Commitments and Contingencies

12 Months Ended

Mar. 31, 2024

Commitments and Contingencies Disclosure [Abstract]

Legal Contingencies

In August 2015, LCT Capital, LLC (“LCT”) filed a lawsuit against the GP and the Partnership seeking payment for investment banking services relating to the purchase of TransMontaigne Inc. and related assets in July 2014. After pre-trial rulings, LCT was limited to pursuing claims of (i) quantum meruit (the value of the services rendered by LCT) and (ii) fraudulent misrepresentation against the defendants. Following a jury trial conducted in Delaware state court from July 23, 2018 through August 1, 2018, the jury returned a verdict consisting of an award of $4.0 million for quantum meruit and $29.0 million for fraudulent misrepresentation, subject to statutory interest. On December 5, 2019, in response to the defendants’ post-trial motion, the Court issued an Order overturning the jury’s damages award and ordering the case to be set for a damages-only trial (“December 5th Order”). Both parties filed applications with the trial court asking the trial court to certify the December 5th Order for interlocutory, immediate review by the Appellate Court. On January 7, 2020, the Supreme Court of Delaware entered an Order accepting an interlocutory appeal of various issues relating to both the quantum meruit and fraudulent misrepresentation verdicts. The Supreme Court of Delaware heard oral arguments of the parties on November 4, 2020, took the matters presented under advisement and on January 28, 2021, issued a ruling that (a) LCT is not entitled to “benefit-of-the-bargain” damages on its fraud claim; (b) LCT is not entitled to receive fraudulent misrepresentation damages separate from its quantum meruit damages; (c) the trial court abused its discretion when it ordered a new trial on damages

relating to LCT’s claim of fraudulent misrepresentation; and (d) the trial court properly ordered a new trial on LCT’s claim of quantum meruit damages. The re-trial of the quantum meruit claim was conducted in Delaware state court from February 6, 2023 through February 15, 2023 and resulted in the jury returning a verdict consisting of an award of $36.0 million, subject to statutory interest and costs, as applicable. The GP and the Partnership contend that the jury verdict is not supportable by controlling law or the evidentiary record, and on July 28, 2023, filed their notice of appeal to the Supreme Court of Delaware which raises various issues relating to the quantum meruit verdict, including but not limited to, certain written orders and oral evidentiary and other rulings made prior to and during the February 2023 remand trial. On October 12, 2023, LCT filed its answering brief on appeal and cross-appellant’s opening brief on cross-appeal. The GP and the Partnership filed their reply and answering brief on cross-appeal on November 13, 2023. On February 7, 2024, the Supreme Court of Delaware held before the Court en Banc oral arguments for the appeal matters. On May 28, 2024, the Supreme Court of Delaware affirmed the jury verdict and remanded the case back to the trial court to re-calculate the amount of the pre- and post-judgment interest accrual. As of March 31, 2024, we accrued $62.1 million related to this matter, of which approximately $26.1 million represents interest accrued through March 31, 2024 and $0.1 million of costs awarded to the plaintiff. Interest will continue to accrue until the amount of the judgment is paid.

The Partnership is a party defendant to a purported class action complaint filed in the federal court in the Northern District of Oklahoma styled Gary R. Underwood, Successor Trustee for the James L. Price Revocable Living Trust, on behalf of the Trust and all others similarly situated v. NGL Energy Partners LP, Case No. 4:21-cv-00135-CVE-SH. This case seeks class certification on behalf of owners who allege the Partnership’s Crude Oil Logistics group violated Oklahoma’s Production Revenue Standards Act when it failed to include statutory interest on proceeds payments it made to certain mineral owners and to state unclaimed property divisions for oil purchased from certain Oklahoma wells. A substantial portion of the statutory interest claimed to be owed in the lawsuit related to suspended proceeds we inherited from our predecessors and remitted to various state unclaimed property divisions in 2016. With no admission of liability or wrongdoing, but only to avoid the expense and uncertainty of future litigation, the Partnership entered into a settlement agreement in this case to resolve all claims made against it by the plaintiff and the proposed class and paid approximately $8.4 million to the plaintiff and the proposed class. During the final fairness hearing on June 15, 2023, the settlement agreement was approved by the court and an order granting final approval of the class action settlement was entered into record.

We are party to various other claims, legal actions, and complaints arising in the ordinary course of business. In the opinion of our management, the ultimate resolution of these claims, legal actions, and complaints, after consideration of amounts accrued, insurance coverage, and other arrangements, is not expected to have a material adverse effect on our consolidated financial position, results of operations or cash flows. However, the outcome of such matters is inherently uncertain, and estimates of our liabilities may change materially as circumstances develop.

Environmental Matters

At March 31, 2024, we have an environmental liability, measured on an undiscounted basis, of $1.3 million, which is recorded within accrued expenses and other payables in our consolidated balance sheet. Our operations are subject to extensive federal, state, and local environmental laws and regulations. Although we believe our operations are in substantial compliance with applicable environmental laws and regulations, risks of additional costs and liabilities are inherent in our business, and there can be no assurance that we will not incur significant costs. Moreover, it is possible that other developments, such as increasingly stringent environmental laws, regulations and enforcement policies thereunder, and claims for damages to property or persons resulting from the operations, could result in substantial costs. Accordingly, we have adopted policies, practices, and procedures in the areas of pollution control, product safety, occupational health, and the handling, storage, use, and disposal of hazardous materials designed to prevent material environmental or other damage, and to limit the financial liability that could result from such events. However, some risk of environmental or other damage is inherent in our business.

Asset Retirement Obligations

We have contractual and regulatory obligations at certain facilities for which we have to perform remediation, dismantlement or removal activities when the assets are retired. Our liability for asset retirement obligations is discounted to present value. To calculate the liability, we make estimates and assumptions about the retirement cost and the timing of retirement. Changes in our assumptions and estimates may occur as a result of the passage of time and the occurrence of future events.

