Asset Retirement Obligations

9 Months Ended

Sep. 30, 2013

Asset Retirement Obligation Disclosure [Abstract]

ASSET RETIREMENT OBLIGATIONS

The Company recognizes a liability for the fair value of asset retirement obligations (ARO) in the periods 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.

During the nine months ended September 30, 2013, 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 as of December 31, 2012	$	118,023
Liabilities incurred	2,466
Liabilities settled	(542		)
Accretion expense (including discontinued operations of $944)	6,131
Reclassification associated with held for sale properties*	(19,474		)
Balance as of September 30, 2013	$	106,604

* Asset retirement obligation associated with Black Warrior Basin and North Louisiana/East Texas properties are included as liabilities related to assets held for sale in current liabilities on the balance sheet.

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 $25.8 million and $24.9 million to purge and cap its gas pipelines upon abandonment as a regulatory liability as of September 30, 2013 and December 31, 2012, respectively. Regulatory assets for rate recovery of accumulated asset removal costs of $2.2 million and $3.3 million as of September 30, 2013 and December 31, 2012, 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.