Note 18. Commitments and Contingencies

Litigation

As part of our normal business activities, we may be named as defendants in legal proceedings, including those arising from regulatory and environmental matters. Although we are insured against various risks to the extent we believe it is prudent, there is no assurance that the nature and amount of such insurance will be adequate, in every case, to fully indemnify us against losses arising from future legal proceedings.We will vigorously defend the partnership in litigation matters.

Management has regular quarterly litigation reviews, including updates from legal counsel, to assess the possible need for accounting recognition and disclosure of these contingencies. We accrue an undiscounted liability for those contingencies where the loss is probable and the amount can be reasonably estimated. If a range of amounts can be reasonably estimated and no amount within the range is a better estimate than any other amount, then the minimum amount in the range is accrued.

We do not record a contingent liability when the likelihood of loss is probable but the amount cannot be reasonably estimated or when the likelihood of loss is believed to be only reasonably possible or remote. For contingencies where an unfavorable outcome is reasonably possible and the impact would be material, we disclose the nature of the contingency and, where feasible, an estimate of the possible loss or range of loss. Based on a consideration of all relevant known facts and circumstances (including the availability of insurance coverage), we do not believe the ultimate outcome of any currently pending lawsuit against us will have a material impact on our financial statements individually or in the aggregate. See Note 19 for information regarding our insurance program.

At December 31, 2011 and 2010, litigation accruals on an undiscounted basis of $16.5 million and $8.6 million, respectively, were recorded in our Consolidated Balance Sheets as a component of “Other current liabilities.” Our evaluation of litigation contingencies is based on the facts and circumstances of each case and predicting the outcome of these matters involves substantial uncertainties. In the event the assumptions we use to evaluate these matters change in future periods or new information becomes available, we may be required to record additional accruals. In an effort to mitigate expenses associated with litigation, we may settle legal proceedings out of court.

Redelivery Commitments

We store natural gas, crude oil, NGLs and certain petrochemical products owned by third parties under various agreements. Under the terms of these agreements, we are generally required to redeliver volumes to the owner on demand. At December 31, 2011, we had approximately 7.0 trillion British thermal units of natural gas, 8.2 MMBbls of crude oil, and 27.5 MMBbls of NGL and petrochemical products in our custody that were owned by third parties. We maintain insurance coverage related to such volumes that we believe is consistent with our exposure. See Note 19 for information regarding insurance matters.

Contractual Obligations

The following table summarizes our various contractual obligations at December 31, 2011. A description of each type of contractual obligation follows:

	Payment or Settlement due by Period
Contractual Obligations	Total		2012		2013		2014		2015		2016		Thereafter
Scheduled maturities of debt obligations	$	14,482.7	$	500.0	$	1,200.0	$	1,150.0	$	650.0	$	900.0	$	10,082.7
Estimated cash interest payments	$	16,109.5	$	819.6	$	759.1	$	688.3	$	642.4	$	623.1	$	12,577.0
Operating lease obligations	$	386.4	$	58.3	$	47.4	$	39.7	$	38.2	$	32.3	$	170.5
Purchase obligations:
Product purchase commitments:
Estimated payment obligations:
Natural gas	$	4,974.8	$	909.4	$	807.8	$	739.6	$	679.7	$	631.5	$	1,206.8
NGLs	$	6,048.0	$	2,806.4	$	1,578.1	$	833.1	$	457.6	$	372.8	$	--
Crude oil	$	1,770.3	$	1,770.3	$	--	$	--	$	--	$	--	$	--
Petrochemicals & refined products	$	2,027.8	$	1,309.5	$	382.1	$	113.5	$	111.2	$	111.5	$	--
Other	$	49.7	$	7.6	$	7.5	$	6.9	$	6.6	$	6.3	$	14.8
Underlying major volume commitments:
Natural gas (in BBtus) (1)		1,738,568		321,030		287,384		260,051		237,251		219,600		413,252
NGLs (in MBbls) (2)		88,207		42,503		23,458		12,122		5,773		4,351		--
Crude oil (in MBbls) (2)		18,015		18,015		--		--		--		--		--
Petrochemicals & refined products (in MBbls) (2)		28,074		17,962		5,257		1,639		1,606		1,610		--
Service payment commitments	$	627.3	$	100.3	$	96.9	$	74.8	$	64.8	$	82.5	$	208.0
Capital expenditure commitments	$	1,312.5	$	1,312.5	$	--	$	--	$	--	$	--	$	--
(1) Volume is measured in billion British thermal units (“BBtus”). (2) Volume is measured in thousands of barrels (“MBbls”).

Scheduled Maturities of Long-Term Debt. We have long-term and short-term payment obligations under debt agreements. Amounts shown in the preceding table represent our contractually scheduled future maturities of debt principal for the periods presented after taking into consideration the long-term refinancing of Senior Notes S and the TEPPCO Senior Notes due February 2012 using proceeds from the issuance of Senior Notes EE on February 15, 2012. See Notes 12 and 23 for additional information regarding our consolidated debt obligations.

