2.2.0.25falsefalse1020 - Disclosure - Summary of Significant Accounting Policiestruefalsefalse1falsefalseUSDfalsefalse1/1/2010 - 12/31/2010 USD ($) USD ($) / shares $D2010http://www.sec.gov/CIK0001166036duration2010-01-01T00:00:002010-12-31T00:00:00USDStandardhttp://www.xbrl.org/2003/iso4217USDiso42170SharesStandardhttp://www.xbrl.org/2003/instancesharesxbrli0USDPerShareDividehttp://www.xbrl.org/2003/iso4217USDiso4217http://www.xbrl.org/2003/instancesharesxbrli0USDUSD$2true0mwe_SummaryOfSignificantAccountingPoliciesDisclosureAbstractmwefalsenadurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalse1falsefalsefalse00falsefalsefalsefalsefalseOtherxbrli:stringItemTypestringNo definition available.falsefalseSummary of Significant Accounting Policies3false0us-gaap_SignificantAccountingPoliciesTextBlockus-gaaptruenadurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseterselabel1falsefalsefalse00<table style="font-size:10pt; font-family:'Times New Roman',times,serif;"> <tr> <td> 2. Summary of Significant Accounting Policies <ul> <li style="list-style: none"> Basis of Presentation</li></ul>         The Partnership's consolidated financial statements include all majority-owned or majority-controlled subsidiaries. In addition, MarkWest Liberty Midstream & Resources, L.L.C. ("MarkWest Liberty Midstream") and MarkWest Pioneer, L.L.C. ("MarkWest Pioneer"), variable interest entities for which the Partnership has been determined to be the primary beneficiary, are included in the consolidated financial statements (see Note 4 for further discussion of MarkWest Liberty Midstream and MarkWest Pioneer). All significant intercompany investments, accounts and transactions have been eliminated. Investments in which the Partnership exercises significant influence but does not control, or is not the primary beneficiary, are accounted for using the equity method. The accompanying consolidated financial statements include the accounts of the Partnership, and have been prepared in accordance with GAAP. <ul> <li style="list-style: none"> Non-Controlling Interest in Consolidated Subsidiaries </li></ul>         The Partnership owns a controlling operating interest in Wirth Gathering, a general partnership. The Partnership's equity interest was acquired as part of the acquisition of PQ Gathering Assets, L.L.C. ("PQ Assets"). The interests in Wirth Gathering, MarkWest Liberty Midstream and MarkWest Pioneer that are not owned by the Partnership have been recorded as Non-controlling interest in consolidated subsidiaries in the accompanying Consolidated Balance Sheets. The Non-controlling interest in consolidated subsidiaries amounts recorded in 2010 and 2009 relate to all three of these entities and the amount recorded in 2008 relates primarily to Wirth Gathering. <ul> <li style="list-style: none"> Use of Estimates</li></ul>         The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Estimates affect, among other items, valuing identified intangible assets; determining the fair value of derivative instruments; valuing inventory; evaluating impairments of long-lived assets, goodwill and equity investments; establishing estimated useful lives for long-lived assets; recognition of share-based compensation expense; estimating revenues and expense accruals; valuing asset retirement obligations; and in determining liabilities, if any, for legal contingencies. <ul> <li style="list-style: none"> Cash and Cash Equivalents</li></ul>         The Partnership considers investments in highly liquid financial instruments purchased with an original maturity of 90 days or less to be cash equivalents. Such investments include money market accounts. <ul> <li style="list-style: none"> Restricted Cash</li></ul>         Restricted cash includes cash and investments that must be held in escrow until related project spending occurs and the third party releases the restriction. Restricted cash related to projects that will be completed over a period longer than twelve months is classified as a long-term asset in the Consolidated Balance Sheets. <ul> <li style="list-style: none"> Inventories </li></ul>         Inventories, which consist primarily of natural gas, propane, other NGLs and spare parts, are valued at the lower of weighted average cost or market. Processed natural gas inventories include material, labor and overhead. Shipping and handling costs related to purchases of natural gas and NGLs are included in inventory. <ul> <li style="list-style: none"> Property, Plant and Equipment</li></ul>         Property, plant and equipment are recorded at cost. Expenditures that extend the useful lives of assets are capitalized. Repairs, maintenance and renewals that do not extend the useful lives of the assets are expensed as incurred. Interest costs for the construction or development of long-lived assets are capitalized and amortized over the related asset's estimated useful life. Leasehold improvements are depreciated over the shorter of the useful life or lease term. Depreciation is provided, principally on the straight-line method, over a period of 20 to 25 years for all assets, with the exception of miscellaneous equipment and vehicles that are depreciated over a period of three to ten years. <ul> <li style="list-style: none"> Asset Retirement Obligations</li></ul>         An asset retirement obligation ("ARO") is a legal obligation associated with the retirement of tangible long-lived assets that generally result from the acquisition, construction, development