COMMITMENTS AND CONTINGENCIES

Legal Matters

Apache is party to various legal actions arising in the ordinary course of business, including litigation and governmental and regulatory controls. The Company has an accrued liability of approximately $15 million for all legal contingencies that are deemed to be probable of occurring and can be reasonably estimated. Apache’s estimates are based on information known about the matters and its experience in contesting, litigating, and settling similar matters. Although actual amounts could differ from management’s estimate, none of the actions are believed by management to involve future amounts that would be material to Apache’s financial position, results of operations, or liquidity after consideration of recorded accruals. For material matters that Apache believes an unfavorable outcome is reasonably possible, the Company has disclosed the nature of the matter and a range of potential exposure, unless an estimate cannot be made at this time. It is management’s opinion that the loss for any other litigation matters and claims that are reasonably possible to occur will not have a material adverse effect on the Company’s financial position, results of operations, or liquidity.

Argentine Claims

On March 12, 2014, the Company and its subsidiaries completed the sale of all of the Company’s subsidiaries’ operations and properties in Argentina to YPF Sociedad Anonima (YPF). As part of that sale, YPF assumed responsibility for all of the past, present, and future litigation in Argentina involving Company subsidiaries, except that Company subsidiaries have agreed to indemnify YPF for certain environmental, tax, and royalty obligations capped at an aggregate of $100 million. The indemnity is subject to specific agreed conditions precedent, thresholds, contingencies, limitations, claim deadlines, loss sharing, and other terms and conditions. On April 11, 2014, YPF provided its first notice of claims pursuant to the indemnity. Company subsidiaries have not paid any amounts under the indemnity but will continue to review and consider claims presented by YPF. Further, Company subsidiaries retain the right to enforce certain Argentina-related indemnification obligations against Pioneer Natural Resources Company (Pioneer) in an amount up to $67.5 million pursuant to the terms and conditions of stock purchase agreements entered in 2006 between Company subsidiaries and subsidiaries of Pioneer.

Louisiana Restoration

Louisiana surface owners often file lawsuits or assert claims against oil and gas companies, including Apache, claiming that operators and working interest owners in the chain of title are liable for environmental damages on the leased premises, including damages measured by the cost of restoration of the leased premises to their original condition, regardless of the value of the underlying property. From time-to-time restoration lawsuits and claims are resolved by the Company for amounts that are not material to the Company, while new lawsuits and claims are asserted against the Company. With respect to each of the pending lawsuits and claims, the amount claimed is not currently determinable or is not material, except as noted. Further, the overall exposure related to these lawsuits and claims is not currently determinable. While an adverse judgment against Apache is possible, Apache intends to actively defend these lawsuits and claims.

On July 24, 2013, a lawsuit captioned Board of Commissioners of the Southeast Louisiana Flood Protection Authority – East v. Tennessee Gas Pipeline Company et al., Case No. 2013-6911 was filed in the Civil District Court for the Parish of Orleans, State of Louisiana, in which plaintiff on behalf of itself and as the board governing the levee districts of Orleans, Lake Borgne Basin, and East Jefferson alleges that Louisiana coastal lands have been damaged as a result of oil and gas industry activity, including a network of canals for access and pipelines. Plaintiff seeks unspecified damages and injunctive relief in the form of abatement and restoration based on claims of negligence, strict liability, natural servitude of drain, public nuisance, private nuisance, and breach of contract – third party beneficiary. Apache has been indiscriminately named as one of many defendants in the lawsuit. In 2014 the Louisiana state government passed a law (SB 469) clarifying that only entities authorized under the Coastal Zone Management Act may bring litigation to assert claims arising out of the permitted activities. Plaintiff is not one of those authorized entities. On February 13, 2015, the federal court entered judgment in favor of defendants dismissing all of plaintiff’s claims with prejudice on various grounds, and plaintiff appealed the case to the 5^th Circuit Court of Appeals. The appeal is still pending. The overall exposure related to this lawsuit is not currently determinable. While an adverse judgment against Apache might be possible, Apache intends to continue to vigorously oppose the claims, including by defending against plaintiff’s appeal of the federal court’s judgment.

