Duke Energy 2015 Annual Report Download - page 45

PART I
25
ITEM 3. LEGAL PROCEEDINGS
For information regarding legal proceedings, including regulatory
and environmental matters, see Note 4, “Regulatory Matters,” and Note 5,
“Commitments and Contingencies,” to the Consolidated Financial Statements.
Virginia Department of Environmental Quality Civil Enforcement
In June 2015, the Virginia State Water Control Board voted to approve a
consent order to resolve the civil enforcement claim of the Virginia Department
of Environmental Quality (VDEQ) against Duke Energy Carolinas related to the
February 2014 Dan River coal ash release. Pursuant to the terms of the $2.5
million settlement, Duke Energy Carolinas is required to perform $2.25 million of
environmental projects that benefit Virginia communities and fund an additional
$250,000 for VDEQ to respond to environmental emergencies. Failure to perform
sufficient environmental projects will require Duke Energy Carolinas to make a
cash payment in the amount of the shortfall.
MTBE Litigation
On June 29, 2007, the New Jersey Department of Environmental Protection
(NJDEP) filed suit against, among others, Duke Energy Merchants (DEM),
alleging contamination of “waters of the state” by MTBE from leaking gasoline
storage tanks. MTBE is a gasoline additive intended to increase the oxygen level
in gasoline and make it burn cleaner. The case was moved to federal court and
consolidated in an existing multidistrict litigation docket of pending MTBE cases.
DEM and NJDEP have reached an agreement in principle to settle the case for
a payment by DEM of $1.7 million. On February 19, 2016, the Court approved a
Consent Decree executed by the parties which settles the case.
DEM is also a defendant in a similar case filed by the Commonwealth
of Pennsylvania on June 19, 2014. That case has also been moved to the
consolidated multidistrict proceeding. Discovery in this case continues.
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. DEIGP’s original assessment under these Resolutions
amounts to approximately $43 million inclusive of interest through December
2015. Pending resolution of this dispute on the merits, DEIGP deposited
the disputed portion, approximately $15 million, 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 in the amount of approximately $7 million
for DEIGP’s failure to pay the disputed portion of the assessment. The $7 million
was also deposited into a court-monitored escrow. In December 2014, the trial
court ruled in favor of DEIGP on the merits of the original assessment. The
merits of the original assessment and fine, as well as the contradiction between
the trial court’s ruling in favor of DEIGP on the original assessment but against
DEIGP on its alleged failure to timely pay that assessment are being addressed
on appeal.
Brazilian Regulatory Citations
In September 2007, the State Environmental Agency of Parana (IAP)
assessed seven fines against DEIGP for failure to comply with reforestation
measures allegedly required by state regulations in Brazil. DEIGP has challenged
the fines in administrative and judicial proceedings. Two of the seven fines
have subsequently been dismissed or otherwise resolved in favor of DEIGP.
A third fine was determined legitimate by the trial court, but is under appeal.
The remaining fines are pending. The total current amount of the IAP fines is
approximately $10 million.
Additionally, DEIGP was assessed three fines by Brazil Institute of
Environment and Renewable Natural Resources (IBAMA) for improper
maintenance of existing reforested areas. One of these fines was determined
legitimate by the trial court and is under appeal. The others are pending. The
total current IBAMA assessment is approximately $400,000. DEIGP believes that
it has properly maintained all reforested areas and has challenged the IBAMA
assessments.
ITEM 4. MINE SAFETY DISCLOSURES
This is not applicable for any of the Duke Energy Registrants.