or normal operation of the asset. AROs are recorded at fair value in the period in which they are incurred, if a reasonable estimate of fair value can be made, and added to the carrying amount of the associated asset. This additional carrying amount is then depreciated over the life of the asset. The liability is determined using a risk free interest rate, and increases due to the passage of time based on the time value of money until the obligation is settled. The Partnership recognizes a liability of a conditional ARO as soon as the fair value of the liability can be reasonably estimated. A conditional ARO is defined as an unconditional legal obligation to perform an asset retirement activity in which the timing and/or method of settlement are conditional on a future event that may or may not be within the control of the entity. <ul> <li style="list-style: none"> Property, Plant and Equipment for FERC Regulated Assets </li></ul>         Depreciation is generally computed over the asset's estimated useful life using the straight-line method. The composite weighted-average depreciation rates were 4% for all periods presented. When the Partnership retires its regulated property, plant and equipment, it charges the original cost plus the cost of retirement, less salvage value, to accumulated depreciation and amortization. <ul> <li style="list-style: none"> Allowance for Funds Used During Construction </li></ul>         Allowance for funds used during construction ("AFUDC"), which represents the estimated debt and equity costs of capital funds necessary to finance the construction and expansion of regulated facilities, consists of an equity component and an interest expense component. The equity component is a non-cash item. AFUDC is capitalized as a component of Property, plant and equipment, with offsetting credits to the Consolidated Statements of Operations included in Miscellaneous income (expense), net for the equity component and Interest expense for the interest component. After construction is completed, the Partnership is permitted to recover these costs through inclusion in the rate base and in the depreciation provision. The total amount of AFUDC included in the Consolidated Statements of Operations was zero for the year ended December 31, 2010, $5.0 million for the year ended December 31, 2009 (an equity component of $2.8 million and an interest expense component of $2.2 million) and zero for the year ended December 31, 2008. <ul> <li style="list-style: none"> Accounting for Sales of Real Estate </li></ul>         The Partnership evaluates transactions involving the sale of assets to determine if they are, in-substance, the sale of real estate. Tangible assets may be considered real estate if the costs to relocate them for use in a different location exceeds 10% of the asset's fair value. Financial assets, primarily in the form of ownership interests in an entity, may be in-substance real estate based on the significance of the real estate in the entity. Sales of real estate are not considered consummated if the Partnership maintains an interest in the asset after it is sold, or has certain other forms of continuing involvement. Significant judgment is required to determine if a transaction is a sale of real estate and if a transaction has been consummated. If a sale of real estate is not considered consummated, the Partnership cannot record the transaction as a sale and must account for the transaction under an alternative method of accounting such as a financing or leasing arrangement. During 2009, the Partnership entered into two transactions which were accounted for as real estate. The sale of the steam methane reformer ("SMR") was not considered a sale of real estate due to the Partnership's continuing involvement, and was accounted for as a financing arrangement. The Partnership's sale of equity interest in MarkWest Pioneer was considered the sale of in-substance real estate. See Note 5 and Note 4, respectively, for a description of each transaction and its impact on the financial statements. <ul> <li style="list-style: none"> Investment in Unconsolidated Affiliates </li></ul>         Equity investments in which the Partnership exercises significant influence, but does not control and is not the primary beneficiary, are accounted for using the equity method, and are reported in Investment in unconsolidated affiliate in the accompanying Consolidated Balance Sheets. Refer to Note 14 for further discussion of the Partnership's equity investments.         The Partnership believes the equity method is an appropriate means for it to recognize increases or decreases measured by GAAP in the economic resources underlying the investments. Regular evaluation of these investments is appropriate to evaluate any potential need for impairment. It uses the following types of evidence of a loss in value to identify a loss in value of an investment that is other than a temporary decline. Examples of an other-than-temporary loss in value may be identified by: <ul> <li style="list-style: none"> <dl compact="compact"> <dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"></dt> <dd style="FONT-FAMILY: times">The potential inability to recover the carrying amount of the investment; </dd> <dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"></dt> <dd style="FONT-FAMILY: times">The estimated fair value of an investment that is less than its carrying amount. Factors considered include