Note 14. Business Segments

We have five reportable business segments: (i) NGL Pipelines & Services; (ii) Onshore Natural Gas Pipelines & Services; (iii) Onshore Crude Oil Pipelines & Services; (iv) Offshore Pipelines & Services; and (v) Petrochemical & Refined Products Services. Our business segments are generally organized and managed according to the types of services rendered (or technologies employed) and products produced and/or sold. The following information summarizes the current assets and operations of each business segment.

Our NGL Pipelines & Services business segment includes our natural gas processing plants and related NGL marketing activities; approximately 16,700 miles of NGL pipelines; NGL and related product storage facilities; and 14 NGL fractionators. This segment also includes our NGL import and export terminal operations.

Our Onshore Natural Gas Pipelines & Services business segment includes approximately 19,900 miles of onshore natural gas pipeline systems that provide for the gathering and transportation of natural gas in Colorado, Louisiana, New Mexico, Texas and Wyoming. We lease underground salt dome natural gas storage facilities located in Texas and Louisiana and own an underground salt dome storage cavern in Texas, all of which are important to our natural gas pipeline operations. This segment also includes our related natural gas marketing activities.

§	Our Onshore Crude Oil Pipelines & Services business segment includes approximately 5,100 miles of onshore crude oil pipelines, crude oil storage terminals located in Oklahoma and Texas, and our crude oil marketing activities.

Our Offshore Pipelines & Services business segment serves some of the most active drilling and development regions, including deepwater production fields, in the northern Gulf of Mexico offshore Texas, Louisiana, Mississippi and Alabama. This segment includes approximately 2,300 miles of offshore natural gas and crude oil pipelines and six offshore hub platforms.

Our Petrochemical & Refined Products Services business segment includes (i) propylene fractionation and related operations; (ii) a butane isomerization facility and related pipeline system; (iii) octane enhancement and high purity isobutylene production facilities; (iv) refined products pipelines and related marketing activities; and (v) marine transportation and other services.

All activities included in our former sixth reportable business segment, Other Investments, ceased on January 18, 2012, which was the date we discontinued using the equity method to account for our previously held investment in Energy Transfer Equity. See Note 9 for information regarding the liquidation of our investment in Energy Transfer Equity.

We evaluate segment performance based on the non-GAAP financial measure of gross operating margin. Gross operating margin (either in total or by individual segment) is an important performance measure of the core profitability of our operations. This measure forms the basis of our internal financial reporting and is used by our management in deciding how to allocate capital resources among business segments. We believe that investors benefit from having access to the same financial measures that our management uses in evaluating segment results. The GAAP financial measure most directly comparable to total segment gross operating margin is operating income. Our non-GAAP financial measure of total segment gross operating margin should not be considered an alternative to GAAP operating income.

We define total segment gross operating margin as operating income before: (i) depreciation, amortization and accretion expenses; (ii) non-cash asset impairment charges; (iii) operating lease expenses for which we did not have the payment obligation; (iv) gains and losses attributable to the disposal of assets; and (v) general and administrative costs. Gross operating margin by segment is calculated by subtracting segment operating costs and expenses (net of the adjustments noted above) from segment revenues, with both segment totals before the elimination of intercompany transactions. In accordance with GAAP, intercompany accounts and transactions are eliminated in the preparation of our consolidated financial statements. Gross operating margin is exclusive of other income and expense transactions, income taxes, the cumulative effect of changes in accounting principles and extraordinary charges. Gross operating margin is presented on a 100% basis before any allocation of earnings to noncontrolling interests.

Segment revenues include intersegment and intrasegment transactions, which are generally based on transactions made at market-based rates. Our consolidated revenues reflect the elimination of intercompany transactions.

Substantially all of our consolidated revenues are earned in the U.S. and derived from a wide customer base. Our largest non-affiliated customer for 2012 was BP p.l.c. and its affiliates (collectively, "BP"), which accounted for 9.5% of our consolidated revenues for this period. Our largest non-affiliated customer for 2011 and 2010 was Shell Oil Company and its affiliates, which accounted for 10.6% and 9.4% of our consolidated revenues during these years, respectively.

We include equity in income of unconsolidated affiliates in our measurement of segment gross operating margin and operating income. Equity investments with industry partners are a significant component of our business strategy. They are a means by which we conduct our operations to align our interests with those of customers and/or suppliers. This method of operation enables us to achieve favorable economies of scale relative to the level of investment and business risk assumed. Many of these businesses perform supporting or complementary roles to our other midstream business operations.

