Asset Retirement Obligations

6 Months Ended

Jun. 30, 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 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 six months ended June 30, 2011, 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, 2010	$	97,415
Liabilities incurred	2,291
Liabilities settled	(924		)
Accretion expense	3,338
Balance of ARO as of June 30, 2011	$	102,120

The Company recognizes conditional obligations if such obligations can be reasonably estimated and a legal requirement to perform an asset retirement activity exists. Alagasco recorded a conditional asset retirement obligation, on a discounted basis of $11.6 million and $11.4 million to purge and cap its gas pipelines upon abandonment, as a regulatory liability as of June 30, 2011, and December 31, 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 liabilities for accumulated asset removal costs of $7.7 million and $6.9 million for June 30, 2011, and December 31, 2010, respectively, are included as regulatory liabilities in deferred credits and other liabilities on the balance sheets. As of June 30, 2011, the Company recognized $20.6 million and $71.9 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.