Atmos Energy 1997 Annual Report Download - page 38

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ATMOS ENERGY CORPORATION
The United Cities Division owns or owned former manufactured gas plant sites in
Johnson City and Bristol, Tennessee; Hannibal, Missouri; and Americus, Georgia. UCGC
and the Tennessee Department of Environment and Conservation entered into a consent
order effective January 23, 1997, for the purpose of facilitating the investigation, removal
and remediation of the Johnson City site. UCGC began the implementation of the con-
sent order in the first quarter of 1997. The Company is unaware of any information
which suggests that the Bristol site gives rise to a present health or environmental risk as
a result of the manufactured gas process or that any response action will be necessary. The
Missouri Department of Natural Resources (“MDNR”) conducted a site reconnaissance
and sampling at the Hannibal site. In its most recent report the MDNR concludes that
hazardous substances and hazardous wastes are present on site, and that a release of haz-
ardous substances to soils has occurred; however, the risk of human exposure appears to
be minimal. Additional site work is likely. As of September 30, 1997, the Company had
incurred and deferred for recovery $352,000, including $258,000 related to an insurance
recoverability study, and accrued and deferred for recovery an additional $750,000 asso-
ciated with the preliminary survey and invasive study of these three sites. The Tennessee
Regulatory Authority granted UCGC permission to defer, until its next rate case, all costs
incurred in Tennessee in connection with state and federally mandated environmental
control requirements. On May 14, 1997, the Georgia Environmental Protection Division
requested that UCGC enter into a proposed voluntary consent order for the remediation
of the Americus site. Subsequently, the other responsible parties at the site advised UCGC
that they would be willing to enter into a “cashout” settlement for a one-time payment
by the Company of $250,000. The Company is willing to pay $250,000 for a “cashout”
settlement. The Company has provided its comments to the proposed settlement agree-
ment and expects to conclude those discussions shortly. As of September 30, 1997, the
Company had accrued and deferred for recovery amounts related to this site.
Pursuant to the Tennessee Petroleum Underground Storage Tank Act, the Company is
required to upgrade or remove certain underground storage tanks (“USTs”) situated in
Tennessee. As of September 30, 1997, the Company had identified a small number of
USTs in this category in Tennessee and had incurred and deferred for recovery $98,000
and, based on available current information, accrued and deferred for recovery an addi-
tional $70,000 for the upgrade or removal of these USTs. The Tennessee Regulatory
Authority granted UCGC permission to defer, until its next rate case, all costs incurred in
connection with state and federally mandated environmental control requirements. In
addition, the Company may be able to recover a portion of any corrective action costs from
the Tennessee Underground Storage Tank Fund for certain of the UST sites in Tennessee.
In October 1995, UCGC received two Notices of Violation (“NOVs”) from the Tennessee
Department of Environment and Conservation (“TDEC”) concerning historic releases
from a UST in Kingsport, Tennessee. This UST was formerly owned by Holston Oil Co.,
Inc. (“Holston”), which at one time was a wholly-owned subsidiary of Tennessee-Virginia
Energy Corporation (“TVEC”). Prior to TVEC’s merger with UCGC in 1986, TVEC sold
the common stock of Holston to an unrelated party. UCGC responded to the NOVs advis-
ing the TDEC that UCGC was not a responsible party for any environmental contamination
at the site. The Company does not anticipate incurring any response action costs at this site.
The Kansas Department of Health and Environment (“KDHE”) identified the need to
investigate gas industry activities which utilize mercury equipment in Kansas. The
Company and KDHE have signed a Consent Order for the investigation and possible
response action for mercury contamination at any gas pipeline site which is identified as
exceeding the KDHE’s established acceptable concentration levels. As of September 30,
1997, the Company had identified approximately 720 meter sites where mercury may
have been used and had incurred and deferred for recovery $100,000 and, based on avail-
able current information, accrued and deferred for recovery an additional $280,000 for
the investigation of these sites. UCGC has received an order from the Kansas Corporation
Commission (“KCC”) allowing UCGC to defer and seek recovery in future rate proceed-
ings the reasonable and prudent costs and expenses associated with the Consent Order. In
the order, the Commission approved a Stipulation and Agreement which provides a cap
of $1,500,000 on amounts deferred with the ability to exceed this cap if reasonable costs
of response action are incurred. Based on a decision by the KCC concerning the recovery
of environmental response action costs incurred by another company, the Company
expects recovery of the costs involved in the investigation and response action associated
with the mercury meter sites in Kansas.
The Company addresses other environmental matters from time to time in the regular and
ordinary course of its business. Management expects that future expenditures related to
response action at any site will be recovered through rates or insurance, or shared among
other potentially responsible parties. Therefore, the costs of responding to these sites are
not expected to materially affect the results of operations, financial condition or cash
flows of the Company.
SIX Leases
The Company has entered into noncancelable leases involving office space and warehouse
space. The remaining lease terms range from one to 20 years and generally provide for the
payment of taxes, insurance and maintenance by the lessee. Net property, plant and equip-
ment included amounts for capital leases of $2,327,000 and $2,511,000 at September 30,
1997 and 1996, respectively.
The related future minimum lease payments at September 30, 1997 were as follows:
(In thousands) Capital Operating
leases leases
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1998 .......................................................................................................... $ 699 $ 9,841
1999 .......................................................................................................... 699 9,583
2000 .......................................................................................................... 760 9,187
2001 .......................................................................................................... 568 8,607
2002 .......................................................................................................... 568 8,344
Thereafter ................................................................................................. 2,279 61,044
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Total minimum lease payments ............................................................ 5,573 $106,606
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Less amount representing interest ...................................................... (2,526)
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Present value of net minimum lease payments................................... $ 3,047
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