the length of time in which the market has been less than cost and the intent and ability to retain the investment to sufficiently allow for any recovery; and </dd> <dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"></dt> <dd style="FONT-FAMILY: times">Other operational or external factors including economic trends and projected financial performance that cause management to believe the investment may be worth less than otherwise accounted for by using the equity method. </dd></dl> Intangible Assets</li></ul>         The Partnership's intangible assets are comprised of customer contracts and relationships acquired in business combinations, recorded under the purchase method of accounting at their estimated fair values at the date of acquisition. Using relevant information and assumptions, management determines the fair value of acquired identifiable intangible assets. Fair value is generally calculated as the present value of estimated future cash flows using a risk-adjusted discount rate. The key assumptions include probability of contract renewals, economic incentives to retain customers, historical volumes, current and future capacity of the gathering system, pricing volatility, and the discount rate. Amortization of intangibles with definite lives is calculated using the straight-line method over the estimated useful life of the intangible asset. The estimated economic life is determined by assessing the life of the assets to which the contracts and relationships relate, likelihood of renewals, the projected reserves, competitive factors, regulatory or legal provisions, and maintenance and renewal costs. <ul> <li style="list-style: none"> Goodwill </li></ul>         Goodwill is the cost of an acquisition less the fair value of the net identifiable assets of the acquired business. The Partnership evaluates goodwill for impairment annually as of November 30, and whenever events or changes in circumstances indicate it is more likely than not that the fair value of a reporting unit is less than its carrying amount. Impairment testing of goodwill consists of a two-step process. The first step involves comparing the fair value of the reporting unit, to which goodwill has been allocated, with its carrying amount. If the carrying amount of a reporting unit exceeds its fair value, the second step of the process involves comparing the implied fair value to the carrying value of the goodwill for that reporting unit. If the carrying value of the goodwill of a reporting unit exceeds the implied fair value of that goodwill, the excess of the carrying value over the implied fair value is recognized as an impairment loss. <ul> <li style="list-style: none"> Impairment of Long-Lived Assets</li></ul>         The Partnership's policy is to evaluate whether there has been a permanent impairment in the value of long-lived assets when certain events indicate that the remaining balance may not be recoverable. The Partnership evaluates the carrying value of its property, plant and equipment on at least a segment level and at lower levels where the cash flows for specific assets can be identified and are largely independent from other asset groups. A long-lived asset group is considered impaired when the estimated undiscounted cash flows from such asset group are less than the asset group's carrying value. In that event, a loss is recognized to the extent that the carrying value exceeds the fair value of the long-lived asset group. Fair value is determined primarily using estimated discounted cash flows. Management considers the volume of reserves behind the asset and future NGL product and natural gas prices to estimate cash flows. The amount of additional reserves developed by future drilling activity depends, in part, on expected natural gas prices. Projections of reserves, drilling activity and future commodity prices are inherently subjective and contingent upon a number of variable factors, many of which are difficult to forecast. Any significant variance in any of these assumptions or factors could materially affect future cash flows, which could result in the impairment of an asset group.         For assets identified to be disposed of in the future, the carrying value of these assets is compared to the estimated fair value, less the cost to sell, to determine if impairment is required. Until the assets are disposed of, an estimate of the fair value is re-determined when related events or circumstances change. <ul> <li style="list-style: none"> Deferred Financing Costs</li></ul>         Deferred financing costs are amortized over the estimated lives of the related obligations or, in certain circumstances, accelerated if the obligation is refinanced, using the effective interest method. <ul> <li style="list-style: none"> Deferred Contract Costs</li></ul>         The Partnership may pay consideration to a producer upon entering a long-term arrangement to provide midstream services to the producer. In such cases, the amount of consideration paid is recorded as Deferred contract cost, net of accumulated amortization on the accompanying Consolidated Balance Sheets and is amortized over the term of the arrangement. <ul> <li style="list-style: none"> Derivative Instruments</li></ul>         Derivative instruments (including derivative instruments embedded in other contracts) are recorded at fair value and included in the consolidated balance sheet as assets or liabilities. Assets and liabilities related to derivative instruments with the same counterparty are not netted in the consolidated balance sheet. The Partnership discloses the fair value of substantially all of its derivative instruments separate from other assets and liabilities under the caption Fair value of derivative instruments in the Consolidated Balance Sheet, inclusive of option premiums (net of amortization). The fair value of derivatives related to long-term debt is included as a component of Long-term debt in the Consolidated Balance Sheet.         