On November 8, 2013, Plaquemines Parish, Louisiana, filed three lawsuits against Apache and other oil and gas producers in the Parish’s 25th Judicial District Court, captioned Parish of Plaquemines v. Rozel Operating Company et al., Docket No. 60-996; Parish of Plaquemines v. Apache Oil Corporation et al., Docket No. 610; and Parish of Plaquemines v. HHE Energy Company et al., Docket No. 60-983. On or about February 4, 2016, Cameron Parish, Louisiana, filed six new lawsuits against Apache and other oil and gas producers in the Parish’s 38th Judicial District Court, captioned Parish of Cameron v. BEPCO, L.P., et al., Docket No. 10-19572; Parish of Cameron v. BP America Production Company et al., Docket No. 10-19576; Parish of Cameron v. Apache Corporation (of Delaware) et al., Docket No. 10-19579; Parish of Cameron v. Atlantic Richfield Company et al., Docket No. 10-19577; Parish of Cameron v. Alpine Exploration Companies, Inc., et al., Docket No. 19580; and Parish of Cameron v. Auster Oil and Gas, Inc., et al, Docket No. 10-19582. On July 28, 2016, Vermillion Parish, Louisiana, filed an amended petition against Apache and other oil and gas producers in the 15^th Judicial District Court, captioned Keith Stutes, District Attorney for the 15^th Judicial District of the State of Louisiana v. Gulfport Energy, et al., Docket No.102156. On September 30, 2016, St. Bernard Parish, Louisiana, filed an Amended Petition against Apache and other oil and gas producers in the 34^th Judicial District Court, captioned The Parish of St. Bernard v. Atlantic Richfield et al., Docket No. 16-1228. Many similar lawsuits have been filed against other oil and gas producers in Parishes across south Louisiana. In these cases, the Parishes, as plaintiffs, allege that certain of defendants’ oil and gas exploration, production, and transportation operations in specified fields were conducted in violation of the State and Local Coastal Resources Management Act of 1978, as amended, and applicable regulations, rules, orders, and ordinances promulgated or adopted thereunder by the Parish or the State of Louisiana. Plaintiffs allege that defendants caused substantial damage to land and water bodies located in the coastal zone of Louisiana. Plaintiffs seek, among other things, unspecified damages for alleged violations of applicable state law within the coastal zone, the payment of costs necessary to clear, re-vegetate, detoxify, and otherwise restore the subject coastal zone as near as practicable to its original condition, and actual restoration of the coastal zone to its original condition. While an adverse judgment against Apache might be possible, Apache intends to vigorously oppose these claims.

Apollo Exploration Lawsuit

In a case captioned Apollo Exploration, LLC, Cogent Exploration, Ltd. Co. & SellmoCo, LLC v. Apache Corporation, Cause No. CV50538 in the 385th Judicial District Court, Midland County, Texas, in a Fourth Amended Petition filed on March 21, 2016, plaintiffs allege damages in excess of $500 million (having previously claimed in excess of $1.1 billion) relating to purchase and sale agreements, mineral leases, and areas of mutual interest agreements concerning properties located in Hartley, Moore, Potter, and Oldham Counties, Texas. Apache believes that plaintiffs’ claims lack merit, and further that plaintiffs’ alleged damages are grossly inflated. Apache will vigorously oppose the claims.

Escheat Audits

In September 2010, the State of Delaware, Department of Finance, Division of Revenue (Unclaimed Property) (Delaware), notified Apache Corporation that Delaware’s consultant, Kelmar Associates (Kelmar), would examine Apache’s books and records and those of its subsidiaries and related entities to determine compliance with Delaware Escheat Laws.

Delaware completed its audit of the Company's accounts payable, payroll, and royalty payments, on which the Company expects an assessment of less than $200,000. However, Delaware suspended its audit before completing its examination of the Company’s accounts receivable, following the June 2016 Temple-Inland v. Cook court decision, in which the Delaware federal court determined that Delaware’s current method and technique for estimating a company’s unclaimed property liability violates the due process requirements of the U.S. Constitution. In response to that decision, the Delaware Legislature is considering changes to its unclaimed property statute. The timing and extent of any legislative modifications is currently unknown.

Burrup-Related Gas Supply Lawsuits

In the cases captioned Radhika Oswal v. Australia and New Zealand Banking Group Limited (ANZ) et al., No. SCI 2011 4653 and Pankaj Oswal v. Australia and New Zealand Banking Group Limited (ANZ) et al., No. SCI 2012 01995, in the Supreme Court of Victoria, Australia, trial commenced on May 30, 2016. In August 2016, the cases settled on confidential terms including an exchange of consideration that did not have a material effect on the Company’s financial position.

Environmental Matters

The Company, as an owner or lessee and operator of oil and gas properties, is subject to various federal, provincial, state, local, and foreign country laws and regulations relating to discharge of materials into, and protection of, the environment. These laws and regulations may, among other things, impose liability on the lessee under an oil and gas lease for the cost of pollution clean-up resulting from operations and subject the lessee to liability for pollution damages. In some instances, the Company may be directed to suspend or cease operations in the affected area. We maintain insurance coverage, which we believe is customary in the industry, although we are not fully insured against all environmental risks.

