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Derivative Instruments, Hedging Activities and Fair Value Measurements (Tables)
 6 Months Ended
Jun. 30, 2019
Derivative Instruments, Hedging Activities and Fair Value Measurements [Abstract]  
Hedging Instruments Under the FASB's Derivative and Hedging Guidance
In May 2019, we entered into two 30-year forward-starting swaps in connection with the expected future issuance of senior notes.  The following table summarizes our portfolio of these swaps at June 30, 2019:

Hedged Transaction
Number and Type
of Derivatives
Outstanding
Notional
Amount
Expected
Settlement
Date
Average Rate
Locked
Accounting
Treatment
Future long-term debt offering
1 forward-starting swap
$75.0
9/2020
2.39%
Cash flow hedge
Future long-term debt offering
1 forward-starting swap
$75.0
4/2021
2.41%
Cash flow hedge

The following table summarizes our portfolio of commodity derivative instruments outstanding at June 30, 2019 (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”))
25.9
n/a
Cash flow hedge
Forecasted sales of NGLs (million barrels (“MMBbls”))
4.2
n/a
Cash flow hedge
Octane enhancement:
      
Forecasted purchase of NGLs (MMBbls)
1.3
n/a
Cash flow hedge
Forecasted sales of octane enhancement products (MMBbls)
2.0
n/a
Cash flow hedge
Natural gas marketing:
      
Forecasted purchase of natural gas (Bcf)
3.7
n/a
Cash flow hedge
Natural gas storage inventory management activities (Bcf)
1.7
n/a
Fair value hedge
NGL marketing:
      
Forecasted purchases of NGLs and related hydrocarbon products (MMBbls)
55.0
2.8
Cash flow hedge
Forecasted sales of NGLs and related hydrocarbon products (MMBbls)
72.1
0.8
Cash flow hedge
NGLs inventory management activities (MMBbls)
0.6
n/a
Fair value hedge
Refined products marketing:
 
    
Refined products inventory management activities (MMBbls)
0.1
n/a
Fair value hedge
Crude oil marketing:
    
 
Forecasted purchases of crude oil (MMBbls)
19.2
n/a
Cash flow hedge
Forecasted sales of crude oil (MMBbls)
26.2
n/a
Cash flow hedge
Propylene marketing:
      
Forecasted sales of NGLs for propylene marketing activities (MMBbls)
0.3
n/a
Cash flow hedge
Derivatives not designated as hedging instruments:
      
Natural gas risk management activities (Bcf) (3)
47.5
0.1
Mark-to-market
NGL risk management activities (MMBbls) (3)
5.4
n/a
Mark-to-market
Refined products risk management activities (MMBbls) (3)
1.8
n/a
Mark-to-market
Crude oil risk management activities (MMBbls) (3)
39.0
1.6
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, December 2019 and December 2020, respectively.
(3)
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, 2019
 
December 31, 2018
 
June 30, 2019
 
December 31, 2018
 
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 assets
$
–
  
Other assets
$
–
  
Other liabilities
$
5.2
  
Other liabilities
$
–
Commodity derivatives
Current assets
$
172.4
 
Current assets
$
138.5
 
Current
liabilities
$
115.2
 
Current
liabilities
$
115.0
Commodity derivatives
Other assets
 
4.9
 
Other assets
 
5.6
 
Other liabilities
 
7.6
 
Other liabilities
 
11.1
Total commodity derivatives
  
$
177.3
    
$
144.1
    
$
122.8
    
$
126.1
Total derivatives designated as hedging instruments
  
$
177.3
    
$
144.1
    
$
128.0
    
$
126.1
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivatives not designated as hedging instruments
                              
Commodity derivatives
Current assets
$ 
23.4
 
Current assets
$ 
15.9
 
Current
liabilities
$
13.2
 
Current
liabilities
$ 
33.2
Commodity derivatives
Other assets
 
1.6
 
Other assets
 
1.9
 
Other liabilities
 
1.0
 
Other liabilities
 
3.1
Total
 
$ 
25.0
 
 
$ 
17.8
 
 
$
14.2
 
 
$ 
36.3
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, 2019:
                                          
Commodity derivatives
  
$
202.3
    
$
–
    
$
202.3
    
$
(137.7
)
  
