New York State Electric & Gas Corp. v. FirstEnergy Corp.

DECISION AND ORDER

DAVID E. PEEBLES, United States Magistrate Judge.

TABLE OF CONTENTS

Page No.

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I. FINDINGS OF FACT......................................................429

A. Corporate Histories....................................................429

1. NYSEG..........................................................429

2. AGECO..........................................................430

3. FirstEnergy......................................................434

B. Facts Related to Veil-Piercing Analysis...................................434

1. 1906-1922 ........................................................ 434

2. 1922-1940 ........................................................ 436

3. 1940-1942 ........................................................444

C. Environmental Concerns Associated with MGP Operations Generally.........444

D. Summary of NYSEG’S MGP Investigations and Remedial Responses.........446

E. NYSEG’s Responses at the Sixteen Sites in Dispute........................452

1. Corning..........................................................452

a. Ownership and Operation.......................................452

b. Investigation and Remediation...................................453

2. Cortland-Homer..................................................453

a. Ownership and Operation.......................................453

b. Investigation and Remediation...................................455

3. Dansville.........................................................457

a. Ownership and Operation.......................................457

b. Investigation and Remediation...................................458

4. Elmira-Madison Avenue............................................459

a. Ownership and Operation.......................................459

b. Investigation and Remediation...................................461

5. Geneva-Border City...............................................462

a. Ownership and Operation.......................................462

b. Investigation and Remediation...................................462

6. Goshen...........................................................463

a. Ownership and Operation.......................................463

b. Investigation and Remediation...................................464

7. Granville.........................................................464

a. Ownership and Operation.......................................464

b. Investigation and Remediation...................................465

8. Ithaca — Court.....................................................465

a. Ownership and Operation.......................................465

b. Investigation and Remediation...................................466

9. Ithaca — First Street...............................................468

a. Ownership and Operation.......................................468

b. Investigation and Remedial........................:............468

10. MechanicviUe — Central Avenue......................................469

a. Ownership and Operation.......................................469

b. Investigation and Remediation...................................470

11. Newark..........................................................471

a. Ownership and Operation.......................................471

b. Investigation and Remediation............. 472

12. Norwich..........................................................472

a. Ownership and Operation.......................................472

b. Investigation and Remediation...................................473

13. Oneonta..........................................................474

a. Ownership and Operation.......................................474

b. Investigation and Remediation...................................475

14. Owego...........................................................477

a. Ownership and Operation.......................................477

b. Investigation and Remediation...................................477

15. Penn Yan-Water Street............................................479

a. Ownership and Operation.......................................479

b. Investigation and Remediation...................................480

16. Plattsburgh-Saranac Street.........................................480

a. Ownership and Operation.......................................480

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b. Investigation and Remediation...................................481

F. Cost Recovery and Allocation............................................484

II.PROCEDURAL HISTORY.............................!...................485

III. DISCUSSION.............................................................486

A. CERCLA Liability Generally............................................486

B. Summary of NYSEG Claims and FirstEnergy Defenses.....................489

C. Analysis of FirstEnergy’s Liability Under CERCLA........................491

1. Direct Owner Liability.............................................491

2. Direct Operator Liability...........................................491

3. Indirect Liability as an Owner and/or Operator........................494

a. Pre-1922 ..................................................... 498

b. 1922-1940.....................................................498

c. 1940-1942.....................................................502

D. Affirmative Defenses...................................................502

1. Bankruptcy Discharge .............................................502

2. 1945 Covenant Not to Sue..........................................503

3. Statute of Limitations..............................................504

a. Plattsburgh...................................................508

b. Owego .......................................................511

c. Ithaca-Court Street............................................511

d. Norwich......................................................512

E. Analysis of I.D. Booth’s CERCLA Liability................................514

F. Compensable Response Costs............................................519

1. Certainty of Damages..............................................520

2. NCP Compliance..................................................521

3. Necessity of Cost..................................................522

4. Offset for Recovery From Collateral Sources..........................525

a. Insurance Recovery............................................526

b. Rate Recovery................................................528

G. Allocation.............................................................529

1. Allocation Generally...............................................529

2. Allocation as Between NYSEG and FirstEnergy.......................530

3. Allocation as Between FirstEnergy and I.D. Booth.....................532

IV. CONCLUSIONS OF LAW..................................................533

V. SUMMARY AND ORDER..................................................535

Plaintiff New York State Electric & Gas Corporation (“NYSEG”) commenced this action in April of 2003 seeking to recover from defendant FirstEnergy Corporation (“FirstEnergy”) expenses incurred to remediate twenty-four hazardous waste sites throughout Upstate New York formerly associated with manufactured gas plant (“MGP”) operations of NYSEG and its predecessor utility companies. The MGP operations conducted at those locations were typical of those carried out by many public utilities during the 1800s and the first half of the twentieth century to produce gas, manufactured principally through processes employing coal as raw material, for commercial and residential usage. By their nature, MGP facilities generated significant quantities of byproducts, including coal tar and oils, containing what have come to be regarded as hazardous substances. Those byproducts were typically stored on-site and often released into the soil and groundwater at and near the MGP sites, on occasion migrating off-site and into nearby waterways.

NYSEG’s complaint, as amended in October 2004, at one time asserted a combi

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nation of federal and state law causes of action including,

inter alia,

under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (“CERCLA”), as amended, 42 U.S.C. § 9601

et seq.

Its claims, however, have been materially reshaped as a result of the ongoing refinement of CERCLA jurisprudence. Given the rapid and robust development of environmental caselaw, coupled with rejection by the court of plaintiffs contribution cause of action under § 113(f) of CERCLA, and dismissal of plaintiffs New York Navigation Law and common law indemnification counts, on stipulation of the parties, all that now remains is NYSEG’s cost recovery claim against FirstEnergy under § 107(a) of CERCLA, together with FirstEnergy’s contribution counterclaim and a third-party claim for contribution against I.D. Booth, Inc. (“I.D. Booth”), the current owner of portions of two of the sites in issue, both of which are asserted under § 113(f).

The action was tried to the court beginning on December 6, 2010.

1

For a variety of reasons, by the time of trial the number of former MGP sites implicated were winnowed from twenty-four to seventeen and, with the dismissal at trial of claims related to one site, now stands at sixteen. NY-SEG claims to have paid more than $94 million through the end of 2009 to address contamination at the sixteen remaining MGP sites in issue, with the expectation that the expenditure of upwards of an additional $144 million will be required in order to complete the cleanup process. Those remedial efforts have been conducted in large part pursuant to an administrative order issued in 1994 by the New York State Department of Environmental Con-serration (“DEC”), on consent, addressing remediation efforts at several former MGP sites including all but one of those now in issue.

In addition to the issues normally associated with a typical environmental cost recovery action, NYSEG’s claims present complex threshold questions regarding the interplay between a number of related corporations, revolving around events dating back to the early twentieth century. Resolution of the CERCLA claims now presented turns, in the first instance, on an exceedingly labyrinthine set of facts surrounding the corporate history of NYSEG and its predecessor utility companies as well as the relationship of NYSEG and its affiliates with their former parent company, the Associated Gas

&

Electric Company (“AGECO”) — -a predecessor of defendant FirstEnergy. NYSEG contends that AGECO, although in title a mere holding company, in reality ran the MGP facilities falling under its umbrella and is therefore directly liable under CERCLA as an operator of the sites involved at the time of the hazardous releases in issue. Alternatively, NYSEG argues that the facts justify piercing its corporate veil, and those of its related utility operating companies, in order to find derivative liability on the part of AGECO, the parent corporation, for the environmental liabilities at issue, based upon AGECO’s overwhelming domination of those subsidiaries.

Although thousands of documents were received into evidence at trial, comprising an estimated 90,000 pages, evidence related to the intricate corporate histories associated with ownership of the various sites in question as well as the relationship be

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tween NYSEG and its predecessor utilities on the one hand and FirstEnergy’s predecessor, AGE CO, on the other is somewhat scant. Having considered the available evidence, I conclude that there is a basis upon which to pierce the corporate veil of NYSEG and its sister utility operating companies during the period between 1922 and 1940, though not prior to or after that time period, and accordingly to attribute their environmental liabilities to AGECO, and that FirstEnergy therefore bears responsibility for hazardous waste releases occurring during that time'interval as an owner and operator of the facilities in issue. I will therefore allocate the response costs incurred by NYSEG based upon that finding. I also conclude that while NY-SEG is entitled to reimbursement from FirstEnergy of a proportionate share of the vast majority of the expenses now claimed, recovery of the costs associated with two of the sites in issue is precluded, based upon the governing statute of limitations. Finally, I find that FirstEnergy is entitled to contribution from I.D. Booth with regard to one of the sites involved based upon its status as an owner of the site. The following decision incorporates within it my findings of fact and legal conclusions regarding the matter.

I.FINDINGS OF FACT

A.

Corporate Histories

1.

NYSEG

1. Ithaca Gas Light Company, which as will be seen is one of NYSEG’s predecessor utility companies, was incorporated in 1852.

2. On January 15, 1916, Ithaca Gas Light Company and Ithaca Electric Light

&

Power Company merged, with Ithaca Gas Light Company remaining as the surviving company.

3. Ithaca Gas Light Company changed its name to Ithaca Gas & Electric Corporation on January 15,1916.

4. The Homer

&

Cortland Gas Light Company, Norwich Gas & Electric Company and Oneonta Light & Power Corporation were merged into Ithaca Gas & Electric Corporation on June 1, 1918, with Ithaca Gas

&

Electric Corporation remaining as the surviving corporation.

5. On July 3, 1918, Ithaca Gas & Electric Company adopted the name New York State Gas & Electric Corporation.

6. New York State Gas & Electric Corporation later changed its name to the New York State Electric Corporation on March 8,1928.

7. On August 22,1929, New York State Electric Corporation assumed its present corporate name of New York State Electric & Gas Corporation.

8. NYSEG acquired Eastern New York Electric & Gas Company, Inc. on December 31, 1928. Through that merger NYSEG acquired ownership of the Gran-ville, Mechanicville and Plattsburgh MGP sites.

9. On March 14, 1932, NYSEG acquired the property of Federal-New York Company, Inc. through a foreclosure sale. Among the properties acquired by virtue of that transaction was the Goshen MGP Site.

10. NYSEG acquired the properties of Empire Gas

&

Electric Company including the Newark and Geneva-Border City MGP facilities, two of the sites now in issue, by merger on December 31, 1936.

11. On December 31, 1936, NYSEG also acquired the properties of New York Central Electric Corporation, including the Corning, Dansville, and Penn Yan-Water Street MGP Sites.

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12. The Elmira Light, Heat and Power Corporation was merged into NYSEG on December 29, 1936.

2

Through this merger, NYSEG acquired ownership of the Elmira-Madison Avenue MGP Site.

2. AGECO

3

13. On March 19, 1906, the Associated Gas

&

Electric Company (“AGECO”) was incorporated in New York by the owners of the Ithaca Gas Light Company as a public utility holding company for the group of operating companies controlled by those owners, in order to bring them under common control and management.

14. A holding company is defined as one whose assets consist primarily of stock in one or more other companies. A public utility holding company is simply a holding company whose portfolio consists primarily of stock in utilities.

15. The existence of holding companies dates back at least as far as in or about 1879 when a law was passed in New Jersey permitting a corporation to invest in the stock of another corporation.

4

16. Prior to the holding company era, the MGP industry was principally configured as consisting of small individual operating companies serving limited geographic areas and engaged in fierce competition that was not beneficial to consumers or gas companies. These factors caused many small gas companies to fail during those early years.

17. Holding companies were initially formed in the public utility arena to foster investment by providing better access to financial markets and systems, and to allow for economies of scale in the production of gas.

18. The original shareholders of AGE-CO were William T. Morris, Ebenezer M. Treman, and Thos. W. Summers, all of Ithaca, New York.

19. Among the powers listed in AGE-CO’s certificate of incorporation, according to a Federal Trade Commission communication to the United States Senate, were the following:

To manufacture, purchase or otherwise acquire, hold, own, mortgage, lease, assign, and transfer, invest, trade, deal in and deal with, goods, wares, and merchandise and property of every class and description, including all kinds of engines, boilers, dynamos, generators, gas apparatus, including holders, case and wrought iron pipe, pumps, meters and all kinds of machinery and any and all kinds of implements and articles of manufacture, and any and all kinds of mechanical apparatus;

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To carry on a general contracting business, to do electrical work of every kind and description, including the business of electrical and mechanical engineers, and the dealers either as principal or agents in electrical machinery, appliances and supplies of any nature or kind whatsoever, to do the work of erecting gas apparatus of every description and kind, including the business of gas and mechanical engineers and dealers either as principal or agent in gas machinery, appliances and supplies of every nature and kind whatsoever;

To construct, erect, build, equip and repair public works and conveniences of all kinds, including railways, tramways, tunnels, subways, reservoirs, water, gas, electric light and power, telephonic, telegraphic, and water supply works, and all other works or conveniences; to purchase or otherwise acquire any contracts or concessions for or in relation to the construction, building, erection, improvement or repair of public works or conveniences, and to execute, carry out, dispose of our [sic] transfer or turn to account the same, to carry on the business of builders, contractors, engineers, importers, exporters, and to provide, buy, sell and deal in property of all kinds; ...

20. The stock of various companies controlled by the incorporators was transferred into AGECO following formation of that holding company.

21. In May of 1907, William T. Morris conveyed to AGECO the common stock of fourteen public utilities, including Penn Yan Gas Light Company, Homer & Cortland Gas Light Company, Newark (N.Y.) Gas Light

&

Fuel Company, Owego Gas Light Company, Ithaca Gas Light Company, Ithaca Electric Light and Power Company, and Norwich Gas

&

Electric Company.

22. W.S. Barstow & Co. acquired a controlling interest in AGECO in or about October of 1909.

23. W.S. Barstow & Co. sold its shares in AGECO to Montgomery, Clothier

&

Tyler (later Montgomery & Co.), a Philadelphia banking group, in 1912.

24. From 1912 up until March of 1922, AGECO was controlled by Montgomery, Clothier & Tyler, and J.G. White

&

Co., Inc., with a majority of the original shares of control stock in the company being held by J.G. White

&

Co., Inc. by the end of that period.

25. In March of 1922, control of AGE-CO passed from J.G. White & Co., Inc. and Montgomery & Co. to Associated Utilities Corporation, a company controlled by Howard C. Hopson and various of his associates, including John I. Mange.

26. Control of AGECO was transferred from Associated Utilities Corporation to Associated Securities Corporation in early 1923.

27. Associated Securities Corporation was formed on November 17, 1922 as a Delaware Corporation by interests representing Hopson and Mange, for the purpose of holding the common stock of AGE-CO.

28. Mange and Hopson held the common stock of Associated Securities Corporation until June 1924 when they transferred that stock to Associated Gas & Electric Properties, formed in 1924 under the name of Associated Gas & Electric Company, and also controlled by Hopson and Mange. In 1926 that entity underwent a formal name change to Associated Gas

&

Electric Properties.

29. In addition to Penn Yan Gas Company, Homer-Cortland Gas Light Company, Newark (N.Y.) Gas Light & Fuel Company, Owego Gas Light Company, Ithaca

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Gas Light Company, Ithaca Electric Light and Power Company, and Norwich Gas & Electric Company, at various relevant times AGECO controlled other utility operating and holding companies associated with certain of the MGP sites now at issue.

30. One of those companies was Eastern New York Electric & Gas Company, Inc., which as will be seen owned the Granville, Mechanicville, and Plattsburgh MGP sites at various times.

5

31. Sometime in 1929 AGECO acquired Rochester Central Power Corporation, a holding company that owned and controlled Empire Gas & Electric Company, Elmira Water Light & Railroad Company, and New York Central Electric Corporations.

6

,

7

Of those, New York Central Electric Corporation owned the Corning, Dansville, Owego, Newark, and Penn Yan Sites; Empire Gas & Electric Company owned the Geneva-Border City MGP Site; and Elmira Water Light & Railroad Company owned the Elmira-Madison Avenue Site.

32. At some time prior to December 31, 1929, AGECO acquired ownership and control of Federal-New York Company, Inc. At the time, Federal-New York Company, Inc. owned the Goshen MGP facility.

33. On January 10, 1940, AGECO and its top holding company subsidiary, Associated Gas

&

Electric Corporation (“AGE-CORP”), filed for bankruptcy protection under Chapter X of the Bankruptcy Code.

34. At the time of filing, AGECO had seven direct subsidiaries; four of those, like AGECO, were registered holding companies, including General Gas

&

Electric Corp., Associated Electric Co., N.Y. PA NJ Utilities Company, and Northeastern Water Companies, Inc. The remaining three direct non-holding company subsidiaries of AGECO were Associated Utility Corporation, The United Coach Company, and The Associated Corporation.

35. Following the filing of bankruptcy, Walter H. Poliak, was appointed as trustee of AGECO, and Dennis J. Driscoll and Willard L. Thorp were appointed as trustees for AGECORP.

