Energy Transfer 2012 Annual Report Download - page 191

F - 46
Following the filing of the declaratory judgment action, El Paso filed a third-party complaint against Southern Union, ETE,
and ETP alleging, among other things, breach the capital stock agreement. El Paso was not seeking to enjoin the closing of
the Citrus Acquisition, but rather sought a rescission of the Citrus Acquisition after it was completed or, alternatively, damages.
All parties have agreed the Citrus Acquisition did not trigger a ROFR and the courts granted El Paso's dismissal of its claims
for rescission or damages with prejudice on April 20, 2012.
We or our subsidiaries are a party to various legal proceedings and/or regulatory proceedings incidental to our businesses.
For each of these matters, we evaluate the merits of the case, our exposure to the matter, possible legal or settlement strategies,
the likelihood of an unfavorable outcome and the availability of insurance coverage. If we determine that an unfavorable
outcome of a particular matter is probable and can be estimated, we accrue the contingent obligation, as well as any expected
insurance recoverable amounts related to the contingency. As of December 31, 2012 and 2011, accruals of approximately $15
million and $18 million, respectively, were reflected on our balance sheets related to these contingent obligations. As new
information becomes available, our estimates may change. The impact of these changes may have a significant effect on our
results of operations in a single period.
The outcome of these matters cannot be predicted with certainty and there can be no assurance that the outcome of a particular
matter will not result in the payment of amounts that have not been accrued for the matter. Furthermore, we may revise accrual
amounts prior to resolution of a particular contingency based on changes in facts and circumstances or changes in the expected
outcome.
No amounts have been recorded in our December 31, 2012 or 2011 consolidated balance sheets for contingencies and current
litigation, other than amounts disclosed herein.
Will Price. Will Price, an individual, filed actions in the U.S. District Court for the District of Kansas for damages against a
number of companies, including Panhandle, alleging mis-measurement of natural gas volumes and Btu content, resulting in
lower royalties to mineral interest owners. On September 19, 2009, the Court denied plaintiffs’ request for class
certification. Plaintiffs have filed a motion for reconsideration, which the Court denied on March 31, 2010. Panhandle believes
that its measurement practices conformed to the terms of its FERC natural gas tariffs, which were filed with and approved
by the FERC. As a result, Southern Union believes that it has meritorious defenses to the Will Price lawsuit (including FERC-
related affirmative defenses, such as the filed rate/tariff doctrine, the primary/exclusive jurisdiction of the FERC, and the
defense that Panhandle complied with the terms of its tariffs). In the event that Plaintiffs refuse Panhandle’s pending request
for voluntary dismissal, Panhandle will continue to vigorously defend the case. Southern Union believes it has no liability
associated with this proceeding.
Attorney General of the Commonwealth of Massachusetts v New England Gas Company. On July 7, 2011, the Massachusetts
Attorney General (AG) filed a regulatory complaint with the MDPU against New England Gas Company with respect to
certain environmental cost recoveries. The AG is seeking a refund to New England Gas Company customers for alleged
“excessive and imprudently incurred costs” related to legal fees associated with Southern Union’s environmental response
activities. In the complaint, the AG requests that the MDPU initiate an investigation into the New England Gas Company’s
collection and reconciliation of recoverable environmental costs including: (i) the prudence of any and all legal fees, totaling
$19 million, that were charged by the Kasowitz, Benson, Torres & Friedman firm and passed through the recovery mechanism
since 2005, the year when a partner in the firm, the Company’s former Vice Chairman, President and Chief Operating Officer,
joined Southern Union’s management team; (ii) the prudence of any and all legal fees that were charged by the Bishop, London
& Dodds firm and passed through the recovery mechanism since 2005, the period during which a member of the firm served
as the Company’s Chief Ethics Officer; and (iii) the propriety and allocation of certain legal fees charged that were passed
through the recovery mechanism that the AG contends only qualify for a lesser, 50%, level of recovery. Southern Union has
filed its answer denying the allegations and moved to dismiss the complaint, in part on a theory of collateral estoppel. The
hearing officer has deferred consideration of Southern Union’s motion to dismiss. The AG’s motion to be reimbursed expert
and consultant costs by the Company of up to $150,000 was granted. The hearing officer has stayed discovery until resolution
of a separate matter concerning the applicability of attorney-client privilege to legal billing invoices. Southern Union believes
it has complied with all applicable requirements regarding its filings for cost recovery and has not recorded any accrued
liability; however, Southern Union will continue to assess its potential exposure for such cost recoveries as the matter
progresses. Additionally, New England Gas Company’s assets and liabilities have been included in discontinued operations
at December 31, 2012.
Air Quality Control. SUGS is currently negotiating settlements to certain enforcement actions by the NMED and the TCEQ.
Compliance Orders from the New Mexico Environmental Department
SUGS has been in discussions with the NMED concerning allegations of violations of New Mexico air regulations related to
the Jal #3 and Jal #4 facilities. The NMED has issued amended compliance orders and proposed penalties for alleged violations
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