Algonquin Power & Utilities Corp. – Management’s Discussion & Analysis Liberty Utilities’ facilities are operated with the assumption that their services will be required in perpetuity and  there are no contractual decommissioning requirements. In order to remain in compliance with the applicable  regulatory bodies, Liberty Utilities has regular maintenance programs at each facility to ensure its equipment is  properly maintained and replaced on a cyclical basis. These maintenance expenses, expenses associated with  replacing aging distribution facilities and expenses associated with providing new sources of commodity supply  can generally be included in the facility’s rate base and thus Liberty Utilities expects to be allowed to earn a  return on such investment.  In conjunction with the recent acquisitions the Company assumed certain asset retirement obligations. The  asset retirement obligations mainly relate to legal requirements to: (i) remove of wind farm facilities upon  termination of land leases; (ii) cut (disconnect from the distribution system), purge (clean of natural gas and PCB  contaminants) and cap gas mains within the gas distribution and transmission system when mains are retired in place, or dispose of sections of gas main when removed from the pipeline system, (iii) clean and remove  storage tanks containing waste oil and other waste contaminants, and (iv) remove asbestos upon major  renovation or demolition of structures and facilities.  APUC and its subsidiaries face a number of environmental risks that are normal aspects of operating within the  renewable power generation, thermal power generation and utilities business segments which have the potential  to become environmental liabilities. Many of these risks are mitigated through the maintenance of adequate  insurance which include property, boiler and machinery, environmental and excess liability policies. Liberty Utilities faces environmental risks that are normal aspects of operating within its business segment. The  primary environmental risks associated with the operation of an electrical distribution system are related to  potential accidental release of mineral oil to the environment from non-operational events and the management  of hazardous and universal waste in accordance with the various Federal, State and local environmental laws.  Like most other industrial companies, Liberty Utilities generates some hazardous wastes as a result of its  operations. 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 order to monitor and mitigate these risks and to remain within the regulatory requirements appropriate for  these assets, Liberty Utilities investigates promptly all reported accidental releases to take all required remedial  actions and manages hazardous waste and universal waste streams in accordance with the applicable Federal  and State Legislation.  The primary risks associated with the operation of gas distribution systems are related to uncontrolled natural  gas releases, equipment damage by construction equipment/third parties or severe weather events. The gas  distribution assets are heavily regulated by the Pipeline Hazardous Material Safety Administration (PHMSA)  under the United States Department of Transportation and their respective State regulations in which the assets  are located. Gas Distribution systems are subject to detailed annual inspections by State Regulatory Agency to  ensure strict adherence to applicable regulations. PHMSA reviews the Company’s policies in reference to  operation and maintenance, construction, training, emergency response, reporting, contractor management and  measurements. Liberty monitors all aspects of pipeline safety and quickly mitigates any identified concerns.  Liberty Utilities (East)’s ongoing operations and historic activities 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”). Similar to other  industrial companies, the gas and electric distribution utilities generate certain 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 Gas Utility and Granite State Electric Utility 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 Liberty Utilities is currently investigating and remediating, as necessary, those MGP and related sites where  it is the lead project manager in accordance with plans submitted to the NHDES. The Liberty Utilities believes  that obligations imposed on it because of those sites will not have a material impact on its results of operations  or financial position. 2012 Annual Report 63 Environmental Risks 