Estimated Cash Interest Payments. Our estimated cash payments for interest are based on the principal amount of our consolidated debt obligations outstanding at December 31, 2011 and the scheduled maturities of such balances (after taking into account the issuance of Senior Notes EE and related refinancing activities noted above). With respect to our variable-rate debt obligations, we applied the weighted-average interest rate paid during 2011 to determine the estimated cash payments. See Note 12 for the weighted-average variable interest rates charged in 2011 under our credit agreements. In addition, our estimate of cash payments for interest gives effect to interest rate swap agreements that were in place at December 31, 2011. See Note 6 for information regarding these derivative instruments. Our estimated cash payments for interest are significantly influenced by the long-term maturities of our $550.0 million Junior Subordinated Notes A (due August 2066), $682.7 million Junior Subordinated Notes B (due January 2068), $285.8 million Junior Subordinated Notes C (due June 2067) and TEPPCO Junior Subordinated Notes (due June 2067). Our estimated cash payments for interest assume that these subordinated notes are not called prior to their respective maturity dates. We applied the current fixed interest rate through the respective maturity date for each junior subordinated note to determine the estimated cash payments for interest.

Operating Lease Obligations. We lease certain property, plant and equipment under noncancelable and cancelable operating leases. Amounts shown in the preceding table represent minimum cash lease payment obligations under our operating leases with terms in excess of one year.

Our significant lease agreements consist of (i) the lease of underground storage caverns for natural gas and NGLs, (ii) leased office space with affiliates of EPCO and (iii) land held pursuant to right-of-way agreements. In general, our material lease agreements have current terms that range from 14 to 20 years. The agreements for leased office space with affiliates of EPCO and underground NGL storage caverns we lease from a third party include renewal options that could extend these contracts for up to an additional 20 years. The remainder of our material lease agreements do not provide for additional renewal terms.

Lease expense is charged to operating costs and expenses on a straight-line basis over the period of expected economic benefit. Contingent rental payments are expensed as incurred. We are generally required to perform routine maintenance on the underlying leased assets. In addition, certain leases give us the option to make leasehold improvements. Maintenance and repairs of leased assets resulting from our operations are charged to expense as incurred. We did not make any significant leasehold improvements during the years ended December 31, 2011, 2010 or 2009.

Consolidated costs and expenses include lease and rental expense amounts of $86.2 million, $72.9 million and $60.7 million during the years ended December 31, 2011, 2010 and 2009, respectively.

Purchase Obligations. We define a purchase obligation as an agreement to purchase goods or services that is enforceable and legally binding (unconditional) on us that specifies all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transactions. We have classified our unconditional purchase obligations into the following categories:

We have long and short-term product purchase obligations for natural gas, NGLs, crude oil, refined products and certain petrochemicals with third party suppliers. The prices that we are obligated to pay under these contracts approximate market prices at the time we take delivery of the volumes. The preceding table shows our volume commitments and estimated payment obligations under these contracts for the periods presented. Our estimated future payment obligations are based on the contractual price in each agreement at December 31, 2011 applied to all future volume commitments. Actual future payment obligations may vary depending on prices at the time of delivery. At December 31, 2011, we did not have any significant product purchase commitments with fixed or minimum pricing provisions with remaining terms in excess of one year.

We have long and short-term commitments to pay service providers. Our contractual service payment commitments as shown in the preceding table primarily represent our obligations under firm pipeline transportation contracts on pipelines owned by third parties and White River Hub. Payment obligations vary by contract, but generally represent a price per unit of volume multiplied by a firm transportation volume commitment.

We have short-term payment obligations relating to our capital spending program and those of our unconsolidated affiliates. These commitments represent unconditional payment obligations for services to be rendered or products to be delivered in connection with our capital projects. The preceding table presents our share of such commitments, including our share of those of our unconsolidated affiliates, for the periods presented.

Other Long-Term Liabilities

As reflected on our consolidated balance sheet at December 31, 2011, other long-term liabilities primarily represent the noncurrent portion of asset retirement obligations, deferred revenues and accrued pipeline transportation deficiency fees and interest rate derivative instruments.

Commitments Under Equity Compensation Plans of EPCO

In accordance with our agreements with EPCO, we reimburse EPCO for our share of its compensation expense associated with certain employees who perform management, administrative and operating functions for us (see Note 15). See Note 5 for additional information regarding our accounting for equity-based awards.

Other Claims

As part of our normal business activities with joint venture partners and certain customers and suppliers, we occasionally make claims against such parties or have claims made against us as a result of disputes related to contractual agreements or similar arrangements. As of December 31, 2011, our contingent claims against such parties were approximately $38.5 million and claims against us were approximately $46.1 million. These matters are in various stages of assessment and the ultimate outcome of such disputes cannot be reasonably estimated at this time; however, in our opinion, the likelihood of a material impact on our Consolidated Financial Statements from such disputes is remote. Accordingly, accruals for loss contingencies related to these matters have not been reflected in our Consolidated Financial Statements.

Centennial Guarantees

At December 31, 2011, Centennial's debt obligations consisted of $101.9 million borrowed under a master shelf loan agreement. Borrowings under the master shelf agreement mature in May 2024 and are collateralized by substantially all of Centennial's assets and severally guaranteed 50% by us and 50% by our joint venture partner in Centennial. If Centennial were to default on its debt obligations, we and our joint venture partner would each be required to make an approximate $51.0 million payment to Centennial's lenders in connection with the guarantee agreements (based on Centennial's debt principal outstanding at December 31, 2011). We recognized a liability of $7.2 million for our share of the Centennial debt guaranty at December 31, 2011.

In lieu of Centennial procuring insurance to satisfy third party claims arising from a catastrophic event, we and Centennial's other joint venture partner have entered a limited cash call agreement. We are obligated to contribute up to a maximum of $50.0 million (in proportion to our 50% ownership interest in Centennial) in the event of a catastrophic event. At December 31, 2011, we have a recorded liability of $3.1 million representing the estimated fair value of our cash call guaranty. Our cash contributions to Centennial under the agreement may be covered by our other insurance policies depending on the nature of the catastrophic event.