Apache manages its exposure to environmental liabilities on properties to be acquired by identifying existing problems and assessing the potential liability. The Company also conducts periodic reviews, on a Company-wide basis, to identify changes in its environmental risk profile. These reviews evaluate whether there is a probable liability, the amount, and the likelihood that the liability will be incurred. The amount of any potential liability is determined by considering, among other matters, incremental direct costs of any likely remediation and the proportionate cost of employees who are expected to devote a significant amount of time directly to any possible remediation effort. As it relates to evaluations of purchased properties, depending on the extent of an identified environmental problem, the Company may exclude a property from the acquisition, require the seller to remediate the property to Apache’s satisfaction, or agree to assume liability for the remediation of the property. The Company’s general policy is to limit any reserve additions to any incidents or sites that are considered probable to result in an expected remediation cost exceeding $300,000. Any environmental costs and liabilities that are not reserved for are treated as an expense when actually incurred. In Apache’s estimation, neither these expenses nor expenses related to training and compliance programs are likely to have a material impact on its financial condition.

As of December 31, 2016, the Company had an undiscounted reserve for environmental remediation of approximately $51 million. Apache is not aware of any environmental claims existing as of December 31, 2016 that have not been provided for or would otherwise have a material impact on its financial position or results of operations. There can be no assurance however, that current regulatory requirements will not change or past non-compliance with environmental laws will not be discovered on the Company’s properties.

Apache Canada Ltd. (ACL) reported a produced water release from a water injection pipeline in a remote area of the Belloy Field that occurred on or about May 4, 2016, and an H2S leak at the Zama 10-33-115-06 on or about September 19, 2016. The causes of these incidents remain under investigation. With respect to previous releases of produced water that occurred in the Zama area on or between October 3 and October 25, 2013, and in the Belloy Field on or about January 20, 2014, the Company resolved all of the charges associated with these releases with the Crown. The Company does not expect the economic impact of any of these incidents to have a material effect on the Company’s financial position, results of operations, or liquidity.

LNG Divestiture Dispute

Each of Woodside and the Company asserted claims against the other resulting in court proceedings in the Supreme Court of Western Australia and the Court of Queen’s Bench of Alberta, Calgary. Woodside also initiated third party expert determination proceedings at the ICC International Centre for ADR concerning certain aspects of its purchase price adjustment claims. Each of these proceedings has now been dismissed by agreement in November 2016. The parties have resolved the central matters in dispute on mutually agreeable terms and there was no significant impact on the Company’s financial position, results of operations, or liquidity.

Australian Operations Divestiture Dispute

By a Sale and Purchase Agreement dated April 9, 2015 (SPA), the Company and its subsidiaries divested their remaining Australian operations to Quadrant Energy Pty Ltd (Quadrant). Closing occurred on June 5, 2015. By letter dated June 6, 2016, Quadrant provided the Company with a notice of claim under the SPA claiming approximately $200 million in the aggregate. The Company believes that these claims lack merit and will not have a material adverse effect on the Company’s financial position, results of operation, or liquidity.

Contractual Obligations

At December 31, 2016, contractual obligations for long-term operating leases, capital leases, and purchase obligations are as follows:



Net Minimum Commitments	Total		2017		2018-2019		2020-2021		2022 & Beyond
	(In millions)
Drilling rigs	$	244	$	177	$	67	$	—	$	—
Purchase obligations⁽¹⁾	680		119		287		250		24
Operating lease obligations⁽²⁾	258		56		95		37		70
Capital lease obligations	$	43	$	1	$	3	$	3	$	36
Total Net Minimum Commitments	$	1,225	$	353	$	452	$	290	$	130


(1)	Includes minimum commitments associated with long-term take-or-pay contracts, NGL processing agreements, drilling work program commitments, and agreements to secure capacity rights on third-party pipelines.


(2)	Amounts include long-term lease payments for office space, aircraft, supply and standby vessels, gas pipeline and land leases, and equipment related to exploration, development, and production activities, such as compressors. The Company expects to receive $10 million in sublease income associated with these leases.

The table above includes leases for buildings, facilities, and related equipment with varying expiration dates through 2042. Net rental expense for continuing operations was $59 million, $57 million, and $45 million for 2016, 2015, and 2014, respectively. Costs incurred under take-or-pay and throughput obligations were $86 million, $92 million, and $89 million for 2016, 2015, and 2014, respectively.