Variable Interest Entities

6 Months Ended

Jun. 30, 2013

Variable Interest Entity Disclosures [Abstract]

Variable Interest Entity Disclosures [Textblock]

Note 2. Variable Interest Entities

Consolidated VIEs

We consolidate the activities of variable interest entities (VIEs) of which we are the primary beneficiary. The primary beneficiary of a VIE is the entity that has both (1) the power to direct the activities of the VIE that most significantly impact the VIE's economic performance and (2) the obligation to absorb losses or the right to receive benefits that could be significant to the VIE. As of June 30, 2013, we have the following consolidated VIEs:

• During the second quarter of 2013, a third party contributed $187 million to Gulfstar One LLC (Gulfstar)in exchange for a 49 percent ownership interest in Gulfstar. This contribution was based on 49 percent of WPZ's estimated cumulative net investment to date. The $187 million was then distributed to WPZ. As a result of this transaction, WPZ now owns a 51percent interest in Gulfstar, a subsidiary that, due to certain risk-sharing provisions in its customer contracts, is a VIE. WPZ is the primary beneficiary because it has the power to direct the activities that most significantly impact Gulfstar's economic performance. WPZ, as construction agent for Gulfstar, is designing, constructing, and installing a proprietary floating-production system, Gulfstar FPSTM, and associated pipelines which will initially provide production handling and gathering services for the Tubular Bells oil and gas discovery in the eastern deepwater Gulf of Mexico. The project is expected to be in service in mid-2014. WPZ has received certain advance payments from the producer customers andis committed to the producer customers to construct this system. The current estimate of the total remaining construction costsis less than $450 million, which will be funded with capital contributions from WPZ, along with the other equity partner, proportional to ownership interest. If the producer customers do not develop the offshore oil and gas fields to be connected to Gulfstar, they will be responsible for the firm price of building the facilities.
• During the second quarter of 2013, a third party contributed $4 million to Constitution in exchange for a 10 percent ownership interest in Constitution. This contribution was based on 10 percent of Constitution's contributed capital to date. The $4 million was then distributed to WPZ. As a result of this transaction, WPZ now owns a 41 percent interest in Constitution, a subsidiary that, due to shipper fixed-payment commitments under its firm transportation contracts, is a VIE. WPZ is the primary beneficiary because it has the power to direct the activities that most significantly impact Constitution's economic performance. WPZ, as construction agent for Constitution, is building a pipeline connecting our gathering system in Susquehanna County, Pennsylvania, to the Iroquois Gas Transmission and the Tennessee Gas Pipeline systems. WPZ plans to place the project in service in March 2015 and estimates the total remaining construction costs of the project to be less than $650 million, which will be funded with capital contributions from WPZ, along with the other equity partners, proportional to ownership interest.
• We own a 50 percent interest in Bluegrass, a subsidiary that, due to insufficient equity to finance activities during its development stage, is a VIE. We are the primary beneficiary becausewe have the power to direct the activities of the project that most significantly impact its economic performance, particularly until the first developmental stage milestone is met, we have the power to direct if and how fast the project moves forward. We and our partner plan to construct a NGL pipeline connecting processing facilities in the Marcellus and Utica shale-gas areas in the U.S. Northeast to growing petrochemical and export markets in the U.S. Gulf Coast. Pre-construction activities are underway and the project is planned to be in service in late 2015. This development stage entity is currently operating under a preliminary activities budget that governs the spending levels through February 28, 2014.Prior to that time, certain elections by either partner could change the relative ownership of the entity, impact the continued development of the project, and/or revise the determination of the primary beneficiary. The amount that has been projected for spending under the preliminary activities budget is $193 million, and will be funded by us and our partner, proportional to ownership interest. Continued investment in this project beyond the preliminary activities stage will require additional significant capital contributions. Our Board of Directors has approved our continued investment in this project.

The following table presents amounts included in our Consolidated Balance Sheet that are for the use or obligation of these VIEs, which are joint projects in the development and construction phase:

			June 30,		December 31,
			2013		2012		Classification
			(Millions)
Assets (liabilities):
	Cash and cash equivalents		$	60	$	8	Cash and cash equivalents
	Accounts receivable			1		-	Accounts and notes receivable
	Construction in progress			727		556	Property, plant, and equipment, at cost
	Accounts payable			(105)		(128)	Accounts payable
	Construction retainage			(1)		-	Accrued liabilities
	Deferred revenue associated with
		customer advance payments		(110)		(109)	Other noncurrent liabilities

Nonconsolidated VIEs

We have also identified certain interests in VIEs where we are not the primary beneficiary. These include:

• WPZ'sequity-method investment in Laurel Mountain Midstream, LLC (Laurel Mountain) is considered to be a VIE generally due to contractual provisions that transfer certain risks to customers. As decisions about the activities that most significantly impact the economic performance of this entity require a unanimous vote of all members, WPZ is not the primary beneficiary. Our maximum exposure to loss is limited to the carrying value of this investment, which is $491 million at June 30, 2013.
• WPZ's 47.5 percent-owned equity-method investment in Caiman Energy II, LLC(Caiman) has been determined to be a VIEbecause it has insufficient equity to finance activities during the construction stage of the Blue Racer Midstream joint project, which is an expansion to gathering and processing and the associated liquids infrastructure serving oil and gas producers in the Utica shale, primarily in Ohio and northwest Pennsylvania. WPZ is not the primary beneficiary because it does not have the power to direct the activities of Caiman that most significantly impact its economic performance. Our maximum exposure to loss is limited to $380 million of total contributions that we have committed to make. At June 30, 2013, the carrying value of our investment in Caiman was $132 million, which substantially reflects our contributions to date.
• Our equity-method investment in Moss Lake Fractionation LLC (Moss Lake) is a VIE because it has insufficient equity to finance activities during its development stage. We currently own 50 percent of this joint project which plans to construct a new large-scale fractionation plant and expand natural gas liquids storage facilities in Louisiana and construct a pipeline connecting these facilities to the Bluegrass Pipeline.We are not the primary beneficiary because we do not have the power to direct the majority of the activities of Moss Lake that most significantly impact its economic performance at this stage. Currently, our maximum exposure to loss is limited to our proportional share of capital contributions necessary to fund the preliminary activities through February 28, 2014, which is estimated to be $52 million.Continued investment in this project beyond the preliminary activities stage will require additional significant capital contributions. The carrying value of our investment in Moss Lake at June 30, 2013, was $2 million, which represents our contributions to date.