Equity Compensation Plans

9 Months Ended

Sep. 30, 2012

Equity Compensation Plans

Equity Compensation Plans

Note 10—Equity Compensation Plans

For additional discussion of our equity compensation awards, see Note 10 to our Consolidated Financial Statements included in Part IV of our 2011 Annual Report on Form 10-K.

PAA Two-for-One Unit Split. A two-for-one split of PAA’s common units was effected on October 1, 2012. In conjunction with the split, the number of units available for issuance under each of PAA’s LTIP Plans was doubled and for all outstanding unit-denominated LTIP awards, the number of unvested units and DERs (if applicable) was doubled, and the vesting requirements for such outstanding LTIP grants and related DERs, as well as awards denominated in Plains AAP, L.P. Class B Units, that are based on achievement of a specified distribution level were reduced by 50%. The remaining terms and conditions of the outstanding LTIP awards were not impacted. All LTIP information for PAA is presented as adjusted for the unit split.

PNG LTIP Modification.  In February 2012, the Board of Directors of PNG’s general partner approved the modification of certain awards previously granted under the PNG Plan.  As a result of the modification, 232,500 equity-classified phantom unit awards will now vest in the following manner: (i) 69,750 awards, with DERs also modified to begin payment in February 2012, will vest upon the date PNG pays an annualized distribution of at least $1.45, (ii) 69,750 awards, with DERs also modified to begin payment in May 2013, will vest upon the date PNG pays an annualized distribution of at least $1.50 and (iii) 93,000 awards, with DERs also modified to begin payment in May 2014, will vest upon the date PNG pays an annualized distribution of at least $1.55.  Fifty percent of any awards that have not vested as of the November 2016 distribution date will vest at that time and the remainder will expire.  Additionally, 232,500 of equity-classified phantom unit awards with vesting terms originally tied to the conversion of PNG’s Series A and Series B subordinated units were modified such that all these awards will now fully vest upon conversion of the Series A subordinated units to common units.  DERs were also granted with respect to these awards to begin payment in February 2012.  There was no financial impact at the time of the modification; however, we anticipate that we will recognize additional equity compensation expense in the future as a result of the modification.

Class B Units of Plains AAP, L.P. The following table contains a summary of Plains AAP, L.P. Class B Unit awards:

	Reserved for Future Grants	Outstanding		Outstanding Units Earned	Grant Date Fair Value of Outstanding Class B Units (1)
Balance as of December 31, 2011	16,500	183,500		80,063	$	44
Forfeitures	1,000	(1,000	)	—	$	—
Earned	N/A	N/A		50,187	$	N/A
Balance as of September 30, 2012	17,500	182,500		130,250	$	44

(1)Of the grant date fair value, approximately $6 million was recognized as expense during the nine months ended September 30, 2012.

Other Equity Compensation Information.  Our equity compensation activity for LTIP awards denominated in PAA and PNG units is summarized in the following table (units in millions):

	PAA Units (1) (2) (3)				PNG Units (4) (5) (6) (7)
	Units		Weighted Average Grant Date Fair Value per Unit		Units	Weighted Average Grant Date Fair Value per Unit
Outstanding, December 31, 2011	8.0		$	21.77	0.8	$	20.55
Granted	1.4		$	33.32	0.1	$	15.33
Vested	(3.1	)	$	19.65	—	$	23.64
Cancelled or forfeited	(0.3	)	$	29.66	—	$	—
Outstanding, September 30, 2012	6.0		$	25.35	0.9	$	17.49

(1)	Amounts do not include Class B Units of Plains AAP, L.P.
(2)	Approximately 0.9 million common units were issued, net of approximately 0.5 million common units withheld for taxes, for PAA Units that vested during the nine months ended September 30, 2012. The remaining 1.7 million PAA Units that vested were settled in cash.
(3)	PAA Units are presented as adjusted for the two-for-one unit split effected on October 1, 2012.
(4)	Amounts do not include Class B Units of PNGS GP LLC.
(5)	Amounts include PNG Transaction Grants.
(6)	Weighted average grant date fair value per unit for PNG Units outstanding at September 30, 2012 is impacted by the modification of PNG awards during the first quarter of 2012 as discussed above.
(7)	Less than 0.1 million PNG Units vested during the nine months ended September 30, 2012.

The table below summarizes the expense recognized and the value of vesting (settled both in units and cash) related to our equity compensation plans (in millions):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2012		2011		2012		2011
Equity compensation expense	$	22	$	10	$	82	$	56
LTIP unit-settled vestings (1)	$	2	$	2	$	60	$	24
LTIP cash-settled vestings	$	1	$	—	$	66	$	18
DER cash payments	$	2	$	1	$	5	$	3

(1)For the nine months ended September 30, 2012 and September 30, 2011, approximately $1 million and $2 million, respectively, relate to unit vestings that were settled with PNG common units.