Changes in the fair value of derivative instruments are reported in the Statement of Operations in accounts related to the item economically hedged. Substantially all derivative instruments were marked to market through Revenue, Purchased product costs, Facility expenses, Interest expense, or Miscellaneous income (expense), net. Revenue gains and losses relate to contracts utilized to hedge the cash flow for the sale of a product and the amortization of associated option premiums. Option premiums are amortized over the effective term of the corresponding option contract. Purchased product costs gains and losses relate to contracts utilized to hedge costs, typically in a keep-whole arrangement. Facility expenses gains and losses relate to a contract utilized to hedge electricity costs. Interest expense gains relate to contracts to manage the interest rate risk associated with the fair value of its fixed rate borrowings. Miscellaneous income (expense), net relate to changes in the fair value of certain embedded put options (see Note 6 and Note 17). Changes in risk management activities are reported in cash flow from operating activities on the accompanying Consolidated Statements of Cash Flows.         During 2010, 2009 and 2008 the Partnership did not designate any hedges or designate any contracts as normal purchases and normal sales. <ul> <li style="list-style: none"> Fair Value of Financial Instruments </li></ul>         Management believes the carrying amount of financial instruments, including cash, accounts receivable, accounts payable, and accrued expenses approximates fair value because of the short-term maturity of these instruments. The recorded value of the amounts outstanding under the Credit Facility approximate fair value due to the variable interest rate that reflects current market conditions. Derivative instruments are recorded at fair value, based on available market information (see Note 6). The following table shows the carrying value and related fair value of financial instruments that are not recorded in the financial statements at fair value as of December 31, 2010 and 2009 (amounts in thousands). <div style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 20%; WIDTH: 60%; PADDING-TOP: 0pt; POSITION: relative">   <div align="center"> <table cellspacing="0" cellpadding="0" width="100%" border="0"> <tr style="HEIGHT: 0px"> <td style="FONT-FAMILY: times" align="left"></td> <td style="FONT-FAMILY: times" width="12"></td> <td style="FONT-FAMILY: times" align="right" width="7"></td> <td style="FONT-FAMILY: times" width="70"></td> <td style="FONT-FAMILY: times" width="12"></td> <td style="FONT-FAMILY: times" align="right" width="7"></td> <td style="FONT-FAMILY: times" width="61"></td> <td style="FONT-FAMILY: times" width="12"></td> <td style="FONT-FAMILY: times" align="right" width="7"></td> <td style="FONT-FAMILY: times" width="70"></td> <td style="FONT-FAMILY: times" width="12"></td> <td style="FONT-FAMILY: times" align="right" width="7"></td> <td style="FONT-FAMILY: times" width="61"></td> <td style="FONT-FAMILY: times" width="12"></td></tr> <tr style="HEIGHT: 0px" valign="bottom"> <th style="FONT-FAMILY: times" align="left">  </th> <th style="FONT-FAMILY: times"> </th> <th style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align="center" colspan="5">December 31, 2010 </th> <th style="FONT-FAMILY: times"> </th> <th style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align="center" colspan="5">December 31, 2009 </th> <th style="FONT-FAMILY: times"> </th></tr> <tr style="HEIGHT: 0px" valign="bottom"> <th style="FONT-FAMILY: times" align="left">  </th> <th style="FONT-FAMILY: times"> </th> <th style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align="center" colspan="2">Carrying Value </th> <th style="FONT-FAMILY: times"> </th> <th style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align="center" colspan="2">Fair Value </th> <th style="FONT-FAMILY: times"> </th> <th style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align="center" colspan="2">Carrying Value </th> <th style="FONT-FAMILY: times"> </th> <th style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align="center" colspan="2">Fair Value </th> <th style="FONT-FAMILY: times"> </th></tr> <tr style="HEIGHT: 0px" valign="top" bgcolor="#CCEEFF"> <td style="FONT-FAMILY: times" valign="bottom"> Long-term debt</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">$</td> <td style="FONT-FAMILY: times" valign="bottom" align="right">1,273,434</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">$</td> <td style="FONT-FAMILY: times" valign="bottom" align="right">1,333,875</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">$</td> <td style="FONT-FAMILY: times" valign="bottom" align="right">1,170,072</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">$</td> <td style="FONT-FAMILY: times" valign="bottom" align="right">1,212,238</td> <td style="FONT-FAMILY: times" valign="bottom"> </td></tr> <tr