TRGPTarga Resources

commencement date based on the present value of future lease payments over the lease term. The right-of-use asset also includes any lease prepayments and excludes lease incentives. We made an accounting policy election to combine lease and non-lease components for both arrangements in which Targa is the lessee or lessor. As most of the Company’s leases do not provide an implicit interest rate, we use our incremental borrowing rate as the discount rate to compute the present value of our lease liability. The discount rate applied is determined based on information available on the date of adoption for all leases existing as of that date, and on the date of lease commencement for all subsequent leases. Our lease arrangements may include variable lease payments based on an index or market rate, or may be based on performance. For variable lease payments based on an index or market rate, we estimate and apply a rate based on information available at the commencement date. Variable lease payments based on performance are excluded from the calculation of the right-of-use asset and lease liability, and are recognized in our Consolidated Statements of Operations when the contingency underlying such variable lease payments is resolved. Our lease terms may include options to extend or terminate the lease. Such options are included in the measurement of our right-of-use asset and liability at commencement, provided we determine that we are reasonably certain to exercise the option. 45Q Tax Credits We earn tax credits under Internal Revenue Code Section 45Q through our carbon capture and sequestration activities. We recognize 45Q tax credits by analogy to the grant model within International Accounting Standard 20, Accounting for Government Grants and Disclosure Assistance, as other operating income in our Consolidated Statements of Operations based on the volume of captured carbon sequestered and dollar value of the tax credit during the period in which captured carbon is sequestered underground. We recognize realized 45Q tax credits as a reduction to income taxes payable because the tax credits reduce Targa’s future quarterly estimated cash tax payments. Recent Accounting Pronouncements Recently Adopted Accounting Pronouncements Improvements to Reportable Segment Disclosures In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amendments in this update require, among other items, that public entities disclose, on an annual and interim basis, significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and included within each reported measure of segment profit or loss. These amendments are effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The disclosures required in the amendments apply retrospectively to all prior periods presented in the financial statements. We adopted this ASU on October 1, 2024, and applied the amendments to all prior periods presented in our consolidated financial statements. See Note 22 - Segment Information. Recently issued accounting pronouncements not yet adopted Improvements to Income Tax Disclosures In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments in this update require, among other items, that public entities disclose, on an annual and interim basis, (i) specific categories of income taxes in the rate reconciliation, and (ii) a disaggregation of income taxes paid by federal, state, and foreign taxes. These amendments are effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The amendments are required to be applied prospectively with retrospective application permitted. We are evaluating the effect of the amendments on our consolidated financial statements and expect to disclose the required information beginning in the Annual Report on Form 10-K for the year ended December 31, 2025. The impact of the adoption will be limited to disclosure in the notes to consolidated financial statements.

In the United States, no comprehensive climate change legislation has been implemented at the federal level, though laws such as level. Notwithstanding the IRA advance numerous climate-related objectives. However, because EPA’s recent proposal to revoke the U.S. Supreme Court has held that GHG emissions constitute a pollutant under “Endangerment Finding,” which supports the CAA, majority of EPA’s GHG-related regulations, the EPA has under previous presidential administrations adopted a number of rules that, that included, among other things, establish construction and operating permit reviews for GHG emissions from certain large stationary sources, require efforts concerning the reduction, monitoring and annual reporting of GHG emissions from certain petroleum and natural gas system sources, implement New Source Performance Standards directing the reduction of methane from certain new, modified, or reconstructed facilities in the oil and natural gas sector, and together with the DOT, implement GHG emissions limits on vehicles manufactured for operation in the United States. Additionally, in emissions. In August 2022, the IRA was signed into law, which appropriates significant federal funding for renewable energy initiatives and amends amended the CAA to impose a first-time fee on the emission of excess methane above statutory methane emissions thresholds from sources required to report their GHG emissions to the EPA, including those sources in the onshore petroleum and natural gas production and gathering and boosting source categories. The In November 2024, the EPA issued a final rule implementing the methane emissions fee began fee, although in calendar year 2024 at $900 per ton of methane, increasing to $1,200 in February 2025, and $1,500 for 2026 and each year after. Calculation of Congress repealed the fee is based on certain thresholds established rule under the Congressional Review Act. Additionally, in the IRA. In order to support OBBBA, Congress delayed the implementation of the methane emission fee until 2034. We cannot predict if the current Presidential administration and/or Congress may take further actions with respect to the IRA or methane emissions fee, including exemptions from the same, future implementation of which is uncertain at this time. However, compliance with this and other air pollution control and permitting requirements has the EPA finalized revisions potential to its Greenhouse Gas Reporting Rule in May 2024. The revisions amend requirements applicable to the petroleum and natural gas systems source category to ensure reporting is based on empirical data and accurately reflects total methane and waste emissions. The methane emissions fee and renewable and low carbon energy funding provisions of the law could increase our and our customers’ operating costs and accelerate the transition away from fossil fuels, delay development of our projects, which could in turn reduce demand for our products and services and adversely affect our business and results of operations. However, at this time, it remains uncertain whether the new Presidential administration will take any action to revise or repeal the methane emissions fee or if Congress may take action to repeal or revise the IRA, including with respect to the methane emissions fee.

The decrease in net cash used in financing activities was due to higher proceeds from debt financings in 2025, lower distributions to noncontrolling interests subsequent to the CBF Acquisition in the fourth quarter of 2024 and the Badlands Transaction in the first quarter of 2025 and lower repurchases of noncontrolling interests primarily due to the Grand Prix Transaction in 2023, common stock, partially offset by higher repurchases of common stock, noncontrolling interests due to the Badlands Transaction and higher dividends paid and lower borrowings of debt in 2024. This decrease in debt borrowing activity was due to lower proceeds from senior unsecured notes, partially offset by higher net borrowings under the Commercial Paper Program, lower repayments under the Term Loan Facility in 2024, and repayments under the Existing TRGP Revolver in 2023. 2025.

In April 2024, we received an administrative NOV Notice of Violation (the “EPA NOV”) from the EPA and a request for the production of documents from the United States Attorney’s Office for North Dakota relating to alleged violations of the Clean Air Act (“CAA”), at certain Targa Badlands LLC compressor stations. The EPA NOV and subpoena stem from inspections the EPA conducted at the compressor stations on June 15, 2023, as well as related records reviews. In October 2024, we began negotiations with the U.S. Attorney’s Office with respect to resolution of a single-count information alleging a violation of the CAA related to untimely installation of monitoring equipment at one compressor station, which carries a maximum fine of $500,000, and we entered into a Plea Agreement on December 16, 2024 reflecting these terms. We have also In July 2025, we entered into discussions with the EPA with respect to a proposed Consent Agreement and Final Order with the EPA that would resolve resolves the allegations contained in the EPA NOV by requiring, among other things, payment of an administrative penalty in the amount of approximately $3.2 million. On December 5, 2025, Targa Badlands was sentenced under the Plea Agreement, which, among other things, imposed the maximum fine of $500,000.