$
(64.6
)
  
$
–
    
$
–
  
As of December 31, 2018:
                                                        
Commodity derivatives
  
$
161.9
    
$
–
    
$
161.9
    
$
(158.6
)
  
$
–
    
$
–
    
$
3.3
  

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, 2019:
                                          
Interest rate derivatives
  
$
5.2
      
–
    
$
5.2
    
$
–
    
$
–
    
$
–
    
$
5.2
  
Commodity derivatives
    
137.0
    
$
–
      
137.0
      
(137.7
)
    
–
      
0.2
      
(0.5
)
As of December 31, 2018:
                                                        
Commodity derivatives
  
$
162.4
    
$
–
    
$
162.4
    
$
(158.6
)
  
$
–
    
$
(2.3
)
  
$
1.5
  

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,
  
 
 
  
2019
    
2018
    
2019
    
2018
  
Interest rate derivatives
Interest expense
  
$
–
    
$
0.6
    
$
–
    
$
1.3
  
Commodity derivatives
Revenue
    
6.9
      
4.8
      
(1.6
)
    
4.6
  
Total
 
  
$
6.9
    
$
5.4
    
$
(1.6
)
  
$
5.9
  

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,
  
 
 
  
2019
    
2018
    
2019
    
2018
  
Interest rate derivatives
Interest expense
  
$
–
    
$
(0.6
)
  
$
–
    
$
(1.4
)
Commodity derivatives
Revenue
    
(3.6
)
    
(4.9
)
    
6.3
      
(1.8
)
Total
 
  
$
(3.6
)
  
$
(5.5
)
  
$
6.3
    
$
(3.2
)
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 indicated:

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,
  
 
  
2019
    
2018
    
2019
    
2018
  
Interest rate derivatives
  
$
(5.2
)
  
$
3.5
    
$
(5.2
)
  
$
14.6
  
Commodity derivatives – Revenue (1)
    
84.3
      
(14.2
)
    
(2.4
)
    
(11.2
)
Commodity derivatives – Operating costs and expenses (1)
    
(2.8
)
    
0.6
      
(11.3
)
    
1.0
  
Total
  
$
76.3
    
$
(10.1
)
  
$
(18.9
)
  
$
4.4
  

(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
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,
  
 
 
  
2019
    
2018
    
2019
    
2018
  
Interest rate derivatives
Interest expense
  
$
(9.2
)
  
$
(9.4
)
  
$
(18.4
)
  
$
(19.9
)
Commodity derivatives
Revenue
    
2.5
      
(39.4
)
    
67.8
      
(25.4
)
Commodity derivatives
Operating costs and expenses
    
(0.3
)
    
0.2
      
(7.3
)
    
0.7
  
Total
 
  
$
(7.0
)
  
$
(48.6
)
  
$
42.1
    
$
(44.6
)
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,
  
 
 
  
2019
    
2018
    
2019
    
2018
  
Commodity derivatives
Revenue
  
$
(20.2
)
  
$
(406.3
)
  
$
74.9
    
$
(559.8
)
Commodity derivatives
Operating costs and expenses
    
(4.8
)
    
–
      
(4.7
)
    
(1.5
)
Total
 
  
$
(25.0
)
  
$
(406.3
)
  
$
70.2
    
$
(561.3
)
Fair Value Measurements of Financial Assets and Liabilities Measured on a Recurring Basis The values for commodity derivatives are presented before and after the application of Chicago Mercantile Exchange (“CME”) Rule 814, 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.

 
  
At June 30, 2019
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:
                        
Commodity derivatives:
                        
Value before application of CME Rule 814
  
$
62.7
    
$
339.4
    
$
6.3
    
$
408.4
  
Impact of CME Rule 814
    
(46.7
)
    
(154.2
)
    
(5.2
)
    
(206.1
)
Total commodity derivatives
    
16.0
      
185.2
      
1.1
      
202.3
  
Total
  
$
16.0
    
$
185.2
    
$
1.1
    
$
202.3
  
 
                                
Financial liabilities:
                                
Liquidity Option Agreement (see Note 15)
  
