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Fair Value Measurements
9 Months Ended
Sep. 30, 2011
Fair Value Measurements [Abstract] 
Fair Value Measurements
FAIR VALUE MEASUREMENTS:
The carrying amounts of cash and cash equivalents, accounts receivable and accounts payable approximate their fair value. Price risk management assets and liabilities are recorded at fair value.
Based on the estimated borrowing rates currently available to us and our subsidiaries for long-term loans with similar terms and average maturities, the aggregate fair value and carrying amount of our consolidated debt obligations as of September 30, 2011 was $12.27 billion and $11.68 billion, respectively. As of December 31, 2010, the aggregate fair value and carrying amount of our consolidated debt obligations was $10.23 billion and $9.38 billion, respectively.
We have marketable securities, commodity derivatives, interest rate derivatives, the Preferred Units and embedded derivatives in the Preferred Units of a Subsidiary (the “Regency Preferred Units”) that are accounted for as assets and liabilities at fair value in our consolidated balance sheets. We determine the fair value of our assets and liabilities subject to fair value measurement by using the highest possible “level” of inputs. Level 1 inputs are observable quotes in an active market for identical assets and liabilities. We consider the valuation of marketable securities and commodity derivatives transacted through a clearing broker with a published price from the appropriate exchange as a Level 1 valuation. Level 2 inputs are inputs observable for similar assets and liabilities. We consider over-the-counter (“OTC”) commodity derivatives entered into directly with third parties as a Level 2 valuation since the values of these derivatives are quoted on an exchange for similar transactions. Additionally, we consider our options transacted through our clearing broker as having Level 2 inputs due to the level of activity of these contracts on the exchange in which they trade. We consider the valuation of our interest rate derivatives as Level 2 since we use a LIBOR curve based on quotes from an active exchange of Eurodollar futures for the same period as the future interest swap settlements and discount the future cash flows accordingly, including the effects of credit risk. Level 3 inputs are unobservable. Derivatives related to the Regency Preferred Units are valued using a binomial lattice model. The market inputs utilized in the model include credit spread, probabilities of the occurrence of certain events, common unit price, dividend yield, and expected value, and are considered Level 3. The fair value of the Preferred Units was based predominantly on an income approach model and is also considered Level 3.

The following tables summarize the fair value of our financial assets and liabilities measured and recorded at fair value on a recurring basis as of September 30, 2011 and December 31, 2010 based on inputs used to derive their fair values:

 
Fair Value Measurements  at
September 30, 2011 Using
 
Fair Value
Total
 
Level 1
 
Level 2
 
Level 3
Assets:
 
 
 
 
 
 
 
Marketable securities
$
3,151

 
$
3,151

 
$
—

 
$
—

Interest rate derivatives
30,564

 
—

 
30,564

 
—

Commodity derivatives:
 
 
 
 
 
 
 
Natural Gas:
 
 
 
 
 
 
 
Basis Swaps IFERC/NYMEX
74,892

 
74,892

 
—

 
—

Swing Swaps IFERC
21,818

 
1,074

 
20,744

 
—

Fixed Swaps/Futures
73,076

 
70,112

 
2,964

 
—

Options — Puts
13,348

 
—

 
13,348

 
—

Forward Physical Swaps
738

 
—

 
738

 
—

NGLs — Forward Swaps
577

 
—

 
577

 
—

Propane — Forward Swaps
77

 
—

 
77

 
—

WTI Crude Oil
4,817

 
—

 
4,817

 
—

Total commodity derivatives
189,343

 
146,078

 
43,265

 
—

Total Assets
$
223,058

 
$
149,229

 
$
73,829

 
$
—

Liabilities:
 
 
 
 
 
 
 
Interest rate derivatives
$
(99,658
)
 
$
—

 
$
(99,658
)
 
$
—

Series A Convertible Preferred Units
(314,980
)
 
—

 
—

 
(314,980
)
Embedded derivatives in the Regency Preferred Units
(36,268
)
 
—

 
—

 
(36,268
)
Commodity derivatives:
 
 
 
 
 
 
 
Natural Gas:
 
 
 
 
 
 
 
Basis Swaps IFERC/NYMEX
(68,918
)
 
(68,918
)
 
—

 
—

Swing Swaps IFERC
(22,707
)
 
(1,988
)
 
(20,719
)
 
—

Fixed Swaps/Futures
(48,287
)
 
(48,133
)
 
(154
)
 
—

Options — Puts
(423
)
 
—

 
(423
)
 
—

Options — Calls
(122
)
 
—

 
(122
)
 
—

Forward Physical Swaps
(482
)
 
—

 
(482
)
 
—

NGLs — Forward Swaps
(11,722
)
 
—

 
(11,722
)
 
—

Propane — Forward Swaps
(2,086
)
 
—

 
(2,086
)
 
—

Total commodity derivatives
(154,747
)
 
(119,039
)
 
(35,708
)
 
—

Total Liabilities
$
(605,653
)
 
$
(119,039
)
 
$
(135,366
)
 
$
(351,248
)

 
Fair Value Measurements  at
December 31, 2010 Using
 
Fair Value
Total
 
Level 1
 
Level 2
 
Level 3
Assets:
 
 
 
 
 
 
 
Marketable securities
$
2,032

 
$
2,032

 
$
—

 
$
—

Interest rate derivatives
20,790

 
—

 
20,790

 
—

Commodity derivatives:
 
 
 
 
 
 
 
Natural Gas:
 
 
 
 
 
 
 
Basis Swaps IFERC/NYMEX
15,756

 
15,756

 
—

 
—

Swing Swaps IFERC
1,682

 
1,562

 
120

 
—

Fixed Swaps/Futures
44,955

 
42,474

 
2,481

 
—

Options — Calls
75

 
—

 
75

 
—

Options — Puts
26,241

 
—

 
26,241

 
—

NGLs — Forward Swaps
192

 
—

 
192

 
—

Propane — Forward Swaps
6,864

 
—

 
6,864

 
—

Total commodity derivatives
95,765

 
59,792

 
35,973

 
—

Total Assets
$
118,587

 
$
61,824

 
$
56,763

 
$
—

Liabilities:
 
 
 
 
 
 
 
Interest rate derivatives
$
(20,922
)
 
$
—

 
$
(20,922
)
 
$
—

Series A Convertible Preferred Units
(317,600
)
 
—

 
—

 
(317,600
)
Embedded derivatives in the Regency Preferred Units
(57,023
)
 
—

 
—

 
(57,023
)
Commodity derivatives:
 
 
 
 
 
 
 
Natural Gas:
 
 
 
 
 
 
 
Basis Swaps IFERC/NYMEX
(17,372
)
 
(17,372
)
 
—

 
—

Swing Swaps IFERC
(3,768
)
 
(3,520
)
 
(248
)
 
—

Fixed Swaps/Futures
(42,252
)
 
(41,825
)
 
(427
)
 
—

Options — Calls
(2,643
)
 
—

 
(2,643
)
 
—

Options — Puts
(7
)
 
—

 
(7
)
 
—

NGLs — Forward Swaps
(10,684
)
 
—

 
(10,684
)
 
—

WTI Crude Oil
(3,581
)
 
—

 
(3,581
)
 
—

Total commodity derivatives
(80,307
)
 
(62,717
)
 
(17,590
)
 
—

Total Liabilities
$
(475,852
)
 
$
(62,717
)
 
$
(38,512
)
 
$
(374,623
)


The following table presents a reconciliation of the beginning and ending balances for liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the nine months ended September 30, 2011. There were no transfers between the fair value hierarchy levels during the nine months ended September 30, 2011.

Balance, December 31, 2010
$
(374,623
)
Net unrealized gains included in other income (expense)
23,375

Balance, September 30, 2011
$
(351,248
)