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INCOME TAXES
 9 Months Ended
Sep. 30, 2012
INCOME TAXES [Abstract]  
INCOME TAXES
INCOME TAXES

The tax effects of significant temporary differences representing deferred income tax assets and liabilities were as follows:
 
September 30,
2012
 
December 31, 2011
 
(Thousands of Dollars)
Deferred income tax assets:
 
 
 
Net operating losses
$
24,552

 
$
17,089

Environmental and legal reserves
216

 
14,822

Capital loss
1,712

 
1,044

Valuation allowance
(71
)
 
(1,161
)
Total deferred income tax assets
26,409

 
31,794

 
 
 
 
Deferred income tax liabilities:
 
 
 
Property, plant and equipment
(54,184
)
 
(57,392
)
Other
(996
)
 
(698
)
Total deferred income tax liabilities
(55,180
)
 
(58,090
)
 
 
 
 
Net deferred income tax liability
$
(28,771
)
 
$
(26,296
)
 
 
 
 
Reported on the Consolidated Balance Sheets as:
 
 
 
Deferred income tax asset
$
2,080

 
$
9,141

Deferred income tax liability
(30,851
)
 
(35,437
)
Net deferred income tax liability
$
(28,771
)
 
$
(26,296
)


Grace Energy Corporation Matter
In connection with the settlement of the Grace Energy Corporation matter, we recognized a pre-tax gain of $28.7 million within one of our taxable subsidiaries. As a result, we recorded related income tax expense of $10.1 million, resulting from the reduction of the related deferred income tax asset. See Note 6. Commitments and Contingencies for a discussion on the Grace Energy Corporation matter.
 
Canadian Income Tax Audit
During the second quarter of 2012, we recorded $1.0 million of additional income tax liability and $2.2 million of interest and penalties associated with an ongoing Canadian income tax audit for the years 2006 through 2011. We also recorded $1.3 million of Canadian withholding tax and $0.7 million of interest and penalties associated with the withholding tax liability related to interest payments made from our Canadian subsidiaries to a United States entity from 2003 to 2009. We believe that adequate provisions for uncertainties related to the Canadian audits have been reflected in the financial statements.