Our integrated midstream energy asset network (including the midstream energy assets owned by our equity method investees) provides services to producers and consumers of natural gas, NGLs, crude oil, refined products and certain petrochemicals. In general, hydrocarbons enter our asset system in a number of ways, such as an offshore natural gas or crude oil pipeline, an offshore platform, a natural gas processing plant, an onshore natural gas gathering pipeline, an onshore crude oil pipeline or terminal, an NGL fractionator, an NGL storage facility or an NGL gathering or transportation pipeline. Many of our equity investees are included within our integrated midstream asset network. For example, we have ownership interests in several offshore Gulf of Mexico natural gas and crude oil pipelines. Other examples include our use of the Promix NGL fractionator to process mixed NGLs extracted by our natural gas processing plants and our use of the Centennial pipeline to loop the TE Products Pipeline. Given the integral nature of our equity method investees to our operations, we believe the presentation of equity earnings from such investees as a component of gross operating margin and operating income is meaningful and appropriate.

Segment assets consist of property, plant and equipment, investments in unconsolidated affiliates, intangible assets and goodwill. The carrying values of such amounts are assigned to each segment based on each asset's or investment's principal operations and contribution to the gross operating margin of that particular segment. Since construction-in-progress amounts (a component of property, plant and equipment) generally do not contribute to segment gross operating margin, such amounts are excluded from segment asset totals until the underlying assets are placed in service. Intangible assets and goodwill are assigned to each segment based on the classification of the assets to which they relate. Substantially all of our plants, pipelines and other fixed assets are located in the U.S.

The following table presents our measurement of total segment gross operating margin for the periods indicated:

	For Year Ended December 31,
	2012			2011			2010
Revenues	$	42,583.1		$	44,313.0		$	33,739.3
Less: Operating costs and expenses		(39,367.9	)		(41,318.5	)		(31,449.3	)
Add: Equity in income of unconsolidated affiliates		64.3			46.4			62.0
Depreciation, amortization and accretion recorded in operating costs and expenses		1,061.7			958.7			936.3
Non-cash asset impairment charges recorded in operating costs and expenses		63.4			27.8			8.4
Operating lease expenses paid by EPCO recorded in operating costs and expenses		--			0.3			0.7
Gains attributable to disposal of assets recorded in operating costs and expenses		(17.6	)		(156.0	)		(44.4	)
Total segment gross operating margin	$	4,387.0		$	3,871.7		$	3,253.0

The following table presents a reconciliation of total segment gross operating margin to operating income and further to income before income taxes for the periods indicated:

	For Year Ended December 31,
	2012			2011			2010
Total segment gross operating margin	$	4,387.0		$	3,871.7		$	3,253.0
Adjustments to reconcile total segment gross operating margin to operating income:
Amounts included in operating costs and expenses:
Depreciation, amortization and accretion		(1,061.7	)		(958.7	)		(936.3	)
Non-cash asset impairment charges		(63.4	)		(27.8	)		(8.4	)
Operating lease expenses paid by EPCO		--			(0.3	)		(0.7	)
Gains attributable to disposal of assets		17.6			156.0			44.4
General and administrative costs		(170.3	)		(181.8	)		(204.8	)
Operating income		3,109.2			2,859.1			2,147.2
Other expense, net		(698.4	)		(743.6	)		(737.4	)
Income before income taxes	$	2,410.8		$	2,115.5		$	1,409.8

Information by business segment, together with reconciliations to our consolidated financial statement totals, is presented in the following table:

