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Risk Management
 12 Months Ended
Dec. 31, 2013
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Risk Management
Risk Management

Certain of our business activities expose us to risks associated with unfavorable changes in the market price of natural gas, NGL and crude oil. We also have exposure to interest rate risk as a result of the issuance of our debt obligations. Pursuant to our management’s approved risk management policy, we use derivative contracts to hedge or reduce our exposure to certain of these risks. Additionally, as part of our May 1, 2013 Copano acquisition, we acquired derivative contracts related to natural gas, NGL and crude oil. None of these derivatives are designated as accounting hedges.
Energy Commodity Price Risk Management
As of December 31, 2013, we had entered into the following outstanding commodity forward contracts to hedge our forecasted energy commodity purchases and sales:
 
Net open position
long/(short)
Derivatives designated as hedging contracts
 
 
Crude oil fixed price
(22.6)
MMBbl
Natural gas fixed price
(19.8)
Bcf
Natural gas basis
(18.9)
Bcf
Derivatives not designated as hedging contracts
 
 
Crude oil fixed price
(0.9)
MMBbl
Natural gas fixed price
(17.3)
Bcf
Natural gas basis
(9.3)
Bcf
NGL fixed price
(1.1)
MMBbl


As of December 31, 2013, the maximum length of time over which we have hedged our exposure to the variability in future cash flows associated with energy commodity price risk is through December 2017.
Interest Rate Risk Management

As of December 31, 2013, we had a combined notional principal amount of $4,675 million of fixed-to-variable interest rate swap agreements, effectively converting the interest expense associated with certain series of our senior notes from fixed rates to variable rates based on an interest rate of LIBOR plus a spread.  All of our swap agreements have termination dates that correspond to the maturity dates of the related series of senior notes and, as of December 31, 2013, the maximum length of time over which we have hedged a portion of our exposure to the variability in the value of this debt due to interest rate risk is through March 15, 2035.

In June 2013, we terminated three of our existing fixed-to-variable interest rate swap agreements in separate transactions. These swap agreements had a combined notional principal amount of $975 million, and we received combined proceeds of $96 million from the early termination of these swap agreements. In August 2013, we entered into six separate fixed-to-variable interest rate swap agreements having a combined notional principal amount of $500 million. Four of these agreements effectively convert a portion of the interest expense associated with our 2.65% senior notes due February 1, 2019, from a fixed rate to a variable rate based on an interest rate of LIBOR plus a spread, and the remaining two agreements effectively convert a portion of the interest expense associated with our 4.15% senior notes due February 1, 2024, from a fixed rate to a variable rate based on an interest rate of LIBOR plus a spread. In December 2013, three separate fixed-to-variable interest rate swap agreements having a combined notional principal amount of $375 million and effectively converting a portion of the interest expense associated with our 5.00% senior notes terminated upon the maturing of the associated notes.
 
As of December 31, 2012, we had a combined notional principal amount of $5,525 million of fixed-to-variable interest rate swap agreements.  

Fair Value of Derivative Contracts

The following table summarizes the fair values of our derivative contracts included on our accompanying consolidated balance sheets as of December 31, 2013 and 2012 (in millions):
Fair Value of Derivative Contracts
 
 
 
Asset derivatives
 
Liability derivatives
 
 
 
December 31,
2013
 
December 31,
2012
 
December 31,
2013
 
December 31,
2012
 
Balance sheet location
 
Fair value
 
Fair value
 
Fair value
 
Fair value
Derivatives designated as hedging contracts
 
 
 
 
 
 
 
 
 
Energy commodity derivative contracts
Other current assets/(Other current liabilities)
 
$
18

 
$
42

 
$
(33
)
 
$
(18
)
 
Deferred charges and other assets/(Other long-term liabilities and deferred credits)
 
58

 
40

 
(30
)
 
(11
)
Subtotal
 
 
$
76

 
$
82

 
$
(63
)
 
$
(29
)
Interest rate swap agreements
Other current assets/(Other current liabilities)
 
76

 
9

 
—

 
—

 
Deferred charges and other assets/(Other long-term liabilities and deferred credits)
 
141

 
594

 
(116
)
 
(1
)
Subtotal
 
 
$
217

 
$
603

 
$
(116
)
 
$
(1
)
Total
 
 
$
293

 
$
685

 
$
(179
)
 
$
(30
)
 
 
 
 
 
 
 
 
 
 
Derivatives not designated as hedging contracts
 
 
 
 
 
 
 
 
 
Energy commodity derivative contracts
Other current assets/(Other current liabilities)
 
$
4

 
$
4

 
$
(5
)
 
$
(3
)
 
Deferred charges and other assets/(Other long-term liabilities and deferred credits)
 
—

 
—

 
—

 
(1
)
Total
 
 
$
4

 
$
4

 
$
(5
)
 
$
(4
)
Total derivatives
 
 
$
297

 
$
689

 
$
(184
)
 
$
(34
)

