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Intangible Assets and Goodwill
 12 Months Ended
Dec. 31, 2018
Intangible Assets and Goodwill [Abstract]  
Intangible Assets and Goodwill

Note 6.  Intangible Assets and Goodwill

Identifiable Intangible Assets

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

 
 
December 31, 2018
  
December 31, 2017
 
 
 
Gross
Value
  
Accumulated
Amortization
  
Carrying
Value
  
Gross
Value
  
Accumulated
Amortization
  
Carrying
Value
 
NGL Pipelines & Services:
                  
Customer relationship intangibles
 
$
457.3
  
$
(201.9
)
 
$
255.4
  
$
447.4
  
$
(187.5
)
 
$
259.9
 
Contract-based intangibles
  
363.4
   
(238.7
)
  
124.7
   
280.8
   
(218.4
)
  
62.4
 
Segment total
  
820.7
   
(440.6
)
  
380.1
   
728.2
   
(405.9
)
  
322.3
 
Crude Oil Pipelines & Services:
                        
Customer relationship intangibles
  
2,203.5
   
(174.1
)
  
2,029.4
   
2,203.5
   
(127.0
)
  
2,076.5
 
Contract-based intangibles
  
276.9
   
(211.7
)
  
65.2
   
281.0
   
(171.0
)
  
110.0
 
Segment total
  
2,480.4
   
(385.8
)
  
2,094.6
   
2,484.5
   
(298.0
)
  
2,186.5
 
Natural Gas Pipelines & Services:
                        
Customer relationship intangibles
  
1,350.3
   
(447.8
)
  
902.5
   
1,350.3
   
(417.1
)
  
933.2
 
Contract-based intangibles
  
464.7
   
(387.9
)
  
76.8
   
464.7
   
(379.5
)
  
85.2
 
Segment total
  
1,815.0
   
(835.7
)
  
979.3
   
1,815.0
   
(796.6
)
  
1,018.4
 
Petrochemical & Refined Products Services:
                        
Customer relationship intangibles
  
181.4
   
(51.8
)
  
129.6
   
181.4
   
(45.9
)
  
135.5
 
Contract-based intangibles
  
46.0
   
(21.2
)
  
24.8
   
46.0
   
(18.4
)
  
27.6
 
Segment total
  
227.4
   
(73.0
)
  
154.4
   
227.4
   
(64.3
)
  
163.1
 
Total intangible assets
 
$
5,343.5
  
$
(1,735.1
)
 
$
3,608.4
  
$
5,255.1
  
$
(1,564.8
)
 
$
3,690.3
 

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

 
 
For the Year Ended December 31,
 
 
 
2018
  
2017
  
2016
 
NGL Pipelines & Services
 
$
34.7
  
$
28.9
  
$
30.6
 
Crude Oil Pipelines & Services
  
87.8
   
92.5
   
98.4
 
Natural Gas Pipelines & Services
  
39.1
   
36.2
   
33.2
 
Petrochemical & Refined Products Services
  
8.7
   
9.3
   
9.1
 
Total
 
$
170.3
  
$
166.9
  
$
171.3
 

The following table presents our forecast of amortization expense associated with existing intangible assets for the years indicated:

2019
  
2020
  
2021
  
2022
  
2023
 
$
167.1
  
$
159.8
  
$
162.1
  
$
167.6
  
$
167.8
 

Customer relationship intangible assets
Customer relationship intangible assets represent the estimated economic value assigned to commercial relationships acquired in connection with business combinations. Our customer relationship intangible assets are classified as either (i) basin-specific or (ii) general. Basin-specific customer relationships represent access to customers associated with a defined resource basin (e.g., customers using a natural gas gathering system serving a specific production field) and is analogous to having a franchise in a particular area. General customer relationships are associated with customers whose hydrocarbon volumes are not attributable to specific resource basins (e.g. customers at a marine terminal that handles volumes originating from multiple sources).

The estimated fair value of each customer relationship intangible asset was determined at the time of acquisition using a discounted cash flow analysis, which incorporates various assumptions regarding the acquired business. The assumptions may include Level 3 fair value inputs, including long-range cash flow forecasts that extend for the estimated economic life of the hydrocarbon resource base served by the asset network, anticipated service contract renewals, resource base depletion rates and expected customer attrition rates.

The recognition of customer relationships are supported by a variety of factors.  In general, midstream infrastructure requires a significant investment, both in terms of initial construction costs and ongoing maintenance, and is generally supported by long-term contracts that establish a customer base. The level of expenditures and regulatory requirements involved in constructing new midstream asset networks can create significant economic barriers to entry that may limit potential competition. Furthermore, efficient, continuous operation of the acquired fixed assets not only supports the commercial relationships existing at the time of the acquisition, but it provides us with opportunities to establish new ones.  These factors support the long-term value attributed to our customer relationship intangible assets.

