Marcellus Shale Firm Transportation Commitments

12 Months Ended

Dec. 31, 2018

Commitments and Contingencies Disclosure [Abstract]

Marcellus Shale Firm Transportation Commitments

Note 10. Marcellus Shale Firm Transportation Commitments

On June 28, 2017, we closed the sale of our Marcellus Shale upstream assets, which were primarily natural gas properties. In connection with the divestiture, we retained certain financial commitments on pipelines flowing natural gas production inside and outside of the Marcellus Basin. These financial commitments represent commitments to pay transportation fees; thus, we have no commitment to physically transport minimum volumes of natural gas.

Since closing, we have continued efforts to commercialize these firm transportation commitments including the permanent assignment of capacity, negotiation of capacity releases, utilization of capacity through purchase and transport of third-party natural gas, and other potential arrangements. In the event we execute a permanent assignment of capacity, we no longer have a contractual obligation to the pipeline company and, as such, our gross contractual commitment is reduced. In the event we execute a capacity release or utilize the capacity through the purchase and transport of third-party natural gas, we remain the primary obligor to the pipeline company. While our gross contractual commitment is not reduced, except through use under those arrangements, we would receive future cash payments from the third-parties with whom we negotiated a capacity release or from the sale of purchased natural gas to third-parties.

As of December 31, 2018, our gross retained firm transportation commitment for the remaining obligations under these agreements, which have remaining terms of approximately four to fifteen years, is approximately $1.5 billion, undiscounted. See Note 11. Commitments and Contingencies.

One of the retained contracts relates to the Texas Eastern Pipeline. This contract is being fully utilized through a capacity release agreement with the acquirer of the Marcellus Shale upstream assets. The financial commitment on this contract is being fully mitigated by a netback agreement with the purchaser.

One of the retained contracts relates to the Appalachian Gateway Project. In 2017, we recorded an exit cost of $41 million, discounted, related to this contract, as we no longer have production to satisfy the commitment and do not plan to utilize this capacity in the future.

Additional retained contracts relate to the Leach Xpress and Rayne Xpress (Leach/Rayne Xpress) pipelines. In 2017, we permanently assigned a portion of the capacity, recording an exit cost of $52 million, discounted, related to future commitments to the third-party. Throughout 2018, we mitigated the impact of the remaining capacity through purchasing third-party natural gas and selling the natural gas to other third parties at prevailing market prices. Revenues and expenses associated with these activities 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.

In addition to the retained firm transportation commitments, we also have the following accrued discounted liabilities associated with the exit cost activities described above:

	December 31,
(millions)	2018			2017
Balance at Beginning of Period	$	90		$	—
Marcellus Exit Cost Accrual	—			93
Payments, Net of Accretion	(10		)	(3		)
Balance at End of Period	$	80		$	90
Less Current Portion Included in Other Current Liabilities	13			14
Long-term Portion Included in Other Noncurrent Liabilities	$	67		$	76

Two additional retained contracts relate to the WB Xpress and NEXUS pipelines. In fourth quarter 2018, we entered into capacity release agreements with third parties extending through March and October 2020, respectively. Revenues and expenses associated with these agreements, as well as those associated with purchasing and selling third-party natural gas to mitigate Leach/Rayne Xpress capacity, are as follows:

		Year Ended December 31,
(millions)	Statements of Operations Location	2018		2017		2016
Sales of Purchased Gas	Sales of Purchased Oil and Gas and Other	$	113	$	—	$	—
Cost of Purchased of Gas	Other Operating Expense, Net	108		—		—
Utilized Firm Transportation Expense (1)	Other Operating Expense, Net	29		—		—
Unutilized Firm Transportation Expense	Other Operating Expense, Net	3		—		—
Cost of Purchased Gas, Total	Other Operating Expense, Net	$	140	$	—	$	—

⁽¹⁾  Includes the net impact of the difference in the firm transportation contract rates and the rates agreed to in the capacity releases. Additionally, amount includes transportation expense associated with our transport of purchased natural gas on Leach/Rayne Xpress.

We expect to continue our commercialization actions, including utilizing pipeline capacity through purchases of third-party natural gas and sales 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 the financial commitment associated with these contracts. 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 5. Acquisitions and Divestitures.

Subsequent Event In January 2019, we executed agreements on Leach/Rayne Xpress to permanently assign the remaining capacity to a third-party effective January 1, 2021 extending through the remainder of the contract term. The permanent assignment reduces our total undiscounted financial commitment under the Marcellus Shale firm transportation contracts by approximately $350 million. In January 2019, we recorded exit costs of $92 million, discounted, related to future commitments to the third-party. We will continue efforts to mitigate the impact of these transportation agreements during 2019 and 2020.