Southern California Pipeline Incident	3 Months Ended
Mar. 31, 2022
Southern California Pipeline Incident
Southern California Pipeline Incident	Note 16. Southern California Pipeline Incident On October 2, 2021, contractors operating under the direction of Beta, a subsidiary of Amplify, observed an oil sheen on the water approximately four miles off the coast of Newport Beach, California (the “Incident”). Beta platform personnel were notified and promptly initiated the Company’s Oil Spill Response Plan, which was reviewed and approved by the Bureau of Safety and Environmental Enforcement’s Oil Spill Preparedness Division within the United States Department of the Interior, and which included the required notifications of specified regulatory agencies. On October 3, 2021, a Unified Command, consisting of the Company, the U.S. Coast Guard and California Department of Fish and Wildlife’s Office of Spill Prevention and Response, was established to respond to the Incident. On October 5, 2021, the Unified Command announced that reports from its contracted commercial divers and Remotely Operated Vehicle footage indicated that a 4,000-foot section of the Company’s pipeline had been displaced with a maximum lateral movement of approximately 105 feet and that the pipeline had a 13-inch split, running parallel to the pipe. On October 14, 2021, the U.S. Coast Guard announced that it had a high degree of confidence the size of the release was approximately 588 barrels of oil, which is below the previously reported maximum estimate of 3,134 barrels. On October 16, 2021, the U.S. Coast Guard announced that it had identified the Mediterranean Shipping Company (DANIT) as a “vessel of interest” and its owner Dordellas Finance Corporation and operator Mediterranean Shipping Company, S.A. as parties in interest in connection with an anchor-dragging incident, in January 2021 (the “Anchor Dragging Incident”), which occurred in close proximity to our pipeline, and that additional vessels of interest continued to be investigated. On November 19, 2021, the U.S. Coast Guard announced that it had identified the COSCO (Beijing) as another vessel involved in the Anchor Dragging Incident and named its owner Capetanissa Maritime Corporation of Liberia and its operator V.Ships Greece Ltd. as parties in interest. The cause, timing and details regarding the Incident remain under investigation. At the height of the Incident response, the Company deployed over 1,800 personnel working under the guidance and at the direction of the Unified Command to aid in cleanup operations. As of October 14, 2021, all beaches that had been closed following the Incident have reopened. On February 2, 2022, the Unified Command announced that response and monitoring efforts have officially concluded for the Incident, and Unified Command would stand down as of such date. Amplify is grateful to its Unified Command partners for their collaboration and professionalism over the course of the response. In response to the Incident, all operations have been suspended and the pipeline has been shut-in until the Company receives the required regulatory approvals to begin operations. On October 4, 2021, the Pipeline and Hazardous Materials Safety Administration (PHMSA), Office of Pipeline Safety (OPS) issued a Corrective Action Order (CAO) pursuant to 49 U.S.C. § 60112, which makes clear that no restart of the affected pipeline may occur until PHMSA has approved a written restart plan. Additionally, the California Coastal Commission requested approval from the Office of Coastal Management for the National Oceanic and Atmospheric Association (NOAA) to conduct a Coastal Zone Management Act consistency review of the U.S. Army Corps of Engineers Nationwide Permit (NWP) 12 application for the proposed permanent repair permit; on April 7, 2022, NOAA denied that request. The Company is working expeditiously and cooperatively to comply with the requirements of the relevant agencies in order to gain such approvals and any other regulatory approvals that are necessary to permanently repair the pipeline and restart operations. As a result of the uncertainties related to the permitting and regulatory approval process, the Company can provide no assurances as to whether and when, if at all, operation will restart at the Beta field. At present, no operations are underway in the Beta field. On December 15, 2021, a federal grand jury in the Central District of California returned a federal criminal indictment against Amplify Energy Corp., Beta Operating Company, LLC, and San Pedro Bay Pipeline Company in connection with the Incident. The indictment alleges that the Company committed a misdemeanor violation of the federal Clean Water Act for negligently discharging oil into the contiguous zone of the United States. A trial is set for November 1, 2022. The United States Attorney’s Office for the Central District of California has stated that its investigation of the Incident and related matters is ongoing. State authorities are conducting parallel criminal investigations as well. We are continuing to cooperate with these federal and state investigations. The outcome of these investigations is uncertain, including whether they will result in additional criminal charges. The Company is currently subject to a number of ongoing investigations related to the Incident by certain federal and state agencies. To date, the U.S. Coast Guard, the U.S. Bureau of Ocean Energy Management, the U.S. Department of Justice, PHMSA, the U.S. Department of the Interior Bureau of Safety and Environmental Enforcement, the California Department of Justice, the Orange County District Attorney, the Los Angeles County District Attorney, and the California Department of Fish & Wildlife are conducting investigations or examinations of the Incident. On April 8, 2022, in light of the allegations raised in the December 15, 2021 federal indictment, the Company received a Show Cause Notice from the U.S. Environmental Protection Agency (“EPA") asking the Company to provide information as to why it should not be suspended from participating in future Federal contracting and assisting activities pursuant to 2 C.F.R. § 180.700(a), (c) and 2 C.F.R. § 180.800(a)(4). On April 22, 2022, the Company responded to the Show Cause Notice and is working cooperatively with the EPA in connection with this matter. Other federal agencies may or have commenced investigations and proceedings, and may initiate enforcement actions seeking penalties and other relief under the Clean Water Act and other statutes. Amplify continues to comply with all regulatory requirements and investigations. The outcomes of these investigations and the nature of any remedies pursued will depend on the discretion of the relevant authorities and may result in regulatory or other enforcement actions, as well as civil and criminal liability. The Company and certain of its subsidiaries have been named as defendants in approximately 14 putative class action lawsuits, which have been consolidated into a