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Stock-Based Compensation

6 Months Ended

Jun. 30, 2012

Disclosure Stock Based Compensation [Abstract]

Stock Based Compensation Text Block

6. Stock-Based Compensation

Our stock-based compensation plans include a Long-Term Incentive Plan (LTIP), an Employee Stock Purchase Plan, and a Restated Stock Option Plan (Restated SOP). The Restated SOP was terminated in the second quarter of 2012 as approved by shareholders. Shareholders also approved the amended LTIP and added 250,000 shares to the plan. These plans are designed to promote stock ownership in NW Natural by employees and officers. For additional information on our stock-based compensation plans, see Note 6, in the 2011 Form 10-K and current updates provided below.

Long-Term Incentive Plan

In the second quarter of 2012 shares available for issuance under the LTIP were increased from 600,000 shares to 850,000 shares. The additional 250,000 shares may only be used for option grants under the LTIP and not for full-value awards such as Restricted Stock Units (RSUs) or performance shares.

Performance-Based Stock Awards. On February 22, 2012, 35,340 performance-based shares were granted under the LTIP, which include a market condition, based on target-level awards and a weighted-average grant date fair value of $53.92 per share. Fair value was estimated as of the date of grant using a Monte-Carlo option pricing model based on the following assumptions:

Stock price on valuation date	$	48.00
Performance term (in years)		3.0
Quarterly dividends paid per share	$	0.445
Expected dividend yield		3.6	%
Dividend discount factor		0.9012

Restricted Stock Units. The current LTIP allows for a variety of awards including RSUs to be granted. The RSUs awarded include a performance based threshold and a vesting period of four years from the grant date. The Company is obligated upon vesting of an RSU to issue the RSU holder one share of common stock plus a cash payment equal to the total amount of dividends paid per share between the grant date and vesting date of the RSU. On February 22, 2012, RSUs totaling 21,720 were granted with a grant date fair value of $48.00 per share.

Restated Stock Option Plan

As of June 30, 2012, there was $0.7 million of unrecognized compensation cost from grants of stock options in prior years, which is expected to be recognized over a period extending through 2014. The Restated SOP was terminated in the second quarter of 2012; however, the outstanding options may still be exercised through their expiration dates. Any new grants of stock options would be made under the LTIP; however, no new stock options were granted in the six months ended June 30, 2012.

Tabular disclosure of components of a stock option or other award plan under which equity-based compensation is awarded to employees, typically comprised of the amount of unearned compensation (deferred compensation cost), compensation expense, and changes in the quantity and fair value of the shares (or other type of equity) granted, exercised, forfeited, and issued and outstanding pertaining to that plan. Disclosure may also include nature and general terms of such arrangements that existed during the period and potential effects of those arrangements on shareholders, effect of compensation cost arising from equity-based payment arrangements on the income statement, method of estimating the fair value of the goods or services received, or the fair value of the equity instruments granted, during the period, cash flow effects resulting from equity-based payment arrangements and, for registrants that accelerate vesting of out of the money share options, reasons for the decision to accelerate.

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