GOODWILL

9 Months Ended

Sep. 30, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL

GOODWILL

Under U.S. GAAP, we evaluate our goodwill related to Tuscarora and North Baja for impairment at least annually and if any indicators of impairment are evident.

In 2019, based on our analysis of Tuscarora and North Baja’s current market conditions, we believed there was a greater than 50 percent likelihood that Tuscarora and North Baja’s estimated fair value exceeded their carrying value. As a result, at December 31, 2019, we did not identify an impairment on the $71 million of goodwill related to the Tuscarora ($23 million) and North Baja ($48 million) reporting units.

On March 11, 2020, the World Health Organization (WHO) declared COVID-19 a global pandemic. While there are continuing concerns around the decline in energy demand related to the pandemic, we believe the current state of the macroeconomic environment does not represent a permanent shift. However, it remains difficult to predict with any certainty the severity of the impact of these events or how long any disruptions are likely to continue.

The following additional factors were considered in our first quarter 2020 analysis specific to the Partnership's Tuscarora and North Baja reporting units:

•the long-term natural gas price futures relevant to gas transported on Tuscarora and North Baja do not reflect material differences from what was forecast in 2019;

•at least 90 percent of Tuscarora's and North Baja's revenue is tied to long-term take-or-pay, fixed-price contracts which have a low correlation to short-term changes in demand;

•Tuscarora and North Baja have not experienced any material customer defaults to date and have significant collateral in support of their contracts;

•multiples and discount rate assumptions used in our quantitative model are reflective of the long-term outlook for Tuscarora and North Baja, in line with their underlying asset lives, versus the shorter-term nature of the current situation;

•Tuscarora's expansion project, Tuscarora XPress, is materially on track, and we do not anticipate any significant changes in outlook or delay or inability to proceed due to financing requirements; and

•Tuscarora and North Baja's businesses are broadly considered essential in the United States given the important role their infrastructures play in delivering energy to the market areas they serve.

As a result of these factors, we concluded during our first quarter 2020 analysis that there was a greater than 50 percent likelihood that both Tuscarora’s and North Baja’s estimated fair values would continue to exceed their carrying values. Therefore, no impairment exists on our goodwill. While the issues described above persist in the current quarter, we continue to believe these conditions remain temporary and are not aware of any other conditions or triggering events in the third quarter that would require us to change the conclusion reached during the first quarter. Adverse changes to our key considerations could, however, result in future impairments on our goodwill.