Property, Plant and Equipment

12 Months Ended

Dec. 31, 2022

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment

Note 4.  Property, Plant and Equipment

The historical costs of our property, plant and equipment and related balances were as follows at the dates indicated:

	Estimated Useful Life			December 31,
	in Years			2022		2021
Plants, pipelines and facilities (1)		3-45	(5)	$	54,396	$	51,636
Underground and other storage facilities (2)		5-40	(6)		4,329		4,327
Transportation equipment (3)		3-10			222		209
Marine vessels (4)		15-30			921		918
Land					387		379
Construction in progress					2,867		1,616
Subtotal					63,122		59,085
Less accumulated depreciation					18,800		17,083
Subtotal property, plant and equipment, net					44,322		42,002
Capitalized major maintenance costs for reaction-based    plants, net of accumulated amortization (7)					79		86
Property, plant and equipment, net				$	44,401	$	42,088

(1)	Plants, pipelines and facilities include processing plants; NGL, natural gas, crude oil and petrochemical and refined products pipelines; terminal loading and unloading facilities; buildings; office furniture and equipment; laboratory and shop equipment and related assets.
(2)	Underground and other storage facilities include underground product storage caverns; above ground storage tanks; water wells and related assets.
(3)	Transportation equipment includes tractor-trailer tank trucks and other vehicles and similar assets used in our operations.
(4)	Marine vessels include tow boats, barges and related equipment used in our marine transportation business.
(5)	In general, the estimated useful lives of major assets within this category are: processing plants, 20-35 years; pipelines and related equipment, 5-45 years; terminal facilities, 10-35 years; buildings, 20-40 years; office furniture and equipment, 3-20 years; and laboratory and shop equipment, 5-35 years.
(6)	In general, the estimated useful lives of assets within this category are: underground storage facilities, 5-35 years; storage tanks, 10-40 years; and water wells, 5-35 years.
(7)	For reaction-based plants, we use the deferral method when accounting for major maintenance activities.  Under the deferral method, major maintenance costs are capitalized and amortized over the period until the next major overhaul project.  On a weighted-average basis, the expected remaining amortization period for these costs is 1.5 years.

The following table summarizes our depreciation expense and capitalized interest amounts for the years indicated:

	For the Year Ended December 31,
	2022		2021		2020
Depreciation expense (1)	$	1,779	$	1,705	$	1,682
Capitalized interest (2)		90		80		115

(1)	Depreciation expense is a component of “Third party and other costs” within “Costs and expenses” as presented on our Statements of Consolidated Operations.
(2)	Capitalized interest is a component of “Interest expense” as presented on our Statements of Consolidated Operations.

Asset Retirement Obligations

We record AROs in connection with legal requirements to perform specified retirement activities under contractual arrangements and/or governmental regulations.  Our contractual AROs primarily result from right-of-way agreements associated with our pipeline operations and property leases associated with our plant sites.  In addition, we record AROs in connection with governmental regulations associated with the abandonment or retirement of above-ground brine storage pits and certain marine vessels.  We also record AROs in connection with regulatory requirements associated with the renovation or demolition of certain assets containing hazardous substances such as asbestos.  We typically fund our AROs using cash flow from operations.

Property, plant and equipment at December 31, 2022 and 2021 includes $117 million and $81 million, respectively, of asset retirement costs capitalized as an increase in the associated long-lived asset.

The following table presents information regarding our AROs for the years indicated:

	For the Year Ended December 31,
	2022			2021			2020
ARO liability beginning balance	$	176		$	150		$	132
Liabilities incurred (1)		20			6			5
Revisions in estimated cash flows (2)		30			6			–
Liabilities settled (3)		(10	)		(4	)		(2	)
Accretion expense (4)		18			18			15
ARO liability ending balance	$	234		$	176		$	150

(1)	Represents the initial recognition of estimated ARO liabilities during period.
(2)	Represents subsequent adjustments to estimated ARO liabilities during period.
(3)	Represents cash payments to settle ARO liabilities during period.
(4)	Represents net change in ARO liability balance attributable to the passage of time and other adjustments, including true-up amounts associated with revised closure estimates.

