Vectren 2010 Annual Report Download - page 44

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Environmental Remediation Efforts
In the past, Indiana Gas, SIGECO, and others operated facilities for the manufacture of gas. Given the availability of natural
gas transported by pipelines, these facilities have not been operated for many years. Under currently applicable environmental
laws and regulations, those that owned or operated these facilities may now be required to take remedial action if certain
contaminants are found above the regulatory thresholds at these sites.
Indiana Gas identified the existence, location, and certain general characteristics of 26 gas manufacturing and storage sites for
which it may have some remedial responsibility. Indiana Gas completed a remedial investigation/feasibility study (RI/FS) at one
of the sites under an agreed order between Indiana Gas and the IDEM, and a Record of Decision was issued by the IDEM in
January 2000. Indiana Gas submitted the remainder of the sites to the IDEM's Voluntary Remediation Program (VRP) and is
currently conducting some level of remedial activities, including groundwater monitoring at certain sites, where deemed
appropriate, and will continue remedial activities at the sites as appropriate and necessary.
Indiana Gas accrued the estimated costs for further investigation, remediation, groundwater monitoring, and related costs for
the sites. While the total costs that may be incurred in connection with addressing these sites cannot be determined at this
time, Indiana Gas has recorded cumulative costs that it reasonably expects to incur totaling approximately $23.1 million. The
estimated accrued costs are limited to Indiana Gas’ share of the remediation efforts. Indiana Gas has arrangements in place for
19 of the 26 sites with other potentially responsible parties (PRP), which limit Indiana Gas’ costs at these 19 sites to between 20
percent and 50 percent. With respect to insurance coverage, Indiana Gas has received approximately $20.8 million from all
known insurance carriers under insurance policies in effect when these plants were in operation.
In October 2002, SIGECO received a formal information request letter from the IDEM regarding five manufactured gas plants
that it owned and/or operated and were not enrolled in the IDEM’s VRP. In October 2003, SIGECO filed applications to enter
four of the manufactured gas plant sites in IDEM's VRP. The remaining site is currently being addressed in the VRP by another
Indiana utility. SIGECO added those four sites into the renewal of the global Voluntary Remediation Agreement that Indiana
Gas has in place with IDEM for its manufactured gas plant sites. That renewal was approved by the IDEM in February 2004.
SIGECO was also named in a lawsuit, involving another waste disposal site subject to potential environmental remediation
efforts. With respect to that lawsuit, SIGECO settled with the plaintiff during 2010 mitigating any future claims at this site.
SIGECO has filed a declaratory judgment action against its insurance carriers seeking a judgment finding its carriers liable
under the policies for coverage of further investigation and any necessary remediation costs that SIGECO may accrue under the
VRP program and/or related to the site subject to the recently settled lawsuit. In November, the Court ruled on two motions for
summary judgment, finding for SIGECO and against certain insurers on indemnification and defense obligations in the policies
at issue.
SIGECO has recorded cumulative costs that it reasonably expects to incur related to these environmental matters, including the
recent settlement discussed above, totaling approximately $15.8 million. However, the total costs that may be incurred in
connection with addressing all of these sites cannot be determined at this time. With respect to insurance coverage, SIGECO
has recorded approximately $14.1 million of expected insurance recoveries from certain of its insurance carriers under
insurance policies in effect when these sites were in operation. While negotiations are ongoing with certain carriers, settlements
have been reached with some carriers and $8.2 million in proceeds have been received.
The costs the Company expects to incur are estimated by management using assumptions based on actual costs incurred, the
timing of expected future payments, and inflation factors, among others. While the Company’s utilities have recorded all costs
which they presently expect to incur in connection with activities at these sites, it is possible that future events may require some
level of additional remedial activities which are not presently foreseen and those costs may not be subject to PRP or insurance
recovery. As of December 31, 2010 and 2009, respectively, approximately $5.5 million and $6.5 million of accrued, but not yet
spent, costs are included in Other Liabilities related to both the Indiana Gas and SIGECO sites.