36. In June of 1943, the trustees of AGECO and AGECORP submitted a plan of reorganization for both debtors to the Securities and Exchange Commission (“SEC”) for consideration by that body. The plan was approved by order issued by the Commission on April 14, 1944, with certain minor amendments and subject to various specified terms and conditions.

37. Based upon that approval, the plan of reorganization submitted on behalf of AGECO and AGECORP was confirmed by United States District Judge Vincent L. Leibell on August 9, 1945, and on January 10, 1946 was ordered to be consummated by the court. The AGECO and AGE-CORP bankruptcy trustees were subsequently discharged by order issued on August 12,1946.

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38. In accordance with the plan of reorganization, AGECO merged into AGE-CORP on January 10, 1946, and immediately changed its name to General Public Utilities Corporation (“GPU”), which later became GPU, Inc.

39. A Certificate of Consolidation and Agreement of Merger setting forth the terms of the merger was publicly filed on January 12, 1946. That certificate stated,

inter alia,

that

[t]he consolidated corporation is one of the constituent corporations, namely AGECO, and not a new corporation. The existence of AGECO shall continue for all purposes whatsoever after the consolidation and merger with and into itself of AGECORP, and the separate existence of AGECORP shall cease.

40. Following the completion of the AGECO bankruptcy process, GPU conducted its business from AGECO’s corporate headquarters at 61 Broadway, New York, New York.

41. In a December 1945 Annual Report to shareholders, GPU represented itself to be a public utility holding company registered with the SEC and the successor in interest to AGECO and AGECORP.

42. By the time Judge Leibell ordered the reorganization plan implemented, the bankruptcy trustees had disposed of nearly all of the AGECO and AGECORP assets in order to comply with the Public Utilities Holding Company Act of 1935 (“PUHCA”), retaining only certain New York, New Jersey, and Pennsylvania subsidiary operating companies, including NY-SEG.

43. As a result of the plan of reorganization the remaining assets of AGECO, consisting of the stock in various operating utility companies, was held by N.Y. PA NJ Utilities Company. That corporation, in turn, was owned by GPU. Both of those were holding companies were registered under the PUHCA.

44. In December of 1946, the SEC approved of the dissolution of N.Y. PA NJ Utilities Company and the acquisition by GPU of all assets of that corporation, subject to its liabilities, if any. Among the assets acquired by GPU in connection with that transaction was the common stock of NYSEG.

45. In order to resolve certain potential financial claims of NYSEG against AGE-CO, in 1945 NYSEG and the bankruptcy trustees entered into the following covenant:

Resolved, that in accordance with the request of N.Y. PA NJ Utilities Company dated May 9, 1945, this Company shall take no action with respect to the filing of any claim or claims against the Estate of [AGECO] or the Estate of [AGECORP] ... provided, however, that in consideration therefor N.Y. PA NJ Utilities Company shall release this Corporation and its officers and directors from any liability arising from the omission of this Corporation to file such claim or claims and also from any liability for having made or approved allegedly excessive payments through various service corporations or funds prior to 1939; and provided, further that the Trustees of the above-mentioned Estates shall execute and deliver to this Corporation and appropriate covenant not to sue on account of any alleged failure to pay its

pro rata

share of any alleged Federal tax liability for the years 1927 to 1933, inclusive; ...

46. The minutes of a June 26, 1945 meeting of the NYSEG Board of Directors, at which the covenant was approved, provides the following clarifying language regarding its intent:

The Chairman stated that a letter had been received under date of May 9, 1945

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from Mr. E.W. Morehouse, Vice President of N.Y. PA NJ Utilities Company in connection with the settlement of certain claims and counterclaims between [NYSEG] and the Trustees of [AGECO] and [AGECORP] which he reviewed together with previous reports made to this Board on the possibility of such claims in connection with Case No. 9587 of the Public Service Commission of the State of New York.

3.

FirstEnergy

47. FirstEnergy is a corporation organized under the laws of the State of Ohio, with its principal place of business located in Akron, Ohio.

48. In 2001, GPU merged into defendant FirstEnergy.

B.

Fads Related to Veil-Piercing Analysis

1.

1906-1922

49. Between 1906 and 1922, corporate formalities were observed with regard to Ithaca Gas Light Company and its successor corporations. During that period annual shareholder and board of directors meetings were regularly conducted, and minutes of those meetings were maintained.

50. During the late 1800s and early 1900s utility companies began contracting with service companies to carry out certain of their corporate functions. Such service companies, which in the case of Ithaca Gas Light Company included W.S. Barstow

& Go.

and J.G. White & Company, Inc., offered specialized expertise to the utility operating companies, permitting them to achieve economies of scale and affording them the ability to provide services on a streamlined and centralized basis. Through the use of service agreements, public utilities were able to lower prices and expand service areas.

51. Prior to April 1, 1912, W.S. Bar-stow & Co. operated as the general manager of Ithaca Gas Light Company pursuant to a series of such service agreements.

52. The minutes of an Ithaca Gas Light Company board of directors meeting held on January 11,1911 clarify the role of W.S. Barstow & Co. as general manager of the company, authorizing Barstow “to make all purchases of materials and supplies and to contract for the same, to negotiate sales of whatever nature, and ... [perform] all powers not expressly herewith delegated to them, which as General Managers it would be their natural function to exercise

53. On November 26, 1912, Ithaca Gas Light Company entered into a contract with J.G. White & Co., Inc., under which White was appointed to replace W.S. Bar-stow & Co. as operating manager for the company.

54. J.G. White Management Corp. was formed in December of 1912 and on the same date purchased the assets of J.G. White & Co. Inc. AGECO acquired control of J.G. White Management Corp. sometime prior to May 1,1928.

55. At an Ithaca Gas Light Company board of directors meeting held on May 24, 1912, John I. Mange was appointed as a vice-president of the company, to act under the direction of J.G. White

& Go.

Minutes of that board meeting reflect the view of the company’s president that “it was deemed to the best interest of the Company to employ a man as Vice-President who had broad operating experience, if the most effective results were to be obtained from the management of the plant.” Prior to his appointment as vice-president, Mange had no direct involvement with Ithaca Gas Light Company as either an officer or a director.

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56. A new five year agreement with J.G. White Management Corporation, under which White was to act as operating manager for the utility for a period of five years, beginning on October 1, 1913, was approved by the Ithaca Gas Light Company board of directors on December 31, 1913.

57. On October 16, 1918, the Board of Directors of New York State Gas & Electric Corporation approved of a new five year agreement J.G. White Management Corp., under which representatives of White were to act as “Operating Managers of the Company” for a period of five years beginning on July 1,1918.

58. On May 1, 1928, J.G. White Management Corp. purchased from the Utility Management Corp. contracts for management of various operating companies within the AGECO system.

59. The service contracts with W.S. Barstow & Co., and later with J.G. White & Co., covered management of Ithaca Gas Light Company’s Cortland-Homer, Ithaea-Court Street, and Norwich MGP facilities, and by 1916 also encompassed the Oneonta MGP location.

60. There was no evidence presented at trial of any fraud, wrongdoing, or abuse associated with the employment of service companies by NYSEG and its predecessor utilities prior to 1922.

61. There is no evidence in the record of any agreement between Ithaca Gas Light Company or its successor utility companies with AGECO, prior to 1922, under which AGECO agreed to oversee or manage the company’s operation.

62. There was no evidence presented at trial to show that between 1906 and 1922 Ithaca Gas Light Company and its successors, including New York State Gas & Electric Corporation, were inadequately capitalized.

63. From time to time between 1906 and 1922 money was loaned by AGECO to Ithaca Gas Light Company or its affiliate operating companies, which in turn executed promissory notes to AGECO. Those loans included $125,000 advanced to Homer & Cortland Gas Light Company to be used for the purchase of stock of the Cayuga Power Corporation, reflected by a promissory note and secured by a pledge of Cayuga Power Corporation stock.

64. On occasion between 1906 and 1922 AGECO also appears to have guaranteed loans made to Ithaca Gas Light Company, Ithaca Gas & Electric Corporation and New York State Gas & Electric Corporation. As one example, on December 2, 1920 the board of directors of the New York State Gas & Electric Corporation authorized officers of the company to borrow a total of $30,000 from two separate lending institutions and to execute notes in favor of those institutions or to endorse the name of New York State Gas & Electric Corporation on promissory notes of AGECO given to those lending institutions for the amounts borrowed.

65. Between 1906 and 1922, there was some overlap in directors and officers of Ithaca Gas Light Company or it successor companies and AGECO. There is also evidence of overlap during that same time period in officers and directors and other personnel between Ithaca Gas Light Company, AGECO, W.S. Barstow

&

Co. and/or J.G. White & Co., Inc.

66. During the later years leading up to 1922, H.B. Brown, C.A. Dougherty, C.A. Greenidge, John I. Mange and T.W. Moffat served as directors of Ithaca Gas & Electric Corporation and later its successor, New York State Gas & Electric Corporation. During the earlier years, including in 1910, the directors of Ithaca Gas Light Company and its successors includ

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ed E.M. Treman, J.B. Taylor, T.W. Summers, O. Clement Swenson, and William S. Barstow.

67. Between 1906 and 1922, annual meetings of Ithaca Gas Light Company and its affiliated operating companies were held at various places, including at offices of W.S. Barstow

&

Co. and/or J.G. White & Co., Inc., during the times when those companies controlled AGECO, the parent company. There is no evidence, however, that AGECO used the offices of Ithaca Gas Light Company for meetings or other purposes.

68. The evidence adduced at trial was equivocal concerning whether or not AGE-CO and Ithaca Gas Light Company were treated as independent profit centers during the period between 1906 and 1922. The outsourcing of operations by the parent company through the use of service contracts suggests that the individual operating companies were not so regarded. Each of those companies, however, had its own customers.

69. There was no evidence presented at trial to establish that between 1906 and 1922 Ithaca Gas Light Company corporate funds were diverted for personal purposes.

2.

1922-mO

70. Between 1922 and 1940, the AGE-CO system was dominated and controlled by Hopson and, to a lesser degree, Mange.

71. Hopson had no involvement with AGECO prior to 1922.

72. By April 1923, Hopson and Mange had acquired all of AGECO’s shares of voting stock, and exercised control over the boards of AGECO and its subsidiaries by holding their respective directors’ undated signed resignations.

73. Between 1922 and 1940, AGECO and its affiliate companies, sometimes collectively referred to as the “AGECO Empire,” were controlled by Hopson through a maze of corporate structures and trusts.

74. As of November 30,1939, the AGE-CO Empire consisted of approximately seventy public utility companies, forty-two water companies, fifteen transportation companies, two ice companies, and twenty-six miscellaneous companies. Among those public utilities held in the AGECO family was NYSEG.

75. During the years of their control over utilities within the AGECO system Mange, who was connected with J.G. White Management Corp., was primarily involved in matters related to management of the operations of the various utility companies’ properties while financing, accounting, legal, and similar matters fell principally under the control of Hopson.

76. It is estimated that between 1929 and 1938, through use of service companies, Hopson siphoned approximately $20 million principally from AGECO system operating companies, at least $7 million of which was unjustified profit. During the period between 1934 and 1938, Hopson operated eighteen service companies, and he and his family received at least $3.6 million in revenue through this source.

77. Between 1922 and 1940, AGECO held itself out as operating all of the properties within its system and having a single operating and ownership structure, and did not respect the corporate separateness of it and its various subsidiaries during that time period.

78. Much of the focus at trial was upon the relationship between AGECO and NY-SEG, and a not inconsiderable body of evidence was adduced bearing upon that relationship and the abuses worked by AGECO upon NYSEG during the period between 1922 and 1940.

79. During the course of the AGECO bankruptcy the court recounted the follow

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ing history of AGECO and its dominance by Hopson and Mange:

Ageco was incorporated in New York on March 19, 1906. It was a comparatively small public utility holding company with gross consolidated assets in 1922 of $7,000,000. Between March 14, 1922 and April 1923 Howard C. Hopson and John I. Mange acquired all of Ageco’s outstanding shares of voting stock. Hopson and Mange held and exercised voting control of Ageco until January 10, 1940. Mange was the operating executive. Hopson controlled the financial and accounting policies of Ageco and its subsidiaries throughout. He controlled their Boards of Directors and held their undated signed resignations. Hopson’s employees kept the minute books; some of the minutes were spurious. They also kept the books of account (irregularly maintained). Entries were changed and reinstated as Hopson directed; one item was changed 13 times. Alleged contracts for stock subscriptions of Ageco in subsidiaries, disappeared and reappeared as the occasion required. There were no corporate resolutions authorizing the transfer of the bulk of Ageco assets to AUICorp. The officers of Ageco and Agecorp were selected by Hopson and were paid through checks of Hopson ‘service companies’ which furnished the corporations in the Associated System with ‘auditing, corporate, security, transfer, tax consultant and other services.’ For these services Hopson’s personally-owned service companies were paid large sums by the companies in the Associated System, giving him and his family a profit in excess of $6,500,000 in the period of 1922 to 1938.

80.In 1935, Congress enacted the PUHCA in response to abuses worked by public utilities through manipulation of corporate structures, resulting in burden to the ratepayers particularly during the Great Depression.

See S. Union Co. v. Missouri Pub. Serv. Comm’n,

138 F.Supp.2d 1201, 1204 (W.D.Mo.2001).

81. The PUHCA, which resulted from a Congressionally-mandated investigation by the FTC into the concentration of power and “well publicized abuses committed by public utility holding companies”, restricted utility holding companies to each operating a single regional utility system.

Yankee Gas Servs.,

616 F.Supp.2d at 239.

82. One of the concerns that prompted Congress to enact the PUHCA was the practice among utility companies of pyramiding, a phenomenon that did not appear to have a legitimate business purpose for the upstream subsidiaries.

83. Pyramiding involves ownership of an operating company with a large series of holding companies conceptually positioned above the operating company, financed through the earnings from the operating company at the lowest level. In a pyramid structure, dividends paid by the operating company flow upward to satisfy debts and obligations of the holding companies at the higher levels. Typically, in a pyramid structure each of the holding companies finances itself with debt and has as assets equity in the companies below.

84. Between 1922 and 1940, the AGE-CO Empire epitomized the typical public utility pyramid ownership structure. The following depicts the corporate holding company structure above NYSEG during that period:

THE AGECO/NYSEG PYRAMID STRUCTURE

Associated Gas & Electric Properties (MA)

Associated Securities Corporation (DE)

Associated Gas

&

Electric (N.Y.)

Associated Gas & Electric (DE)

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Rochester Central Power (DE)

Rochester Central Power (N.Y.)

Mohawk Valley Company (N.Y.)

Mohawk Valley Company (DE)

New York Electric Company (DE)

_NYSEG_

Both Associated Gas & Electric Properties and Associated Securities Corporation were holding companies within the AGE-CO Empire.

85. The PUHCA placed holding companies under the supervision of the SEC, requiring that they register with that agency. Registration under the PUHCA resulted in heightened scrutiny and regulation of the company’s investments in both utility and non-utility company stock.

See S. Union Co.,

138 F.Supp.2d at 1204 . After unsuccessfully challenging the Act, AGECO eventually registered in 1938 with the SEC as a utility holding company.

86. During the period from 1922 until 1940 the holding companies within the AGECO system and their subsidiary operating companies were not generally regarded as independent profit centers. Instead, the entire pyramidal structure was treated as a single entity.

87. At the time of their bankruptcy filing AGECO and AGECORP were registered public utility holding companies under the PUHCA.

88. During the pendency of the AGE-CO bankruptcy a special master was appointed to conduct a hearing and report on the fairness of a proposed compromise of litigation pending in connection with that proceeding. The transcript of the hearing extended over 12,000 pages, memorializing testimony taken over 133 sessions ending by the middle of September 1942. During the course of the hearing approximately 700 exhibits were received in evidence.

89. According to the district court’s summarization, in his report of that investigation the special master found that “[t]he various wholly-owned subholding companies, on whose books the stocks purchased by Ageco were entered as owned by the subholding companies, were only ‘corporate pockets’ of Ageco.” The court went on to note that “[t]he purchased properties were really owned by Ageco and had been acquired with Ageco funds or by the issuance of Ageco debentures and other securities.”

90. In the years during which AGECO and its affiliates were controlled by Hop-son and Mange, those companies came under scrutiny of several agencies, including the Federal Power Commission (“FPC”), the Federal Trade Commission (“FTC”), the SEC, and the New York Public Service Commission (“PSC”).

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91. During the period between 1922 and 1940, the corporate separateness and distinctions between AGECO and its held operating utility companies were blurred, if not non-existent.