single consolidated action in the United States District Court for the Central District of California. In the consolidated action, Plaintiffs filed a consolidated class action complaint on January 28, 2022. The consolidated complaint asserted claims against the Company and MSC Mediterranean Shipping Company, Dordellas Finance Corp., Costamare Shipping Co. S.A., and Capetanissa Maritime Corporation of Liberia. In a third-party complaint filed on February 28, 2022, the Company also asserted claims against those entities, as well as against the Marine Exchange of Los Angeles-Long Beach Harbor, V Ships Greece Ltd, the MSC Danit (proceeding in rem), and the COSO Beijing (proceeding in rem). The Company moved to dismiss the Plaintiffs’ consolidated complaint on February 28, 2022. Certain of the shipping-related defendants have moved to dismiss the Company’s complaint against them. MSC Mediterranean Shipping Company and Dordellas Finance Corp. have filed a Petition for Limitation of Liability under maritime law in the United States District Court for the Central District of California. The Court is considering whether to consolidate the Limitation of Liability action with the consolidated class action. Resolution of the civil litigation may take considerable time, and it is not possible at this time to estimate our potential liability resulting from these actions. Under the OPA 90, the Company’s pipeline was designated by the U.S. Coast Guard as the source of the oil discharge and therefore the Company is financially responsible for remediation and for certain costs and economic damages as provided for in OPA 90, as well as certain natural resource damages associated with the spill and certain costs determined by federal and state trustees engaged in a joint assessment of such natural resource damages. The Company is currently processing covered claims under OPA 90 as expeditiously as possible. In addition, the Natural Resource Damage Assessment remains ongoing and therefore the extent, timing and cost related to such assessment are difficult to project. While the Company anticipates insurance will reimburse it for expenses related to the Natural Resource Damage Assessment, any potentially uncovered expenses may be material and could impact the Company’s business and results of operations and could put pressure on its liquidity position going forward. The Company currently estimates that the total costs it has incurred or will incur with respect to the Incident related to (i) actual and projected response and remediation expenses incurred under the direction of the Unified Command and (ii) estimates for certain legal fees, to be approximately $100.0 million to $120.0 million. These estimates consider currently available facts and presently enacted laws and regulations. The Company has made assumptions regarding (i) the probable and estimable amounts expected to be settled with certain vendors for response and remediation expenses and (ii) the resolution of certain third-party claims, excluding claims with respect to losses, which are not probable and reasonably estimable, and (iii) future claims and lawsuits. The Company’s estimates do not include (i) the nature, extent and cost of future legal services that will be required in connection with all lawsuits, claims and other matters requiring legal or expert advice associated with the Incident, (ii) any lost revenue associated with the suspension of operations at Beta, (iii) any liabilities or costs that are not reasonably estimable at this time or that relate to contingencies where the Company currently regards the likelihood of loss as being only reasonably possible or remote and (iv) the costs associated with the permanent repair of the pipeline and the restart of the Beta operations. The Company believes it has accrued adequate amounts for all probable and reasonably estimable costs; however, this estimate is subject to uncertainties associated with the assumptions that it has made. For example, settlements with vendors for response and remediation expenses could turn out to be significantly higher or lower than the Company has estimated. Accordingly, as the Company’s assumptions and estimates may change in future periods based on future events and total costs may materially increase; therefore, the Company can provide no assurance that it will not have to accrue significant additional costs in future periods with respect to the Incident. In accordance with customary insurance practice, the Company maintains insurance policies, including loss of production income insurance, against many potential losses or liabilities arising from its operations and at costs that the Company believes to be economic. The Company regularly reviews its risk of loss and the cost and availability of insurance and revises its insurance accordingly. The Company’s insurance does not cover every potential risk associated with its operations and is subject to certain exclusions and deductibles. While the Company expects its insurance policies will cover a material portion of the total aggregate costs associated with the Incident, including but not limited to response and remediation expenses, defense costs and loss of revenue resulting from suspended operations, it can provide no assurance that its coverage will adequately protect it against liability from all potential consequences, damages and losses related to the Incident and such view and understanding is preliminary and subject to change. As of March 31, 2022, and inclusive of cost associated with the temporary repair of the pipeline, the Company has incurred total aggregate gross costs of $111.2 million, of which the Company has received or expects that it is probable that it will receive $109.0 million in insurance recoveries. The Company’s net charge of $0.6 million, which is classified as “Pipeline Incident Loss” in the Company’s Unaudited Condensed Consolidated Statements of Operations, reflects legal costs incurred during the three months ended March 31, 2022, that are not currently expected to be recovered under an insurance policy. The Company incurred the balance of the difference, or $1.6 million, in expense for the year ended December 31, 2021. Through March 31, 2022, the Company had collected $70.4 million out of the approximately $109.0 million of costs that the Company expects are probable of recovery from insurance carriers, net of deductibles. Therefore as of March 31, 2022, the Company had a receivable of approximately $38.6 million for the portion of costs that the Company expects is probable of recovery from insurance, net of deductibles and amounts collected during 2022. Additionally, during the three months ended March 31, 2022, the Company recognized $17.5 million related to approved LOPI insurance proceeds, which is classified as “Other Revenues” in the Company’s Unaudited Condensed Consolidated Statements of Operations. As of March 31, 2022, the Company has recorded a receivable of $8.9 million related to approved but unpaid LOPI claims.

