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, 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	2018	2017	2018	2017
ARO Operating Costs
Accretion	$ 2,684	$ 2,857	$ 8,036	$ 8,620
Depreciation	1,512	1,494	4,192	4,741
Total	$ 4,196	$ 4,351	$ 12,228	$ 13,361

ARO operating costs are reported in cost of revenues. 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	2018	2017	2018	2017
Asset Retirement Obligations
Balance at beginning of period	$ 215,421	$ 223,953	$ 218,117	$ 223,872
Liabilities incurred	0	731	0	1,066
Liabilities settled	(2,649)	(5,263)	(10,476)	(15,739)
Accretion expense	2,684	2,857	8,036	8,620
Revisions, net	10,628	610	10,407	5,069
Balance at end of period	$ 226,084	$ 222,888	$ 226,084	$ 222,888

ARO liabilities settled during the first nine months of 2018 and 2017 include $6,108,000 and $8,117,000, respectively, of reclamation activities required under a development agreement and conditional use permits at two adjacent aggregates sites on owned property in Southern California. The reclamation required under the reclamation agreement will result in the restoration and development of 90 acres of previously mined property suitable for retail and commercial development.