Marcellus Share Firm Transportation Contracts (Notes)

9 Months Ended

Sep. 30, 2018

Commitments and Contingencies Disclosure [Abstract]

Marcellus Shale Firm Transportation Contracts

Note 12. Marcellus Shale Firm Transportation Contracts

On June 28, 2017, we closed the sale of all of our Marcellus Shale upstream assets, which were primarily natural gas properties. In connection with the divestiture, we retained certain firm transportation commitments to flow Marcellus Shale natural gas production to various markets inside and outside of the Marcellus Basin. As of September 30, 2018, our financial commitment for these agreements, which have remaining terms of approximately four to fifteen years, is approximately $1.5 billion, undiscounted. The agreements relate to firm transportation commitments on certain pipelines which were placed into service in late 2017 and early 2018 or to services on new pipeline projects to be constructed by, and connected to, existing and new interstate pipeline systems, with estimated in-service dates in December 2018. The contracts with estimated fourth quarter 2018 in-service dates represent approximately $925 million, undiscounted, of the total undiscounted commitment of approximately $1.5 billion.

In 2017, we accrued non-cash exit costs totaling $93 million, discounted, relating to:

• $41 million, discounted, for a retained transportation contract for a pipeline project that is in service; however, we no longer have production to satisfy this commitment and we do not have plans to utilize this capacity in the future; and

• $52 million, discounted, for future commitments to a third party who assumed a portion of our retained capacity relating to pipeline projects that were placed into service.

The non-cash exit costs were included in loss on Marcellus Shale exit activities in our consolidated statements of operations in 2017 in accordance with accounting for exit or disposal activities under ASC 420, Exit or Disposal Cost Obligations.

The change in the Marcellus Shale firm transportation commitment, discounted, is as follows:

(millions)	September 30, 2018			December 31, 2017
Balance at Beginning of Period	$	90		$	—
Firm Transportation Accrual	—			93
Payments	(9		)	(3		)
Balance at End of Period	$	81		$	90
Less Current Portion Included in Other Current Liabilities	12			14
Long-term Portion Included in Other Noncurrent Liabilities	$	69		$	76

We are currently engaged in efforts to commercialize these firm transportation commitments which provide for the transportation of 450,000 MMBtu/d of natural gas. Efforts include the permanent assignment of capacity, negotiation of capacity release, utilization of capacity through purchase of third party natural gas, and other potential arrangements. Beginning in first quarter 2018, we entered into purchase transactions of third party natural gas and separate sale transactions to other third parties at prevailing market prices to mitigate these firm transportation commitments. Revenues and expenses from these transactions are recorded on a gross basis, as we act as a principal in these arrangements by assuming control of the purchased commodity before it is transferred to the customer.

The components of revenues and expenses associated with these transactions are as follows:

		Three Months Ended September 30,					Nine Months Ended September 30,
(millions)	Statements of Operations Location	2018			2017		2018			2017
Sales of Purchased Gas	Sales of Purchased Oil and Gas and Other	$	26		$	—	$	81		$	—
Cost of Purchased of Gas	Other Operating Expense (Income), Net	$	24		$	—	$	77		$	—
Firm Transportation Expense	Other Operating Expense (Income), Net	7			—		18			—
Unutilized Firm Transportation Expense	Other Operating Expense (Income), Net	1			—		3			—
Purchased Gas, Total	Other Operating Expense (Income), Net	$	32		$	—	$	98		$	—
Sales of Purchased Gas, Net		$	(6	)	$	—	$	(17	)	$	—

We expect to continue our commercialization actions, including utilizing pipeline capacity through purchase transactions of third party natural gas and separate sale transactions to other third parties, to mitigate these firm transportation commitments. Some of our commercialization efforts may require pipeline and/or FERC approval to ultimately reduce our financial commitment associated with these contracts. At the date each pipeline is placed in service and our commitment begins, we will evaluate our position. If we determine that we will not utilize a portion, or all, of the contracted pipeline capacity, we will accrue a liability at fair value for the net amount of the estimated remaining financial commitment. We cannot guarantee our commercialization efforts will be successful and we may recognize substantial future liabilities. See Note 2. Basis of Presentation and Note 3. Acquisitions and Divestitures.