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Contingent Liabilities and Commitments (Notes)
3 Months Ended
Mar. 31, 2017
Commitments and Contingencies Disclosure [Abstract]  
Contingent Liabilities and Commitments
CONTINGENT LIABILITIES AND COMMITMENTS
Rate Matters
General rate case (Docket No. RP06-569) On August 31, 2006, we submitted to the Federal Energy Regulatory Commission (FERC) a general rate filing principally designed to recover increased costs. The rates became effective March 1, 2007, subject to refund and the outcome of a hearing. All issues in this proceeding except one have been resolved by settlement.
The one issue reserved for litigation or further settlement relates to our proposal to change the design of the rates for service under our WSS-OA storage rate schedule, which was implemented subject to refund on March 1, 2007. Following a hearing, the FERC issued an opinion approving our proposed incremental rate design, and subsequently denied requests for rehearing of that approval. On February 21, 2014, the U. S. Court of Appeals for the D.C. Circuit (D.C. Circuit) issued an opinion that vacated and remanded the FERC's order because the FERC did not adequately support its conclusions. On March 17, 2016, the FERC issued an order addressing the issues raised by the D.C. Circuit's opinion. In the March 17 order, the FERC reversed its prior opinion and found that Transco's incremental rate design is unjust and unreasonable. The FERC directed Transco to design its WSS-OA rates on a rolled-in basis, to file revised WSS-OA rates reflecting the findings in the order, and to refund the amounts collected in excess of those rates since March 1, 2007. On April 18, 2016, we submitted the compliance filing reflecting rolled-in rates for WSS-OA service consistent with the March 17 order, and began charging those rates beginning April 19, 2016. We also filed a request for rehearing of the March 17 order. If we are unsuccessful, refunds will be due within 60 days after a final FERC order no longer subject to rehearing. As of March 31, 2017, we have accrued a liability for potential refunds of $18.9 million.

Station 62 Incident
On October 8, 2015, an explosion and fire occurred at our Compressor Station No. 62 in Gibson, Louisiana. At the time of the incident, planned facility maintenance was being performed at the station and the facility was not operational. The incident was related to maintenance work being performed on the slug catcher at the station. Four contractor employees were killed in the incident and others were injured.
In responding to the incident, we cooperated with local, state and federal authorities, including the Louisiana State Police, Terrebonne Parish, the Louisiana Department of Environmental Quality, the U.S. Environmental Protection Agency (Region 6), the Occupational Safety and Health Administration, and the U.S. Department of Transportation's Pipeline and Hazardous Materials Safety Administration (PHMSA). On July 29, 2016, PHMSA issued a Notice of Probable Violation (NOPV), which includes a $1.6 million proposed civil penalty to us in connection with the incident. This penalty was accrued in the second quarter of 2016 and would not be covered by our insurance policies. We filed a response to the NOPV on August 25, 2016.
The incident did not cause any rupture of the gas pipeline or any damage to the building containing the compressor engines. In anticipation of the planned maintenance, our Southeast Louisiana Lateral was taken out of service on October 4, 2015, which affected approximately 200 MMcf/d of natural gas production. The lateral was restored to service in early 2016 after repairs were made to the facilities damaged in the incident.
We are a defendant in lawsuits seeking damages for wrongful death, personal injury and property damages. We believe it is reasonably possible that losses will be incurred on some lawsuits. However, in management's judgment, the ultimate resolution of these matters will not have a material effect on our financial condition, results of operations or cash flows. While we also have claims for indemnification, we believe that it is probable that any ultimate losses incurred will be covered by our general liability insurance policy.
Environmental Matters
We have had studies underway for many years to test some of our facilities for the presence of toxic and hazardous substances such as polychlorinated biphenyls (PCBs) and mercury to determine to what extent, if any, remediation may be necessary. We have also similarly evaluated past on-site disposal of hydrocarbons at a number of our facilities. We have worked closely with and responded to data requests from the U.S. Environmental Protection Agency (EPA) and state agencies regarding such potential contamination of certain of our sites. On the basis of the findings to date, we estimate that environmental assessment and remediation costs under various federal and state statutes will total approximately $6 million to $8 million (including both expense and capital expenditures), measured on an undiscounted basis, and will substantially be spent over the next four to six years. This estimate depends on a number of assumptions concerning the scope of remediation that will be required at certain locations and the cost of the remedial measures. We are conducting environmental assessments and implementing a variety of remedial measures that may result in increases or decreases in the total estimated costs. At March 31, 2017, we had a balance of approximately $4.1 million for the expense portion of these estimated costs recorded in current liabilities ($2.1 million) and other long-term liabilities ($2.0 million) in the accompanying Condensed Consolidated Balance Sheet. At December 31, 2016, we had a balance of approximately $4.2 million for the expense portion of these estimated costs recorded in current liabilities ($2.1 million) and other long-term liabilities ($2.1 million) in the accompanying Condensed Consolidated Balance Sheet.