The following table summarizes changes in our asset retirement obligations, which is reported within other noncurrent liabilities in our consolidated balance sheets (in thousands):


Asset retirement obligations at March 31, 2022	$	29,941
Liabilities incurred	3,880
Liabilities associated with disposed assets (1)	(1,493)
Liabilities settled	(391)
Accretion expense	3,226
Asset retirement obligations at March 31, 2023	35,163
Liabilities incurred	23,088

Liabilities associated with disposed assets (2)	(3,718)
Liabilities settled	(222)
Liabilities held for sale (3)	(356)
Accretion expense	2,619
Asset retirement obligations at March 31, 2024	$	56,574

(1) Relates to the sale of certain saltwater disposal wells and other long-lived assets within our Water Solutions segment (see Note 17).

(2) Relates to the sale of certain saltwater disposal wells and other long-lived assets within our Water Solutions segment and the sale of a natural gas liquids terminal in our Liquids Logistics segment (see Note 17).

(3) Relates to asset retirement obligations classified as held for sale for the sale of certain saltwater disposal assets within our Water Solutions segment (see Note 17).

In addition to the obligations described above, we may be obligated to remove facilities or perform other remediation upon retirement of certain other assets. However, the fair value of the asset retirement obligation cannot currently be reasonably estimated because the settlement dates are indeterminable. We will record an asset retirement obligation for these assets in the periods in which settlement dates are reasonably determinable.

Pipeline Capacity Agreement

We have a noncancelable agreement with a crude oil pipeline operator, which guarantees us minimum monthly shipping capacity on the pipeline. As a result, we are required to pay the minimum shipping fees if actual shipments are less than our allotted capacity. Under this agreement, we have the ability to recover minimum shipping fees previously paid if our shipping volumes exceed the minimum monthly shipping commitment during each month remaining under the agreement, and this agreement allows us to continue shipping up to six months after the maturity date of the contract in order to recapture previously paid minimum shipping delinquency fees.

The future minimum throughput payments under this agreement at March 31, 2024 were $30.4 million, of which all will be recognized during the year ending March 31, 2025.

Sales and Purchase Contracts

We have entered into product sales and purchase contracts for which we expect the parties to physically settle and deliver the inventory in future periods.

At March 31, 2024, we had the following commodity purchase commitments:


	Crude Oil (1)			Natural Gas Liquids
	Value		Volume (in barrels)	Value		Volume (in gallons)
	(in thousands)
Fixed-Price Commodity Purchase Commitments:
Year Ending March 31,
2025	$	76,134	1,037	$	25,413	33,204
2026	—		—	4,464		6,510
2027	—		—	2,963		4,284

Total	$	76,134	1,037	$	32,840	43,998

Index-Price Commodity Purchase Commitments:
Year Ending March 31,
2025	$	3,658,596	46,617	$	950,129	996,662
2026	721,488		10,506	40,873		56,053
2027	—		—	12,642		25,200

Total	$	4,380,084	57,123	$	1,003,644	1,077,915

(1) Our crude oil index-price purchase commitments exceed our crude oil index-price sales commitments (presented below) due primarily to our long-term purchase commitments for crude oil that we purchase and ship on the Grand Mesa Pipeline. As these purchase commitments are deliver-or-pay contracts, whereby our counterparty is required to pay us for any volumes not delivered, we have not entered into corresponding long-term sales contracts for volumes we may not receive.

At March 31, 2024, we had the following commodity sale commitments:


	Crude Oil			Natural Gas Liquids
	Value		Volume (in barrels)	Value		Volume (in gallons)
	(in thousands)
Fixed-Price Commodity Sale Commitments:
Year Ending March 31,
2025	$	76,593	1,037	$	35,840	38,377
2026	—		—	4,888		6,136
2027	—		—	3,140		4,247
2028	—		—	74		80
Total	$	76,593	1,037	$	43,942	48,840

Index-Price Commodity Sale Commitments:
Year Ending March 31,
2025	$	2,953,808	35,749	$	538,274	479,487
2026	30,068		390	2,080		2,007


Total	$	2,983,876	36,139	$	540,354	481,494

We account for the contracts shown in the tables above using the normal purchase and normal sale election. Under this accounting policy election, we do not record the physical contracts at fair value at each balance sheet date; instead, we record the purchase or sale at the contracted value once the delivery occurs. Contracts in the tables above may have offsetting derivative contracts (described in Note 10) or inventory positions (described in Note 2).

Certain other forward purchase and sale contracts do not qualify for the normal purchase and normal sale election. These contracts are recorded at fair value in our consolidated balance sheet and are not included in the tables above. These

contracts are included in the derivative disclosures in Note 10, and represent $52.2 million of our prepaid expenses and other current assets and $34.7 million of our accrued expenses and other payables at March 31, 2024.

Other Commitments

We have noncancelable agreements for product storage, railcar spurs, capital projects and real estate. The following table summarizes future minimum payments under these agreements at March 31, 2024 (in thousands):


Year Ending March 31,
2025	$	34,815
2026	6,379
2027	6,405
2028	2,353
2029	2,136
Thereafter	3,587
Total	$	55,675

As part of the acquisition of Hillstone Environmental Partners, LLC, we assumed an obligation to pay a quarterly subsidy payment in the event that specified volumetric thresholds are not exceeded at a third-party facility (“Subsidy Agreement”). During the years ended March 31, 2023 and 2022, we recorded $1.3 million and $2.1 million, respectively, within operating expense in our consolidated statements of operations. The Subsidy Agreement expired on December 31, 2022.