Item 1. Legal Proceedings
Item 1. LEGAL PROCEEDINGS
From time to time, we may be involved in litigation and claims arising out of our operations in the normal course of business. Additionally, other than for DCP Midstream, LP (DCP LP), and its subsidiaries, we have elected a $300,000 threshold to disclose certain proceedings arising under federal, state or local environmental laws when a governmental authority is a party to the proceedings. During the third quarter of 2022, no such new matters arose and no material developments occurred with respect to matters previously reported but still unresolved. We do not currently believe that the eventual outcome of any matters previously reported but still unresolved, individually or in the aggregate, could have a material adverse effect on our business, financial condition, results of operations or cash flows.
DCP LP and its subsidiaries have elected a $1 million threshold to disclose certain environmental proceedings. Material developments during the third quarter regarding such matters are discussed herein.
• In March 2019, Region 8 of the EPA issued a Notice of Violation alleging various non-compliance with federal Leak Detection and Repair (LDAR) regulations that exist to mitigate emissions of volatile organic compounds from certain equipment at natural gas plants, at various times over the course of late 2011 through 2017 at five of DCP LP’s Colorado natural gas processing plants. DCP LP does not agree with many of the allegations of non-compliance, and has been engaged in discussions with EPA about the propriety of the allegations, including the facts and regulatory underpinnings of the various allegations. DCP LP, EPA and the State of Colorado resolved these allegations in July 2022 with a Consent Decree in which DCP LP agreed to implement enhancements to its LDAR program at all of its Colorado natural gas processing plants, implement an environmental mitigation project valued at $1.15 million at its Mewbourn gas plant in Colorado, and pay a civil penalty of $3.25 million. Public review having been completed, the U.S. District Court (Colorado) entered the final Consent Decree on October 27, 2022, providing the final resolution of this enforcement matter.
• In 2018, the Colorado Department of Public Health and Environment (“CDPHE”) issued a Compliance Advisory in relation to an improperly permitted facility flare and related air emissions from flare operations at one of DCP’s gas processing plants, which DCP LP self-disclosed to CDPHE in December 2017. Following information exchanges and discussions with CDPHE, a resolution was proposed pursuant to which the plant’s air permit would be revised, and DCP LP would be assessed an administrative penalty and economic benefit payment. A revised air permit was issued in May 2019, but the parties had not yet entered into a final settlement agreement to complete the matter. Subsequently, in July 2020, CDPHE issued a Notice of Violation in relation to amine treater emissions at this plant, which DCP LP self-disclosed to CDPHE in April 2020. DCP LP is engaging with CDPHE as to this and the flare-related matter, including possible settlement terms, although these matters, which have since been combined, may end up in formal legal proceedings. It is possible that resolution of this matter may include an administrative penalty and economic benefit payment, further revisions to the facility air permit, or installation of emissions management equipment, or a combination of these, that could, in the aggregate, exceed $1 million. We do not currently believe that the eventual outcome of this matter could have a material adverse effect on our business, financial condition, results of operations or cash flows.
Further, our U.S. refineries are implementing two separate consent decrees, regarding alleged violations of the Federal Clean Air Act, with the EPA, five states and one local air pollution agency. Some of the requirements and limitations contained in the decrees provide for stipulated penalties for violations. Stipulated penalties under the decrees are not automatic, but must be requested by one of the agency signatories. As part of periodic reports under the decrees or other reports required by permits or regulations, we occasionally report matters that could be subject to a request for stipulated penalties. If a specific request for stipulated penalties meeting the reporting threshold set forth in SEC rules is made pursuant to these decrees based on a given reported exceedance, we will separately report that matter and the amount of the proposed penalty.
See Note 12—Contingencies and Commitments, in the Notes to Consolidated Financial Statements, for additional information.
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