NOTE 7 – ENVIRONMENTAL MATTERS

UNITIL’S ENVIRONMENTAL MATTERS ARE DESCRIBED IN NOTE 8 TO THE FINANCIAL STATEMENTS IN ITEM 8 OF PART II OF UNITIL CORPORATION’S FORM 10-K FOR DECEMBER 31, 2015 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 28, 2016.

The Company’s past and present operations include activities that are generally subject to extensive and complex federal and state environmental laws and regulations. The Company is in material compliance with applicable environmental and safety laws and regulations and, as of September 30, 2016, has not identified any material losses reasonably likely to be incurred in excess of recorded amounts. However, we cannot assure that significant costs and liabilities will not be incurred in the future. It is possible that other developments, such as increasingly stringent federal, state or local environmental laws and regulations could result in increased environmental compliance costs.

Northern Utilities Manufactured Gas Plant Sites – Northern Utilities has an extensive program to identify, investigate and remediate former manufactured gas plant (MGP) sites, which were operated from the mid-1800s through the mid-1900s. In New Hampshire, MGP sites were identified in Dover, Exeter, Portsmouth, Rochester and Somersworth. In Maine, Northern Utilities has documented the presence of MGP sites in Lewiston and Portland, and a former MGP disposal site in Scarborough.

Northern Utilities has worked with the Maine Department of Environmental Protection (ME DEP) and New Hampshire Department of Environmental Services (NH DES) to address environmental concerns with these sites. Northern Utilities or others have substantially completed remediation of the Exeter, Rochester, Dover, Somersworth, Portsmouth, Lewiston, Portland and Scarborough sites, though future activities may be required.

Off-site sediment contamination attributed to the former Exeter MGP was remediated successfully in January 2016. The closure report submitted by Northern Utilities was accepted by the NH DES with minor water quality monitoring for a limited time period.

At the site in Somersworth, Northern Utilities submitted the investigative report requested by the NH DES in September 2016. Although the report is currently under review by the NH DES, a recommendation was advanced favoring a third round of on-site treatment of MGP residuals. Northern Utilities anticipates a decision by the NH DES on the recommendation by December 2016.

In Lewiston, on-site monitoring continues with a continued yet gradual reduction observed in the concentration of MGP residuals in the on-site groundwater.

Final remediation activities in Portland were completed in December 2015 and closure documentation was submitted to the ME DEP in June 2016. Northern Utilities anticipates the ME DEP will issue a Certificate of Completion for these activities by December 2016. Pursuant to an agreement between the State of Maine and Northern Utilities, future remedial activities necessitated as a result of development of the site will be primarily the responsibility of the State of Maine.

The NHPUC and MPUC have approved regulatory mechanisms for the recovery of MGP environmental costs. For Northern Utilities’ New Hampshire division, the NHPUC has approved the recovery of MGP environmental costs over succeeding seven-year periods, without carrying costs. For Northern Utilities’ Maine division, the MPUC has authorized the recovery of environmental remediation costs over succeeding five-year periods, without carrying costs.

The Environmental Obligations table below shows the amounts accrued for Northern Utilities related to estimated future cleanup costs associated with Northern Utilities’ environmental remediation obligations for former MGP sites. Corresponding Regulatory Assets were recorded to reflect that the future recovery of these environmental remediation costs is expected based on regulatory precedent and established practices.

Fitchburg’s Manufactured Gas Plant Site – Fitchburg completed the scheduled site work at the former MGP site at Sawyer Passway, located in Fitchburg, Massachusetts in the fourth quarter of 2014. The closure documentation for the site was submitted in December 2015 and is under review by the Massachusetts Department of Environmental Protection (MA DEP) with a decision anticipated by the fourth quarter of 2016.

The Environmental Obligations table below shows the amounts accrued for Fitchburg related to estimated future cleanup costs for permanent remediation of the Sawyer Passway site with a corresponding Regulatory Asset recorded to reflect that the recovery of these environmental remediation costs are probable through the regulatory process. The amounts recorded do not assume any amounts are recoverable from insurance companies or other third parties. Fitchburg recovers the environmental response costs incurred at this former MGP site in gas rates pursuant to the terms of a cost recovery agreement approved by the MDPU. Pursuant to this agreement, Fitchburg is authorized to amortize and recover environmental response costs from gas customers over succeeding seven-year periods, without carrying costs.

The Company’s ultimate liability for future environmental remediation costs, including MGP site costs, may vary from estimates, which may be adjusted as new information or future developments become available. Based on the Company’s current assessment of its environmental responsibilities, existing legal requirements and regulatory policies, the Company does not believe that these environmental costs will have a material adverse effect on the Company’s consolidated financial position or results of operations.

The following table sets forth a summary of changes in the Company’s liability for Environmental Obligations for the nine months ended September 30, 2016 and 2015.


Environmental Obligations
	($ millions)
	Fitchburg				Northern Utilities				Total
	Nine months ended September 30,
	2016		2015		2016		2015		2016		2015
Total Balance at Beginning of Period	$	1.2	$	1.9	$	1.6	$	3.6	$	2.8	$	5.5
Additions		—		—		0.9		1.9		0.9		1.9
Less: Payments / Reductions		0.1		0.3		0.6		1.6		0.7		1.9

Total Balance at End of Period		1.1		1.6		1.9		3.9		3.0		5.5

Less: Current Portion		0.1		1.6		0.2		3.4		0.3		5.0

Noncurrent Balance at End of Period	$	1.0	$	—	$	1.7	$	0.5	$	2.7	$	0.5