Gas Reserves

3 Months Ended

Mar. 31, 2021

GAS RESERVES

NW Natural has invested $188 million through the gas reserves program in the Jonah Field located in Wyoming as of March 31, 2021. 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 2020 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	2021		2020		2020
Gas reserves, current	$	10,659	$	14,351	$	11,409
Gas reserves, non-current	176,648		172,956		175,898
Less: Accumulated amortization	145,048		127,722		141,414
Total gas reserves(1)	42,259		59,585		45,893
Less: Deferred taxes on gas reserves	9,831		14,522		10,572
Net investment in gas reserves	$	32,428	$	45,063	$	35,321

(1) The net investment in additional wells included in total gas reserves was $2.8 million, $3.6 million and $3.0 million at March 31, 2021 and 2020 and December 31, 2020, 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.