As part of our normal business activities, we may be named as defendants in litigation and legal proceedings, including those arising from regulatory and environmental matters.

Although the Company is insured against various risks to the extent the Company believes it is prudent, there is no assurance that the nature and amount of such insurance will be adequate, in every case, to indemnify it against liabilities arising from future legal proceedings.

Environmental costs for remediation are accrued based on estimates of known remediation requirements. Such accruals are based on management’s best estimate of the ultimate cost to remediate a site and are adjusted as further information and circumstances develop. Those estimates may change substantially depending on information about the nature and extent of contamination, appropriate remediation technologies and regulatory approvals. Expenditures to mitigate or prevent future environmental contamination are capitalized. Ongoing environmental compliance costs are charged to expense as incurred. In accruing for environmental remediation liabilities, costs of future expenditures for environmental remediation are not discounted to their present value, unless the amount and timing of the expenditures are fixed or reliably determinable. At December 31, 2022 and 2021, the Company had no environmental reserves recorded.

The Company and certain of its subsidiaries are named defendants in a putative class action pending in the United States District Court for the Central District of California. The Company is also participating in a related claims process organized under the Oil Pollution Act of 1990, 33 U.S.C. § 2701 et seq. (“OPA 90”). Under OPA 90, a party alleged to be responsible for a discharge of oil is required to establish a claims process to pay for interim costs and damages as a result of the discharge. The OPA 90 claims process remains ongoing.

On August 25, 2022, the Company reached an agreement in principle with plaintiffs in the class action to resolve all civil claims against it and its subsidiaries. The settlement of $50.0 million, which also includes certain injunctive relief, will be funded under the Company’s insurance policies, and the final agreement will be subject to court approval. The Court preliminarily approved the settlement on December 7, 2022. The final approval papers were submitted to the Court on January 25, 2023 and a final approval hearing is scheduled for April 24, 2023.

On August 26, 2022, the Company reached an agreement with the United States government, which the court has approved, to resolve all federal criminal matters involving the Company and its subsidiaries stemming from Incident. As part of the resolution with the United States, the Company agreed to plead guilty to one count of misdemeanor negligent discharge of oil in violation of the Clean Water Act. The Company will pay a fine of approximately $7.1 million in installments over a period of three years, serve a term of four years’ probation and reimburse governmental agencies approximately $5.8 million for their response to this event. The Company also has agreed to implement certain compliance measures including installation of a new leak detection system and increased Remote Operated Vehicle inspections of the pipeline. As a result of this agreement, the Company’s Consolidated Statements of Operations for the year ended December 31, 2022 included $7.1 million in expenses classified as “Pipeline Incident Settlement.” As of December 31, 2022, the Company recorded $2.0 million in “Accrued liability−pipeline incident” and $3.1 million in “Other long-term liabilities” for the remaining payments related to this settlement on its Consolidated Balance Sheet.

On September 8, 2022, the Company reached an agreement with the state of California to resolve all related state criminal matters. As part of the resolution with the state of California, which also has court approval, the Company agreed to enter a plea of No Contest to six misdemeanor charges. The Company will pay a fine in the amount of $4.9 million to be distributed among the state of California, including the State’s Fish and Game Preservation Fund, and Orange County. The Company also will serve a one-year term of probation and has agreed to certain compliance enhancements to its operations. As a result of this agreement, the Company’s Consolidated Statements of Operations for the year ended December 31, 2022 included $4.9 million in expenses classified as “Pipeline Incident Settlement.” As of December 31, 2022, the Company recorded $2.9 million in “Accrued liability−pipeline incident” for the remaining payments related to this settlement on its Consolidated Balance Sheet.

Subsequent Events. On March 1, 2023, the Company announced that the vessels that struck and damaged the pipeline and their respective owners and operators have agreed to pay the Company $96.5 million in a settlement. The Marine Exchange has agreed to non-monetary terms as well. The overall resolution includes subrogation claims by Amplify’s property damage and loss of production insurers, with Amplify ultimately receiving a net payment of approximately $85 million. The parties are working to finalize the settlement agreement documentation. The settlement resolves Amplify’s affirmative claims related to the Incident. As part of the settlement, after payment is made, Amplify will dismiss all of its legal claims against those parties.

Future litigation may be necessary, among other things, to defend ourselves by determining the scope, enforceability, and validity of claims. The results of any current or future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors.

Beta Operating Company, LLC, a wholly owned subsidiary, assumed an obligation with a third party to make payments into a sinking fund in connection with its 2009 acquisition of the Company properties in federal waters offshore Southern California, the purpose of which is to provide funds adequate to decommission the portion of the San Pedro Bay Pipeline that lies within state waters and the surface facilities. Under the terms of the agreement, the operator of the properties is obligated to make monthly deposits into the sinking fund account in an amount equal to $0.25 per barrel of oil and other liquid hydrocarbon produced from the acquired working interest. Interest earned in the account stays in the account. The obligation to fund ceases when the aggregate value of the account reaches $4.3 million. As of December 31, 2022, the account balance included in restricted investments was approximately $4.3 million.

Beta Operating Company, LLC has an obligation with the BOEM in connection with the 2009 acquisition of the Beta properties. The Company supports this obligation with $161.3 million in A-rated surety bonds and $7.0 million in cash at December 31, 2022. The Company’s existing bonding arrangements issued in connection with the decommissioning obligations related to our Beta properties contain additional collateral requirements pursuant to which we may be required to post collateral at any time, on demand, at the sureties’ sole discretion, which may negatively impact our liquidity position.

Pursuant to these additional collateral requirements, on December 15, 2021, the Company entered into two escrow funding agreements with its surety providers to fund interest-bearing escrow accounts on a quarterly basis to reimburse and indemnify the surety providers for any claims arising under the surety bonds related to the decommissioning of our Beta properties. As long as we continue to comply with our obligations under such escrow agreements, the surety providers party thereto have agreed to stay requests of additional collateral in the form of cash or letters of credit, certificates of deposit or other similar forms of liquid collateral. If any such additional collateral were requested, such additional collateral may negatively impact the Company’s liquidity position. The obligation ceases when the aggregate value of the account reaches $172.6 million. The table below outlines our funding commitment under these agreements at December 31, 2022 (in thousands):

(1)	The remaining payments will be made during the years of 2028 through 2033.

The expense related to the surety bonds is recorded in interest expense in the Company Statement of Consolidated Operations.

Operating Leases

We have leases for offshore Southern California pipeline right-of-way use as well as office space in our operating regions. We also lease equipment, compressors and incur surface rentals related to its business operations.

For the years ended December 31, 2022 and 2021, the Company recognized $8.7 million and $7.6 million of rent expense, respectively.

See Note 12 for the minimum lease payment obligations under non-cancelable operating leases with a remaining term in excess of one year.

Purchase Commitments

At December 31, 2022, the Company had a CO₂ purchase commitment with a third party associated with its Wyoming Bairoil properties. The price we will pay for CO₂ generally varies depending on the amount of CO₂ delivered and the price of oil. The table below outlines its purchase commitments under these contracts based on pricing at December 31, 2022 (in thousands):


	Payment or Settlement Due by Period
Purchase commitment	Total		2023		2024		2025		2026		2027		Thereafter
CO₂ minimum purchase commitment	$	11,876	$	3,851	$	4,076	$	3,949	$	—	$	—	$	—

Minimum Volume Commitment

At December 31, 2022, the Company has a long-term minimum volume commitment with a third party associated with a certain portion of its properties located in Oklahoma. The table below outlines the future payment commitments associated with the minimum volume commitment plus any applicable fee for not meeting the minimum volume commitment (in thousands):


	Payment or Settlement Due by Period (1)
	Total		2023		2024		2025		2026		2027		Thereafter
Minimum volume commitment	$	3,243	$	3,243	$	—	$	—	$	—	$	—	$	—

(2)	The amounts in the table do not reflect costs adjusted for inflation.

The Company is party to a gathering and processing contract in Oklahoma, which includes certain minimum NGL commitments. To the extent the Company does not deliver natural gas volumes in sufficient quantities to generate, when processed, the minimum levels of recovered NGLS, it would be required to reimburse the counterparty an amount equal to the sum of the monthly shortfall, if any, multiplied by a fee. The Company is not meeting the minimum volume required under these contractual provisions. The commitment fee expense for the year ended December 31, 2022 and 2021, was approximately $1.8 million and $1.6 million, respectively. The minimum volume commitment for Oklahoma ends on June 30, 2023.

The Company was a party to a gas purchase, gathering and processing contract in East Texas, which includes certain minimum gas commitments. The Company did not meet the minimum volume required under this contractual provision. The commitment fee expense for the year ended December 31, 2022 and 2021, was approximately $1.9 million and $2.0 million, respectively. The minimum volume commitment for East Texas ended on November 30, 2022.