style="HEIGHT: 0px" valign="top" bgcolor="white"> <td style="FONT-FAMILY: times" valign="bottom"> SMR Liability</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">95,784</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">125,600</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">95,210</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">95,210</td> <td style="FONT-FAMILY: times" valign="bottom"> </td></tr> <tr style="FONT-SIZE: 1.5pt; HEIGHT: 0px" valign="top"> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td></tr> <tr style="HEIGHT: 0px" valign="top" bgcolor="#CCEEFF"> <td style="FONT-FAMILY: times" valign="bottom"> Total</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">$</td> <td style="FONT-FAMILY: times" valign="bottom" align="right">1,369,218</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">$</td> <td style="FONT-FAMILY: times" valign="bottom" align="right">1,459,475</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">$</td> <td style="FONT-FAMILY: times" valign="bottom" align="right">1,265,282</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">$</td> <td style="FONT-FAMILY: times" valign="bottom" align="right">1,307,448</td> <td style="FONT-FAMILY: times" valign="bottom"> </td></tr> <tr style="FONT-SIZE: 1.5pt; HEIGHT: 0px" valign="top"> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 2.25pt double; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 2.25pt double; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 2.25pt double; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 2.25pt double; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td></tr></table></div> </div> <ul> <li style="list-style: none"> Fair Value Measurement</li></ul>         The Partnership adopted guidance related to fair value measurements, effective January 1, 2008, except for certain provisions related to non-financial assets and liabilities that were deferred by the FASB and adopted as of January 1, 2009. The guidance defines fair value, establishes a framework for measuring fair value, establishes a three-level valuation hierarchy, and expands the disclosures about fair value measurements.         The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows: <ul> <li style="list-style: none"> <dl compact="compact"> <dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"></dt> <dd style="FONT-FAMILY: times">Level 1inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. </dd> <dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"></dt> <dd style="FONT-FAMILY: times">Level 2inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. </dd> <dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"></dt> <dd style="FONT-FAMILY: times">Level 3inputs to the valuation methodology are unobservable and significant to the fair value measurement.</dd></dl></li></ul>         A financial instrument's categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.         The determination to classify a financial instrument with Level 3 of the valuation hierarchy is based upon the significance of the unobservable inputs to the overall fair value measurement. However, Level 3 financial instruments typically include, in addition to the unobservable or Level 3 inputs, observable inputs (that is, inputs that are actively quoted and can be validated to external sources); accordingly, the gains and losses for Level 3 financial instruments include changes in fair value due in part to observable inputs that are part of the valuation methodology. Level 3 financial instruments include interest rate swaps, crude oil options, all NGL derivatives, the embedded derivatives in commodity contracts, and the embedded put options discussed in Note 6 and Note 17, as they have significant unobservable inputs.         The methods and assumptions described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Partnership believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. For further discussion see Note 7. <ul> <li style="list-style: none"> Revenue Recognition</li></ul>         The Partnership generates the majority of its revenues from natural gas gathering, transportation and processing; NGL transportation, fractionation, marketing and storage; and crude oil gathering and transportation. It enters into a variety of contract types. In many cases, the Partnership provides services under contracts that contain a combination of more than one of the arrangements described below. The Partnership provides services under the following different types of arrangements: <ul> <li style="list-style: none"> <dl compact="compact"> <dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"></dt> <dd style="FONT-FAMILY: times">Fee-based arrangementsUnder fee-based arrangements, the Partnership receives a fee or fees for one or more of the following services: gathering, processing and transmission of natural gas; transportation, fractionation and storage of NGLs; and gathering and transportation of crude oil. The revenue the Partnership earns from these arrangements is generally directly related to the volume of natural gas, NGLs or crude oil that flows through the Partnership's systems and facilities and is not directly dependent on commodity prices. In certain cases, the Partnership's arrangements provide for minimum annual payments or fixed demand charges. </dd> <dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"></dt> <dd style="FONT-FAMILY: times">Percent-of-proceeds arrangementsUnder