Commitments and Contingencies

3 Months Ended

Mar. 31, 2021

Commitments and Contingencies Disclosure [Abstract]

Legal Proceedings

The Partnership is a party to ongoing legal proceedings in the ordinary course of business. For each outstanding legal matter, if any, we will evaluate the merits of the case, exposure to the matter, possible legal or settlement strategies and the likelihood of an unfavorable outcome. While the outcome of these proceedings cannot be predicted with certainty, we do not believe the results of these proceedings, individually or in the aggregate, will have a material adverse effect on the Partnership's business, financial condition, results of operations or liquidity.

Indemnification

Under our omnibus agreement, our Parent will indemnify us for certain environmental liabilities, litigation and other matters attributable to the ownership or operation of our assets prior to our ownership. For the purposes of determining the indemnified amount of any loss suffered or incurred by the Partnership, the Partnership’s ownership of 28.5% in Mars and 65% in Mardi Gras, and Mardi Gras’ 56% ownership in Caesar, 53% ownership in Cleopatra, 65% ownership in Endymion and 65% ownership in Proteus will be considered. Indemnification for certain identified environmental liabilities is subject to a cap of $25.0 million without any deductible. Other matters covered by the omnibus agreement are subject to a cap of $15.0 million and an aggregate deductible of $0.5 million before we are entitled to indemnification. Indemnification for any unknown environmental liabilities was limited to liabilities due to occurrences on or before October 30, 2017, which were identified prior to October 30, 2020. We continue to maintain indemnification by our general partner for matters previously discovered. To the extent that unknown environmental liabilities arise relating to prior ownership, the Partnership will be liable.

The Interest Purchase Agreement contains customary representations, warranties and covenants of our Parent and the Partnership. Our Parent, on the one hand, and the Partnership, on the other hand, have agreed to indemnify each other and their respective affiliates, officers, directors and other representatives against certain losses, including those resulting from any breach of their representations, warranties or covenants contained in the Interest Purchase Agreement, subject to certain limitations and survival periods. This agreement covers the Partnership’s ownership of 22.7% in Ursa and 25% in KM Phoenix.

Environmental Matters

We are subject to federal, state, and local environmental laws and regulations. We record provisions for environmental liabilities based on management’s best estimates, using all information that is available at the time. In making environmental liability estimations, we consider the material effect of environmental compliance, pending legal actions against us and potential third-party liability claims. Often, as the remediation evaluation and effort progress, additional information is obtained, requiring revisions to estimated costs. We are indemnified by our Parent under the omnibus agreement against environmental cleanup costs for incidents that occurred prior to Partnership ownership. Revisions to the estimated environmental liability for conditions that are not indemnified under the omnibus agreement with our Parent are reflected in the Partnership's condensed consolidated statements of operations in the year in which they are probable and reasonably estimable.

We accrued $3.6 million and $3.4 million for environmental liabilities at March 31, 2021 and December 31, 2020, respectively. These balances are broken down on the condensed consolidated balance sheets as follows:


	Balance sheet location	March 31, 2021		December 31, 2020
Current portion of environmental remediation obligations	Other current liabilities	$	0.5	$	0.4
Long-term portion of environmental remediation obligations	Other liabilities	3.1		3.0
Total		$	3.6	$	3.4

The balances are related to incidents that occurred prior to our ownership and are entirely indemnified by our Parent. As a result, we recorded corresponding indemnification assets $3.6 million and $3.4 million at March 31, 2021 and December 31, 2020, respectively. These balances are broken down on the condensed consolidated balance sheets as follows:


	Balance sheet location	March 31, 2021		December 31, 2020
Current portion of indemnification assets	Other current assets	$	0.5	$	0.4
Non-current portion of indemnification assets	Other assets	3.1		3.0
Total		$	3.6	$	3.4

Griffith Station Incident

On June 13, 2019, a building fire occurred at the Griffith Station on BP2. Management performed an evaluation of the assets and determined that an impairment was required. We have incurred $0.1 million for response expense during each of the three months ended March 31, 2021 and 2020. Our assets are insured with a deductible of $1.0 million per incident. Total costs associated with the incident were offset with an insurance receivable of $2.5 million under "Other current assets" on our condensed consolidated balance sheets as of March 31, 2021 and December 31, 2020. In the event that insurance proceeds exceed the receivable balance, such amounts would be recognized as a gain. Refer to Note 13 - Commitments and Contingencies in the Partnership's 2020 10-K for additional information.