92. On June 14, 1932, the PSC issued a report entitled “Associated Gas and Electric System Practices.” That report contained the following relevant observations:

a. All levels of operating utility employees, including meter readers, office clerks, and other front-line employees, devoted working time to selling securities in AGECO.

b. The local utility offices, trucks, equipment, and consumer utility

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bills all bore the title “Associated Gas and Electric System.” The local utility office was listed under “Associated Gas and Electric System” in the phonebook. At least some of the local utilities used “As-b.„ dated Gas and Electric System” letterhead.

c. A publicly distributed pamphlet, known as the “Harris-Forbes” booklet, emphasized the idea of a unified, centrally controlled “Associated Gas and Electric System.”

d. On September 25, 1929, Empire Gas & Electric Company requested consent to transfer its franchises to NYSEG. When the Commission’s accountants examined Empire’s books and accounts at Empire’s Geneva office, the Commission was told that any contracts would have to be obtained from the New York City office of AGECO.

93. The PSC report was critical of the use of service contracts and other means by which holding companies were able to divert funds from operating companies, noting the following:

Twenty-five years ago, the holding company was in an embryonic stage and was used principally for the purpose of centralizing control. In recent years, particularly during the last decade, the holding company idea has been utilized to siphon funds from operating utilities into holding companies or their subsidiaries and affiliates which are not subject to public regulation; and in certain instances, funds have been diverted even from the holding companies to the pockets of individuals.

The PSC report did not point to any abusive practices in place prior to 1922.

94. The 1932 PSC Report noted that large payments were made to various service companies from the operating utility companies, including Utility Management Corporation (formerly J.G. White Management Corp.), W.S. Barstow

&

Co., The Utilities Purchasing and Supply Company, and Public Utilities Appliance Corporation. The PSC report characterized the AGECO system service contracts as reflecting “the influence and control of the system over the operations of the controlled utilities.” The Commission went on to note that the terms of those contracts

would seem to cover almost every phase of utility operation, leaving no vestige of independent authority or control in the hands of the operating utilities. Under the provisions of these contracts, the service corporations manage, dominate, and practically operate the utilities. The contracts cover every activity of the local corporation and all its property. No distinguishable workable identity remains. The operating utilities become even less than agencies or instrumentalities of holding companies or the system. They exist only in name and live only in the bookkeeping records of the system.

95. One investigation conducted by the PSC resulted in the issuance of an exhaustive opinion by PSC Commissioner Brewster (“Brewster Report”) on December 30, 1940 recounting the abuses of AGECO and its affiliates including in “siphoning of funds from the treasuries of the operating companies to the pockets of those individuals and corporations engaged in milking the operating companies through the device of servicing and management contracts.”

96. That investigation, which focused on the period between 1934 and 1938, was commissioned

[a]s to the methods of accounting, the books, records, accounts and other documents of the New York State Electric

&

Gas Corporation; that an investiga

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tion should be instituted as to the methods, practices, regulations and property employed by said corporation in the transaction of its business and as to whether said corporation is failing or omitting or about to fail or omit anything required of it by law or by order of the Commission, or is doing anything or about to do anything or permitting anything or about to permit anything to be done contrary to or in violation of law or of any order of the Commission; that an investigation should be instituted to determine the persons, corporations, partnerships or trusts who are affiliated interests of said corporation; and the extent and propriety of the transactions had by said corporation with such affiliated interests, and as to whether the contracts or transactions had by such corporation with affiliated interests are in the public interest.

The Brewster Report did not specifically focus upon the operation of MGP facilities.

97. According to the Brewster Report, the Utility Management Corporation charged operating companies in the AGE-CO system, including NYSEG, a management fee equivalent to 2.5% of the gross revenues of the operating companies. In 1939, however, there were no management employees from the Utility Management Corporation located on any property owned by the operating companies.

98. The Brewster Report identified, among other things, abuses related to defraying personal expenses of Howard C. Hopson as well as Howard C. Hopson

&

Company, which were charged to operating companies within the AGECO System.

99. According to the Brewster Report, more than $1.3 million was siphoned from NYSEG by AGECO and its control group annually.

100. On September 27, 1940, the FPC issued a report of an investigation of the AGECO system. While the focus of the report was on six Pennsylvania utilities it is relevant to the issues now before the court, since from a managerial or governance perspective AGECO’s relationship with and handling of those Pennsylvania utilities was typical of what has been described as its “cookie cutter approach” management style with respect to its various utilities throughout the United States.

101. In its report of that investigation the FPC wrote the following: “[o]ur investigation has developed an extraordinary picture of the exploitation of an essential public service for which the holding-company device served as a cloak. Almost every possibility for plunder was exploited.”

102. Among the abuses uncovered by the FPC was the diversion of millions of dollars from the operating companies through the use of service companies formed by Hopson and his associates, in the process going to great lengths to shield their identities and true ownership, with the service companies charging exorbitant amounts and realizing unjustified profits from the operating companies for performing various services.

108. The report of the FPC investigation concluded as follows:

While the record of this proceeding presents perhaps an extreme example of the evils of the holding-company system in the public-utility field, it was no isolated instance. The unjust burdening of operating utilities with improper or unnecessary charges to their expense and property accounts, the concealment of real ownership and control, the efforts by one means or another to confuse and obstruct investigation and regulation, and, generally, the manipulation and exploitation of operating properties for the selfish interests of the holding compa

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nies and their owners, have all been inherent tendencies of the holding company method of organization as it has grown up in the inadequately controlled public-utility industry especially during the past two decades.

Here, perhaps, there was a somewhat unusual concentration of mind and efforts almost exclusively devoted to manipulation and selfish exploitation. It was legerdemain at its worse. The ingenuity of Hopson and his associates were [sic] indeed worthy of a better cause. They were apparently single-heartedly determined upon extracting currently every dollar they could wring from the operating utilities regardless of the effect upon consumers and investors. The fact that they were unjustly and improperly impairing the efficient and economical operation of such utilities and laying unlawful burdens upon the rate payers seemed not to concern them at all.

The record and report submitted by the trial examiner detailing the iniquitous practices and the different schemes by which the respondents here were victimized furnished impressive evidence of the vision, foresight, and fidelity to the public interest of those responsible for that great reform measure, the Public Utility Act of 1935, under which much has been achieved toward the onward march of those modern freebooters who saw in the rapid development of public utility service in the United States only a new and unusual opportunity for speculation and exploitation.

It should be noted, however, that the passage of this Act requiring the service companies to operate at cost, led Hop-son and his associates to attempt to retain unjustified profits by padding service company costs. Such inflation of costs must be zealously guarded against and it is hoped that this investigation may aid public regulatory bodies to this end. Further legislation may be necessary effectively to close the door to such practices.

104. The FPC investigation was followed by a separate investigation conducted by the SEC, leading to the issuance of a report on August 4, 1942 summarizing the agency’s findings and ordering the de-listing of AGECO securities from the Los Angeles Stock Exchange and the New York Curb Exchange on the ground that its application for registration and annual reports contained false statements and did not accurately represent the nature of intermediate control of operating companies through parent companies.

105. In the report of its investigation, the SEC noted that with the filing of the AGECO and AGECORP bankruptcy petitions “[investors, both present and prospective, are now warned by the pendency of the reorganization proceedings that the financial statements and other information on file with the [the SEC] may not be accepted indiscriminately as the guides to the registrant’s financial and the prospects for its reorganization.”

106. Hopson resigned from his position as a director of AGECO on August 30, 1935 and as treasurer of that company on December 30, 1935.

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Despite those resignations, Hopson continued to exert considerable influence over the AGECO Empire.

107. During the period between 1922 and 1940, there was considerable overlap of officers and directors within the AGE-

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CO system, including among both holding companies were operating companies. The following charts illustrate this overlap:

[[Image here]]

108. During the period between 1922 and 1940, board meetings for NYSEG and the various other AGECO operating companies were generally held in New York City at or near AGECO’s offices at 61 Broadway, New York, New York.

109. That address, 61 Broadway, New York, New York, is also the location of offices maintained during all or a portion of the period from 1922 to 1940 by Hop-son’s accounting and financial organization, which rendered financing, accounting, legal, and auditing services to AGECO and its various subsidiary companies.

110. Hopson was elected as a director of New York State Gas & Electric Corporation on August 19,1927.

111. During all or most of the years from 1922 until 1940, Mange served as president of AGECO, and a director of NYSEG.

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112. Hopson resigned from the NY-SEG Board of Directors on May 14, 1934. There is no indication, however, of any material change in the relationship between AGECO and NYSEG as a consequence of his resignation.

113. Somewhat less is known from the record concerning AGECO’s interaction with various of its other subsidiaries, including New York Central Electric Corporation, Empire Gas & Electric Company, Eastern New York Electric & Gas Company, Inc., and Federal-New York Company, Inc., than has been revealed regarding its relationship with NYSEG.

114. At trial, NYSEG’s expert, Professor Jonathan Macey, opined that AGECO treated those operating companies in the same manner as others within the Associated System.

115. In his decision, PSC Commissioner Brewster, concluded that the same fraudulent activities and policies that AGECO had imposed on NYSEG were also inflicted on those other operating companies.

116. During all or portions of the period between 1922 and 1940, NYSEG, as well as affiliated companies Federal-New York Company, Inc. (beginning on or prior to December 31, 1929), Empire Gas & Electric Company (from May 1, 1929), Elmira Water, Light & Railroad Company, New York Central Electric Corporation (from May 1, 1929), New York Central Electric Corporation (from May 1, 1929), Eastern New York Electric & Gas Company, Inc.

(from on or

prior

to

December 31, 1926), and Owego Gas Corporation (from May 1, 1929), were all dominated by AGE-CO in such a way as to make them mere instrumentalities of AGECO, and AGECO exploited its control of those subsidiaries to commit a wrong, namely the operation of their MGP facilities and the resulting release of hazardous substances, causing those subsidiaries to suffer an unjust loss or injury as a result.

117. During the period between 1922 and 1940, NYSEG and the other holding and operating companies within the AGE-CO system retained little business discretion. Many of the management functions of NYSEG and the other operating utilities during that time period were outsourced through the use of service company contracts.

118. On January 8, 1926, for example, NYSEG entered into a five year agreement under which AGECO was retained “as general operating and financial manager of [NYSEG’s] properties, with authority to supervise and direct the management and operation and financial policies of such properties ...

119. The service contracts through which NYSEG’s operations were outsourced during the period of 1922 to 1940 lack any indicia of being arms length agreements since it does not appear that there was anyone negotiating those agreements on behalf of NYSEG and the other subsidiary operating companies within the AGECO Empire.

120. None of the service agreements entered into by NYSEG and its sister operating companies specifically referenced tar handling services at MGP sites, or addressed environmental activities at the facilities.

121. Between 1922 and 1942, NYSEG was adequately capitalized.

122. NYSEG was profitable in every year between 1906 and 1942. NYSEG’s net income grew

from

$171,000 in 1921 to $2.99 million in 1931.

123. In every year during the Great Depression in the 1930s, with the exception of 1935, NYSEG earned net income of more than $1.5 million.

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124. There is no evidence that NYSEG experienced financial distress at any point between 1906 and 1945, nor was evidence presented at trial to show that NYSEG was unable to pay its debts at any time during that period or was on the verge of receivership.

125. NYSEG’s revenues grew from $58,000 in 1906 to $28,585 million in 1942. During the same time period NYSEG’s operating profit margin generally ranged from 30% to 50%.

126. Between 1906 and 1942, NYSEG observed all corporate formalities, including 1) holding regular meetings of its board of directors; 2) maintaining minutes of board meetings; 3) holding annual shareholder meetings; 4) issuing annual reports; 5) making routine filings with the PSC.

127. Between 1906 and 1942, NYSEG was able to raise capital at rates similar to overall industry yields. Between 1910 and 1941, NYSEG successfully completed ten separate bond issues, at rates comparable to industry averages for the electric utility industry.

128. During that same period, according to Professor Frank C. Torchio, one of FirstEnergy’s experts, NYSEG was viewed in the credit markets to be in a similar risk category as the average utility and was able to borrow money at comparable rates.

129. During the period from 1922 until 1940, NYSEG had its own employees. In 1935, the company had over 2,000 employees, and its workforce grew to 2,500 by 1939. Among those employees during that time period was a plant superintendent at each of the NYSEG MGP facilities.

3.

1940-im

130. During the course of reorganization following the filing of bankruptcy, AGE CO and AGECORP were operated under the control of the bankruptcy trustees.

131. There was no evidence presented at trial to suggest that the past domination, fraud, and abuses worked by AGE CO toward NYSEG continued into the bankruptcy period beyond the point when AGECO began operating under the control of the bankruptcy trustees.

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C.

Environmental Concerns Associated with MGP Operations Generally

132. Manufactured gas plants began operating in the United States by the mid-nineteenth century, and for the most part had ceased producing gas by the 1940s, when natural gas became more readily available through the development of supply and transmission systems. Gas produced in MGP facilities was provided to residential and commercial customers for use in heating, cooking and lighting.

133. NYSEG and its predecessor and other affiliated utility companies sold manufactured gas to their respective customers from approximately 1851 until around 1960 when the last NYSEG plant, located in Plattsburgh, New York, was closed.

134. Because of the large volumes of water required to operate MGP facilities, most were located near bodies of water.

135. Two primary technologies were used to manufacture gas at the MGP sites: coal carbonization and a carbureted water gas process. The original method, coal carbonization, entailed heating coal in enclosed retorts or beehive ovens, resulting

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in volatile constituents being driven off as a gas, collected, cooled, and purified for conveyance by pipe networks into surrounding areas for use. In the 1870s the carbxxreted water gas process was introduced, and by 1900 had become the predominate method of MGP production. That process, which had several variations, typically began by heating coke or coal in the presence of steam, creating a flammable gas mixture of methane and carbon monoxide. Petroleum products were then sprayed into the hot gas mixture, creating more methane and increasing the heating and lighting capacity of the gas.

136. While these two processes differed in how gas was produced, both created similar by-products when the gas cooled, including primarily coal tar and, in the case of carbureted water gas plants, oil.

137. Some of the coal tar generated at MGP facilities was recovered for reuse or sale. Coal tar, however, also typically leaked from tar-handling equipment throughout the operation of MGPs, including from underground bases of tar-handling equipment and from pipes. Inadvertent spills of coal tar were also common.

138. Coal tar generated from MGP operations typically contained various chemical constituents, among them being polycyclic aromatic hydrocarbons (“PAHs”), which do not readily dissolve in water and therefore rarely migrate beyond the tar itself, and a family of volatile organic compounds (“VOCs”) including Benzene, Toluene, Ethylbenzine, and Xylene (“BTEX”).

139. Although earlier recognized as a nuisance associated with former MGP facilities and nearby waterways, as of 1991 coal tar was not yet officially listed as a hazardous waste under New York law. However, coal tar produced from MGP processes and its constituents are now regarded as hazardous substances for purposes of federal and state environmental laws.

140. Once released, coal tar will tend to migrate in the subsurface at a site. Coal tar is heavier than water. Accordingly, if a sxiffieient amount of tar is released, it will travel through the water table until it reaches a confining layer sexrving to impede its downward movement. Elements of coal tar can leach into groundwater, causing groundwater contamination. Even immobile tar may present concerns as a potential source of groundwater contamination where groundwater contacts the tar and dissolves coal tar constituents.

141. Coal tar is the primary contaminant of concern (“COC”) at the sites in issue in this case. As a result of tar leaks and spills, as well as consequent tar migration, residual coal tar typically exists at former MGP sites in three distinct potential forms. First, coal tar may be found in a semi-solidified mass remaining around MGP structures. Second, it may be present as a viscous substance that has flowed some distance away from MGP structures, including into adjacent surface water bodies. Finally, it may exist in a dissolved phase where the tar has released some of its constituents.

142. In addition to coal tar, the gas purification process associated with MGP facilities was also known to produce a solid waste material referred to as “purifier waste” or “box waste” generally consisting of wood chips, iron filings and clumps of solidified tar.

143. The New York State DEC serves as the lead agency authorized to manage the cleanup of MGP facilities in New York State.

144. The DEC did not have a formal policy or program for remediation of former MGP sites in place until 1992 or 1993. Prior to that time, however, the DEC be

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came involved occasionally in discrete issues at an MGP sites, such as where pollutants at a portion of an MGP site were releasing into a body of water. At various points in the 1980s, it was uncertain whether the DEC had jurisdiction over coal tar-contaminated sites.

145. The state’s policies concerning remediation of former MGP sites are laid out in a document which, while undated, appears to have been relatively recently generated based upon analysis of its contents, entitled “New York State’s Approach to the Remediation of Former Manufactured Gas Plant Sites.”

146. The DEC reports that 235 MGP-related sites have been located in New York State, with an estimate that in the past as many as 300 were operated within the state. Of these, 202 have been identified as involving a current New York State utility as the responsible party.

147. Out of the 202 former MGP sites identified, cleanup had been completed, or a no further action determination had been made, at only twenty-one locations as of the time of publication of the DEC’s MGP remediation approach pamphlet. Those cleanups were all relatively recent; no MGP site in New York State was fully remediated prior to 1990.

148. Over time since the 1980s the technologies associated with treatment and disposal of coal tar impacted soils have improved and the costs associated with various available options for addressing MGP waste have decreased. By way of example, it is estimated that the present cost of on-site thermal desorption of such contaminated soils is $60 per ton, as corn-pared with an estimated per ton cost in 1988 of land burial in CECOS, a certified hazardous waste landfill, of $150.

