Note 17. Commitments and Contingencies

Legal Proceedings We are involved in various legal proceedings in the ordinary course of business. These proceedings are subject to the uncertainties inherent in any litigation. We are defending ourselves vigorously in all such matters and we believe that the ultimate disposition of such proceedings will not have a material adverse effect on our financial position, results of operations or cash flows.

Colorado Air Matter In April 2015, we entered into a joint consent decree (Consent Decree) with the US Environmental Protection Agency, US Department of Justice, and State of Colorado to improve emission control systems at a number of our condensate storage tanks that are part of our upstream crude oil and natural gas operations within the Non-Attainment Area of the DJ Basin. The Consent Decree was entered by the US District Court for the District of Colorado on June 2, 2015.

The Consent Decree, which alleges violations of the Colorado Air Pollution Prevention and Control Act and Colorado’s federal approved State Implementation Plan, specifically Colorado Air Quality Control Commission Regulation Number 7, requires us to perform certain injunctive relief activities and to complete mitigation projects and supplemental environmental projects (SEP), and pay a civil penalty. Costs associated with the settlement consist of $4.95 million in civil penalties which were paid in 2015. Mitigation costs of $4.5 million and SEP costs of $4 million are being expended in accordance with schedules established in the Consent Decree. Costs associated with the injunctive relief are also being expended in accordance with schedules established in the Consent Decree. Over the last three years, 2015 through 2017, we spent approximately $72.0 million to undertake injunctive relief at certain tank systems following the outcome of adequacy of design evaluations and certain operation and maintenance activities to handle potential peak instantaneous vapor flow rates. Future costs associated with injunctive relief are not yet precisely quantifiable as we are continually evaluating various approaches to meet the ongoing obligations of the Consent Decree.

Overall compliance with the Consent Decree has resulted in the temporary shut-in and permanent plugging and abandonment of certain wells and associated tank batteries. Consent Decree compliance could result in additional temporary shut-ins and permanent plugging and abandonment of certain wells and associated tank batteries. The Consent Decree sets forth a detailed compliance schedule with deadlines for achievement of milestones through early 2019 that may be extended depending on certain situations. The Consent Decree contains additional obligations for ongoing inspection and monitoring beyond that which is required under existing Colorado regulations.

We have concluded that the penalties, injunctive relief, and mitigation expenditures that resulted from this settlement did not have, and based on currently available information will not have, a material adverse effect on our financial position, results of operations or cash flows.

Colorado Water Quality Control Division Matter In January 2017, we received a Notice of Violation/Cease and Desist Order (NOV/CDO) advising us of alleged violations of the Colorado Water Quality Control Act (Act) and its implementing regulations as it relates to our Colorado Discharge Permit System General Permit for construction activities associated with oil and gas exploration and/or production within our Wells Ranch Drilling and Production field located in Weld County, Colorado (Permit). The NOV/CDO further orders us to cease and desist from all violations of the Act, the regulations and the Permit and to undertake certain corrective actions. Given the uncertainty associated with administrative actions of this nature, we are unable to predict the ultimate outcome of this action at this time but believe that the resolution of this action will not have a material adverse effect on our financial position, results of operations or cash flows.

Colorado Oil & Gas Conservation Commission Administrative Order on Consent In November 2017, we received a proposed Administrative Order on Consent (AOC) from the COGCC to resolve allegations of noncompliance associated with site preparation and stabilization at an oil and gas location in Weld County, Colorado. The AOC, which provides for an opportunity to further discuss the offer of settlement, has not yet been executed. Given the uncertainty associated with administrative actions of this nature, we are unable to predict the ultimate outcome of this action at this time but believe that the resolution of this action will not have a material adverse effect on our financial position, results of operations or cash flows.

Colorado Air Compliance Order on Consent In April 2017, we received a proposed Compliance Order on Consent (COC) from the Colorado Department of Public Health and Environment’s Air Pollution Control Division (APCD) to resolve allegations of noncompliance associated with compliance testing of certain engines subject to various General Permit 02 conditions and/or individual permit conditions. In May 2017, we reached a final resolution with the APCD and executed the COC, which requires payment of a civil penalty of $24,710 and an expenditure of no less than $98,840 on an approved SEP(s). This resolution is not believed to have a material adverse effect on our financial position, results of operations or cash flows.

Transportation and Gathering Obligations As part of our Marcellus Shale upstream divestiture, we retained certain transportation and gathering obligations to flow Marcellus Shale natural gas production to various markets inside and outside of the Marcellus Basin. Our financial commitment for these agreements, which have remaining terms of two to 16 years, is approximately $1.4 billion, undiscounted. The agreements for firm transportation primarily relate to services on certain pipelines which were recently placed into service in late 2017/early 2018 or for services on new pipeline projects to be constructed by, and connecting to, existing and new interstate pipeline systems with estimated in-service dates in late 2018. The associated commitments are included in the table below. See Note 1. Summary of Significant Accounting Policies – Exit Costs.

We also have transportation and gathering obligations to flow DJ Basin, Eagle Ford Shale, and Gulf of Mexico production to various markets. Our financial commitment for these agreements, which have remaining terms of one to 11 years, is approximately $781 million, undiscounted. The commitment is included in the table below.

Non-Cancelable Leases and Other Commitments We hold leases and other commitments for drilling rigs, buildings, equipment and other property. Rental expense for office buildings and oil and gas operations equipment was $69 million in 2017, $76 million in 2016, and $84 million in 2015.

Minimum commitments as of December 31, 2017 consist of the following:



(millions)	Drilling, Equipment, and Purchase Obligations		Transportation and Gathering Obligations		Operating Lease Obligations		Capital Lease and Other Obligations⁽¹⁾		Total
2018	$	636	$	215	$	44	$	74	$	969
2019	167		252		33		45		497
2020	40		247		32		42		361
2021	13		223		32		29		297
2022	8		182		33		21		244
2023 and Thereafter	32		1,355		156		124		1,667
Total	$	896	$	2,474	$	330	$	335	$	4,035


⁽¹⁾	Annual lease payments, net to our interest, exclude regular maintenance and operational costs. See Note 10. Long-Term Debt.