Asset Retirement Obligation

6 Months Ended

Jun. 30, 2011

ASSET RETIREMENT OBLIGATION

ASSET RETIREMENT OBLIGATION

 

NOTE 3 — ASSET RETIREMENT OBLIGATION

The Partnership recognizes an estimated liability for the plugging and abandonment of its oil and gas wells and related facilities. It also recognizes a liability for future asset retirement obligations if a reasonable estimate of the fair value of that liability can be made. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. The Partnership also considers the estimated salvage value in the calculation of depletion.

The estimated liability is based on the MGP's historical experience in plugging and abandoning wells, estimated remaining lives of those wells based on reserve estimates, external estimates as to the cost to plug and abandon the wells in the future and federal and state regulatory requirements. The liability is discounted using an assumed credit-adjusted risk-free interest rate. Revisions to the liability could occur due to changes in estimates of plugging and abandonment costs or remaining lives of the wells or if federal or state regulators enact new plugging and abandonment requirements. The Partnership has no assets legally restricted for purposes of settling asset retirement obligations. Except for its oil and gas properties, the Partnership has determined that there are no other material retirement obligations associated with tangible long-lived assets.

			Period Ended				Period Ended
	Three Months		April 1, 2010		Six Months		April 1, 2010
	Ended		Through		Ended		Through
	June 30,		June 30,		June 30,		June 30,
	2011		2010		2011		2010
Asset retirement obligation at beginning of period	$	1,662,100	$	—	$	1,407,800	$	—
Liabilities incurred from drilling wells		—		—		231,400		—
Accretion expense		24,500		—		47,400		—
Asset retirement obligation at end of period	$	1,686,600	$	—	$	1,686,600	$	—