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Commitments and Contingencies | 3 Months Ended
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Mar. 31, 2023
Commitments And Contingencies. |
Commitments and Contingencies | Note 14. Commitments and Contingencies Litigation and Environmental As part of our normal business activities, we may be named as defendants in litigation and legal proceedings, including those arising from regulatory and environmental matters. Although the Company is insured against various risks to the extent it believes it is prudent, there is no assurance that the nature and amount of such insurance will be adequate, in every case, to indemnify it against liabilities arising from future legal proceedings. At March 31, 2023 and December 31, 2022, the Company had no environmental reserves recorded in its Unaudited Condensed Consolidated Balance Sheet. Southern California Pipeline Incident On August 25, 2022, the Company reached an agreement in principle with plaintiffs in a putative class action pending in the United States District Court for the Central District of California to resolve all civil claims against the Company and its subsidiaries related to the Incident. The settlement of $50.0 million, which also includes certain injunctive relief, will be funded under the Company’s insurance policies. The Court preliminarily approved the settlement on December 7, 2022 and granted final approval on April 24, 2023. On August 26, 2022, the Company reached an agreement with the United States government, which the court has approved, to resolve all federal criminal matters involving the Company and its subsidiaries stemming from Incident. As part of the resolution with the United States, the Company agreed to plead guilty to one count of misdemeanor negligent discharge of oil in violation of the Clean Water Act. The Company will pay a fine of approximately $7.1 million in installments over a period of three years, serve a term of four years’ probation and reimburse governmental agencies approximately $5.8 million for their response to this event. The Company also has agreed to implement certain compliance measures including installation of a new leak detection system and increased Remote Operated Vehicle inspections of the pipeline. As of March 31, 2023, the Company recorded $2.0 million in “Accrued liability – pipeline incident” and $3.1 million in “Other long-term liabilities” for the remaining payments related to this settlement on its Unaudited Condensed Consolidated Balance Sheet. On September 8, 2022, the Company reached an agreement with the state of California to resolve all related state criminal matters. As part of the resolution with the state of California, which also has court approval, the Company agreed to enter a plea of No Contest to six misdemeanor charges. The Company will pay a fine in the amount of $4.9 million to be distributed among the state of California, including the State’s Fish and Game Preservation Fund, and Orange County. The Company also will serve a one-year term of probation and has agreed to certain compliance enhancements to its operations. As of March 31, 2023, the Company recorded $2.9 million in “Accrued liability – pipeline incident” for the remaining payments related to this settlement on its Unaudited Condensed Consolidated Balance Sheet. On March 1, 2023, the Company announced that the vessels that struck and damaged the pipeline and their respective owners and operators have agreed to pay the Company $96.5 million in a settlement. The Marine Exchange of Los Angeles-Long Beach Harbor (the “Marine Exchange”) has agreed to non-monetary terms as well. The overall resolution includes subrogation claims by Amplify’s property damage and loss of production income insurers, with Amplify ultimately receiving a net payment of approximately $85.0 million. The settlement resolves Amplify’s affirmative claims related to the Incident. As part of the settlement, Amplify has dismissed its legal claims against those parties. The Company is also participating in a related claims process organized under the Oil Pollution Act of 1990, 33 U.S.C. § 2701 et seq. (“OPA 90”). Under OPA 90, a party alleged to be responsible for a discharge of oil is required to establish a claims process to pay for interim costs and damages as a result of the discharge. The OPA 90 claims process remains ongoing. Future litigation may be necessary, among other things, to defend the Company by determining the scope, enforceability, and validity of claims. The results of any current or future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources, and other factors. For further information regarding the Incident, please see Note 16. Minimum Volume Commitment The Company is party to a gas purchase, gathering and processing contract in Oklahoma, which includes certain minimum NGL commitments. To the extent the Company does not deliver natural gas volumes in sufficient quantities to generate, when processed, the minimum levels of recovered NGLs, it would be required to reimburse the counterparty an amount equal to the sum of the monthly shortfall, if any, multiplied by a fee. The Company is not meeting the minimum volume required under this contractual provision. The commitment fee expense for the three months ended March 31, 2023 and 2022 was approximately $0.1 million and $0.4 million, respectively. The minimum volume commitment for Oklahoma expires on June 30, 2023. Sinking Fund Trust Agreement Beta Operating Company, LLC (“Beta”), a wholly owned subsidiary, assumed an obligation with a third party to make payments into a sinking fund in connection with its 2009 acquisition of the Company properties in federal waters offshore Southern California, the purpose of which is to provide funds adequate to decommission the portion of the San Pedro Bay Pipeline that lies within state waters and the surface facilities. Under the terms of the agreement, the operator of the properties is obligated to make monthly deposits into the sinking fund account in an amount equal to $0.25 per barrel of oil and other liquid hydrocarbon produced from the acquired working interest. Interest earned in the account stays in the account. The obligation to fund ceases when the aggregate value of the account reaches $4.3 million. As of March 31, 2023, the account balance included in restricted investments was approximately $4.3 million. Supplemental Bond for Decommissioning Liabilities Trust Agreement Beta has a decommissioning obligation with BOEM in connection with its 2009 acquisition of the Company’s properties in federal waters offshore Southern California. The Company supports its decommissioning obligation with $161.3 million of A-rated surety bonds. In December 2021, the Company entered into two escrow funding agreements with its surety providers to fund interest-bearing escrow accounts on a quarterly basis to reimburse and indemnify the surety providers for any claims arising under the surety bonds related to the decommissioning of our Beta properties. The obligation ceases when the aggregate value of the escrow accounts reaches $172.6 million. As of March 31, 2023, the Company has funded $9.1 million into the escrow accounts which is reflected in “Restricted investments” on the Unaudited Condensed Consolidated Balance Sheet.

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