	Reportable Business Segments
	NGL Pipelines & Services		Onshore Natural Gas Pipelines & Services		Onshore Crude Oil Pipelines & Services			Offshore Pipelines & Services		Petrochemical & Refined Products Services			Other Investments			Adjustments and Eliminations			Consolidated Total
Revenues from third parties:
Year ended December 31, 2012	$	15,158.9	$	3,297.7	$	17,661.6		$	182.7	$	6,208.9		$	--		$	--		$	42,509.8
Year ended December 31, 2011		16,938.1		3,510.0		16,061.0			246.4		6,782.4			--			--			43,537.9
Year ended December 31, 2010		13,736.8		3,479.4		10,794.7			300.3		4,729.7			--			--			33,040.9
Revenues from related parties:
Year ended December 31, 2012		9.5		54.9		0.1			8.8		--			--			--			73.3
Year ended December 31, 2011		545.2		220.2		0.1			9.6		--			--			--			775.1
Year ended December 31, 2010		465.7		222.2		0.1			10.4		--			--			--			698.4
Intersegment and intrasegment revenues:
Year ended December 31, 2012		12,500.6		871.6		6,906.9			10.4		1,758.9			--			(22,048.4	)		--
Year ended December 31, 2011		13,657.7		1,131.8		4,904.3			6.6		1,799.1			--			(21,499.5	)		--
Year ended December 31, 2010		10,209.9		900.8		927.0			3.6		1,106.7			--			(13,148.0	)		--
Total revenues:
Year ended December 31, 2012		27,669.0		4,224.2		24,568.6			201.9		7,967.8			--			(22,048.4	)		42,583.1
Year ended December 31, 2011		31,141.0		4,862.0		20,965.4			262.6		8,581.5			--			(21,499.5	)		44,313.0
Year ended December 31, 2010		24,412.4		4,602.4		11,721.8			314.3		5,836.4			--			(13,148.0	)		33,739.3
Equity in income (loss) of unconsolidated affiliates:
Year ended December 31, 2012		15.9		4.4		32.6			26.9		(17.9	)		2.4			--			64.3
Year ended December 31, 2011		21.8		5.5		(4.1	)		27.1		(18.7	)		14.8			--			46.4
Year ended December 31, 2010		17.7		4.6		6.7			44.8		(9.0	)		(2.8	)		--			62.0
Gross operating margin:
Year ended December 31, 2012		2,468.5		775.5		387.7			173.0		579.9			2.4			--			4,387.0
Year ended December 31, 2011		2,184.2		675.3		234.0			228.2		535.2			14.8			--			3,871.7
Year ended December 31, 2010		1,732.6		527.2		113.7			297.8		584.5			(2.8	)		--			3,253.0
Property, plant and equipment, net: (see Note 8)
At December 31, 2012		8,494.8		8,950.1		1,385.9			1,343.0		2,559.5			--			2,113.1			24,846.4
At December 31, 2011		7,137.8		8,495.4		456.9			1,416.4		2,539.5			--			2,145.6			22,191.6
At December 31, 2010		6,813.1		6,595.0		427.9			1,390.9		2,498.8			--			1,607.2			19,332.9
Investments in unconsolidated affiliates: (see Note 9)
At December 31, 2012		324.6		24.9		493.8			479.0		72.3			--			--			1,394.6
At December 31, 2011		146.1		30.1		170.7			424.9		64.7			1,023.1			--			1,859.6
At December 31, 2010		131.5		32.6		172.2			443.2		76.8			1,436.8			--			2,293.1
Intangible assets, net: (see Note 11)
At December 31, 2012		320.6		1,067.9		5.9			66.2		106.2			--			--			1,566.8
At December 31, 2011		341.3		1,127.8		5.8			77.5		103.8			--			--			1,656.2
At December 31, 2010		379.7		1,246.1		6.2			88.7		121.0			--			--			1,841.7
Goodwill: (see Note 11)
At December 31, 2012		341.2		296.3		311.2			82.1		1,056.0			--			--			2,086.8
At December 31, 2011		341.2		296.3		311.2			82.1		1,061.5			--			--			2,092.3
At December 31, 2010		341.2		311.1		311.2			82.1		1,062.1			--			--			2,107.7
Segment assets:
At December 31, 2012		9,481.2		10,339.2		2,196.8			1,970.3		3,794.0			--			2,113.1			29,894.6
At December 31, 2011		7,966.4		9,949.6		944.6			2,000.9		3,769.5			1,023.1			2,145.6			27,799.7
At December 31, 2010		7,665.5		8,184.8		917.5			2,004.9		3,758.7			1,436.8			1,607.2			25,575.4

The following table presents additional information regarding our consolidated revenues and costs and expenses for the periods indicated:

	For Year Ended December 31,
	2012			2011			2010
NGL Pipelines & Services:
Sales of NGLs and related products	$	14,218.5		$	16,724.6		$	13,449.4
Midstream services		949.9			758.7			753.1
Total		15,168.4			17,483.3			14,202.5
Onshore Natural Gas Pipelines & Services:
Sales of natural gas		2,395.4			2,866.5			2,928.7
Midstream services		957.2			863.7			772.9
Total		3,352.6			3,730.2			3,701.6
Onshore Crude Oil Pipelines & Services:
Sales of crude oil		17,548.7			15,962.6			10,710.4
Midstream services		113.0			98.5			84.4
Total		17,661.7			16,061.1			10,794.8
Offshore Pipelines & Services:
Sales of natural gas		0.4			1.1			1.3
Sales of crude oil		3.3			9.4			9.5
Midstream services		187.8			245.5			299.9
Total		191.5			256.0			310.7
Petrochemical & Refined Products Services:
Sales of petrochemicals and refined products		5,470.9			6,000.6			4,009.1
Midstream services		738.0			781.8			720.6
Total		6,208.9			6,782.4			4,729.7
Total consolidated revenues	$	42,583.1		$	44,313.0		$	33,739.3

Consolidated costs and expenses
Operating costs and expenses:
Cost of sales	$	36,015.5		$	38,292.6		$	28,723.1
Other operating costs and expenses (1)		2,244.9			2,195.4			1,825.9
Depreciation, amortization and accretion		1,061.7			958.7			936.3
Gains attributable to disposal of assets		(17.6	)		(156.0	)		(44.4	)
Non-cash asset impairment charges		63.4			27.8			8.4
General and administrative costs		170.3			181.8			204.8
Total consolidated costs and expenses	$	39,538.2		$	41,500.3		$	31,654.1

(1) Represents cost of operating our plants, pipelines and other fixed assets, excluding non-cash depreciation, amortization and accretion charges.

Year-to-year fluctuations in our product sales revenues and related cost of sales amounts are explained in part by changes in energy commodity prices. In general, lower energy commodity prices result in a decrease in our revenues attributable to product sales; however, these lower commodity prices also decrease the associated cost of sales as purchase costs decline.