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Commitments and Contingencies
6 Months Ended
Jun. 30, 2016
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies
Commitments and Contingencies
Firm Transportation Commitments
We have a contract for firm transportation capacity rights attributable to our production in the Marcellus Shale for specified daily volumes on a pipeline system with a remaining term of 13 years. The contract requires us to pay transportation demand charges regardless of the amount of pipeline capacity we use. The minimum commitment under this agreement is $0.6 million for the remainder of 2016 and approximately $1.1 million per year through 2028. We may sell excess capacity to third parties at our discretion. We have rejected this contract in our bankruptcy proceedings.
Gathering and Intermediate Transportation Commitments
We have a long-term agreement for natural gas gathering, compression and gas lift services for a substantial portion of our natural gas production in the South Texas region through 2039. The agreement requires us to make certain minimum payments regardless of the volume of natural gas production until December 2016. The minimum fee requirement under this agreement is $2.5 million for the remainder of 2016.
We also have long-term agreements for gathering and intermediate pipeline transportation services for a substantial portion of our crude oil and condensate production in the South Texas region through 2041. These agreements, under which we are currently operating, require us to commit certain minimum volumes of crude oil production for the first ten years of the agreements terms, resulting in minimum fee requirements of approximately $12.3 million on an annual basis; however, we are currently in the process of amending and assuming these agreements.
Drilling Carry
In connection with our August 2014 acquisition of undeveloped acreage in the Eagle Ford in Lavaca County, Texas, we committed to providing a drilling carry in the amount of $10.7 million to support development of this acreage through July 2017. If we have not incurred the full balance of the drilling carry by certain dates in 2016 and 2017, we will be required to make a cash payment to the seller to satisfy any shortfall. As we have not completed our drilling requirements for the June 2016 milestone, we recorded a charge of $2.0 million under the drilling carry commitment in the three months ended June 30, 2016 as a component of exploration expense; however, the corresponding obligation has been included in “Liabilities subject to compromise” on our Condensed Consolidated Balance Sheet as of June 30, 2016.
Legal and Regulatory
We are involved, from time to time, in various legal proceedings arising in the ordinary course of business. While the ultimate results of these proceedings cannot be predicted with certainty, our management believes that these claims will not have a material effect on our financial position, results of operations or cash flows. During 2010, we established a $0.9 million reserve for a litigation matter that remained outstanding as of June 30, 2016. During the three months ended June 30, 2016, we established a reserve for a dispute with certain vendors attributable to sales and use taxes in the amount of $0.2 million. We anticipate that claims will be filed by the vendors for each of these matters. As they are both attributable to pre-petition claims, the obligations have been classified as subject to compromise (see Note 3). As of June 30, 2016, we also had AROs of approximately $3.4 million attributable to the plugging of abandoned wells.