Progress Energy 2007 Annual Report Download - page 118

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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be made, we cannot determine the total costs that may be
incurred in connection with the remediation of all sites at
this time. It is probable that current estimates will change
and additional losses, which could be material, may be
incurred in the future.
The following table contains information about accruals
for environmental remediation expenses described below.
Accruals for probable and estimable costs related to
various environmental sites, which were included in other
liabilities and deferred credits on the Balance Sheets, at
December 31 were:
In addition to the Utilities’ sites, discussed under “PEC” and
“PEF” below, our environmental sites include the following
related to our nonregulated operations.
In 2001, we, through our Progress Fuels subsidiary,
established an accrual to address indemnities and retained
an environmental liability associated with the sale of our
Inland Marine Transportation business. At December 31,
2006, the remaining accrual balance was approximately
$3 million. For the year ended December 31, 2007, the
accrual was reduced by approximately $3 million due to
a reduction in the anticipated scope of work based on
responses from regulatory agencies. Expenditures related
to this liability were not material during 2007 and 2006.
On March 24, 2005, we completed the sale of our Progress
Rail subsidiary. In connection with the sale, we incurred
indemnity obligations related to certain pre-closing
liabilities, including certain environmental matters (See
discussion under Guarantees in Note 22C).
PEC
There are currently eight former MGP sites and a number
of other sites associated with PEC that have required or are
anticipated to require investigation and/or remediation. Three
of these sites are in the long-term monitoring phase.
For the year ended December 31, 2007, including the
Carolina Transformer site, the Ward Transformer site and
MGP sites discussed below, PEC’s accrual was reduced
by a net amount of approximately $2 million and PEC spent
approximately $4 million. For the year ended December 31,
2006, PEC accrued approximately $21 million and spent
approximately $6 million. In October 2006, PEC received
orders from the NCUC and SCPSC to defer and amortize
certain environmental remediation expenses, net of
insurance proceeds (See Note 7B).
For the year ended December 31, 2006, based upon
newly available data for several of PEC’s MGP sites,
which had individual site remediation costs ranging
from approximately $2 million to $4 million, a remediation
liability of approximately $12 million was recorded for the
minimum estimated total remediation cost for all of PEC’s
remaining MGP sites. The maximum amount of the range
for all the sites cannot be determined at this time as one of
the remaining sites is significantly larger than the sites for
which we have historical experience. Actual experience
may differ from current estimates, and it is probable that
estimates will continue to change in the future.
During the fourth quarter of 2004, the EPA advised PEC that
it had been identified as a PRP at the Ward Transformer
site located in Raleigh, N.C. The EPA offered PEC and a
number of other PRPs the opportunity to negotiate cleanup
of the site and reimbursement to the EPA for the EPA’s
past expenditures in addressing conditions at the site.
Subsequently, PEC and other PRPs signed a settlement
agreement, which requires the participating PRPs to
remediate the site. For the year ended December 31, 2006,
based upon continuing assessment work performed at
the site, PEC recorded an additional $9 million accrual
for its portion of the estimated remediation costs. At
December 31, 2006, after cumulative expenditures for
the Ward site of approximately $3 million, PEC’s recorded
liability for the site was approximately $9 million. During
2007, the PRP agreement was amended to include an
additional participating PRP, which reduced PEC’s allocable
share, and the estimated scope of work increased. These
factors resulted in a net reduction to PEC’s accrual for
this site. At December 31, 2007, PEC’s recorded liability for
the site was approximately $6 million. Actual experience
may differ from current estimates, and it is probable that
estimates will continue to change in the future. The outcome
of this matter cannot be predicted.
The EPA has also proposed, but not yet selected, a
final remedial action plan to address stream segments
downstream from the Ward Transformer site. The outcome
of this matter cannot be predicted.
(in millions) 2007 2006
PEC
MGP and other sites(a) $16 $22
PEF
Remediation of distribution and substation transformers 31 43
MGP and other sites 17 18
Total PEF environmental remediation accruals(b) 48 61
Progress Energy nonregulated operations –3
Total Progress Energy environmental remediation accruals $64 $86
(a) Expected to be paid out over one to five years.
(b) Expected to be paid out over one to fifteen years.