12. Asset Retirement Obligations

9 Months Ended

Sep. 30, 2014

Asset Retirement Obligation Disclosure [Abstract]

Asset Retirement Obligations

Refinery and Facilities

Management has concluded that there is no legal or contractual obligation to dismantle or remove the Nixon Refinery and related facilities. Management believes that the Nixon Refinery and related facilities have indeterminate lives under FASB ASC guidance for estimating AROs because dates or ranges of dates upon which we would retire these assets cannot reasonably be estimated at this time. When a date or range of dates can reasonably be estimated for the retirement of these assets, we will estimate the cost of performing the retirement activities and record a liability for the fair value of that cost using present value techniques.

Pipelines and Facilities and Oil and Gas Properties

We have AROs associated with the dismantlement and abandonment in place of our pipelines and facilities, as well as the plugging and abandonment of our oil and gas properties.  We recorded a discounted liability for the fair value an ARO with a corresponding increase to the carrying value of the related long-lived asset at the time the asset was installed or placed in service. We amortize the amount added to property and equipment and recognize accretion expense in connection with the discounted liability over the remaining life of the asset.

AROs on a roll-forward basis were as follows:

Asset retirment obligations at December 31, 2013	$	1,597,661
New asset retirement obligations		300,980
Asset retirement obligation payments/liabilities settled		(2,912	)
Accretion expense		158,264
		2,053,993
Less:  current portion of asset retirement obligations		107,509
Asset retirement obligations, long-term balance
at September 30, 2014	$	1,946,484

On February 5, 2014, WBI and BDPL entered into the Purchase Agreement whereby BDPL reacquired WBI’s 1/6th interest in the Pipeline Assets effective October 31, 2013.  Pursuant to the Purchase Agreement, WBI paid BDPL $100,000 in cash and $850,000 in the form of a cash-backed surety bond in exchange for the payment and discharge of any and all payables, claims, and obligations related to the Pipeline Assets. Once plugging and abandonment work has been completed, the collateral will be released to BDPL.  The WBI transaction resulted in a $300,980 increase in our AROs related to the Pipeline Assets, which represents the fair value of the liability, and increased accretion expense throughout the remaining useful life of the pipelines.

For the three months ended September 30, 2014 and 2013, we recognized $0 and $8, respectively, in abandonment expense related to our oil and gas properties.  For the nine months ended September 30, 2014 and 2013, we recognized $0 and $51,360, respectively, in abandonment expense related to our oil and gas properties.  AROs for 2013 were associated with our High Island A7 and High Island 37 oil and gas properties. We will record additional plugging and abandonment costs for oil and gas properties as information becomes available from operators to substantiate actual and/or probable costs.