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

6 Months Ended

Jun. 30, 2018

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 forward starting swaps at June 30, 2018:

Hedged Transaction	Number and Type of Derivatives Outstanding	Notional Amount	Expected Settlement Date	Average Rate Locked	Accounting Treatment
Future long-term debt offering	2 forward starting swaps	$175.0	2/2019	2.56%	Cash flow hedge

The following table summarizes our portfolio of commodity derivative instruments outstanding at June 30, 2018 (volume measures as noted):

	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 (billion cubic feet (“Bcf”))	16.2	n/a	Cash flow hedge
Octane enhancement:
Forecasted purchase of NGLs (million barrels (“MMBbls”))	0.9	n/a	Cash flow hedge
Forecasted sales of octane enhancement products (MMBbls)	0.9	n/a	Cash flow hedge
Natural gas marketing:
Natural gas storage inventory management activities (Bcf)	1.8	n/a	Fair value hedge
NGL marketing:
Forecasted purchases of NGLs and related hydrocarbon products (MMBbls)	49.9	n/a	Cash flow hedge
Forecasted sales of NGLs and related hydrocarbon products (MMBbls)	64.1	n/a	Cash flow hedge
NGLs inventory management activities (MMBbls)	0.5	n/a	Fair value hedge
Refined products marketing:
Forecasted purchase of refined products (MMBbls)	0.9	n/a	Cash flow hedge
Forecasted sales of refined products (MMBbls)	1.2	n/a	Cash flow hedge
Refined products inventory management activities (MMBbls)	0.1	n/a	Fair value hedge
Crude oil marketing:
Forecasted purchases of crude oil (MMBbls)	9.1	4.1	Cash flow hedge
Forecasted sales of crude oil (MMBbls)	9.9	4.1	Cash flow hedge
Derivatives not designated as hedging instruments:
Natural gas risk management activities (Bcf) (3,4)	92.5	2.9	Mark-to-market
Refined products risk management activities (MMBbls) (4)	1.4	n/a	Mark-to-market
Crude oil risk management activities (MMBbls) (4)	68.5	29.0	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 2020, November 2018 and December 2020, respectively. (3)   Current and long-term volumes include 45.8 Bcf and 0.8 Bcf, respectively, of physical derivative instruments that are predominantly priced at a market-based index plus a premium or minus a discount related to location differences. (4)   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
	June 30, 2018			December 31, 2017			June 30, 2018			December 31, 2017
	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	Current assets	$	13.0	Current assets	$	--	Current liabilities	$	--	Current liabilities	$	1.5
Interest rate derivatives	Other assets		--	Other assets		0.1	Other liabilities		--	Other liabilities		0.2
Total interest rate derivatives			13.0			0.1			--			1.7
Commodity derivatives	Current assets		142.7	Current assets		109.5	Current liabilities		141.1	Current liabilities		104.4
Commodity derivatives	Other assets		39.3	Other assets		6.4	Other liabilities		39.2	Other liabilities		6.8
Total commodity derivatives			182.0			115.9			180.3			111.2
Total derivatives designated as hedging instruments		$	195.0		$	116.0		$	180.3		$	112.9
Derivatives not designated as hedging instruments
Commodity derivatives	Current assets	$	9.4	Current assets	$	43.9	Current liabilities	$	255.8	Current liabilities	$	62.3
Commodity derivatives	Other assets		0.2	Other assets		1.9	Other liabilities		23.3	Other liabilities		3.4
Total commodity derivatives		$	9.6		$	45.8		$	279.1		$	65.7

Offsetting Financial Assets

Certain of our commodity derivative instruments are subject to master netting arrangements or similar agreements.  The following tables present our derivative instruments subject to such arrangements at the dates indicated:

	Offsetting of Financial Assets and Derivative Assets
	Gross Amounts of Recognized Assets			Gross Amounts Offset in the Balance Sheet			Amounts of Assets Presented in the Balance Sheet			Gross Amounts Not Offset in the Balance Sheet								Amounts That Would Have Been Presented On Net Basis
										Financial Instruments				Cash Collateral Received		Cash Collateral Paid
	(i)			(ii)			(iii) = (i) – (ii)			(iv)								(v) = (iii) + (iv)
As of June 30, 2018:
Interest rate derivatives		$	13.0		$	--		$	13.0		$	--		$	--	$	--		$	13.0
Commodity derivatives			191.6			--			191.6			(185.6	)		--		--			6.0
As of December 31, 2017:
Interest rate derivatives		$	0.1		$	--		$	0.1		$	(0.1	)	$	--	$	--		$	--
Commodity derivatives			161.7			--			161.7			(157.8	)		--		--			3.9

