Summary of Significant Accounting Policies

Principles of Consolidation

The Company consolidates all entities in which it has a controlling financial interest. All significant intercompany balances and transactions are eliminated. The Company uses proportionate consolidation when accounting for drilling arrangements related to oil and gas producing properties accounted for under the full cost method of accounting.

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Reclassification

Due to the adoption of the authoritative guidance regarding the presentation of debt issuance costs, certain prior year amounts have been reclassified to conform with current year presentation. The Company reclassified debt issuance costs related to long-term debt previously shown as Unamortized Debt Expense as a direct deduction from the carrying value of Long-Term Debt on the Consolidated Balance Sheet.

Regulation

The Company is subject to regulation by certain state and federal authorities. The Company has accounting policies which conform to GAAP, as applied to regulated enterprises, and are in accordance with the accounting requirements and ratemaking practices of the regulatory authorities. Reference is made to Note C — Regulatory Matters for further discussion.

Revenue Recognition

The Company’s Exploration and Production segment records revenue based on entitlement, which means that revenue is recorded based on the actual amount of gas or oil that is delivered to a pipeline and the Company’s ownership interest in the producing well. If a production imbalance occurs between what was supposed to be delivered to a pipeline and what was actually produced and delivered, the Company accrues the difference as an imbalance.

The Company’s Pipeline and Storage segment records revenue for natural gas transportation and storage services. Revenue from reservation charges on firm contracted capacity is recognized through equal monthly charges over the contract period regardless of the amount of gas that is transported or stored. Commodity charges on firm contracted capacity and interruptible contracts are recognized as revenue when physical deliveries of natural gas are made at the agreed upon delivery point or when gas is injected or withdrawn from the storage field. The point of delivery into the pipeline or injection or withdrawal from storage is the point at which ownership and risk of loss transfers to the buyer of such transportation and storage services.

In the Company’s Gathering segment, revenue is recorded at the point at which gathered volumes are delivered into interstate pipelines.

The Company’s Utility segment records revenue for gas sales and transportation in the period that gas is delivered to customers. This includes the recording of receivables for gas delivered but not yet billed to customers based on the Company's estimate of the amount of gas delivered between the last meter reading date and the end of the accounting period. Such receivables are a component of Unbilled Revenue on the Consolidated Balance Sheets.

The Company’s Energy Marketing segment records revenue for gas sales in the period that gas is delivered to customers. This includes the recording of receivables for gas delivered but not yet billed to customers based on the Company's estimate of the amount of gas delivered between the last meter reading date and the end of the accounting period. Such receivables are a component of Unbilled Revenue on the Consolidated Balance Sheets.

Allowance for Uncollectible Accounts

The allowance for uncollectible accounts is the Company’s best estimate of the amount of probable credit losses in the existing accounts receivable. The allowance is determined based on historical experience, the age and other specific information about customer accounts. Account balances are charged off against the allowance twelve months after the account is final billed or when it is anticipated that the receivable will not be recovered.

Regulatory Mechanisms

The Company’s rate schedules in the Utility segment contain clauses that permit adjustment of revenues to reflect price changes from the cost of purchased gas included in base rates. Differences between amounts currently recoverable and actual adjustment clause revenues, as well as other price changes and pipeline and storage company refunds not yet includable in adjustment clause rates, are deferred and accounted for as either unrecovered purchased gas costs or amounts payable to customers. Such amounts are generally recovered from (or passed back to) customers during the following fiscal year.

Estimated refund liabilities to ratepayers represent management’s current estimate of such refunds. Reference is made to Note C — Regulatory Matters for further discussion.

The impact of weather on revenues in the Utility segment’s New York rate jurisdiction is tempered by a WNC, which covers the eight-month period from October through May. The WNC is designed to adjust the rates of retail customers to reflect the impact of deviations from normal weather. Weather that is warmer than normal results in a surcharge being added to customers’ current bills, while weather that is colder than normal results in a refund being credited to customers’ current bills. Since the Utility segment’s Pennsylvania rate jurisdiction does not have a WNC, weather variations have a direct impact on the Pennsylvania rate jurisdiction’s revenues.

