XML 56 R40.htm IDEA: XBRL DOCUMENT v3.20.4
Hedging Activities and Fair Value Measurements (Tables)
 12 Months Ended
Dec. 31, 2020
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 30-year forward-starting swaps at December 31, 2020, all of which are associated with the expected future issuance of senior notes.

Hedged Transaction
Number and Type
of Derivatives Outstanding
Notional
Amount
Expected
Settlement
Date
Weighted-Average
Fixed Rate
Locked
Accounting
Treatment
Future long-term debt offering
1 forward-starting swap
$75.0
4/2021
2.41%
Cash flow hedge
Future long-term debt offering
5 forward-starting swaps
$500.0
4/2021
2.13%
Cash flow hedge
Future long-term debt offering
2 forward-starting swaps (1)
$150.0
2/2022
1.72%
Cash flow hedge
Future long-term debt offering
1 forward starting swap (1)
$100.0
4/2021
1.46%
Cash flow hedge
Future long-term debt offering
2 forward starting swaps (1)
$150.0
2/2022
1.48%
Cash flow hedge
Future long-term debt offering
2 forward starting swaps (1)
$100.0
2/2022
0.95%
Cash flow hedge

(1)
These swaps were entered into during the first quarter of 2020.
The following table summarizes our portfolio of commodity derivative instruments outstanding at December 31, 2020 (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 (Bcf)
6.0
  
n/a
  
Cash flow hedge
Forecasted sales of NGLs (MMBbls)
0.6
  
n/a
  
Cash flow hedge
Natural gas marketing:
  
 
  
 
 
Natural gas storage inventory management activities (Bcf)
4.0
 
n/a
 
Fair value hedge
NGL marketing:
  
 
  
 
 
Forecasted purchases of NGLs and related hydrocarbon products (MMBbls)
142.8
 
1.6
 
Cash flow hedge
Forecasted sales of NGLs and related hydrocarbon products (MMBbls)
172.1
 
4.5
 
Cash flow hedge
NGLs inventory management activities (MMBbls)
1.9
  
n/a
  
Fair value hedge
Refined products marketing:
  
 
  
 
 
Forecasted purchases of refined products (MMBbls)
41.2
 
n/a
 
Cash flow hedge
Forecasted sales of refined products (MMBbls)
51.1
 
3.3
 
Cash flow hedge
Refined products inventory management activities (MMBbls)
0.8
  
n/a
  
Fair value hedge
Crude oil marketing:
  
 
  
 
 
Forecasted purchases of crude oil (MMBbls)
32.9
 
n/a
 
Cash flow hedge
Forecasted sales of crude oil (MMBbls)
44.5
 
n/a
 
Cash flow hedge
Petrochemical marketing:
          
Forecasted purchases of petrochemical products (MMBbls)
0.4
  
n/a
  
Cash flow hedge
Forecasted sales of petrochemical products (MMBbls)
0.5
  
n/a
  
Cash flow hedge
Derivatives not designated as hedging instruments:
  
 
  
 
 
Natural gas risk management activities (Bcf) (3)
10.3
 
0.4
 
Mark-to-market
NGL risk management activities (MMBbls) (3)
26.5
  
7.9
  
Mark-to-market
Refined products risk management activities (MMBbls) (3)
6.9
  
n/a
  
Mark-to-market
Crude oil risk management activities (MMBbls) (3)
32.5
 
2.6
 
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 2022, December 2021 and October 2023, 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
 
December 31, 2020
 
December 31, 2019
 
December 31, 2020
 
December 31, 2019
 
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
$
–
  
Current assets
$
–
  
Current
liabilities
$
109.1
  
Current
liabilities
$
6.7
Interest rate derivatives
Other assets
  
12.4
  
Other assets
  
–
  
Other liabilities
  
11.0
  
Other liabilities
  
6.8
Total interest rate derivatives
    
12.4
      
–
      
120.1
      
13.5
Commodity derivatives
Current assets
  
210.5
 
Current assets
  
116.5
 
Current
liabilities
  
234.0
 
Current
liabilities
  
107.1
Commodity derivatives
Other assets
 
0.4
 
Other assets
 
–
 
Other liabilities
 
6.1
 
Other liabilities
 
–
Total commodity derivatives
    
210.9
      
116.5
      
240.1
      
107.1
Total derivatives designated as hedging instruments
  
$
223.3
    
$
116.5
    
$
360.2
    
$
120.6
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivatives not designated as hedging instruments
                              
Commodity derivatives
Current assets
 
18.1
 
Current assets
  
10.7
 
Current
liabilities
  
6.1
 
Current
liabilities
  
8.6
Commodity derivatives
Other assets
 
0.2
 
Other assets
  
0.6
 
Other liabilities
  
0.1
 
Other liabilities
  
0.5
Total commodity derivatives
 
 
18.3
 
 
  
11.3
 
 
  
6.2
 
 
  
9.1
Total derivatives not designated as hedging instruments
  
$
18.3
    
$
11.3
    
$
6.2
    
$
9.1

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 Not Offset
in the Balance Sheet
      
 
Gross
Amounts of
Recognized
Assets
  
Gross
Amounts
Offset in the
Balance Sheet
  
Amounts
of Assets
Presented
in the
Balance Sheet
  
Financial
Instruments
    
Cash
Collateral
Paid
    
Cash
Collateral
Received
  
Amounts That
Would Have
Been Presented
On Net Basis
  
 
(i)
  
(ii)
  
(iii) = (i) – (ii)
  
(iv)
  
(v) = (iii) + (iv)
  
As of December 31, 2020:
                    
Interest rate derivatives
  
$
12.4
    
$
–
    
$
12.4
    
$
–
    
$
–
    
$
–
    
$
12.4
  
Commodity derivatives
    
229.2
      
–
      
229.2
      
(228.5
)
    
–
      
–
      
0.7
  
As of December 31, 2019:
                                                        
Commodity derivatives
  
$
127.8
      
–
    
$
127.8
    
$
(115.3
)
  
$
(11.0
)
  
$
–
    
$
1.5
  
Offsetting Financial Liabilities
Offsetting of Financial Liabilities and Derivative Liabilities
  
 
            
Gross Amounts Not Offset
in the Balance Sheet
      
 
Gross
Amounts of
Recognized
Liabilities
  
Gross
Amounts
Offset in the
Balance Sheet
  
Amounts
of Liabilities
Presented
in the
Balance Sheet
  
Financial
Instruments
  
Cash
Collateral
Paid
  
Amounts That
Would Have
Been Presented
On Net Basis
  
 
(i)
  
(ii)
  
(iii) = (i) – (ii)
  
(iv)
  
(v) = (iii) + (iv)
  
As of December 31, 2020:
                        
Interest rate derivatives
  
$
120.1
    
$
–
    
$
120.1
    
$
–
    
$
–
    
$
120.1
  
Commodity derivatives
    
246.3
      
–
      
246.3
      
(228.5
)
    
(17.3
)
    
0.5
  
As of December 31, 2019:
                                                
Interest rate derivatives
  
$
13.5
    
$
–
    
$
13.5
    
$
–
    
$
–
    
$
13.5
  
Commodity derivatives
    
116.2
      
–
      
116.2
      
(115.3
)
    
–
      
0.9
  
Derivative Instruments Effects on Statements of Operations
The following tables present the effect of our derivative instruments designated as fair value hedges on our Statements of Consolidated Operations for the years indicated:

 Derivatives in Fair Value
Hedging Relationships
Location
  
Gain (Loss) Recognized in
Income on Derivative
  
 
  
  
For the Year Ended December 31,
  
 
 
  
2020
    
2019
    
2018
  
Interest rate derivatives
Interest expense
  
$
–
    
$
–
    
$
1.3
  
Commodity derivatives
Revenue
    
(88.0
)
    
2.2
      
9.9
  
Total
 
  
$
(88.0
)
  
$
2.2
    
$
11.2
  

 Derivatives in Fair Value
Hedging Relationships
Location
  
Gain (Loss) Recognized in
Income on Hedged Item
  
 
  
  
For the Year Ended December 31,
  
 
 
  
2020
    
2019
    
2018
  
Interest rate derivatives
Interest expense
  
$
–
    
$
–
    
$
(1.4
)
Commodity derivatives
Revenue
    
168.1
      
6.9
      
(6.9
)
Total
 
  
$
168.1
    
$
6.9
    
$
(8.3
)
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 Statements of Consolidated Operations and Statements of Consolidated Comprehensive Income for the years indicated:

Derivatives in Cash Flow
Hedging Relationships
Change in Value Recognized in
Other Comprehensive Income (Loss)
On Derivative
  
 
For the Year Ended December 31,
  
 
2020
  
2019
  
2018
  
Interest rate derivatives
  
$
(127.5
)
  
$
81.4
    
$
22.2
  
Commodity derivatives – Revenue (1)
    
134.7
      
55.8
      
293.0
  
Commodity derivatives – Operating costs and expenses (1)
    
(10.3
)
    
(11.7
)
    
0.2
  
Total
  
$
(3.1
)
  
$
125.5
    
$
315.4
  

(1)
The fair value of these derivative instruments will be reclassified to their respective locations on the Statement of Consolidated Operations when the forecasted transactions affect earnings.
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 Year Ended December 31,
  
 
 
  
2020
    
2019
    
2018
  
Interest rate derivatives
Interest expense
  
$
(39.3
)
  
$
(37.3
)
  
$
(38.1
)
Commodity derivatives
Revenue
    
282.6
      
152.4
      
131.7
  
Commodity derivatives
Operating costs and expenses
    
(9.9
)
    
(10.7
)
    
(1.3
)
Total
 
  
$
233.4
    
$
104.4
    
$
92.3
  
Gain/(Loss) Recognized in Income on Derivative
The following table presents the effect of our derivative instruments not designated as hedging instruments on our Statements of Consolidated Operations for the years indicated:

Derivatives Not Designated as
Hedging Instruments
Location
  
Gain (Loss) Recognized in
Income on Derivative
  
 
  
  
For the Year Ended December 31,
  
 
 
  
2020
    
2019
    
2018
  
Interest rate derivatives
Interest expense
  
$
–
    
$
(94.9
)
  
$
–
  
Commodity derivatives
Revenue
    
166.0
      
102.2
      
(462.9
)
Commodity derivatives
Operating costs and expenses
    
(0.2
)
    
(12.4
)
    
8.2
  
Total
 
  
$
165.8
    
$
(5.1
)
  
$
(454.7
)
Unrealized mark-to-market gains (losses)
In total and inclusive of both fair value hedges and derivatives not designated as hedging instruments, unrealized mark-to-market gains (losses) included in gross operating margin and interest expense for the years indicated:

   
For the Year Ended December 31,
 
 
  
2020
    
2019
    
2018
  
Mark-to-market gains (losses) in gross operating margin:
                  
NGL Pipelines & Services
  
$
48.4
    
$
(5.5
)
  
$
18.0
  
Crude Oil Pipelines & Services
    
20.1
      
80.6
      
(44.1
)
Natural Gas Pipelines & Services
    
6.3
      
(0.2
)
    
6.7
  
Petrochemical & Refined Products Services
    
4.5
      
(7.2
)
    
1.7
  
     Total mark-to-market impact on gross operating margin
    
79.3
      
67.7
      
(17.7
)
Mark-to-market gains (losses) in interest expense
    
–
      
(94.9
)
    
(0.1
)
Total
  
$
79.3
    
$
(27.2
)
  
$
(17.8
)
Fair Value Measurements of Financial Assets and Liabilities Measured on a Recurring Basis

 
  
At December 31, 2020
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
  
$
–
    
$
12.4
    
$
–
    
$
12.4
  
Commodity derivatives:
                                
   Value before application of CME Rule 814
    
678.6
      
878.6
      
12.9
      
1,570.1
  
   Impact of CME Rule 814 change
    
(678.6
)
    
(650.4
)
    
(11.9
)
    
