Derivative Instruments, Hedging Activities and Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2011

Derivative Instruments, Hedging Activities and Fair Value Measurements [Abstract]

Hedging Instruments Under the FASB's Derivative and Hedging Guidance

The following table summarizes our interest rate swap derivative instruments outstanding at September 30, 2011:

Hedged Transaction	Number and Type of Derivative(s) Employed	Notional Amount	Period of Hedge	Rate Swap	Accounting Treatment
Senior Notes C	1 fixed-to-floating swap	$100.0	1/04 to 2/13	6.4% to 2.3%	Fair value hedge
Senior Notes G	3 fixed-to-floating swaps	$300.0	10/04 to 10/14	5.6% to 1.4%	Fair value hedge
Senior Notes P	7 fixed-to-floating swaps	$400.0	6/09 to 8/12	4.6% to 2.6%	Fair value hedge
Senior Notes AA	10 fixed-to-floating swaps	$750.0	1/11 to 2/16	3.2% to 1.2%	Fair value hedge
Undesignated swaps	6 floating-to-fixed swaps	$600.0	5/10 to 7/14	0.2% to 2.0%	Mark-to-market

The following table summarizes our forward starting interest rate swaps, which hedge the expected underlying benchmark interest rates related to forecasted issuances of debt, outstanding at September 30, 2011:

Hedged Transaction	Number and Type of Derivatives Employed	Notional Amount	Expected Termination Date	Average Rate Locked	Accounting Treatment
Future debt offering	10 forward starting swaps	$500.0	2/12	4.5%	Cash flow hedge
Future debt offering	7 forward starting swaps	$350.0	8/12	3.7%	Cash flow hedge
Future debt offering	16 forward starting swaps	$1,000.0	3/13	3.7%	Cash flow hedge

 The following table summarizes our commodity derivative instruments outstanding at September 30, 2011:

	Volume (1)		Accounting
Derivative Purpose	Current (2)	Long-Term (2)	Treatment
Derivatives designated as hedging instruments:
Natural gas processing:
Forecasted natural gas purchases for plant thermal reduction (“PTR”) (3)	24.8 Bcf	n/a	Cash flow hedge
Forecasted sales of NGLs (4)	6.4 MMBbls	n/a	Cash flow hedge
Octane enhancement:
Forecasted sales of octane enhancement products	1.0 MMBbls	n/a	Cash flow hedge
Natural gas marketing:
Natural gas storage inventory management activities	10.4 Bcf	0.5 Bcf	Fair value hedge
NGL marketing:
Forecasted purchases of NGLs and related hydrocarbon products	1.1 MMBbls	n/a	Cash flow hedge
Forecasted sales of NGLs and related hydrocarbon products	1.5 MMBbls	n/a	Cash flow hedge
Refined products marketing:
Forecasted purchases of refined products	1.5 MMBbls	n/a	Cash flow hedge
Forecasted sales of refined products	1.7 MMBbls	n/a	Cash flow hedge
Crude oil marketing:
Forecasted purchases of crude oil	1.0 MMBbls	n/a	Cash flow hedge
Forecasted sales of crude oil	1.3 MMBbls	n/a	Cash flow hedge
Derivatives not designated as hedging instruments:
Natural gas risk management activities (5,6)	351.3 Bcf	65.1 Bcf	Mark-to-market
Refined products risk management activities (6)	1.6 MMBbls	n/a	Mark-to-market
Crude oil risk management activities (6)	5.4 MMBbls	n/a	Mark-to-market
(1)   Volume for derivatives designated as hedging instruments reflects the total amount of volumes hedged whereas volume for derivatives not designated as hedging instruments reflects the absolute value of derivative notional volumes. (2)   The maximum term for derivatives designated as cash flow hedges, derivatives designated as fair value hedges and derivatives not designated as hedging instruments is December 2012, January 2013 and December 2013, respectively. (3)   PTR represents the British thermal unit equivalent of the NGLs extracted from natural gas by a processing plant, and includes the natural gas used as plant fuel to extract those liquids, plant flare and other shortages. (4)   Forecasted sales of NGL volumes under natural gas processing exclude 1.1 MMBbls of additional hedges executed under contracts that have been designated as normal sales agreements. (5)   Current and long-term volumes include approximately 61.6 Bcf and 1.4 Bcf, respectively, of physical derivative instruments that are predominantly priced at an index plus a premium or minus a discount related to location differences. (6)   Reflects the use of derivative instruments to manage risks associated with transportation, processing and storage assets.

