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Commitments and Contingencies
12 Months Ended
Dec. 31, 2022
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies
Note 14. Commitments and Contingencies

Commitments

We have entered into long-term commitments to purchase CO2 that are either non-cancelable or cancellable only upon the occurrence of specified future events.  The commitments continue for up to 6 years.  The price we will pay for CO2 generally varies depending on the amount of CO2 delivered and the price of oil.  In addition, we have a processing fee contract related to our overriding royalty interest in the CO2 at LaBarge Field. Our annual commitment under these contracts could range from $40.6 million to $52.0 million in 2023, assuming a $75 per Bbl NYMEX oil price and declines in future years as the CO2 purchase contract commitments expire.

During the first quarter of 2022, we entered into a CO2 storage agreement that included two non-cancellable payments of $2 million, totaling $4 million, due in 2023 and 2024.
We are party to long-term contracts that require us to deliver CO2 to our customers who are industrial end-users of CO2 or EOR customers at various contracted prices. Based upon the maximum daily contract quantities as stated in the industrial contracts, total amounts deliverable to these customers could be up to 478 Bcf of CO2 over the next 12 years.

Litigation

We are involved in various lawsuits, claims and regulatory proceedings incidental to our businesses. While we currently believe that the ultimate outcome of these proceedings, individually and in the aggregate, will not have a material adverse effect on our financial position, results of operations or cash flows, litigation is subject to inherent uncertainties.  We accrue for losses from litigation and claims if we determine that a loss is probable and the amount can be reasonably estimated.

On May 26, 2022, the Pipeline and Hazardous Materials Safety Administration (“PHMSA”) of the U.S. Department of Transportation issued a Notice of Probable Violation, Proposed Civil Penalty, and Proposed Compliance Order (“NOPV”) relating to the February 2020 pipeline failure near Satartia, Mississippi in our CO2 pipeline running between the Tinsley and Delhi fields. The NOPV proposed a preliminarily assessed civil penalty of $3.9 million in connection with the incident, which we recorded in our second quarter of 2022 financial statements. We have responded to the NOPV and are pursuing discussions with PHMSA regarding the probable violations alleged in the NOPV, the proposed civil penalty, and the nature of the compliance order contained in the NOPV.

Other Contingencies

We are subject to audits for various taxes (income, sales and use, and severance) in the various states in which we operate, and from time to time receive assessments for potential taxes that we may owe.  In the past, settlement of these matters has not had a material adverse financial impact on us, and currently we have no material assessments for potential taxes.

We are subject to various possible contingencies that arise primarily from interpretation of federal and state laws and regulations affecting the oil and natural gas industry.  Such contingencies include differing interpretations as to the prices at which oil and natural gas sales may be made, the prices at which royalty owners may be paid for production from their leases, environmental issues and other matters.  Although we believe that we have complied with the various laws and regulations, administrative rulings and interpretations thereof, adjustments could be required as new interpretations and regulations are issued.  In addition, production rates, marketing and environmental matters are subject to regulation by various federal and state agencies.