XML 33 R10.htm IDEA: XBRL DOCUMENT

4. Fair Value Measurements

9 Months Ended

Jun. 30, 2011

We report certain assets and liabilities at fair value, which is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). We record cash and cash equivalents, accounts receivable and accounts payable at carrying value, which substantially approximates fair value due to the short-term nature of these assets and liabilities. For other financial assets and liabilities, we primarily use quoted market prices and other observable market pricing information to minimize the use of unobservable pricing inputs in our measurements when determining fair value. The methods used to determine fair value for our assets and liabilities are fully described in Note 2 to the financial statements in our Annual Report on Form 10-K for the fiscal year ended September 30, 2010. During the three and nine months ended June 30, 2011, there were no changes in these methods.

Fair value measurements also apply to the valuation of our pension and postretirement plan assets. Current accounting guidance requires employers to annually disclose information about fair value measurements of the assets of a defined benefit pension or other postretirement plan. The fair value of these assets is presented in Note 8 to the financial statements in our Annual Report on Form 10-K for the fiscal year ending September 30, 2010.

Quantitative Disclosures

Financial Instruments

The classification of our fair value measurements requires judgment regarding the degree to which market data are observable or corroborated by observable market data. Authoritative accounting literature establishes a fair value hierarchy that prioritizes the inputs used to measure fair value based on observable and unobservable data. The hierarchy categorizes the inputs into three levels, with the highest priority given to unadjusted quoted prices in active markets for identical assets and liabilities (Level 1), with the lowest priority given to unobservable inputs (Level 3). The following tables summarize, by level within the fair value hierarchy, our assets and liabilities that were accounted for at fair value on a recurring basis as of June 30, 2011 and September 30, 2010. Assets and liabilities are categorized in their entirety based on the lowest level of input that is significant to the fair value measurement.

		Quoted		Significant		Significant
		Prices in		Other		Other
		Active		Observable		Unobservable		Netting and
		Markets		Inputs		Inputs		Cash		June 30,
		(Level 1)		(Level 2)⁽¹⁾		(Level 3)		Collateral⁽²⁾		2011
			(In thousands)

Assets:
Financial instruments
	Natural gas distribution segment	$	-	$	2,739	$	-	$	-	$	2,739
	Nonregulated segment		3,696		34,367		-		(25,006)		13,057
Total financial instruments			3,696		37,106		-		(25,006)		15,796

Hedged portion of gas stored
	underground		86,544		-		-		-		86,544
Available-for-sale securities			44,045		-		-		-		44,045
Total assets		$	134,285	$	37,106	$	-	$	(25,006)	$	146,385

Liabilities:
Financial instruments
	Natural gas distribution segment	$	-	$	5,263	$	-	$	-	$	5,263
	Nonregulated segment		10,645		38,827		-		(40,388)		9,084
Total liabilities		$	10,645	$	44,090	$	-	$	(40,388)	$	14,347

		Quoted		Significant		Significant
		Prices in		Other		Other
		Active		Observable		Unobservable		Netting and
		Markets		Inputs		Inputs		Cash		September 30,
		(Level 1)		(Level 2)⁽¹⁾		(Level 3)		Collateral⁽³⁾		2010
			(In thousands)

Assets:
Financial instruments
	Natural gas distribution segment	$	-	$	2,266	$	-	$	-	$	2,266
	Nonregulated segment		18,544		42,462		-		(41,760)		19,246
Total financial instruments			18,544		44,728		-		(41,760)		21,512

Hedged portion of gas stored
	underground		57,507		-		-		-		57,507
Available-for-sale securities			41,466		-		-		-		41,466
Total assets		$	117,517	$	44,728	$	-	$	(41,760)	$	120,485

Liabilities:
Financial instruments
	Natural gas distribution segment	$	-	$	51,866	$	-	$	-	$	51,866
	Nonregulated segment		41,430		31,950		-		(66,649)		6,731
Total liabilities		$	41,430	$	83,816	$	-	$	(66,649)	$	58,597

(1) Our Level 2 measurements primarily consist of non-exchange-traded financial instruments, such as over-the-counter options and swaps where market data for pricing is observable. The fair values for these assets and liabilities are determined using a market-based approach in which observable market prices are adjusted for criteria specific to each instrument, such as the strike price, notional amount or basis differences.

(2) This column reflects adjustments to our gross financial instrument assets and liabilities to reflect netting permitted under our master netting agreements and the relevant authoritative accounting literature. In addition, as of June 30, 2011, we had $15.4 million of cash held in margin accounts to collateralize certain financial instruments. Of this amount, $4.4 million was used to offset current risk management liabilities under master netting arrangements and the remaining $11.0 million is classified as current risk management assets.

(3) This column reflects adjustments to our gross financial instrument assets and liabilities to reflect netting permitted under our master netting agreements and the relevant authoritative accounting literature. In addition, as of September 30, 2010 we had $24.9 million of cash held in margin accounts to collateralize certain financial instruments. Of this amount, $12.6 million was used to offset current risk management liabilities under master netting arrangements and the remaining $12.3 million is classified as current risk management assets.

Nonrecurring Fair Value Measurements

As discussed in Note 9, during the third quarter we performed an impairment assessment of certain natural gas gathering assets in our nonregulated segment. We used a combination of a market and income approach in a weighted average discounted cash flow analysis that included significant inputs such as our weighted average cost of capital and assumptions regarding future natural gas prices. This is a Level 3 fair value measurement because the inputs used are unobservable. Based on this analysis, we determined the assets to be impaired. We reduced the carrying value of the assets to their estimated fair value of approximately $6 million and recorded a pre-tax noncash impairment loss of approximately $11 million.

Other Fair Value Measures

Our debt is recorded at carrying value. The fair value of our debt is determined using third party market value quotations. The following table presents the carrying value and fair value of our debt as of June 30, 2011:

	June 30, 2011
	(In thousands)

Carrying Amount	$	2,212,630
Fair Value	$	2,474,064

- Definition

This item represents the complete disclosure regarding the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments, assets, and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the Company is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risk is are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References+ Details