Southern California Pipeline Incident

3 Months Ended

Mar. 31, 2022

Southern California Pipeline Incident

Note 16. Southern California Pipeline Incident

On October 2, 2021, contractors operating under the direction of Beta, a subsidiary of Amplify, observed an oil sheen on the water approximately four miles off the coast of Newport Beach, California (the “Incident”). Beta platform personnel were notified and promptly initiated the Company’s Oil Spill Response Plan, which was reviewed and approved by the Bureau of Safety and Environmental Enforcement’s Oil Spill Preparedness Division within the United States Department of the Interior, and which included the required notifications of specified regulatory agencies. On October 3, 2021, a Unified Command, consisting of the Company, the U.S. Coast Guard and California Department of Fish and Wildlife’s Office of Spill Prevention and Response, was established to respond to the Incident.

On October 5, 2021, the Unified Command announced that reports from its contracted commercial divers and Remotely Operated Vehicle footage indicated that a 4,000-foot section of the Company’s pipeline had been displaced with a maximum lateral movement of approximately 105 feet and that the pipeline had a 13-inch split, running parallel to the pipe. On October 14, 2021, the U.S. Coast Guard announced that it had a high degree of confidence the size of the release was approximately 588 barrels of oil, which is below the previously reported maximum estimate of 3,134 barrels. On October 16, 2021, the U.S. Coast Guard announced that it had identified the Mediterranean Shipping Company (DANIT) as a “vessel of interest” and its owner Dordellas Finance Corporation and operator Mediterranean Shipping Company, S.A. as parties in interest in connection with an anchor-dragging incident, in January 2021 (the “Anchor Dragging Incident”), which occurred in close proximity to our pipeline, and that additional vessels of interest continued to be investigated. On November 19, 2021, the U.S. Coast Guard announced that it had identified the COSCO (Beijing) as another vessel involved in the Anchor Dragging Incident and named its owner Capetanissa Maritime Corporation of Liberia and its operator V.Ships Greece Ltd. as parties in interest. The cause, timing and details regarding the Incident remain under investigation.

