OG&E 2010 Annual Report Download - page 90

of contracts covering several wells by failing to purchase gas from the plaintiffs in amounts set forth in the contracts. The plaintiffs’
most recent Statement of Claim described $2.7 million in take-or-pay damages (including interest) and $36 million in contract
repudiation damages (including interest), subject to the limitation described below. In 2001, the Company agreed to provide the
plaintiffs with $5.8 million of consideration and the parties agreed to arbitrate the dispute. On May 19, 2010, the arbitration panel
issued an arbitration award in an amount less than the consideration previously paid by the Company and, as a result, the Company did
not owe any additional amount. The Company now considers this case closed.
Franchise Fee Lawsuit
On June 19, 2006, two Company customers brought a putative class action, on behalf of all similarly situated customers, in
the District Court of Creek County, Oklahoma, challenging certain charges on the Company’s electric bills. The plaintiffs claim that
the Company improperly charged sales tax based on franchise fee charges paid by its customers. The plaintiffs also challenge certain
franchise fee charges, contending that such fees are more than is allowed under Oklahoma law. The Company’s motion for summary
judgment was denied by the trial judge. In January 2007, the Oklahoma Supreme Court “arrested” the District Court action until, and
if, the propriety of the complaint of billing practices is determined by the OCC. In September 2008, the plaintiffs filed an application
with the OCC asking the OCC to modify its order which authorizes the Company to collect the challenged franchise fee charges. On
December 9, 2009 the OCC issued an order dismissing the plaintiffs’ request for a modification of the 1994 OCC order which
authorized the Company to collect and remit sales tax on franchise fee charges. In its December 9, 2009 order, the OCC advised the
plaintiffs that the ruling does not address the question of whether the Company’s collection and remittance of such sales tax should be
discontinued prospectively. On April 19, 2010, the OCC issued a final order dismissing with prejudice the applicants’ claims for
recovery of previously paid taxes on franchise fees and approving the closing of this matter. On June 10, 2010, the plaintiffs filed a
motion in the District Court of Creek County, Oklahoma, asking the court to proceed with the original class action. On July 8, 2010, a
hearing in this matter was held and the court granted the plaintiffs motion to lift the stay of discovery previously imposed by the
Oklahoma Supreme Court but denied any other specific relief pending further action by the court. On August 4, 2010, the Company
filed an application to assume original jurisdiction and a petition for a writ of prohibition with the Oklahoma Supreme Court. On
September 13, 2010, the Oklahoma Supreme Court issued a writ prohibiting the District Court judge from proceeding further in this
case except to dismiss the case. On September 20, 2010, the plaintiffs filed a motion to reconsider this matter with the Oklahoma
Supreme Court. On December 6, 2010 the Oklahoma Supreme Court denied the plaintiffs motion to reconsider. In compliance with
the Oklahoma Supreme Court order, on December 14, 2010, the District Court of Creek County dismissed the lawsuit. The Company
considers this matter closed.
Environmental Laws and Regulations
The activities of the Company are subject to stringent and complex Federal, state and local laws and regulations governing
environmental protection including the discharge of materials into the environment. These laws and regulations can restrict or impact
the Company’s business activities in many ways, such as restricting the way it can handle or dispose of its wastes, requiring remedial
action to mitigate pollution conditions that may be caused by its operations or that are attributable to former operators, regulating
future construction activities to mitigate harm to threatened or endangered species and requiring the installation and operation of
pollution control equipment. Failure to comply with these laws and regulations may result in the assessment of administrative, civil
and criminal penalties, the imposition of remedial requirements, and the issuance of orders enjoining future operations.
Environmental regulation can increase the cost of planning, design, initial installation and operation of the Company’s
facilities. Historically, the Company’s total expenditures for environmental control facilities and for remediation have not been
significant in relation to its financial position or results of operations. The Company believes, however, that it is reasonably likely that
the trend in environmental legislation and regulations will continue towards more restrictive standards. Compliance with these
standards is expected to increase the cost of conducting business.
Air
Acid Rain and Sulfur Dioxide Air Quality Standards
The Federal Clean Air Act includes an acid rain program to reduce SO2 emissions. Reductions were obtained through a
program of emission (release) allowances issued by the EPA to power plants covered by the acid rain program. Each allowance is
worth one ton of SO2 released from the chimney. Plants may only release as much SO2 as they have allowances. Allowances may be
banked and traded or sold nationwide. Beginning in 2000, the Company became subject to more stringent SO2 emission requirements
in Phase II of the acid rain program. These lower limits had no significant financial impact due to
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