Commitments and Contingencies

Operating Leases and Other Commitments

The Company leases office space and other property and equipment under lease agreements expiring on various dates through 2020. The Company recognized expense under operating leases of approximately $6 million for each of the years ending December 31, 2015, and December 31, 2014, and $302,000 and $5 million for the periods from December 17, 2013 through December 31, 2013, and January 1, 2013 through December 16, 2013, respectively.

The following table presents the Company’s future minimum payments under noncancelable operating leases and other commitments as of December 31, 2015:



	Total		2016		2017		2018		2019		2020		Thereafter
(in thousands)
Operating leases⁽¹⁾	$	9,377	$	3,710	$	2,234	$	1,279	$	1,175	$	979	$	—
Firm natural gas transportation contracts⁽²⁾	146,981		33,446		33,417		23,972		22,528		19,123		14,495
Other commitments ⁽³⁾	2,442		2,442		—		—		—		—		—
Total	$	158,800	$	39,598	$	35,651	$	25,251	$	23,703	$	20,102	$	14,495


⁽¹⁾	Operating leases relate primarily to obligations associated with the Company’s office facilities, rail cars and vehicles.


⁽²⁾	The Company enters into certain firm commitments to transport natural gas production to market and to transport natural gas for use in the Company’s cogeneration and conventional steam generation facilities. The remaining terms of these contracts range from approximately two to eight years and require a minimum monthly charge regardless of whether the contracted capacity is used or not


⁽³⁾	Other commitments relate primarily to cogeneration facility management services and equipment rental obligations.

East Texas Gathering System

The Company is party to certain long-term natural gas gathering agreements for its East Texas production. The agreements contain embedded leases and the transaction was accounted for as a financing obligation. The asset is being depreciated over the remaining useful life and has a net book value of approximately $5 million at December 31, 2015. There are no minimum payments required under these agreements.

Carry and Earning Agreement

In January 2011, the Company entered into an amendment relating to certain contractual obligations to a third-party co-owner of certain Piceance Basin assets in Colorado. The amendment waives a $200,000 penalty for each well not spud by February 2011 and requires the Company to reassign to such third party, by January 31, 2020, all of the interest acquired by the Company from the third party in each 160-acre tract in which the Company has not drilled and completed a well that is producing or capable of producing from a designated formation, or deeper formation, on January 1, 2020. The amendment also requires the Company to pay the first $9 million of costs incurred in connection with the construction of either an extension of the existing access road or a new access road, including the third party’s 50% share. Pursuant to the terms of a further amendment effective September 30, 2015, if by September 30, 2017, the Company does not expend $9 million on the construction of either the extension of the existing access road or a new access road, the Company is obligated to pay the third party 50% of the difference between $12 million and the actual amount expended on road construction as of such date. Under the terms of the 2015 amendment, this deadline is subject to further extension to no later than December 31, 2017. Due to the need to obtain regulatory approvals, among other reasons, the Company has not yet commenced construction of either an extension of the existing access road or a new access road and may be unable to do so by the extended deadline, thus triggering the payment of the obligation to the third party.

Environmental Matters

The Company has no material accrued environmental liabilities for its sites, including sites in which governmental agencies have designated the Company as a potentially responsible party, because it is not probable that a loss will be incurred and the minimum cost and/or amount of loss cannot be reasonably estimated. However, because of the uncertainties associated with environmental assessment and remediation activities, future expense to remediate the currently identified sites, and sites identified in the future, if any, could be incurred. Management believes, based upon current site assessments, that the ultimate resolution of any matters will not result in material costs to the Company.

Legal Matters

The Company is involved in various lawsuits, claims and inquiries, most of which are routine to the nature of its business. In the opinion of management, the resolution of these matters will not have a material adverse effect on its overall business, financial position, results of operations or liquidity; however, cash flow could be significantly impacted in the reporting periods in which such matters are resolved.

During the years ended December 31, 2015, and December 31, 2014, and the periods from December 17, 2013 through December 31, 2013, and January 1, 2013 through December 16, 2013, the Company made no significant payments to settle any legal, environmental or tax proceedings. The Company regularly analyzes current information and accrues for probable liabilities on the disposition of certain matters as necessary. Liabilities for loss contingencies arising from claims, assessments, litigation or other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated.