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## ALGONQUIN POWER & UTILITIES CORP. 

Notes to the Consolidated Financial Statements December 31, 2012 and 2011  (in thousands of Canadian dollars except as noted and amounts per share) 

## 21. Commitments and contingencies 

a) Contingencies 

ii) The normal ongoing operations and historic activities of the Company are subject to various federal, state and local environmental laws and regulations and are regulated by agencies such as the United States Environmental Protection Agency and the New Hampshire Department of Environmental Services (“NHDES”). Like most other industrial companies, the gas and electric distribution utilities generate some hazardous wastes. Under federal and state Superfund laws, potential liability for historic contamination of property may be imposed on responsible parties jointly and severally, without fault, even if the activities were lawful when they occurred. In the case of regulated utilities these costs are often allowed in rate case proceedings to be recovered from rate payers over a specified period. 

Prior to their acquisition by Liberty Utilities, EnergyNorth and Granite State were named as potentially responsible parties for remediation of several sites at which hazardous waste is alleged to have been disposed as a result of historic operations of Manufactured Gas Plants (“MGP”) and related facilities. The Company is currently investigating and remediating, as necessary, those MGP and related sites in accordance with plans submitted to the NHDES. The Company believes that obligations imposed on it because of those sites will not have a material impact on its results of operations or financial position. 

The Company estimates the remaining undiscounted, unescalated cost of these MGP-related environmental cleanup activities will be $59,862 (U.S. $60,168) which at a discount rate of 3.5% represents the recorded accrual of $56,587 at December 31, 2012. This amount reflects the approval from the NHDES on December 10, 2012 of a Conceptual Remedial Design Report submitted to NHDES for removal of tar-impacted media at the Liberty Hill Road Site in New Hampshire. The NHDES approval at Liberty Hill Road Site reduced the overall cost estimate and consequently the Company withdrew its pending appeal. Remediation costs estimates for each site may vary, depending upon changing technologies and regulatory standards, selected end use for each site, and actual environmental conditions encountered. 

By rate orders, the Regulator provided for the recovery of actual expenditures for site investigation and remediation over a period of 7 years and accordingly, at December 31, 2012 the Company has reflected a regulatory asset of $59,789 for the MGP and related sites. 

Estimated cash flows for site investigation and remediation costs in the next five years and thereafter are as follows: 

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