Commitments and Contingencies

9 Months Ended

Sep. 30, 2011

Commitments and Contingencies [Abstract]

Commitments and Contingencies

Note 11 – Commitments and Contingencies

Legal Proceedings

In 2010, the Company’s Maine utility asserted a claim against H.Q. Energy Services (US), Inc. (“HQ”) for a breach of a firm gas transportation service agreement between the parties. HQ filed a counterclaim against the Company for reimbursement of certain transportation charges that HQ paid to the Company. The parties agreed to arbitration and the arbitrators awarded HQ the sum of approximately $280,000 for past transportation charges that HQ paid to the Company. The arbitrators also ordered the Company to pay future transportation charges that will be incurred during the remaining term of the agreement while HQ was ordered to pay the Company for future fuel reimbursements for the remaining term of the agreement. The Company recorded an accrual in the amount of $300,000 for the liability and resulting expense in connection with the arbitration in the three months ended September 30, 2011.

On April 15, 2011, Gas Natural and Richard M. Osborne, Gas Natural’s Chairman of the Board and Chief Executive Officer, filed a lawsuit captioned “Richard M. Osborne and Gas Natural Inc. v. Michael I. German, Henry B. Cook, Ted W. Gibson, George J. Welch and Corning Natural Gas Corporation,” Case No. 1:11-CV-744 which was filed in the U.S. District Court for the Northern District of Ohio. The lawsuit claims that Messrs. German, Cook, Gibson and Welch, as directors of Corning Natural Gas Corporation (“Corning”), breached their fiduciary duties to shareholders of Corning by (i) failing to maximize shareholder value in connection with Gas Natural’s offers to acquire all of Corning’s outstanding shares of common stock and (ii) instituting a rights offering to dilute Mr. Osborne and Gas Natural’s ownership of Corning. Alternatively, the lawsuit provides for a derivative claim against the directors of Corning for the same conduct. Mr. Osborne and Gas Natural seek to rescind the rights offering.

Corning and the directors of Corning filed a motion to dismiss the lawsuit. The court has stayed discovery in the lawsuit until it rules on the motion to dismiss. In the Company’s opinion, the outcome of these legal actions will not have a material adverse effect on its financial condition, cash flows or results of operations.

From time to time, the Company is involved in lawsuits that have arisen in the ordinary course of business. The Company is contesting each of these lawsuits vigorously and believes it has defenses to the allegations that have been made.