D.

Summary of NYSEG’S MGP Investigations and Remedial Responses

149. Currently at issue in this case are sixteen former MGP facilities currently or previously owned and operated by NYSEG or its predecessor utility companies.

11

150. All or most of the sixteen sites in issue were first listed by the DEC in 1986 as Class “2a” sites in the Registry of Inactive Hazardous Waste Disposal Sites in New York. Class 2a is a temporary classification assigned to a site that has inadequate and/or insufficient data for inclusion in any of the other DEC classifications. Several of the sites have since been re-categorized as falling within Class “2”, signifying that they present a “significant threat to the public health or environment — action required.”

151. With the exception of Corning, NYSEG has incurred substantial costs in responding to the release of hazardous substances, including coal tar, at the sixteen sites at issue.

12

152. In the 1980s, NYSEG performed investigations at all of the MGP sites in this litigation, with the exception of the Newark and Corning Sites. NYSEG’s early investigation efforts at its former MGP facilities are summarized in a document prepared in August of 1989 by NY-SEG employees T.M. O’Meara and Sheila Snyder. That report contains a ten year projection of those investigative efforts

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and the anticipated resulting expense, describes NYSEG’s “proposed investigative/remedial approach”, and notes that as of the writing of that report “Plattsburgh is the only site that has undergone an extensive remediation program.”

153. When Sheila Snyder, a NYSEG employee who testified concerning the company’s efforts to evaluate remedial and disposal options for MGPs in the late 1980s, searched for examples of other MGPs that had been remediated she found only one, located in Minnesota; while some work had been completed at that facility as of the time of her study, however, it had not then been fully remediated.

154. In November of 1983, NYSEG employee J.B. Marean proposed conducting an investigative program over a five year period beginning in January 1984 and ending in December of 1988 with respect to seventeen NYSEG MGP sites, and estimated that any necessary remedial work at any given site could be fully performed within two years following completion of the investigative study. By contrast, it is now estimated that at the current pace it will have taken NYSEG forty years to remediate all sixteen sites from the time those efforts were initiated.

155. NYSEG’s early investigations of its former MGP sites were divided into a series of specific tasks, and were calculated to determine whether any of the sites posed a problem that needed to be addressed.

156. The memorandum prepared in August of 1989 by T.M. O’Meara and Sheila Snyder described the various tasks to be undertaken in connection with NYSEG’s early investigations of former MGP sites. Task 1 was limited to identifying the location of any on-site coal gas plant structures such as gas holders and tar sumps, and to identify processing activities and waste disposal practices at each of the sites. This task was accomplished primarily through review of historical documents and interviews of former employees. Tasks 2 and 3 followed, consisting of a sampling program including “a geophysical survey, a soil gas survey, test pitting, soil borings, and monitoring well installations.” In conjunction with those testings and surveys, soils, stream sediments, ground and surface water, and air samples were chemically analyzed in an effort to ascertain the vertical and horizontal extent of any contamination. Task 4 consisted of analysis of the collected data and assessment of public health and environmental risks presented by the site. Task 5 entailed the preparation of a remediation plan for the site, with Task 6 being the submission of the remedial plan to the DEC for approval and, ultimately, including in a consent order. The August 1989 memorandum also describes a seventh task, that being implementation of an agreed-upon remedial plan.

157. As NYSEG embarked upon the contemplated investigations of the various MGP sites it forwarded courtesy copies of the task reports to the DEC, although those reports were neither mandated nor controlled by the agency.

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158. With two exceptions, none of the early work at NYSEG’s former MGP sites proceeded past Task 4, in light of a determination by the company’s consultants that no further action was required beyond worker protection, monitoring, and placing limitations on groundwater extraction. NYSEG’s consultants did recommend further action at Owego and Mechanicville and steps were taken in the early 1990s to

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address those sites, under consent orders with the DEC.

159. In March of 1994, NYSEG acquiesced in the issuance of a Consent Order (No. DO-0002-9309) (the “1994 Consent Order”) by the DEC. The 1994 Consent Order addressed the investigation and cleanup of coal tar and associated contaminated hazardous substances at all of the MGP sites at issue in this action, with the exception of the Corning location.

14

160. At the time the 1994 Consent Order was signed both NYSEG and the DEC anticipated that between two and three MGP remediation projects would be conducted by NYSEG during each year.

161. Pursuant to the 1994 Consent Order, NYSEG is required to commence a sequence of studies and reports in order to investigate and remediate the sites covered, under the DEC’s direction. Based upon an initial submittal by NYSEG, the DEC must then determine whether to require more data in order to characterize the nature and extent of hazardous substances at a given site, and to ascertain whether such substances constitute a significant threat to public health or the environment, necessitating remediation. In the event of unavailability of such information, the 1994 Consent Order requires NYSEG to create a Preliminary Site Assessment (“PSA”), which must “provide all appropriate assessments and evaluations” set forth in CERCLA, the National Contingency Plan (“NCP”), and EPA/DEC guidance documents. The task reports prepared by NYSEG during its early investigations satisfied the PSA requirement for any site for which they were available.

162. All of the investigations performed by NYSEG pursuant to the 1994 Consent Order were mandated by the DEC.

163. Under the Consent Order, if the DEC determines that a significant threat exists, NYSEG must next create a Remedial Investigation (“RI”)/Feasibility Study (“FS”) Work Plan, incorporating all appropriate elements of an RI/FS, as set forth in CERCLA, the NCP, and EPA/DEC guidance on regarding the preparation of an RI and an FS.

15

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164. The 1994 Consent Order permits NYSEG to conduct Interim Remedial Measures (“IRMs”) at the covered sites, if approved by the DEC. The order provides that any IRM must be performed pursuant to a DEC-approved IRM Work Plan, which must include a health and safety plan, a contingency plan, and, if required by the DEC, a citizen participation plan. While the 1994 Consent Order does not reference compliance with the NCP with respect to IRMs, the regulations under which the consent order was issued do require both NCP compliance and cost effectiveness.

See

6 N.Y.C.R.R. § 375-2.8. After an IRM Work Plan is approved, the project is performed subject to DEC oversight.

165. NYSEG has conducted IRMs under the 1994 Consent Order at eight of the sites in issue.

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These IRMs are summarized below and discussed in greater detail in the portion of this decision addressing the specifics of NYSEG’s environmental responses in connection with the individual sites:

a. Cortland-Homer: 2002 utility reconstruction project

b. Elmira-Madison Avenue: 2003 removal of gasholders

c. Geneva-Border City: 1999 paving project; 2004 tar well excavation

d. Ithaca-Court Street: 2000 excavation and removal of coal tar impacted soil

e. Ithaca-First Street: 1998 soil stockpile removal

f. Mechanicville: 1999-2000 removal of gas relief holder foundation and piping

g. Norwich: Three-phase IRM conducted from 1993 to 1997, with the first two phases related to a demonstration project excavation. The third phase carried out in 1997, included excavation of a former relief holder, tar well, and associated pipe, and also installation of an air sparging/soil vapor extraction system

h. Plattsburgh-Saranac Street: 2002 removal of tarholders, pipelines and purifier wastes.

166.Several of those IRMs involved removals of MGP structures, including gas holders containing source materials such as tar. The DEC has an express policy of preferring the performance of source removals as IRMs. The document describing the agency’s approach to remediating MGP sites notes the following:

MGP sites typically contain buried structures or other areas of highly concentrated wastes which are good candidates for interim remedial measures. The Department MGP Program often conducts removals of gas holder foundations, tar wells, and/or other MGP-related structures as an initial step while more detailed evaluations are underway elsewhere on the site. Where possible, IRMs are intended to achieve final remedial criteria to minimize the need to revisit an area during the final site remedy. Thus, the IRMs seek to remove not only the contents of buried struc

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tures, but also the structures themselves and any contaminated soils immediately surrounding and beneath the structure.

This is consistent with the DEC’S policy approach concerning former MGP facilities since at least 1997.

167. Whether or not an IRM has been implemented at a site, NYSEG is required to prepare an RI/FS Work Plan for each site chosen by the DEC for remediation. Following approval of the RI/FS Work Plan, NYSEG is then required to prepare an RI Report. Among other requirements, the report must “provide all appropriate assessments and evaluations” set forth in CERCLA, the NCP, and EPA/ DEC guidance documents.

168. After the DEC approves an RI for a site, NYSEG must then prepare and submit an FS. Unless the DEC specifies otherwise, the FS must be performed in a manner consistent with CERCLA, the NCP, and relevant guidance documents.

169. Once an FS is approved, the 1994 Consent Order requires NYSEG to cooperate with the DEC in soliciting public comment regarding the RI/FS and a Proposed Remedial Action Plan (“PRAP”), in accordance with CERCLA, the NCP, and relevant guidance documents.

170. Following the close of the public comment period, the DEC next selects the final remedial alternative for the site for inclusion into a Record of Decision (“ROD”), which becomes an enforceable part of the Consent Order.

171. Following the issuance of the ROD, NYSEG must next create a Remedial Design Work Plan, in accordance with the ROD. Once that plan is approved by the DEC, the remedy must be implemented as approved by the agency.

172. The DEC typically stations one or more representatives on-site throughout remedial construction. Based upon post construction submissions, the DEC concludes whether remedial construction has been conducted in accordance with the Remedial Design.

173. In addition to providing specific approvals, under the 1994 Consent Order the DEC also retains general oversight power over the remediation process under a section which provides that

[i]f the Department concludes that any element of the Remedial Program fails to achieve its objective or otherwise fails to protect human health or the environment, [NYSEG] shall take whatever action the Department determines necessary to achieve those objectives or to ensure that the Remedial Program otherwise protects human health or the environment.

NYSEG’s only recourse if it does not agree with the DEC’s decision-making at a site is to request a hearing before a DEC administrative law judge, at which NYSEG would bear the of burden of proving that the DEC’s position is unjustified.

174. Each month NYSEG has provided progress reports to the DEC regarding its efforts at the sites covered, as required under the Consent Order. Those reports typically update monthly activity at the various sites, and also list major past events.

175. One limitation faced by NYSEG in remediating the MGP sites in dispute, particularly in the earlier years, was the availability of relatively few disposal locations that would accept contaminated coal tar waste.

176. Studies of various means of disposal of contaminated MGP waste were conducted by NYSEG in the 1980s. One such study was reported in a memorandum dated August 22, 1988 from Sheila Snyder to J.B. Marean. Among the options con

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sidered in that and other studies was the burning of coal tar contaminated soil.

177. Between 1994 and 1998, NYSEG had the ability to co-burn coal tar contaminated soil at two of its coal burning power plants, including Hickling Station, located in Corning, New York, and Jennison Station, located in Bainbridge, New York. Co-burning involves mixing coal tar impacted soils with coal for burning, with the percentage of MGP wastes not exceeding 25% of the total volume. The process also requires the introduction of activated carbon into the mix, stockpiling of MGP waste, testing of the waste for toxicity, and then blending the waste with coal.

178. NYSEG’s study of co-burning at Hickling and Jennison ultimately led to the submission of a proposal to the DEC on December 5, 1989, requesting permission to co-burn contaminated soils at the Jennison plant.

179. In March of 1994, the DEC issued NYSEG permits for the co-burning of coal tar contaminated soil at both the Hickling and Jennison facilities.

180. Co-burning was utilized in or about 1994 or 1995 to treat approximately 13,155 tons of contaminated soil excavated from the Owego Site.

181. When all costs associated with co-burning of coal tar contaminated waste from the Owego Site were factored in, including excavation, backfilling, waste handling, air monitoring, transportation, disposal, crushing and screening, and adding carbon, the estimated cost of co-burning was $200 per ton.

182. By comparison, at the time of trial NYSEG was paying approximately $60 per ton for on-site thermal destruction of coal tar contaminated soil.

183. In 1998, NYSEG sold the Hickling and Jennison facilities. Shortly after the sales, those facilities were closed.

184. Throughout the four year period during which Hickling and Jennison were available for use in co-burning MGP waste, the functionality of those facilities was limited by their ages, inefficiencies, operating schedules, capacities, and the DEC’s schedule for investigation and remediation of NYSEG’s MGP sites.

185. Another potential means of disposing of coal tar contaminated soil considered by NYSEG was removal to off-site landfills.

186. Prior to 1989, MGP contaminated soils were not classified as hazardous waste and could be disposed of at most landfills.

187. The Model City Landfill, located near Buffalo, New York, and the Seneca Meadows Industrial Solid Waste Landfill in Waterloo, New York, were permitted and able to accept MGP contaminated soils during the 1980s.

188. During the same period, the CE-COS Landfill in Niagara, New York, the High Acres Landfill in Monroe County, New York, the Ontario County Landfill in Stanley, New York, and Safety-Kleen in Ontario, Canada were also permitted and able to accept MGP contaminated soils.

189. From 1989 through 2002, MGP wastes could be “decharaeterized” and sent to most licensed landfills.

190. Despite the availability of landfills for disposal of coal tar contaminated soils, NYSEG was reluctant to pursue that avenue, particularly since all or most of those landfills were unlined, given the potential that it could be considered a PRP for having disposed of contaminated soils should the receiving landfill later be declared a hazardous waste site under CERCLA.

191. The DEC has been involved with all of the work that NYSEG has per

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formed under the 1994 Consent Order at each of the covered sites. Throughout its investigations and remedial efforts, NY-SEG has been in frequent contact with the DEC, both regarding issues specific to the cleanup of individual sites and concerning the DEC’S approach to MGP cleanup in the state generally.

192. The DEC has frequently visited the MGP sites being remediated to monitor NYSEG’s activities. In addition, the DEC has reviewed and commented on all remedial plans. When necessary, NYSEG has revised those plans in consultation with the DEC, and resubmitted them for approval.

193. NYSEG follows all work performed at a site with a report which certifies that the approved plans were followed, and this report itself is subject to DEC approval. The DEC typically issues letters to NYSEG indicating whether it approves a given plan or report.

194. With minor exception, the DEC has approved all of the work that has been undertaken by NYSEG at the sites in dispute.

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195. A failure by NYSEG to comply with any term of the 1994 Consent Order could constitute a violation of the order under New York State law. The DEC has never taken the position that NYSEG is not in compliance with the 1994 Consent Order.

196. Some of the delay in NYSEG’s investigation and remediation of its MGP sites has been caused by the DEC. Between approximately 1994 and 1996 only one person at the DEC generally oversaw NYSEG’s work under the 1994 Consent Order. As of 1996 or 1997, there were approximately five individuals performing in that role. In those early years, it was very difficult to get documents quickly reviewed and approved by the agency. There now are about a dozen employees involved in the process at the DEC.

E.

NYSEG’s Responses at the Sixteen Sites in Dispute

1.

Corning

a.

Ownership and Operation

197. The Corning Site covers approximately two acres of land and is located at the intersection of Chestnut Street and West Tioga Avenue in the City of Corning, Steuben County, New York.

198. From 1892 until 1924, Corning Gas Company, and later Corning Light & Power Corporation, owned the Corning Site.

199. On August 1, 1924, New York Central Electric Corporation acquired the franchises, works and system of Corning Light & Power Corporation.

200. On December 31, 1936, NYSEG acquired New York Central Electric Corporation.

201. In 1946, NYSEG sold the Corning Site to Corning Glass Works.

202. The Corning MGP facility operated between 1860 and 1938. During the time of its operation approximately 1,049.3 million cubic feet of gas was produced at the facility.

203. Between 1922 and the close of operations in 1938, 465.3 million cubic feet of gas was produced at the plant. From the time AGE CO gained control of the facility on May 1, 1929 until its closure, approxi

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mately 91.6 million cubic feet of gas was produced there.

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b.

Investigation and Remediation

204. On January 17, 1991, NYSEG and Corning Glass Works representatives performed a visual site inspection of the Corning Site.

205. To date, no other environmental investigation, remediation, or other similar other work has been performed at the Corning Site.

206. The DEC has requested that NY-SEG conduct a records search to ascertain information regarding MGP activities at the site, and whether NYSEG has potential responsibility for contamination at the site. NYSEG expects to advance to the initial investigation phase at Corning, and that the site will eventually come under the purview of the 1994 Consent Order. Both the DEC and NYSEG anticipate findings that coal tar releases occurred at the site.

207. To date, NYSEG has spent a total of $585 in connection with investigation of the Corning site, and seeks recovery of a portion of that amount in this action.

2.

Cortland-Homer

a.

Ownership and Operation

208. The Cortland-Homer Site consists of two acres of property located at 216 South Main (Route 11) Street in the Village of Homer, Cortland County, New York.

209. The Cortland-Homer Site encompasses two adjoining land parcels, often referred to as the southern parcel and northern parcel.

210. The two segments are bordered by New York State Route 11 to the east, the New York and Susquehanna railroad line to the west, and commercial properties to the north and south.

