OG&E 2009 Annual Report Download - page 97

OGE Energy intends to vigorously defend this action. At this time, OGE Energy is unable to provide an evaluation of the
likelihood of an unfavorable outcome and an estimate of the amount or range of potential loss to OGE Energy.
Franchise Fee Lawsuit
On June 19, 2006, two Company customers brought a putative class action, on behalf of all similarly situated customers, in
the District Court of Creek County, Oklahoma, challenging certain charges on the Company’s electric bills. The plaintiffs claim that
the Company improperly charged sales tax based on franchise fee charges paid by its customers. The plaintiffs also challenge certain
franchise fee charges, contending that such fees are more than is allowed under Oklahoma law. The Company’s motion for summary
judgment was denied by the trial judge. The Company filed a writ of prohibition at the Oklahoma Supreme Court asking the court to
direct the trial court to dismiss the class action suit. In January 2007, the Oklahoma Supreme Court “arrested” the District Court
action until, and if, the propriety of the complaint of billing practices is determined by the OCC. In September 2008, the plaintiffs
filed an application with the OCC asking the OCC to modify its order which authorizes the Company to collect the challenged
franchise fee charges. On March 10, 2009, the Oklahoma Attorney General, the Company, OG&E Shareholders Association and the
Staff of the Public Utility Division of the OCC all filed briefs arguing that the application should be dismissed. On December 9, 2009
the OCC issued an order dismissing the plaintiffs’ request for a modification of the OCC order which authorizes the Company to
collect and remit sales tax on franchise fee charges. In its December 9, 2009 order, the OCC advised the plaintiffs that the ruling does
not address the question of whether the Company’s collection and remittance of such sales tax should be discontinued prospectively.
On December 21, 2009, the plaintiffs filed a motion at the Oklahoma Supreme Court asking the court to deny the Company’s writ of
prohibition and to remand the cause to the District Court. On December 29, 2009, the Oklahoma Supreme Court declared the
plaintiffs’ motion moot. On January 27, 2010, the OCC Staff filed a motion asking the OCC to dismiss the cause and close the cause
at the OCC. If the OCC Staff’s motion is granted, the plaintiffs would be required to file a new cause in order to ask for prospective
relief. In its motion, the OCC Staff stated that the plaintiff’s counsel advised the OCC Staff counsel that the plaintiffs have no desire
to seek a determination regarding prospective relief from the OCC. It is unknown whether the plaintiffs will attempt to continue the
District Court action. The Company believes that the lawsuit is without merit.
Oxley Litigation
The Company has been sued by John C. Oxley D/B/A Oxley Petroleum et al. in the District Court of Haskell County,
Oklahoma. This case has been pending for more than 11 years. The plaintiffs alleged that the Company breached the terms
of contracts covering several wells by failing to purchase gas from the plaintiffs in amounts set forth in the contracts. The plaintiffs’
most recent Statement of Claim describes approximately $2.7 million in take-or-pay damages (including interest) and approximately
$36 million in contract repudiation damages (including interest), subject to the limitation described below. In 2001, the Company
agreed to provide the plaintiffs with approximately $5.8 million of consideration and the parties agreed to arbitrate the dispute.
Consequently, the Company will only be liable for the amount, if any, of an arbitration award in excess of $5.8 million. The
arbitration hearing was completed recently and the next step is briefing by the parties. While the Company cannot predict the precise
outcome of the arbitration, based on the information known at this time, the Company believes that this lawsuit will not have a
material adverse effect on the Company’s financial position or results of operations.
Environmental Laws and Regulations
The activities of the Company are subject to stringent and complex Federal, state and local laws and regulations governing
environmental protection including the discharge of materials into the environment. These laws and regulations can restrict or impact
the Company’s business activities in many ways, such as restricting the way it can handle or dispose of its wastes, requiring remedial
action to mitigate pollution conditions that may be caused by its operations or that are attributable to former operators, regulating
future construction activities to avoid endangered species or enjoining some or all of the operations of facilities deemed in
noncompliance with permits issued pursuant to such environmental laws and regulations. In most instances, the applicable regulatory
requirements relate to water and air pollution control or solid waste management measures. Failure to comply with these laws and
regulations may result in the assessment of administrative, civil and criminal penalties, the imposition of remedial requirements, and
the issuance of orders enjoining future operations. Certain environmental statutes can impose burdensome liability for costs required
to clean up and restore sites where substances or wastes have been disposed or otherwise released into the environment. Moreover, it
is not uncommon for neighboring landowners and other third parties to file claims for personal injury and property damage allegedly
caused by the release of substances or wastes into the environment. The Company handles some materials subject to the requirements
of the Federal Resource Conservation and Recovery Act and the Federal Water Pollution Control Act of 1972, as amended (“Federal
Clean Water Act”) and comparable state statutes, prepares and files reports and documents pursuant to the Toxic Substance Control
Act and the Emergency Planning and Community Right to Know Act and obtains permits pursuant to the Federal Clean Air Act and
comparable state air statutes.
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