Derivative Assets and Liabilities Balance Sheet

The following table provides a balance sheet overview of our derivative assets and liabilities at the dates indicated:

	Asset Derivatives						Liability Derivatives
	September 30, 2011			December 31, 2010			September 30, 2011			December 31, 2010
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives designated as hedging instruments
Interest rate derivatives	Other current assets	$	44.3	Other current assets	$	30.3	Other current liabilities	$	152.0	Other current liabilities	$	5.5
Interest rate derivatives	Other assets		48.0	Other assets		77.8	Other liabilities		111.7	Other liabilities		26.2
Total interest rate derivatives			92.3			108.1			263.7			31.7
Commodity derivatives	Other current assets		49.8	Other current assets		46.3	Other current liabilities		69.4	Other current liabilities		93.0
Commodity derivatives	Other assets		0.2	Other assets		1.0	Other liabilities		--	Other liabilities		1.7
Total commodity derivatives (1)			50.0			47.3			69.4			94.7
Total derivatives designated as    hedging instruments		$	142.3		$	155.4		$	333.1		$	126.4
Derivatives not designated as hedging instruments
Interest rate derivatives	Other current assets	$	--	Other current assets	$	--	Other current liabilities	$	11.2	Other current liabilities	$	21.0
Interest rate derivatives	Other assets		--	Other assets		--	Other liabilities		12.9	Other liabilities		0.9
Total interest rate derivatives			--			--			24.1			21.9
Commodity derivatives	Other current assets		29.3	Other current assets		38.6	Other current liabilities		33.2	Other current liabilities		41.2
Commodity derivatives	Other assets		6.8	Other assets		4.5	Other liabilities		2.9	Other liabilities		5.4
Total commodity derivatives			36.1			43.1			36.1			46.6
Foreign currency derivatives	Other current assets		0.2	Other current assets		0.3	Other current liabilities		--	Other current liabilities		0.1
Total derivatives not designated as    hedging instruments		$	36.3		$	43.4		$	60.2		$	68.6
(1)   Represents commodity derivative instrument transactions that have either not settled or have settled and not been invoiced. Settled and invoiced transactions are reflected in either accounts receivable or accounts payable depending on the outcome of the transaction.

Derivative Instruments Effects on Statements of Operations and Statements of Comprehensive Income

The following tables present the effect of our derivative instruments designated as fair value hedges on our Unaudited Condensed Statements of Consolidated Operations for the periods presented:

Derivatives in Fair Value Hedging Relationships	Location	Gain Recognized in Income on Derivative
		For the Three Months				For the Nine Months
		Ended September 30,				Ended September 30,
		2011		2010		2011		2010
Interest rate derivatives	Interest expense	$	23.6	$	8.1	$	32.4	$	27.1
Commodity derivatives	Revenue		8.6		6.1		7.3		9.0
Total		$	32.2	$	14.2	$	39.7	$	36.1

Derivatives in Fair Value Hedging Relationships	Location	Loss Recognized in Income on Hedged Item
		For the Three Months						For the Nine Months
		Ended September 30,						Ended September 30,
		2011			2010			2011			2010
Interest rate derivatives	Interest expense	$	(22.5	)	$	(8.6	)	$	(32.2	)	$	(26.8	)
Commodity derivatives	Revenue		(7.7	)		(7.0	)		(8.8	)		(9.4	)
Total		$	(30.2	)	$	(15.6	)	$	(41.0	)	$	(36.2	)

The following tables present the effect of our derivative instruments designated as cash flow hedges on our Unaudited Condensed Statements of Consolidated Comprehensive Income and Consolidated Operations for the periods presented:

Derivatives in Cash Flow Hedging Relationships	Change in Value Recognized in Other Comprehensive Income/(Loss) on Derivative (Effective Portion)
	For the Three Months						For the Nine Months
	Ended September 30,						Ended September 30,
	2011			2010			2011			2010
Interest rate derivatives (1)	$	(260.1	)	$	(81.6	)	$	(306.1	)	$	(168.4	)
Commodity derivatives – Revenue (2)		8.8			(44.2	)		(166.0	)		42.2
Commodity derivatives – Operating costs and expenses		(14.9	)		(19.9	)		(13.2	)		(73.2	)
Foreign currency derivatives		--			0.1			--			(0.1	)
Total	$	(266.2	)	$	(145.6	)	$	(485.3	)	$	(199.5	)
(1)   The other comprehensive loss recognized for interest rate derivatives for the third quarter of 2011 and year-to-date 2011 is primarily due to the impact of decreases in forward London Interbank Offered Rates (“LIBOR”) on our forward starting interest rate swap portfolio.  The change in fair value of this portfolio between June 30, 2011 and September 30, 2011 accounted for $242.7 million of the quarterly other comprehensive loss.  Any gain or loss ultimately recognized upon settlement of these cash flow hedges would be amortized into earnings as a reduction or increase, respectively, in interest expense over the forecasted hedge period of 10 years. (2)   The increase in other comprehensive income for the third quarter of 2011 and loss for the year-to-date 2011 is primarily due to the impact of falling and rising prices, respectively, on our crude oil, refined products and NGL derivative instruments designated as cash flow hedges of future physical sales transactions.

