In applying regulatory accounting principles in accordance with U.S. GAAP, we capitalize or defer certain costs and revenues as regulatory assets and liabilities. At September 30, 2011 and 2010 and at December 31, 2010, the amounts deferred as regulatory assets and liabilities were as follows:

			Regulatory Assets
			September 30,		September 30,		December 31,
Thousands			2011		2010		2010
Current:
	Unrealized loss on derivatives⁽¹⁾	$	46,651	$	59,898	$	38,437
	Pension and other postretirement benefit liabilities⁽²⁾		10,988		7,502		10,988
	Other⁽³⁾		19,095		16,145		3,289
Total current		$	76,734	$	83,545	$	52,714
Non-current:
	Unrealized loss on derivatives⁽¹⁾	$	7,429	$	27,211	$	17,022
	Income tax asset		70,241		75,515		72,341
	Pension and other postretirement benefit liabilities⁽²⁾		110,007		104,327		118,248
	Environmental costs⁽⁴⁾		122,454		111,931		114,311
	Other⁽³⁾		18,626		20,802		26,975
Total non-current		$	328,757	$	339,786	$	348,897

			Regulatory Liabilities
			September 30,		September 30,		December 31,
Thousands			2011		2010		2010
Current:
	Gas costs payable	$	16,991	$	20,487	$	15,583
	Unrealized gain on derivatives⁽¹⁾		3,932		1,864		2,245
	Other⁽³⁾		7,670		9,151		-
Total current		$	28,593	$	31,502	$	17,828
Non-current:
	Gas costs payable	$	1,250	$	900	$	2,297
	Unrealized gain on derivatives⁽¹⁾		227		518		628
	Accrued asset removal costs		263,123		248,920		252,941
	Other⁽³⁾		2,307		2,087		2,165
Total non-current		$	266,907	$	252,425	$	258,031

Utility and non-utility revenues, which are derived primarily from the sale, transportation or storage of natural gas, are recognized upon the delivery of gas commodity or service to customers. Since 2007, utility net operating revenues also included the recognition of a regulatory adjustment for income taxes paid pursuant to a legislative rule (commonly referred to as SB 408) in effect for certain gas and electric utilities in Oregon. Under SB 408, we were required to automatically implement a rate refund, or a rate surcharge, to utility customers on an annual basis. The refund or surcharge amount was based on the difference between income taxes paid and income taxes authorized to be collected in customer rates. We recorded the refund, or surcharge, each quarter from 2007 through 2010 based on the annual amount to be recognized. However, on May 24, 2011, SB 408 was repealed and replaced by Senate Bill 967. SB 967 requires utilities to eliminate amounts accrued under SB 408 for the 2010 and 2011 tax years, thereby denying recovery by NW Natural of the surcharge related to 2010, which resulted in a one-time pre-tax charge of $7.4 million (or 17 cents per share) in the second quarter of 2011. With respect to 2011, there was substantial uncertainty surrounding the continuation of the legal requirements of SB 408 as of March 31, 2011, and accordingly, we changed our revenue recognition policy effective January 1, 2011 and did not record an accrual for the regulatory adjustment of income taxes paid pursuant to SB 408.

Net periodic pension costs consist of service costs, interest costs, the expected returns on plan assets, and the amortization of actuarial gains and losses. Effective January 1, 2011, we began deferring a portion of our net periodic pension costs to a regulatory account on the balance sheet pursuant to Public Utility Commission of Oregon (OPUC) approval to defer certain pension expenses above or below the amount set in rates. As of September 30, 2011, the total amount deferred was $4.0 million. See Note 9 for further information.

Fair Value Disclosures. In January 2010, the Financial Accounting Standards Board (FASB) issued authoritative guidance on new fair value measurements and disclosures. This guidance requires additional disclosures for fair value measurements that use significant assumptions not observable in active markets (i.e. level 3 valuations), including a roll-forward schedule. These changes were effective for periods beginning after December 15, 2010; however, we elected to early adopt these disclosure requirements, as shown in Note 9 in our 2010 Form 10-K. The adoption of this standard did not have a material effect on our financial statement disclosures.

Fair Value Measurement. In May 2011, the FASB issued amendments to the authoritative guidance on fair value measurement. The amendments are primarily related to disclosure requirements, which go into effect for periods beginning after December 15, 2011. Early implementation is not allowed and we are currently assessing the impact on our financial statement disclosures.

Comprehensive Income. In June 2011, the FASB issued authoritative guidance on the presentation of comprehensive income within the financial statements. An entity can elect to present items of net income and other comprehensive income in one continuous statement — referred to as the statement of comprehensive income — or in two separate, but consecutive, statements. These changes are effective for periods beginning after December 15, 2011. We intend to present net income and other comprehensive income in one continuous statement starting January 1, 2012.

Multiemployer Pension Plans. In September 2011, the FASB issued authoritative guidance regarding multiemployer pension plan disclosures. The revised standard is intended to provide more information about an employer's financial obligations to a multiemployer pension plan and, therefore, help financial statement users better understand the financial health of all significant plans in which the employer participates. This standard is effective for periods ending after December 15, 2011. We are currently assessing the impact on our financial statement disclosures.