211. The southern parcel of the Cortland-Homer Site contains a single-story commercial building, part of which is occupied by I.D. Booth (hereinafter the “Booth building”). The northern parcel is utilized for parking.

212. The Cortland-Homer Site was originally owned by Homer & Cortland Gas Light Company.

213. The stock of Homer & Cortland Gas Light Company was transferred into AGECO in or about May of 1907.

214. In or about 1916, AGECO sold the stock of Homer & Cortland Gas Light Company to Ithaca Gas

&

Electric Corporation.

215. On June 1, 1918, Homer

&

Cortland Gas Light Company merged into Ithaca Gas & Electric Corporation, with Ithaca Gas

&

Electric Corporation remaining as the surviving entity. Thereafter, in 1918, Ithaca Gas

&

Electric Corporation changed its name to New York State Gas & Electric Corporation. The corporate name again changed in or about 1928 to New York State Electric Corporation, and later, in or about 1929, to NYSEG.

216. In October of 1971, I.D. Booth purchased the Cortland-Homer Site property from Mack Trucks, Inc., which had earlier acquired the site from NYSEG.

217. I.D. Booth has no corporate relationship with NYSEG or FirstEnergy.

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218. At the time of its purchase of the Cortland-Homer Site, I.D. Booth was unaware of the existence of any hazardous substance or other contaminants on the property.

219. Prior to the time of its purchase of the Cortland-Homer property in 1971, I.D. Booth did not perform a title search, interview any past owners, perform an appraisal, review aerial photographs or Sandborn maps of the property, or even walk or survey the site.

220. Since its purchase of the Cortland-Homer Site, I.D. Booth has used the property for the sale of plumbing and heating products, and in addition has rented a portion of the site to New York Telephone Company/Verizon.

221. In the early 1980s, I.D. Booth was notified that NYSEG would be conducting an investigation into the possible presence of potentially hazardous substances, including coal tar, at the Cortland-Homer Site.

222. Following that notification, I.D. Booth permitted NYSEG access to the site for purposes of conducting its investigation and performing any response actions.

223. I.D. Booth has not been an active participant in the investigation or remediation processes at the Cortland-Homer MGP Site.

224. Despite awareness of the possible presence of potentially hazardous substances at the site, in the late 1980s, when performing paving operations at the Cortland-Homer Site, one of I.D. Booth’s contractors removed one of the wells containing coal gasification constituents.

225. Two former gasholders, which are primary source areas of coal tar contamination at the Cortland-Homer Site, are located below the Booth building.

226. In light of its desire to conduct source excavation as the preferred option at the Cortland-Homer Site, as a more permanent remedy, NYSEG approached I.D. Booth in the early to mid-1990s concerning the possibility of repurchasing the property.

227. In 2005, NYSEG had the Cortland-Homer Site appraised on an uncontaminated basis. The appraisal provided “an estimate of the market value of the real property, unencumbered by any form of environmental contamination and as of the date of inspection, June 23, 2005.” As of that date, the estimated market value of the property was $350,000.

228. I.D. Booth was aware that an appraisal was performed on an uneontaminated basis and that the appraisal estimated the fair market value in the mid-$300,000 range.

229. I.D. Booth was reluctant to sell the property in light of the disruption which would result to its business as well as the loss of rental income from Verizon it would suffer.

230. During ensuing negotiations with NYSEG, I.D. Booth demanded $2,000,000 for the southern two-thirds of the Booth building as the cost of relocating its business. Significant delays occurred during the course of the parties’ negotiations, owing principally to the conduct of I.D. Booth throughout the process.

231. On May 8, 2008, NYSEG paid I.D. Booth $1,800,000 for the southern portion of the Booth building and granted I.D. Booth a right of first offer, whereby I.D. Booth retained the right to reacquire the property after remediation of the Cortland-Homer Site for $1.00 in the event NYSEG were to decide to sell the property. After the sale, I.D. Booth retained the northern portion of the Cortland-Homer Site.

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232. NYSEG agreed to demolish only two-thirds of the Booth building (the southern portion) so that I.D. Booth was able to relocate its business to the remaining one-third portion of the Booth building (the northern portion).

233. NYSEG did not consider requesting New York State to initiate condemnation proceedings to permit access to the I.D. Booth property as a suitable alternative to purchase in light of the estimated length of time — up to five years — the process could have taken.

234. Pursuant to the parties’ agreement NYSEG was responsible for demolition of the southern portion of the Booth building, and I.D. Booth was responsible for modifications of the remaining (northern) portion of the Booth building, with the exception of any required excavation.

235. As pai’t of the agreement, I.D. Booth promised to vacate the southern portion of the Booth building within eight months after the closing date. However, I.D. Booth did not move out of that portion of the building until January 15, 2010— more than eight months after the closing date — and therefore was required to pay a monthly rent of $5,450.00 until it relocated to the northern portion of the Booth building.

236. The Cortland-Homer MGP facility was engaged in coal gasification from 1858 through 1921 and thereafter produced carbureted water gas from 1921 to 1933. During the time of its operation approximately 1,416.3 million cubic feet of gas was produced at the facility. Between 1922 and the close of operations in 1933, 634.4 million cubic feet of gas was produced at Cortland-Homer.

b.

Investigation and Remediation

237. The Cortland-Homer Site is divided into two operable units (“OU”), OU-1 and OU-2.

238. The focus of OU-1 of the Cortland-Homer Site is the former MGP area, including the Booth building, as well as two former gasholders and a purifying house, which are buried below the surface. OU-1 also encompasses offsite contaminated soils under Route 11.

239. OU-2 of the Cortland-Homer Site includes a parcel of land between the Tioughnioga River and Route 11 (often referred to as the downgradient area) and contaminated sediments in the West Branch of the Tioughnioga River.

240. In July and August of 1985, NY-SEG, through its consultant E.C. Jordan Co., performed a Task 1 Preliminary Site Evaluation at the Cortland-Homer Site, resulting in the issuance of a report in October 1995.

241. From October 1985 through April of 1986, E.C. Jordan performed a Task 2 study of the Cortland-Homer Site, and a Task 2 report was generated in July of 1987.

242. In May 1987, E.C. Jordan commenced a Task 3 “Expanded Problem Definition Program” at the Cortland-Homer Site, resulting in the issuance of a report in May of 1989.

243. In March of 1991, the results of the Task 1 through 3 investigations were consolidated into a summary document entitled “Summary of Site Investigations;” that report was submitted to the DEC.

244. In May 1991, E.C. Jordan completed a Task 4 “Risk Assessment” at the site.

245. In 1992, NYSEG, through its consultant Remediation Technologies, Inc., performed an evaluation of remedial options for the Cortland-Homer Site.

246. In the early 1990s, NYSEG hired Groundwater Technology, Inc. to review its historical investigative work done at the

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Cortland-Homer Site and to refashion its presentation into an acceptable RI/FS format. This reformatted “Summary Document” was completed in March 1993 and submitted to the DEC.

247. In August 1999, NYSEG, through its consultant Stearns & Wheeler, Inc., performed a Supplemental Remedial Investigation (“SRI”) at the Cortland-Homer Site. The Work Plan for the SRI was finalized in October 1999.

248. From August 7 through August 23, 2000, NYSEG performed a storm drain construction IRM adjacent to the Cortland-Homer Site. The IRM was performed in conjunction with the New York State Department of Transportation’s (“DOT”) New York State Route 11 reconstruction and preservation project. In carrying out the IRM, NYSEG removed 305.56 tons of impacted soil and disposed of it in the Seneca Meadow Industrial Solid Waste Landfill in Waterloo, New York. A final engineering report concerning that IRM was submitted to and approved by the DEC in March 2002.

249. On October 8, 2000, in response to the DEC’s comments regarding the SRI Report, NYSEG prepared an SRI Work Plan Addendum, calling for a second phase of the SRI.

250. In April 2001, as part of the SRI investigation, NYSEG, through its consultant Stearns & Wheeler, Inc., prepared a historical summary of the Cortland-Homer Site.

251. NYSEG later conducted a utility reconstruction project at Cortland-Homer in 2002; that project was also denominated as an IRM. The IRM was performed in response to DOT road construction plan that was to result in excavation of coal tar-impacted soils. NYSEG undertook that work pursuant to an IRM work plan due to the potential for human exposure to hazardous substances as a result of the road work.

252. In March 2003, NYSEG, through its consultant Stearns & Wheeler, Inc., prepared a Revised SRI Report that was submitted to the DEC. After an additional round of comments, the SRI Report was approved by the DEC and finalized in December 2003.

253. On April 9, 2004, NYSEG, through its consultant URS Corporation, completed an FS Report for the Cortland-Homer Site.

254. In February 2005, the DEC issued a PRAP for the OU-2 portion of the Cortland-Homer Site.

255. In March 2005, the DEC issued a ROD for OU-2 of the Cortland-Homer Site. The remedy selected by the DEC in the ROD included removal and off-site disposal of thirty-seven hundred cubic yards of sediments contaminated with PAHs from the West Branch of the Tioughnioga River and

in situ

stabilization (“ISS”) of subsurface impacted soil and NAPL in the downgradient area to a depth of below ground surface.

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256. In May 2006, NYSEG completed a Remedial Design for OU-2 of the Cortland-Homer Site.

257. NYSEG and the DEC chose to consider implementing a remedy at OU-2 before completing the OU-1 remedy, in light of I.D. Booth’s ownership of the building, despite the fact that this sequence was not generally considered as optimum from a technical perspective.

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258. In February 2007, the DEC issued a PRAP for the OU-1 portion of the Cortland-Homer Site.

258. In March 2007, the DEC issued its ROD for OU-1 of the Cortland-Homer Site. The remedy selected by the DEC for OU-1 entailed demolition of the southern portion of the Booth building, as necessary to enable excavation of contaminated soils, and excavation and removal of MGP waste, NAPL and contaminated soils, estimated to include 44,000 cubic yards, to a depth of twenty-four feet below ground surface, as well as evaluation of soil vapor intrusion in the remaining portion of the building.

260. On October 20, 2007, NYSEG submitted to the DEC a 50% Remedial Design for OU-1 of the Cortland-Homer Site.

261. In January of 2008, NYSEG, through its consultant Earth Tech Northeast, prepared a Utility Relocation Feasibility Study for the Cortland-Homer Site.

262. In February 2008, Earth Tech Northeast, on behalf of NYSEG, finalized an Internal Draft Remedial Action Design 75% Submittal for OU-1. The Remedial Design was 100% completed in March 2008.

263. In August of 2009 NYSEG, through its consultant AECOM, prepared a Proposed ROD Amendment for OU-1 of the Cortland-Homer Site.

264. A Focused Feasibility Study of the Cortland-Homer Site was also prepared in August of 2009.

265. Construction to implement the selected remedy at OU-1, earlier scheduled to commence in the Spring of 2010, has been postponed until at least 2012.

266. The delay in NYSEG’s ability to acquire the portion of the building necessary to remediate OU-1, caused by the protracted negotiations with I.D. Booth, led to corresponding delay in the issuance of a PRAP for the site.

267. Source excavation was considered to be the preferred option for remediation for OU-1 of the Cortland-Homer Site, since it represented a more permanent remedy. The delay caused by I.D. Booth’s reluctance to sell the building was a significant obstacle in implementing source excavation at the Site.

268. The delay caused by I.D. Booth’s reluctance to sell the Booth building in implementing the remedy at the Cortland-Homer Site has exacerbated the contamination at the site, permitting continued migration of coal tar and other hazardous MPG waste.

269. NYSEG incurred a total of $2,615,005.90 in response costs which are now claimed in this action in connection with the Cortland-Homer Site between 1994 and 2009.

3.

Dansville

a.

Ownership and Operation

270. The Dansville Site is comprised of approximately 2.25 acres of land located at 50 Ossian Street in the Village of Dansville, Livingston County, New York.

271. From 1861 until 1895, the Dansville Gas Light Company operated the Dansville MGP facility.

272. Sometime between 1895 and 1899, the Dansville Gas Light Company and the Dansville Gas & Electric Light Company merged to form the Dansville Gas

&

Electric Company.

273. The Dansville Gas

&

Electric Company owned and operated the Dansville MGP until 1924.

274. On May 5, 1924, New York Central Electric Corporation acquired the franchises, works and systems of the Dansville Gas

&

Electric Company.

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275. On December 31, 1936, New York Central Electric Corporation was acquired by NYSEG.

276. The Dansville MGP facility was built in 1861, and operated initially from then until 1921. The plant was placed on standby in 1921 when natural gas became available, but resumed manufactured gas production from 1926 until in or about January of 1930.

277. During the entire time of its operation approximately 267 million cubic feet of manufactured gas was produced at the facility. Between 1922 and the close of operations in or about 1930, 79.6 million cubic feet of gas was produced there. 15.3 million cubic feet of gas was produced at the facility after AGECO’s domination of New York Central Electric Corporation began on May 1,1929.

b.

Investigation and Remediation

278. The Dansville Site is divided into two operable units. OU-1 consists of the soil lying above and below the groundwater table within a portion of the site. OU-2 consists of all the remaining on-site soil, groundwater for the entire Dansville Site, and soil and groundwater in the areas of off-site migration.

279. On April 20, 1986, TRC Environmental Consultants, Inc. (“TRC”), under contract with NYSEG, initiated an investigation of the Dansville Site.

280. TRC conducted Task 2 field work at the Dansville Site between July 28, 1986 and June 10,1987.

281. On June 27, 1989, TRC, under contract with NYSEG, commenced a Task 3 investigation at the Dansville Site. A report concerning that investigation was prepared in June of 1990.

282. TRC, under contract with NY-SEG, performed a Task 4 assessment at the Dansville Site; that assessment was completed in May 1991.

283. Between 1991 and 2003, NYSEG monitored groundwater at the Dansville Site. There is indication that that groundwater sampling program addressed chlorinated solvents potentially attributable to a nearby dry cleaning business. It is clear, however, that the primary thrust of that program was to study the migration of MGP waste. Since the court has not been provided with any basis for apportioning the groundwater monitoring expenses between the COCs associated with the two potential sources of contamination, I have not discounted the amount now sought by NYSEG for remedial activity at the site on this basis.

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284. In November 2003, NYSEG submitted to the DEC a Final Work Plan for an SRI in connection with the Dansville Site.

285. In January 2006, NYSEG, through its consultant Ish, Inc., finalized an SRI Report for OU-1 of the Dansville Site.

286. In May of 2006, NYSEG, through its consultant Ish, Inc., finalized an SRI Report for OU-2 of the Dansville Site.

287. In October 2007, NYSEG, through its consultant Ish, Inc., finalized an FS and Addendum for OU-1 of the Dansville Site.

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The DEC approved the FS for OU-1 on October 31, 2007.

288. In November of 2007, the DEC issued a PRAP for OU-1 of the Dansville Site.

289. In March 2008, the DEC issued a ROD for OU-1 of the Dansville Site. The remedy selected by the DEC called for demolition of the southern portion of an on-site building as necessary to enable the excavation of contaminated soils, and the excavation of contaminated soils to an estimated depth of sixteen feet below the ground surface.

290. In September of 2008, NYSEG, through its consultant Ish, Inc., prepared a Final Work Plan for Pre-Design Investigation for OU-1 of the Dansville Site.

291. On July 2, 2009, NYSEG submitted a Pre-Design Investigation Report for OU-1 of the Dansville Site to the DEC. The DEC approved the Pre-Design Investigation Report for OU-1 on July 2, 2009.

292. On October 1, 2009, NYSEG submitted a 50% Remedial Design for OU-1 to the DEC.

293. NYSEG incurred a total of $864,961.26 in response costs which are now claimed in this action at the Dansville Site between 1996 and 2009.

4.

Elmirar-Madison Avenue

a.

Oumership and Operation

294. The Elmira Site is situated on an approximately six-acre parcel located in the City of Elmira, Chemung County, New York, comprised of three parcels acquired at different times. The Elmira Site is bounded by East Fifth Street to the north and northeast, East Clinton Street to the south, and Madison Avenue to the west.

295. In 1884, the Elmira Gas Light Company acquired tract number 1 of the Elmira Site from numerous members of the Arnot family.

296. The Elmira Gas Light & Illuminating Company acquired tract number 2 of the Elmira Site from Dugold Graham in 1892.

297. On July 3,1893, the Elmira Gas & Illuminating Company acquired the property, rights and franchises of the Elmira Gas Light Company. Accordingly, as of July 1893, that entity owned tracts 1 and 2 of the site.

298. On May 25, 1900, the Elmira Gas

&

Illuminating Company conveyed its property, rights and franchises to the Elmira Water, Light Company. On May 26, 1900, the Elmira Water, Light Company changed its name to the Elmira Water, Light

&

Railroad Company. Accordingly, as of May 1900, the Elmira Water, Light & Railroad Company owned tracts 1 and 2.

299. In 1920, the Elmira Water, Light & Railroad Company acquired tract number 3 of the Elmira Site from Arnot Realty Corp. As of 1920, the Elmira Water, Light & Railroad Company therefore owned tracts 1 through 3 of the site.