Certain of our derivative contracts are subject to master netting agreements. As of December 31, 2013 and 2012, we presented the fair value of our derivative contracts on a gross basis on our accompanying consolidated balance sheets.  The following tables present our derivative contracts subject to such netting agreements as of December 31, 2013 and 2012 (in millions):
Offsetting of Financial Assets and Derivative Assets
 
Gross Amounts of Recognized Assets
 
Gross Amounts Offset in the Balance Sheet
 
Amounts of Assets Presented in the Balance Sheet
 
Gross Amounts Not Offset in the Balance Sheet
 
Net Amount
Financial Instruments
 
Cash Collateral Held(a)
As of December 31, 2013:
 
 
 
 
 
 
 
 
 
 
 
Energy commodity derivative contracts
$
80

 
$
—

 
$
80

 
$
(44
)
 
$
—

 
$
36

Interest rate swap agreements
$
217

 
$
—

 
$
217

 
$
(28
)
 
$
—

 
$
189

As of December 31, 2012:
 
 
 
 
 
 
 
 
 
 
 
Energy commodity derivative contracts
$
86

 
$
—

 
$
86

 
$
(17
)
 
$
—

 
$
69

Interest rate swap agreements
$
603

 
$
—

 
$
603

 
$
—

 
$
—

 
$
603



Offsetting of Financial Liabilities and Derivative Liabilities
 
Gross Amounts of Recognized Liabilities
 
Gross Amounts Offset in the Balance Sheet
 
Amounts of Liabilities Presented in the Balance Sheet
 
Gross Amounts Not Offset in the Balance Sheet
 
Net Amount
Financial Instruments
 
Cash Collateral Posted(b)
As of December 31, 2013:
 
 
 
 
 
 
 
 
 
 
 
Energy commodity derivative contracts
$
(68
)
 
$
—

 
$
(68
)
 
$
44

 
$
17

 
$
(7
)
Interest rate swap agreements
$
(116
)
 
$
—

 
$
(116
)
 
$
28

 
$
—

 
$
(88
)
As of December 31, 2012:
 
 
 
 
 
 
 
 
 
 
 
Energy commodity derivative contracts
$
(33
)
 
$
—

 
$
(33
)
 
$
17

 
$
5

 
$
(11
)
Interest rate swap agreements
$
(1
)
 
$
—

 
$
(1
)
 
$
—

 
$
—

 
$
(1
)
___________
(a)
Cash margin deposits held by us associated with our energy commodity contract positions and OTC swap agreements and reported within “Other current liabilities” on our accompanying consolidated balance sheets.
(b)
Cash margin deposits posted by us associated with our energy commodity contract positions and OTC swap agreements and reported within “Other current assets” on our accompanying consolidated balance sheets.

Debt Fair Value Adjustments

The offsetting entry to adjust the carrying value of the debt securities whose fair value was being hedged is included within “Debt fair value adjustments” on our accompanying consolidated balance sheets. Our “Debt fair value adjustments” also include all unamortized debt discount/premium amounts, purchase accounting on our debt balances, and any unamortized portion of proceeds received from the early termination of interest rate swap agreements. As of December 31, 2013 and 2012, these fair value adjustments to our debt balances included (i) $645 million and $638 million, respectively, associated with fair value adjustments to our debt previously recorded in purchase accounting; (ii) $101 million and $602 million, respectively, associated with the offsetting entry for hedged debt; (iii) $517 million and $488 million, respectively, associated with unamortized premium from the termination of interest rate swap agreements; and offset by (iv) $49 million and $30 million, respectively, associated with unamortized debt discount amounts. As of December 31, 2013, the weighted-average amortization period of the unamortized premium from the termination of the interest rate swaps was approximately 16 years.
Effect of Derivative Contracts on the Income Statement

The following two tables summarize the impact of our derivative contracts on our accompanying consolidated statements of income for each of the years ended December 31, 2013, 2012 and 2011 (in millions):

Derivatives in fair value hedging
relationships
 
Location of gain/(loss) recognized
in income on derivatives
 
Amount of gain/(loss) recognized in income
on derivatives and related hedged item(a)
 
 
 
 
Year Ended December 31,
 
 
 
 
2013
 
2012
 
2011
Interest rate swap agreements
 
Interest expense
 
$
(405
)
 
$
59

 
$
520

Total
 
 
 
$
(405
)
 
$
59

 
$
520

Fixed rate debt
 
Interest expense
 
$
405

 
$
(59
)
 
$
(520
)
Total
 
 
 
$
405

 
$
(59
)
 
$
(520
)
___________
(a)
Amounts reflect the change in the fair value of interest rate swap agreements and the change in the fair value of the associated fixed rate debt, which exactly offset each other as a result of no hedge ineffectiveness.

Derivatives in
cash flow hedging
relationships
 
Amount of gain/(loss)
recognized in OCI on
derivative (effective
portion)(a)
 
Location of
gain/(loss)
reclassified from
Accumulated OCI
into income
(effective portion)
 
Amount of gain/(loss)
reclassified from
Accumulated OCI
into income
(effective portion)(b)
 
Location of
gain/(loss)
recognized in
income on
derivative
(ineffective portion
and amount
excluded from
effectiveness
testing)
 
Amount of gain/(loss)
recognized in income
on derivative
(ineffective portion
and amount
excluded from
effectiveness testing)
 
 
Year Ended
December 31,
 
 
 
Year Ended
December 31,
 
 
 
Year Ended
December 31,
 
 
2013
 
2012
 
2011
 
 
 
2013
 
2012
 
2011
 
 
 
2013
 
2012
 
2011
Energy commodity derivative contracts
 
$
(60
)
 
$
117

 
$
14

 
Revenues-Natural gas sales
 
$
—

 
$
4

 
$
3

 
Revenues-Natural gas sales
 
$
—

 
$
—

 
$
—

 
 
 
 
 
 
 
 
Revenues-Product sales and other
 
(20
)
 
(19
)
 
(270
)
 
Revenues-Product sales and other
 
3

 
(11
)
 
5

 
 
 
 
 
 
 
 
Costs of sales
 
2

 
23

 
11

 
Costs of sales
 
—

 
—

 
—

Total
 
$
(60
)
 
$
117

 
$
14

 
Total
 
$
(18
)
 
$
8

 
$
(256
)
 
Total
 
$
3

 
$
(11
)
 
$
5

____________
(a)
We expect to reclassify an approximate $6 million loss associated with energy commodity price risk management activities and included in our Partners’ Capital as of December 31, 2013 into earnings during the next twelve months (when the associated forecasted sales and purchases are also expected to occur); however, actual amounts reclassified into earnings could vary materially as a result of changes in market prices.
(b)
Amounts reclassified were the result of the hedged forecasted transactions actually affecting earnings (i.e., when the forecasted sales and purchases actually occurred).
For the year ended December 31, 2013, we recognized losses of $9 million from derivative contracts not designated as accounting hedges. We included this loss amount within “Revenues-Product sales and other” on our accompanying consolidated statement of income. For the years ended December 31, 2012 and 2011, we recognized no material gain or loss in income from derivative contracts not designated as accounting hedges.
Credit Risks

We have counterparty credit risk as a result of our use of financial derivative contracts. Our counterparties consist primarily of financial institutions, major energy companies and local distribution companies. This concentration of counterparties may impact our overall exposure to credit risk, either positively or negatively, in that the counterparties may be similarly affected by changes in economic, regulatory or other conditions.

We maintain credit policies with regard to our counterparties that we believe minimize our overall credit risk. These policies include (i) an evaluation of potential counterparties’ financial condition (including credit ratings); (ii) collateral requirements under certain circumstances; and (iii) the use of standardized agreements which allow for netting of positive and negative exposure associated with a single counterparty. Based on our policies, exposure, credit and other reserves, our management does not anticipate a material adverse effect on our financial position, results of operations, or cash flows as a result of counterparty performance.

Our OTC swaps and options are entered into with counterparties outside central trading organizations such as futures, options or stock exchanges. These contracts are with a number of parties, all of which have investment grade credit ratings. While we enter into derivative transactions with investment grade counterparties and actively monitor their ratings, it is nevertheless possible that from time to time losses will result from counterparty credit risk in the future.

In conjunction with the purchase of exchange-traded derivative contracts or when the market value of our derivative contracts with specific counterparties exceeds established limits, we are required to provide collateral to our counterparties, which may include posting letters of credit or placing cash in margin accounts. As of both December 31, 2013 and 2012, we had no outstanding letters of credit supporting our hedging of energy commodity price risks associated with the sale of natural gas, NGL and crude oil.

We also have agreements with certain counterparties to our derivative contracts that contain provisions requiring us to post additional collateral upon a decrease in our credit rating. As of December 31, 2013, we estimate that if our credit rating was downgraded one notch, we would be required to post no additional collateral to our counterparties. If we were downgraded two notches (that is, below investment grade), we would be required to post $8 million
 of additional collateral.

Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income
Cumulative revenues, expenses, gains and losses that under GAAP are included within our comprehensive income but excluded from our earnings are reported as “Accumulated other comprehensive income” within “Partners’ Capital” in our consolidated balance sheets.  Changes in the components of our “Accumulated other comprehensive income” for the year ended December 31, 2013 are summarized as follows (in millions):
 
Net unrealized
gains/(losses)
on cash flow
hedge derivatives
 
Foreign
currency
translation
adjustments
 
Pension and
other
postretirement
liability adjs.
 
Total
Accumulated other
comprehensive
income/(loss)
Balance as of December 31, 2012
$
66

 
$
132

 
$
(30
)
 
$
168

Other comprehensive income before reclassifications
(60
)
 
(136
)
 
43

 
(153
)
Amounts reclassified from accumulated other comprehensive income
18

 
—

 
—

 
18

Net current-period other comprehensive income
(42
)
 
(136
)
 
43

 
(135
)
Balance as of December 31, 2013
$
24

 
$
(4
)
 
$
13

 
$
33