Asset Retirement Obligations

12 Months Ended

Dec. 31, 2011

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 2011, 2010 and 2009, 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, 2008	$	66,151
Liabilities incurred	8,226
Liabilities settled	(672		)
Revision in estimated cash flows	9,658
Accretion expense	4,935
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

The Company recognizes conditional obligations if such obligations can be reasonably estimated and a legal requirement to perform an asset retirement activity exist. Included in the liabilities incurred for the year ended December 31, 2009, is $6.6 million related to the acquisition of certain oil properties in the Permian Basin from Range Resources Corporation (Range Resources). Alagasco recorded a conditional asset retirement obligation, on a discounted basis, of $20.8 million and $11.4 million to purge and cap its gas pipelines upon abandonment as a regulatory liability as of December 31, 2011 and 2010, respectively. The conditional asset retirement obligations reflect the re-estimation of removal costs associated with Alagasco’s revised depreciation rate. The costs associated with asset retirement obligations are currently either being recovered in rates or are probable of recovery in future rates.

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. Regulatory assets for accumulated asset removal costs of $1.0 million as of December 31, 2011 are included as regulatory assets in noncurrent assets on the balance sheets. Regulatory liabilities for accumulated asset removal costs of $6.9 million as of December 31, 2010 are included as regulatory liabilities in deferred credits and other liabilities on the balance sheets. As of December 31, 2011, the Company recognized $20.3 million and $65.6 million of refundable negative salvage as regulatory liabilities in current liabilities and deferred credit and other liabilities, respectively, on the balance sheet in response to the June 28, 2010, APSC order as discussed in Note 1, Summary of Significant Accounting Policies.