Commitments and Contingencies

6 Months Ended

Jun. 30, 2020

Commitments and Contingencies [Abstract]

Commitments and Contingencies

Note 16.  Commitments and Contingencies

Litigation

As part of our normal business activities, we may be named as defendants in legal proceedings, including those arising from regulatory and environmental matters.  Although we are insured against various risks to the extent we believe it is prudent, there is no assurance that the nature and amount of such insurance will be adequate, in every case, to fully indemnify us against losses arising from future legal proceedings.  We will vigorously defend the partnership in litigation matters.

Our accruals for litigation contingencies were $0.2 million at June 30, 2020 and December 31, 2019, and recorded in our Unaudited Condensed Consolidated Balance Sheets as a component of “Other current liabilities.”  

Energy Transfer Matter

As reported in our 2019 Form 10-K, we prevailed on our appeal on January 31, 2020 when the Supreme Court of Texas unanimously affirmed the opinion of the Dallas Court of Appeals.  On March 6, 2020, the Supreme Court of Texas issued its mandate to the Dallas County Civil District Court, bringing this lawsuit and the resulting appeal to a close.

PDH Litigation

In July 2013, we executed a contract with Foster Wheeler USA Corporation (“Foster Wheeler”) pursuant to which Foster Wheeler was to serve as the general contractor responsible for the engineering, procurement, construction and installation of our initial propane dehydrogenation (“PDH 1”) facility.  In November 2014, Foster Wheeler was acquired by an affiliate of AMEC plc to form Amec Foster Wheeler plc, and Foster Wheeler is now known as Amec Foster Wheeler USA Corporation (“AFW”).  In December 2015, Enterprise and AFW entered into a transition services agreement under which AFW was partially terminated from the PDH 1 project.  In December 2015, Enterprise engaged a second contractor, Optimized Process Designs LLC, to complete the construction and installation of PDH 1.

On September 2, 2016, we terminated AFW for cause and filed a lawsuit in the 151st Judicial Civil District Court of Harris County, Texas against AFW and its parent company, Amec Foster Wheeler plc, asserting claims for breach of contract, breach of warranty, fraudulent inducement, string-along fraud, gross negligence, professional negligence, negligent misrepresentation and attorneys’ fees.  We intend to diligently prosecute these claims and seek all direct, consequential, and exemplary damages to which we may be entitled.

Contractual Obligations

Scheduled Maturities of Debt

We have long-term and short-term payment obligations under debt agreements.  In total, the principal amount of our consolidated debt obligations were $29.90 billion and $27.88 billion at June 30, 2020 and December 31, 2019, respectively.  See Note 7 for additional information regarding our scheduled future maturities of debt principal.

Lease Accounting Matters

The following table presents information regarding operating leases where we are the lessee at June 30, 2020:

Asset Category	ROU Asset Carrying Value (1)		Lease Liability Carrying     Value (2)		Weighted- Average Remaining Term	Weighted- Average Discount Rate (3)
Storage and pipeline facilities	$	134.0	$	134.7	16 years	4.3%
Transportation equipment		41.5		43.8	3 years	3.5%
Office and warehouse space		173.6		180.5	17 years	3.2%
Total	$	349.1	$	359.0

(1)	Right-of-use (“ROU”) asset amounts are a component of “Other assets” on our Unaudited Condensed Consolidated Balance Sheet.
(2)	At June 30, 2020, lease liabilities of $30.1 million and $328.9 million were included within “Other current liabilities” and “Other liabilities,” respectively.
(3)	The discount rate for each category of assets represents the weighted average of either (i) the implicit rate applicable to the underlying leases (where determinable) or (ii) our incremental borrowing rate adjusted for collateralization (if the implicit rate is not determinable).  In general, the discount rates are based on either (i) information available at the lease commencement date or (ii) January 1, 2019 for leases existing at the adoption date for ASC 842.

The following table disaggregates our total operating lease expense for the periods indicated:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2020		2019		2020		2019
Long-term operating leases:
Fixed lease expense:
Non-cash lease expense (amortization of ROU assets)	$	9.8	$	10.7	$	19.8	$	21.7
Related accretion expense on lease liability balances		3.3		2.4		6.7		4.8
Total fixed lease expense		13.1		13.1		26.5		26.5
Variable lease expense		0.1		1.1		0.3		2.9
Subtotal operating lease expense		13.2		14.2		26.8		29.4
Short-term operating leases		11.8		11.7		25.0		23.5
Total operating lease expense	$	25.0	$	25.9	$	51.8	$	52.9

Fixed lease expense is charged to earnings on a straight-line basis over the contractual term, with any variable lease payments expensed as incurred.  Short-term operating lease expense is expensed as incurred.  Cash paid for operating lease liabilities recorded on our balance sheet was $7.9 million and $12.9 million for the three months ended June 30, 2020 and 2019, respectively.  For the six months ended June 30, 2020 and 2019 cash paid for operating lease liabilities was $18.3 million and $26.4 million, respectively.

We do not have any significant operating or direct financing leases where we are the lessor.  Our operating lease income for the three months ended June 30, 2020 and 2019 was $2.6 million and $2.4 million, respectively.  For the six months ended June 30, 2020 and 2019 operating lease income was $6.1 million and $7.2 million, respectively.  We do not have any sales-type leases.

Our operating lease commitments at June 30, 2020 did not differ materially from those reported in our 2019 Form 10-K.

Purchase Obligations

We have contractual future product purchase commitments for natural gas, NGLs, crude oil, petrochemicals and refined products.  These commitments represent enforceable and legally binding agreements as of the reporting date.  Our product purchase commitments at June 30, 2020 declined by an estimated $8.63 billion when compared to those reported in our 2019 Form 10-K primarily due to lower NGL and crude oil prices in the six months ended June 30, 2020.  At June 30, 2020, our estimated long-term product purchase obligations totaled $11.94 billion after reflecting the decline in commodity prices, agreements added during the six months ended June 30, 2020 and those commitments that expired during the year.  At December 31, 2019, our estimated long-term product purchase obligations totaled $20.57 billion.

Settlement of Liquidity Option

See Note 8 for information regarding settlement of the Liquidity Option on March 5, 2020.