Abandonment Obligations

9 Months Ended

Sep. 30, 2011

3. Abandonment Obligations

The Partnership follows the provisions of ASC topic 410-20, formerly SFAS No. 143, “Accounting for Asset Retirement Obligations”. ASC topic 410-20 requires the Partnership to recognize a liability for the present value of all legal obligations associated with the retirement of tangible, long-lived assets and capitalize an equal amount as a cost of the asset. The cost associated with the abandonment obligations, along with any estimated salvage value, is included in the computation of depreciation, depletion and amortization.

Our asset retirement obligation is measured using primarily Level 3 inputs. The significant unobservable inputs to this fair value measurement include estimates of plugging, abandonment and remediation costs, inflation rate and well life. The inputs are calculated based on historical data as well as current estimated costs.

Changes in abandonment obligations for the nine months ended September 30, 2011 and 2010 are as follows:

	2011			2010
Beginning of period	$	378,605		$	360,540
Settlement of obligations for plugged and abandoned wells	(26,925		)	(3,317		)
Reduction of obligations due to farm-out	—			(222		)
Additional abandonment obligations from new wells	—			290
Revisions of estimates	—			533
Accretion expense	17,592			17,069
End of period	$	369,272		$	374,893

SOUTHWEST ROYALTIES INSTITUTIONAL INCOME FUND X-B LP 10-Q