Note 11. Intangible Assets and Goodwill

Identifiable Intangible Assets

The following table summarizes our intangible assets by business segment at the dates indicated:

	December 31, 2011							December 31, 2010
	Gross Value		Accum. Amort.			Carrying Value		Gross Value		Accum. Amort.			Carrying Value
NGL Pipelines & Services:
Customer relationship intangibles	$	340.8	$	(128.2	)	$	212.6	$	340.8	$	(106.7	)	$	234.1
Contract-based intangibles (1)		298.4		(169.7	)		128.7		322.2		(176.6	)		145.6
Segment total		639.2		(297.9	)		341.3		663.0		(283.3	)		379.7
Onshore Natural Gas Pipelines & Services:
Customer relationship intangibles		1,163.6		(209.7	)		953.9		1,163.6		(160.8	)		1,002.8
Contract-based intangibles (2)		464.8		(290.9	)		173.9		565.3		(322.0	)		243.3
Segment total		1,628.4		(500.6	)		1,127.8		1,728.9		(482.8	)		1,246.1
Onshore Crude Oil Pipelines & Services:
Customer relationship intangibles		9.7		(4.1	)		5.6		9.7		(3.7	)		6.0
Contract-based intangibles		0.4		(0.2	)		0.2		0.4		(0.2	)		0.2
Segment total		10.1		(4.3	)		5.8		10.1		(3.9	)		6.2
Offshore Pipelines & Services:
Customer relationship intangibles		205.8		(129.2	)		76.6		205.8		(118.1	)		87.7
Contract-based intangibles		1.2		(0.3	)		0.9		1.2		(0.2	)		1.0
Segment total		207.0		(129.5	)		77.5		207.0		(118.3	)		88.7
Petrochemical & Refined Products Services:
Customer relationship intangibles		104.3		(28.4	)		75.9		104.7		(23.8	)		80.9
Contract-based intangibles		57.6		(29.7	)		27.9		60.3		(20.2	)		40.1
Segment total		161.9		(58.1	)		103.8		165.0		(44.0	)		121.0
Total all segments	$	2,646.6	$	(990.4	)	$	1,656.2	$	2,774.0	$	(932.3	)	$	1,841.7

(1) In March 2011, we sold two NGL fractionators that were not strategic to our operations and the related contract-based intangible assets. (2) In December 2011, we sold our Petal and Hattiesburg, Mississippi underground natural gas storage facilities (i.e., the sale of Crystal) and their related contract-based intangible assets. See Note 8 for additional information regarding the sale of Crystal.

The following table presents the amortization expense of our intangible assets by business segment for the periods presented:

	For Year Ended December 31,
	2011		2010		2009
NGL Pipelines & Services	$	41.1	$	40.1	$	36.9
Onshore Natural Gas Pipelines & Services		77.1		72.7		57.2
Onshore Crude Oil Pipelines & Services		0.4		0.4		0.4
Offshore Pipelines & Services		11.2		12.8		14.7
Petrochemical & Refined Products Services		17.2		11.6		10.7
Total all segments	$	147.0	$	137.6	$	119.9

The following table presents forecasted amortization expense associated with existing intangible assets for the years presented:

2012				2013				2014				2015				2016
$	123.3			$	109.3			$	106.7			$	106.2			$	107.6

In general, our intangible assets fall within two categories – customer relationship and contract-based intangible assets. The values assigned to such intangible assets are amortized to earnings using either (i) a straight-line approach or (ii) other methods that closely resemble the pattern in which the economic benefits of associated resource bases are estimated to be consumed or otherwise used, as appropriate.

Customer relationship intangible assets. Customer relationship intangible assets represent the estimated economic value assigned to certain relationships acquired in connection with business combinations and asset purchases whereby (i) we acquired information about or access to customers and now have the ability to provide services to them and (ii) the customers now have the ability to make direct contact with us. Customer relationships may arise from contractual arrangements (such as service contracts) and through means other than contracts, such as through regular contact by sales or service representatives.

