COMMITMENTS AND CONTINGENCIES

Lease Commitments

Barnwell has several non-cancelable operating leases for office space, contract drilling base yard space and leasehold land. Rental expense was $404,000 and $408,000 for the years ended September 30, 2016 and 2015, respectively. Barnwell is committed under these leases for minimum rental payments summarized by fiscal year as follows:



Fiscal year ending
2017	$	261,000
2018	138,000
2019	118,000
2020	118,000
2021	118,000
Thereafter through 2026	130,000
Total	$	883,000

The lease payments for leasehold land were subject to renegotiation as of January 1, 2006. Per the lease agreement, the lease payments will remain unchanged pending an appraisal, whereupon the lease rent could be adjusted to fair market value. Barnwell does not know the amount of the new lease payments which could be effective upon performance of the appraisal; they may remain unchanged or increase, and Barnwell currently expects the adjustment, if any, to not be material. The future rental payment disclosures above assume the minimum lease payments for leasehold land in effect at December 31, 2005 remain unchanged through December 2025, the end of the lease term.

The lease agreement for the contract drilling base yard space has stated minimum lease payments with scheduled rent increases through June 30, 2017, after which the lease payments are adjusted to fair market rent at set redetermination dates through the date of the lease termination on June 30, 2047.

Environmental Matters

In January 2015, there was an oil and saltwater release from one of our operated oil pipelines in Alberta, Canada. The gross environmental remediation costs were approximately $2,200,000. Barnwell’s working interest in the well is 58%, and we have recovered all of the monies from the other working interest owners for their share of the costs. We have collected insurance proceeds, less an $80,000 deductible, for our share of the costs. There was no remaining liability at September 30, 2016.

In February 2016, a gas migration was detected at one of our previously abandoned non-operated wells in Alberta, Canada. We have estimated that probable environmental remediation costs will be within the range of $400,000 to $800,000. Barnwell’s working interest in the well is 50%, and accordingly we accrued approximately $200,000 at September 30, 2016, which has not been discounted and was accrued in "Accrued operating and other expenses" on the Consolidated Balance Sheet, however as non-operator we have no control over the actual cost or timing of the eventual remediation.

Because of the inherent uncertainties associated with environmental assessment and remediation activities, future expenses to remediate the currently identified sites, and sites identified in the future, if any, could be incurred.

Guarantee

See Note 9 for a discussion of Barnwell’s guarantee of the Kukio Resort land development partnership’s performance bonds.

Legal and Regulatory Matters

Barnwell is routinely involved in disputes with third parties that occasionally require litigation. In addition, Barnwell is required to maintain compliance with all current governmental controls and regulations in the ordinary course of business. Barnwell’s management is not aware of any claims or litigation involving Barnwell that are likely to have a material adverse effect on its results of operations, financial position or liquidity.

Other Matters

Barnwell is obligated to pay Nearco, Inc. 10.4% of Kaupulehu Developments’ gross receipts from real estate transactions. The fees represent compensation for promotion and marketing of Kaupulehu Developments’ property and were determined based on the estimated fair value of such services.

In conjunction with the closing of the Increment II transaction in fiscal 2006, Kaupulehu Developments entered into an agreement to pay its external real estate legal counsel 1.5% of all Increment II percentage of sales payments received by Kaupulehu Developments for services provided by its external real estate legal counsel in the negotiation and closing of the Increment II transaction.