The impact of weather normalized usage per customer account in the Utility segment’s New York rate jurisdiction is tempered by a revenue decoupling mechanism. The effect of the revenue decoupling mechanism is to render the Company financially indifferent to throughput decreases resulting from conservation. Weather normalized usage per account that exceeds the average weather normalized usage per customer account results in a refund being credited to customers’ bills. Weather normalized usage per account that is below the average weather normalized usage per account results in a surcharge being added to customers’ bills. The surcharge or credit is calculated over a twelve-month period ending December 31st, and applied to customer bills annually, beginning March 1st.

In the Pipeline and Storage segment, the allowed rates that Supply Corporation and Empire bill their customers are based on a straight fixed-variable rate design, which allows recovery of all fixed costs, including return on equity and income taxes, through fixed monthly reservation charges. Because of this rate design, changes in throughput due to weather variations do not have a significant impact on the revenues of Supply Corporation or Empire.

Property, Plant and Equipment

In the Company’s Exploration and Production segment, oil and gas property acquisition, exploration and development costs are capitalized under the full cost method of accounting. Under this methodology, all costs associated with property acquisition, exploration and development activities are capitalized, including internal costs directly identified with acquisition, exploration and development activities. The internal costs that are capitalized do not include any costs related to production, general corporate overhead, or similar activities. The Company does not recognize any gain or loss on the sale or other disposition of oil and gas properties unless the gain or loss would significantly alter the relationship between capitalized costs and proved reserves of oil and gas attributable to a cost center. For further discussion of capitalized costs, refer to Note M — Supplementary Information for Oil and Gas Producing Activities.

Capitalized costs are subject to the SEC full cost ceiling test. The ceiling test, which is performed each quarter, determines a limit, or ceiling, on the amount of property acquisition, exploration and development costs that can be capitalized. The ceiling under this test represents (a) the present value of estimated future net cash flows, excluding future cash outflows associated with settling asset retirement obligations that have been accrued on the balance sheet, using a discount factor of 10%, which is computed by applying prices of oil and gas (as adjusted for hedging) to estimated future production of proved oil and gas reserves as of the date of the latest balance sheet, less estimated future expenditures, plus (b) the cost of unevaluated properties not being depleted, less (c) income tax effects related to the differences between the book and tax basis of the properties. The natural gas and oil prices used to calculate the full cost ceiling are based on an unweighted arithmetic average of the first day of the month oil and gas prices for each month within the twelve-month period prior to the end of the reporting period. If capitalized costs, net of accumulated depreciation, depletion and amortization and related deferred income taxes, exceed the ceiling at the end of any quarter, a permanent impairment is required to be charged to earnings in that quarter. The book value of the oil and gas properties exceeded the ceiling at September 30, 2015 as well as at June 30, 2015 and March 31, 2015. As such, the Company recognized pre-tax impairment charges of $1.1 billion for the year ended September 30, 2015. Deferred income tax benefits of $476.1 million related to the impairment charges were also recognized for the year ended September 30, 2015. In adjusting estimated future net cash flows for hedging under the ceiling test at September 30, 2015, 2014, and 2013, estimated future net cash flows were increased by $194.5 million, decreased by $33.6 million and increased by $71.6 million, respectively.

The principal assets of the Utility and Pipeline and Storage segments, consisting primarily of gas plant in service, are recorded at the historical cost when originally devoted to service.

Maintenance and repairs of property and replacements of minor items of property are charged directly to maintenance expense. The original cost of the regulated subsidiaries’ property, plant and equipment retired, and the cost of removal less salvage, are charged to accumulated depreciation.