300. On April 27, 1932, the Elmira Water, Light & Railroad Company changed its name to the Elmira Light, Heat & Power Corporation. As of 1920, that corporation therefore owned tracts 1 through 3.

301. On December 29,1936, the Elmira Light, Heat & Power Corporation merged into NYSEG.

302. In 1977, NYSEG sold the western portion of the Elmira Site, including all existing buildings, to I.D. Booth.

303. When purchasing the property I.D. Booth did not perform a title search, interview past owners, obtain an appraisal, review photographs of the site, or even walk or survey the property to be purchased.

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304. Prior to purchasing the Elmira Site I.D. Booth was not aware of the existence of hazardous substance or other contaminants on the premises, including coal tar.

305. I.D. Booth used the Elmira Site as a “heavy hardware store” selling nails, horseshoes, pipes, and fittings, in addition to plumbing, heating, and electrical supplies.

306. NYSEG retained ownership of the northeastern portion of the Elmira Site, and continues to operate an electric substation in that area.

307. The portion of the Elmira Site purchased by I.D. Booth is contaminated with MGP waste.

308. In the mid-1980’s, I.D. Booth was notified by NYSEG that it would conduct an investigation into the possible presence of potentially hazardous substances at the Elmira Site, and in that timeframe became aware of the presence of coal tar on the property.

309. Since that notification I.D. Booth has cooperated with NYSEG in connection with its investigation and has provided access to the property for that purpose.

310. In the late 1980s, and continuing through the 1990s, discussions occurred between NYSEG and I.D. Booth concerning a trade between the two companies of portions of the Elmira Site in order to facilitate NYSEG’s remediation efforts.

311. In 2003, I.D. Booth conveyed the western portion of the Elmira Site back to NYSEG for $225,000. Specifically, in that transaction I.D. Booth sold NYSEG approximately 2.9 acres, which included “the former MGP site, the large warehouse building and the smaller maintenance shop.”

312. As part of this transaction, NY-SEG paid I.D. Booth $17,000 for moving expenses and $6,000 for yard work it had done “to try to fix the parking lot problems which resulted from NYSEG’s restoration after the PCB remediation”, and I.D. Booth retained the right to lease the building and land as well as the right to purchase the land back after remediation. This portion of the Elmira Site has MGP residual impacts.

313. In or around April 2008, NYSEG offered to purchase the Judson Street Extension portion of the site back from I.D. Booth for $25,000. NYSEG proposed that Booth sell back the entire parcel or, in the alternative, just the eastern portion.

314. I.D. Booth did not accept the offer, and currently owns the Judson Street Extension portion of the Elmira Site.

315. A portion of the Elmira MGP Site owned by I.D. Booth contains contaminants generated by the MGP operations at the Site. NYSEG’s investigation and remediation of the Elmira MGP Site will include work at the property owned by I.D. Booth.

316. The Elmira MGP facility operated between 1869 until 1914, and later resumed operation in 1922, producing gas through 1931.

21

Until 1915, coal gas was manufactured at the Elmira MGP Site by baking coal in a dry retort oven. When

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production was restarted at the facility, the carbureted water gas method of gas production was employed.

317. During the time of its operation approximately 4,964 million cubic feet of gas was produced at the Elmira MGP facility. Between 1922 and the close of operations in 1931, 3,743.1 million cubic feet of gas was produced at the plant. Approximately 864.8 million cubic feet of gas was produced at the facility following commencement of AGECO’s domination over the plant’s operating utility in May 1, 1929.

b.

Investigation and Remediation

318. TRC Environmental Consultants, Inc. (“TRC”), completed Task 1 of its four-part investigation of the Elmira Site for NYSEG in November 1985, and generated a report of that preliminary site evaluation on March 21,1986.

319. A Task 2 Report was submitted to NYSEG by TRC on June 18,1987.

320. Between 1986 and 1989, a Task 3 field investigation was conducted at the Elmira Site, a report of which was provided to NYSEG in July of 1990.

321. In August 1990, TRC presented NYSEG with a Task 4 Report concerning the Elmira Site.

322. In 2003 and 2004, NYSEG completed an IRM at the Elmira Site, consisting of the removal and disposal of the contents and foundations of former gasholders. The Work Plan for that project was approved by the DEC. That IRM was performed to address the threat that the holder foundations, which are bulk storage containers, posed a threat of release of the coal tar contained within them through leakage.

323. NYSEG undertook another IRM at the Elmira Site in 2003. That IRM involved demolition of a former gas house located at the site.

324. During the course of performing the 2003 gas house demolition IRM, NY-SEG discovered the presence of purifier waste located at the surface of the ground and on an adjacent property owner’s property, creating a threat of actual or potential exposure to nearby human populations.

325. In 2004, NYSEG undertook an IRM that involved excavation of the purifier wastes discovered along the southern boundary of the Elmira Site during performance of the 2003 IRM. The SRI Work Plan for that IRM was approved by the DEC on August 6, 2003.

326. In January 2006, NYSEG received the combined Final Engineering Report for the gashouse and gasholder IRMs.

327. Beginning in 2003, NYSEG, through its consultant Blasland, Bouck & Lee, performed an SRI concerning the Elmira Site. In February 2007, NYSEG submitted the Final SRI report to the DEC, which approved the report on February 28, 2007.

328. In January 2008, NYSEG submitted an FS for the Elmira Site to the DEC. The DEC approved the FS on April 8, 2008.

329. The DEC issued a PRAP for the Elmira Site in March 2008.

330. The DEC’S ROD for the Elmira Site was published in March 2008.

331. The selected remedy at the Elmira Site was the excavation of an oil and tar separator, removal of a concrete pipe, excavation and removal of MGP tar impacted soil,

in situ

solidification/stabilization of deeper tar impacted oil; oxygen enhancement of groundwater, and passive coal tar recovery.

332. In August 2008, the DEC approved a final Remedial Design Work Plan for the Elmira Site.

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333. In February 2010, NYSEG submitted a Pre-Design Investigation Report (“PDI”) regarding the Elmira Site to the DEC. The PDI contains the observation that it was “required to further define the extent of heavily impacted soil that will require excavation and/or ISS treatment.”

334. The DEC approved the PDI on February 25, 2010.

335. NYSEG incurred a total of $2,986,631.15 in response costs which are now claimed in this action at the ElmiraMadison Avenue Site between 1994 and 2009.

5.

Geneva-Border City

a.

Ownership and Operation

336. The Geneva-Border City Site, which is currently owned by NYSEG, occupies approximately 15 acres of a 100-acre tract of land in Border City, Seneca County, New York.

337. The Geneva-Border City Site is divided into two areas — the Main Site and the Eastern Waste Disposal Area.

338. The Geneva-Border City MGP facility began operating in or about 1901, and was owned at that time by Empire Coke Company.

339. In November 1920, Empire Gas & Electric Company purchased Empire Coke Company.

340. On December 31, 1936, Empire Gas & Electric Company merged into NY-SEG.

341. The Geneva-Border City MGP facility produced manufactured gas from 1901 until 1934. During the time of its operation approximately 27,180 million cubic feet of gas was produced at the facility. Between 1922 and the cessation of production in 1934,17,997 million cubic feet of gas was produced at the plant. 8,087 million cubic feet of gas was produced at the facility after AGECO’s dominance of Empire Gas & Electric Company began on May 1,1929.

b.

Investigation and Remediation

342. In 1985 and 1986, TRC Environmental Consultants, Inc. (“TRC”), performed a Task 1 investigation at the Geneva-Border City Site.

343. TRC began Task 2 work at the site in January of 1986.

344. In early 1986, a sewer line was excavated at or near the Geneva-Border City Site. In the course of this work, NY-SEG performed soil testing and identified coal tar in two locations.

345. From December 15 through 17, 1987, TRC performed a Task 3 investigation at the Geneva-Border City Site.

346. That report was followed in 1989 by the preparation by TRC of a Task 4 report regarding the site.

347. In 1990, Treatek, Inc. conducted a demonstration biotreatment pilot at the Geneva-Border City Site.

348. In January and February of 1993, NYSEG, through its consultant Blasland, Bouck & Lee, conducted a focused feasibility investigation at the Geneva-Border City Site.

349. In July 1996, a crush and screen demonstration project work plan was prepared for the site.

350. Two IRMs have been undertaken at the Geneva-Border City Site.

22

In 1999, an IRM was performed to address coal tar uncovered in the course of a paving project. That work was properly

*463

performed as an IRM since the project required disturbance of a subsurface containing coal tar.

351. Beginning in May 2004, NYSEG performed a second IRM to excavate and dispose of coal tar that had migrated from a tar well to the surface at the westernmost portion of the Geneva-Border City Site. That IRM addressed coal tar in the soil around the pit, which presented a high risk for human exposure at the site. While Dr. Neil Shifrin, FirstEnergy’s environmental expert, testified that this work was only partially qualified for cost recovery, because in his view the “deeper tar” that was removed should have been left for a full remediation, he acknowledged that removing only a top level of shallow tar could cause the remaining tar simply to rise to the surface in hot weather.

352. Removal of the former tar pit and associated soil resulted in that area of Geneva-Border City Site getting a “no further action” determination in the later-issued ROD.

353. A Revised RI Report was completed in connection with Geneva-Border City in July 2007.

354. In December 2008, NYSEG submitted an FS for the Geneva-Border City Site to the DEC.

355. On February 27, 2009, the DEC issued a PRAP for the Geneva-Border City Site.

356. In March 2009, the DEC issued its ROD for the Geneva-Border City Site. The remedy prescribed in the ROD includes removal and off-site treatment and disposal of MGP contaminated soils, removal and off-site disposal of a sub-surface vault and its contents as well as several intact purifier waste structures, and groundwater management.

357. NYSEG and the DEC have agreed that because the Geneva-Border City Site is not a high priority, remedial design for implementation of the prescribed remedy will not be performed for several years. This lowered prioritization is due to the fact that the prior tar pit IRM performed at the site in all likelihood removed the main concern area for the site, and because NYSEG owns and controls the site.

358. NYSEG incurred a total of $2,650,533.93 in response costs which are now claimed in this action at the Geneva-Border Site between 1994 and 2009.

6.

Goshen

a.

Ownership and Operation

359. The Goshen MGP Site consists of a one acre parcel located on West Main Street in the Village of Goshen.

360. Sometime prior to 1905, A. Van Derwerken Water Gas Works, the prior owner of the facility, conveyed the Goshen Site to the Goshen Gas Light Company.

361. In approximately 1923, ownership of the site was transferred to the Goshen Illuminating Company.

362. On August 9, 1928, Federal-New York Company, Inc. acquired the franchises, works, and systems of Goshen Illuminating Company.

363. On March 14, 1932, NYSEG acquired the assets owned by Federal-New York Company, Inc., including the Goshen MGP, at a foreclosure sale.

364. Sometime between 1885 and 1889, water gas operations began at the Goshen MGP. By 1923, the Goshen MGP had transitioned to a coal carbonization process.

365. By 1948, the Goshen plant had been converted to use in connection with the distribution of natural gas.

366. The Goshen MGP facility operated beginning from sometime between 1885

*464

and 1889 and ending in 1938.

23

During the time of its operation approximately 321.9 million cubic feet of gas was produced at the Goshen MGP Site. Between 1922 and the close of operations in 1938, 188.0 million cubic feet of gas was produced at the facility. From the time of AGECO’s dominance over Federal-New York Company, Inc., which began on or prior to December 31, 1929, until cessation of operations, a total of 106.1 million cubic feet of gas was produced there.

b.

Investigation and Remediation

367. In 1990, NYSEG, through its consultant Engineering Science, began a Site Screening and Priority Setting System (SSPS) at the Goshen Site.

368. In 1992 and 1993, NYSEG, through its consultant Blasland, Bouck

&

Lee, Inc., conducted a Task 2 investigation at the Goshen Site.

369. In 2001, NYSEG, through its consultant Blasland, Bouck & Lee, Inc., submitted to the DEC a Site Characterization and Data Summary that included a compilation of the data gathered during the 1991 and 1993 investigations of the Goshen Site.

370. In 2008, NYSEG, through its consultant Arcadis of New York, Inc., performed a soil vapor intrusion evaluation of NYSEG’s service center building located at the Goshen Site.

371. In August of 2008, NYSEG submitted a Remedial Investigation Work Plan for the Goshen Site to the DEC. The DEC approved the work plan in September 2008. NYSEG commenced the RI work in 2008, and continued that work into 2009. NYSEG provided the DEC with an RI Data Summary on June 18, 2009.

372. NYSEG is currently in the process of preparing an FS for the Goshen Site.

373. NYSEG incurred a total of $474,406.70 in response costs which are now claimed in this action at the Goshen Site between 1995 and 2009.

7.

Granville

a.

Ownership and Operation

374. The Granville Site is a sixteen-acre tract of land located one-quarter mile north of the Village of Granville, between the Mettowee River and an abandoned railroad right-of-way, approximately 200 feet west of Route 149.

375. Four areas are under investigation at the Granville Site, including but not limited to the former MGP facility as well as a 1,000-foot reach of the Mettowee River.

376. From 1903 until 1925, Granville Electric

&

Gas Company owned and operated the Granville MGP facility.

377. Records of the AGECO system show that it acquired 1,404 shares of capital stock in Granville Electric

&

Gas Company from Public Utilities Investing in December 1922.

378. On March 16, 1925, Granville Electric & Gas Company changed its name to Eastern New York Electric & Gas Company, Inc.

379. On December 31, 1926, Eastern New York Electric

&

Gas Company, Inc. merged into Plattsburgh Gas & Electric Company which subsequently adopted the name Eastern New York Electric & Gas Company, Inc.

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380. On December 31, 1928, Eastern New York Electric & Gas Company, Inc. merged into NYSEG.

381. The Granville MGP facility produced manufactured gas from approximately 1898 to 1946. During the time of its operation approximately 329.7 million cubic feet of gas was produced at the Granville MGP facility. Between 1922 and 1940, 160.1 million cubic feet of gas was produced at the plant. From the earliest point that Granville became a part of the AGECO System in December of 1922 through 1940 a total of 153.4 million cubic feet of gas was produced there.

b.

Investigation and Remediation

382. In October 1990, NYSEG, through its consultant Engineering Science, began instituting a five-part Site Screening and Priority-Setting System (SSPS) at the Granville Site. The SSPS Report was finalized in January 1992.

383. During 1993, NYSEG, through its consultant Blasland, Bouck

&

Lee, Inc., performed a Task 2 RI at the Granville Site.

384. In February of 2003, NYSEG, through its consultant Blasland, Bouck & Lee, Inc., submitted to the DEC a Site Characterization and Data Summary that included a compilation of the data gathered during the 1990 and 1993 investigations of the Granville Site.

385. On August 14, 2008, the DEC approved a Remedial Investigation Work Plan prepared by ENSR/AECOM, at the direction of NYSEG, related to the Gran-ville Site. An addendum to the Mettowee River Test Boring Work Plan was approved by the DEC on September 14, 2009.

386. The RI fieldwork at the Granville Site was completed in 2009. A draft report of the RI results was submitted to the DEC in the Fall of 2010.

387. NYSEG incurred a total of $709,209.51 in response costs which are now claimed in this action at the Granville Site between 1995 and 2009.

8.

Ithaca

— Court

Street

a.

Ownership and Operation

386. The Ithaca-Court Street Site consists principally of an approximately two-acre tract of land located in the City of Ithaca, Tompkins County. The site also includes a subsurface tar conduit system beginning at the corner of North Plain and Court Streets and continuing down Court Street to the former Ithaca Cayuga Inlet MGP Site.

389. The system of conduits, including wooden ducts and clay pipes, was used to transfer coal tar from the Ithaca-Court Street MGP to the Ithaca Cayuga Inlet Coal Tar Site.

24

390. The original Ithaca-Court Street Site comprises the western half of the block bounded by the southern edge of the sidewalk along Esty Street, the eastern edge of the sidewalk along North Plain Street, the northern edge of the sidewalk along West Court Street, and North Albany Street.

391. The Ithaca Gas Light Company and its corporate successors, including NYSEG, owned and operated the Ithaca-Court Street MGP Site during the entire period of its manufactured gas production operations.

392. In 1964, NYSEG sold the Court Street property to the Ithaca City School District (“ICSD”).

*466

393. The ICSD rented space in the buildings on the Ithaca-Court Street Site to the Board of Cooperative Educational Services (“BOCES”) from 1966 to 1972 for use in conducting industrial workshops.

394. From 1969 through 1978, the ICSD used the Markles Flats Building, the former gas production building, to house an alternative high school at the Ithaca-Court Street site.

395. Since 1978, the ICSD has rented space in the Markles Flats Building on the Ithaca-Court Street Site to various non-school tenants and has utilized one room in the building for storage.

396. In the early 1970s, the City of Ithaca paved a major portion of the Ithaca-Court Street Site for use as a playground and installed an above-ground swimming pool on the site.

