Note 5. Inventories

Inventories primarily consist of NGLs, petrochemicals and refined products, crude oil and natural gas volumes that are valued at the lower of average cost or market. We capitalize, as a cost of inventory, shipping and handling charges (e.g., pipeline transportation and storage fees) and other related costs associated with purchased volumes. As volumes are sold and delivered out of inventory, the cost of these volumes (including freight-in charges that have been capitalized as part of inventory cost) are charged to operating costs and expenses. Our inventory amounts by product type were as follows at the dates indicated:

	September 30, 2011		December 31, 2010
NGLs	$	666.7	$	548.3
Petrochemicals and refined products		566.3		399.7
Crude oil		103.7		121.1
Natural gas		52.6		64.7
Other		--		0.2
Total	$	1,389.3	$	1,134.0

In those instances where we take ownership of inventory volumes through percent-of-liquids contracts and similar arrangements (as opposed to actually purchasing volumes for cash from third parties), these volumes are valued at market-based prices during the month in which they are acquired. In general, our inventory levels have increased since December 31, 2010 due to an increase in the average cost of NGLs and seasonal supply and demand fluctuations.

Due to fluctuating commodity prices, we recognize lower of cost or market adjustments when the carrying value of our inventories exceeds their net realizable value. These non-cash charges are a component of cost of sales in the period they are recognized. To the extent our commodity hedging strategies address inventory-related price risks and are successful, these inventory valuation adjustments are mitigated or offset. See Note 4 for a description of our commodity hedging activities. The following table summarizes our cost of sales and lower of cost or market adjustments for the periods presented:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2011		2010		2011		2010
Cost of sales (1)	$	9,787.6	$	6,814.0	$	28,397.2	$	20,499.5
Lower of cost or market adjustments		5.1		0.2		6.8		7.1
(1) Cost of sales is a component of “Operating costs and expenses,” as presented on our Unaudited Condensed Statements of Consolidated Operations. Period-to-period fluctuations in these amounts are primarily due to changes in energy commodity prices and sales volumes associated with our marketing activities.