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

3 Months Ended

Mar. 31, 2012

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

Hedging Instruments Under the FASB's Derivative and Hedging Guidance

The following table summarizes our portfolio of interest rate swaps at March 31, 2012:

Hedged Transaction	Number and Type of Derivatives Outstanding	Notional Amount	Period of Hedge	Rate Swap	Accounting Treatment
Senior Notes AA	10 fixed-to-floating swaps	$750.0	1/11 to 2/16	3.2% to 1.5%	Fair value hedge
Undesignated swaps	6 floating-to-fixed swaps	$600.0	5/10 to 7/14	0.6% to 2.0%	Mark-to-market

The following table summarizes our portfolio of forward starting swaps outstanding at March 31, 2012.  Forward starting swaps hedge the expected underlying benchmark interest rates related to future issuances of debt.

Hedged Transaction	Number and Type  of Derivatives  Outstanding	Notional Amount	Expected Termination Date	Average Rate Locked	Accounting Treatment
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 March 31, 2012:

	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)	27.7 Bcf	n/a	Cash flow hedge
Forecasted sales of NGLs (4)	2.4 MMBbls	n/a	Cash flow hedge
Octane enhancement:
Forecasted purchases of NGLs	0.3 MMBbls	n/a	Cash flow hedge
Forecasted sales of octane enhancement products	3.2 MMBbls	n/a	Cash flow hedge
Natural gas marketing:
Natural gas storage inventory management activities	10.5 Bcf	n/a	Fair value hedge
NGL marketing:
Forecasted purchases of NGLs and related hydrocarbon products	3.7 MMBbls	n/a	Cash flow hedge
Forecasted sales of NGLs and related hydrocarbon products	3.6 MMBbls	0.2 MMBbls	Cash flow hedge
Refined products marketing:
Forecasted purchases of refined products	0.4 MMBbls	n/a	Cash flow hedge
Forecasted sales of refined products	0.4 MMBbls	n/a	Cash flow hedge
Refined products inventory management activities	0.1 MMBbls	n/a	Fair value hedge
Crude oil marketing:
Forecasted purchases of crude oil	1.6 MMBbls	n/a	Cash flow hedge
Forecasted sales of crude oil	2.6 MMBbls	n/a	Cash flow hedge
Derivatives not designated as hedging instruments:
Natural gas risk management activities (5,6)	416.9 Bcf	69.6 Bcf	Mark-to-market
Refined products risk management activities (6)	0.4 MMBbls	n/a	Mark-to-market
Crude oil risk management activities (6)	6.1 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 2013, May 2012 and October 2015, respectively. (3)   PTR represents the British thermal unit (“Btu”) 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 4.9 MMBbls of additional hedges executed under contracts that have been designated as normal sales agreements. (5)   Current volumes include approximately 104.2 Bcf 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
	March 31, 2012			December 31, 2011			March 31, 2012			December 31, 2011
	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	$	14.7	Other current assets	$	43.7	Other current liabilities	$	146.5	Other current liabilities	$	163.6
Interest rate derivatives	Other assets		22.7	Other assets		44.2	Other liabilities		--	Other liabilities		127.1
Total interest rate derivatives			37.4			87.9			146.5			290.7
Commodity derivatives	Other current assets		47.0	Other current assets		20.3	Other current liabilities		100.1	Other current liabilities		30.3
Commodity derivatives	Other assets		0.4	Other assets		--	Other liabilities		--	Other liabilities		0.2
Total commodity derivatives (1)			47.4			20.3			100.1			30.5
Total derivatives designated as    hedging instruments		$	84.8		$	108.2		$	246.6		$	321.2
Derivatives not designated as hedging instruments
Interest rate derivatives	Other current assets	$	--	Other current assets	$	--	Other current liabilities	$	10.9	Other current liabilities	$	10.1
Interest rate derivatives	Other assets		--	Other assets		--	Other liabilities		9.7	Other liabilities		10.6
Total interest rate derivatives			--			--			20.6			20.7
Commodity derivatives	Other current assets		37.2	Other current assets		34.4	Other current liabilities		16.9	Other current liabilities		32.5
Commodity derivatives	Other assets		5.3	Other assets		12.6	Other liabilities		2.4	Other liabilities		2.0
Total commodity derivatives			42.5			47.0			19.3			34.5
Total derivatives not designated as    hedging instruments		$	42.5		$	47.0		$	39.9		$	55.2
(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

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/(Loss) Recognized in Income on Derivative
		For the Three Months Ended March 31,
		2012			2011
Interest rate derivatives	Interest expense	$	(1.5	)	$	(12.3	)
Commodity derivatives	Revenue		0.7			0.3
Total		$	(0.8	)	$	(12.0	)