Depreciation, Depletion and Amortization

For oil and gas properties, depreciation, depletion and amortization is computed based on quantities produced in relation to proved reserves using the units of production method. The cost of unproved oil and gas properties is excluded from this computation. In the All Other category, for timber properties, depletion, determined on a property by property basis, is charged to operations based on the actual amount of timber cut in relation to the total amount of recoverable timber. For all other property, plant and equipment, depreciation and amortization is computed using the straight-line method in amounts sufficient to recover costs over the estimated service lives of property in service. The following is a summary of depreciable plant by segment:



	As of September 30
	2015		2014
	(Thousands)
Exploration and Production	$	4,556,096	$	3,995,200
Pipeline and Storage	1,710,947		1,609,593
Gathering	307,274		239,507
Utility	1,888,489		1,833,104
Energy Marketing	3,494		3,366
All Other and Corporate	109,193		108,986
	$	8,575,493	$	7,789,756

Average depreciation, depletion and amortization rates are as follows:



	Year Ended September 30
	2015			2014			2013
Exploration and Production, per Mcfe(1)	$	1.52		$	1.85		$	2.02
Pipeline and Storage	2.4		%	2.4		%	2.5		%
Gathering	4.0		%	3.3		%	3.7		%
Utility	2.6		%	2.6		%	2.6		%
Energy Marketing	6.1		%	5.8		%	3.9		%
All Other and Corporate	1.4		%	0.9		%	1.3		%


(1)	Amounts include depletion of oil and gas producing properties as well as depreciation of fixed assets. As disclosed in Note M — Supplementary Information for Oil and Gas Producing Activities, depletion of oil and gas producing properties amounted to $1.49, $1.82 and $1.98 per Mcfe of production in 2015, 2014 and 2013, respectively.

Goodwill

The Company has recognized goodwill of $5.5 million as of September 30, 2015 and 2014 on its Consolidated Balance Sheets related to the Company’s acquisition of Empire in 2003. The Company accounts for goodwill in accordance with the current authoritative guidance, which requires the Company to test goodwill for impairment annually. At September 30, 2015, 2014 and 2013, the fair value of Empire was greater than its book value. As such, the goodwill was not considered impaired at those dates. Going back to the origination of the goodwill in 2003, the Company has never recorded an impairment of its goodwill balance.

Financial Instruments

Unrealized gains or losses from the Company’s investments in an equity mutual fund and the stock of an insurance company (securities available for sale) are recorded as a component of accumulated other comprehensive income (loss). Reference is made to Note G — Financial Instruments for further discussion.

The Company uses a variety of derivative financial instruments to manage a portion of the market risk associated with fluctuations in the price of natural gas and crude oil and to manage a portion of the risk of currency fluctuations associated with transportation costs denominated in Canadian currency. These instruments include price swap agreements and futures contracts. The Company accounts for these instruments as either cash flow hedges or fair value hedges. In both cases, the fair value of the instrument is recognized on the Consolidated Balance Sheets as either an asset or a liability labeled Fair Value of Derivative Financial Instruments. Reference is made to Note F — Fair Value Measurements for further discussion concerning the fair value of derivative financial instruments.

For effective cash flow hedges, the offset to the asset or liability that is recorded is a gain or loss recorded in accumulated other comprehensive income (loss) on the Consolidated Balance Sheets. The gain or loss recorded in accumulated other comprehensive income (loss) remains there until the hedged transaction occurs, at which point the gains or losses are reclassified to operating revenues, purchased gas expense or operation and maintenance expense on the Consolidated Statements of Income. Reference is made to Note G - Financial Instruments for further discussion concerning cash flow hedges.

For fair value hedges, the offset to the asset or liability that is recorded is a gain or loss recorded to operating revenues or purchased gas expense on the Consolidated Statements of Income. However, in the case of fair value hedges, the Company also records an asset or liability on the Consolidated Balance Sheets representing the change in fair value of the asset or firm commitment that is being hedged (see Other Current Assets section in this footnote). The offset to this asset or liability is a gain or loss recorded to operating revenues or purchased gas expense on the Consolidated Statements of Income as well. If the fair value hedge is effective, the gain or loss from the derivative financial instrument is offset by the gain or loss that arises from the change in fair value of the asset or firm commitment that is being hedged. Reference is made to Note G - Financial Instruments for further discussion concerning fair value hedges.

