Xcel Energy 2014 Annual Report Download - page 154

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Environmental Contingencies
Xcel Energy has been or is currently involved with the cleanup of contamination from certain hazardous substances at several sites. In
many situations, the subsidiary involved believes it will recover some portion of these costs through insurance claims. Additionally,
where applicable, the subsidiary involved is pursuing, or intends to pursue, recovery from other PRPs and through the regulated rate
process. New and changing federal and state environmental mandates can also create added financial liabilities for Xcel Energy,
which are normally recovered through the regulated rate process. To the extent any costs are not recovered through the options listed
above, Xcel Energy would be required to recognize an expense.
Site Remediation — Various federal and state environmental laws impose liability, without regard to the legality of the original
conduct, where hazardous substances or other regulated materials have been released to the environment. Xcel Energy Inc.’s
subsidiaries may sometimes pay all or a portion of the cost to remediate sites where past activities of their predecessors or other parties
have caused environmental contamination. Environmental contingencies could arise from various situations, including sites of former
MGPs operated by Xcel Energy Inc.’s subsidiaries or their predecessors, or other entities; and third-party sites, such as landfills, for
which one or more of Xcel Energy Inc.’s subsidiaries are alleged to be a PRP that sent hazardous materials and wastes to that site.
MGP Sites
Ashland MGP Site — NSP-Wisconsin has been named a PRP for contamination at a site in Ashland, Wis. The Ashland/Northern
States Power Lakefront Superfund Site (the Ashland site) includes property owned by NSP-Wisconsin, which was a site previously
operated by a predecessor company as a MGP facility (the Upper Bluff), and two other properties: an adjacent city lakeshore park area
(Kreher Park), on which an unaffiliated third party previously operated a sawmill and conducted wood treating operations; and an area
of Lake Superior’s Chequamegon Bay adjoining the park (the Sediments).
The EPA issued its Record of Decision (ROD) in 2010, which describes the preferred remedy the EPA has selected for the cleanup of
the Ashland site. For the Sediments at the Ashland Site, the ROD preferred remedy is a hybrid remedy involving both dry excavation
and wet conventional dredging methodologies (the Hybrid Remedy). The ROD also identifies the possibility of a wet conventional
dredging only remedy for the Sediments (the Wet Dredge), contingent upon the completion of a successful Wet Dredge pilot study.
In 2011, the EPA issued special notice letters identifying several entities, including NSP-Wisconsin, as PRPs, for future remediation at
the Ashland site. As a result of settlement negotiations with NSP-Wisconsin, the EPA agreed to segment the Ashland site into separate
areas. The first area (Phase I Project Area) includes soil and groundwater in Kreher Park and the Upper Bluff. The second area
includes the Sediments.
In October 2012, a settlement among the EPA, the WDNR, the Bad River and Red Cliff Bands of the Lake Superior Tribe of
Chippewa Indians and NSP-Wisconsin was approved by the U.S. District Court for the Western District of Wisconsin. This settlement
resolves claims against NSP-Wisconsin for its alleged responsibility for the remediation of the Phase I Project Area. Under the terms
of the settlement, NSP-Wisconsin agreed to perform the remediation of the Phase I Project Area, but does not admit any liability with
respect to the Ashland site. Demolition activities occurred at the Ashland site in 2013. The final design for the soil, including
excavation and treatment, as well as containment wall remedies was submitted to the EPA in April 2014 and work commenced in May
2014. A preliminary design for the groundwater remedy was also submitted to the EPA in April 2014 and those activities are expected
to commence in 2015. Based on these updated designs, the cost estimate for the cleanup of the Phase I Project Area is approximately
$54 million, of which approximately $28 million has already been spent. The settlement also resolves claims by the federal, state and
tribal trustees against NSP-Wisconsin for alleged natural resource damages at the Ashland site, including both the Phase I Project Area
and the Sediments. Fieldwork to address the Phase I Project Area at the Ashland site began at the end of 2012 and continues.
Negotiations are ongoing between the EPA and NSP-Wisconsin regarding who will pay for or perform the cleanup of the Sediments
and what remedy will be implemented at the site to address the Sediments. It is NSP-Wisconsin’s view that the Hybrid Remedy is not
safe or feasible to implement. The EPA’s ROD for the Ashland site includes estimates that the cost of the Hybrid Remedy is between
$63 million and $77 million, with a potential deviation in such estimated costs of up to 50 percent higher to 30 percent lower. In
November 2013, NSP-Wisconsin submitted a revised Wet Dredge pilot study work plan proposal to the EPA. In May 2014, NSP-
Wisconsin entered into a final administrative order on consent for the Wet Dredge pilot study with the EPA. In September 2014, the
EPA granted an extension of time to perform the pilot in the summer of 2015.