Litigation, Commitments and Contingencies (Notes)

12 Months Ended

Dec. 31, 2018

Commitments and Contingencies Disclosure [Abstract]

Litigation, Commitments and Contingencies

Litigation, Commitments and Contingencies

Litigation

We and our subsidiaries are parties to various legal, regulatory and other matters arising from the day-to-day operations of our businesses or certain predecessor operations that may result in claims against the Company. Although no assurance can be given, we believe, based on our experiences to date and taking into account established reserves and insurance, that the ultimate resolution of such items will not have a material adverse impact on our business, financial position, results of operations, cash flows, or dividends to our shareholders. We believe we have meritorious defenses to the matters to which we are a party and intend to vigorously defend the Company. When we determine a loss is probable of occurring and is reasonably estimable, we accrue an undiscounted liability for such contingencies based on our best estimate using information available at that time. If the estimated loss is a range of potential outcomes and there is no better estimate within the range, we accrue the amount at the low end of the range. We disclose contingencies where an adverse outcome may be material, or in the

judgment of management, we conclude the matter should otherwise be disclosed. We had no accruals for any outstanding legal proceedings as of December 31, 2018 and 2017.

Base Line Terminal Project Litigation

On March 2, 2018, Arnett & Burgess Oilfield Construction Limited (“A&B”) filed a statement of claim and certificate of lis pendens, in the Court of Queen’s Bench of Alberta, against Alberta Envirofuels Inc. (“AEF”) and Base Line Terminal East Limited Partnership, by its general partner, KM Canada Rail Holdings GP Limited (“BLTELP”). A&B was a contractor on the Base Line Terminal Project (the “BTT Project”) and has claimed it is owed $21.2 million, inclusive of goods and services tax, asserting that BLTELP failed to pay A&B for work performed on the BTT Project under a construction services agreement.

On March 26, 2018, A&B filed a separate statement of claim, in the Court of Queen’s Bench of Alberta, against BLTELP solely, asserting that BLTELP failed to pay for work performed under a separate construction services agreement also related to the BTT Project. With respect to the second claim, A&B has claimed it is owed approximately $1.0 million, inclusive of goods and services tax. We dispute both claims and intend to defend against them vigorously.

On June 5, 2018, Barrier Coating Inc. (“Barrier”) filed a statement of claim and certificate of lis pendens in the Court of Queen’s Bench of Alberta against Enbridge Pipelines Inc., AEF, Strathcona County, BLTELP, KM Canada Rail Holdings GP Limited, Keyera Energy Ltd., Trans Mountain Pipeline ULC and Fabricom Inc. (“Fabricom”). Barrier is a subcontractor on the BTT Project and has a construction agreement with Fabricom (the “Fabricom Agreement”). In its claim, Barrier asserts that Fabricom has breached its obligations under the Fabricom Agreement and, as such, Fabricom owes damages to Barrier. The remaining defendants, including BLTELP, KM Canada Rail Holdings GP Limited and Trans Mountain Pipeline ULC, have been named in the claim as parties with registered interests on lands affected by the work performed by Barrier under the Fabricom Agreement. Barrier asserts that these parties were, collectively, unjustly enriched in the amount of $2.5 million. This matter has been resolved and dismissed without any payment from any Kinder Morgan affiliate.

On September 6, 2018, Fabricom Inc. (“Fabricom”) filed a statement of claim and certificate of lis pendens in the Court of Queen’s Bench of Alberta, against KM Canada Terminals ULC, BLTELP, Trans Mountain Pipeline ULC, AEF, Doran Stewart Oilfield Services (1990) Ltd., Alberta Envirofuels Inc., Enbridge Pipelines Inc., and Strathcona County. Fabricom was a contractor on the BTT Project, and claims that it is owed $30.4 million by BLTELP above the contract value for work performed on the BTT Project under a construction services agreement. Fabricom subsequently sent a notice of arbitration incorporating its claim. Pursuant to a provision in the construction services agreement, the dispute will be resolved by arbitration and the Court of Queen’s Bench matter will be stayed. We dispute this claim and intend to defend against it vigorously.

Commitments

Capital Commitments

As of December 31, 2018, we have commitments for purchases of property, plant, and equipment of $20.2 million which includes approximately $13.8 million of our proportional share of commitments through joint ownership of a joint venture.

Leases and Rights-of-Way Obligations

The table below depicts future gross minimum rental commitments under our operating leases and rights-of-way obligations as of December 31, 2018:

	Commitment
(In millions of Canadian dollars)
2019	61.8
2020	59.9
2021	59.0
2022	59.0
2023	43.2
Thereafter	9.4
Total minimum payments	292.3

The remaining terms on our operating leases range from one to twenty-five years. Total lease and rental expenses were $66.2 million, $69.8 million and $66.5 million for the years ended December 31, 2018, 2017 and 2016, respectively.

Contingencies

We and our subsidiaries are subject to various legal and regulatory actions and proceedings which arise in the normal course of business. While the final outcome of such actions and proceedings cannot be predicted with certainty, we believe that the resolution of such actions and proceedings will not have a material impact on our financial position or results of operations.

We and our subsidiaries are also subject to environmental cleanup and enforcement actions from time to time. Although we believe our operations are in substantial compliance with applicable environmental law and regulations, risks of additional costs and liabilities are inherent in pipeline and terminal operations, and there can be no assurance that we will not incur significant costs and liabilities. Moreover, it is possible that other developments, such as increasingly stringent environmental laws, regulations and enforcement policies under the terms of authority of those laws, and claims for damages to property or persons resulting from our operations, could result in substantial costs and liabilities to us.

Although it is not possible to predict the ultimate outcomes, we believe that the resolution of the environmental matters to which we and our subsidiaries are a party will not have a material adverse effect on our business, financial position, results of operations or cash flows. As of December 31, 2018, we had $0.1 million accrued for our outstanding environment matters and no accrual as of December 31, 2017.

Land Matters Consultation Initiative Trust

On January 30, 2015 Kinder Morgan established the Trust, a required regulatory liability in relation to the NEB's LMCI. The Trust was created to set aside funds collected through abandonment surcharges over a collection period established by the NEB. The NEB approved the amounts to be collected by the company in respect of future pipeline abandonment. Funds are transferred to the Trust account each billing cycle. As of December 31, 2018 and 2017, our Trust liability balance was $6.5 million and $4.8 million, respectively and we had Trust assets of $6.1 million and $4.3 million. The Trust liability amounts are included within Other Current Liabilities and Other Deferred Credits, and the Trust asset amount is recorded in Deferred Charges and Other Assets, on our accompanying consolidated balance sheet.