Message-ID: <3909100.1075851921960.JavaMail.evans@thyme> Date: Wed, 15 Aug 2001 02:38:00 -0700 (PDT) From: larry.campbell@enron.com To: william.kendrick@enron.com Subject: Due Diligence Northwest Natural Gas Company-Summary Cc: john.shafer@enron.com Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit Bcc: john.shafer@enron.com X-From: Larry Campbell X-To: William Kendrick X-cc: John Shafer X-bcc: X-Folder: \Larry_Campbell_Nov2001_1\Notes Folders\Sent X-Origin: CAMPBELL-L X-FileName: lcampbe.nsf As per your request, an environmental due diligence was completed of the assets and outstanding issues of Northwest Natural Gas Company (NWNG), a local distribution company (LDC), with its corporate headquarters located in Portand, Oregon. This due diligence, which was conducted on August 7-9, 2001, was performed to determine the environmental liabilities and exposures which may be associated with NWNG and identify and evaluate the environmental risks associated with each issue. A relative risk number between 0 and 3 has been assigned to each discipline to evulate the potential risk impact. A rating of "0" indicates that there is no risk associated with this regulation or issue and a rating of "3" indicates a major problem or an issue that has a potential long term risk or exposure. An approximate cost value has also been assigned to each discipline. It is to be understood and explicitly stated that in the calculation of each cost, conservative estimates were used to determine a dollar value to repair, remediate or formally close each issue. Presented below, by discipline, are the environmental activities which impact and affect NWNG. The evualtion and written discussion of each disicpline is based upon the availability of records, documents and discussions with NWNG personnel. Therefore, this summary report is limited to the availability of information presented. General Pipeline Characteristics ; This is a dry pipeline system. No pipeline liquids are generated, only small volumes of compressor oils are collected. All cast iron pipe has been removed from the system. There is still approx. 100 miles of steel pipe which will be repalced in the near future. The only location where horsepower and compression exists is at Mist Storage, and underground injection and storage reservoir (10.5 bcf storage capacity). this is a non Title V major source. NWNG is planning additional property acquisitions to increase their underground storage capacity. NWNG is planning a 60 mile pipeline construction project to begin in fall of 2002. All environmental studies have been completed and sumbmitted to the agencies. Landslide hazards appear to be the biggest pipeline safety concern. NWNG has completed a study to locate and identify high potential landslide areas. Environmental Procedures Manual. The NWNG environmental procedures manual appeared to be comprehensive and in a easily understood format. The topics covered in the manual addressed all environmenatl issues that the company appeared to be involved with. The manual addressed waste management, permitting, disposal and environmetal stewardship. There was also a written statement from management supporting and attesting to NWNG's commitment to enhancing and promoting a clean environment in all activities by NWNG. Risk: 0 Cost: $0 Notices of Violation (NOV)/Notices of Noncompliance (NON). In a summary page provided by NWNG, a list of all state and federal agency actions against the company was available. Although the company had received a few notices (<10), they were of a very minor nature and involved mostly small recordkeeping and right of way issues. There were no outstanding judgements, NOVs, NONs or pending agency actions or issues to be resoved. Risk: 0 Cost: $0 PCBs. In interviews with NWNG, they attested to the fact that they have never used PCBs on their pipeline and that PCBs have never been detected. Although NWNG is an LDC and receives its gas from Northwest Pipeline Company, the status of PCBs on the Northwest pipeline system was unknown. Risk: 1 Cost: $0 Mercury. Mercury was used on the NWNG system, but only in monometers and not in natural gas metering equipment. A decision was made by environmental management of NWNG in 1986-87 to remove mercury manometers. An investigation has never been initiated to determine mercury releases from broken manometers or potential mercury releases from old historic mercury containing equipment which may have been used. Risk: 1 Cost: $3,000-$40,000 Onsite Disposal. Other than the issues surrounding the manufactured gas plants, in interviews with NWNG's environmental management, they were not aware of any onsite waste disposal of any hazardous, toxic or non hazardous waste. Risk: 1 Cost: undefined Hazardous Waste. There is only one location where hazardous waste is generated and this location is a service center where a small parts washer is used. This site is classified as a conditionally exempt small quantity generator. The remainder of the NWNG system is a non generator of hazardous waste. Risk: 0 Cost: 0 NORMS. The environmental management of NWNG has stated that natrually occurring radioactive materials (NORMS) are not a problem in the pipeline system. Tesing has not been completed to verify or confirm this, nor does NWNG have evidence to determine NORM status from Northwest Pipeline Company. Risk: 1 Cost: $500 Underground Storage Tanks (UST). There is only one regulated underground storage tank (UST) remaining on the NWNG system (Albany), and this