(1,340.9
)
   Total commodity derivatives
    
–
      
228.2
      
1.0
      
229.2
  
Total
  
$
–
    
$
240.6
    
$
1.0
    
$
241.6
  
 
                                
Financial liabilities:
                                
Interest rate derivatives
  
$
–
    
$
120.1
    
$
–
    
$
120.1
  
Commodity derivatives:
                                
   Value before application of CME Rule 814
    
1,065.6
      
1,047.4
      
25.9
      
2,138.9
  
   Impact of CME Rule 814 change
    
(1,065.6
)
    
(807.3
)
    
(19.7
)
    
(1,892.6
)
   Total commodity derivatives
    
–
      
240.1
      
6.2
      
246.3
  
Total
  
$
–
    
$
360.2
    
$
6.2
    
$
366.4
  

 
  
At December 31, 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
  
$
53.4
    
$
343.7
    
$
0.1
    
$
397.2
  
   Impact of CME Rule 814 change
    
(47.0
)
    
(222.4
)
    
–
      
(269.4
)
   Total commodity derivatives
    
6.4
      
121.3
      
0.1
      
127.8
  
Total
  
$
6.4
    
$
121.3
    
$
0.1
    
$
127.8
  
 
                                
Financial liabilities:
                                
Liquidity Option (see Note 17)
  
$
–
    
$
–
    
$
509.6
    
$
509.6
  
Interest rate derivatives
    
–
      
13.5
      
–
      
13.5
  
Commodity derivatives:
                                
   Value before application of CME Rule 814
    
88.1
      
273.6
      
0.3
      
362.0
  
   Impact of CME Rule 814 change
    
(81.9
)
    
(163.9
)
    
–
      
(245.8
)
   Total commodity derivatives
    
6.2
      
109.7
      
0.3
      
116.2
  
Total
  
$
6.2
    
$
123.2
    
$
509.9
    
$
639.3
  
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 years indicated:

test
 
  
For the Year Ended December 31,
  
test
Location
  
2020
    
2019
  
Financial liability balance, net, January 1
 
  
$
(509.8
)
  
$
(395.9
)
Total gains (losses) included in:
 
                
Net income (1)
Revenue
    
(1.6
)
    
3.7
  
Net income
Other expense, net – Liquidity Option
    
(2.3
)
    
(119.6
)
Other comprehensive income (loss)
Commodity derivative instruments – changes in fair value of cash flow hedges
    
(23.7
)
    
(2.1
)
Settlements (1)
Revenue
    
3.2
      
(3.5
)
Transfer out of Level 3 – Liquidity Option (2)
      
511.9
      
–
  
Other transfers out of Level 3
 
    
17.1
      
7.6
  
Financial liability balance, net, December 31
 
  
$
(5.2
)
  
$
(509.8
)

(1)
There were $0.7 million and $0.2 million of unrealized gains included in these amounts for the years ended December 31, 2020 and 2019, respectively.
(2)
In March 2020, the Liquidity Option settled and was transferred out of Level 3.  See Note 17 for information regarding the Liquidity Option.
Nonrecurring Fair Value Measurements
We wrote down the assets comprising our marine transportation business and certain natural gas gathering and processing activities to their estimated fair values in 2020 (see Note 4).  Apart from these matters, we did not have any significant nonrecurring fair value measurements during the years ended December 31, 2020, 2019 or 2018.  The following table presents information regarding our significant nonrecurring fair value measurements at December 31, 2020:

 
Components of Carrying Value
at December 31, 2020 by
Level of Fair Value Measurement
          
 
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
  
Significant
Other
Observable
Inputs
(Level 2)
  
Significant
Unobservable
Inputs
(Level 3)
  
Carrying
Values at
December 31, 2020
  
Impairment
Charges
Recognized
in 2020
  
Long-lived assets held and used: (1)
                              
   Marine transportation business
  
$
–
    
$
–
    
$
410.0
    
$
410.0
    
$
256.7
  
   South Texas natural gas gathering and processing
    
–
      
–
      
21.3
      
21.3
      
125.7
  

(1)
Our fair value estimates for these assets were based on an income approach (i.e., a discounted cash flow approach).