$
–
    
$
–
    
$
474.4
    
$
474.4
  
Interest rate derivatives
    
–
      
5.2
      
–
      
5.2
  
Commodity derivatives:
                                
Value before application of CME Rule 814
    
77.6
      
253.4
      
22.6
      
353.6
  
Impact of CME Rule 814
    
(62.0
)
    
(138.3
)
    
(16.3
)
    
(216.6
)
Total commodity derivatives
    
15.6
      
115.1
      
6.3
      
137.0
  
Total
  
$
15.6
    
$
120.3
    
$
480.7
    
$
616.6
  

 
  
At December 31, 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:
                        
Commodity derivatives:
                        
Value before application of CME Rule 814
  
$
172.3
    
$
282.4
    
$
2.2
    
$
456.9
  
Impact of CME Rule 814
    
(134.8
)
    
(159.3
)
    
(0.9
)
    
(295.0
)
Total commodity derivatives
    
37.5
      
123.1
      
1.3
      
161.9
  
Total
  
$
37.5
    
$
123.1
    
$
1.3
    
$
161.9
  
 
                                
Financial liabilities:
                                
Liquidity Option Agreement (see Note 15)
  
$
–
    
$
–
    
$
390.0
    
$
390.0
  
Commodity derivatives:
                                
Value before application of CME Rule 814
    
85.5
      
291.2
      
21.4
      
398.1
  
Impact of CME Rule 814
    
(48.6
)
    
(172.9
)
    
(14.2
)
    
(235.7
)
Total commodity derivatives
    
36.9
      
118.3
      
7.2
      
162.4
  
Total
  
$
36.9
    
$
118.3
    
$
397.2
    
$
552.4
  

Fair Value Measurements, Valuation Techniques

 
  
Fair Value
  
 
 
   
 
  
Financial
Assets
    
Financial
Liabilities
  
Valuation
Techniques
Unobservable
Input
Range
Commodity derivatives – Crude oil
  
$
0.2
    
$
0.3
  
Discounted cash flow
Forward commodity prices
$57.62-$58.65/barrel
Commodity derivatives – Propane
    
–
      
1.7
  
Discounted cash flow
Forward commodity prices
$0.56-$0.62/gallon
Commodity derivatives – Natural gasoline
    
–
      
1.9
  
Discounted cash flow
Forward commodity prices
$1.11-$1.15/gallon
Commodity derivatives – Ethane
    
0.9
      
1.5
  
Discounted cash flow
Forward commodity prices
$0.17-$0.24/gallon
Commodity derivatives – Normal Butane
    
–
      
0.9
  
Discounted cash flow
Forward commodity prices
$0.62-$0.69/gallon
   Total
  
$
1.1
    
$
6.3
          

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:

test
 
  
For the Six Months
Ended June 30,
  
test
Location
  
2019
    
2018
  
Financial liability balance, net, January 1
 
  
$
(395.9
)
  
$
(332.7
)
Total gains (losses) included in:
 
                
Net income (1)
Revenue
    
3.1
      
(0.5
)
Net income
Other expense, net
    
(57.8
)
    
(7.5
)
Other comprehensive income (loss)
Commodity derivative instruments – changes in fair value of cash flow hedges
    
4.0
      
–
  
Settlements (1)
Revenue
    
(0.1
)
    
(1.2
)
Transfers out of Level 3
      
(0.2
)
    
–
  
Financial liability balance, net, March 31
 
    
(446.9
)
    
(341.9
)
Total gains (losses) included in:
 
                
Net income (1)
Revenue
    
(0.1
)
    
1.3
  
Net income
Other expense, net
    
(26.6
)
    
(8.9
)
Other comprehensive income (loss)
 
Commodity derivative instruments – changes in fair value of cash flow hedges
    
(2.9
)
    
–
  
Settlements (1)
Revenue
    
(3.1
)
    
0.5
  
Transfers out of Level 3
      
–
      
–
  
Financial liability balance, net, June 30
 
  
$
(479.6
)
  
$
(349.0
)

(1)
There were unrealized losses of $3.2 million and $0.2 million included in these amounts for the three and six months ended June 30, 2019, respectively.  There were unrealized losses of $1.8 million and $0.1 million included in these amounts for the three and six months ended June 30, 2018, respectively.