Derivatives in Fair Value Hedging Relationships	Location	Gain/(Loss) Recognized in Income on Hedged Item
		For the Three Months Ended March 31,
		2012		2011
Interest rate derivatives	Interest expense	$	1.1	$	11.3
Commodity derivatives	Revenue		0.4		(1.3	)
Total		$	1.5	$	10.0

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

Derivatives in Cash Flow Hedging Relationships	Location	Gain/(Loss) Reclassified  from Accumulated Other Comprehensive Income/(Loss) to Income (Effective Portion)
		For the Three Months
		Ended March 31,
		2012			2011
Interest rate derivatives	Interest expense	$	(2.7	)	$	(1.5	)
Commodity derivatives	Revenue		(10.0	)		(69.2	)
Commodity derivatives	Operating costs and expenses		(12.0	)		0.3
Total		$	(24.7	)	$	(70.4	)

Derivatives in Cash Flow Hedging Relationships	Location	Gain/(Loss) Recognized  in Income on Derivative (Ineffective Portion)
		For the Three Months
		Ended March 31,
		2012		2011
Commodity derivatives	Revenue	$	--	$	(0.1	)
Commodity derivatives	Operating costs and expenses		0.3		--
Total		$	0.3	$	(0.1	)

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
		Ended March 31,
		2012			2011
Interest rate derivatives	Interest expense	$	(2.2	)	$	(2.1	)
Commodity derivatives	Revenue		20.8			3.8
Commodity derivatives	Operating costs and expenses		(2.8	)		--
Total		$	15.8		$	1.7

Derivative Instruments Effects on Statements of Comprehensive Income

The following tables present the effect of our derivative instruments designated as cash flow hedges on our Unaudited Condensed Statements of Consolidated Operations and Unaudited Condensed Statements of Consolidated Comprehensive Income 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 Ended March 31,
	2012			2011
Interest rate derivatives	$	28.9		$	14.1
Commodity derivatives – Revenue		(39.6	)		(155.4	)
Commodity derivatives – Operating costs and expenses		(20.0	)		4.0
Total	$	(30.7	)	$	(137.3	)

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 March 31, 2012.  These assets and liabilities are measured on a recurring basis and are classified 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 March 31, 2012
	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:
Investment in equity securities – available-for-sale (1)	$	119.8	$	--	$	--	$	119.8
Interest rate derivatives		--		37.4		--		37.4
Commodity derivatives		34.8		50.5		4.6		89.9
Total	$	154.6	$	87.9	$	4.6	$	247.1
Financial liabilities:
Interest rate derivatives	$	--	$	167.1	$	--	$	167.1
Commodity derivatives		89.9		25.8		3.7		119.4
Total	$	89.9	$	192.9	$	3.7	$	286.5
(1)   See Note 7 for information related to our investment in Energy Transfer Equity common units, which trade on the NYSE under ticker symbol “ETE.”

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 Three Months
		Ended March 31,
	Location	2012			2011
Balance, January 1		$	0.4		$	(25.9	)
Total gains (losses) included in:
Net income (1)	Revenue		0.5			(0.5	)
Other comprehensive income (loss)	Commodity  derivative instruments – changes in    fair value of cash flow hedges		0.5			16.2
Settlements			(0.5	)		0.8
Transfers out of Level 3 (2)			--			9.8
Balance, March 31		$	0.9		$	0.4
(1)   There were unrealized gains of $0.1 million and losses of $0.2 million included in these amounts for the three months ended March 31, 2012 and 2011, respectively. (2)   Transfers out of Level 3 into Level 2 during 2011 were primarily due to the change in observability of forward NGL prices.

Fair Value Measurements, Valuation Techniques

The followingtable provides quantitative information about our Level 3 fair value measurements at March 31, 2012:

	Fair Value
	Financial Assets		Financial Liabilities		Valuation Techniques	Unobservable Input	Range
Commodity derivatives – Propane	$	0.6	$	--	Discounted cash flow	Forward commodity price	$1.27 – $1.33 /gallon
Commodity derivatives – Crude Oil		3.9		3.6	Discounted cash flow	Forward commodity price	$103.02 – $104.66 /barrel
Commodity derivatives – Natural gas		0.1		0.1	Discounted cash flow	Forward commodity price	$2.11 – $2.22 /MMBtu
Total	$	4.6	$	3.7

Noncash Impairment Charges

The following table summarizes our non-cash impairment charges, which are a component of operating costs and expenses, by business segment during the three months ended March 31, 2012:

NGL Pipelines & Services	$	5.1
Petrochemical & Refined Products Services		0.3
Total non-cash impairment charges	$	5.4