Xcel Tariff/Environmental Agreement Threatens Brownfield Development

Over the past year, Xcel Energy has been trying to negotiate environmental covenants with certain landowners/developers in and around Denver, with limited success. On May 1, 2009, Public Service Company of Colorado ("PSCo" or "Company") filed a request for the Colorado Public Utilities Commission ("PUC") to approve certain changes and additions to the Company’s P.U.C. No. 7 – Electric Tariff that will address these issues by shifting liability for certain environmental contamination encountered or exacerbated by PSCo from responsible parties to developers of urban infill and so-called "Brownfields" sites in PSCo territory as well as to any property owner receiving service from PSCo. The tariff changes are effective June 5, 2009, unless the PUC decides to suspend the tariff pending a hearing. A summary of these proposed changes and additions is summarized below. The new tariff would impose a significant burden on the development community, particularly in this market. Please take a moment to review the proposed tariff changes and consider filing a written protest to the PUC prior to June 5th.

Tariff

The proposed tariff language includes the following provisions applicable to all customers:

• Customers must provide an environmental indemnification and release in favor of PSCo from any and all environmental claims on or near property owned by the customer.

• A release, but not an indemnification, in favor of PSCo is required for any and all environmental claims on or near property that is not owned by the customer but is controlled, leased or used by the customer. The indemnification and release do not apply in the case of "Company Materials"—i.e., hazardous materials first brought onto and introduced to the property by PSCo.

• PSCo may, but is not required to, stop its activities related to installation, relocation and maintenance until contamination has been managed or removed by the customer.

• PSCo may require the customer to enter into a new "Environmental Protection Agreement" before PSCo will extend any facilities or services to a property and financial assurances for the customer’s performance under Environmental Agreement, including parent guarantees or environmental liability insurance in amounts and scope satisfactory to PSCo.  In testimony submitted with the filing, PSCo states that this agreement will "generally be used for brownfield sites or other properties with contamination or a history of contamination." 

• Customers must reimburse PSCo for costs or expenses related to delays in scheduled installation of facilities that are caused by the customer, including delays in the customer’s construction of trenching or delays related to obligations for excavation/removal, management and disposal of hazardous materials.

• If PSCo is required to relocate facilities due to an environmental concern, the customer will bear the cost.

Environmental Agreement

The proposed standard Environmental Agreement, which PSCo may require before it extends any facilities and service to a property , includes the following provisions:

• The Owner of the Property (defined as the Owner’s entire site) is liable for the performance of all the obligations of the Environmental Agreement applicable not only to the Owner’s Property but also applicable to Public Property (including a public street, right of way, or other public place, park or property of such nature that it is located inside the boundaries of the Property or Offsite Property), and/or Offsite Property (any private property or private right-of-way not located within the boundaries of the Property on which PSCo relocates existing utility facilities in order to accommodate Owner’s request for installation or relocation of utility facilities on the Property).
• The Owner’s obligations include:
  • Owner must provide comprehensive disclosure of any known or suspected soil contamination and/or groundwater contamination to PSCo.
  • Owner may be responsible for performing all utility trenching on the Property to dimensions and specifications provided by PSCo.
  • Owner may be responsible for backfilling or providing PSCo with clean soil for backfilling.
  • Owner is responsible for all excavation/removal, management, transport, use/reuse or disposal of any contaminated soil and/or contaminated groundwater produced on the Property associated with the installation, relocation or maintenance of utility facilities.  Owner must release PSCo and its affiliated parties from liability arising out of or related to management and disposal of contamination from Owner’s Property as well as from Public Property and/or Offsite Property.
  • Owner must reimburse PSCo for the costs of any delays that are caused by Owner, including delays in trenching or delays in removing, managing and disposing of contamination.
  • With respect to any utility facilities installed on Public Property or Offsite Property during Owner’s ownership of any portion of the Property, the Owner is responsible for the obligations under the Agreement to the extent that any governmental or quasi-governmental owner or the owner of Public Property or Offsite Property declines to assume such obligations.
  • If PSCo is required to relocate utility facilities requested by Owner due to an environmental concern, the cost is borne by Owner.
• Owner must release and indemnify PSCo and other Benefited Parties with respect to any environmental claims or costs related to the Property, Public Property or Offsite Property, regardless of whether PSCo’s activities caused, contributed to or exacerbated a release of hazardous materials . 
• If hazardous materials are encountered on the Property, Offsite Property or Public Property in connection with PSCo’s installation, relocation or maintenance of utility facilities, PSCo may, but is not required to, stop work until Owner has provided notification that the hazardous materials have been removed, managed and disposed of.  PSCo is not required to address the contamination.
• Unlike the proposed tariff language, the Agreement does not make an exception for hazardous materials first brought onto and introduced to the property by PSCo.
• The Agreement is binding on successor and assigns.

Links to the relevant portions of the PSCo filings are included below.  Please feel free to forward copies of this Alert to your contacts in the Brownfields development community.  Please contact Steve Kaplan or me if you have any questions.  If you do not wish to receive further copies of these  Alerts   and would like to be removed from this mailing list, please let us know. 

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Polly B. Jessen
Kaplan Kirsch & Rockwell LLP
1675 Broadway, Suite 2300
Denver, CO  80202
(303) 825-7000
www.kaplankirsch.com