397. Since 1980, the ICSD has used the remaining buildings on the Ithaca-Court Street Site for storage, offices, workshops and vehicle maintenance facilities.

398. The Ithaca-Court Street MGP facility manufactured gas from 1853 until 1927. The plant operated as a coal carbonization facility until 1911, at which time a water gas system was added.

399. During the entire time of its operation the Ithaca-Court Street plant produced a total of 2,165.6 million cubic feet of gas. Between 1922 and the close of operations in 1927, 659.2 million cubic feet of gas was produced at the facility.

b.

Investigation and Remediation

400. OU-1 of the Ithaca-Court Street Site initially consisted only of the site property, extending to the surrounding sidewalks, and the wooden ducts. OU-1 of the Ithaca-Court Street Site has since been expanded, and now includes both the former MGP property and the wooden duct that runs beneath West Court Street.

401. OU-2 of the Ithaca-Court Street Site was initially defined as encompassing any remnants of the wooden duct that remained west of Meadow Street, as well as all coal tar (and associated soil and groundwater) that migrated from the Ithaca-Court Street Site and the wooden duct. OU-2 of the Ithaca-Court Street Site now includes wooden ducts and clay tile pipes that were not previously addressed and any properties that may have been impacted by the migration of MGP material from OU-1.

402. There are four subsurface conduits — two wooden ducts and two clay pipes — associated with the Ithaca-Court Street Site.

403. In April 1986, E.C. Jordan prepared a Task 1 Investigation Report for NYSEG regarding the Ithaca-Court Street Site.

404. In December of 1986, E.C. Jordan submitted a Task 6 Work Plan to NYSEG.

405. In February of 1987, E.C. Jordan produced a Task 2 Report for the Ithaca-Court Street Site.

406. In March of 1988, a Task 3 Report was produced for the Ithaca-Court Street Site.

407. In March of 1990, E.C. Jordan prepared a Task 4 Report for the Ithaca-Court Street Site.

408. In October 1990, E.C. Jordan prepared a Work Plan for the Ithaca-Court Street Site for removal of coal tar waste from underground storage vessels at the former MGP facility as an IRM. That proposed IRM was not undertaken.

409. On August 30,1993, OHM Remediation Services Corp. submitted to NYSEG a Work Plan for an IRM at the Ithaca-Court Street Site, consisting of underground vessel investigation and remedia

*467

tion. That proposed IRM similarly was not undertaken.

410. In 1995, NYSEG became involved in a New York DOT construction project near the Ithaca-Court Street Site that had the potential to impact coal tar contaminated soils. The potential impact upon contaminated soils was an unexpected event, which NYSEG learned of just days before commencement of the project. NYSEG’s work in connection with the project included excavation of soils and removal of a portion of a wooden duct for the DOT. NYSEG is not seeking cost recovery with respect to this project.

411. In March of 2000, as a DEC-approved IRM, NYSEG excavated coal tar and contaminated soil and water associated with two tar wells in close proximity to the Markles Flats Building at the Ithaca-Court Street Site. In the process NYSEG removed 1,900 gallons of coal tar from the two underground storage tanks and excavated a buried scrubber, tar separator and associated piping encountered during the process. As part of the project NYSEG also excavated an additional 225 tons of solid material and captured 26,916 gallons of water and liquid tar classified as hazardous waste under the Resource Conservation and Recovery Act (“RCRA”), 42 U.S.C. § 6901

et seq.

412. An RI was completed in connection with the Ithaca-Court Street Site in October of 2002.

413. In 2002, NYSEG replaced iron natural gas main piping beneath Park Place and North Plain Street in the City of Ithaca.

414. In April 2003, NYSEG, through its consultant MWH Americas, Inc., submitted an RI Report for OU-1 of the Ithaca-Court Street Site to the DEC.

415. In May of 2003, NYSEG, through its consultant MWH Americas, Inc., submitted a Focused FS Report for OU-1 of the Ithaca-Court Street Site to the DEC.

416. In June of 2003, the DEC issued a PRAP for OU-1 of the Ithaca-Court Street Site.

417. In September 2003, the DEC issued a ROD for OU-1 of the Ithaca-Court Street Site. The remedy selected by the DEC included excavation of the top two feet of soil from the entire site, and excavation and off-site treatment or disposal of all subsurface soil to a depth of eight feet containing unacceptable levels of PAHs or visibly impacted by coal tar, and removal of the subsurface wooden duct along West Court Street from the former plant site to Meadow Street.

418. In April 2007, a Final Engineering Report for OU-1 of the Ithaca-Court Street Site was prepared.

419. A Remedial Design (“RD”) Work Plan for OU-1 was finalized in July of 2007. The RD describes the removal and disposal of contaminated soils and sub-grade structures associated with the Ithaca-Court Street former MGP, as well as containment measures around the Markles Flats Building. The DEC approved the RD Work Plan on November 6, 2007.

420. On September 12, 2008, the DEC approved a Sediment and Erosion Control Plan for Markles Flats.

421. On or about September 15, 2008, construction of the OU-1 remedial design commenced.

422. Hand-in-hand with removal of the coal tar ducts associated with OU-1, NY-SEG replaced sewer piping owned by the City of Ithaca. The costs associated with the replacement of that piping were paid by the City, and NYSEG does not seek recovery of the cost directly attributed to the replacement of the sewer piping.

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423. In August 2002, NYSEG, through its consultant MWH Americas, Inc., prepared an Interim Draft Supplemental RI Report for OU-2 of the Ithaca-Court Street Site.

424. In September of 2009, NYSEG, through its consultant AECOM, prepared an RI Work Plan for OU-2.

425. A revised RI Report was submitted by the DEC in August of 2010, and is awaiting approval.

426. Investigation work is continuing with respect to OU-2 of the Ithaca-Court Street Site, contemporaneous with commencement of an FS that was estimated to be completed by August 30, 2010.

427. In October 2010, NYSEG finalized a Work Plan for an IRM to remove the wooden ducts on West Court Street between Meadow and Fulton Streets.

428. NYSEG incurred a total of $29,048,258.72 in response costs which are now claimed in this action at the Ithaca-Court Street Site between 1995 and 2009.

9.

Ithaca

— First

Street

a.

Ownership and Operation

429. The Ithaca-First Street Site consists of an approximately three-acre area, situated on an 10.74-acre parcel, located between Third Street and Cascadilla Creek in the City of Ithaca, Tompkins County, New York.

430. The Ithaca-First Street Site was acquired by NYSEG’s predecessor, Ithaca Gas & Electric Corporation, in or prior to 1927.

431. In 1959, the City of Ithaca purchased the Ithaca-First Street Site from NYSEG to expand and construct a waste-water treatment facility.

432. In connection with the City of Ithaca’s purchase, NYSEG leased a portion of the Ithaca-First Street Site back from the City from 1959 through 1969. The deed evidencing that transaction lists “a total consideration of $88,850, $16,000 of which is to be credited to [the City] and represents rental by [NYSEG] of a portion of the property to be conveyed to [City] for a period of ten years.”

433. The Ithaca-First Street Site is currently owned by three municipalities— the City of Ithaca, the Town of Ithaca, and the Town of Dryden, New York.

434. The Ithaca-First Street MGP began gas production in 1927, when the Ithaca-Court Street MGP facility closed, and operated until 1932 when it was placed on standby status. During the time of its operation between 1927 and 1932 a total of 998.3 million cubic feet of gas was produced at the Ithaca-First Street plant.

b.

Investigation and Remedial

435. In October 1985, E.C. Jordan Co. began a Task 1 investigation of the Ithaca-First Street Site. A report of that investigation was issued in February of 1986.

436. Beginning in December 1985, E.C. Jordan Co. performed a Task 2 initial field investigation at the Ithaca-First Street Site.

437. In December 1987 and January of 1988, E.C. Jordan Co. performed a Task 2 Field Investigation Program Addendum at the Ithaca-First Street Site.

438. In April of 1990, NYSEG, through its consultant Remediation Technologies, Inc., prepared an evaluation entitled “MGP Site Groundwater POTW Co-Treatment Evaluation” with respect to the Ithaca-First Street Site.

439. In August 1990, E.C. Jordan Co. completed a Task 4 Risk Assessment in connection with the Ithaca-First Street Site.

440. Between August 3, 1998 and October 27, 1998, NYSEG performed a Stock

*469

piled Coal Tar Contaminated Soil Removal and Disposal IRM at the Ithaca-First Street Site. That IRM entailed the removal and disposal of 12,610 tons of stockpiled coal tar soil and debris. The 1998 IRM was performed pursuant to a Work Plan approved by the DEC on July 31, 1998.

441. FirstEnergy challenges the construction of a nature trail as part of NY-SEG’s remedial efforts at the Ithaca-First Street Site. NYSEG undertook this work because it learned that the City of Ithaca was planning a nature trail, and elevated PAH levels in surface soils along the proposed trail attributed to MGP contamination needed to be addressed before the City could construct the trail in that area.

442. An RI Work Plan was completed for the Ithaca-First Street Site on August 24, 2009.

443. Preparation of an RI and an FS are now both in process at the Ithaca-First Street Site. NYSEG typically would wait until after DEC approval of the RI to begin preparation of an FS; because the City of Ithaca contemplates construction on the site, however, NYSEG is undertaking the RI and FS preparation simultaneously. The DEC has indicated to NY-SEG that it is satisfied with the scope of NYSEG’s investigation.

444. NYSEG incurred a total of $41,641.43 in response costs which are now claimed in this action at the Ithaca-First Street Site between 1994 and 2009.

10.

Mechanicville

— Central

Avenue

a.

Ownership and Operation

445. The Mechanicville MGP Site is located in the City of Mechanicville, Saratoga County, New York and covers approximately 1.8 acres.

446. The Mechanicville Site is bordered on the east by North Central Avenue (formerly the Champlain Canal), on the south by Ferris Lane, on the west by a railroad right-of-way, and on the north by the Anthony Kill River.

447. The Halfmoon Light, Heat and Power Company began gas manufacturing operations at the Mechanicville Site in 1901, and owned the facility until late 1925.

25

448. The common stock of Halfmoon Light, Heat and Power Company was acquired principally as a result of a contract executed on April 11,1924 between Mange and Hopson, for the Associated system, and William L. Howland of Mechanicville, New York.

449. On December 31, 1925, Eastern New York Electric & Gas Company, Inc. acquired the franchises, works and systems of Halfmoon Light, Heat and Power Company.

450. On December 31, 1926, Eastern New York Electric & Gas Company, Inc. merged into the Plattsburgh Gas & Electric Company, and transferred all of Eastern’s franchises, works and systems into that utility company. Plattsburgh Gas

&

Electric Company later adopted the name Eastern New York Electric & Gas Company, Inc. on April 4,1928.

451. On December 31, 1928, Eastern New York Electric & Gas Company, Inc. merged into NYSEG.

452. NYSEG currently owns the Mechanicville Site.

*470

453. The Mechanicville MGP facility produced manufactured gas from 1901 until 1954. During the time of its operation approximately 1,568.8 million cubic feet of gas was produced at the Mechanicville plant. Between 1922 and 1940, a total of 630.9 million cubic feet of gas was produced at the facility. From the earliest time, according to the proof at trial, that Mechanicville became a part of the AGE-CO system on April 11, 1924 through 1940 a total of 579.5 million cubic feet of gas was produced there.

b.

Investigation and Remediation

454. In 1981, NYSEG collected soil samples from the filter bed area and the gas relief holder foundation at the Mechanicville Site. A sample from the filter beds reflected that it exceeded the threshold for the characteristic of re-activity, indicating that the soil should be considered to be a hazardous waste.

455. In August 1986, E.C. Jordan Co. prepared a Task 1 Preliminary Site Evaluation Report with respect to the Mechanic-ville Site.

456. In December 1987, E.C. Jordan Co. prepared a Task 2 Initial Field Investigation Report concerning the Mechanic-ville MGP facility.

457. In September 1989, E.C. Jordan Co. prepared a Task 3 Report addressing the site.

458. In August 1990, E.C. Jordan Co. prepared a Task 4 Risk Assessment Report for NYSEG with respect to the Mechanicville Site.

459. The results of the four task investigations were consolidated into a summary document entitled “Investigation of the Former Coal Gasification Site at Mechanicville, New York; Phase II Remedial Investigation Report and Work Plan for Phase IIA Supplemental Remedial Investigation and Feasibility Study,” which was in the turn submitted to the DEC in June of 1992. Those investigations revealed that portions of the surface and subsurface soils at the Mechanicville Site are contaminated with PAHs, cyanide, and VOCs. In addition, they establish that the groundwater in the vicinity of the site is contaminated and that MGP contaminants are migrating into the surface waters of the Anthony Kill.

460. In February of 1993, NYSEG entered into an Order on Consent with the DEC relating to the Mechanicville Site. That Consent Order required the preparation of a supplemental RI and the submission of a report of that investigation to the DEC, together with the concurrent submission of an FS to consider remedial actions for the elimination, to “the maximum extent practicable”, of all health and environmental hazardous and potential hazards attributable to the site.

461. In December of 1993, NYSEG, through its consultant ABB Environmental Services, Inc., finalized a Phase IIA Supplemental RI and FS Report for the Mechanicville Site. The report summarized the supplemental investigation undertaken at the site between May and July 1993.

462. From October 18, 1999 through September 27, 2000, NYSEG performed an IRM at the Mechanicville Site pursuant to a Work Plan entitled “Interim Remedial Measures Work Plan” that was approved by the DEC.

463. That IRM involved 1) removal of the contents of a gas relief holder foundation; 2) removal of a filter bed; and 3) removal of all associated piping encountered during excavation. Overall, a total of 7,264.33 tons of material was removed and either thermally or chemically treated or placed in a landfill. The IRM was performed to address coal tar sheens ob

*471

served in the Anthony Kill, a river immediately adjacent to the site.

464. As part of the IRM a NAPL collection system wa,s installed on top of the bedrock along the bank of the Anthony Kill.

465. Between April 2001 and January 2003, NYSEG, through its consultant URS Corporation, investigated the extent of MGP related residuals in the bedrock and soil at the Mechanicville Site as part of an SRI.

466. During the course of the SRI, a total of 123 soil borings, eighteen surface soil samples, fifty-six subsurface soil samples, two samples of NAPL, seven sediment samples from the Anthony Kill, five sediment samples from the Hudson River near the confluence with the Anthony Kill, and ninety-two groundwater samples were collected. NYSEG also evaluated the then-current conditions in the Anthony Kill upstream (both along and downstream of the Mechanicville Site) and the impacts upon the local fish and wildlife communities.

467. A report of that SRI was submitted to the DEC and, after revisions were made, was approved in September 2004.

468. Between October 2001 and July 18, 2003, approximately 513 liters of NAPL were recovered from the Mechanicville Site.

469. In December of 2005, NYSEG, through its consultant URS Corporation, submitted a Final FS regarding the Mechanicville Site to the DEC.

470. The DEC issued a PRAP for the Mechanicville Site in February 2006.

471. In March 2006, the DEC issued its ROD for the Mechanicville Site.

472. Under the ROD, the prescribed remedy included removal and either treatment or off-site disposal of all soil to the top of bedrock containing PAH concentrations greater than five hundred parts per million or soil containing visual tar or NAPL, removal of purifier waste remaining in or near the North Central Avenue embankment, and installation of a NAPL recovery system for the bedrock.

473. Beginning in July 2008, preremediation soil sampling and analysis was undertaken at the Mechanicville Site.

474. Commencing in October of 2008, NYSEG, through its consultant Sevenson Environmental Services, Inc., excavated over 25,600 tons of material, including the relief holder foundation, below grade structures, and piping. All soil removed from the Mechanicville Site was sent to ESMI in Fort Edward, New York and thermally treated; approximately 4,787 tons of treated soil was later returned to the site as fill.

475. A long-term NAPL recovery test is currently underway to determine the extent of recovery of any NAPL presented in the fractured bedrock below the Mechanicville Site.

476. NYSEG incurred a total of $7,795,809.35 in response costs which are now claimed in this action at the Mechanic-ville Site between 1993 and 2009.

11.

Newark

a.

Ownership and Operation

477. The Newark Site is located in Newark, New York and is situated west of Route 88 between the New York State Barge Canal and the old railroad grade (north of Water Street) behind the Quality Inn Hotel.

478. The Newark Site is presently occupied by a Quality Inn hotel and a parking lot, as well as a NYSEG gas regulator building surrounded by open vegetated land.

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479. From 1899 until 1910, Newark (N.Y.) Gas Light & Fuel Company owned the Newark Site.

480. On June 24, 1910, Newark (N.Y.) Gas Light & Fuel Company merged with the New Light, Heat and Power Company of Newark, NY, the Lyons Gas Light Company, and the Palmyra Gas and Electric Company to form Wayne County Gas & Electric Company (which was incorporated on the same date).

481. On March 7, 1911, Wayne County Gas

&

Electric Company was merged into or consolidated with Geneva-Seneca Electric Company to form Central New York Gas & Electric Company.