At December 31, 2011, the carrying value of our customer relationship intangible assets was $1.32 billion. The following information summarizes the significant components of this category of intangible assets:

§	State Line and Fairplay customer relationships – We acquired these customer relationships in connection with our acquisition of the State Line and Fairplay natural gas gathering systems in May 2010. The acquired customer relationships as of December 31, 2011 are presented in the following table:

	Gross Value		Accum. Amort.			Carrying Value
State Line natural gas gathering customer relationships (1)	$	675.0	$	(36.1	)	$	638.9
Fairplay natural gas gathering customer relationships (1)		116.6		(11.6	)		105.0
Fairplay natural gas processing customer relationships (2)		103.4		(10.3	)		93.1
Total acquired customer relationships	$	895.0	$	(58.0	)	$	837.0

(1) These natural gas gathering customer relationship intangible assets are a component of our Onshore Natural Gas Pipelines & Services business segment. (2) The Fairplay natural gas processing customer relationship intangible assets are a component of our NGL Pipelines & Services business segment.

In this context, a customer relationship is broadly defined as a relationship between the natural gas gathering system and the production fields from which it gathers natural gas. Natural gas gathering systems require a significant investment, both in terms of initial construction costs and ongoing maintenance. Investing the capital to construct a natural gas gathering system establishes access to producers in a particular field and represents a significant economic barrier effectively limiting competition (i.e., akin to a franchise). The low risk of competition ensures a long commercial relationship with existing customers as well as a high probability of commercial relationships with new producers in the field. As such, the relationship with producers is generally limited by the quantity and production life of the underlying natural gas resource base.

The economic value we attribute to customer relationships acquired with the State Line and Fairplay systems was estimated using recognized business valuation techniques based on several key assumptions, which include assumptions regarding the renewal of existing contracts and natural gas resource bases. In general, natural gas is gathered on the State Line and Fairplay systems under long-term contracts, which include acreage dedications of approximately 110,000 acres and 100,000 acres, respectively, as well as volumetric commitments from certain natural gas producers on both systems. In addition, certain contracts related to the Fairplay system include natural gas processing services. Based on our experience as a provider of natural gas gathering and processing services, we anticipate the acquired customer relationships to extend well beyond the discrete term of existing contracts.

Customer relationship intangibles related to the State Line system have an estimated economic useful life of 27 years. The natural gas gathering and processing customer relationships associated with the Fairplay system have an estimated economic useful life of 23 years. Amortization expense is recorded using the units-of-production method based on gathering volumes. This method of amortization allows for expense to be recorded in a manner that closely resembles the pattern in which we benefit from natural gas gathering and processing services provided to customers. See Note 10 for additional information regarding this business combination.

San Juan Gathering System customer relationships – We acquired these customer relationships in connection with the GulfTerra Merger, which was completed in September 2004. At December 31, 2011, the carrying value of this group of intangible assets was $188.1 million. These intangible assets are being amortized to earnings over their estimated economic life of 35 years through 2039. Amortization expense is recorded using a method that closely resembles the pattern in which the economic benefits of the underlying natural gas resource bases are expected to be consumed or otherwise used.

Offshore Pipeline & Platform customer relationships – We acquired these customer relationships in connection with the GulfTerra Merger. At December 31, 2011, the carrying value of this group of intangible assets was $76.6 million. These intangible assets are being amortized to earnings over their estimated economic lives, which range from 18 to 33 years (i.e., through 2022 to 2037). Amortization expense is recorded using a method that closely resembles the pattern in which the economic benefits of the underlying crude oil and natural gas resource bases are expected to be consumed or otherwise used.

Encinal natural gas processing customer relationship – We acquired this customer relationship in connection with our acquisition of certain South Texas midstream energy assets in 2006. At December 31, 2011, the carrying value of this intangible asset was $71.8 million. This intangible asset is being amortized to earnings over its estimated economic life of 20 years through 2026. Amortization expense is recorded using a method that closely resembles the pattern in which the economic benefit of the underlying natural gas resource bases are expected to be consumed or otherwise used.

Contract-based intangible assets. Contract-based intangible assets represent specific commercial rights we acquired in connection with business combinations or asset purchases. At December 31, 2011, the carrying value of our contract-based intangible assets was $331.6 million. The following information summarizes the significant components of this category of intangible assets:

Enterprise Jonah Gas Gathering Company LLC (“Jonah”) natural gas gathering agreements – These intangible assets represent the value attributed to certain of Jonah's natural gas gathering contracts that were originally acquired by TEPPCO in 2001. At December 31, 2011, the carrying value of this group of intangible assets was $104.0 million. These intangible assets are being amortized to earnings using a units-of-production method based on gathering volumes on the Jonah system, which is estimated to extend through 2041.