At the height of the Incident response, the Company deployed over 1,800 personnel working under the guidance and at the direction of the Unified Command to aid in cleanup operations. As of October 14, 2021, all beaches that had been closed following the Incident have reopened. On February 2, 2022, the Unified Command announced that response and monitoring efforts have officially concluded for the Incident, and Unified Command would stand down as of such date. Amplify is grateful to its Unified Command partners for their collaboration and professionalism over the course of the response.

In response to the Incident, all operations have been suspended and the pipeline has been shut-in until the Company receives the required regulatory approvals to begin operations. On October 4, 2021, the Pipeline and Hazardous Materials Safety Administration (PHMSA), Office of Pipeline Safety (OPS) issued a Corrective Action Order (CAO) pursuant to 49 U.S.C. § 60112, which makes clear that no restart of the affected pipeline may occur until PHMSA has approved a written restart plan. Additionally, the California Coastal Commission requested approval from the Office of Coastal Management for the National Oceanic and Atmospheric Association (NOAA) to conduct a Coastal Zone Management Act consistency review of the U.S. Army Corps of Engineers Nationwide Permit (NWP) 12 application for the proposed permanent repair permit; on April 7, 2022, NOAA denied that request. The Company is working expeditiously and cooperatively to comply with the requirements of the relevant agencies in order to gain such approvals and any other regulatory approvals that are necessary to permanently repair the pipeline and restart operations. As a result of the uncertainties related to the permitting and regulatory approval process, the Company can provide no assurances as to whether and when, if at all, operation will restart at the Beta field. At present, no operations are underway in the Beta field.

On December 15, 2021, a federal grand jury in the Central District of California returned a federal criminal indictment against Amplify Energy Corp., Beta Operating Company, LLC, and San Pedro Bay Pipeline Company in connection with the Incident. The indictment alleges that the Company committed a misdemeanor violation of the federal Clean Water Act for negligently discharging oil into the contiguous zone of the United States. A trial is set for November 1, 2022. The United States Attorney’s Office for the Central District of California has stated that its investigation of the Incident and related matters is ongoing. State authorities are conducting parallel criminal investigations as well. We are continuing to cooperate with these federal and state investigations. The outcome of these investigations is uncertain, including whether they will result in additional criminal charges.

The Company is currently subject to a number of ongoing investigations related to the Incident by certain federal and state agencies. To date, the U.S. Coast Guard, the U.S. Bureau of Ocean Energy Management, the U.S. Department of Justice, PHMSA, the U.S. Department of the Interior Bureau of Safety and Environmental Enforcement, the California Department of Justice, the Orange County District Attorney, the Los Angeles County District Attorney, and the California Department of Fish & Wildlife are conducting investigations or examinations of the Incident. On April 8, 2022, in light of the allegations raised in the December 15, 2021 federal indictment, the Company received a Show Cause Notice from the U.S. Environmental Protection Agency (“EPA") asking the Company to provide information as to why it should not be suspended from participating in future Federal contracting and assisting activities pursuant to 2 C.F.R. § 180.700(a), (c) and 2 C.F.R. § 180.800(a)(4). On April 22, 2022, the Company responded to the Show Cause Notice and is working cooperatively with the EPA in connection with this matter. Other federal agencies may or have commenced investigations and proceedings, and may initiate enforcement actions seeking penalties and other relief under the Clean Water Act and other statutes. Amplify continues to comply with all regulatory requirements and investigations. The outcomes of these investigations and the nature of any remedies pursued will depend on the discretion of the relevant authorities and may result in regulatory or other enforcement actions, as well as civil and criminal liability.

The Company and certain of its subsidiaries have been named as defendants in approximately 14 putative class action lawsuits, which have been consolidated into a single consolidated action in the United States District Court for the Central District of California. In the consolidated action, Plaintiffs filed a consolidated class action complaint on January 28, 2022. The consolidated complaint asserted claims against the Company and MSC Mediterranean Shipping Company, Dordellas Finance Corp., Costamare Shipping Co. S.A., and Capetanissa Maritime Corporation of Liberia. In a third-party complaint filed on February 28, 2022, the Company also asserted claims against those entities, as well as against the Marine Exchange of Los Angeles-Long Beach Harbor, V Ships Greece Ltd, the MSC Danit (proceeding in rem), and the COSO Beijing (proceeding in rem). The Company moved to dismiss the Plaintiffs’ consolidated complaint on February 28, 2022. Certain of the shipping-related defendants have moved to dismiss the Company’s complaint against them. MSC Mediterranean Shipping Company and Dordellas Finance Corp. have filed a Petition for Limitation of Liability under maritime law in the United States District Court for the Central District of California. The Court is considering whether to consolidate the Limitation of Liability action with the consolidated class action. Resolution of the civil litigation may take considerable time, and it is not possible at this time to estimate our potential liability resulting from these actions.