We have been identified as a potentially responsible party (PRP) at various Superfund and state waste disposal sites. Based on present volumetric estimates and other factors, our estimated aggregate exposure for remediation of these sites is less than $0.5 million. The estimated remediation costs for all of these sites are included in the $6 million to $8 million range discussed above. Liability under the Comprehensive Environmental Response, Compensation and Liability Act and applicable state law can be joint and several with other PRPs. Although volumetric allocation is a factor in assessing liability, it is not necessarily determinative; thus, the ultimate liability could be substantially greater than the amounts described above.
In March 2008, the EPA promulgated a new, lower National Ambient Air Quality Standard (NAAQS) for ground-level ozone. In May 2012, the EPA completed designation of new eight-hour ozone non-attainment areas. Several of our facilities are located in 2008 ozone non-attainment areas. To date, no federal actions have been proposed to mandate additional emission controls at these facilities. Pursuant to recently finalized state regulatory actions associated with implementation of the 2008 ozone standard, we anticipate that some facilities may be subject to increased controls within five years. As a result, the cost of additions to property, plant, and equipment is expected to increase. We are unable at this time to estimate with any certainty the cost of additions that may be required to meet the proposed regulations.
In December 2014, the EPA proposed to further reduce the ground-level ozone NAAQS from the March 2008 levels and subsequently finalized a rule on October 1, 2015. We are monitoring the rule's implementation as the reduction will trigger additional federal and state regulatory actions that may impact our operations. As a result, the cost of additions to property, plant and equipment is expected to increase. We are unable at this time to estimate with any certainty the cost of additions that may be required to meet new regulations.
On January 22, 2010, the EPA set a new one-hour nitrogen dioxide (NO2) NAAQS. The effective date of the new NO2 standard was April 12, 2010. On January 20, 2012, the EPA determined pursuant to available information that no area in the country is violating the 2010 NO2 NAAQS and thus designated all areas of the country as “unclassifiable/attainment.” Also, at that time, the EPA noted its plan to deploy an expanded NO2 monitoring network beginning in 2013. However, on October 5, 2012, the EPA proposed a graduated implementation of the monitoring network between January 1, 2014 and January 1, 2017. Once three years of data are collected from the new monitoring network, the EPA will reassess attainment status with the one-hour NO2 NAAQS. Until that time, the EPA or states may require ambient air quality modeling on a case by case basis to demonstrate compliance with the NO2 standard. Because we are unable to predict the outcome of the EPA’s or states’ future assessment using the new monitoring network, we are unable to estimate the cost of additions that may be required to meet this regulation.
We consider prudently incurred environmental assessment and remediation costs and the costs associated with compliance with environmental standards to be recoverable through rates. To date, we have been permitted recovery of environmental costs, and it is our intent to continue seeking recovery of such costs through future rate filings. As a result, as estimated costs of environmental assessment and remediation are incurred, they are recorded as regulatory assets in the Condensed Consolidated Balance Sheet until collected through rates. At March 31, 2017, we had a balance of approximately $2.2 million of uncollected environmental related regulatory assets recorded in current assets ($1.2 million) and other assets ($1.0 million) in the accompanying Condensed Consolidated Balance Sheet. At December 31, 2016, we had a balance of approximately $2.5 million of uncollected environmental related regulatory assets recorded in current assets ($1.2 million) and other assets ($1.3 million) in the accompanying Condensed Consolidated Balance Sheet.
Other Matters
Various other proceedings are pending against us and are considered incidental to our operations.
Summary
We estimate that for all matters for which we are able to reasonably estimate a range of loss, including those noted above and others that are not individually significant, our aggregate reasonably possible losses beyond amounts accrued for all of our contingent liabilities are immaterial to our expected future annual results of operations, liquidity and financial position. These calculations have been made without consideration of any potential recovery from third parties. We have disclosed all significant matters for which we are unable to reasonably estimate a range of possible loss.