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Note 12 - Commitments and Contingencies

12 Months Ended

Sep. 30, 2023

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

12.

COMMITMENTS AND CONTINGENCIES

Long-Term Contracts

Due to the nature of the natural gas distribution business, Roanoke Gas enters into agreements with suppliers and pipelines to contract for natural gas commodity purchases, storage capacity and pipeline delivery capacity. Roanoke Gas obtains most of its natural gas supply through a third-party asset management contract. Roanoke Gas utilizes an asset manager to optimize the use of its transportation, storage rights and gas supply inventories, which helps to ensure a secure and reliable source of natural gas. Under the current asset management contract, Roanoke Gas has designated the asset manager to act as agent for its storage capacity and all gas balances in storage. Roanoke Gas retains ownership of gas in storage. Under provisions of this contract, Roanoke Gas is obligated to purchase its winter storage requirements from the asset manager during the spring and summer injection periods at market price. The table below details the volumetric obligations as of September 30, 2023 for the remainder of the contract period. The current asset management contract was renewed in September 2022 for a two-year period which will expire in March 2025. The contract was renewed at essentially the same terms and conditions as the prior agreement, except the utilization fee retained by Roanoke Gas increased.

		*Natural Gas Contracts*
Year		*(In DTHs)*
2023-2024			2,089,220
2024-2025			295,866
Total			2,385,086

In addition to the volumetric commitment above, the Company also has fixed price agreements to purchase approximately 1.1 million DTH, from October 2023 to March 2024, at prices ranging from $2.75 to $4.57 per DTH.

Roanoke Gas also has contracts for pipeline and storage capacity which extend for various periods. These capacity costs and related fees are valued at tariff rates in place as of September 30, 2023. These rates may increase or decrease in the future based upon rate filings and rate orders granting a rate change to the pipeline or storage operator. Roanoke Gas expended approximately $44,253,000 and $51,408,000 under the asset management, pipeline and storage contracts in fiscal years 2023 and 2022, respectively. The table below details the pipeline and storage capacity commitments as of September 30, 2023 for the remainder of the contract period.

		*Pipeline and*
Year		*Storage Capacity*
2023 - 2024		$	14,071,706
2024 - 2025			10,510,104
2025 - 2026			6,604,410
2026 - 2027			5,411,934
2027 - 2028			2,110,556
Thereafter			127,196
Total		$	38,835,906

Roanoke Gas maintains franchise agreements granted by the local cities and towns served by the Company. Roanoke Gas renewed its franchise agreements with the City of Roanoke, the City of Salem and the Town of Vinton in 2016 for 20-year terms to expire in December 2035. Per these agreements, franchise fees increase at a rate of 3% annually. As of September 30, 2023, $1,942,731 in future obligations remain under the franchise agreements.

Other Contracts

The Company has a contract in place for approximately $1.2 million to complete the two gate stations that interconnect with the MVP.

The Company maintains other agreements in the ordinary course of business covering various maintenance, equipment, user fees and service contracts. These agreements currently extend through December 2031 and are not material to the Company.

Environmental Matters

Roanoke Gas operated an MGP as a source of fuel for lighting and heating until the early 1950’s. A by-product of operating the MGP was coal tar, and the potential exists for tar waste contaminants at the former plant site. While the Company does not currently recognize any commitments or contingencies related to environmental costs, should the Company ever be required to remediate the site, it will pursue all prudent and reasonable means to recover any related costs, including the use of insurance claims and regulatory approval for rate case recognition of expenses associated with any work required.