawsuit by Heard against the Trans La Division, the
successor in interest to Oceana Heights Gas Company, which the Company acquired in
November 1995. The trial judge also awarded interest on the total judgment amount. The
claims are for events that occurred prior to the time Atmos acquired Oceana Heights Gas
Company. Heard claimed damages associated with delays he allegedly incurred in con-
structing a sewer system in Iberville Parish, Louisiana. Heard filed the suit against the
Trans La Division and two other defendants, alleging that gas leaks had caused delays in
Heard’s completion of a sewer project, resulting in lost business opportunities for the con-
tractor during 1994. The Company believes that the gas leaks claimed in the lawsuit were
minor leaks, common in normal operations of gas systems, and were repaired in accor-
dance with standard industry practices and did not cause the damages claimed.
The jury awarded punitive damages under a prior Louisiana statute that allowed punitive
damages to be awarded in cases involving hazardous substances, which, as defined in the
statute, included natural gas. Although not retroactive, the Louisiana legislature repealed
the statute in 1996. The Company does not believe that punitive damages are applicable
in the case and should not be awarded because there were no direct damages caused by
natural gas. The Company plans to immediately appeal the verdict and to aggressively
pursue obtaining reversal of the judgment. However, the Company cannot assess, at this
time, the likelihood of the judgment being reversed on appeal. The Company is in the
process of reviewing its insurance coverage with respect to this case. Although Oceana
Heights Gas Company was insured, it appears that a claim of this nature will not be cov-
ered by such insurance. However, the Company does not expect the final outcome of this
case to have a material adverse effect on the financial condition, the results of operations
or the net cash flows of the Company.
From time to time, other claims are made and lawsuits are filed against the Company arising
out of the ordinary business of the Company. In the opinion of the Company’s manage-
ment, liabilities, if any, arising from these other claims and lawsuits are either covered by
insurance, adequately reserved for by the Company or would not have a material adverse
effect on the financial condition, results of operations, or cash flows of the Company.
Environmental matters UCGC is the owner or previous owner of manufactured gas
plant sites which were used to supply gas prior to the availability of natural gas.
Manufactured gas was an inexpensive source of fuel for lighting and heating nationwide. As
a result of the gas manufacturing process, certain by-products and residual materials, includ-
ing coal-tar, were produced and may have been accumulated at the plant sites. This was an
acceptable and satisfactory process at the time such operations were being conducted. Under
current environmental protection laws and regulations, the Company may be responsible
for response actions with respect to such materials, if response actions are necessary.
In June 1995, UCGC entered into an agreement to pay $1,787,000 to Union Electric
whereby Union Electric agreed to assume responsibility for UCGC’s continuing investiga-
tion and environmental response action obligations as outlined in the feasibility study
related to a former manufactured gas plant site in Keokuk, Iowa. At September 30, 1997,
the Company had $714,600 accrued for its remaining liability related to the agreement.
This amount is to be paid in equal annual payments over each of the next two years.
UCGC deferred the agreement amount of $1,787,000 and was granted recovery over a
ten-year period in the May 1996 Iowa rate increase.