Asset Retirement Obligations

12 Months Ended

Dec. 31, 2012

7 Asset Retirement Obligations

The Company’s asset retirement obligations are based on net ownership in wells and facilities and management’s estimate of the timing and expected future costs associated with site reclamation, facilities dismantlement and the plugging and abandonment of wells.

The following table provides a reconciliation of the beginning and ending aggregate carrying amount of the obligation associated with the retirement of property and equipment:

		Year ended December 31, 2012		Year ended December 31, 2011		Year ended December 31, 2010
Balance, beginning of year	$	1,180,661	$	1,309,789	$	1,220,046
Liabilites incurred				313,684		17,743
Change in estimate		163,850		(422,813)	(i)	-
Reduction to liabilities		(1,180,336)		(105,737)		(9,110)
Accretion expense		39,686		85,738		81,110
Balance, end of year	$	203,861	$	1,180,661	$	1,309,789

(i) The Company adjusted the remaining life of its California oil and gas properties in calculating its asset retirement obligation from approximately 9 years to 25 years to better reflect estimated useful lives of the properties.

The balance of $203,861 at the end of December 31, 2012 is related to the remaining liability to plug the Louisiana well.

- Definition

The entire disclosure for an asset retirement obligation and the associated long-lived asset. An asset retirement obligation is a legal obligation associated with the disposal or retirement from service of a tangible long-lived asset that results from the acquisition, construction or development, or the normal operations of a long-lived asset, except for certain obligations of lessees.

+ References+ Details

NiMin Energy Corp. 10-K