Accumulated Other Comprehensive Income (Loss)

The components of Accumulated Other Comprehensive Income (Loss) and changes for the year ended September 30, 2015, net of related tax effect, are as follows (amounts in parentheses indicate debits) (in thousands):



	Gains and Losses on Derivative Financial Instruments			Gains and Losses on Securities Available for Sale			Funded Status of the Pension and Other Post-Retirement Benefit Plans			Total
Year Ended September 30, 2015
Balance at October 1, 2014	$	43,659		$	8,382		$	(56,020	)	$	(3,979	)
Other Comprehensive Gains and Losses Before Reclassifications	220,146			(2,039		)	(19,616		)	198,491
Amounts Reclassified From Other Comprehensive Income	(106,608		)	(374		)	5,842			(101,140		)
Balance at September 30, 2015	$	157,197		$	5,969		$	(69,794	)	$	93,372

Year Ended September 30, 2014
Balance at October 1, 2013	$	30,722		$	6,337		$	(56,293	)	$	(19,234	)
Other Comprehensive Gains and Losses Before Reclassifications	4,805			2,465			(5,560		)	1,710
Amounts Reclassified From Other Comprehensive Loss	8,132			(420		)	5,833			13,545
Balance at September 30, 2014	$	43,659		$	8,382		$	(56,020	)	$	(3,979	)

The amounts included in accumulated other comprehensive income (loss) related to the funded status of the Company’s pension and other post-retirement benefit plans consist of prior service costs and accumulated losses. The total amount for prior service (cost) credit was ($1.5 million) and $0.2 million at September 30, 2015 and 2014, respectively. The total amount for accumulated losses was $68.3 million and $56.2 million at September 30, 2015 and 2014, respectively.

Reclassifications Out of Accumulated Other Comprehensive Income (Loss)

The details about the reclassification adjustments out of accumulated other comprehensive income (loss) for the year ended September 30, 2015 are as follows (amounts in parentheses indicate debits to the income statement) (in thousands):



Details About Accumulated Other Comprehensive Income (Loss) Components	Amount of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income (Loss) for the Year Ended September 30,						Affected Line Item in the Statement Where Net Income (Loss) is Presented
	2015			2014
Gains (Losses) on Derivative Financial Instrument Cash Flow Hedges:
Commodity Contracts		$180,069			($14,880	)	Operating Revenues
Commodity Contracts	4,884			(2,767		)	Purchased Gas
Gains (Losses) on Securities Available for Sale	591			662			Other Income
Amortization of Prior Year Funded Status of the Pension and Other Post-Retirement Benefit Plans:
Prior Service Credit	109			131			(1)
Net Actuarial Loss	(9,326		)	(9,334		)	(1)
	176,327			(26,188		)	Total Before Income Tax
	(75,187		)	12,643			Income Tax Expense
		$101,140			($13,545	)	Net of Tax


(1)	These accumulated other comprehensive income (loss) components are included in the computation of net periodic benefit cost. Refer to Note H — Retirement Plan and Other Post-Retirement Benefits for additional details.

Gas Stored Underground — Current

In the Utility segment, gas stored underground — current in the amount of $26.8 million is carried at lower of cost or market, on a LIFO method. Based upon the average price of spot market gas purchased in September 2015, including transportation costs, the current cost of replacing this inventory of gas stored underground — current exceeded the amount stated on a LIFO basis by approximately $13.8 million at September 30, 2015. All other gas stored underground — current, which is in the Energy Marketing segment, is carried at an average cost method, subject to lower of cost or market adjustments.

Unamortized Debt Expense

Costs associated with the reacquisition of debt related to rate-regulated subsidiaries are deferred and amortized over the remaining life of the issue or the life of the replacement debt in order to match regulatory treatment. At September 30, 2015, the remaining weighted average amortization period for such costs was approximately 4 years.