Under the OPA 90, the Company’s pipeline was designated by the U.S. Coast Guard as the source of the oil discharge and therefore the Company is financially responsible for remediation and for certain costs and economic damages as provided for in OPA 90, as well as certain natural resource damages associated with the spill and certain costs determined by federal and state trustees engaged in a joint assessment of such natural resource damages. The Company is currently processing covered claims under OPA 90 as expeditiously as possible. In addition, the Natural Resource Damage Assessment remains ongoing and therefore the extent, timing and cost related to such assessment are difficult to project. While the Company anticipates insurance will reimburse it for expenses related to the Natural Resource Damage Assessment, any potentially uncovered expenses may be material and could impact the Company’s business and results of operations and could put pressure on its liquidity position going forward.

The Company currently estimates that the total costs it has incurred or will incur with respect to the Incident related to (i) actual and projected response and remediation expenses incurred under the direction of the Unified Command and (ii) estimates for certain legal fees, to be approximately $100.0 million to $120.0 million. These estimates consider currently available facts and presently enacted laws and regulations. The Company has made assumptions regarding (i) the probable and estimable amounts expected to be settled with certain vendors for response and remediation expenses and (ii) the resolution of certain third-party claims, excluding claims with respect to losses, which are not probable and reasonably estimable, and (iii) future claims and lawsuits. The Company’s estimates do not include (i) the nature, extent and cost of future legal services that will be required in connection with all lawsuits, claims and other matters requiring legal or expert advice associated with the Incident, (ii) any lost revenue associated with the suspension of operations at Beta, (iii) any liabilities or costs that are not reasonably estimable at this time or that relate to contingencies where the Company currently regards the likelihood of loss as being only reasonably possible or remote and (iv) the costs associated with the permanent repair of the pipeline and the restart of the Beta operations. The Company believes it has accrued adequate amounts for all probable and reasonably estimable costs; however, this estimate is subject to uncertainties associated with the assumptions that it has made. For example, settlements with vendors for response and remediation expenses could turn out to be significantly higher or lower than the Company has estimated. Accordingly, as the Company’s assumptions and estimates may change in future periods based on future events and total costs may materially increase; therefore, the Company can provide no assurance that it will not have to accrue significant additional costs in future periods with respect to the Incident.

In accordance with customary insurance practice, the Company maintains insurance policies, including loss of production income insurance, against many potential losses or liabilities arising from its operations and at costs that the Company believes to be economic. The Company regularly reviews its risk of loss and the cost and availability of insurance and revises its insurance accordingly. The Company’s insurance does not cover every potential risk associated with its operations and is subject to certain exclusions and deductibles. While the Company expects its insurance policies will cover a material portion of the total aggregate costs associated with the Incident, including but not limited to response and remediation expenses, defense costs and loss of revenue resulting from suspended operations, it can provide no assurance that its coverage will adequately protect it against liability from all potential consequences, damages and losses related to the Incident and such view and understanding is preliminary and subject to change.

As of March 31, 2022, and inclusive of cost associated with the temporary repair of the pipeline, the Company has incurred total aggregate gross costs of $111.2 million, of which the Company has received or expects that it is probable that it will receive $109.0 million in insurance recoveries. The Company’s net charge of $0.6 million, which is classified as “Pipeline Incident Loss” in the Company’s Unaudited Condensed Consolidated Statements of Operations, reflects legal costs incurred during the three months ended March 31, 2022, that are not currently expected to be recovered under an insurance policy. The Company incurred the balance of the difference, or $1.6 million, in expense for the year ended December 31, 2021.

Through March 31, 2022, the Company had collected $70.4 million out of the approximately $109.0 million of costs that the Company expects are probable of recovery from insurance carriers, net of deductibles. Therefore as of March 31, 2022, the Company had a receivable of approximately $38.6 million for the portion of costs that the Company expects is probable of recovery from insurance, net of deductibles and amounts collected during 2022.

Additionally, during the three months ended March 31, 2022, the Company recognized $17.5 million related to approved LOPI insurance proceeds, which is classified as “Other Revenues” in the Company’s Unaudited Condensed Consolidated Statements of Operations. As of March 31, 2022, the Company has recorded a receivable of $8.9 million related to approved but unpaid LOPI claims.