Our regulatory assets and liabilities result from our application of the provisions of Topic 980 and are reflected on our balance sheet. Current regulatory assets are included in prepayments and other. Current regulatory liabilities are included in other accrued liabilities and noncurrent regulatory liabilities are included in deferred credits and other noncurrent liabilities. These balances are presented on our balance sheet on a gross basis and are recoverable or refundable over various periods. Below are the details of our regulatory assets and liabilities as of December 31, 2012 and 2011:

				2012		2011

				(Thousands of Dollars)
Current regulatory assets:
	Environmental costs			$	1,300	$	2,200
	Fuel recovery				1,249		78
		Total current regulatory assets			2,549		2,278
Noncurrent regulatory assets:
	Environmental costs				739		1,117
	Grossed-up deferred taxes on equity funds used during construction				16,083		17,034
	Levelized depreciation				33,979		33,485
	Asset retirement obligations, net				9,497		7,969
		Total noncurrent regulatory assets			60,298		59,605
			Total regulatory assets	$	62,847	$	61,883

Current regulatory liabilities:
	Fuel recovery			$	-	$	3,562
Noncurrent regulatory liabilities:
	Postretirement benefits				17,395		17,386
			Total regulatory liabilities	$	17,395	$	20,948

Environmental Costs We have accrued liabilities for assessment and remediation activities to bring certain sites up to current environmental standards. The accrual for these liabilities is offset by a regulatory asset. The regulatory asset is being amortized to expense consistent with amounts collected in rates.

Fuel Recovery These amounts reflect the value of the cumulative volumetric difference between the gas retained from our customers and the gas consumed in operations. These amounts are not included in the rate base, but are expected to be recovered or refunded by changing the fuel reimbursement factor in subsequent fuel filings.

Grossed-Up Deferred Taxes on Equity Funds Used During Construction The regulatory asset balance was established to offset the deferred tax for the equity component of the allowance for funds used during the construction of long-lived assets. Taxes on capitalized funds used during construction and the offsetting deferred income taxes are included in the rate base and are recovered over the depreciable lives of the long-lived asset to which they relate.

Levelized Depreciation Levelized depreciation allows contract revenue streams to remain constant over the primary contract terms by recognizing lower than book depreciation in the early years and higher than book depreciation in later years. The depreciation component of the levelized incremental rates will equal the accumulated book depreciation by the end of the primary contract terms. The difference between levelized depreciation and straight-line book depreciation is recorded in a FERC approved regulatory asset or liability and is extinguished over the levelization period.

Asset Retirement Obligations We record an asset and a liability equal to the present value of each expected future ARO. The ARO asset is depreciated in a manner consistent with the expected future abandonment of the underlying physical assets. We measure changes in the liability due to passage of time by applying an interest rate to the liability balance. This amount is recognized as an increase in the carrying amount of the liability and is offset by a regulatory asset. The regulatory asset is being recovered through the net negative salvage component of depreciation included in our rates, and is being amortized to expense consistent with the amounts collected in rates.

Postretirement Benefits We seek to recover the actuarially determined cost of postretirement benefits through rates that are set through periodic general rate filings. Any differences between the annual actuarially determined cost and amounts currently being recovered in rates are recorded as regulatory assets or liabilities and collected or refunded through future rate adjustments. These amounts are not included in the rate base, and we are not currently recovering postretirement benefit costs in our rates.