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Stock-Based Compensation

3 Months Ended

Mar. 31, 2012

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 Note 6, in the 2011 Form 10-K and current updates provided below.

Long-Term Incentive Plan

Performance-Based Stock Awards. On February 22, 2012, 35,340 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 $53.92 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	$	48.00
Performance term (in years)		3.0
Quarterly dividends paid per share	$	0.445
Expected dividend yield		3.6	%
Dividend discount factor		0.9012

Restricted Stock Units. A new form of restricted stock awards was approved by the Board in 2011. Restricted Stock Units (RSUs) are being used instead of the Restated SOP beginning in February of 2012. The current LTIP allows for a variety of awards including RSUs to be granted. RSUs include a performance based threshold and a vesting period of four years from the grant date. An RSU obligates the Company upon vesting to issue the RSU holder one share of common stock plus a cash payment equal to the total amount of dividends paid per share between the grant date and vesting date of the RSU. On February 22, 2012, RSUs totaling 21,720 were granted with a grant date fair value of $48.00 per share.

Restated Stock Option Plan

As of March 31, 2012, there was $0.8 million of unrecognized compensation cost from grants of stock options in prior years, which is expected to be recognized over a period extending through 2014. No new stock options were granted in the three months ended March 31, 2012.

Tabular disclosure of components of a stock option or other award plan under which equity-based compensation is awarded to employees, typically comprised of the amount of unearned compensation (deferred compensation cost), compensation expense, and changes in the quantity and fair value of the shares (or other type of equity) granted, exercised, forfeited, and issued and outstanding pertaining to that plan. Disclosure may also include nature and general terms of such arrangements that existed during the period and potential effects of those arrangements on shareholders, effect of compensation cost arising from equity-based payment arrangements on the income statement, method of estimating the fair value of the goods or services received, or the fair value of the equity instruments granted, during the period, cash flow effects resulting from equity-based payment arrangements and, for registrants that accelerate vesting of out of the money share options, reasons for the decision to accelerate.

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