Xcel Energy 2005 Annual Report Download - page 73

la Poudre River. On Dec. 14, 2005, the court denied Schrader’s request to dismiss the PSCo suit. On Jan. 3, 2006, Schrader filed a response
to the PSCo complaint and a counterclaim against PSCo for its response costs under the CERCLA and under the Resource Conservation and
Recovery Act (RCRA). Schrader has alleged as part of its counterclaim an “ imminent and substantial endangerment” of its property as defined
by RCRA. PSCo believes the allegations with respect to PSCo are without merit and will vigorously defend itself.
Third Party and Other Environmental Site Remediation
Asbestos Removal Some of our facilities contain asbestos. Most asbestos will remain undisturbed until the facilities that contain it are
demolished or renovated. Xcel Energy has recorded an estimate for final removal of the asbestos as an asset retirement obligation. See
additional discussion of asset retirement obligations elsewhere in Note 14. It may be necessary to remove some asbestos to perform maintenance
or make improvements to other equipment. The cost of removing asbestos as part of other work is immaterial and is recorded as incurred
as operating expenses for maintenance projects, capital expenditures for construction projects or removal costs for demolition projects.
Leyden Gas Storage Facility In February 2001, the CPUC approved PSCo’s plan to abandon the Leyden natural gas storage facility (Leyden)
after 40 years of operation. In July 2001, the CPUC decided that the recovery of all Leyden costs would be addressed in a future rate proceeding
when all costs were known. In 2003, PSCo began flooding the facility with water, as part of an overall plan to convert Leyden into a municipal
water storage facility owned and operated by the city of Arvada, Colo. In August 2003, the Colorado Oil and Gas Conservation Commission
(COGCC) approved the closure plan, the last formal regulatory approval necessary before conversion. On Dec. 31, 2005, PSCo’s leases of the
Leyden properties were terminated and the city of Arvada took custody of the facility. PSCo is obligated to monitor the site for two years
after closure. As of Dec. 31, 2005, PSCo has incurred approximately $5.7 million of costs associated with engineering buffer studies, damage
claims paid to landowners and other initial closure costs. PSCo has accrued an additional $0.2 million of costs expected to be incurred
through 2006 to complete the decommissioning and closure of the facility. PSCo has deferred these costs as a regulatory asset. In May 2005,
PSCo filed a natural gas rate case with the CPUC requesting recovery of the Leyden costs, totaling $4.8 million to be amortized over four years.
Xcel Energy has reached a settlement agreement with the parties in the case. The CPUC approved the settlement agreement on Jan. 19, 2006,
and the final order became effective on Feb. 3, 2006. Xcel Energy believes that the additional $0.9 million of costs incurred may be recovered
in a future case.
In December 2003, a homeowners’ association petitioned the EPA to assess the threat of a natural gas release from the Leyden facility pursuant
to Section 105(d) of the CERCLA. The EPA completed its review in October 2004 and concluded that the risk to nearby residents is relatively
low. The EPA referred the matter to its RCRA program. On Nov. 24, 2004, the EPA sent a letter to the COGCC requesting that the COGCC
contact Xcel Energy and request certain information concerning the closure. To date no formal request has been received by PSCo.
On Aug. 17, 2005, the EPA requested information from PSCo regarding the compliance status of the Leyden facility under the federal Clean
Air Act (CAA). On Sept. 19, 2005, PSCo responded to the requests for information. PSCo believes the Leyden facility is in compliance with the
CAA and other applicable state and federal environmental laws. Xcel Energy cannot predict the ultimate outcome of this inquiry; however,
any consequence is not expected to have a material impact.
Polychlorinated Biphenyl (PCB) Storage and Disposal In August 2004, SPS received notice from the EPA contending SPS violated PCB
storage and disposal regulations with respect to storage of a drained transformer and related solids. The EPA contends the fine for the alleged
violation is approximately $1.2 million. SPS is contesting the fine and is in discussions with the EPA.
Cunningham Station Groundwater Cunningham Station is a natural gas-fired power plant constructed in the 1960s by SPS and has 28 water
wells installed on its water rights. The well field provides water for boiler makeup, cooling water and potable water. Following an acid release
in 2002, groundwater samples revealed elevated concentrations of inorganic salt compounds not related to the release. The contamination
was identified in wells located near the plant buildings. The source of contamination is thought to be leakage from ponds that receive blowdown
water from the plant. In response to a request by the New Mexico Environment Department (NMED), SPS prepared a corrective action plan
to address the groundwater contamination. Under the plan submitted to the NMED, SPS agreed to control leakage from the plant blowdown
ponds through construction of a new lined pond, additional irrigation areas to minimize percolation, and installation of additional wells
to monitor groundwater quality. On June 23, 2005, NMED issued a letter approving the corrective action plan. The action plan is subject
to continued compliance with New Mexico regulations and oversight by the NMED. These actions, which are considered future improvements,
are estimated to cost approximately $3.8 million through 2008 and will be capitalized or expensed as incurred.
Other Environmental Requirements
Clean Air Interstate and Mercury Rules In March 2005, the EPA issued two significant new air quality rules. The Clean Air Interstate Rule
(CAIR) further regulates sulfur dioxide (SO2) and nitrogen oxide (NOx) emissions, and the Clean Air Mercury Rule (CAMR) regulates mercury
emissions from power plants for the first time.
The objective of the CAIR is to cap emissions of SO2and NOxin the eastern United States, including Minnesota, Texas and Wisconsin, which
are within Xcel Energy’s service territory. Xcel Energy generating facilities in other states are not affected. When fully implemented, CAIR
will reduce SO2emissions in 28 eastern states and the District of Columbia by over 70 percent, and NOxemissions by over 60 percent from
2003 levels. It is designed to address the transportation of fine particulates, ozone and emission precursors to nonattainment downwind
states. CAIR has a two-phase compliance schedule, beginning in 2009 for NOxand 2010 for SO2, with a final compliance deadline in 2015
for both emissions. Under CAIR, each affected state will be allocated an emissions budget for SO2and NOxthat will result in significant
emission reductions. It will be based on stringent emission controls and forms the basis for a cap-and-trade program. State emission budgets
or caps decline over time. States can choose to implement an emissions reduction program based on the EPA’s proposed model program, or
they can propose another method, which the EPA would need to approve.
XCEL ENERGY 2005 ANNUAL REPORT 71
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS