Commitments and Contingent Liabilities

12 Months Ended

Dec. 31, 2020

Commitments and Contingencies [Abstract]

Commitments and Contingencies

Note 17.  Commitments and Contingent Liabilities

Litigation

As part of our normal business activities, we may be named as defendants in legal proceedings, including those arising from regulatory and environmental matters.  Although we are insured against various risks to the extent we believe it is prudent, there is no assurance that the nature and amount of such insurance will be adequate, in every case, to fully indemnify us against losses arising from future legal proceedings.  We will vigorously defend the Partnership in litigation matters.

Management has regular quarterly litigation reviews, including updates from legal counsel, to assess the possible need for accounting recognition and disclosure of these contingencies.  We accrue an undiscounted liability for those contingencies where the loss is probable and the amount can be reasonably estimated.  If a range of probable loss amounts can be reasonably estimated and no amount within the range is a better estimate than any other amount, then the minimum amount in the range is accrued.

We do not record a contingent liability when the likelihood of loss is probable but the amount cannot be reasonably estimated or when the likelihood of loss is believed to be only reasonably possible or remote.  For contingencies where an unfavorable outcome is reasonably possible and the impact would be material to our consolidated financial statements, we disclose the nature of the contingency and, where feasible, an estimate of the possible loss or range of loss.  Based on a consideration of all relevant known facts and circumstances, we do not believe that the ultimate outcome of any currently pending litigation directed against us will have a material impact on our consolidated financial statements either individually at the claim level or in the aggregate.

At December 31, 2020 and 2019, our accruals for litigation contingencies were $6.1 million and $0.2 million, respectively, and were recorded in our Consolidated Balance Sheets as a component of “Other current liabilities.”  Our evaluation of litigation contingencies is based on the facts and circumstances of each case and predicting the outcome of these matters involves uncertainties.  In the event the assumptions we use to evaluate these matters change in future periods or new information becomes available, we may be required to record additional accruals.  In an effort to mitigate expenses associated with litigation, we may settle legal proceedings out of court.

PDH Litigation

In July 2013, we executed a contract with Foster Wheeler USA Corporation (“Foster Wheeler”) pursuant to which Foster Wheeler was to serve as the general contractor responsible for the engineering, procurement, construction and installation of our first propane dehydrogenation facility (“PDH 1”).  In November 2014, Foster Wheeler was acquired by an affiliate of AMEC plc to form Amec Foster Wheeler plc, and Foster Wheeler is now known as Amec Foster Wheeler USA Corporation (“AFW”).  In December 2015, Enterprise and AFW entered into a transition services agreement under which AFW was partially terminated from the PDH 1 project.  In December 2015, Enterprise engaged a second contractor, Optimized Process Designs LLC, to complete the construction and installation of PDH 1.

On September 2, 2016, we terminated AFW for cause and filed a lawsuit in the 151st Judicial Civil District Court of Harris County, Texas against AFW and its parent company, Amec Foster Wheeler plc, asserting claims for breach of contract, breach of warranty, fraudulent inducement, string-along fraud, gross negligence, professional negligence, negligent misrepresentation and attorneys’ fees.  We intend to diligently prosecute these claims and seek all direct, consequential, and exemplary damages to which we may be entitled.

Redelivery Commitments

We store natural gas, crude oil, NGLs and certain petrochemical products owned by third parties under various agreements.  Under the terms of these agreements, we are generally required to redeliver volumes to the owner on demand.  At December 31, 2020, we had approximately 9.9 trillion British thermal units (“TBtus”) of natural gas, 19.4 MMBbls of crude oil, and 31.1 MMBbls of NGL and petrochemical products in our custody that were owned by third parties.  We maintain insurance coverage in connection with such volumes that is consistent with our exposure.  See Note 18 for information regarding insurance matters.

Commitments Under Equity Compensation Plans of EPCO

In accordance with our agreements with EPCO, we reimburse EPCO for our share of its compensation expense attributable to employees who perform management, administrative and operating functions for us.  See Notes 13 and 15 for additional information regarding our accounting for equity-based awards and related party information, respectively.

Contractual Obligations

The following table summarizes our various contractual obligations at December 31, 2020.  A description of each type of contractual obligation follows:

	Payment or Settlement due by Period
Contractual Obligations	Total		2021		2022		2023		2024		2025		Thereafter
Scheduled maturities of debt obligations	$	30,146.4	$	1,325.0	$	1,400.0	$	1,250.0	$	850.0	$	1,150.0	$	24,171.4
Estimated cash interest payments	$	28,834.6	$	1,294.0	$	1,241.2	$	1,201.0	$	1,162.8	$	1,121.4	$	22,814.2
Operating lease obligations	$	460.5	$	33.7	$	36.1	$	33.2	$	29.9	$	28.8	$	298.8
Purchase obligations:
Product purchase commitments:
Estimated payment obligations:
Natural gas	$	155.0	$	84.6	$	70.4	$	–	$	–	$	–	$	–
NGLs	$	3,908.4	$	685.2	$	696.8	$	494.4	$	436.4	$	336.8	$	1,258.8
Crude oil	$	10,365.7	$	1,390.1	$	1,390.1	$	1,390.1	$	1,354.9	$	1,297.2	$	3,543.3
Petrochemicals and refined products	$	346.1	$	100.9	$	100.9	$	76.0	$	68.3	$	–	$	–
Other	$	25.5	$	5.8	$	5.9	$	6.0	$	5.1	$	2.7	$	–
Service payment commitments	$	278.8	$	62.0	$	59.7	$	42.3	$	16.1	$	12.9	$	85.8

Scheduled Maturities of Debt

We have long-term and short-term payment obligations under debt agreements.  Amounts shown in the preceding table represent our scheduled future maturities of debt principal for the years indicated.  See Note 7 for additional information regarding our consolidated debt obligations.

Estimated Cash Interest Payments

Our estimated cash payments for interest are based on the principal amount of our consolidated debt obligations outstanding at December 31, 2020, the contractually scheduled maturities of such balances, and the applicable interest rates.  Our estimated cash payments for interest are influenced by the long-term maturities of our $2.65 billion in junior subordinated notes (due June 2067 through February 2078).  The estimated cash payments assume that (i) the junior subordinated notes are not repaid prior to their respective maturity dates and (ii) the amount of interest paid on the junior subordinated notes is based on either (a) the current fixed interest rate charged or (b) the weighted-average variable rate paid in 2020, as applicable, for each note through the respective maturity date.  See Note 7 for information regarding fixed and weighted-average variable interest rates charged in 2020.

Operating Lease Obligations

We lease certain property, plant and equipment under noncancelable and cancelable operating leases.  Amounts shown in the preceding table represent minimum cash lease payment obligations under our operating leases with terms in excess of one year.

Our significant lease agreements consist of (i) land held pursuant to property leases, (ii) the lease of underground storage caverns for natural gas and NGLs, (iii) the lease of transportation equipment used in our operations and (iv) office space leased from affiliates of EPCO.  These lease agreements have terms that range from 5 to 30 years.  The agreements to lease office space from affiliates of EPCO and those relating to underground NGL storage caverns we lease from a third party include renewal options that could extend these contracts for up to an additional 20 years.  The remainder of our significant lease agreements do not provide for additional renewal terms.

Lease expense is charged to operating costs and expenses on a straight-line basis over the period of expected economic benefit.  Contingent rental payments are expensed as incurred.  We are generally required to perform routine maintenance on the underlying leased assets.  In addition, certain leases give us the option to make leasehold improvements.  Maintenance and repairs of leased assets resulting from our operations are charged to expense as incurred.  

The following table presents information regarding operating leases where we are the lessee at December 31, 2020:

Asset Category	ROU Asset Carrying Value (1)		Lease Liability Carrying Value (2)		Weighted- Average Remaining Term	Weighted- Average Discount Rate (3)
Storage and pipeline facilities	$	128.0	$	128.7	15 years		4.3	%
Transportation equipment		33.5		35.6	3 years		3.5	%
Office and warehouse space		170.5		184.3	16 years		3.2	%
Total	$	332.0	$	348.6

(1)	ROU asset amounts are a component of “Other assets” on our Consolidated Balance Sheet.
(2)	At December 31, 2020, lease liabilities of $27.8 million and $320.8 million were included within “Other current liabilities” and “Other liabilities,” respectively.
(3)	The discount rate for each category of assets represents the weighted average incremental borrowing rate adjusted for collateralization (if the implicit rate is not determinable).  In general, the discount rates are based on either (i) information available at the lease commencement date or (ii) January 1, 2019 for leases existing at the adoption date for ASC 842.

In total, our ROU asset and lease liability carrying values increased $121.8 million and $136.6 million, respectively, since December 31, 2019 primarily due to the modification of an office space lease with an affiliate of EPCO in 2020.

In total, operating lease expense was $102.0 million, $106.6 million and $86.4 million for the years ended December 31, 2020, 2019 and 2018, respectively.  The following table disaggregates our total operating lease expense for the years indicated:

	For the Year Ended December,
	2020		2019
Long-term operating leases:
Fixed lease expense:
Non-cash lease expense (amortization of ROU assets)	$	39.0	$	42.8
Related accretion expense on lease liability balances		13.0		9.0
Total fixed lease expense		52.0		51.8
Variable lease expense		0.2		6.2
Subtotal operating lease expense		52.2		58.0
Short-term operating leases		49.8		48.6
Total operating lease expense	$	102.0	$	106.6

Fixed lease expense is charged to earnings on a straight-line basis over the contractual term, with any variable lease payments expensed as incurred.  Short-term operating lease expense is expensed as incurred.  Cash paid for operating lease liabilities recorded on our balance sheet was $37.1 million and $48.1 million for the years ended December 31, 2020 and 2019, respectively.

We do not have any significant operating or direct financing leases where we are the lessor.  Our operating lease income for the years ended December 31, 2020 and 2019 was $11.4 million and $14.4 million, respectively.  We do not have any sales-type leases.

Purchase Obligations

We define purchase obligations as agreements with remaining terms in excess of one year to purchase goods or services that are enforceable and legally binding (i.e., unconditional) on us that specify all significant terms, including (i) fixed or minimum quantities to be purchased, (ii) fixed, minimum or variable price provisions and (iii) the approximate timing of the transactions.  We classify our unconditional purchase obligations into the following categories:

• Product purchase commitments – We have long-term product purchase obligations for natural gas, NGLs, crude oil, and petrochemicals and refined products with third party suppliers.  The prices that we are obligated to pay under these contracts approximate market prices at the time we take delivery of the volumes.  The preceding table presents our estimated future payment obligations under these contracts based on the contractual price in each agreement at December 31, 2020 applied to all future volume commitments.  Actual future payment obligations may vary depending on prices at the time of delivery.  

• Service payment commitments – We have long-term commitments to pay service providers, including those attributable to obligations under firm pipeline transportation contracts.  Payment obligations vary by contract, but generally represent a price per unit of volume multiplied by a firm transportation volume commitment.

Other Commitments

We are obligated to spend up to an aggregate $270 million over a ten-year period ending in 2025 on specified midstream gathering assets for certain producers utilizing our EFS Midstream System.  If constructed, these new assets would be owned by us and be a component of the EFS Midstream System. As of December 31, 2020, we have spent $151 million of the $270 million commitment.

Other Long-Term Liabilities

The following table summarizes the components of “Other long-term liabilities” as presented on our Consolidated Balance Sheets at the dates indicated:

	December 31,
	2020		2019
Noncurrent portion of AROs (see Note 4)	$	137.6	$	126.9
Deferred revenues – non-current portion (see Note 9)		198.2		197.0
Liquidity Option liability		–		509.6
Lease liability – non-current portion		320.8		171.6
Derivative liabilities		17.2		7.3
Other		12.8		20.0
Total	$	686.6	$	1,032.4

Liquidity Option

Prior to its settlement on March 5, 2020, the Liquidity Option liability, at any measurement date, represented the fair value of estimated federal and state income taxes that we believe a market participant would assume due to ownership of OTA, including its deferred income tax liabilities.  At December 31, 2019 and March 5, 2020, we estimated that our liability under the Liquidity Option Agreement, which was a component of “Other long-term liabilities” on our Consolidated Balance Sheet was $509.6 million and $511.9 million, respectively.

Our valuation estimates for the Liquidity Option liability at December 31, 2019 and March 5, 2020 incorporated several factors not readily observable in the market (i.e., Level 3 inputs) such as: (i) a discount rate of 5.7%; (ii) a blended federal and state income tax rate of approximately 22.8%; (iii) forecasted annual growth rates in our taxable earnings ranging from approximately 0.7%  to 2.2%; (iv) allocations of Partnership income to OTA ranging from approximately 2.3% to 2.5%; and (v) the length of time that OTA is in existence following exercise of the option (up to 30 years).

Changes in the fair value of the Liquidity Option liability were recognized in earnings as a component of other expense on our Statements of Consolidated Operations. We recognized $2.3 million of non-cash accretion expense for the period January 1, 2020 to March 5, 2020 attributable to the Liquidity Option liability. Results for the years ended December 31, 2019 and 2018 include $119.6 million and $56.1 million, respectively, of expense attributable to accretion and changes in management estimates regarding inputs to the valuation model. The higher level of expense recognized in 2019 is primarily due to a decrease in the discount factor used in determining the present value of the liability since December 31, 2018.  The discount rate is based on a weighted-average cost of capital, which declined over the course of 2019 due to lower U.S. interest rates.

For information regarding settlement of the Liquidity Option, see Note 8.