Income Taxes

The Company and its subsidiaries file a consolidated federal income tax return. State tax returns are filed on a combined or separate basis depending on the applicable laws in the jurisdictions where tax returns are filed. Investment tax credit, prior to its repeal in 1986, was deferred and is being amortized over the estimated useful lives of the related property, as required by regulatory authorities having jurisdiction.

The Company reports a liability or a reduction of deferred tax assets for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return. When applicable, the Company recognizes interest relating to uncertain tax positions in Other Interest Expense and penalties in Other Income.

Consolidated Statement of Cash Flows

For purposes of the Consolidated Statement of Cash Flows, the Company considers all highly liquid debt instruments purchased with a maturity of generally three months or less to be cash equivalents.

Hedging Collateral Deposits

This is an account title for cash held in margin accounts funded by the Company to serve as collateral for hedging positions. In accordance with its accounting policy, the Company does not offset hedging collateral deposits paid or received against related derivative financial instrument liability or asset balances.

Other Current Assets

The components of the Company’s Other Current Assets are as follows:



	Year Ended September 30
	2015		2014
	(Thousands)
Prepayments	$	10,743	$	10,079
Prepaid Property and Other Taxes	13,709		13,743
Federal Income Taxes Receivable	—		8,211
Fair Values of Firm Commitments	15,775		—
Regulatory Assets	20,438		22,719
	$	60,665	$	54,752

Other Accruals and Current Liabilities

The components of the Company’s Other Accruals and Current Liabilities are as follows:



	Year Ended September 30
	2015		2014
	(Thousands)
Accrued Capital Expenditures	$	53,652	$	80,348
Regulatory Liabilities	5,346		18,072
Federal Income Taxes Payable	5,686		—
State Income Taxes Payable	1,170		5,798
Other	30,703		32,454
	$	96,557	$	136,672

Customer Advances

The Company’s Utility and Energy Marketing segments have balanced billing programs whereby customers pay their estimated annual usage in equal installments over a twelve-month period. Monthly payments under the balanced billing programs are typically higher than current month usage during the summer months. During the winter months, monthly payments under the balanced billing programs are typically lower than current month usage. At September 30, 2015 and 2014, customers in the balanced billing programs had advanced excess funds of $16.2 million and $19.0 million, respectively.

Customer Security Deposits

The Company, in its Utility, Pipeline and Storage, and Energy Marketing segments, often times requires security deposits from marketers, producers, pipeline companies, and commercial and industrial customers before providing services to such customers. At September 30, 2015 and 2014, the Company had received customer security deposits amounting to $16.5 million and $15.8 million, respectively.

Earnings Per Common Share

Basic earnings per common share is computed by dividing income or loss by the weighted average number of common shares outstanding for the period. Diluted earnings per common share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. For purposes of determining earnings per common share, the only potentially dilutive securities the Company has outstanding are stock options, SARs, restricted stock units and performance shares. As the Company recognized a net loss in 2015, the aforementioned securities, amounting to 709,063 securities, were not recognized in the diluted earnings per share calculation for 2015. For 2014 and 2013, the diluted weighted average shares outstanding shown on the Consolidated Statements of Income reflects the potential dilution as a result of these securities as determined using the Treasury Stock Method. Stock options, SARs, restricted stock units and performance shares that are antidilutive are excluded from the calculation of diluted earnings per common share. For 2014 and 2013, 1,007 securities and 181,418 securities were excluded as being antidilutive, respectively.

Stock-Based Compensation

The Company has various stock option and stock award plans which provide or provided for the issuance of one or more of the following to key employees: incentive stock options, nonqualified stock options, SARs, restricted stock, restricted stock units, performance units or performance shares. The Company follows authoritative guidance which requires the measurement and recognition of compensation cost at fair value for all share-based payments. Stock options and SARs under all plans have exercise prices equal to the average market price of Company common stock on the date of grant, and generally no stock option or SAR is exercisable less than one year or more than ten years after the date of each grant. The Company has chosen the Black-Scholes-Merton closed form model to calculate the compensation expense associated with stock options and SARs.

