2.2.0.7 false Other Commitments and Contingencies 0219 - Disclosure - Other Commitments and Contingencies true false false false 1 USD false false USD Standard http://www.xbrl.org/2003/iso4217 USD iso4217 0 USDEPS Divide http://www.xbrl.org/2003/iso4217 USD iso4217 http://www.xbrl.org/2003/instance shares xbrli 0 Shares Standard http://www.xbrl.org/2003/instance shares xbrli 0 $ 2 Other Commitments and Contingencies [Abstract] 0 ni_OtherCommitmentsAndContingenciesAbstract ni false na duration Other Commitments and Contingencies. false false false false false true false false false false false false 1 false false false false 0 0 false false false xbrli:stringItemType string Other Commitments and Contingencies. false 3 Other Commitments and Contingencies 1 us-gaap_CommitmentsAndContingenciesDisclosureTextBlock us-gaap true na duration No definition available. false false false false false false false false false false false verboselabel false 1 false false false false 0 0   <div style="font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>19.</b>           <b>Other Commitments and Contingencies</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>A.</b>             <b>Guarantees and Indemnities. </b>As a part of normal business, NiSource and certain subsidiaries enter into various agreements providing financial or performance assurance to third parties on behalf of certain subsidiaries. Such agreements include guarantees and stand-by letters of credit. These agreements are entered into primarily to support or enhance the creditworthiness otherwise attributed to a subsidiary on a stand-alone basis, thereby facilitating the extension of sufficient credit to accomplish the subsidiaries’ intended commercial purposes. The total commercial commitments in existence at June 30, 2010 and the years in which they expire were: </div> <div align="center"> <table style="font-size: 9pt; padding: 2px; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="27%"> </td> <td width="4%"> </td> <td width="1%"> </td> <td width="7%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="7%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="7%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="7%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="7%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="7%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="7%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 9pt; padding-top: 0px" valign="bottom"> <td nowrap="nowrap" align="left"><i>(in millions)</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="2">Total</td> <td> <div style="text-align: justify">  </div></td> <td nowrap="nowrap" align="center" colspan="2">2010</td> <td> <div style="text-align: justify">  </div></td> <td nowrap="nowrap" align="center" colspan="2">2011</td> <td> <div style="text-align: justify">  </div></td> <td nowrap="nowrap" align="center" colspan="2">2012</td> <td> <div style="text-align: justify">  </div></td> <td nowrap="nowrap" align="center" colspan="2">2013</td> <td> <div style="text-align: justify">  </div></td> <td nowrap="nowrap" align="center" colspan="2">2014</td> <td> <div style="text-align: justify">  </div></td> <td nowrap="nowrap" align="center" colspan="2">After</td> <td> </td> </tr>   <tr style="font-size: 1px; padding-top: 0px"> <td colspan="23" align="left" style="border-top: 2px solid #000000; padding: 0px"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Guarantees of subsidiaries debt </div></td> <td> </td> <td align="left">$</td> <td align="right">6,135.8</td> <td> <div style="text-align: justify">  </div></td> <td align="left">$</td> <td align="right">681.8</td> <td> <div style="text-align: justify">  </div></td> <td align="left">$</td> <td align="right">-</td> <td> <div style="text-align: justify">  </div></td> <td align="left">$</td> <td align="right">315.0</td> <td> <div style="text-align: justify">  </div></td> <td align="left">$</td> <td align="right">545.0</td> <td> <div style="text-align: justify">  </div></td> <td align="left">$</td> <td align="right">500.0</td> <td> <div style="text-align: justify">  </div></td> <td align="left">$</td> <td align="right">4,094.0</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Guarantees supporting commodity transactions of subsidiaries </div></td> <td> </td> <td> <div style="text-align: justify">  </div></td> <td align="right">368.7</td> <td> <div style="text-align: justify">  </div></td> <td> </td> <td align="right">172.9</td> <td> <div style="text-align: justify">  </div></td> <td> </td> <td align="right">193.7</td> <td> <div style="text-align: justify">  </div></td> <td> </td> <td align="right">-</td> <td> <div style="text-align: justify">  </div></td> <td> </td> <td align="right">-</td> <td> <div style="text-align: justify">  </div></td> <td> </td> <td align="right">-</td> <td> <div style="text-align: justify">  </div></td> <td> </td> <td align="right">2.1</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Letters of credit </div></td> <td> </td> <td> <div style="text-align: justify">  </div></td> <td align="right">45.5</td> <td> <div style="text-align: justify">  </div></td> <td> </td> <td align="right">13.3</td> <td> <div style="text-align: justify">  </div></td> <td> </td> <td align="right">31.2</td> <td> <div style="text-align: justify">  </div></td> <td> </td> <td align="right">-</td> <td> <div style="text-align: justify">  </div></td> <td> </td> <td align="right">-</td> <td> <div style="text-align: justify">  </div></td> <td> </td> <td align="right">1.0</td> <td> <div style="text-align: justify">  </div></td> <td> </td> <td align="right">-</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Other guarantees </div></td> <td> </td> <td> <div style="text-align: justify">  </div></td> <td align="right">718.9</td> <td> <div style="text-align: justify">  </div></td> <td> </td> <td align="right">-</td> <td> <div style="text-align: justify">  </div></td> <td> </td> <td align="right">2.8</td> <td> <div style="text-align: justify">  </div></td> <td> </td> <td align="right">13.7</td> <td> <div style="text-align: justify">  </div></td> <td> </td> <td align="right">224.0</td> <td> <div style="text-align: justify">  </div></td> <td> </td> <td align="right">32.2</td> <td> <div style="text-align: justify">  </div></td> <td> </td> <td align="right">446.2</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="23" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Total commercial commitments </div></td> <td> </td> <td align="left">$</td> <td align="right">7,268.9</td> <td> <div style="text-align: justify">  </div></td> <td align="left">$</td> <td align="right">868.0</td> <td> <div style="text-align: justify">  </div></td> <td align="left">$</td> <td align="right">227.7</td> <td> <div style="text-align: justify">  </div></td> <td align="left">$</td> <td align="right">328.7</td> <td> <div style="text-align: justify">  </div></td> <td align="left">$</td> <td align="right">769.0</td> <td> <div style="text-align: justify">  </div></td> <td align="left">$</td> <td align="right">533.2</td> <td> <div style="text-align: justify">  </div></td> <td align="left">$</td> <td align="right">4,542.3</td> <td> </td> </tr> <tr style="font-size: 1px"> <td colspan="23" align="left" style="border-top: 2px solid #000000"> </td> </tr>  </table> </div> <div align="justify" style="font-size: 10pt; margin-top: 12pt"><b>Guarantees of Subsidiaries Debt. </b>NiSource has guaranteed the payment of $6.1 billion of debt for various wholly-owned subsidiaries including NiSource Finance, and through a support agreement, Capital Markets, which is reflected on NiSource’s Condensed Consolidated Balance Sheets (unaudited). The subsidiaries are required to comply with certain financial covenants under the debt indenture and in the event of default, NiSource would be obligated to pay the debt’s principal and related interest. NiSource does not anticipate its subsidiaries will have any difficulty maintaining compliance. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>Guarantees Supporting Commodity Transactions of Subsidiaries. </b>NiSource has issued guarantees, which support up to approximately $368.7 million of commodity-related payments for its current subsidiaries involved in energy marketing activities. These guarantees were provided to counterparties in order to facilitate physical and financial transactions involving natural gas. To the extent liabilities exist under the commodity-related contracts subject to these guarantees, such liabilities are included in the Condensed Consolidated Balance Sheets (unaudited). </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 0pt"> <u> </u> <u> </u> </div> <div align="justify" style="font-size: 10pt; margin-top: 0pt"> <font style="font-variant: small-caps"> <b> </b> </font> <b> </b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>Lines and Letters of Credit and Accounts Receivable Advances. </b>NiSource Finance maintains a $1.5 billion five-year revolving credit facility with a syndicate of banks which has a termination date of July 7, 2011. This facility provides a reasonable cushion of short-term liquidity for general corporate purposes including meeting cash requirements driven by volatility in natural gas prices, as well as provides for the issuance of letters of credit. At June 30, 2010, NiSource had $73.5 million in borrowings under its five-year revolving credit facility and $139.3 million outstanding under its accounts receivable securitization agreements. At June 30, 2010, NiSource issued stand-by letters of credit of approximately $45.5 million for the benefit of third parties. See Note 17, Short-term Borrowings. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>Other Guarantees or Obligations. </b>On June 30, 2008, NiSource sold Whiting Clean Energy to BPAE for $216.7 million which included $16.1 million in working capital. The agreement with BPAE contains representations, warranties, covenants and closing conditions. NiSource has executed purchase and sales agreement guarantees totaling $220 million which guarantee performance of PEI’s covenants, agreements, obligations, liabilities, representations and warranties under the agreement with BPAE. No amounts related to the purchase and sales agreement guarantees are reflected in the Condensed Consolidated Balance Sheet (unaudited) as of June 30, 2010. These guarantees are due to expire in June 2013. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">NiSource has additional purchase and sales agreement guarantees totaling $30.0 million, which guarantee performance of the seller’s covenants, agreements, obligations, liabilities, representations and warranties under the agreements. No amounts related to the purchase and sales agreement guarantees are reflected in the Condensed Consolidated Balance Sheets (unaudited). Management believes that the likelihood NiSource would be required to perform or otherwise incur any significant losses associated with any of the aforementioned guarantees is remote. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">On August 29, 2007, Millennium entered into a bank credit agreement to finance the construction of the Millennium pipeline project. As a condition precedent to the credit agreement, NiSource issued a guarantee securing payment for its indirect ownership interest percentage of amounts borrowed under the credit agreement up until such time as the amounts payable under the agreement are paid in full. As of June 30, 2010, Millennium owed $798.9 million under the financing agreements, of which NiSource guaranteed $379.5 million. The interim bank credit agreement expires August 29, 2010. NiSource recorded an accrued liability of approximately $7.6 million related to the fair value of this guarantee. On July, 20, 2010, Millennium completed pricing on two tranches of fixed-rate notes in the private placement market totaling $725.0 million and the associated interest rate swaps were terminated. Millennium will issue the notes, settle the interim financing, terminate the sponsor guarantee, and cash settle the interest rate hedges on August 26, 2010. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">On June 29, 2006, Columbia Transmission, Piedmont, and Hardy Storage entered into multiple agreements to finance the construction of the Hardy Storage project, which is accounted for by NiSource as an equity investment. Under the financing agreement, Columbia Transmission issued guarantees securing payment for 50% of any amounts issued in connection with Hardy Storage up until such time as the project is placed in service and operated within certain specified parameters. As of December 31, 2009, Hardy Storage had outstanding borrowings of $123.4 million under the temporary financing agreement, for which Columbia Transmission had recorded an accrued liability of approximately $1.2 million related to the fair value of its guarantee securing payment for $61.7 million which is 50% of the amount borrowed. Hardy Storage satisfied the terms and conditions of its financing agreement on March 17, 2010, when Hardy Storage secured permanent financing, facilitating Columbia Transmission’s release from its underlying guarantee and therefore, the accrued liability of $1.2 million was relieved as of March 31, 2010. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">NiSource has issued other guarantees supporting derivative related payments associated with interest rate swap agreements issued by NiSource Finance, operating leases for many of its subsidiaries and for other agreements entered into by its current and former subsidiaries. </div> <div align="justify" style="font-size: 10pt; margin-top: 12pt"><b>B.</b>             <b>Other Legal Proceedings. </b>In the normal course of its business, NiSource and its subsidiaries have been named as defendants in various legal proceedings. In the opinion of management, the ultimate disposition of these currently asserted claims will not have a material adverse impact on NiSource’s consolidated financial position. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 0pt"> <u> </u> <u> </u> </div> <div align="justify" style="font-size: 10pt; margin-top: 0pt"> <font style="font-variant: small-caps"> <b> </b> </font> <b> </b> </div> <div align="justify" style="font-size: 10pt; margin-top: 20pt"><b>Tawney, et al. v. Columbia Natural Resources, Inc., Roane County, WV Circuit Court</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">The Plaintiffs, who are West Virginia landowners, filed a lawsuit in early 2003 in the West Virginia Circuit Court for Roane County, West Virginia (the “Trial Court”) against CNR alleging that CNR underpaid royalties on gas produced on their land by improperly deducting post-production costs and not paying a fair value for the gas. Plaintiffs also claimed that Defendants fraudulently concealed the deduction of post-production charges. In December 2004, the Trial Court granted Plaintiffs’ motion to add NiSource and Columbia as Defendants. The Trial Court later certified the case as a class action that includes any person who, after July 31, 1990, received or is due royalties from CNR (and its predecessors or successors) on lands lying within the boundary of the state of West Virginia. Although NiSource sold CNR in 2003, NiSource remained obligated to manage this litigation and was responsible for the majority of any damages awarded to Plaintiffs. On January 27, 2007, the jury hearing the case returned a verdict against all Defendants in the amount of $404.3 million inclusive of both compensatory and punitive damages; Defendants