Fair value measurements

The Company measures its investments in certain fixed-income and equity securities at fair value with changes in fair value recognized in income. The Company anticipates using these investments, which consist of an insurance contract, to satisfy its obligations under its unfunded, nonqualified benefit plans for executive officers and certain key management employees, and invests in these fixed-income and equity securities for the purpose of earning investment returns and capital appreciation. These investments, which totaled $66.5 million, $63.6 million and $65.8 million, at September 30, 2015 and 2014, and December 31, 2014, respectively, are classified as Investments on the Consolidated Balance Sheets. The net unrealized loss on these investments was $1.7 million for the three months ended September 30, 2015, and the net unrealized gain on these investments was $700,000 for the nine months ended September 30, 2015. The net unrealized loss on these investments was $800,000 for the three months ended September 30, 2014, and the net unrealized gain on these investments was $1.2 million for the nine months ended September 30, 2014. The change in fair value, which is considered part of the cost of the plan, is classified in operation and maintenance expense on the Consolidated Statements of Income.

The Company did not elect the fair value option, which records gains and losses in income, for its available-for-sale securities, which include mortgage-backed securities and U.S. Treasury securities. These available-for-sale securities are recorded at fair value and are classified as Investments on the Consolidated Balance Sheets. Unrealized gains or losses are recorded in accumulated other comprehensive income (loss). Details of available-for-sale securities were as follows:



September 30, 2015	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(In thousands)
Mortgage-backed securities	$	7,843	$	29	$	(18	)	$	7,854
U.S. Treasury securities	2,324		4		(4		)	2,324
Total	$	10,167	$	33	$	(22	)	$	10,178



September 30, 2014	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(In thousands)
Mortgage-backed securities	$	7,838	$	71	$	(8	)	$	7,901
U.S. Treasury securities	2,368		8		(2		)	2,374
Total	$	10,206	$	79	$	(10	)	$	10,275



December 31, 2014	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(In thousands)
Mortgage-backed securities	$	6,594	$	60	$	(18	)	$	6,636
U.S. Treasury securities	3,574		—		(19		)	3,555
Total	$	10,168	$	60	$	(37	)	$	10,191

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. The ASC establishes a hierarchy for grouping assets and liabilities, based on the significance of inputs.

The estimated fair values of the Company's assets and liabilities measured on a recurring basis are determined using the market approach.

The Company's Level 2 money market funds are valued at the net asset value of shares held at the end of the quarter, based on published market quotations on active markets, or using other known sources including pricing from outside sources. Units of these funds can be redeemed on a daily basis at their net asset value and have no redemption restrictions. The assets are invested in high-quality, short-term money market instruments that consist of municipal obligations. There are no unfunded commitments related to these funds.

The estimated fair value of the Company's Level 2 mortgage-backed securities and U.S. Treasury securities are based on comparable market transactions, other observable inputs or other sources, including pricing from outside sources.

The estimated fair value of the Company's Level 2 insurance contract is based on contractual cash surrender values that are determined primarily by investments in managed separate accounts of the insurer. These amounts approximate fair value. The managed separate accounts are valued based on other observable inputs or corroborated market data.

The estimated fair value of the Company's Level 2 RIN obligations are based on the market approach using quoted prices from an independent pricing service. RINs are assigned to biofuels produced or imported into the United States as required by the EPA, which sets annual quotas for the percentage of biofuels that must be blended into transportation fuels consumed in the United States. As a producer of diesel fuel, Dakota Prairie Refinery is required to blend biofuels into the fuel it produces at a rate that will meet the EPA's quota. RINs are purchased in the open market to satisfy the requirement as Dakota Prairie Refinery is currently unable to blend biofuels into the diesel fuel it produces.

Though the Company believes the methods used to estimate fair value are consistent with those used by other market participants, the use of other methods or assumptions could result in a different estimate of fair value. For the nine months ended September 30, 2015 and 2014, there were no transfers between Levels 1 and 2.

