Exit Cost - Transportation Commitments

12 Months Ended

Dec. 31, 2019

Commitments and Contingencies Disclosure [Abstract]

Note 11. Exit Cost – Transportation Commitments

In connection with the divestiture of Marcellus Shale upstream assets in 2017, we retained certain long-term financial commitments to pay transportation fees on certain pipelines in the Marcellus Basin. As of December 31, 2019, our undiscounted financial commitment for the remaining obligations under these agreements, which have remaining terms of three to fourteen years, was approximately $1.0 billion, which excludes the impact of ongoing mitigation activities to reduce and offset this cost. See Note 4. Acquisitions and Divestitures and Note 12. Commitments and Contingencies.

Our efforts to mitigate and thereby reduce these obligations primarily include permanent assignment of capacity, negotiation of capacity releases and utilization of capacity through purchase and transport of third-party natural gas. Revenues and expenses associated with mitigation activities are recorded in sales of purchased oil and gas and cost of purchased oil and gas, respectively, in our consolidated statements of operations. 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 financial 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 financial 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 a result of our mitigation activities, we reduced and offset our financial obligations by approximately $38 million and $8 million in 2019 and 2018, respectively.

Leach Xpress and Rayne Xpress Permanent Assignment In January 2019, we executed agreements on the Leach Xpress and Rayne Xpress pipelines to permanently assign the remaining capacity to a third-party effective January 1, 2021, extending through the remainder of the contract. The permanent assignment reduced our total financial commitment by approximately $350 million, undiscounted. As a result of the assignment, we recorded firm transportation exit cost at a fair value $92 million, representing the discounted, present value of our remaining obligation to the third-party. We will continue efforts to mitigate the impact of these transportation agreements through 2020.

Exit Costs Reconciliation of accrued exit costs at December 31, 2019 is as follows:



	December 31,
(millions)	2019			2018
Balance at Beginning of Period	$	80		$	90
Exit Cost Accrual⁽¹⁾	88			—
Payments, Net of Accretion	(5		)	(10		)
Balance at End of Period	$	163		$	80
Less Current Portion Included in Other Current Liabilities	34			13
Long-term Portion Included in Other Noncurrent Liabilities	$	129		$	67


⁽¹⁾	Amount includes $92 million exit cost for the permanent assigned discussed above, offset by a gain of $4 million.

Revenues and expenses associated with these long-term financial commitments, including mitigation activities discussed above, were as follows:



	Year Ended December 31,
(millions)	2019		2018		2017
Sales of Purchased Gas	$	90	$	113	$	—

Cost of Purchased of Gas	85		108		—
Utilized Firm Transportation Expense	57		29		—
Unutilized Firm Transportation Expense	1		3		—
Cost of Purchased Gas, Total	$	143	$	140	$	—