Offsetting Financial Liabilities

	Offsetting of Financial Liabilities and Derivative Liabilities
	Gross Amounts of Recognized Liabilities			Gross Amounts Offset in the Balance Sheet			Amounts of Liabilities Presented in the Balance Sheet			Gross Amounts Not Offset in the Balance Sheet									Amounts That Would Have Been Presented On Net Basis
										Financial Instruments				Cash Collateral Received		Cash Collateral Paid
	(i)			(ii)			(iii) = (i) – (ii)			(iv)									(v) = (iii) + (iv)
As of June 30, 2018:
Commodity derivatives		$	459.4		$	--		$	459.4		$	(185.6	)	$	--	$	(272.9	)		$	0.9
As of December 31, 2017:
Interest rate derivatives		$	1.7		$	--		$	1.7		$	(0.1	)	$	--	$	--			$	1.6
Commodity derivatives			176.9			--			176.9			(157.8	)		--		(17.3	)			1.8

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 indicated:

Derivatives in Fair Value Hedging Relationships	Location	Gain (Loss) Recognized in Income on Derivative
		For the Three Months Ended June 30,				For the Six Months Ended June 30,
		2018		2017		2018		2017
Interest rate derivatives	Interest expense	$	0.6	$	0.4	$	1.3	$	(0.5	)
Commodity derivatives	Revenue		4.8		18.8		4.6		37.6
Total		$	5.4	$	19.2	$	5.9	$	37.1

Derivatives in Fair Value Hedging Relationships	Location	Gain (Loss) Recognized in Income on Hedged Item
		For the Three Months Ended June 30,						For the Six Months Ended June 30,
		2018			2017			2018			2017
Interest rate derivatives	Interest expense	$	(0.6	)	$	(0.3	)	$	(1.4	)	$	0.6
Commodity derivatives	Revenue		(4.9	)		(16.3	)		(1.8	)		(28.7	)
Total		$	(5.5	)	$	(16.6	)	$	(3.2	)	$	(28.1	)

Derivative Instruments Effects on Statements of Comprehensive Income

Derivatives in Cash Flow Hedging Relationships	Change in Value Recognized in Other Comprehensive Income (Loss) on Derivative
	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2018			2017			2018			2017
Interest rate derivatives	$	3.5		$	(6.9	)	$	14.6		$	(4.5	)
Commodity derivatives – Revenue (1)		(14.2	)		31.4			(11.2	)		179.0
Commodity derivatives – Operating costs and expenses (1)		0.6			(1.0	)		1.0			(3.8	)
Total	$	(10.1	)	$	23.5		$	4.4		$	170.7
(1)   The fair value of these derivative instruments will be reclassified to their respective locations on the Unaudited Condensed Statement of Consolidated Operations upon settlement of the underlying derivative transactions, as appropriate.

Gain/(Loss) Reclassified from Accumulated Other Comprehensive Income/(Loss) to Income (Effective Portion)

Derivatives in Cash Flow Hedging Relationships	Location	Gain (Loss) Reclassified from Accumulated Other Comprehensive Income (Loss) to Income
		For the Three Months Ended June 30,						For the Six Months Ended June 30,
		2018			2017			2018			2017
Interest rate derivatives	Interest expense	$	(9.4	)	$	(10.0	)	$	(19.9	)	$	(19.6	)
Commodity derivatives	Revenue		(39.4	)		46.0			(25.4	)		38.5
Commodity derivatives	Operating costs and expenses		0.2			--			0.7			0.4
Total		$	(48.6	)	$	36.0		$	(44.6	)	$	19.3

Gain/(Loss) Recognized in Income on Derivative

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 indicated:

Derivatives Not Designated as Hedging Instruments	Location	Gain (Loss) Recognized in Income on Derivative
		For the Three Months Ended June 30,						For the Six Months Ended June 30,
		2018			2017			2018			2017
Commodity derivatives	Revenue	$	(406.3	)	$	18.7		$	(559.8	)	$	34.4
Commodity derivatives	Operating costs and expenses		--			(0.8	)		(1.5	)		3.7
Total		$	(406.3	)	$	17.9		$	(561.3	)	$	38.1

Unrealized mark-to-market gains (losses)

The $561.3 million loss recognized during the 2018 earnings from derivatives not designated as hedging instruments reflects $106.9 million of realized losses on such instruments.  It does not reflect the $8.1 million of unrealized losses from fair value hedges.  In the aggregate, our unrealized mark-to-market losses for the six months ended June 30, 2018 were $462.5 million inclusive of all derivative instrument types.   The following table summarizes the impact of net unrealized, mark-to-market losses on our gross operating margin by segment for the six months ended June 30, 2018:

Unrealized mark-to-market gains (losses) by segment:
NGL Pipelines & Services	$	7.8
Crude Oil Pipelines & Services		(467.5	)
Natural Gas Pipelines & Services		(2.5	)
Petrochemical & Refined Products Services		(0.3	)
Total	$	(462.5	)

Fair Value Measurements of Financial Assets and Liabilities Measured on a Recurring Basis

The following tables set forth, by level within the Level 1, 2 and 3 fair value hierarchy, the carrying values of our financial assets and liabilities at the dates indicated.  These assets and liabilities are measured on a recurring basis and are classified based on the lowest level of input used to estimate their fair value.  Our assessment of the relative significance of such inputs requires judgment.

