Asset Retirement Obligations

12 Months Ended

Dec. 31, 2012

Asset Retirement Obligation Disclosure [Abstract]

Asset Retirement Obligations

ASSET RETIREMENT OBLIGATIONS

The Company recognizes a liability for the fair value of asset retirement obligations (ARO) in the period incurred. Subsequent to initial measurement, liabilities are accreted to their present value and capitalized costs are depreciated over the estimated useful life of the related assets. Upon settlement of the liability, the Company may recognize a gain or loss for differences between estimated and actual settlement costs. The ARO fair value liability is recognized on a discounted basis incorporating an estimate of performance risk specific to the Company. Revisions in estimates to the ARO result from revisions to the estimated timing or amount of the underlying cash flows. In 2012, 2011 and 2010, Energen Resources recognized amounts representing expected future costs associated with site reclamation, facilities dismantlement, and plug and abandonment of wells as follows:

(in thousands)
Balance of ARO as of December 31, 2009	$	88,298
Liabilities incurred	4,033
Liabilities settled	(1,094		)
Accretion expense	6,178
Balance of ARO as of December 31, 2010	97,415
Liabilities incurred	4,627
Liabilities settled	(1,539		)
Accretion expense	6,837
Balance of ARO as of December 31, 2011	107,340
Liabilities incurred	3,994
Liabilities settled	(845		)
Accretion expense	7,534
Balance of ARO as of December 31, 2012	$	118,023

The Company recognizes conditional obligations if such obligations can be reasonably estimated and a legal requirement to perform an asset retirement activity exists. Alagasco accrues removal costs on certain gas distribution assets over the useful lives of its property, plant and equipment through depreciation expense in accordance with rates approved by the APSC. Alagasco recorded a conditional asset retirement obligation, on a discounted basis, of $24.9 million and $20.8 million to purge and cap its gas pipelines upon abandonment as a regulatory liability as of December 31, 2012 and 2011, respectively. Regulatory assets for accumulated asset removal costs of $3.3 million and $1.0 million as of December 31, 2012 and 2011, are included as regulatory assets in noncurrent assets on the balance sheets. The costs associated with asset retirement obligations are either currently being recovered in rates or are probable of recovery in future rates.