Duke Energy 2014 Annual Report Download - page 153

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PART II
DUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. •
DUKE ENERGY PROGRESS, INC. • DUKE ENERGY FLORIDA, INC. • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, INC.
Combined Notes to Consolidated Financial Statements – (Continued)
matters. However, based on Duke Energy’s past experiences with similar cases
of this nature, it does not believe its exposure under these remaining matters is
material.
Brazil Expansion Lawsuit
On August 9, 2011, the State of São Paulo sued Duke Energy International
Geracao Paranapenema S.A. (DEIGP) in Brazilian state court. The lawsuit claims
DEIGP is under a continuing obligation to expand installed generation capacity
in the State of São Paulo by 15 percent pursuant to a stock purchase agreement
under which DEIGP purchased generation assets from the state. On August
10, 2011, a judge granted an ex parte injunction ordering DEIGP to present a
detailed expansion plan in satisfaction of the 15 percent obligation. DEIGP has
previously taken a position the expansion obligation is no longer viable given
changes that have occurred in the electric energy sector since privatization.
DEIGP submitted its proposed expansion plan on November 11, 2011, but
reserved objections regarding enforceability. It is not possible to predict whether
Duke Energy will incur any liability or to estimate the damages, if any, it might
incur in connection with this matter.
Duke Energy Carolinas and Duke Energy Progress
DENR State Enforcement Actions
In the fi rst quarter of 2013, environmental organizations sent notices
of intent to sue Duke Energy Carolinas and Duke Energy Progress related to
alleged groundwater violations and Clean Water Act (CWA) violations from coal
ash basins at two of their coal-fi red power plants in North Carolina. DENR fi led
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 fi led in Mecklenburg
County Superior Court. The case against Duke Energy Progress was fi led in Wake
County Superior Court. The cases are being heard before a single judge.
On October 4, 2013, Duke Energy Carolinas, Duke Energy Progress and
DENR negotiated a proposed consent order covering these two plants. The
consent order would have assessed civil penalties and imposed 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. In light of the coal ash
release that occurred at Dan River on February 2, 2014, on March 21, 2014,
DENR withdrew its support of the consent orders and requested that the court
proceed with the litigation.
On August 16, 2013, DENR fi led an enforcement action against Duke
Energy Carolinas and Duke Energy Progress related to their remaining plants
in North Carolina, alleging violations of the CWA and violations of the North
Carolina groundwater standards. The case against Duke Energy Carolinas was
fi led in Mecklenburg County Superior Court. The case against Duke Energy
Progress was fi led in Wake County Superior Court. Both of these cases have
been assigned to the judge handling the enforcement actions discussed above.
Southern Environmental Law Center (SELC), on behalf of several environmental
groups, has been permitted to intervene in these cases.
It is not possible to predict any liability or estimate any damages Duke
Energy Carolinas or Duke Energy Progress might incur in connection with these
matters.
North Carolina Declaratory Judgment Action
On October 10, 2012, the SELC, on behalf of the same environmental
groups that were permitted to challenge the consent decrees discussed above,
fi led a petition with the North Carolina Environmental Management Commission
(EMC) asking for a declaratory ruling seeking to clarify the application of
the state’s groundwater protection rules to coal ash basins. The petition
sought to change the interpretation of regulations that permitted DENR to
assess the extent, cause and signifi cance of any groundwater contamination
before ordering action to eliminate the source of contamination, among other
issues. Duke Energy Carolinas and Duke Energy Progress were both permitted
to intervene in the matter. On December 3, 2012, the EMC affi rmed this
interpretation of the regulations.
On March 6, 2014, the North Carolina State Court judge overturned the
ruling of the EMC holding that in the case of groundwater contamination, DENR
was required to issue an order to immediately eliminate the source of the
contamination before an assessment of the nature, signifi cance and extent of
the contamination or the continuing damage to the groundwater was conducted.
Duke Energy Carolinas, Duke Energy Progress, and the EMC appealed the ruling
in April 2014. On May 16, 2014, the North Carolina Court of Appeals denied a
petition to stay the case during the appeal. On October 10, 2014, the parties
were notifi ed the case has been transferred to the NCSC. Oral argument has
been scheduled for March 16, 2015.
Federal Citizens Suits
There are currently fi ve cases fi led in various North Carolina federal courts
contending that the DENR state enforcement actions discussed above do not
adequately address the issues raised in the notices of intent to sue related to the
Riverbend, Sutton, Cape Fear, H.F. Lee and Buck plants.
On June 11, 2013, Catawba Riverkeeper Foundation, Inc. (Catawba
Riverkeeper) fi led 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 Catawba
Riverkeeper’s notice of intent to sue relating to the Riverbend plant. On April 11,
2014, the Court denied Catawba Riverkeeper’s objections to the Magistrate
Judge’s recommendation that plaintiff’s case be dismissed as well as Duke
Energy Carolinas’ motion to dismiss. The Court allowed limited discovery, after
which Duke Energy Carolinas may fi le any renewed motions to dismiss.
On September 12, 2013, Cape Fear River Watch, Inc., Sierra Club, and
Waterkeeper Alliance fi led 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 at the Sutton plant. On June 9, 2014,
the court granted Duke Energy Progress’ request to dismiss the groundwater
claims but rejected its request to dismiss the surface water claims. In response
to a motion fi led by the SELC, on August 1, 2014, the court modifi ed the original
June 9 order to dismiss only the plaintiff’s federal law claim based on hydrologic
connections at Sutton Lake. The claims related to the alleged state court
violations of the permits are back in the case.
On September 3, 2014, three cases were fi led by various environmental
groups: (i) a citizen suit in the United States Court for the Middle District of North
Carolina alleging unpermitted discharges to surface water and groundwater
violations at the Cape Fear plant; (ii) a citizen suit in the United States Court
for the Eastern District of North Carolina alleging unpermitted discharges to
surface water and groundwater violations at the H.F. Lee plant; and (iii) a citizen
suit in the United States Court for the Middle District of North Carolina alleging
unpermitted discharges to surface water and groundwater violations at the Buck
plant. On January 5, 2015, Duke Energy Carolinas fi led a Motion to Dismiss and a
Motion to Stay the proceeding relating to the Buck plant.
It is not possible to predict whether Duke Energy Carolinas or Duke Energy
Progress will incur any liability or to estimate the damages, if any, they might
incur in connection with these matters.