482. On August 8, 1916, the franchises, works, and systems of Central New York Gas & Electric Company were acquired by Empire Gas

&

Electric Company.

483. On December 31, 1936, Empire Gas

&

Electric Company was merged into NYSEG.

484. From 1937 until 1974, NYSEG owned the Newark Site.

485. The Newark facility operated between 1899 and sometime prior to 1929. The plant originally produced gas utilizing the coal carbonization process, but in about 1917 was converted to a carbureted water gas manufacturing facility. During the time of its operation approximately 77.7 million cubic feet of gas was produced at the Newark MGP facility. All of that reported production occurred prior to 1922, and before the earlier of either NYSEG’s acquisition of the facility or the onset of AGECO’s dominance of Empire Gas & Electric Company on May 1,1929.

b.

Investigation and Remediation

486. In 1990, Atlantic Environmental Services, Inc. prepared a site screening report for NYSEG regarding the Newark Site.

487. On April 2 and 3, 2008, NYSEG collected indoor air and sub-slab soil vapor samples at the Quality Inn. From those samples NYSEG concluded that no vapor intrusion is occurring at the Newark Quality Inn.

488. In December of 2009, NYSEG, through its consultant Arcadis, presented the DEC with a conceptual work scope for conducting a site characterization at the Newark Site. Following revision, the Work Plan submission was approved by the DEC on May 25, 2010.

489. NYSEG incurred a total of $19,596.28 in response costs which are now claimed in this action at the Newark Site between 1997 and 2008.

12.

Norwich

a.

Ownership and Operation

490. The Norwich Site consists of approximately one acre of land located at 20 Birdsall Street, west of the intersection of Birdsall and Ross Streets.

491. By 1877 the MGP facility was operated by Norwich Gas Light Company.

492. From 1892 until 1917, Norwich Illuminating Co. and/or Norwich Light Co. owned the Norwich Site.

493. Norwich Illuminating Co. later became Norwich Gas & Electric Company. In or about May of 1907 the stock of Norwich Gas

&

Electric Company was transferred into AGECO.

494. The stock of Norwich Gas & Electric Company was acquired by Ithaca Gas

&

Electric Company, NYSEG’s predecessor, from AGECO in 1916.

495. NYSEG is the current owner of the Norwich Site.

496. The Norwich MGP facility produced gas from approximately 1863 until 1952. During the time of its operation, 1,978.5 million cubic feet of gas was pro

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duced at the Norwich MGP facility. Between 1922 and 1940, 793.6 million cubic feet of gas was produced at the plant,

b.

Investigation and Remediation

497. In the fall of 1990, NYSEG, through its consultant Engineering Science, began a five-part Site Screening and Priority-Setting System (“SSPS”) at the Norwich Site. The SSPS included a literature and records search, on-site evaluation, a site survey with mapping, sampling and analysis, and preparation of a report. The SSPS Report was finalized in September of 1991.

498. During January through April of 1992, Engineering-Science conducted a Task 2 investigation of the Norwich Site.

499. In July 1992, Engineering-Science began Task 3 work at the Norwich Site, leading ultimately to the preparation of a Task 3 Investigation Report for the site in July of 1993.

500. NYSEG conducted work at the Norwich Site from 1993 through 1997. Whether this work qualified as an IRM for purposes of cost recovery in this action is a matter of dispute between the parties. For convenience purposes, this work will be referred to as the “Norwich IRM”. NYSEG does not seek recovery of the costs associated with the Norwich IRM in this action.

501. Phase One of the Norwich IRM commenced in 1993 and ended in the last quarter of 1994, and involved excavation of the former distribution holder area and stockpiling of the soil.

502. In May 1996, Fluor Daniel GTI, Inc. prepared a Work Plan calling for the transportation of the stockpiled soils at the Norwich Site to the Geneva-Border City Site for processing by means of crushing and screening.

503. The second phase of the Norwich IRM, which was completed in September 1996, involved transporting 1,600 tons of the stockpiled material from the first phase to the Geneva-Border City Site for processing and ultimate destruction at NY-SEG’s Hickling Station in East Corning, New York.

504. The final phase of the Norwich IRM, which was completed in August 1997, involved the excavation of several source areas, including the former relief holder, the former tar well, and process piping associated with the former Norwich MGP facility and in the location of the former purifier house. Phase Three also included the excavation of the top two feet of surface soil throughout the site. In total, approximately 11,000 to 12,000 tons of soil was excavated and removed; of that amount, 6,800 tons of the soil removed was considered source material.

505. An AS/SVE system was installed on the north side of the former Aero Products building at the Norwich Site, and was activated on December 17, 1999. The system initially operated from 1999 until 2001 in order to reduce subsurface VOCs and SVOCs at the Norwich Site. Due to high continuing groundwater concentrations on the south side of the former Aero Products building, the system was enlarged and additional AS/SVE wells were installed in 2001.

506. The third phase of the IRM, which was approved by the DEC, was performed in and prior to August of 1997 due to the anticipated construction of a supermarket to be built immediately adjacent to the site and to avoid the potential for exposure of persons to contamination in the event that remediation occurred later. That phase of the IRM cost less than $2 million, and took approximately four months to accomplish.

507. In March of 2004, URS Corporation recommended to NYSEG that the AS/

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SVE system be shut down, as it was no longer providing any significant contaminant removal.

508. Beginning in October of 2004, NY-SEG, through its consultant Ish, Inc., performed an SRI of the Norwich Site.

509. During the Summer of 2006, NY-SEG demolished the former Aero Products building at the Norwich Site.

510. In November of 2007, NYSEG, through its consultant Ish, Inc., prepared an FS Report in connection with the Norwich Site.

511. In February 2008, the DEC issued a PRAP for the Norwich Site.

512. In March 2008, the DEC issued a ROD for the Norwich Site. In that ROD the DEC directed NYSEG to conduct ISS of on-site source areas and off-site soils from portions of two adjacent properties, and to remove and dispose of off-site MGP waste, coal tar, or contaminated soils meeting specified criteria. The ROD also directed the collection of NAPL and highly contaminated groundwater at off-site areas south of Front Street.

513. On February 23, 2009, NYSEG, through its consultant AECOM, submitted a revised Remedial Design Work Plan to the DEC. The DEC approved the Remedial Design Work Plan, as revised, on March 27, 2009.

514. In July 2009, NYSEG submitted a Remedial Design 50% Report to the DEC, describing the first of three phases of the Remedial Design.

515. NYSEG is currently implementing the planned remediation at Norwich.

516. NYSEG incurred a total of $1,835,874.47 in response costs which are now claimed in this action at the Norwich Site between 1993 and 2009.

13.

Oneonta

a.

Ownership and Operation

517. The Oneonta Site is a two-acre parcel located in the City of Oneonta, Otsego County, New York, and is comprised of two parcels divided by James Georgeson Avenue. The portion of the Oneonta Site west of James Georgeson Avenue, referred to as the “western plant area”, contained a majority of the former MGP buildings and operations associated with that facility. The segment of the Oneonta Site situated east of James Georgeson Avenue, referred to as the “eastern plant area”, was used primarily to house storage tanks during the final years of MGP operation.

518. The land immediately south of the Oneonta Site is known as Damaschke Field, a minor league baseball field complex that has existed since 1937. Damaschke Field is part of Neawah Park, a public city park.

519. From 1881 until 1887, the Oneonta Gas Light Company owned the Oneonta Site.

520. In 1887, the Oneonta Gas Light Company merged into Oneonta Electric Power & Light Company.

521. Prior to 1916, the stock of Oneonta Light & Power Company was held by J.G. White and Montgomery Clothier

&

Tyler.

522. In or about August of 1916, the stock of Oneonta Light & Power Company was acquired by Ithaca Gas & Electric Corporation.

523. On June 1, 1918, Ithaca Gas & Electric Corporation acquired Oneonta Light & Power Company by merger.

524. From 1918 until 1966, NYSEG owned the Oneonta Site.

525. In 1966, NYSEG sold the real property associated with the Oneonta Site

*475

to the City of Oneonta, the current owner of the property.

526. The Oneonta Site produced manufactured gas from approximately 1881 until approximately 1952. During the time of its operation the Oneonta plant produced 2,478.3 million cubic feet of gas was produced at the facility. Between 1922 and 1940, at total of 1,043 million cubic feet of gas was produced at the facility.

b.

Investigation and Remediation

527. TRC Environmental Consultants, Inc. (“TRC”), one of NYSEG’s consultants, began a Task 1 Preliminary Site Evaluation of the Oneonta Site on April 21, 1986. The results of that evaluation were set out in a report dated August 20,1986.

528. TRC began work on a Task 2 investigation of the site in August 1986.

529. In November of 1987, NYSEG, through its consultant E.C. Jordan Co., conducted a soil gas survey at the Oneonta Site.

530. TRC completed a Task 3 Report for NYSEG regarding the Oneonta Site on November 28,1989.

531. A Task 4 Risk Assessment regarding the Oneonta Site was completed by TRC in early 1990.

532. In 1990, NYSEG, through its consultant Remediation Technologies, Inc., conducted laboratory treatability testing of site soils from the Oneonta Site.

533. In July of 1991, NYSEG, through its consultant Atlantic Environmental Services, Inc., summarized for the DEC the previous studies and existing data regarding the Oneonta Site.

534. In November 1991, NYSEG, through its consultant Remediation Technologies, Inc., issued a report entitled “Evaluation of Remedial Options” regarding the Oneonta Site.

535. In 1994 or early 1995, NYSEG, through its consultant Atlantic Environmental, conducted a Supplemental Site Investigation of the Oneonta Site as an IRM. The intent of that measure was to help reduce the amount of groundwater contamination leaving the site by introducing air into the subsurface. The results of the Supplemental Site Investigation were published in a report dated January 28, 1993.

536. In March of 1995, NYSEG, through its consultant GT Engineering/Flour Daniel GTI, Inc., installed an air sparging/vapor extraction (“AS/SVE”) system at the Oneonta Site. After initial studies and tests, the system was activated in July 1997, and operated until November 2001.

537. In February 2001, in reaction to a plan by the City of Oneonta to install a new water line at the Oneonta Site as part of a Neahwa Park Improvement Project, NYSEG proposed a test pit program to the DEC to monitor and sample the soil and air around the proposed waterline installation location. The DEC approved the proposed test pit program.

538. In August 2001, NYSEG submitted a Work Plan to the DEC in connection with the Oneonta Site, proposing a source removal IRM to be conducted in October 2001. The DEC did not approve the proposed IRM Work Plan, which was then withdrawn by NYSEG.

26

*476

539. In March 2002, NYSEG submitted to the DEC a draft scope of work proposal for an SRI to be conducted at the Oneonta Site. NYSEG supplemented the March 2002 scope of work outline with an accelerated groundwater investigation at the Oneonta Site, which was completed in May-2002.

540. NYSEG, through its consultant Blasland, Bouck & Lee, Inc., submitted an SRI Work Plan regarding the Oneonta Site to the DEC in October 2002. That revised Work Plan was approved by the agency on or about October 18, 2002.

541. In November of 2004, NYSEG published a draft PS, addressing subsurface source materials, groundwater, and sediments at the Oneonta Site.

542. The DEC issued a PRAP concerning the Oneonta Site in February 2005.

543. In March 2005, the DEC issued a ROD for the Oneonta Site. The remedy prescribed under the ROD included excavation and removal of on-site soils containing tar or elevated levels of PAHs, as well as tar-contaminated sediments in the Mill Race Creek, and the construction of a biosparge system on the outside limits of the MGP site excavation area to accelerate the degradation of MGP-related contaminants in groundwater. The ROD also prescribed the drilling of a series of tar collection wells to recover tars still present in subsurface areas outside of the MGP excavation region.

544. On May 5, 2005, NYSEG submitted a Remedial Design Work Plan for the eastern plant area of the Oneonta Site to the DEC. Between May 2005 and May 2007, NYSEG implemented the portion of the remedy set forth in the ROD for soil and sediment.

545. In June 2006, the Remedial Action Design for the western plant area off-site disposal of coal tar impacted soil for the Oneonta Site was finalized. The DEC approved the Remedial Action Design on June 23, 2006.

546. In September of 2007, NYSEG, through its consultant Earth Tech, submitted a Draft Work Plan addendum to the DEC regarding installation of a permeable wall as part of the eastern plant area remediation. The DEC approved the Work Plan on November 28, 2007.

547. In December 2007, NYSEG completed a draft Remedial Action Construction Certification Report for removal and off-site disposal of coal tar impacted soil from both the eastern and western plant areas of the Oneonta Site. The report was finalized in May 2008, and was approved by the DEC on May 12, 2008.

548. NYSEG finalized a Site Management Plan for the Oneonta Site in April of 2009; that plan was approved by the DEC.

549. Remediation is substantially complete at the Oneonta Site. An AS/SVE system was constructed at the site, due to a concern that dissolved phase constituents of coal tar could threaten a public drinking water well.

550. The remediation specified in the DEC’S ROD for the Oneonta Site impacted portions of a minor league baseball facility located at the site. The ROD for the site noted that in order to eliminate or mitigate threats to human health or the environment “[m]ost of the on-site buildings [at the site] will be demolished.” The ROD specifically required removal of three buildings associated with the stadium — the souvenir booth, restroom building, and concession stand — because they were situated atop the most heavily contaminated soils and structures.

551. Because of the high cost of replacing the facility to current minor league standards, NYSEG attempted to convince

*477

the DEC to move the excavation line, without success.

552. During the course of remediation at the Oneonta Site, NYSEG demolished the designated portions of the baseball facility and later replaced them with new buildings, constructed to meet contemporary minor league standards.

553. NYSEG incurred a total of $14,664,190.45 in response costs which are now claimed in this action at the Oneonta Site between 1994 and 2009.

14.

Owego

a.

Ownership and Operation

554. The Owego Site consists principally of approximately one acre of land configured in a triangular shape and located at the intersection of Erie Street and East Main Street in Owego, New York. The site also includes portions of the nearby Susr quehanna River and a pipe outfall acting as a preferential pathway for the migration of coal tar.

555. The Owego Gas Light Company acquired the Owego Site from George W. Hollenbeck in 1856.

556. In December 1923, the Owego Gas Corporation purchased the properties and business of the Owego Gas Light Company.

557. Some shares of the Owego Gas Corporation were acquired by AGECO pri- or to May 1, 1929. Control of Owego Gas Corporation was acquired by AGECO on that date.

558. On December 31, 1939, the Owego Gas Corporation was merged into NYSEG.

559. The Owego MGP facility manufactured gas from 1856 until 1935. During the time of its operation, 481.0 million cubic feet of gas was produced at the Owego MGP facility. Between 1922 and the close of operations in 1935, a total of 209.2 million cubic feet of gas was produced at the plant. Between the time of commencement of AGECO’s domination of the Owe-go Gas Corporation on May 1, 1929, through the end of production in 1935, a total of 21.1 million cubic feet of gas was produced at the Owego MGP facility.

27

b.

Investigation and Remediation

560. OU-1 of the one-acre Owego Site is located on a triangular piece of land bordered by East Main Street to the north, the Conrail railroad tracks to the southwest, and a lumber mill to the east.

561. In September of 1986, NYSEG, through its consultant E.C. Jordan Co., conducted a Preliminary Site Evaluation of the Owego Site, and prepared a Task 1 Report dated October 1986.

562. In 1987, E.C. Jordan Co. conducted a Task 2 Initial Field Investigation regarding the Owego Site.

563. In 1988, E.C. Jordan Co., conducted a Task 4 Risk Assessment and Evaluation at the Owego Site, and prepared a report of that investigation in August of 1988.

564. E.C. Jordan Co. conducted a Task 3 Supplemental Field Investigation in connection with the Owego Site in 1990.

565. On or about January 6, 1991, the DEC issued an Order on Consent relating to remediation of the landside portion of the Owego Site. In that consent order the

*478

DEC noted that the Owego Site was listed in the Registry of Inactive Hazardous Waste Disposal as a classification 2 site, presenting a “significant threat to the public health or environment-action required .. — a determination with which NYSEG disagreed — and directed the preparation of an SRI and an FS to address the health and environmental potential hazardous attributable to the site.

566. An IRM was carried out at the Owego Site, with DEC approval, and was completed in November of 1992. That IRM consisted of the installation of an extraction well in a gasholder and dewatering of the holder foundation, followed by temporary capping of the ground surface overlying the gasholder with an impermeable material.

567. In January of 1993, NYSEG, through its consultant ABB Environmental Services, Inc., prepared an RI Summary and FS with respect to the Owego Site.

568. In January 1994, the DEC issued a PRAP for the Owego Site.

569. In March of 1994, the DEC issued a ROD for OU-1 of the Owego Site. Pursuant to the ROD, the Susquehanna River was defined as OU-2 of the Owego Site. The remedy prescribed under that ROD included excavation of surface soil from a majority of the site to a depth of two feet and excavation of the contents of the abandoned underground relief holder

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