Shell Processing Agreement – This margin-band/keepwhole processing agreement grants us the right to process Shell Oil Company's (or its assignee's) current and future natural gas production within the state and federal waters of the Gulf of Mexico. We acquired the Shell Processing Agreement in connection with our 1999 purchase of certain of Shell's midstream energy assets located along the U.S. Gulf Coast. At December 31, 2011, the carrying value of this intangible asset was $83.8 million. This intangible asset is being amortized to earnings on a straight-line basis over its estimated economic life of 20 years through 2019.

San Juan basin natural gas gathering agreements – These intangible assets represent the value attributed to certain natural gas gathering contracts with producers in the San Juan basin that were originally acquired by TEPPCO in 2002. At December 31, 2011, the carrying value of these intangible assets was $69.3 million. These intangible assets are being amortized to earnings using a units-of-production method based on gathering volumes on the San Juan Gathering System, which is estimated to extend through 2021.

Goodwill

Goodwill represents the excess of the purchase price of an acquired business over the amounts assigned to assets acquired and liabilities assumed in the transaction. Goodwill is not amortized; however, it is subject to annual impairment testing at the end of each fiscal year, and more frequently, if circumstances indicate it is probable that the fair value of goodwill is below its carrying amount. The following table presents changes in the carrying amount of goodwill for the periods presented:

	NGL Pipelines & Services		Onshore Natural Gas Pipelines & Services			Onshore Crude Oil Pipelines & Services		Offshore Pipelines & Services		Petrochemical & Refined Products Services			Consolidated Totals
Balance at December 31, 2008	$	341.2	$	284.9		$	303.0	$	82.1	$	1,008.4		$	2,019.6
Impairment charges (1)		--		--			--		--		(1.3	)		(1.3	)
Balance at December 31, 2009 (2)		341.2		284.9			303.0		82.1		1,007.1			2,018.3
Goodwill related to acquisitions		--		26.2			8.2		--		55.0			89.4
Balance at December 31, 2010 (2)		341.2		311.1			311.2		82.1		1,062.1			2,107.7
Goodwill adjustment (3)		--		--			--		--		(0.6	)		(0.6	)
Goodwill related to the sale of assets (4)		--		(14.8	)		--		--		--			(14.8	)
Balance at December 31, 2011 (2)	$	341.2	$	296.3		$	311.2	$	82.1	$	1,061.5		$	2,092.3

(1) See Note 6 for information regarding impairment charges recorded during 2009. (2) The total carrying amount of goodwill at December 31, 2011, 2010 and 2009 is net of $1.3 million of accumulated impairment charges. (3) The goodwill we recorded in connection with a marine business acquisition completed in November 2010 was subsequently reduced in May 2011 due to a purchase price adjustment. (4) In December 2011, we sold our ownership interests in Crystal, including related goodwill. See Note 8 for additional information regarding the sale of Crystal.

In May 2010, we recorded $26.2 million of goodwill in connection with our acquisition of the State Line and Fairplay natural gas gathering systems. In June 2010, we recorded $6.1 million of goodwill related to our acquisition of a marine transportation business that provides crude oil gathering services in south Louisiana. In August 2010, we recorded $2.1 million of goodwill related to our acquisition of a crude oil trucking business based in North Dakota. In September 2010, we recorded $5.5 million of goodwill related to our acquisition of ownership interest in a trucking business from EPCO. In November 2010, we recorded $49.5 million of goodwill related to our acquisition of certain assets related to marine shipyard operations. We attribute these goodwill amounts to our ability to leverage the acquired businesses with our existing asset base to create future business opportunities.

Goodwill impairment testing involves determining the fair value of the associated reporting unit. These fair value amounts are based on assumptions regarding the future economic prospects of the businesses that make up the reporting unit. Such assumptions include (i) discrete financial forecasts for the businesses contained within the reporting unit, which rely on management's estimates of operating margins, throughput volumes and similar factors; (ii) long-term growth rates for cash flows beyond the discrete forecast period; and (iii) appropriate discount rates. Based on our most recent goodwill impairment tests, each reporting unit's fair value was substantially in excess of its carrying value (i.e., by at least 10%).