Gas Reserves

3 Months Ended

Mar. 31, 2020

GAS RESERVES

NW Natural has invested $188 million through the gas reserves program in the Jonah Field located in Wyoming as of March 31, 2020. Gas reserves are stated at cost, net of regulatory amortization, with the associated deferred tax benefits recorded as liabilities in the consolidated balance sheets. The investment in gas reserves provides long-term price protection for NGD customers through the original agreement with Encana Oil & Gas (USA) Inc. under which NW Natural invested $178 million and the amended agreement with Jonah Energy LLC under which an additional $10 million was invested.

The cost of gas, including a carrying cost for the rate base investment, is included in the annual Oregon PGA filing, which allows NW Natural to recover these costs through customer rates. The investment under the original agreement, less accumulated amortization and deferred taxes, earns a rate of return. See Note 13 in the 2019 Form 10-K.

Gas produced from the additional wells is included in the Oregon PGA at a fixed rate of $0.4725 per therm, which approximates the 10-year hedge rate plus financing costs at the inception of the investment.

The following table outlines NW Natural's net gas reserves investment:



	March 31,				December 31,
In thousands	2020		2019		2019
Gas reserves, current	$	14,351	$	16,157	$	15,278
Gas reserves, non-current	172,956		171,150		172,029
Less: Accumulated amortization	127,722		109,243		123,635
Total gas reserves⁽¹⁾	59,585		78,064		63,672
Less: Deferred taxes on gas reserves	14,522		19,638		15,515
Net investment in gas reserves	$	45,063	$	58,426	$	48,157


⁽¹⁾	The net investment in additional wells included in total gas reserves was $3.6 million, $4.5 million and $3.8 million at March 31, 2020 and 2019 and December 31, 2019, respectively.

NW Natural's investment is included in NW Holdings' and NW Natural's consolidated balance sheets under gas reserves with the maximum loss exposure limited to the investment balance.