Progress Energy 2004 Annual Report Download - page 100

the remediation costs can be made, at this time PEF is
unable to provide an estimate of its obligation to
remediate these sites beyond what is currently accrued.
As more activity occurs at these sites, PEF will assess the
need to adjust the accruals. It is anticipated that
sufficient information will become available in 2005 to
make a reasonable estimate of PEF’s obligation for one of
the MGP sites.
The Florida Legislature passed risk-based corrective
action (RBCA, known as Global RBCA) legislation in the
2003 regular session. Risk-based corrective action
generally means that the corrective action prescribed
for contaminated sites can correlate to the level of
human health risk imposed by the contamination at the
property. The Global RBCA law expands the use of the
risk-based corrective action to all contaminated sites in
the state that are not currently in one of the state’s waste
cleanup programs. The FDEP developed the rules
required by the RBCA statute, holding meetings with
interested stakeholders and hosting public workshops.
The rules have the potential for making future cleanups
in Florida more costly to complete. The Global RBCA rule
was adopted at the February 2, 2005, Environmental
Review Commission hearing. The effective date of the
Global RBCA rule is expected to be announced in April
2005. The Company and PEF are in the process of
assessing the impact of this matter.
Florida Progress Corporation
In 2001, FPC established a $10 million accrual to address
indemnities and retained an environmental liability
associated with the sale of its Inland Marine
Transportation business. In 2003, the accrual was
reduced to $4 million based on a change in estimate.
During 2004, expenditures related to this liability were not
material to the Company’s financial condition. As of
December 31, 2004, the remaining accrual balance was
approximately $3 million. FPC measures its liability for
these exposures based on estimable and probable
remediation scenarios.
Certain historical sites are being addressed voluntarily by
FPC. An immaterial accrual has been established to
address investigation expenses related to these sites. At
this time, the Company cannot determine the total costs
that may be incurred in connection with these sites.
Rail
Rail Services is voluntarily addressing certain historical
waste sites. At this time, the Company cannot determine
the total costs that may be incurred in connection with
these sites.
Air Quality
Congress is considering legislation that would require
reductions in air emissions of NOx, SO2, carbon dioxide
and mercury. Some of these proposals establish
nationwide caps and emission rates over an extended
period of time. This national multi-pollutant approach to
air pollution control could involve significant capital costs
that could be material to the Company’s consolidated
financial position or results of operations. Control
equipment that will be installed on North Carolina fossil
generating facilities as part of the NC Clean Air
legislation discussed below may address some of the
issues outlined above. However, the Company cannot
predict the outcome of this matter.
The EPA is conducting an enforcement initiative related
to a number of coal-fired utility power plants in an effort
to determine whether changes at those facilities were
subject to New Source Review requirements or New
Source Performance Standards under the Clean Air Act.
The Company was asked to provide information to the
EPA as part of this initiative and cooperated in supplying
the requested information. The EPA initiated civil
enforcement actions against other unaffiliated utilities as
part of this initiative. Some of these actions resulted in
settlement agreements calling for expenditures by these
unaffiliated utilities, in excess of $1.0 billion. These
settlement agreements have generally called for
expenditures to be made over extended time periods, and
some of the companies may seek recovery of the related
cost through rate adjustments or similar mechanisms.
The Company cannot predict the outcome of this matter.
In 2003, the EPA published a final rule addressing routine
equipment replacement under the New Source Review
program. The rule defines routine equipment
replacement and the types of activities that are not
subject to New Source Review requirements or New
Source Performance Standards under the Clean Air Act.
The rule was challenged in the Federal Appeals Court
and its implementation stayed. In July 2004, the EPA
announced it will reconsider certain issues arising from
the final routine equipment replacement rule. The
comment period closed on August 30, 2004. The Company
cannot predict the outcome of this matter.
In 1998, the EPA published a final rule under Section 110
of the Clean Air Act addressing the regional transport of
ozone (NOx SIP Call). Total capital expenditures to meet
the requirements of the NOx SIP Call Rule in North and
South Carolina could reach approximately $370 million,
which has not been adjusted for inflation. To date, the
Company has spent approximately $282 million related to
98
Notes to Consolidated Financial Statements