COMMITMENTS AND CONTINGENCIES

Lease Commitments

Barnwell has several non-cancelable operating leases for office space, contract drilling base yard space and leasehold land, and records rent on a straight-line basis over the lease term. Rental expense was $426,000 and $404,000 for the years ended September 30, 2017 and 2016, respectively. At September 30, 2017, the difference between the recognized rent expense and the amounts paid totaled $21,000 and was reported as a non-current liability within "Deferred rent" on the Consolidated Balance Sheet. There was no deferred rent liability at September 30, 2016. Barnwell is committed under these leases for minimum rental payments summarized by fiscal year as follows:



Fiscal year ending
2018	$	298,000
2019	277,000
2020	277,000
2021	277,000
2022	219,000
Thereafter through 2047	6,482,000
Total	$	7,830,000

The lease payments for the Lot 4C 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.

Environmental Matters

In February 2016, a gas migration was detected at one of our previously abandoned non-operated wells in Alberta, Canada. Barnwell’s working interest in the well is 50% and as non-operator we have no control over the actual cost or timing of the remediation. In February 2016, we accrued approximately $200,000 for estimated probable environmental remediation costs, which was the balance of the accrual in "Accrued operating and other expenses" at September 30, 2016. However, based on recent information from the operator of the well, the cost to remediate will be less than originally estimated and the remaining liability is approximately $2,000 at September 30, 2017, which has not been discounted and was accrued in "Accrued operating and other expenses" on the Consolidated Balance Sheets.

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.

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 Enterprises Ltd. 10.4%, net of non-controlling interests' share, 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. These fees are included in general and administrative expenses.

Barnwell is obligated to pay its external real estate legal counsel 1.2%, net of non-controlling interests' share, of all Increment II 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. These fees are included in general and administrative expenses.