Duke Energy 2015 Annual Report Download - page 156

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PART II
DUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. •
DUKE ENERGY PROGRESS, LLC • DUKE ENERGY FLORIDA, LLC • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, INC.
Combined Notes to Consolidated Financial Statements – (Continued)
groundwater standards. Both of these cases have been assigned to the judge
handling the enforcement actions discussed above. SELC, on behalf of several
environmental groups, has been permitted to intervene in these cases.
On July 10, 2015, Duke Energy Carolinas and Duke Energy Progress filed
Motions for Partial Summary Judgment in the case on the basis that there is no
longer either a genuine controversy or disputed material facts about the relief for
seven of the 14 North Carolina plants with coal ash basins. On September 14,
2015, the court granted the Motions for Partial Summary Judgment pending court
approval of the terms through an order. In November 2015, NCDEQ submitted
a proposed order. On November 23, 2015, Duke Energy Carolinas, Duke Energy
Progress and SELC filed separate objections to portions of the NCDEQ filing. The
parties are drafting a consolidated order to comply with the ruling made by the
judge at a hearing held on February 12, 2016.
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 are involved in the state enforcement actions discussed above,
filed 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 NCDEQ to assess the
extent, cause and significance 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 affirmed this interpretation of the
regulations.
On March 6, 2014, a North Carolina Superior Court judge overturned
the ruling of the EMC holding that in the case of groundwater contamination,
NCDEQ was required to issue an order to immediately eliminate the source of the
contamination before an assessment of the nature, significance 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 notified the case has been transferred to the North Carolina Supreme Court
(NCSC). Oral argument was held on March 16, 2015. On June 11, 2015, the
NCSC issued its opinion in favor of Duke Energy Carolinas, Duke Energy Progress
and the EMC and remanded the matter to the state court judge with instructions
to dismiss the case. This matter is now closed.
Federal Citizens Suits
There are currently five cases filed in various North Carolina federal courts
related to the Riverbend, Sutton, Cape Fear, H.F. Lee and Buck plants.
On June 11, 2013, Catawba Riverkeeper Foundation, Inc. (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 Catawba
Riverkeeper’s notice of intent to sue relating to the Riverbend Steam Station.
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. On August 13, 2015, the court issued
an order suspending all proceedings until further order from the court.
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 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 filed by the SELC, on August 1, 2014, the court modified 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 August 26, 2015, the court
suspended the proceedings until further order from the court.
On September 3, 2014, three citizen suits were filed 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) 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) in the
United States Court for the Middle District of North Carolina alleging unpermitted
discharges to surface water and groundwater violations at the Buck Steam
Station. Motions to Stay or Dismiss the proceedings were filed in each of the
three cases. The proceedings related to Cape Fear and H.F. Lee have been stayed.
On October 20, 2015, the court issued an order denying the motions in the Buck
proceedings. Duke Energy Carolinas’ motion seeking appellate review of the
District Court’s decision was denied on January 29, 2016.
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.
North Carolina Ash Basin Grand Jury Investigation
As a result of the Dan River ash basin water release discussed above,
NCDEQ issued a Notice of Violation and Recommendation of Assessment of
Civil Penalties with respect to this matter on February 28, 2014, which the
company responded to on March 13, 2014. Duke Energy and certain Duke Energy
employees received subpoenas issued by the United States Attorney for the
Eastern District of North Carolina in connection with a criminal investigation
related to all 14 of the North Carolina facilities with ash basins and the nature of
Duke Energy’s contacts with NCDEQ with respect to those facilities. This was a
multidistrict investigation that also involves state law enforcement authorities.
On February 20, 2015, Duke Energy Carolinas, Duke Energy Progress and
Duke Energy Business Services LLC (DEBS), a wholly owned subsidiary of Duke
Energy, each entered into Plea Agreements in connection with the investigation
initiated by the United States Department of Justice Environmental Crimes
Section and the United States Attorneys for the Eastern District of North Carolina,
the Middle District of North Carolina and the Western District of North Carolina
(collectively, USDOJ). On May 14, 2015, the United States District Court for the
Eastern District of North Carolina approved the Plea Agreements.
Under the Plea Agreements, DEBS and Duke Energy Progress pleaded
guilty to four misdemeanor CWA violations related to violations at Duke Energy
Progress’ H.F. Lee Steam Electric Plant, Cape Fear Steam Electric Plant and
Asheville Steam Electric Generating Plant. Duke Energy Carolinas and DEBS
pleaded guilty to five misdemeanor CWA violations related to violations at Duke
Energy Carolinas’ Dan River Steam Station and Riverbend Steam Station. DEBS,
Duke Energy Carolinas and Duke Energy Progress also agreed (i) to a five-year
probation period, (ii) to pay a total of approximately $68 million in fines and
restitution and $34 million for community service and mitigation (the Payments),
(iii) to fund and establish environmental compliance plans subject to the
oversight of a court-appointed monitor in addition to certain other conditions set
out in the Plea Agreements. Duke Energy Carolinas and Duke Energy Progress
also agree to each maintain $250 million under their Master Credit Facility as