percent-of-proceeds arrangements, the Partnership gathers and processes natural gas on behalf of producers, sells the resulting residue gas, condensate and NGLs at market prices and remits to producers an agreed-upon percentage of the proceeds. In other cases, instead of remitting cash payments to the producer, the Partnership will deliver an agreed-upon percentage of the residue gas and NGLs to the producer and sell the volumes the Partnership keeps to third parties at market prices. </dd> <dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"></dt> <dd style="FONT-FAMILY: times">Percent-of-index arrangementsUnder percent-of-index arrangements, the Partnership will purchase natural gas at either (1) a percentage discount to a specified index price, (2) a specified index price less a fixed amount or (3) a percentage discount to a specified index price less an additional fixed amount. The Partnership will then gather and deliver the natural gas to pipelines where the Partnership will resell the natural gas at the index price, or at a different percentage discount to the index price. </dd> <dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"></dt> <dd style="FONT-FAMILY: times">Keep-whole arrangementsUnder keep-whole arrangements, the Partnership gathers natural gas from the producer, processes the natural gas and sells the resulting condensate and NGLs to third parties at market prices. Because the extraction of the condensate and NGLs from the natural gas during processing reduces the Btu content of the natural gas, the Partnership must either purchase natural gas at market prices for return to producers or make cash payment to the producers equal to the energy content of this natural gas. Certain keep-whole arrangements also have provisions that require the Partnership to share a percentage of the keep-whole profits with the producers based on the oil to gas ratio or the NGL to gas ratio. </dd> <dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"></dt> <dd style="FONT-FAMILY: times">Settlement marginTypically, the Partnership is allowed to retain a fixed percentage of the volume gathered to cover the compression fuel charges and deemed-line losses. To the extent the Partnership's gathering systems are operated more or less efficiently than specified per contract allowance, the Partnership is entitled to retain the benefit or loss for its own account.</dd></dl></li></ul>         In many cases, the Partnership provides services under contracts that contain a combination of more than one of the arrangements described above. The terms of the Partnership's contracts vary based on gas quality conditions, the competitive environment when the contracts are signed and customer requirements. Under all of the arrangements, revenue is recognized at the time the product is delivered and title is transferred. It is upon delivery and title transfer that the Partnership meets all four revenue recognition criteria, and it is at such time that the Partnership recognizes revenue.         The Partnership's assessment of each of the four revenue recognition criteria as they relate to its revenue producing activities is as follows:         Persuasive evidence of an arrangement exists.    The Partnership's customary practice is to enter into a written contract, executed by both the customer and the Partnership.         Delivery.    Delivery is deemed to have occurred at the time the product is delivered and title is transferred, or in the case of fee-based arrangements, when the services are rendered.         The fee is fixed or determinable.    The Partnership negotiates the fee for its services at the outset of its fee-based arrangements. In these arrangements, the fees are nonrefundable. For other arrangements, the amount of revenue is determinable when the sale of the applicable product has been completed upon delivery and transfer of title.         Collectibility is reasonably assured.    Collectibility is evaluated on a customer-by-customer basis. New and existing customers are subject to a credit review process, which evaluates the customers' financial position (e.g. cash position and credit rating) and their ability to pay. If collectibility is not considered reasonably assured at the outset of an arrangement in accordance with the Partnership's credit review process, revenue is recognized when the fee is collected.         The Partnership enters into revenue arrangements where it sells customer's gas and/or NGLs and depending on the nature of the arrangement acts as the principal or agent. Revenue from such sales is recognized gross where the Partnership acts as the Principal, as the Partnership takes title to the gas and/or NGLs, has physical inventory risk and does not earn a fixed amount. Revenue is recognized net when the Partnership earns a fixed amount and does not take ownership of the gas and/or NGLs.         