OG&E 2011 Annual Report Download - page 40

38 OGE Energy Corp.
Natural Gas Inventory
Natural gas inventory is held by Enogex, through its transportation and
storage business to provide operational support for its pipeline deliveries
and through its marketing business to manage its leased storage capacity.
In an effort to mitigate market price exposures, Enogex may enter into
contracts or hedging instruments to protect the cash flows associated
with its inventory. All natural gas inventory held by Enogex is valued using
moving average cost and is recorded at the lower of cost or market. As
part of its recurring marketing activity, OER injects and withdraws natural
gas into and out of inventory under the terms of its storage capacity
contracts. During the years ended December 31, 2011, 2010 and 2009,
Enogex recorded write-downs to market value related to natural gas
storage inventory of $4.8 million, $0.3 million and $6.1 million, respec-
tively. The amount of Enogex’s natural gas inventory was $23.7 million
and $23.9 million at December 31, 2011 and 2010, respectively. The cost
of gas associated with sales of natural gas storage inventory is presented
in Cost of Goods Sold on the Consolidated Statements of Income.
Allowance for Uncollectible Accounts Receivable
The allowance for uncollectible accounts receivable for Enogex is
calculated based on outstanding accounts receivable balances over
180 days old. In addition, other outstanding accounts receivable balances
less than 180 days old are reserved on a case-by-case basis when Enogex
believes the collection of specific amounts owed is unlikely to occur. The
allowance for uncollectible accounts receivable is a reduction to Accounts
Receivable on the Consolidated Balance Sheets and is included in Other
Operation and Maintenance Expense on the Consolidated Statements
of Income. The aggregate allowance for uncollectible accounts receiv-
able for Enogex’s transportation and storage, gathering and processing
and marketing segments was less than $0.1 million and $0.3 million at
December 31, 2011 and 2010, respectively.
Accounting Pronouncements
See Note 2 of Notes to Consolidated Financial Statements for a
discussion of recently issued accounting pronouncements that are
applicable to the Company.
Commitments and Contingencies
Except as disclosed otherwise in the Company’s Form 10-K, management,
after consultation with legal counsel, does not currently anticipate that
liabilities arising out of these pending or threatened lawsuits, claims
and contingencies will have a material adverse effect on the Company’s
consolidated financial position, results of operations or cash flows. See
Notes 16 and 17 of Notes to Consolidated Financial Statements and
Item 3 of Part I in the Company’s Form 10-K for a discussion of the
Company’s commitments and contingencies.
Environmental Laws and Regulations
The activities of OG&E and Enogex are subject to stringent and complex
Federal, state and local laws and regulations governing environmental
protection including the discharge of materials into the environment.
These laws and regulations can restrict or impact OG&E’s and Enogex’s
business activities in many ways, such as restricting the way it can handle
or dispose of their wastes, requiring remedial action to mitigate pollution
conditions that may be caused by their operations or that are attributable
to former operators, regulating future construction activities to mitigate
harm to threatened or endangered species and requiring the installation
and operation of pollution control equipment. Failure to comply with
these laws and regulations may result in the assessment of administrative,
civil and criminal penalties, the imposition of remedial requirements
and the issuance of orders enjoining future operations. OG&E and Enogex
believe that their operations are in substantial compliance with current
Federal, state and local environmental standards.
Environmental regulation can increase the cost of planning, design,
initial installation and operation of OG&E’s or Enogex’s facilities. Historically,
OG&E’s and Enogex’s total expenditures for environmental control
facilities and for remediation have not been significant in relation to its
consolidated financial position or results of operations. The Company
believes, however, that it is reasonably likely that the trend in environ-
mental legislation and regulations will continue towards more restrictive
standards. Compliance with these standards is expected to increase
the cost of conducting business.
OG&E expects that environmental expenditures necessary to comply
with the environmental laws and regulations discussed below will qualify
as part of a pre-approval plan to handle state and Federally mandated
environmental upgrades which will be recoverable in Oklahoma from
OG&E’s retail customers under House Bill 1910, which was enacted into
law in May 2005.
Of the Company’s capital expenditures budgeted for 2012,
$34.4 million are to comply with environmental laws and regulations,
of which $33.7 million and $0.7 million are related to OG&E and Enogex,
respectively. Of the Company’s capital expenditures budgeted for 2013,
$36.0 million are to comply with environmental laws and regulations, of
which $35.3 million and $0.7 million are related to OG&E and Enogex,
respectively. The Company’s management believes that all of its opera-
tions are in substantial compliance with current Federal, state and local
environmental standards. It is estimated that OG&E’s and Enogex’s total
expenditures for capital, operating, maintenance and other costs associ-
ated with environmental quality will be $51.6 million and $6.2 million,
respectively, in 2012 as compared to $24.0 million and $6.5 million,
respectively, in 2011. Management continues to evaluate its compliance
with existing and proposed environmental legislation and regulations and
implement appropriate environmental programs in a competitive market.