Product Sales Revenues

9 Months Ended

Sep. 30, 2011

Product Sales Revenues [Abstract]

Product Sales Revenues

4. Product Sales Revenues

The amounts reported as product sales revenues on our consolidated statements of income include revenues from the physical sale of petroleum products and from mark-to-market adjustments from New York Mercantile Exchange ("NYMEX") contracts. We use NYMEX contracts to hedge against changes in the price of petroleum products we expect to sell from our business activities where we acquire or produce petroleum products. Some of these NYMEX contracts qualify for hedge accounting treatment, and we designate and account for these as either cash flow or fair value hedges. The effective portion of the fair value changes of the contracts we designate as cash flow hedges are recognized as adjustments to product sales when the hedged product is physically sold. Any ineffectiveness in these contracts is recognized as an adjustment to product sales in the period the ineffectiveness occurs. Changes in the fair value and any ineffectiveness of contracts designated as fair value hedges do not impact product sales. We account for those NYMEX contracts that do not qualify for hedge accounting treatment as economic hedges, with the period changes in fair value recognized as product sales. See Note 9 - Derivative Financial Instruments for further disclosures regarding our NYMEX contracts.

For the three and nine months ended September 30, 2010 and 2011, product sales revenues included the following (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2010			2011			2010		2011
Physical sale of petroleum products	$	206,682		$	173,181		$	577,919	$	606,603
NYMEX contract adjustments:
Change in value of NYMEX contracts that did not qualify for hedge accounting treatment and the effective portion of gains and losses of matured NYMEX contracts that qualified for hedge accounting treatment associated with our petroleum products blending and fractionation activities(1)	(3,279		)	21,865			2,599		807
Change in value of NYMEX contracts that did not qualify for hedge accounting treatment associated with the Houston-to-El Paso pipeline section linefill working inventory(1)	(4,924		)	8,281			3,995		(6,918		)
Change in value of NYMEX contracts that did not qualify for hedge accounting treatment associated with our crude oil activities	805			(74		)	805		—
Total NYMEX contract adjustments	(7,398		)	30,072			7,399		(6,111		)
Total product sales revenues	$	199,284		$	203,253		$	585,318	$	600,492
(1) The associated petroleum products for these activities are, to the extent still owned as of the statement date, or were, to the extent no longer owned as of the statement date, classified as inventory in current assets on our consolidated balance sheets.