Duke Energy 2013 Annual Report Download - page 42

PART I
24
ITEM 3. LEGAL PROCEEDINGS
For information regarding legal proceedings, including regulatory and
environmental matters, see Note 4 to the Consolidated Financial Statements,
“Regulatory Matters” and Note 5 to the Consolidated Financial Statements,
“Commitments and Contingencies — Litigation” and “Commitments and
Contingencies — Environmental.”
Ash Basin Litigation
North Carolina Department of Environment and Natural Resources
Enforcement Actions
In the first quarter of 2013, environmental organizations sent notices
of intent to sue to Duke Energy Carolinas and Duke Energy Progress related
to alleged groundwater violations and Clean Water Act violations from coal
ash ponds at two of their coal-fired power plants in North Carolina. The North
Carolina Department of Environment and Natural Resources (DENR) filed
enforcement actions against Duke Energy Carolinas and Duke Energy Progress
alleging violations of water discharge permits and North Carolina groundwater
standards. The case against Duke Energy Carolinas was filed in Mecklenburg
County Superior Court. The case against Duke Energy Progress was filed in
Wake County Superior Court. On October 4, 2013, Duke Energy Carolinas,
Duke Energy Progress and DENR negotiated a proposed consent order. The consent
order assesses civil penalties (approximately $100,000 in the aggregate)
and imposes a compliance schedule requiring Duke Energy Carolinas and Duke
Energy Progress to undertake monitoring and data collection activities toward
making appropriate corrective action to address any substantiated violations.
On February 10, 2014, DENR asked the court to postpone consideration of the
consent order while DENR reviews Duke Energy Carolinas’ and Duke Energy
Progress’s coal ash ponds in light of the release that occurred at Dan River on
February 2, 2014. On February 20, 2014, DENR informed the court it will make a
recommendation on the proposed consent order by March 21, 2014. See Note 5
to the Consolidated Financial Statements, “Commitments and Contingencies –
Litigation – Duke Energy Carolinas” for additional information related to the Dan
River release.
On August 16, 2013, the DENR filed an enforcement action against Duke
Energy Carolinas and Duke Energy Progress related to their remaining plants in
North Carolina, alleging violations of the Clean Water Act and violations of the
North Carolina groundwater standards. The case against Duke Energy Carolinas
was filed in Mecklenburg County Superior Court. The case against Duke Energy
Progress was filed in Wake County Superior Court. Both of these cases have
been assigned to the judge handling the enforcement actions discussed above.
Catawba Riverkeeper Foundation, Inc. (Catawba Riverkeeper) moved to intervene
in the Duke Energy Carolinas case. Southern Environmental Law Center, on
behalf of several environmental groups, moved to intervene in the Duke Energy
Progress case. On November 17, 2013, the court granted, in part, Catawba
Riverkeeper’s and Southern Environmental Law Center’s motions to intervene,
allowing them full party status as to certain plants, but granting only permissive
intervention for the remaining plants.
Catawba Riverkeeper Foundation, Inc. v. Duke Energy Carolinas
On June 11, 2013, Catawba Riverkeeper filed a separate action in the
United States Court for the Western District of North Carolina. The lawsuit
contends the state enforcement action discussed above does not adequately
address issues raised in its notice of intent to sue. On August 1, 2013, Duke
Energy Carolinas filed a motion to dismiss this case in light of North Carolina’s
diligent prosecution in the state enforcement actions. Catawba Riverkeeper
filed objections to the Magistrate’s recommendation of dismissal on
December 18, 2013.
Cape Fear River Watch, Inc., Sierra Club, and Waterkeeper Alliance v.
Duke Energy Progress
On September 12, 2013, Cape Fear River Watch, Inc., Sierra Club, and
Waterkeeper Alliance filed a citizen suit in the Federal District Court for the
Eastern District of North Carolina. The lawsuit alleges unpermitted discharges
to surface water and groundwater violations. Duke Energy Progress filed a motion
to dismiss this lawsuit on November 5, 2013.
For additional information, see Note 5 to the Consolidated Financial
Statements, “Commitments and Contingencies.”
Avian Mortalities
On November 22, 2013, Duke Energy entered into a settlement with the
U.S. Department of Justice (DOJ) related to the incidental deaths of golden eagles
and other migratory birds resulting from turbine collisions at four wind farms in
Wyoming. Terms of the agreement include two misdemeanor violations of the
Migratory Bird Treaty Act, payment of $1 million in fines and restitution, five
years’ probation, and implementation of a migratory bird compliance plan. The
agreement includes a ten-year non-prosecution agreement for future incidental
deaths at four facilities. Duke Energy undertakes adaptive management practices
designed to avoid and minimize additional avian impacts.
Brazilian Transmission Fee Assessments
On July 16, 2008, Duke Energy International Geracao Paranapanema
S.A. (DEIGP) filed a lawsuit in the Brazilian federal court challenging
transmission fee assessments imposed under two new resolutions promulgated
by the Brazilian electricity regulatory agency (ANEEL) (collectively, the
Resolutions). The Resolutions purport to impose additional transmission fees
on generation companies located in the State of Sao Paulo for utilization of the
electric transmission system. The fees were retroactive to July 1, 2004 and
effective through June 30, 2009. The charges were based upon a flat-fee that
failed to take into account the locational usage by each generator. DEIGP’s
additional assessment under these Resolutions amounts to approximately
$57 million inclusive of interest through December 2013. Pending resolution
of this dispute on the merits, DEIGP deposited the disputed portion of the
assessment into a court-monitored escrow, and paid the undisputed portion to
the distribution companies. In a decision published on October 2, 2013, the trial
court affirmed an additional fine imposed by ANEEL on April 1, 2009 for DEIGP’s
failure to pay the disputed portion of the assessment. DEIGP appealed the trial
court’s ruling and deposited $10 million into a court-monitored escrow.
Brazilian Regulatory Citations
In September 2007, the State Environmental Agency of Parana (IAP)
assessed seven fines against DEIGP, totaling $15 million for failure to comply
with reforestation measures allegedly required by state regulations in Brazil.
On January 14, 2010, DEIGP received a notice that one of the fines was
subsequently increased, on grounds that DEIGP is an alleged repeat offender;
however, in 2012 the decision to increase the amount of that fine was reversed.
DEIGP filed administrative appeals with respect to all the fines. Between 2009
and 2012, four of the fines, in the total amount of $9 million, were judged to
be valid in the administrative courts. DEIGP challenged those administrative
rulings in the Brazilian state courts, by filing judicial actions for annulment and
also requested its payment obligations be enjoined pending resolution on the
merits. In one of the four cases, the court granted DEIGP’s request for injunction,
and subsequently ruled on the merits in favor of DEIGP. The plaintiff filed an
appeal. In two of the four cases, the court granted DEIGP’s request for injunction,