Exit Costs - Transportation Commitments

3 Months Ended

Mar. 31, 2019

Commitments and Contingencies Disclosure [Abstract]

Note 9. Exit Cost – Transportation Commitments

In connection with the divestiture of Marcellus Shale upstream assets in 2017, we retained certain financial commitments on pipelines flowing natural gas production inside and outside of the Marcellus Basin. These financial commitments represent commitments to pay transportation fees; thus, we have no commitment to physically transport minimum volumes of natural gas.

Since closing, we have continued efforts to commercialize these firm transportation commitments, including permanent assignment of capacity, negotiation of capacity releases, utilization of capacity through purchase and transport of third-party natural gas, and other potential arrangements. In the event we execute a permanent assignment of capacity, we no longer have a contractual obligation to the pipeline company and, as such, our gross contractual commitment is reduced. In the event we execute a capacity release or utilize capacity through the purchase and transport of natural gas, we remain the primary obligor to the pipeline company. While our gross contractual commitment is not reduced, except through use under those arrangements, we would receive future cash payments from the third-parties with whom we negotiated a capacity release or from the sale of purchased natural gas to third-parties.

As of March 31, 2019, our gross retained firm transportation commitment for the remaining obligations under these agreements, which have remaining terms of approximately four to fourteen years, is approximately $1.1 billion, undiscounted.

Leach Xpress and Rayne Xpress Permanent Assignment In January 2019, we executed agreements on the Leach Xpress and Rayne Xpress pipelines to permanently assign remaining capacity to a third-party effective January 1, 2021, extending through the end of the contract. The permanent assignment reduced our total financial commitment by approximately $350 million, undiscounted. As a result of the assignment, we recorded firm transportation exit cost of $92 million, discounted, related to future commitments to the third party. We will continue efforts to mitigate the impact of these transportation agreements during 2019 and 2020.

Financial Statement Impact In addition to the retained firm transportation commitments, we have the following accrued discounted liabilities associated with exit cost activities, including the permanent assignment described above:



	Three Months Ended March 31,
(millions)	2019			2018
Balance at Beginning of Period ⁽¹⁾	$	80		$	90
Firm Transportation Exit Cost Accrual	92			—
Payments, Net of Accretion	(5		)	(6		)
Balance at End of Period	167			84
Less: Current Portion Included in Other Current Liabilities	11			11
Long-term Portion Included in Other Noncurrent Liabilities at End of Period	$	156		$	73


⁽¹⁾	Balances include current accruals of $13 million which are included in other current liabilities on our consolidated balance sheets.

Revenues and expenses associated with capacity release agreements and purchases and sales of natural gas are as follows:



		Three Months Ended March 31,
(millions)	Statements of Operations Location	2019		2018
Sales of Purchased Gas	Sales of Purchased Oil and Gas	$	27	$	31
Cost of Purchased Gas and Related Expense
Cost of Purchased of Gas	Cost of Purchased Oil and Gas	27		30
Utilized Firm Transportation Expense ⁽¹⁾	Cost of Purchased Oil and Gas	15		5
Unutilized Firm Transportation Expense	Cost of Purchased Oil and Gas	—		1
Cost of Purchased Gas and Related Expense, Total	Cost of Purchased Oil and Gas	$	42	$	36

⁽¹⁾

Includes the net impact of the difference in the firm transportation contract rates and rates agreed to in the capacity releases, as well as transportation expenses associated with transport of purchased natural gas.