Stock-Based Compensation

9 Months Ended

Sep. 30, 2011

Disclosure Stock Based Compensation [Abstract]

Stock Based Compensation Text Block

6.       Stock-Based Compensation

We have several stock-based compensation plans, including a Long-Term Incentive Plan (LTIP), a Restated Stock Option Plan (Restated SOP) and an Employee Stock Purchase Plan.  These plans are designed to promote stock ownership in NW Natural by employees and officers.  For additional information on our stock-based compensation plans, see Part II, Item 8., Note 6, in the 2010 Form 10-K and current updates provided below.

Long-Term Incentive Plan.  On February 23, 2011, 37,950 performance-based shares were granted under the LTIP, which include a market condition, based on target-level awards and a weighted-average grant date fair value of $25.25 per share.  Fair value was estimated as of the date of grant using a Monte-Carlo option pricing model based on the following assumptions:

Stock price on valuation date	$	45.74
Performance term (in years)		3.0
Quarterly dividends paid per share	$	0.435
Expected dividend yield		3.7	%
Dividend discount factor		0.8930

Restated Stock Option Plan.  On February 23, 2011, options to purchase 122,700 shares were granted under the Restated SOP, with an exercise price equal to the closing market price of $45.74 per share on the date of grant, vesting over a four-year period following the date of grant and a term of 10 years and 7 days. The weighted-average grant date fair value was $6.73 per share.  Fair value was estimated as of the date of grant using the Black-Scholes option pricing model based on the following assumptions:

Risk-free interest rate	2.0	%
Expected life (in years)	4.5
Expected market price volatility factor	24.5	%
Expected dividend yield	3.8	%
Forfeiture rate	3.1	%

As of September 30, 2011, there was $1.0 million of unrecognized compensation cost related to the unvested portion of outstanding Restated SOP awards expected to be recognized over a period extending through 2014.