With respect to amortization periods, the duration of a basin-specific customer relationship is limited to the estimated economic life of the associated resource basin. The duration of our other customer relationships is typically limited to the term of the underlying service contracts, including assumed renewals. Amortization expense attributable to customer relationships is recorded in a manner that closely resembles the pattern in which we expect to benefit from such relationships.

At December 31, 2018, the carrying value of our portfolio of customer relationship intangible assets was $3.3 billion, the principal components of which were as follows:


Weighted
Average
Remaining
Amortization
Period
 
December 31, 2018
 

 
Gross
Value
  
Accumulated
Amortization
  
Carrying
Value
 
Basin-specific customer relationships:
          
   EFS Midstream
23.4 years
 
$
1,409.8
  
$
(117.0
)
 
$
1,292.8
 
   State Line and Fairplay
28.2 years
  
895.0
   
(183.2
)
  
711.8
 
   San Juan Gathering
20.8 years
  
331.3
   
(227.7
)
  
103.6
 
   Encinal
8.0 years
  
132.9
   
(103.5
)
  
29.4
 
General customer relationships:
             
   Oiltanking
25.0 years
  
1,192.5
   
(86.1
)
  
1,106.4
 

§
The EFS Midstream customer relationships provide us with long-term access to natural gas, NGL and condensate producers served by our EFS Midstream System, which we acquired in 2015.  The EFS Midstream System serves producers in the Eagle Ford Shale, providing condensate gathering and processing services as well as gathering, treating and compression services for associated natural gas.

§
The State Line and Fairplay customer relationships provide us with long-term access to natural gas producers served by our Haynesville and Fairplay Gathering Systems, which we acquired in 2010. The Haynesville Gathering System gathers and treats natural gas produced from the Haynesville and Bossier Shale supply basins and the Cotton Valley and Taylor Sand formations in Louisiana and eastern Texas for delivery to regional markets, including (through an interconnect with the Haynesville Extension pipeline) markets served by our Acadian Gas System.  The Fairplay Gathering System gathers natural gas produced from the Cotton Valley formation within Panola and Rusk Counties in East Texas for delivery to regional markets.

§
The San Juan Gathering customer relationships provide us with long-term access to natural gas producers served by our San Juan Gathering System, which we acquired in 2004.  The San Juan Gathering System gathers and treats natural gas produced from the San Juan Basin in northern New Mexico and southern Colorado and delivers the natural gas either directly into interstate pipelines (if dry natural gas) or to regional natural gas plants, including our Chaco facility, for further processing (if rich natural gas) prior to being transported on interstate pipelines.

§
The Encinal customer relationships provide us with long-term access to natural gas producers in the Olmos and Wilcox formations in South Texas.  We acquired this intangible asset in 2006.

§
The Oiltanking customer relationships provide us with long-term access to crude oil and refined products storage and terminal customers served at our Houston Ship Channel and Beaumont, Texas terminals.   We acquired this intangible asset in 2014.

Contract-based intangible assets
Contract-based intangible assets represent specific commercial rights we acquired in connection with business combinations. These intangible assets are typically valued using an income approach that incorporate the terms of the agreements.  At December 31, 2018, the carrying value of our portfolio of contract-based intangible assets was $291.5 million, the principal components of which were as follows:

 
Weighted
Average
Remaining
Amortization
Period
 
December 31, 2018
 

 
Gross
Value
  
Accumulated
Amortization
  
Carrying
Value
 
Oiltanking customer contracts
4.0 years
 
$
293.3
  
$
(221.1
)
 
$
72.2
 
Jonah natural gas gathering agreements
23.0 years
  
224.4
   
(166.3
)
  
58.1
 
Delaware Basin natural gas processing contracts
8.0 years
  
82.6
   
(6.4
)
  
76.2
 

§
The Oiltanking customer contracts represent the estimated value we assigned to crude oil storage and terminal agreements we acquired in 2014 associated with our Houston and Beaumont terminals. Amortization expense attributable to these contracts is recorded using a straight-line approach over the terms of the underlying contracts.

§
The Jonah natural gas gathering agreements represent the estimated value we assigned to natural gas gathering contracts acquired in 2001 associated with the Jonah Gathering System. Amortization expense attributable to these intangible assets is recorded using a units-of-production method based on gathering volumes.

§
The Delaware Basin natural gas processing contracts represent the estimated value we assigned to natural gas processing contracts we acquired in 2018 in connection with our step acquisition of the remaining 50% member interest in Delaware Processing (see Note 12). Amortization expense attributable to these contracts is recorded using a straight-line approach over the terms of the underlying contracts.

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.  We did not record any goodwill impairment charges, or reclassify any goodwill amounts between business segments, during the years ended December 31, 2018, 2017 or 2016.  Based on our most recent goodwill impairment test at December 31, 2018, we estimated that the fair value of each of our reporting units was substantially in excess of its carrying value (i.e., by at least 10%).  See Note 10 for our goodwill by segment balances.