PROPERTY AND EQUIPMENT AND ASSET RETIREMENT OBLIGATION

12 Months Ended

Sep. 30, 2011

PROPERTY AND EQUIPMENT AND ASSET RETIREMENT OBLIGATION

PROPERTY AND EQUIPMENT AND ASSET RETIREMENT OBLIGATION

6.         PROPERTY AND EQUIPMENT AND ASSET RETIREMENT OBLIGATION

Barnwell’s property and equipment is detailed as follows:

					Accumulated
					Depletion,
	Estimated	Gross			Depreciation,				Net
	Useful	Property and			and				Property and
	Lives	Equipment			Amortization				Equipment
At September 30, 2011:
Land			$	863,000		$	-			$	863,000
Oil and natural gas properties (full cost accounting)			224,852,000			(175,715,000		)		49,137,000
Drilling rigs and equipment	3 – 10 years		7,020,000			(4,988,000		)		2,032,000
Offices	40 years		2,420,000			(203,000		)		2,217,000
Other property and equipment	3 – 17 years		3,881,000			(3,511,000		)		370,000
Total			$	239,036,000		$	(184,417,000	)		$	54,619,000
					Accumulated
					Depletion,
	Estimated	Gross			Depreciation,				Net
	Useful	Property and			and				Property and
	Lives	Equipment			Amortization				Equipment
At September 30, 2010:
Land			$	365,000		$	-			$	365,000
Oil and natural gas properties (full cost accounting)			214,249,000			(168,199,000		)		46,050,000
Drilling rigs and equipment	3 – 10 years		6,855,000			(4,479,000		)		2,376,000
Office	40 years		1,059,000			(145,000		)		914,000
Other property and equipment	3 – 17 years		3,840,000			(3,457,000		)		383,000
Total			$	226,368,000		$	(176,280,000	)		$	50,088,000

In October 2004, the Government of Alberta enacted amendments to the Natural Gas Royalty Regulation which provide a mechanism to reduce royalties for operators of natural gas wells which have been denied the right to produce by the Energy Resources Conservation Board as a result of government bitumen conservation policies.  If production recommences from zones previously ordered to be shut-in, Barnwell may pay an incremental royalty to the Crown on production from the reinstated pools, along with Alberta Gas Crown Royalties otherwise payable.  Barnwell received a total of $98,000 and $124,000 for wells shut-in in the Thornbury area in fiscal years 2011 and 2010, respectively.  It is Barnwell’s estimation that the subject Thornbury wells will not recommence production and the receipts are payments for deemed production by the Government of Alberta to Barnwell for condemnation of the wells and accordingly, were credited to oil and natural gas properties for book purposes.

Barnwell recognizes the fair value of a liability for an asset retirement obligation in the period in which it is incurred if a reasonable estimate of fair value can be made.  The following is a reconciliation of the asset retirement obligation for the years ended September 30, 2011 and 2010:

	Year ended September 30,
	2011			2010
Asset retirement obligation as of beginning of year	$	4,869,000		$	4,508,000
Obligations incurred on new wells drilled	123,000			93,000
Revision of estimated obligation	(330,000		)	(48,000		)
Accretion expense	341,000			312,000
Payments	(36,000		)	(182,000		)
Foreign currency translation adjustment	(46,000		)	186,000
Asset retirement obligation as of end of year	$	4,921,000		$	4,869,000