COMMITMENTS AND CONTINGENT LIABILITIES

Cash Commitments

NJNG has entered into long-term contracts, expiring at various dates through August 2030, for the supply, storage and delivery of natural gas. These contracts include current annual fixed charges of approximately $95.9 million at current contract rates and volumes, which are recoverable through BGSS.

For the purpose of securing storage and pipeline capacity, NJRES enters into storage and pipeline capacity contracts, which require the payment of certain demand charges by NJRES to maintain the ability to access such natural gas storage or pipeline capacity, during a fixed time period, which generally ranges from one to five years. Demand charges are based on established rates as regulated by the FERC. These demand charges represent commitments to pay storage providers or pipeline companies for the right to store and transport natural gas utilizing their respective assets.

Commitments as of September 30, 2013, for natural gas purchases and future demand fees for the next five fiscal year periods are as follows:



(Thousands)	2014		2015		2016		2017		2018		Thereafter
NJRES:
Natural gas purchases	$	238,843	$	31,282	$	15,513	$	—	$	—	$	—
Storage demand fees	28,613		12,017		7,114		5,035		3,318		4,000
Pipeline demand fees	44,277		20,364		10,046		8,303		6,983		2,783
Sub-total NJRES	$	311,733	$	63,663	$	32,673	$	13,338	$	10,301	$	6,783
NJNG:
Natural gas purchases	$	104,466	$	100,487	$	8,564	$	113	$	—	$	—
Storage demand fees	29,082		22,158		12,396		9,993		9,299		13,948
Pipeline demand fees	66,796		41,326		35,762		33,440		33,171		193,593
Sub-total NJNG	$	200,344	$	163,971	$	56,722	$	43,546	$	42,470	$	207,541
Total⁽¹⁾	$	512,077	$	227,634	$	89,395	$	56,884	$	52,771	$	214,324


(1)	Does not include amounts related to intercompany asset management agreements between NJRES and NJNG.

As of September 30, 2013, the Company's future minimum lease payments under various operating leases will not be more than $1.6 million annually for the next five years and $16.9 million in the aggregate for all years thereafter.

Guarantees

As of September 30, 2013, there were NJR guarantees covering approximately $301.2 million of natural gas purchases and NJRES demand fee commitments not yet reflected in accounts payable on the Consolidated Balance Sheets.

The Company previously entered into agreements to lease vehicles, generally over a five-year term, that qualified as operating leases. These agreements contain provisions that could require the Company to make additional cash payments at the end of the term for a portion of the residual value of the vehicles. As of September 30, 2013, the present value of the liability recognized on the Consolidated Balance Sheets is $680,000. In the event performance under the guarantee is required, the Company's maximum future payment would be $922,000.

Legal Proceedings

Manufactured Gas Plant Remediation

NJNG is responsible for the remedial cleanup of five MGP sites, dating back to gas operations in the late 1800s and early 1900s that contain contaminated residues from former gas manufacturing operations. NJNG is currently involved in administrative proceedings with the NJDEP, as well as participating in various studies and investigations by outside consultants, to determine the nature and extent of any such contaminated residues and to develop appropriate programs of remedial action, where warranted, under Administrative Consent Orders or Memoranda of Agreement with the NJDEP.

NJNG may, subject to BPU approval, recover its remediation expenditures, including carrying costs, over rolling seven-year periods pursuant to a RA approved by the BPU. In February 2012, NJNG filed its 2011 SBC filing, requesting approval of its MGP expenditures incurred through June 30, 2011, which would continue its existing overall SBC rate and recovery at approximately $20 million. In July 2013, NJNG requested approval of its MGP expenditures incurred through June 2013 as well as a reduction in the RA factor to $18.7 million annually. The petition was provisionally approved by the BPU on November 22, 2013. As of September 30, 2013, $47 million of previously incurred remediation costs, net of recoveries from customers and insurance proceeds, are included in regulatory assets on the Consolidated Balance Sheets.

NJNG periodically, and at least annually, performs an environmental review of the MGP sites, including a review of potential liability for investigation and remedial action. NJNG estimated at the time of the review that total future expenditures to remediate and monitor the five MGP sites for which it is responsible, including potential liabilities for Natural Resource Damages that might be brought by the NJDEP for alleged injury to groundwater or other natural resources concerning these sites, will range from approximately $159.8 million to $261 million. NJNG's estimate of these liabilities is based upon known facts, existing technology and enacted laws and regulations in place when the review was completed. Where it is probable that costs will be incurred, and the information is sufficient to establish a range of possible liability, NJNG accrues the best estimated amount in the range. If no point within the range is more likely than the other, it is NJNG's policy to accrue the lower end of the range. Accordingly, as of September 30, 2013, NJNG recorded an MGP remediation liability and a corresponding regulatory asset of $183.6 million on the Consolidated Balance Sheets, based on the best estimate. The actual costs to be incurred by NJNG are dependent upon several factors, including final determination of remedial action, changing technologies and governmental regulations, the ultimate ability of other responsible parties to pay and any insurance recoveries.

NJNG will continue to seek recovery of MGP-related costs through the RA. If any future regulatory position indicates that the recovery of such costs is not probable, the related non-recoverable costs would be charged to income in the period of such determination. However, because recovery of such costs is subject to BPU approval, there can be no assurance as to the ultimate recovery through the RA or the impact on the Company's results of operations, financial position or cash flows, which could be material.

General

The Company is party to various other claims, legal actions and complaints arising in the ordinary course of business. In the Company's opinion, the ultimate disposition of these matters will not have a material effect on its financial condition, results of operations or cash flows.