Asset Retirement Obligations

6 Months Ended

Jun. 30, 2014

Asset Retirement Obligations [Line Items]

Asset Retirement Obligations

ASSET RETIREMENT OBLIGATIONS

Energen’s asset retirement obligations (ARO) primarily relate to the future plugging, abandonment and reclamation of wells and facilities. We recognize a liability for the fair value of the ARO in the periods incurred. The ARO fair value liability is determined by calculating the present value of the estimated future cash outflows we expect to incur to plug, abandon and reclaim our producing properties at the end of their productive lives, and is recognized on a discounted basis incorporating an estimate of performance risk specific to Energen. Subsequent to initial measurement, liabilities are accreted to their present value and capitalized costs are depreciated over the estimated useful lives of the related assets. Upon settlement of the liability, Energen may recognize a gain or loss for differences between estimated and actual settlement costs.

The following table reflects the components of the change in Energen’s ARO balance for the six months ended June 30, 2014:

(in thousands)
Balance as of December 31, 2013	$	108,533
Liabilities incurred	1,504
Liabilities settled	(676		)
Accretion expense	3,726
Balance as of June 30, 2014	$	113,087

Alabama Gas Corporation

Asset Retirement Obligations [Line Items]

Asset Retirement Obligations

ASSET RETIREMENT OBLIGATIONS

Alagasco 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 lives of the related assets. The ARO fair value liability is recognized on a discounted basis incorporating an estimate of performance risk specific to Alagasco.

Alagasco 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 $28.2 million and $27.5 million to purge and cap its gas pipelines upon abandonment and to remediate other related obligations, as a regulatory liability as of June 30, 2014 and December 31, 2013, respectively. Regulatory assets for rate recovery of accumulated asset removal costs of $3.4 million and $4.6 million as of June 30, 2014 and December 31, 2013, 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.