The values for commodity derivatives are presented before and after the application of Rule 814 of the Chicago Mercantile Exchange (“CME”), which deems that financial instruments cleared by the CME are settled daily in connection with variation margin payments.  As a result of this exchange rule, CME-related derivatives are considered to have no fair value at the balance sheet date for financial reporting purposes; however, the derivatives remain outstanding and subject to future commodity price fluctuations until they are settled in accordance with their contractual terms.  Derivative transactions cleared on exchanges other than the CME (e.g., the Intercontinental Exchange or ICE) continue to be reported on a gross basis.

	June 30, 2018 Fair Value Measurements Using
	Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)		Total
Financial assets:
Interest rate derivatives	$	--		$	13.0		$	--	$	13.0
Commodity derivatives:
Value before application of CME Rule 814		92.9			224.0			4.8		321.7
Impact of CME Rule 814 change		(6.9	)		(123.2	)		--		(130.1	)
Total commodity derivatives		86.0			100.8			4.8		191.6
Total financial assets	$	86.0		$	113.8		$	4.8	$	204.6
Financial liabilities:
Liquidity Option Agreement	$	--		$	--		$	350.3	$	350.3
Interest rate derivatives		--			--			--		--
Commodity derivatives:
Value before application of CME Rule 814		119.5			729.1			3.5		852.1
Impact of CME Rule 814 change		(34.3	)		(358.4	)		--		(392.7	)
Total commodity derivatives		85.2			370.7			3.5		459.4
Total financial liabilities	$	85.2		$	370.7		$	353.8	$	809.7

	December 31, 2017 Fair Value Measurements Using
	Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)		Total
Financial assets:
Interest rate derivatives	$	--		$	0.1		$	--	$	0.1
Commodity derivatives:
Value before application of CME Rule 814		47.1			184.9			2.9		234.9
Impact of CME Rule 814 change		(47.1	)		(26.1	)		--		(73.2	)
Total commodity derivatives		--			158.8			2.9		161.7
Total financial assets	$	--		$	158.9		$	2.9	$	161.8
Financial liabilities:
Liquidity Option Agreement	$	--		$	--		$	333.9	$	333.9
Interest rate derivatives		--			1.7			--		1.7
Commodity derivatives:
Value before application of CME Rule 814		118.4			270.6			1.7		390.7
Impact of CME Rule 814 change		(118.4	)		(95.4	)		--		(213.8	)
Total commodity derivatives		--			175.2			1.7		176.9
Total financial liabilities	$	--		$	176.9		$	335.6	$	512.5

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 fair values of our recurring Level 3 financial assets and liabilities on a combined basis for the periods indicated:

		For the Six Months Ended June 30,
	Location	2018			2017
Financial liability balance, net, January 1		$	(332.7	)	$	(268.2	)
Total gains (losses) included in:
Net income (1)	Revenue		(0.5	)		0.7
Net income	Other expense, net		(7.5	)		(5.5	)
Other comprehensive income (loss)	Commodity derivative instruments – changes in fair value of cash flow hedges		--			--
Settlements (1)	Revenue		(1.2	)		(1.4	)
Transfers out of Level 3			--			--
Financial liability balance, net, March 31			(341.9	)		(274.4	)
Total gains (losses) included in:
Net income (1)	Revenue		1.3			0.1
Net income	Other expense, net		(8.9	)		(18.6	)
Other comprehensive income (loss)	Commodity derivative instruments – changes in fair value of cash flow hedges		--			0.1
Settlements (1)	Revenue		0.5			(0.7	)
Transfers out of Level 3			--			--
Financial liability balance, net, June 30		$	(349.0	)	$	(293.5	)
(1)   There were unrealized gains of $1.8 million and $0.1 million included in these amounts for the three and six months ended June 30, 2018, respectively. There were unrealized losses of $0.6 million and $1.3 million included in these amounts for the three and six months ended June 30, 2017, respectively.

Fair Value Measurements, Valuation Techniques

The followingtable provides quantitative information regarding our recurring Level 3 fair value measurements for commodity derivatives at June 30, 2018:

	Fair Value
	Financial Assets		Financial Liabilities		Valuation Techniques	Unobservable Input	Range
Commodity derivatives – Crude oil	$	4.8	$	3.5	Discounted cash flow	Forward commodity prices	$65.01-$76.84/barrel
Total	$	4.8	$	3.5

Asset Impairment Charges by Segment

The following table summarizes our non-cash asset impairment charges for long-lived assets by segment during each of the periods indicated:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2018		2017		2018		2017
NGL Pipelines & Services	$	12.4	$	2.8	$	12.4	$	3.0
Crude Oil Pipelines & Services		0.1		0.6		0.3		0.6
Natural Gas Pipelines & Services		1.8		9.7		2.5		9.9
Petrochemical & Refined Products Services		1.5		--		1.5		--
Total	$	15.8	$	13.1	$	16.7	$	13.5