Annual report pursuant to Section 13 and 15(d)

Property, Plant and Equipment

v2.4.0.6
Property, Plant and Equipment
 12 Months Ended
Dec. 31, 2012
Property, Plant and Equipment [Abstract]  
Property, Plant and Equipment
PROPERTY, PLANT AND EQUIPMENT
 
Property, plant and equipment consists of LNG terminal and natural gas pipeline costs,, investments in oil and gas properties, and fixed assets, as follows (in thousands):
 
December 31,
 
2012
 
2011
LNG terminal costs
 
 
 
LNG terminal
$
1,651,106

 
$
1,647,107

LNG terminal construction-in-process
1,267,371

 
39,010

LNG site and related costs, net
5,398

 
4,982

Accumulated depreciation
(167,472
)
 
(125,108
)
Total LNG terminal costs, net
$
2,756,403

 
$
1,565,991

 
 
 
 
Natural gas pipeline costs
 

 
 

Natural gas pipeline
$
564,034

 
$
564,021

Natural gas pipeline construction-in-process
2,427

 
2,427

Pipeline right-of-ways
18,455

 
18,455

Accumulated depreciation
(67,803
)
 
(52,878
)
Total natural gas pipeline costs, net
$
517,113

 
$
532,025

 
 
 
 
Oil and gas properties, successful efforts method
 

 
 

Proved
$
3,917

 
$
4,170

Accumulated depreciation, depletion and amortization
(3,209
)
 
(3,033
)
Total oil and gas properties, net
$
708

 
$
1,137

 
 
 
 
Fixed assets
 

 
 

Computer and office equipment
$
7,014

 
$
5,952

Furniture and fixtures
4,057

 
4,057

Computer software
13,012

 
12,601

Leasehold improvements
6,989

 
7,318

Other
2,927

 
1,892

Accumulated depreciation
(25,918
)
 
(23,844
)
Total fixed assets, net
$
8,081

 
$
7,976

Property, plant and equipment, net
$
3,282,305

 
$
2,107,129


 
LNG Terminal Costs
 
Depreciation expense related to the Sabine Pass LNG terminal totaled $42.1 million, $42.6 million and $41.8 million for the years ended December 31, 2012, 2011 and 2010, respectively.

The Sabine Pass LNG terminal is depreciated using the straight-line depreciation method applied to groups of LNG terminal assets with varying useful lives. The identifiable components of the Sabine Pass LNG terminal with similar estimated useful lives have a depreciable range between 15 and 50 years, as follows:
Components
 
Useful life (yrs)
LNG storage tanks
 
50
Marine berth, electrical, facility and roads
 
35
Regasification processing equipment (recondensers, vaporization, and vents)
 
30
Sendout pumps
 
20
Other
 
15-30

In June 2012, Train 1 and Train 2 of the Liquefaction Project satisfied the criteria for capitalization. Accordingly, costs associated with the construction of Train 1 and Train 2 of the Liquefaction Project have been recorded as construction-in-process since that date. For the year ended December 31, 2012, we capitalized $35.1 million of interest expense related to the construction of Train 1 and Train 2 of the Liquefaction Project.

In March 2006, our Corpus Christi LNG terminal project satisfied the criteria for capitalization for certain site work that improved the associated land.  Accordingly, costs associated with the initial site work for the Corpus Christi LNG terminal have been capitalized.  As of December 31, 2012, $35.5 million of costs associated with the initial site work for the Corpus Christi LNG terminal were capitalized as LNG terminal construction-in-process.  As noted in Note 2—"Summary of Significant Accounting Policies," management reviews property, plant and equipment for impairment periodically and whenever events or changes in circumstances have indicated that the carrying amount of property, plant and equipment might not be recoverable.  Management’s assessment is based on certain estimates and assumptions used to determine if impairment is warranted.  If the estimates and assumptions used are determined to be different in the future, the amount capitalized may be subject to impairment.  

Natural Gas Pipeline Costs 

Our natural gas pipeline is subject to the jurisdiction of the FERC in accordance with the Natural Gas Act of 1938 and the Natural Gas Policy Act of 1978. The economic effects of regulation can result in a regulated company recording as assets those costs that have been or are expected to be approved for recovery from customers, or recording as liabilities those amounts that are expected to be required to be returned to customers, in a rate-setting process in a period different from the period in which the amounts would be recorded by an unregulated enterprise. Accordingly, we record assets and liabilities that result from the regulated rate-making process that may not be recorded under GAAP for non-regulated entities. We continually assess whether regulatory assets are probable of future recovery by considering factors such as applicable regulatory changes and recent rate orders applicable to other regulated entities. Based on this continual assessment, we believe the existing regulatory assets are probable of recovery. These regulatory assets and liabilities are primarily classified in our Consolidated Balance Sheets as other assets and other liabilities. We periodically evaluate their applicability under GAAP and consider factors such as regulatory changes and the effect of competition. If cost-based regulation ends or competition increases, we may have to reduce our asset balances to reflect a market basis less than cost and write-off the associated regulatory assets and liabilities. 

Regulatory assets and liabilities for the Creole Trail Pipeline are tariff provisions related to a "Deferred Fuel Account" (fuel tracker). Creole Trail Pipeline collects and retains a portion of shippers' gas to reimburse itself for actual fuel usage, incidental fuel usage, and lost and unaccounted for gas. Regulatory assets are recorded for net volumes of fuel gas under-retained and regulatory liabilities are recorded for net volumes of fuel gas over-retained.

Fixed Assets 

Our fixed assets are recorded at cost and are depreciated on a straight-line method based on estimated lives of the individual assets or groups of assets.