Restricted stock is subject to restrictions on vesting and transferability. Restricted stock awards entitle the participants to full dividend and voting rights. The market value of restricted stock on the date of the award is recorded as compensation expense over the vesting period. Certificates for shares of restricted stock awarded under the Company’s stock option and stock award plans are held by the Company during the periods in which the restrictions on vesting are effective. Restrictions on restricted stock awards generally lapse ratably over a period of not more than ten years after the date of each grant. Restricted stock units also are subject to restrictions on vesting and transferability. Restricted stock units, both performance and non-performance based, represent the right to receive shares of common stock of the Company (or the equivalent value in cash or a combination of cash and shares of common stock of the Company, as determined by the Company) at the end of a specified time period. The performance based and non-performance based restricted stock units do not entitle the participants to dividend and voting rights. The accounting for performance based and non-performance based restricted stock units is the same as the accounting for restricted share awards, except that the fair value at the date of grant of the restricted stock units (represented by the market value of Company common stock on the date of the award) must be reduced by the present value of forgone dividends over the vesting term of the award. The fair value of restricted stock units on the date of award is recorded as compensation expense over the vesting period.

Performance shares are an award constituting units denominated in common stock of the Company, the number of which may be adjusted over a performance cycle based upon the extent to which performance goals have been satisfied. Earned performance shares may be distributed in the form of shares of common stock of the Company, an equivalent value in cash or a combination of cash and shares of common stock of the Company, as determined by the Company. The performance shares do not entitle the participant to receive dividends during the vesting period. For performance shares based on a return on capital goal, the fair value at the date of grant of the performance shares is determined by multiplying the expected number of performance shares to be issued by the market value of Company common stock on the date of grant reduced by the present value of forgone dividends. For performance shares based on a total shareholder return goal, the Company uses the Monte Carlo simulation technique to estimate the fair value price at the date of grant.

Refer to Note E — Capitalization and Short-Term Borrowings under the heading “Stock Option and Stock Award Plans” for additional disclosures related to stock-based compensation awards for all plans.

New Authoritative Accounting and Financial Reporting Guidance

In May 2014, the FASB issued authoritative guidance regarding revenue recognition. The authoritative guidance provides a single, comprehensive revenue recognition model for all contracts with customers to improve comparability. The revenue standard contains principles that an entity will apply to determine the measurement of revenue and timing of when it is recognized. The original effective date of this authoritative guidance was as of the Company's first quarter of fiscal 2018. However, the FASB has delayed the effective date of the new revenue standard by one year, and the guidance will now be effective as of the Company's first quarter of fiscal 2019. The Company is currently evaluating the impact that adoption of this guidance will have on its consolidated financial statements and disclosures.

In June 2014, the FASB issued authoritative guidance regarding accounting for share-based payments when the terms of an award provide that a performance target could be achieved after the employee has completed the requisite service period. This authoritative guidance requires that such performance targets that affect vesting be treated as performance conditions, meaning that the performance target should not be factored in the calculation of the award at the grant date. Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved. This authoritative guidance will be effective as of the Company's first quarter of fiscal 2017, with early adoption permitted. The Company is currently evaluating the impact that adoption of this guidance will have on its consolidated financial statements.

In April 2015, the FASB issued authoritative guidance regarding the presentation of debt issuance costs. The authoritative guidance requires that all costs incurred to issue debt be presented in the balance sheet as a direct deduction from the carrying value of the debt. The Company early adopted this guidance at September 30, 2015 on a retrospective basis.

In July 2015, the FASB issued authoritative guidance simplifying inventory measurement by requiring companies to value inventory at the lower of cost and net realizable value. The authoritative guidance applies to all inventory other than inventory that is measured using last-in, first-out or the retail inventory method. The intention of this authoritative guidance is to eliminate some diversity in practice. This authoritative guidance will be effective as of the Company's first quarter of fiscal 2018, with early adoption permitted. The Company is currently evaluating the impact that adoption of this guidance will have on its consolidated financial statements.