The Company's assets and liabilities measured at fair value on a recurring basis were as follows:



	Fair Value Measurements at September 30, 2015, Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance at September 30, 2015
	(In thousands)
Assets:
Money market funds	$	—	$	1,219	$	—	$	1,219
Insurance contract*	—		66,464		—		66,464
Available-for-sale securities:
Mortgage-backed securities	—		7,854		—		7,854
U.S. Treasury securities	—		2,324		—		2,324
Total assets measured at fair value	$	—	$	77,861	$	—	$	77,861
Liabilities:
RIN obligations	$	—	$	1,170	$	—	$	1,170
Total liabilities measured at fair value	$	—	$	1,170	$	—	$	1,170

* The insurance contract invests approximately 9 percent in common stock of mid-cap companies, 6 percent in common stock of small-cap companies, 18 percent in common stock of large-cap companies, 65 percent in fixed-income investments, 1 percent in target date investments and 1 percent in cash equivalents.



	Fair Value Measurements at September 30, 2014, Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance at September 30, 2014
	(In thousands)
Assets:
Money market funds	$	—	$	684	$	—	$	684
Insurance contract*	—		63,578		—		63,578
Available-for-sale securities:
Mortgage-backed securities	—		7,901		—		7,901
U.S. Treasury securities	—		2,374		—		2,374
Total assets measured at fair value	$	—	$	74,537	$	—	$	74,537

* The insurance contract invests approximately 21 percent in common stock of mid-cap companies, 17 percent in common stock of small-cap companies, 29 percent in common stock of large-cap companies, 32 percent in fixed-income investments and 1 percent in cash equivalents.



	Fair Value Measurements at December 31, 2014, Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance at December 31, 2014
	(In thousands)
Assets:
Money market funds	$	—	$	890	$	—	$	890
Insurance contract*	—		65,831		—		65,831
Available-for-sale securities:
Mortgage-backed securities	—		6,636		—		6,636
U.S. Treasury securities	—		3,555		—		3,555
Total assets measured at fair value	$	—	$	76,912	$	—	$	76,912

* The insurance contract invests approximately 20 percent in common stock of mid-cap companies, 18 percent in common stock of small-cap companies, 29 percent in common stock of large-cap companies, 32 percent in fixed-income investments and 1 percent in cash equivalents.

The Company applies the provisions of the fair value measurement standard to its nonrecurring, non-financial measurements, including long-lived asset impairments. These assets are not measured at fair value on an ongoing basis but are subject to fair value adjustments only in certain circumstances. The Company reviews the carrying value of its long-lived assets, excluding goodwill, whenever events or changes in circumstances indicate that such carrying amounts may not be recoverable.

During the second quarter of 2015, natural gas gathering assets at the pipeline and energy services segment were reviewed for impairment and found to be impaired and were written down to their estimated fair value using the income approach. Under this approach, fair value is determined by using the present value of future estimated cash flows. The factors used to determine the estimated future cash flows include, but are not limited to, internal estimates of gathering revenue, future commodity prices and operating costs and equipment salvage values. The estimated cash flows are discounted using a rate that approximates the weighted average cost of capital of a market participant. These fair value inputs are not typically observable. At June 30, 2015, natural gas gathering assets were written down to the nonrecurring fair value measurement of $1.1 million.

The Company is negotiating the sale of certain non-strategic natural gas gathering assets at the pipeline and energy services segment and as a result these assets were found to be impaired in the third quarter of 2015 and were written down to their estimated fair value using the market approach. The estimated fair value of natural gas gathering assets that were impaired at September 30, 2015, was largely determined by agreed upon pricing in a purchase and sale agreement that the Company is negotiating. At September 30, 2015, natural gas gathering assets were written down to the nonrecurring fair value measurement of $10.8 million.

The fair value of these natural gas gathering assets have been categorized as Level 3 in the fair value hierarchy.

The Company performed a fair value assessment of the assets and liabilities classified as held for sale. For more information on this Level 3 nonrecurring fair value measurement, see Note 10.

The Company's long-term debt is not measured at fair value on the Consolidated Balance Sheets and the fair value is being provided for disclosure purposes only. The fair value was based on discounted future cash flows using current market interest rates. The estimated fair value of the Company's Level 2 long-term debt was as follows:



	Carrying Amount		Fair Value
	(In thousands)
Long-term debt at September 30, 2015	$	2,275,105	$	2,350,475
Long-term debt at September 30, 2014	$	2,209,519	$	2,331,848
Long-term debt at December 31, 2014	$	2,093,830	$	2,238,548

The carrying amounts of the Company's remaining financial instruments included in current assets and current liabilities approximate their fair values.