tank is in complance with the UST regualtions for monitoring, testing and recordkeeping. All other underground tanks have been removed. At one of the tank removal sites, there exists an active remediation in progress. Closure of this site is expected in the near future. Risk: 1 Cost: $500 LNG plants. In interviews with NWNG environmental management, there are no histoirc or present outstanding environmental issues at the liquified natural gas (LNG) plants. The exception to this is a historic site of a manufactured gas plant (Linnton site) which underlies the LNG plant. This issue will be addressed under the section of the Linnton Manufactured Gas Plant. Risk: 0 Cost: $0 Manufactured Gas Plants. NWNG owned and operated a number of manufactured gas plants (MGPs). Presented below are the MGP sites that NWNG owned or had operating interest in for which there are associated liabilites and risks. Eugene Water and Electrical Board. The City of Eugene has determined that a parcel of property within the city has been contaminated by numerous responsible parties of which NWNG owned and operated a MGP during the time period of 1958-1976. The Eugene Water and Electrical Board (EWEB), which is the regulatory agency in Eugene, has determined that the total cost to clean the entire area will be approximately $1,300,000, of which the EWEB has indicated that NWNGs responsibility will be $93,750. NWNG has offered to pay compensation damages in the amount of $70,000-90,000 to be relaesed from all liability and damages associated with the contamination impacts to the City of Eugene. The environmental management of NWNG has stated that the EWEB has verbally and in principal agreed with the NWNG offer of approximately $94,000. Risk: 1-2 Cost: $94,000 Salem Site. According to NWNG management, this historic MGP site has been remediated and formally closed by the City of Salem, which is the regulatory agency with jurisdiction over this site. NWNG has received endemnification and written closure from the City of Salem for this feature. Risk: 1 Cost: $0 Manufactured Gas Plant. This site, which ceased operation in the early 1900's, was dismantled and abandoned. From the time the facility ceased operations, untill the present, a railroad has constructed a steel rail bridge over the site and the City of Portland and constructed a city park. The site is immediately adjacent ot he Wilammette River, a major perennial watercourse in Oregon. There have been no soil, groundwater or river/ river sediment studies completed to determine potential environmental impacts. NWNG environmental personnel have stated that the site was insured by Lloyds of London. The insurance policies were not available at the time of this due diligence to determine policy applicability and coverage amounts for this site. Risks: 2-3 Costs: 0-$300,000,000 Portland Harbor Superfund Site. The Environmetnal Protection Agency has determined that the Portland Harbor, on the Wilammette River, has received contamination of a sufficient nature and magnitude to warrent and classify the 6.7 miles of the Harbor as a Superfund site. This superfund site extends for a distance of 6.7 miles and includes the Linnton and Wacker sites, originally owned by NWNG. The EPA has designated approximately 69 primary responsible parties which are directly or indirectly involved in the contamination of this section of the Willamette River. NWNG has been identified as a contributing member to the contamination. Linnton MGP/Wacker Site. The Linnton MGP and Wacker Site, has 47 acres of water front exposure on the Wilammette River and is included in the Portland Harbor Superfund Site. The Linnton facility, which originally included the Wacker Site, initiated operation in 1913 and ceased operation in 1956. During the operation of the facility operation, various organic coal tar wastes, comprised of light non aqueous phase liquids (LNAPLs) and dense non aqueous phase liquids (DNAPLs) were generated. Characteristically these waste products include: polynuclear aromatic hydrocarbons (PAHs), BTEX and cyanide. During the early stages of facility operation, these wastes were originally directly deposited into the Willammette River, and then later, in 1941 unlined ponds were constructed at the facility. Preliminary investigation reports of the volumes of regulated waste from the facility operations which were released either directly or indirectly into the soil underlying the facility or into the Wilamette River were in excess of 4.6 million gallons or 23,000 cubic yards. It was also estimated from these reports that there is approximately 250,000 cubic yards of tar and tar mixed with soil underlying the historic tar ponds. Negotiations for cleanup and closure of this site may take up to 20 or more years. NWNG has stated that it has insurance policies from Lloyds of London which they feel will cover all costs assciated with NWNG's portion of this superfund responsibility. The policies were not availble during the due diligence to verify or confirm the amount of coverage. Additionally, because the horizontal and vertical extent of the contamination in the subsurface soil, groundwater and in the Willamette River sediments has not been determined, it seems unlikely that insurance coverage can adequatley be evaluated. It should also be mentioned that because the proportionate extent of NWNGs contamination responsibility is not known, adequate insurance coverage appears to be somewhat premature. Risk: 3 Cost: $50,000,000-300,000,000