2.4.0.81070 - Disclosure - GAS PROCESSING AGREEMENTStruefalsefalse1false falsefalseD2013Q2YTDhttp://www.sec.gov/CIK0001086319duration2013-01-01T00:00:002013-06-30T00:00:001true 1gsxn_GasProcessingAgreementDisclosureAbstractgsxn_falsenadurationfalsefalsefalsefalsefalsefalsefalsefalse1falsefalsefalse00falsefalsefalsexbrli:stringItemTypestringfalse0GAS PROCESSING AGREEMENTS2false 2gsxn_GasProcessingAgreementDisclosureTextBlockgsxn_falsenadurationfalsefalsefalsefalsefalsefalsefalsefalseterseLabel1falsefalsefalse00<div style="font-size:10.0pt;font-family:Times New Roman;"> NOTE 7 — GAS PROCESSING AGREEMENTS   On September 21, 2011, the Company entered into a Gas Processing Agreement (the “Chipeta Processing Agreement”) with Chipeta Processing LLC (“Chipeta”) pursuant to which the Company dedicated certain of its natural gas production from its acreage in Utah to Chipeta for processing, and Chipeta agreed to process all natural gas production from such assets through facilities and related equipment that Chipeta constructed.   The primary term of the Chipeta Processing Agreement is ten years, beginning after the in-service date of a 300 MMcf/d cryogenic processing facility that was built and placed in service on February 7, 2013. The primary term will be extended for one-year terms unless terminated by either party giving 180 day’s notice prior to the expiration of the then-current term.   Pursuant to the Chipeta Processing Agreement, the Company reserved 25,000 Mcf/d of capacity in the Chipeta processing plant for cryogenic processing.  The Company agreed to pay specified processing fees per MMBtu as well as a pro rata share of all applicable electric compression costs, subject to escalation on an annual basis.  Under the agreement, the Company committed to deliver, on average, at least 90% of its contracted cryogenic capacity of 25,000 Mcf/d (the “Minimum Daily Quantity”) during each monthly accounting period. Following the first twelve monthly accounting periods, Chipeta may determine whether the Company failed to deliver equal to or greater than the Minimum Daily Quantity multiplied by the number of days in the annual accounting period.  If the Company delivered less than the quantity it committed to deliver, it would be required to pay a deficiency payment equal to the contracted cryogenic processing fee multiplied by the deficient quantity. In addition, to the extent that Chipeta has reasonable grounds for uncertainty regarding the performance of our obligations under the agreement, including a material change in the Company’s creditworthiness, Chipeta may sell the Company’s natural gas and apply amounts received against any amounts owed to Chipeta, set off any amount owed to the Company against amounts owed to Chipeta or cease processing our natural gas until the Company’s account is current, with interest.  Chipeta may also demand adequate assurance of performance from the Company, which may be in the form of a standby irrevocable letter of credit, prepayment or performance bond or guaranty. The Company has not received notification from Chipeta that it intends to pursue any of these options.   Historically, the Company’s natural gas production had been gathered and processed by Monarch Natural Gas, LLC (“Monarch”) pursuant to the Gas Gathering and Processing Agreement, effective March 1, 2010, between Monarch and the Company. On March 22, 2012, the Company entered into an Amended and Restated Gas Gathering and Processing Agreement (the “Amended and Restated Monarch Agreement”) with Monarch in which Monarch agreed to, among other things, (a) release and waive its rights to process the first 50,000 MMBtu/day of the Company’s gas delivered to Monarch’s gathering system pursuant to the Amended and Restated Monarch Agreement (the “Excluded Production”) and (b) retain all processing rights for all gas volumes produced from certain of the Company’s reserves in excess of the Excluded Production.  The Excluded Production may be reduced if the Company fails to meet certain drilling investment targets.  The Company is committed to deliver to Monarch for gathering a minimum of 25,000 Mcf/day and, unless suspended pursuant to the terms of the Amended and Restated Monarch Agreement or waived, it is obligated to pay for any shortfall following the end of each quarterly period, measured by the shortfall quantity for the quarter multiplied by the then-current gathering and processing fees under the Amended and Restated Monarch Agreement.   The Company has also entered into the Questar Wet Line Agreement (the “QPC Transportation Agreement”), dated September 20, 2011, with Questar Pipeline Company (“QPC”), pursuant to which the Company agreed to enter into separate transportation services agreements for firm transportation services. The Company is currently committed to deliver to QPC for transportation services a minimum of 25,000 MMBtu/day.   These contracts expire at various dates through 2023 and, unless suspended pursuant to the terms of the contracts or waived by the counterparty, the Company will be required to make periodic deficiency payments for any shortfalls in delivering the minimum volume commitments. These amounts are owed regardless of whether the Company delivers any natural gas quantities to the applicable parties. As described in Note 2 — Going Concern, herein, there is substantial doubt regarding the Company’s ability to generate sufficient cash flows from operations to fund its ongoing operations. If the Company is unable to fund additional drilling projects, and based on its June 30, 2013 reserve estimates, assuming no future drilling and constant gas prices, it estimates that it could have a possible future aggregate minimum production shortfall of approximately 48,000 MMcf valued at approximately $33 million on an undiscounted gross basis. The Company accrued $217,000 in shortfall commitments related to the six months ended June 30, 2013.   The Company is considering several alternatives to mitigate the estimated production shortfall such as the sale of its firm commitment positions, seeking relief from the firm commitments because of  legal delays in the area that prevented the Company from obtaining various governmental approvals and the purchase of production quantities to meet its minimum production requirements. Also, future increases in gas prices would increase the related reserve estimates and reduce the possible shortfalls. However, there is no assurance that the Company will be successful in accomplishing these actions should there be a shortfall. Accordingly, the Company has not accrued the future possible obligation as of June 30, 2013 as it is not probable or reasonably estimable. </div>falsefalsefalsenonnum:textBlockItemTypenaRepresents entire disclosure of gas processing agreement.No definition available.false0GAS PROCESSING AGREEMENTSfalseGAS PROCESSING AGREEMENTSUnKnownUnKnownUnKnownUnKnowntruefalsefalseSheethttp://www.gascoenergy.com/role/DisclosureGasProcessingAgreements12