7.PROPERTY AND EQUIPMENT AND ASSET RETIREMENT OBLIGATION

Barnwell’s property and equipment is detailed as follows:

					Accumulated
					Depletion,
	Estimated	Gross			Depreciation,				Net
	Useful	Property and			and				Property and
	Lives	Equipment			Amortization				Equipment
At September 30, 2014:
Land			$	863,000		$	-			$	863,000
Oil and natural gas properties
(full cost accounting)			209,702,000			(191,478,000		)		18,224,000
Drilling rigs and equipment	3 – 10 years		6,759,000			(5,754,000		)		1,005,000
Offices	40 years		2,420,000			(384,000		)		2,036,000
Other property and equipment	3 – 17 years		3,279,000			(3,057,000		)		222,000
Total			$	223,023,000		$	(200,673,000	)		$	22,350,000

					Accumulated
					Depletion,
	Estimated	Gross			Depreciation,				Net
	Useful	Property and			and				Property and
	Lives	Equipment			Amortization				Equipment
At September 30, 2013:
Land			$	863,000		$	-			$	863,000
Oil and natural gas properties
(full cost accounting)			239,243,000			(202,400,000		)		36,843,000
Drilling rigs and equipment	3 – 10 years		6,758,000			(5,513,000		)		1,245,000
Offices	40 years		2,420,000			(324,000		)		2,096,000
Other property and equipment	3 – 17 years		3,588,000			(3,329,000		)		259,000
Total			$	252,872,000		$	(211,566,000	)		$	41,306,000

See Note 18 for discussion of divestitures of oil and natural gas properties in fiscal 2014 and the reduction of carrying value of oil and gas properties recognized in fiscal 2013.

Barnwell recognizes the fair value of a liability for an asset retirement obligation in the period in which it is incurred if a reasonable estimate of fair value can be made. The following is a reconciliation of the asset retirement obligation:

	Year ended September 30,
	2014				2013
Asset retirement obligation as of beginning of year		$	7,520,000			$	5,629,000
Obligations incurred on new wells drilled		105,000				61,000
Liabilities associated with properties sold		(718,000		)		-
Revision of estimated obligation		2,437,000				1,783,000
Accretion expense		624,000				499,000
Payments		(111,000		)		(222,000		)
Foreign currency translation adjustment		(694,000		)		(230,000		)
Asset retirement obligation as of end of year		9,163,000				7,520,000
Less current portion		(978,000		)		-
Asset retirement obligation, long-term		$	8,185,000			$	7,520,000

Barnwell recognized an additional $2,437,000 and $1,783,000 of abandonment and reclamation capitalized costs and liabilities in fiscal 2014 and 2013, respectively, for upward revisions to prior year estimates of costs as a result of the receipt of new and more specific information regarding costs to abandon wells similar to Barnwell’s. Additionally, in the current year, a portion of the revision in estimate was related to the Inactive Well Compliance Program, which was introduced by the Alberta Energy Regulator in July 2014, which will accelerate expenditures to suspend and/or abandon long-term inactive wells.