Significant Risks and Uncertainties

6 Months Ended

Jun. 30, 2011

Significant Risks and Uncertainties [Abstract]

Significant Risks and Uncertainties

Note 15.  Significant Risks and Uncertainties

Insurance Matters

We participate as a named insured in EPCO's insurance program, which provides us with property damage, business interruption and other insurance coverage, the scope and amounts of which we believe are customary and prudent for the nature and extent of our operations.  While we believe EPCO maintains adequate insurance coverage on our behalf, insurance may not fully cover every type of damage, interruption or other loss that might occur.  If we were to incur a significant loss for which we were not fully insured, it could have a material impact on our financial position, results of operations and cash flows.  In addition, there may be a timing difference between amounts we are required to pay in connection with a loss and amounts we receive from insurance as reimbursement.  Any event that materially interrupts the revenues generated by our consolidated operations, or other losses that require us to make material expenditures not covered by insurance, could reduce our ability to pay distributions to our partners and, accordingly, adversely affect the market price of our common units. 

From a financial accounting perspective, we expense losses up to our deductible amount, which can range from $5.0 million to $75.0 million depending on the nature of the loss (windstorm or non-windstorm) and the assets involved (onshore or offshore). With respect to property damage insurance claims in excess of our deductible, we record a claim receivable from our insurers for our actual costs to repair the asset (or the carrying value of damaged assets we elect not to repair) when the recovery of such amounts is probable.  To the extent that any of our property damage claims are later judged not recoverable, such amounts are expensed.  If property damage insurance proceeds exceed our claim receivable, such excess amount is recognized as income (a gain) when either the non-refundable cash is received or we have a binding settlement agreement with a carrier that clearly states that the payment will be made.  

We received cash proceeds of $12.0 million and $41.0 million, respectively, related to property damage claims during the three and six months ended June 30, 2010.  Operating income and gross operating margin for the three and six months ended June 30, 2010 include $10.3 million and $18.2 million, respectively, of related gains.

With respect to business interruption insurance claims, we recognize income only when we receive non-refundable cash proceeds from insurers.  For the six months ended June 30, 2010, we recognized $1.1 million of such gains, which are a component of operating income and gross operating margin.

February 2011 West Storage Incident.  On February 8, 2011, we experienced an NGL release and fire at the West Storage location of our Mont Belvieu, Texas underground storage facility.  West Storage consists of ten underground salt dome storage caverns with a storage capacity of approximately 15 MMBbls.  Through the reconfiguration of product receipt and delivery capabilities and other measures, we have returned our Mont Belvieu plants and related assets to close to the same capabilities as we had prior to the incident; however, our West Storage location and associated underground storage wells remain partially inoperative at this time.  Remaining repairs to this location are underway and are expected to be completed in stages by early 2012.  Our insurance deductible for such property damage events was $5.0 million, which expense was recognized in the first quarter of 2011.  Based on current information, we estimate that the total cost related to this incident will approximate $150 million. At June 30, 2011, we had $44.8 million of estimated property damage insurance claims outstanding, including $37.3 million associated with the fire at West Storage.