11. GAS RESERVES

Our gas reserves are stated at cost, net of regulatory amortization, with the associated deferred tax benefits recorded as liabilities on the balance sheet.

We entered into our agreements with Encana Oil & Gas (USA) Inc. (Encana) to develop and produce physical gas reserves. These agreements are intended to provide long-term gas price protection for our utility customers rather than serving as a source of gas supply. Encana began drilling in 2011 under these agreements, and gas, which is currently being produced from our working interests in these gas fields, is sold by Encana at then prevailing market prices, with revenues from such sales, net of associated production costs, credited to our cost of gas. The cost of gas, including a carrying cost for the net rate base investment, is part of our annual Oregon PGA filing, which allows us to recover our costs through customer rates in a manner previously approved by the OPUC. This transaction acted to hedge the cost of gas for approximately 6% of our gas supplies for the year ended December 31, 2013. The following table outlines our net gas reserves investment at December 31:



In thousands	2013		2012
Gas reserves, current	$	20,646	$	14,966
Gas reserves, non-current	140,573		92,179
Less: Accumulated amortization	18,575		7,486
Total gas reserves	142,644		99,659
Less: Deferred taxes on gas reserves	42,117		28,329
Net investment in gas reserves	$	100,527	$	71,330

Variable Interest Entity (VIE) Analysis

We concluded that the arrangement with Encana qualifies as a variable interest (VI) as our interest represents a minor portion of total extraction activities. Our investment is included on our balance sheet under gas reserves with our maximum loss exposure limited to our current investment balance.