subsequently filed their Petition for Appeal, which was later amended, with the West Virginia Supreme Court of Appeals (the “Appeals Court”), which refused the petition on May 22, 2008. On August 22, 2008, Defendants filed Petitions to the United States Supreme Court for writ of certiorari. Given the Appeals Court’s earlier refusal of the appeal, NiSource adjusted its reserve in the second quarter of 2008 to reflect the portion of the Trial Court judgment for which NiSource would be responsible, inclusive of interest. This amount was included in “Legal and environmental reserves,” on the Consolidated Balance Sheet as of December 31, 2008. On October 24, 2008, the Trial Court preliminarily approved a Settlement Agreement with a total settlement amount of $380 million. The settlement received final approval by the Trial Court on November 22, 2008. NiSource’s share of the settlement liability is up to $338.8 million. NiSource complied with its obligations under the Settlement Agreement to fund $85.5 million in the qualified settlement fund by January 13, 2009. Additionally, NiSource provided a letter of credit on January 13, 2009 in the amount of $254 million and thereby complied with its obligation to secure the unpaid portion of the settlement which has since been drawn down as settlement payments have been made. The Trial Court entered its Order discharging the judgment on January 20, 2009 and is supervising the administration of the settlement proceeds. As of June 30, 2010, NiSource had contributed a total of $318.2 million into the qualified settlement fund, $277.3 million of which was contributed prior to December 31, 2009. As of June 30, 2010, $20.6 million of the maximum settlement liability had not been paid. The remaining balance of the letter of credit is sufficient to cover any remaining payments under the Settlement Agreement. NiSource will be required to make additional payments not expected to exceed the amount accrued, pursuant to the settlement, upon notice from the Class Administrator. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>John Thacker, et al. v. Chesapeake Appalachia, L.L.C., U.S. District Court, E.D. Kentucky Poplar Creek Development Company v. Chesapeake Appalachia, L.L.C., U.S. District Court, E.D. Kentucky</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">On February 8, 2007, Plaintiff filed the Thacker case, a purported class action alleging that Chesapeake has failed to pay royalty owners the correct amounts pursuant to the provisions of their oil and gas leases covering real property located within the state of Kentucky. Columbia has assumed the defense of Chesapeake in this matter pursuant to the provisions of the Stock Purchase Agreement dated July 3, 2003, among Columbia, NiSource, and Triana Energy Holding, Inc., Chesapeake’s predecessor in interest (“Stock Purchase Agreement”). Plaintiffs filed an Amended Complaint on March 19, 2007, which, among other things, added NiSource and Columbia as Defendants. On March 31, 2008, the Court denied a Motion by Defendants to Dismiss and on June 3, 2008, the Plaintiffs moved to certify a class consisting of all persons entitled to payment of royalty by Chesapeake under leases operated by Chesapeake at any point after February 5, 1992, on real property in Kentucky. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">In June 2009, the parties to the Thacker litigation presented a Settlement Agreement to the Court for preliminary approval. The court granted the Motion for Preliminary approval and held a fairness hearing on November 10, 2009. On March 3, 2010 the Court granted final approval of the settlement and on March 31, 2010 Poplar Creek filed a notice of appeal of that approval with the Sixth Circuit. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">On October 9, 2008, Chesapeake tendered the Poplar Creek case to Columbia and Columbia conditionally assumed the defense of this matter pursuant to the provisions of the Stock Purchase Agreement. Poplar Creek also purports to be a class action covering royalty owners in the state of Kentucky and alleges that Chesapeake has improperly deducted costs from the royalty payments; thus there is some overlap of parties and issues between the Poplar Creek and Thacker cases. Chesapeake filed a motion for judgment on the pleadings in December 2008, which was granted on July 2, 2009. Plaintiffs appealed the dismissal to the 6<sup style="font-size: 85%; vertical-align: text-top">th</sup> Circuit Court of Appeals. </div> <div align="justify" style="font-size: 10pt; margin-top: 20pt"><b>Environmental Protection Agency Notice of Violation</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">On September 29, 2004, the EPA issued an NOV to Northern Indiana for alleged violations of the CAA and the Indiana SIP. The NOV alleges that modifications were made to certain boiler units at three of Northern Indiana’s generating stations between the years 1985 and 1995 without obtaining appropriate air permits for the modifications. The ultimate resolution could require additional capital expenditures and operations and maintenance costs as well as payment of substantial penalties and development of supplemental environmental projects. Northern Indiana is currently in discussions with the EPA regarding possible resolutions to this NOV. Although penalties have been proposed and a reserve has been recorded for the matter, Northern Indiana is unable to predict the outcome of this matter at this time. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>C.</b>             <b>Environmental Matters.</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">NiSource operations are subject to environmental statutes and regulations related to air quality, water quality, hazardous waste and solid waste. NiSource believes that it is in substantial compliance with those environmental regulations currently applicable to its operations and believes that it has all necessary permits to conduct its operations. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">It is management’s continued intent to address environmental issues in cooperation with regulatory authorities in such a manner as to achieve mutually acceptable compliance plans. However, there can be no assurance that fines and penalties will not be incurred. Management expects a significant portion of environmental assessment and remediation costs to be recoverable through rates for certain NiSource companies. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">As of June 30, 2010 and December 31, 2009, NiSource had recorded reserves of approximately $73.3 million and $76.4 million, respectively, to cover environmental remediation at various sites. NiSource accrues for costs associated with environmental remediation obligations when the incurrence of such costs is probable and the amounts can be reasonably estimated. The original estimates for cleanup can differ materially from the amount ultimately expended. The actual future expenditures depend on many factors, including currently enacted laws and regulations, the nature and extent of contamination, the method of cleanup, and the availability of cost recovery from customers. NiSource periodically adjusts its reserves as information is collected and estimates become more refined. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><u><b>Air</b></u><br /> </div> <div align="justify" style="font-size: 10pt">The actions listed below could require further reductions in emissions from various emission sources. NiSource will continue to closely monitor developments in these matters. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>Climate Change. </b>Future legislative and regulatory programs could significantly restrict emissions of GHGs or could impose a cost or tax on GHG emissions. Recently, proposals have been developed to implement Federal, state and regional GHG programs and to create renewable energy standards. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">On June 26, 2009, the United States House of Representatives passed a climate change bill called ACES. The comprehensive bill proposes a GHG cap and trade system starting in 2012 for electrical suppliers, 2014 for natural gas transmission companies, and 2016 for natural gas distribution companies. The cap and trade system would establish economy-wide reduction targets of 3% by 2012 and 83% by 2050. ACES would allocate natural gas distribution companies and electric suppliers a certain number of emission allowances without charge, but these allocations would decrease over time, phasing out entirely by 2030. Gas transmission companies would not receive any emission allowances under ACES. ACES also contains renewable energy standards, which would require retail electric suppliers to provide a portion of their power from renewable sources and mandates performance standards for particular sources. The Senate has been considering its own renewable energy standard and climate change bills. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 0pt"> <u> </u> <u> </u> </div> <div align="justify" style="font-size: 10pt; margin-top: 0pt"> <font style="font-variant: small-caps"> <b> </b> </font> <b> </b> </div> <div align="justify" style="font-size: 10pt; margin-top: 20pt">If ACES or other Federal comprehensive climate change bills were to pass both Houses of Congress and be enacted into law, the impact on NiSource’s financial performance would depend on a number of factors, including the overall level of required GHG reductions, the renewable energy targets, the degree to which offsets may be used for compliance, the amount of recovery allowed from customers, and the extent to which NiSource would be entitled to receive free CO<sub style="font-size: 85%; vertical-align: text-bottom">2</sub> allowances. Federal or state climate change legislation could result in additional expense or compliance costs that may not be fully recoverable from customers and could materially impact NiSource’s financial results. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">The EPA is also taking action to regulate GHGs under the CAA. On December 7, 2009, the EPA made the following findings: (a) that GHGs in the atmosphere endanger the public health and welfare within the meaning of the CAA and (b) that emissions from new motor vehicles contribute to the mix of GHGs in the atmosphere. It is the EPA’s position that this “endangerment” finding, along with some other recent regulatory developments, will trigger permitting requirements for large industrial sources of GHGs. On June 3, 2010, the EPA issued final regulations, commonly called the “tailoring rule,” applicable to the two CAA programs, New Source Review and Title V. Beginning in 2011, the rule would impose new GHG permitting requirements on facilities with existing Title V permits. The rule would also regulate very large sources of GHGs without existing Title V permits and projects that cause sizable increases in GHG emissions. New and modified sources could be required to apply Best Available Control Technology. Regulation of smaller GHG sources could begin as early as 2016. The total cost impact of EPA regulation of GHG under the CAA cannot be determined at this time. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">The EPA on April 12, 2010, proposed an expansion of the GHG reporting rule to include natural gas systems. The rule in the proposed form could have a material impact on the company. NiSource will continue to closely monitor developments in these matters and cannot estimate the impact of these rules at this time. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>National Ambient Air Quality Standards. </b>The CAA requires EPA to set national air quality standards for particulate matter and five other pollutants (the NAAQS) considered harmful to public health and the environment. Periodically EPA imposes new or modifies existing NAAQS. States that contain areas that do not meet the new or revised standards must take steps to maintain or achieve compliance with the standards. These steps could include additional pollution controls on boilers, engines, turbines, and other facilities owned by electric generation, gas distribution, and gas transmission operations. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">The following NAAQS were recently added or modified: </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><i>Particulate Matter: </i>In 2006, the EPA issued revisions to the NAAQS for particulate matter. The final rule (1) increased the stringency of the current fine particulate (PM2.5) standard, (2) added a new standard for inhalable coarse particulate (particulate matter between 10 and 2.5 microns in diameter), and (3) revoked the annual standards for coarse particulate (PM10) while retaining the 24-hour PM10 standards. These actions were challenged in a case before the DC Court of Appeals, <i>American Farm Bureau Federation et al. v. EPA. </i>In 2009, the appeals court granted portions of the plaintiffs’ petitions challenging the fine particulate standards but denied portions of the petitions challenging the standards for coarse particulate. State plans implementing the new standard for inhalable coarse particulate and the modified 24-hour standard for fine particulate are expected in 2012. The annual and secondary PM2.5 standards have been remanded to the EPA for reconsideration. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><i>Ozone (eight hour): </i>On March 12, 2008, the EPA announced the tightening of the eight-hour ozone NAAQS. EPA has yet to announce the classification structure and the corresponding attainment dates for the new standard. On September 16, 2009, the EPA announced it would reconsider the March 2008 tightening of the ozone NAAQS and if needed promulgate more stringent standards by August 2010. If the standards are tightened and area designations subsequently changed, new SIPs will need to be developed by the states by December 2013 to bring the nonattainment areas into compliance. NiSource will continue to closely monitor developments in these matters and cannot estimate the impact of these rules at this time. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><i>Nitrogen Dioxide (NO2): </i>The EPA revised the NO2 NAAQS by adding a one-hour standard while retaining the annual standard. The new standard could impact NiSource combustion sources such as coal-fired electric generation and natural gas compressor stations. EPA will designate areas that do not meet the new standard beginning in 2012. States with areas that do not meet the standard will need to develop rules to bring areas into compliance within five years of designation. Additionally, under certain permitting circumstances emissions from existing compressor stations or generating stations may need to be assessed and compared to the revised NO2 standards before areas are designated. Petitions challenging the rule have been filed by various parties. NiSource will continue to closely monitor developments in these matters and cannot estimate the impact of these rules at this time. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>National Emission Standard for Hazardous Air Pollutants. </b>On February 25, 2009, the EPA proposed national emission standards for hazardous air pollutants for stationary reciprocating internal combustion engines that are not already covered by earlier EPA regulation. The proposed rule is scheduled to be finalized in 2010, with compliance generally required three years later. NiSource will continue to closely monitor developments in this matter and cannot estimate the actual cost of compliance at this time. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><u><b>Waste</b></u> </div> <div align="justify" style="font-size: 10pt">Several NiSource subsidiaries are potentially responsible parties at waste disposal sites under the CERCLA (commonly known as Superfund) and similar state laws. Additionally, a program has been instituted to identify and investigate former Manufactured Gas Plant sites where Gas Distribution Operations subsidiaries or predecessors may have liability. The program has identified up to 84 such sites and initial investigations have been conducted at 56 sites. Follow-up investigation activities have been completed or are in progress at 50 sites and remedial measures have been implemented or completed at 31 sites. Remedial actions at many of these sites are being overseen by state or federal environmental agencies through consent agreements or voluntary remediation agreements. The final costs of cleanup have not yet been determined. As site investigations and cleanups proceed reserves are adjusted to reflect new information. </div> <div align="justify" style="font-size: 10pt; margin-top: 12pt"><u><b><i>Additional Issues Related to Individual Business Segments</i></b></u> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">The sections above describe various regulatory actions that affect Gas Transmission and Storage Operations, Electric Operations, and certain other discontinued operations for which we have retained a liability. Specific information is provided below. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Gas Transmission and Storage Operations.</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><u><b>Waste</b></u> </div> <div align="justify" style="font-size: 10pt">Columbia Transmission continues to conduct characterization and remediation activities at specific sites under a 1995 EPA AOC. The AOC covered 245 facilities, approximately 13,000 liquid removal points, approximately 2,200 mercury measurement stations and about 3,700 storage well locations. Obligations under the AOC have been completed at the mercury measurement stations, liquid removal point sites, storage well locations and all but 50 of the 245 facilities. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">One of the facilities subject to the AOC is the Majorsville Operations Center, which was remediated under an EPA approved Remedial Action Work Plan in summer 2008. Pursuant to the Remedial Action Work Plan, Columbia Transmission completed a project that stabilized residual oil contained in soils at the site and in sediments in an adjacent stream. On April 23, 2009, PADEP issued an NOV to Columbia Transmission, alleging that the remediation was not effective. The NOV asserts violations of the Pennsylvania Clean Streams Law and the Pennsylvania Solid Waste Management Act and contains proposed penalty of $1 million. Columbia Transmission is unable to estimate the likelihood or cost of potential penalties or additional remediation at this time. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Electric Operations.</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><u><b>Air</b></u> </div> <div align="justify" style="font-size: 10pt">Northern Indiana expects to become subject to a number of new air-quality mandates in the next several years. These mandates may require Northern Indiana to make capital improvements to its electric generating stations. The cost of these improvements is estimated to be $560 to $800 million, although this estimate and the timing of expenditures is dependant on future regulatory actions that cannot be fully predicted at this time. Northern Indiana expects that some or all of these costs may be recoverable from ratepayers. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><i>NOx and Ozone Compliance: </i>Indiana’s rule to implement the EPA’s NOx SIP call requires reduction of NOx levels from several sources, including industrial and utility boilers, to reduce regional transport of ozone. In response, Northern Indiana developed a NOx compliance plan, which included the installation of Selective Catalytic Reduction and combustion control NOx reduction technology at its active generating stations and is currently in compliance with the NOx requirements. In implementing the NOx compliance plan, Northern Indiana has expended approximately $316.7 million as of June 30, 2010. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><i>Sulfur dioxide: </i>On December 8, 2009, the EPA revised the SO2 NAAQS by adopting a new 1-hour primary NAAQS for sulfur dioxide (SO2). EPA expects to designate areas that do not meet the new standard by mid 2012. States with such areas would have until 2014 to develop attainment plans with compliance required by 2017. Northern Indiana will continue to closely monitor developments in these matters but does not anticipate a material impact. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><i>Clean Air Interstate Rule (CAIR) / Transport Rule: </i>On July 6, 2010, the EPA released its new Transport Rule proposal, which would replace CAIR upon finalization. The EPA anticipates the rule will become effective in summer 2011. The proposal contains three different approaches to govern emissions of sulfur dioxide and nitrogen oxides from electric generating units. The cost impact of the Transport Rule would depend upon the specific requirements enacted. Northern Indiana will continue to monitor this matter but believes the cost of compliance will be material. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><i>Utility Hazardous Air Pollutants: </i>On February 8, 2008, the United States Court of Appeals for the District of Columbia Circuit vacated two EPA rules that are the basis for the Indiana Air Pollution Control Board’s Clean Air Mercury Rule (CAMR) that established utility mercury emission limits in two phases (2010 and 2018) and a cap-and-trade program to meet those limits. In response to the vacatur, the EPA is pursuing a new Section 112 rulemaking to establish MACT standards for electric utilities. Northern Indiana will continue to monitor this matter but believes the cost of compliance may be material. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><i>New Source Review: </i>On September 29, 2004, the EPA issued an NOV to Northern Indiana for alleged violations of the CAA and the Indiana SIP. The NOV alleges that modifications were made to certain boiler units at three of Northern Indiana’s generating stations between the years 1985 and 1995 without obtaining appropriate air permits for the modifications. The ultimate resolution could require additional capital expenditures and operations and maintenance costs as well as payment of substantial penalties and development of supplemental environmental projects. Northern Indiana is currently in discussions with the EPA regarding possible resolutions to this NOV. Although penalties have been proposed and a reserve has been recorded for the matter, Northern Indiana is unable to predict the outcome of this matter at this time. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><u><b>Water</b></u> </div> <div align="justify" style="font-size: 10pt">The Phase II Rule of the Clean Water Act Section 316(b), which requires all large existing steam electric generating stations to meet certain performance standards to reduce the effects on aquatic organisms at their cooling water intake structures, became effective on September 7, 2004. Under this rule, stations will either have to demonstrate that the performance of their existing fish protection systems meet the new standards or develop new systems, such as a closed-cycle cooling tower. Various court challenges and EPA responses ensued. As a result of the litigation, the EPA will propose a revised Section 316(b). The Bailly Generating Station is the only Northern Indiana generating station that does not utilize closed cycle cooling. Northern Indiana will continue to closely monitor this activity and cannot estimate the costs associated with the ultimate outcome at this time. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><u><b>Waste</b></u> </div> <div align="justify" style="font-size: 10pt">On March 31, 2005, the EPA and Northern Indiana entered into an AOC under the authority of Section 3008(h) of the RCRA for the Bailly Station. The order requires Northern Indiana to identify the nature and extent of releases of hazardous waste and hazardous constituents from the facility. Northern Indiana must also remediate any release of hazardous constituents that present an unacceptable risk to human health or the environment. The process to complete investigation and select appropriate remediation activities is ongoing. The final costs of cleanup could change based on EPA review. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">On June 21, 2010, EPA published a proposed rule for coal combustion residuals. The proposal outlines multiple regulatory approaches that EPA is considering. These proposed regulations could affect Northern Indiana’s ongoing byproduct reuse programs and would impose additional requirements on its management of coal ash wastes. Northern Indiana will monitor developments in this matter and cannot estimate the potential financial impact at this time but believes that the cost of compliance under one of the scenarios could be as much as $70 million of capital improvements in the first 5 years. Northern Indiana expects that some or all of these costs may be recoverable from ratepayers. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Other Operations.</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><u><b>Waste</b></u><br /> NiSource affiliates have retained environmental liabilities, including cleanup liabilities associated with some of its former operations. Four sites are associated with its former propane operations and ten sites associated with former petroleum operations. At one of those sites, an AOC has been signed with EPA to address petroleum residue in soil and groundwater. </div> </div>  <!-- Begin Block Tagged Note false false false us-types:textBlockItemType textblock Includes disclosure of commitments and contingencies. This element may be used as a single block of text to encapsulate the entire disclosure including data and tables. 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