CenterPoint Energy 2010 Annual Report Download - page 132

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of approximately $52 million. The 200 MMcf per day incremental volume commitment made by Shell and Encana
began contemporaneously with the completion of the expansion.
Under the long-term agreements, Encana or Shell may elect to require CEFS to expand the capacity of the
Magnolia Gathering System by up to an additional 800 MMcf per day, bringing the total system capacity to 1.7 Bcf
per day. CEFS estimates that the cost to expand the capacity of the Magnolia Gathering System by an additional
800 MMcf per day would be as much as $240 million. Encana and Shell would provide incremental volume
commitments in connection with an election to expand the system’s capacity.
Olympia Gathering System. In April 2010, CEFS entered into additional long-term agreements with Encana and
Shell to provide gathering and treating services for their natural gas production from certain Haynesville Shale and
Bossier Shale formations in Texas and Louisiana. Pursuant to these agreements, CEFS acquired jointly-owned
gathering facilities (the Olympia Gathering System) from Encana and Shell in northwest Louisiana.
Under the terms of the agreements, CEFS is expanding the Olympia Gathering System in order to permit the
system to gather and treat up to 600 MMcf per day of natural gas. As of December 31, 2010, CEFS had spent
approximately $340 million on the 600 MMcf per day project, including the purchase of the original facilities, and
expects to incur up to an additional $85 million to complete this expansion. CEFS expects the full 600 MMcf per
day of capacity to be in service in the first quarter of 2011. CEFS is in the first year of the 10-year 600 MMcf per
day volume commitment made by Shell and Encana.
Under the long-term agreements, Encana and Shell may elect to require CEFS to expand the capacity of the
Olympia Gathering System by up to an additional 520 MMcf per day, bringing the total system capacity to 1.1 Bcf
per day. CEFS estimates that the cost to expand the capacity of the Olympia Gathering System by an additional
520 MMcf per day would be as much as $200 million. Encana and Shell would provide incremental volume
commitments in connection with an election to expand the system’s capacity.
(f) Legal, Environmental and Other Regulatory Matters
Gas Market Manipulation Cases. CenterPoint Energy, CenterPoint Houston or their predecessor, Reliant Energy,
Incorporated (Reliant Energy), and certain of their former subsidiaries are named as defendants in certain lawsuits
described below. Under a master separation agreement between CenterPoint Energy and a former subsidiary, RRI,
CenterPoint Energy and its subsidiaries are entitled to be indemnified by RRI and its successors for any losses,
including attorneys’ fees and other costs, arising out of these lawsuits. In May 2009, RRI sold its Texas retail
business to NRG Retail, a subsidiary of NRG Energy, Inc. and changed its name to RRI Energy, Inc. In December
2010, Mirant Corporation merged with and became a wholly owned subsidiary of RRI Energy, Inc., and RRI
Energy, Inc. changed its name to GenOn Energy, Inc. (GenOn). Neither the sale of the retail business nor the merger
with Mirant Corporation alters RRI’s (now GenOn’s) contractual obligations to indemnify CenterPoint Energy and
its subsidiaries, including CenterPoint Houston, for certain liabilities, including their indemnification obligations
regarding the gas market manipulation litigation, nor does it affect the terms of existing guaranty arrangements for
certain GenOn gas transportation contracts discussed below.
A large number of lawsuits were filed against numerous gas market participants in a number of federal and
western state courts in connection with the operation of the natural gas markets in 2000-2002. CenterPoint Energy’s
former affiliate, RRI, was a participant in gas trading in the California and Western markets. These lawsuits, many
of which have been filed as class actions, allege violations of state and federal antitrust laws. Plaintiffs in these
lawsuits are seeking a variety of forms of relief, including, among others, recovery of compensatory damages (in
some cases in excess of $1 billion), a trebling of compensatory damages, full consideration damages and attorneys’
fees. CenterPoint Energy and/or Reliant Energy were named in approximately 30 of these lawsuits, which were
instituted between 2003 and 2009. CenterPoint Energy and its affiliates have been released or dismissed from all but
two of such cases. CenterPoint Energy Services, Inc. (CES), a subsidiary of CERC Corp., is a defendant in a case
now pending in federal court in Nevada alleging a conspiracy to inflate Wisconsin natural gas prices in 2000-2002.
Additionally, CenterPoint Energy was a defendant in a lawsuit filed in state court in Nevada that was dismissed in
2007, but in March 2010 the plaintiffs appealed the dismissal to the Nevada Supreme Court. CenterPoint Energy
believes that neither it nor CES is a proper defendant in these remaining cases and will continue to pursue dismissal