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Commitments And Contingencies
12 Months Ended
Dec. 31, 2013
Commitments And Contingencies [Abstract]  
Commitments And Contingencies

NOTE 11 —  COMMITMENTS AND CONTINGENCIES

 

Services Agreement

 

We have entered into the Services Agreement with QRM as described in Note 18 – Related Party Transactions. Beginning January 1, 2013, QRM is entitled to a quarterly reimbursement of general and administrative charges based on the allocation of charges between the Fund and us based on the estimated use of such services by each party.  Through December 31, 2012, QRM was entitled to a quarterly administrative services fee equal to 3.5% of the Adjusted EBITDA, as defined by the Services Agreement, generated by us during the preceding quarter, calculated prior to the payment of the fee. 

 

Property Reclamation Deposit

 

In connection with the December 2012 Transaction, we acquired a property reclamation deposit for future abandonment and remediation obligations. In connection with a 2006 acquisition between ExxonMobil Corporation and the Fund, $10.7 million was required to be deposited into an escrow account as security for abandonment and remediation obligations. As of December 31, 2013 and 2012, $10.7 million was recorded in other assets related to the deposit. We are required to maintain the escrow account in effect for three years after all abandonment and remediation obligations have been completed. The funds in the escrow account are not to be returned to the Partnership until the later of three years after satisfaction of all abandonment obligations or December 31, 2026. At certain dates subsequent to closing, we have the right to request a refund of a portion or all of the property reclamation deposit. Granting of the request is at the seller’s sole discretion.  In addition to the cash deposit, we were required to provide a $3.0 million letter of credit; the agreement also requires an additional $3.0 million letter of credit to be issued in favor of the seller each year through 2012. Letters of credit totaling $23.5 million are issued as of December 31, 2013.

 

Environmental Contingencies

 

As of December 31, 2013 and 2012, we have approximately $2.3 million and $1.9 million in environmental liabilities, respectively, related to the 2013 East Texas Acquisition and the Prize Acquisition.  This is management’s best estimate of the costs of remediation and restoration with respect to these environmental matters, although the ultimate cost could differ materially.  The environmental liability is recorded in Other liabilities on the consolidated balance sheet.  Inherent uncertainties exist in these estimates primarily due to unknown conditions, changing governmental regulation and legal standards regarding liability, and emerging remediation technologies for handling site remediation and restoration.

 

NPI Obligation

 

As a part of the December 2012 Acquisition, we assumed a net profit interest obligation. Under the arrangement with the outside interest, we carry the working interest until historical expenditures are recovered. Once the expenditures are recovered, we will not carry the interest but will retain the future development costs and abandonment obligation which is currently reflected in our asset retirement obligations as of December 31, 2013. The cost of this future obligation is funded through current proceeds attributable to the owner’s interest.

 

Lease Guarantees

 

The Fund has entered into various lease contracts that can routinely extend beyond five years which list the Partnership as a guarantor. In December 2012, we were named guarantor for QRM’s office lease in Houston, Texas with an approximate value of $26.8 million that terminates in 2022.  Beginning in 2013, we were allocated a portion of this obligation as part of the general and administrative expense allocation process.

 

Legal Proceedings

 

In the ordinary course of business, we are involved in various legal proceedings. To the extent we are able to assess the likelihood of a negative outcome for these proceedings, our assessments of such likelihood range from remote to probable. If we determine that a negative outcome is probable and the amount of loss is reasonably estimable, we accrue the estimated amount. We do not believe that the outcome of these legal proceedings, individually or in the aggregate, will have a materially adverse effect on our financial condition, results of operations or cash flows.

 

Operating Lease Commitments

 

QRM is party to an office lease worth approximately $26.8 million that expires in 2022. Beginning in 2013, we were allocated a portion of this expense as part of the general and administrative expense allocation process discussed in Note 19 – Related Party Transactions.