Amounts billed to customers for shipping and handling are included in Revenue. Shipping and handling costs associated with product sales are included in operating expenses. Taxes collected from customers and remitted to the appropriate taxing authority are excluded from revenue. <ul> <li style="list-style: none"> Revenue and Expense Accruals</li></ul>         The Partnership routinely makes accruals based on estimates for both revenues and expenses due to the timing of compiling billing information, receiving certain third party information and reconciling the Partnership's records with those of third parties. The delayed information from third parties includes, among other things, actual volumes purchased, transported or sold, adjustments to inventory and invoices for purchases, actual natural gas and NGL deliveries and other operating expenses. The Partnership makes accruals to reflect estimates for these items based on its internal records and information from third parties. Estimated accruals are reversed when actual information is received from third parties and the Partnership's internal records have been reconciled. <ul> <li style="list-style: none"> Incentive Compensation Plans</li></ul>         The Partnership issues phantom units under certain share-based compensation plans as described further in Note 21. A phantom unit entitles the grantee to receive a common unit upon the vesting of the phantom unit. The majority of phantom units are treated as equity awards, and compensation expense is measured for these phantom unit grants based on the fair value of the units on the grant date, as defined by GAAP. The fair value of the units awarded is amortized into earnings, reduced for an estimate of expected forfeitures, over the period of service corresponding with the vesting period. For certain plans, the awards are accounted for as liability awards and the compensation expense is adjusted monthly for the change in the fair value of the unvested units granted.         To satisfy common unit awards, the Partnership may issue new common units, acquire common units in the open market, or use common units already owned by the general partner. <ul> <li style="list-style: none"> Income Taxes </li></ul>         The Partnership is not a taxable entity for federal income tax purposes. As such, the Partnership does not directly pay federal income tax. The Partnership's taxable income or loss, which may vary substantially from the net income or loss reported in the Consolidated Statements of Operations, is includable in the federal income tax returns of each partner. The Partnership is, however, a taxable entity under certain state jurisdictions. The Corporation is a tax paying entity for both federal and state purposes.         The Partnership and the Corporation account for income taxes under the asset and liability method. Deferred income taxes are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis, capital loss carryforwards and net operating loss and credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates applied to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of any tax rate change on deferred taxes is recognized in the period that includes the enactment date of the tax rate change. Realizability of deferred tax assets is assessed and, if not more likely than not, a valuation allowance is recorded to reflect the deferred tax assets at net realizable value as determined by management. Deferred tax balances that are expected to be settled within twelve months are classified as current, and all other deferred tax balance are classified as long term in the accompanying Consolidated Balance Sheets.         The Corporation recognizes a tax expense or a tax benefit on its proportionate share of Partnership income or loss resulting from the Corporation's ownership of Class A units of the Partnership even though for financial reporting purposes said income or loss is eliminated in consolidation. The deferred income tax component relates to the change in the book to tax basis difference in the carrying amount of the investment in the Partnership which results primarily from its timing differences in the Corporation's proportionate share of the book income or loss as compared with the Corporation's proportionate share of the taxable income or loss of the Partnership.         To account for uncertainty in income taxes recognized in financial statements, the Partnership prescribes a "more likely than not" recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Partnership records penalties and interest related to income taxes as a component of income before tax, if applicable. Penalties are recorded in Miscellaneous income (expense), net and interest is recorded in Interest expense in the accompanying Consolidated Statements of Operations. <ul> <li style="list-style: none"> Comprehensive Income (Loss)</li></ul>         Comprehensive income (loss) includes net income and other comprehensive income (loss), which includes unrealized gains and losses on marketable securities that are classified as available for sale. <ul> <li style="list-style: none"> Earnings (Loss) Per Unit</li></ul>         The Partnership's outstanding phantom units are considered to be participating securities, and therefore basic and diluted earnings per common unit are calculated pursuant to the two-class method described in the generally accepted accounting principles for earnings per share. In accordance with the two-class method, basic earnings per common unit is calculated by dividing net income attributable to the Partnership, after deducting amounts that are allocable to the outstanding phantom units, by the weighted-average number of common units outstanding during the period. The amount allocable to the phantom units is generally calculated as if all of the net income attributable to the Partnership were distributed, and not on the basis of actual cash distributions for the period. However, during periods in which a net loss attributable to the Partnership is reported or periods in which the total distributions