Atmos Energy 1998 Annual Report Download - page 38

Company. In the opinion of the Company’s management, liabili-
ties, if any, arising from these other claims and lawsuits are either
covered by insurance, adequately reserved for by the Company or
would not have a material adverse effect on the financial condition,
results of operations, or cash flows of the Company.
Guarantees
The Company’s wholly-owned subsidiary, UCG Energy, and
Woodward Marketing, Inc. (“WMI”), sole members of WMLLC,
act as guarantors of up to $12.5million of balances outstanding
under a $30 million bank credit facility for WMLLC.UCG Energy
guarantees the payment of up to $5.6million of borrowings
under this facility. No balance was outstanding under this credit
facility at September 30,1998.UCG Energy and WMI also act as
joint and several guarantors on certain accounts payable for gas
purchases. UCG Energy has agreed to guarantee payables of
WMLLC up to $40.0million of natural gas purchases and trans-
portation services from suppliers. WMLLC payable balances
outstanding that were subject to these guarantees amounted to
$8.5million at September 30,1998.
Environmental Matters
Atmos is the owner or previous owner of manufactured gas plant
sites which were used to supply gas prior to availability of natural
gas. The gas manufacturing process resulted in certain by-prod-
ucts and residual materials including coal tar. It was an acceptable
and satisfactory process at the time such operations were being
conducted. Under current environmental protection laws and reg-
ulations, the Company may be responsible for response actions
with respect to such materials, if response actions are necessary.
The United Cities Division owns or owned former manufac-
tured gas plant sites in Johnson City and Bristol, Tennessee,
Hannibal, Missouri and Americus, Georgia. UCGC and the
Tennessee Department of Environment and Conservation entered
into a consent order effective January 23,1997, for the purpose of
facilitating the investigation, removal and remediation of the
Johnson City site. UCGC began the implementation of the con-
sent order in the first quarter of 1997.
The Company is unaware of any information which suggests
that the Bristol site gives rise to a present health or environmen-
tal risk as a result of the manufactured gas process or that any
response action will be necessary. The Tennessee Regulatory
Authority granted UCGC permission to defer, until its next rate
case, all costs incurred in Tennessee in connection with state and
federally mandated environmental control requirements.
On July 22,1998,Atmos entered into an Abatement Order on
Consent with the Missouri Department of Natural Resources
addressing the former manufactured gas plant located in Hannibal,
Missouri. Atmos, through its United Cities Division, agreed in the
order to perform a removal action, a subsequent site evaluation and
to reimburse the response costs incurred by the state of Missouri in
connection with the property. The removal action was conducted
and completed in August 1998 and the site evaluation will be com-
pleted in 1999. The Company has requested an Accounting
Authority Order from the Missouri Public Service Commission
(“MSPC”) that would authorize it to defer its response costs related
to the Hannibal site. On July 7,1998, the MPSC Staff recommended
that the MPSC approve the application.
As of September 30,1998, the Company had incurred and
deferred for recovery $1.1million including $258,000 related to
an insurance recoverability study, and accrued and deferred for
recovery an additional $750,000 associated with the preliminary
survey and invasive study of the Johnson City, Hannibal and
Bristol sites.
On December 16,1997, the Company, through its United
Cities Division, entered into a Settlement Agreement with two
other responsible parties at the Americus, Georgia former manufac-
tured gas plant site. UCGC was a former owner of the property. In
the Settlement Agreement, the Company agreed to pay $250,000
to resolve its liability for response costs and property damages
associated with the site. The Company has paid the $250,000. The
agreement contains a covenant not to sue, an indemnification
provision from the other parties and gives the other parties all
responsibility for investigation and response actions at the site.
On October 20,1998, the Company filed a proposal with the
Georgia Public Service Commission for recovery of this amount
through a rate rider. In November 1998, the Commission
approved recovery through the rate rider which will take affect
December 1,1998.
Atmos is currently conducting an investigation pursuant to a
Consent Order between the Kansas Department of Health and
Environment and UCGC. The Order provides for the investiga-
tion, and a possible response action, for mercury contamination at
gas pipeline sites which utilize or formerly utilized mercury
meter equipment in Kansas. As of September 30,1998, the
Company had identified approximately 720 sites where mercury
may have been used and had incurred and deferred for recovery
$100,000. In addition, based upon available current information,
the Company accrued and deferred for recovery an additional
$280,000 for the investigation of these sites. The Kansas
Corporation Commission has authorized the Company to defer
these costs and seek recovery in a future rate case.
The Company addresses other environmental matters from
time to time in the regular and ordinary course of its business.
Management expects that future expenditures related to response
action at any site will be recovered through rates or insurance, or
34 ATMOS ENERGY CORPORATION