Note 9: Asset Retirement Obligations

Asset retirement obligations (AROs) are legal obligations associated with the retirement of long-lived assets resulting from the acquisition, construction, development and/or normal use of the underlying assets.

Recognition of a liability for an ARO is required in the period in which it is incurred at its estimated fair value. The associated asset retirement costs are capitalized as part of the carrying amount of the underlying asset and depreciated over the estimated useful life of the asset. The liability is accreted through charges to operating expenses. If the ARO is settled for other than the carrying amount of the liability, we recognize a gain or loss on settlement.

We record all AROs for which we have legal obligations for land reclamation at estimated fair value. Essentially all these AROs relate to our underlying land parcels, including both owned properties and mineral leases. For the three and nine month periods ended September 30, we recognized ARO operating costs related to accretion of the liabilities and depreciation of the assets as follows:



	Three Months Ended		Nine Months Ended
		September 30		September 30
in thousands	2013	2012	2013	2012
ARO Operating Costs
Accretion	$ 2,908	$ 1,973	$ 7,731	$ 5,990
Depreciation	886	1,110	2,495	4,837
Total	$ 3,794	$ 3,083	$ 10,226	$ 10,827

ARO operating costs are reported in cost of goods sold. AROs are reported within other noncurrent liabilities in our accompanying Condensed Consolidated Balance Sheets.

Reconciliations of the carrying amounts of our AROs are as follows:



	Three Months Ended		Nine Months Ended
		September 30		September 30
in thousands	2013	2012	2013	2012
Asset Retirement Obligations
Balance at beginning of period	$ 222,851	$ 150,413	$ 150,072	$ 153,979
Liabilities incurred	3,524	82	69,111	127
Liabilities settled	(2,328)	(822)	(8,839)	(2,241)
Accretion expense	2,908	1,973	7,731	5,990
Revisions up (down), net	6,606	(2,923)	15,486	(9,132)
Balance at end of period	$ 233,561	$ 148,723	$ 233,561	$ 148,723

The ARO liabilities incurred during 2013 relate primarily to reclamation activities required under a new development agreement and a new conditional use permit at an aggregates facility on owned property in Southern California. Upward revisions to our ARO liability during 2013 are largely attributable to an adjacent aggregates facility on owned property. The reclamation requirements at this property will result in the restoration and development of mined property into a 90 acre tract suitable for commercial and retail development. The estimated cost to fill and compact the property increased and the estimated settlement date decreased resulting in an upward revision to the ARO.

Downward revisions to our ARO liability during 2012 relate primarily to extensions in the estimated settlement dates at numerous sites.