exceed the reported net income attributable to the Partnership, the amount allocable to the phantom units is based on actual distributions to the phantom unit holders. Diluted earnings per unit is calculated by dividing net income attributable to the Partnership, after deducting amounts allocable to the outstanding phantom units, by the weighted-average number of potential common units outstanding during the period. Potential common units are excluded from the calculation of diluted earnings per unit during periods in which net income attributable to the Partnership, after deducting amounts that are allocable to the outstanding phantom units, is a loss as the impact would be anti-dilutive. <ul> <li style="list-style: none"> Business Combinations</li></ul>         Transactions in which the Partnership acquires control of a business are accounted for under the acquisition method. The identifiable assets, liabilities and any non-controlling interests are recorded at the estimated fair market values as of the acquisition date. The purchase price in excess of the fair value acquired is recorded as goodwill. <ul> <li style="list-style: none"> Accounting for Changes in Ownership Interests in Subsidiaries </li></ul>         The Partnership's ownership interest in a consolidated subsidiary may change if it sells a portion of its interest, or if the subsidiary issues or re-purchases its own shares. If the transaction does not result in a change in control over the subsidiary and it is not deemed to be a sale of real estate, the transaction is accounted for as an equity transaction. If the transaction results in a change in control it would result in the deconsolidation of a subsidiary with a gain or loss recognized in the statement of operations. During 2009 the Partnership's ownership interest in MarkWest Liberty Midstream changed in two separate transactions which were accounted for as equity transactions. See Note 4 for a description of the transactions and the impact to the financial statements. <ul> <li style="list-style: none"> Recent Accounting Pronouncements</li></ul>         In June 2009, the FASB amended the Variable Interest Entity ("VIE") subsections of the consolidation guidance. The amended guidance changes the criteria for determining if a VIE exists and whether or not a VIE should be consolidated. The amended guidance was effective for the Partnership on January 1, 2010, and the Partnership reconsidered its previous VIE conclusions and financial statement disclosures. The amendment had no effect on the Partnership's consolidated financial statements.         In September 2009, the FASB amended the accounting guidance for revenue recognition for multiple-deliverable arrangements. The amended guidance establishes a hierarchy for determining the selling price of each individual deliverable and eliminates the residual value method of allocating the selling price. The amended guidance is effective for the Partnership prospectively for all revenue arrangements entered into or materially modified on or after January 1, 2011. The amendment will not have a material effect on the Partnership's consolidated financial statements.         In January 2010, the FASB issued a clarification to the accounting for decreases in ownership interests in certain subsidiaries. The FASB clarified that the guidance for consolidations does not apply to transactions involving in-substance real estate or the conveyances of oil and gas mineral rights. The FASB indicated that the established guidance for transactions involving in-substance real estate or oil and gas mineral rights should be followed. The clarification also expands disclosures required upon the deconsolidation of a subsidiary. The guidance within this clarification was effective for the Partnership as of December 31, 2009, with retrospective application required to January 1, 2009. The Partnership determined that its sale of equity interests in MarkWest Pioneer qualifies as a sale of in-substance real estate; however, the impact on the Partnership's consolidated financial statements was not material.         In February 2010, the FASB amended the embedded derivative and hedging guidance. The amended guidance modified the requirements for determining whether an embedded derivative is clearly and closely related to the host contract. The amended embedded derivative guidance was effective for the Partnership on January 1, 2010. The amended guidance had no effect on the Partnership's consolidated financial statements.         In March 2010, the FASB amended a scope exception for embedded credit derivatives in the derivatives and hedging guidance. The amended guidance clarified which types of embedded credit derivative features are required to be analyzed for potential bifurcation. The amended guidance was effective for the Partnership on July 1, 2010. The amended guidance had no effect on the Partnership's consolidated financial statements. </td></tr></table> 2. Summary of Significant Accounting Policies Basis of Presentation         The Partnership's consolidated financialfalsefalsefalsefalsefalseOtherus-types:textBlockItemTypestringThis element may be used to describe all significant accounting policies of the reporting entity.Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Principles Board Opinion (APB) -Number 22 -Paragraph 8 falsefalseSummary of Significant Accounting Policies12Summary of Significant Accounting PoliciesUnKnownUnKnownUnKnownUnKnownfalsetrue