Property and Equipment

12 Months Ended

Dec. 31, 2020

Property, Plant and Equipment [Abstract]

Property and EquipmentIn accordance with our capitalization policy, expenditures made to expand the existing operating and/or earnings capacity of our assets are capitalized. We also capitalize certain costs directly related to the construction of such assets, including related internal labor costs, engineering costs and interest costs. For the years ended December 31, 2020, 2019 and 2018, capitalized interest recorded to property and equipment was $8 million, $14 million and $21 million, respectively. In addition, we capitalize interest related to investments in certain unconsolidated entities. See Note 9 for additional information. We also capitalize expenditures for the replacement and/or refurbishment of partially or fully depreciated assets in order to maintain the operating and/or earnings capacity of our existing assets. Repair and maintenance expenditures incurred in order to maintain the day to day operation of our existing assets are expensed as incurred.

Property and equipment, net is stated at cost and consisted of the following (in millions):


	Estimated Useful Lives (Years)	December 31,
		2020		2019
Pipelines and related facilities (1)	10 - 70	$	11,112	$	11,114
Storage, terminal and rail facilities	10 - 70	6,042		6,134
Trucking equipment and other	2 - 15	524		486
Construction in progress	N/A	272		518
Office property and equipment	2 - 50	293		269
Land and other	N/A	342		427
Property and equipment, gross		18,585		18,948
Accumulated depreciation		(3,974)		(3,593)
Property and equipment, net		$	14,611	$	15,355

(1)We include rights-of-way, which are intangible assets, in our Pipelines and related facilities amounts within property and equipment.

We calculate our depreciation using the straight-line method, based on estimated useful lives and salvage values of our assets. Depreciation expense for the years ended December 31, 2020, 2019 and 2018 was $563 million, $525 million and $454 million, respectively. See “Impairment of Long-Lived Assets (Held and Used)” below for a discussion of our policy for the recognition of asset impairments.

As of December 31, 2020, 2019 and 2018, we incurred liabilities for construction in progress that had not been paid of $51 million, $120 million and $206 million, respectively.

Impairment of Long-Lived Assets (Held and Used)

Long-lived assets with recorded values that are not expected to be recovered through future cash flows are written down to estimated fair value in accordance with FASB guidance with respect to the accounting for the impairment or disposal of long-lived assets. Under this guidance, a long-lived asset is tested for impairment when events or circumstances indicate that its carrying value may not be recoverable. The carrying value of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. If the carrying value exceeds the sum of the undiscounted cash flows, an impairment loss equal to the amount by which the carrying value exceeds the fair value of the asset is recognized.

We periodically evaluate property and equipment and other long-lived assets for impairment when events or circumstances indicate that the carrying value of these assets may not be recoverable. The evaluation is highly dependent on the underlying assumptions of related cash flows. The subjective assumptions used to determine the existence of an impairment in carrying value include:

•whether there is an indication of impairment;

•the grouping of assets;

•the intention of “holding,” “abandoning” or “selling” an asset;

•the forecast of undiscounted expected future cash flow over the asset’s estimated useful life; and

•if an impairment exists, the fair value of the asset or asset group.

In addition, when we evaluate property and equipment and other long-lived assets for recoverability, it may also be necessary to review related depreciation estimates and methods.

During the year ended December 31, 2020, we recognized approximately $541 million of non-cash impairment losses, reflected in “(Gains)/losses on asset sales and asset impairments, net” on our Consolidated Statement of Operations.

Of our impairment losses, approximately $415 million was associated with certain pipeline assets in our Transportation segment located in the Central region. The macroeconomic and geopolitical conditions that occurred in 2020, including the collapse of oil prices driven by both the decrease in demand caused by the COVID-19 pandemic and excess supply, as well as changing market conditions and expected lower crude oil production in certain regions, resulted in expected decreases in future cash flows for certain of our assets, which was a triggering event that required us to assess the recoverability of our carrying value of such long-lived assets. As a result of our impairment review, we wrote off the portion of the carrying amount of these long-lived assets that exceeded their fair value. Our estimated fair values (which we consider a Level 3 measurement in the fair value hierarchy) were based upon a discounted cash flow approach utilizing various assumptions and the application of a discount rate of approximately 14%, which represents our estimate of the cost of capital of a theoretical market participant. Such assumptions included (but were not limited to) (i) future commodity volumes (consistent with historical information and estimates of future drilling and completion activity), (ii) tariff rates, (iii) future commodity prices (based on relevant indices and applicable quality and location differentials), and (iv) estimated fixed and variable costs.

The remaining impairment losses were associated with idled or underutilized assets, including certain pipelines in our Transportation segment located in the Western region and other long-lived assets in our Facilities segment, for which it has been determined that it is unlikely that opportunities will exist in the future to recover our investment in these assets. We wrote off substantially all of the carrying value of these assets.

We did not recognize any material impairments during the years ended December 31, 2019 or 2018.