Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2014 |
Commitments And Contingencies Disclosure [Abstract] | ' |
Commitments and Contingencies | ' |
Note 6 — Commitments and Contingencies |
Natural Gas Forward Purchase Contracts |
The Partnership’s policy and practice are to enter into fixed-price forward purchase contracts for natural gas in conjunction with contracted nitrogen fertilizer product sales in order to substantially fix gross margin on those product sales contracts. The Partnership may also enter into a limited amount of additional fixed-price forward purchase contracts for natural gas in order to minimize monthly and seasonal gas price volatility. The Partnership occasionally enters into index-price contracts for the purchase of natural gas. The Partnership has entered into multiple natural gas forward purchase contracts for various delivery dates through April 30, 2014. Commitments for natural gas purchases consist of the following: |
| | | | | | | | |
| | As of | |
| | March 31, | | | December 31, | |
2014 | 2013 |
| | (in thousands, except weighted | |
average rate) |
MMBtus under fixed-price contracts | | | 480 | | | | 2,071 | |
MMBtus under index-price contracts | | | — | | | | 81 | |
| | | | | | | | |
Total MMBtus under contracts | | | 480 | | | | 2,152 | |
| | | | | | | | |
Commitments to purchase natural gas | | $ | 2,283 | | | $ | 8,571 | |
Weighted average rate per MMBtu based on the fixed rates and the indexes applicable to each contract | | $ | 4.76 | | | $ | 3.98 | |
Subsequent to March 31, 2014 through April 30, 2014, the Partnership entered into additional fixed-quantity forward purchase contracts at fixed and indexed prices for various delivery dates through May 31, 2014. The total MMBtus associated with these additional forward purchase contracts are approximately 0.7 million and the total amount of the purchase commitments are approximately $3.1 million, resulting in a weighted average rate per MMBtu of approximately $4.74 in these new commitments. The Partnership is required to make additional prepayments under these forward purchase contracts in the event that market prices fall below the purchase prices in the contracts. |
Contractual Obligations |
On April 17, 2013, the Partnership entered into an engineering, procurement and construction contract (the “EPC Contract”) with Abeinsa Abener Teyma General Partnership (“Abeinsa”). The EPC Contract provides for Abeinsa to be the contractor on the Partnership’s power generation project at the Pasadena Facility. The value of the contract is approximately $25.0 million and the project is expected to be completed by late 2014. As of March 31, 2014, the Partnership has paid approximately $15.7 million and accrued an additional $0.8 million under the EPC contract. |
Litigation |
The Partnership is party to litigation from time to time in the normal course of business. The Partnership accrues legal liabilities only when it concludes that it is probable that it has an obligation for such costs and can reasonably estimate the amount of such costs. In cases where the Partnership determines that it is not probable, but reasonably possible that it has a material obligation, it discloses such obligations and the possible loss or range of loss, if such estimate can be made. While the outcome of the Partnership’s current matters are not estimable or probable, the Partnership maintains insurance to cover certain actions and believes that resolution of its current litigation matters will not have a material adverse effect on the Partnership’s financial statements. |
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Regulation |
The Partnership’s business is subject to extensive and frequently changing federal, state and local, environmental, health and safety regulations governing a wide range of matters, including the emission of air pollutants, the release of hazardous substances into the environment, the treatment and discharge of waste water and the storage, handling, use and transportation of the Partnership’s fertilizer products, raw materials, and other substances that are part of our operations. These laws include the Clean Air Act (the “CAA”), the federal Water Pollution Control Act, the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation and Liability Act, the Toxic Substances Control Act, and various other federal, state and local laws and regulations. The laws and regulations to which the Partnership is subject are complex, change frequently and have tended to become more stringent over time. The ultimate impact on the Partnership’s business of complying with existing laws and regulations is not always clearly known or determinable due in part to the fact that the Partnership’s operations may change over time and certain implementing regulations for laws, such as the CAA, have not yet been finalized, are under governmental or judicial review or are being revised. These laws and regulations could result in increased capital, operating and compliance costs. |
The Partnership entered into a settlement agreement with the Illinois Environmental Protection Agency in August 2013 requiring it to connect a device at the East Dubuque Facility to an ammonia safety flare by December 1, 2015. The Partnership estimates the cost of the project required by the settlement agreement as being approximately $300,000. |