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Asset Retirement Obligations
 12 Months Ended
Dec. 31, 2012
Asset Retirement Obligations

Note G – Asset Retirement Obligations

The majority of the asset retirement obligations liabilities (ARO) recognized by the Company at December 31, 2012 and 2011 related to the estimated costs to dismantle and abandon its producing oil and gas properties and related equipment. A portion of the ARO related to retail gasoline stations. The Company has not recorded an ARO for its refining, ethanol and certain of its marketing assets because sufficient information is presently not available to estimate a range of potential settlement dates for the obligation. These assets are consistently being upgraded and are expected to be operational into the foreseeable future. In these cases, the obligation will be initially recognized in the period in which sufficient information exists to estimate the liability.

 

A reconciliation of the beginning and ending aggregate carrying amount of the asset retirement obligation for 2012 and 2011 is shown in the following table.

 

(Thousands of dollars)

    2012     2011  

Balance at beginning of year

    $ 615,545        555,248   

Accretion expense

      39,341        37,701 1 

Liabilities incurred

      184,439        51,858   

Revision of previous estimates

      10,468        7,608   

Liabilities settled

      (40,434 )      (32,088 )2 

U.K. amounts reclassified to liabilities associated with assets held for sale

      (64,355 )      0   

Changes due to translation of foreign currencies

      6,579        (4,782 ) 
  

 

 

    

 

 

  

Balance at end of year

      751,583        615,545   

Current portion of liability at end of year

      (27,310 )3      0   
  

 

 

    

 

 

  

Noncurrent portion of liability at end of year

    $ 724,273        615,545   
  

 

 

    

 

 

  

 

  1

Includes $2,977 reclassified to discontinued operations associated with U.K. oil and gas production operations.
  2

Includes noncash settlements related to sale of assets in Spain in 2011.
  3

Included in Other Accrued Liabilities on Consolidated Balance Sheet.

The estimation of future ARO is based on a number of assumptions requiring professional judgment. The Company cannot predict the type of revisions to these assumptions that may be required in future periods due to the availability of additional information such as: prices for oil field services, technological changes, governmental requirements and other factors.