ASSET RETIREMENT OBLIGATIONS

The Company has recorded liabilities for future AROs to:


•	restore coal ash containment ponds at Colstrip,


•	cap a landfill at the Kettle Falls Plant,


•	remove plant and restore the land at the Coyote Springs 2 site at the termination of the land lease, and


•	dispose of PCBs in certain transformers.

Due to an inability to estimate a range of settlement dates, the Company cannot estimate a liability for the:


•	removal and disposal of certain transmission and distribution assets, and


•	abandonment and decommissioning of certain hydroelectric generation and natural gas storage facilities.

In 2015, the EPA issued a final rule regarding coal combustion residuals (CCR), also termed coal combustion byproducts or coal ash. Colstrip, of which Avista Corp. is a 15 percent owner of units 3 & 4, produces this byproduct. The rule established technical requirements for CCR landfills and surface impoundments under Subtitle D of the Resource Conservation and Recovery Act, the nation's primary law for regulating solid waste. The Company, in conjunction with the other Colstrip owners, developed a multi-year compliance plan to strategically address the CCR requirements and existing state obligations while maintaining operational stability. During 2015, the operator of Colstrip provided an initial cost estimate of the expected retirement costs associated with complying with the new CCR rule. Based on the initial assessments, Avista Corp. recorded an increase to its ARO of $12.5 million during 2015 with a corresponding increase in the cost basis of the utility plant. During 2016 and 2017, due to additional information and updated estimates, the ARO was adjusted during each of those years by minor amounts.

The actual asset retirement costs related to the CCR rule requirements may vary substantially from the estimates used to record the ARO due to the uncertainty and evolving nature of the compliance strategies that will be used and the availability of data used to estimate costs, such as the quantity of coal ash present at certain sites and the volume of fill that will be needed to cap and cover certain impoundments. Avista Corp. will coordinate with the plant operator and continue to gather additional data in future periods to make decisions about compliance strategies and the timing of closure activities. As additional information becomes available, Avista Corp. will update the ARO for these changes in estimates, which could be material. The Company expects to seek recovery of any increased costs related to complying with the CCR rule through customer rates.

The following table documents the changes in the Company’s asset retirement obligation during the years ended December 31 (dollars in thousands):



	2017		2016			2015
Asset retirement obligation at beginning of year	$	15,515	$	15,997		$	3,028
Liabilities incurred	1,171		430			12,539
Liabilities settled	—		(1,529		)	(29		)
Accretion expense	796		617			459
Asset retirement obligation at end of year	$	17,482	$	15,515		$	15,997