Of the $234 million total ARO liability recorded at December 31, 2022, $20 million was reflected as a current liability and $214 million as a long-term liability.

The following table presents our forecast of ARO-related accretion expense for the years indicated:

2023		2024		2025		2026		2027
$	13	$	13	$	14	$	15	$	16

Impairments of Property, Plant and Equipment

The following table presents our non-cash asset impairment charges involving property, plant and equipment by business segment for the years indicated:

	For the Year Ended December 31,
	2022		2021		2020
NGL Pipelines & Services (1)	$	23	$	20	$	208
Crude Oil Pipelines & Services (2)		3		15		45
Natural Gas Pipelines & Services (3)		6		56		44
Petrochemical & Refined Products Services (4)		9		127		293
Total impairment charges for property, plant and equipment	$	41	$	218	$	590

(1)	2020 amount includes an $87 million non-cash impairment charges associated with our South Texas processing assets.
(2)	2020 amount includes a $42 million non-cash impairment charge associated with the cancellation of our Midland-to-ECHO 4 Pipeline construction project.
(3)	2021 amount includes a $37 million non-cash impairment charge associated with the sale of components of our San Juan Gathering System.  2020 amount includes a $38 million non-cash impairment charge associated with our South Texas gathering assets.
(4)	2021 and 2020 amounts include non-cash impairment charges of $113 million and $252 million, respectively, associated with our marine transportation business.

The following information summarizes our significant asset impairment charges involving property, plant and equipment that were recognized during the year ended December 31, 2021:

• In December 2021, we evaluated our marine transportation business for impairment due to a further deterioration of demand for such services, which resulted in lower-than-expected term and spot rates.  As a result of our review, we recognized an impairment charge of $114 million.  The impairment charge reduced property, plant and equipment by $113 million and intangible assets by $1 million.  We determined the fair value using an income approach (i.e., a discounted cash flow approach), which incorporates Level 3 inputs including: (i) management’s long-term forecast of cash flows generated by the business; (ii) a discount rate of 8.7%, which is based on an estimated weighted-average cost of capital for market participants engaged in similar business activities; and (iii) a growth rate of 2.2% for terminal year cash flows.

• In March 2021, we entered into agreements to sell a coal bed natural gas gathering system and related Val Verde treating facility, both of which were components of our San Juan Gathering System, to a third party for $39 million in cash.  The transaction closed and was effective on April 1, 2021.  We recognized an impairment charge of $44 million attributable to this transaction, which reflects the write down of $37 million of property, plant and equipment and $7 million of intangible assets to their respective fair values.

The following information summarizes our significant asset impairment charges involving property, plant and equipment that were recognized during the year ended December 31, 2020:

• In December 2020, we evaluated our marine transportation business for impairment due to a lower demand outlook for such services. As a result of our review, we recognized an impairment charge of $257 million, which reduced property, plant and equipment by $252 million and intangible assets by $5 million. We determined the fair value using an income approach (i.e., a discounted cash flow approach), which incorporates several Level 3 inputs including: (i) management’s long-term forecast of cash flows generated by the business; (ii) a discount rate of 9.3%, which is based on an estimated weighted-average cost of capital for market participants engaged in similar business activities; and (iii) a growth rate of 2.1% for terminal year cash flows.

• In December 2020, we evaluated certain of our natural gas gathering and processing assets in South Texas for impairment due to a lower production outlook.  As a result of our review, we recognized an aggregate impairment charge of $126 million, which reduced property, plant and equipment by $125 million and intangible assets by $1 million.  The natural gas assets impacted by this review were our Armstrong, Gilmore, Shilling and Indian Springs natural gas processing facilities and our Indian Springs and Big Thicket Gathering Systems.  We determined the fair value using Level 3 inputs which were based primarily on management expectations of the residual values of such facilities and pipelines based on historical experience.

• In September 2020, we recognized $42 million of impairment expense due to our cancellation of the Midland-to-ECHO 4 Pipeline construction project. 

The remainder of our impairment charges for the years ended December 31, 2022, 2021 and 2020 are attributable to the complete write-off of assets that are no longer expected to be used or constructed.