Item 3. Legal Proceedings
Item 3. Legal Proceedings
On July 1, 2020, the U.S. Department of Justice, on behalf of the U.S. Environmental Protection Agency (the “EPA”), and the State of Colorado commenced an enforcement action in the United States District Court for the District of Colorado against Kerr - McGee Gathering LLC (“KMG”), a wholly owned subsidiary of WES, for alleged non - compliance with the leak detection and repair requirements of the federal Clean Air Act (“LDAR requirements”) at its Fort Lupton facility in the DJ Basin complex. KMG previously had been in negotiations with the EPA and the State of Colorado to resolve the alleged non - compliance at the Fort Lupton facility. Per the complaint, plaintiffs pray for injunctive relief, remedial action, and civil penalties. We are currently exploring global resolution of the claims. While such resolution would likely include an injunctive relief component and payment of a civil penalty, which may exceed the disclosure threshold amount required by Item 103 of Regulation S-K, management believes the resolution of these claims will not have a material impact on WES’s results of operations, cash flows, or financial condition.
On October 29, 2020, WGR Operating, LP (“WGR”), on behalf of itself and derivatively on behalf of Mont Belvieu JV, filed suit against Enterprise Products Operating, LLC (“Enterprise”) and Mont Belvieu JV (as a nominal defendant) in the District Court of Harris County, Texas. Our lawsuit seeks a declaratory judgment regarding proper revenue allocation as set forth in the Operating Agreement between Mont Belvieu JV (of which WGR is a 25% owner) and Enterprise (the “Operating Agreement”) related to fractionation trains at the Mont Belvieu complex in Chambers County, Texas. Specifically, the Operating Agreement sets forth a revenue allocation structure, whereby revenue would be allocated to the various fracs at the Mont Belvieu complex in sequential order, with Fracs VII and VIII (which are owned by Mont Belvieu JV) following Fracs I through VI, but preceding any “Later Frac Facilities.” Subsequent to the construction of Fracs VII and VIII, Enterprise built Fracs IX, X, and XI, which it wholly owns, and has treated such subsequent fracs as outside the Mont Belvieu revenue allocation. We do not believe Enterprise’s attempt to bypass the agreed - to revenue allocation is proper under the parties’ agreements and now seek judicial determination. We currently sue only for declaratory judgment to avoid potential future damages. We cannot make any assurances regarding the ultimate outcome of this proceeding and its resulting impact on WGR or WES.
On November 22, 2022, WGR filed suit against Enterprise Crude Oil LLC (“ECO”) in the District Court of Harris County, Texas. Our lawsuit alleges that ECO breached a contract related to the Whitethorn joint venture pursuant to which ECO must share with WGR certain of the profits and losses generated by ECO’s hydrocarbon trading activity conducted utilizing the Whitethorn pipeline. Specifically, we claim that ECO has engaged in trades knowing that the revenue to be realized would be less than the minimum floor set under the contract and has failed to allocate revenues and expenses as prescribed by the contract, resulting in improper losses to WGR. Enterprise has filed a counterclaim to our lawsuit, alleging that, between 2017 and 2019, it had mistakenly overpaid WGR approximately $12.0 million in trading profits and seeking recovery of such amount. We cannot make any assurances regarding the ultimate outcome of this proceeding and its resulting impact on WGR or WES.
Except as discussed above, we are not a party to any legal, regulatory, or administrative proceedings other than proceedings arising in the ordinary course of business. Management believes that there are no such proceedings for which a final disposition could have a material adverse effect on results of operations, cash flows, or financial condition, or for which disclosure is otherwise required by Item 103 of Regulation S - K.
Item 4. Mine Safety Disclosures
Not applicable.
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PART II