Item 3. Legal Proceedings

In the ordinary course of business, various legal and regulatory claims and proceedings are pending or threatened against us. While the amounts claimed may be substantial, we are unable to predict with certainty the ultimate outcome of such claims and proceedings. We accrue legal and other direct costs related to loss contingencies when actually incurred. We have established reserves in amounts that we believe to be appropriate for pending matters and, after consultation with counsel and giving appropriate consideration to available insurance, we believe that the ultimate outcome of any matter currently pending against us will not materially impact our financial position, results of operations or liquidity.

Environmental Proceedings

Produced Water Release, Marshall County, West Virginia. On November 12, 2019, we received a Notice of Violation (NOV) from the West Virginia Department of Environmental Protection (WVDEP) relating to the Goshorn Pad in Marshall County, West Virginia. The NOV alleged violations of Water Pollution Control Rules in connection with a release of produced water from secondary containment at a Goshorn Pad tank battery. We cooperated fully with WVDEP to take appropriate actions to address the secondary containment issues and remediation of the release, and this matter was substantially resolved in March 2020. We were not assessed any monetary penalty for this matter, and the resolution of this matter did not have a material impact on our financial position, results of operations or liquidity.

Secondary Containment underneath Gas Processing Units (GPUs), Allegheny, Greene and Washington Counties, Pennsylvania. On April 1, 2020, we received a draft Consent Order and Agreement from the Pennsylvania Department of Environmental Protection (PADEP) claiming that we failed to install secondary containment systems in accordance with 25 Pa. Code § 78a.64a(b) underneath 228 GPUs located in southwest Pennsylvania between October 8, 2016 and February 4, 2019. On February 4, 2019, we voluntarily disclosed a list of GPUs that did not meet the requirements of 25 Pa. Code § 78a.64a(b). On December 17, 2020, we entered into the Consent Order and Agreement with PADEP, pursuant to which we agreed to install

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secondary containment systems in compliance with 25 Pa. Code § 78a.64a(b) on all new GPU installations going forward, among other things, and this matter was resolved. We were not assessed any monetary penalty for this matter, and the resolution of this matter did not have a material impact on our financial position, results of operations or liquidity.

Other Legal Proceedings

Mary Farr Secrist, et al. v. EQT Production Company, et al., Circuit Court of Doddridge County, West Virginia. On May 2, 2014, royalty owners whose predecessors had entered into a 960-acre lease (the Stout Lease) and several additional leases comprising 6,356-acres (the Cities Services Lease) with EQT Production Company's predecessor, each covering acreage in Doddridge County, West Virginia, filed a complaint in the Circuit Court of Doddridge County, West Virginia. The complaint alleged that EQT Production Company and a number of related companies, including EQT Corporation, EQT Gathering, LLC, EQT Energy, LLC, and EQM Midstream Services, LLC (formerly known as EQT Midstream Services, LLC, the general partner of our former midstream affiliate), underpaid on royalties for gas produced under the leases and took improper post-production deductions from the royalties paid. With respect to the Stout Lease, the plaintiffs also asserted that we committed a trespass by drilling on the leased property, claiming that we had no right under the lease to drill in the Marcellus Shale formation. The plaintiffs also asserted claims for fraud, slander of title, punitive damages, pre-judgment interest and attorneys' fees. The plaintiffs sought more than $100 million in compensatory damages for the trespass claim under the Stout Lease, and approximately $20 million for insufficient royalties under both the Stout Lease and the Cities Services Lease, in addition to punitive damages and other relief. On June 27, 2018, the Court held that EQT Production Company and its marketing affiliate EQT Energy, LLC are alter egos of one another and that royalties paid under the leases should have been based on the price of gas produced under the leases when sold to unaffiliated third parties, and not on the price when the gas was sold from EQT Production Company to EQT Energy, LLC. Further, on January 14, 2019, the Court entered an Order granting the plaintiffs' motion for summary judgment and declaring that we did not have the right to drill in the Marcellus Shale formation under the Stout Lease. The Court also ruled that seven of our wells that have been producing gas under the Stout Lease are trespassing, and that a jury will determine whether the trespass was willful or innocent. On February 27, 2019, we filed a motion seeking permission to immediately appeal the trespass Order to the West Virginia Supreme Court; however, the motion was denied on March 25, 2019, and the Court continued the trial to September 2019. On May 28, 2019, the Court entered an Order excluding certain of our costs that could have otherwise offset any damages for innocent trespass under the Stout Lease. On August 8, 2019, we reached a settlement with the plaintiffs to resolve all claims under the Stout Lease and the Cities Services Lease for $54 million plus lease modifications to address the trespass issue and the calculation of future royalty payments under the leases. We paid $51 million of the settlement in October 2019 and the remaining $3 million of the settlement in January 2020, and the Stout Lease was subsequently amended to address the terms agreed to with the plaintiffs under the settlement. On October 7, 2020, the plaintiffs filed a motion to amend their complaint and to stay entry of an Order of Dismissal. On January 14, 2021, we filed a motion to enforce the settlement agreed to with the plaintiffs and to seek sanctions. All recent motions are pending.

Hammerhead Gathering Agreement Dispute. EQT Corporation and Equitrans Midstream, through certain of our and their subsidiaries, are parties to a gas gathering agreement (the Hammerhead Gathering Agreement) related to Equitrans Midstream's Hammerhead Gas Gathering System. Pursuant to the terms of the Hammerhead Gathering Agreement, if the "In-Service Date" did not occur on or before October 1, 2020, we may terminate the Hammerhead Gathering Agreement and purchase the Hammerhead Gas Gathering System from Equitrans Midstream for an amount equal to 88% of expenses actually incurred and other obligations made or to be incurred by Equitrans Midstream. The "In-Service Date" is defined in the Hammerhead Gathering Agreement as "the later of (i) the first Day of the Month immediately following the date on which Gatherer is first able to provide the Gathering Services to Shipper in accordance with the Hammerhead Gathering Agreement and (ii) the first Day of the Month immediately following the date on which the Interconnect Facilities connecting the Gathering System to the Mountain Valley Pipeline are first able to receive deliveries of the Contract MDQ." On September 24, 2020, we initiated arbitration proceedings against Equitrans Midstream, seeking a declaration that we are entitled to terminate the Hammerhead Gathering Agreement and purchase the Hammerhead Gas Gathering System. The deadline for us to provide notice of our election to terminate the Hammerhead Gathering Agreement and purchase the Hammerhead Gas Gathering System has been tolled while the contract claim is pending in arbitration.