Today in Environmental Contingencies and Proceedings Disclosure

Which EDGAR filers aren’t too bashful to admit to EPA attention? Today we take a peek into recent SEC filings that disclose EPA enforcement action or issuance of a “Notice of Violation” (NOV).  Complaints, class action lawsuits, and other material legal proceedings must generally be disclosed to the SEC under Item 103 of Regulation S-K (17 CFR 229.103), which is often filed as Item 1 of Part II in 10-Qs or Item 3 in 10-Ks.

Photo by lumaxart. Some rights reserved.

NOVs are often issued as a warning in the early stages of an enforcement process. According to the EPA, “such notification indicates to the regulated entity that the enforcement agency believes that the entity is in violation of the law and that it should come into compliance or be prepared to defend its actions in subsequent enforcement. These alleged violation do not represent a final, legal determination that a violation has occurred until an adjudication is complete.” WildLaw, a nonprofit environmental law firm, has published this model NOV for your edification. You can usually find disclosure of NOVs in company Notes to the Financial Statements.

For more on required environmental disclosure in SEC filings, you can read this overview by Davis Polk.

Now for the juicy stuff – here are some choice excerpts from today’s filings:

  • AK STEEL HOLDING CORP | Form 10-Q | 11/1/2010

“On November 26, 2004, Ohio EPA issued a Notice of Violation for alleged waste violations associated with an acid leak at AK Steel’s Coshocton Works. In November 2007, Ohio EPA and AK Steel reached an agreement to resolve this NOV. Pursuant to that agreement, AK Steel implemented an inspection program, initiated an investigation of the area where the acid leak occurred, submitted a closure plan and upon approval from Ohio EPA, will implement that closure plan.”

“On December 20, 2006, Ohio EPA issued an NOV with respect to two electric arc furnaces at AK Steel’s Mansfield Works alleging failure of the Title V stack tests with respect to several air pollutants. The Company has worked with Ohio EPA in an attempt to resolve this NOV. In that regard, Ohio EPA has issued to the Mansfield Works a new air permit that addresses the issues identified in the NOV. The Company cannot be certain, however, that Ohio EPA will not seek further remedies.”

  • AMERICAN ELECTRIC POWER CO INC | Form 10-Q | 11/1/2010

“The Federal EPA, certain special interest groups and a number of states alleged that APCo, CSPCo, I&M and OPCo modified certain units at their coal-fired generating plants in violation of the NSR requirements of the CAA. The cases were settled with the exception of a case involving a jointly-owned Beckjord unit which had a liability trial. Following the trial, the jury found no liability for claims made against the jointly-owned Beckjord unit. Following a second liability trial in 2009, the jury again found no liability at the jointly-owned Beckjord unit. The defendants and the plaintiffs appealed to the Seventh Circuit Court of Appeals. In October 2010, the Seventh Circuit dismissed all of the remaining claims in these cases. Beckjord is operated by Duke Energy Ohio, Inc.”

  • EASTMAN CHEMICAL CO | Form 10-Q | 11/1/2010

“In December 2005, Eastman Chemical Resins, Inc., a wholly-owned subsidiary of the, received a Notice of Violation from the EPA alleging that the ECR Subsidiary’s West Elizabeth, Jefferson Borough, Allegheny County, Pennsylvania manufacturing operation violated certain federally enforceable local air quality regulations and certain provisions in a number of air quality-related permits. In October 2006, the EPA referred the matter to the DOJ. Company representatives have met with the EPA and DOJ on a number of occasions since the NOV’s issuance and have determined that it is not reasonably likely that any civil penalty assessed by the EPA and DOJ will be less than $100,000. ”

  • NORTHERN STATES POWER CO | Form 10-Q | 11/1/2010

“In June 2010, the U.S. DOJ and the EPA filed a complaint in the U.S. District Court in Minnesota against Xcel Energy [the parent company of NSP-Minnesota], alleging that Xcel Energy has failed to fully respond to certain information requests issued by the EPA.[…] The requests focused on past projects undertaken at Xcel Energy’s Sherco and Black Dog plants to determine whether these projects were carried out in compliance with the New Source Review requirements.”

  • STANLEY BLACK & DECKER, INC. | Form 10-Q | 11/1/2010

“The EPA and the Santa Ana Regional Water Quality Control Board have each initiated administrative proceedings against Black & Decker […] alleging that Black & Decker and numerous other defendants are responsible to investigate and remediate alleged groundwater contamination in and adjacent to a 160-acre property located in Rialto, California. […] The administrative proceedings and the lawsuits generally allege that West Coast Loading Corporation (“WCLC”), a defunct company that operated in Rialto between 1952 and 1957, and an as yet undefined number of other defendants are responsible for the release of per chlorate and solvents into the groundwater basin, and that Black & Decker and certain of its current or former affiliates are liable as a “successor” of WCLC.

8 responses to this post.

  1. Note for our Northern Neighbors: On Monday, Canadian law firm Torys published a memo exploring CSA Staff Notice 51-333, which assists “reporting issuers in meeting their existing continuous disclosure requirements under securities laws with respect to environmental matters.”

    Read the Torys memo: http://www.torys.com/Publications/Documents/Publication%20PDFs/ER2010-1.pdf

    See the original Staff Notice: http://www.osc.gov.on.ca/documents/en/Securities-Category5/csa_20101027_51-333_environmental-reporting.pdf

    Reply

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  8. […] we’ve posted in the past, public companies must generally disclose material legal proceedings in their annual […]

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