Derivatives in Cash Flow Hedging Relationships	Location	Gain/(Loss) Reclassified  from Accumulated Other Comprehensive Income/(Loss) to Income (Effective Portion)
		For the Three Months						For the Nine Months
		Ended September 30,						Ended September 30,
		2011			2010			2011			2010
Interest rate derivatives	Interest expense	$	(1.6	)	$	(8.1	)	$	(4.6	)	$	(21.4	)
Commodity derivatives	Revenue		(33.2	)		39.2			(181.7	)		41.7
Commodity derivatives	Operating costs and expenses		(1.9	)		(13.6	)		2.9			(31.1	)
Foreign currency derivatives	Other income		--			--			--			0.3
Total		$	(36.7	)	$	17.5		$	(183.4	)	$	(10.5	)

Derivatives in Cash Flow Hedging Relationships	Location	Gain/(Loss) Recognized in Income on Derivative (Ineffective Portion)
		For the Three Months						For the Nine Months
		Ended September 30,						Ended September 30,
		2011			2010			2011			2010
Commodity derivatives	Revenue	$	--		$	--		$	0.2		$	--
Commodity derivatives	Operating costs and expenses		(0.9	)		(0.4	)		(0.9	)		2.5
Total		$	(0.9	)	$	(0.4	)	$	(0.7	)	$	2.5

The following table presents the effect of our derivative instruments not designated as hedging instruments on our Unaudited Condensed Statements of Consolidated Operations for the periods presented:

Derivatives Not Designated as Hedging Instruments	Location	Gain/(Loss) Recognized in Income on Derivative
		For the Three Months					For the Nine Months
		Ended September 30,					Ended September 30,
		2011			2010		2011			2010
Interest rate derivatives	Interest expense	$	(8.8	)	$	--	$	(19.3	)	$	--
Commodity derivatives	Revenue		4.3			17.0		17.6			12.0
Commodity derivatives	Operating costs and expenses		--			--		--			(1.5	)
Foreign currency derivatives	Other income		0.2			0.1		0.2			0.1
Total		$	(4.3	)	$	17.1	$	(1.5	)	$	10.6

Fair Value Measurements of Financial Assets and Liabilities

The following table sets forth, by level within the fair value hierarchy, the carrying values of our financial assets and liabilities at the date indicated.  These assets and liabilities are measured on a recurring basis and are classified within the table based on the lowest level of input that is significant to their respective fair value.  Our assessment of the relative significance of such inputs requires judgment.

	At September 30, 2011
	Quoted Prices
	in Active
	Markets for		Significant		Significant
	Identical Assets		Observable		Unobservable
	and Liabilities		Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
Financial assets:
Interest rate derivatives	$	--	$	92.3	$	--	$	92.3
Commodity derivatives		43.9		36.9		5.3		86.1
Foreign currency derivatives		--		0.2		--		0.2
Total	$	43.9	$	129.4	$	5.3	$	178.6
Financial liabilities:
Interest rate derivatives	$	--	$	287.8	$	--	$	287.8
Commodity derivatives		49.6		51.3		4.6		105.5
Total	$	49.6	$	339.1	$	4.6	$	393.3

Reconciliation of Changes in the Fair Value of Level 3 Financial Assets and Liabilities

The following table sets forth a reconciliation of changes in the overall fair values of our Level 3 financial assets and liabilities for the periods presented:

	For the Nine Months Ended September 30,
	2011			2010
Balance, January 1	$	(25.9	)	$	5.7
Total gains (losses) included in:
Net income (1)		(0.5	)		(3.6	)
Other comprehensive income (loss)		16.2			(8.3	)
Settlements		0.8			3.6
Transfers out of Level 3 (2)		9.8			--
Balance, March 31		0.4			(2.6	)
Total gains included in:
Net income (1)		1.9			16.2
Other comprehensive income (loss)		--			22.2
Settlements		(0.2	)		(16.2	)
Transfers out of Level 3		--			0.2
Balance, June 30		2.1			19.8
Total gains (losses) included in:
Net income (1)		0.8			18.2
Other comprehensive income (loss)		--			(31.4	)
Settlements		(2.2	)		(16.1	)
Balance, September 30	$	0.7		$	(9.5	)
(1)   There were $0.7 million and $2.5 million of unrealized gains included in these amounts for the three and nine months ended September 30, 2011, respectively. There were $6.4 million and $4.1 million of unrealized gains included in these amounts for the three and nine months ended September 30, 2010, respectively. (2)   Transfers out of Level 3 into Level 2 were primarily due to the change in observability of forward NGL prices as described above.