Commitments and Contingencies
|12 Months Ended|
Dec. 31, 2022
|Commitments and Contingencies.|
|Commitments and Contingencies||
14.Commitments and Contingencies
In the normal course of business, we are subject to various claims, legal actions, contract negotiations and disputes. We provide for losses, if any, in the period in which they become probable and can be reasonably estimated. In management’s opinion, there are currently no such matters outstanding that would have a material effect on the accompanying financial statements.
Additionally, we are party to a guarantee related to a lease agreement with Solaris Energy Management, LLC (“SEM”), a related party of the Company, for the rental of office space at our corporate headquarters. As of December 31, 2022, our share of SEM’s future commitment is included in our lease liabilities. See Note 10. Leases and Note 17. Related Party Transactions.
In the normal course of business, we enter short-term purchase obligations for products and services, related primarily to purchases of pipe, pumps and other components.
We are a party to various surface use and compensation agreements by which we have committed to make minimum royalty payments in exchange for rights to access and use the land for purposes that are generally limited to conducting our water operations. These agreements do not meet the definition of a lease under ASC Topic 842.
We are party to a fixed price power purchase contract to manage the volatility of the price of power needed for ongoing operations. We have elected the normal purchase and normal sale accounting treatment for this contract and therefore record it at cost. The contract has a term that ends in May 2025.
The table below provides estimates of the timing of future payments that we are contractually obligated to make based on agreements in place as of December 31, 2022:
We are also subject to various federal, state and local laws and regulations relating to the protection of the environment. For the years ended December 31, 2022, 2021 and 2020, we recognized $3.0 million, $3.1 million, and $6.5 million of expenses, respectively, related to environmental matters that were recorded in direct operating costs. We also accrued $3.6 million and $3.1 million of insurance proceeds receivable at December 31, 2022 and 2021 that we believe are probable to collect and are reasonably estimable. Although we believe these estimates are reasonable, actual results could differ from these estimates.
The entire disclosure for commitments and contingencies.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef