SMR Transaction

12 Months Ended

Dec. 31, 2012

SMR Transaction

SMR Transaction

5. SMR Transaction

        On September 1, 2009, the Partnership completed the SMR Transaction. At that time, the Partnership had begun constructing the SMR at its Javelina gas processing and fractionation facility in Corpus Christi, Texas. Under the terms of the agreement, the Partnership received proceeds of $73.1 million and the purchaser completed the construction of the SMR. The Partnership and the purchaser also executed a related product supply agreement under which the Partnership will receive all of the product produced by the SMR through 2030 in exchange for processing fees and the reimbursement of certain other expenses. The processing fee payments began when the SMR commenced operations in March 2010. The Partnership is deemed to have continuing involvement with the SMR as a result of certain provisions in the related agreements. Therefore, the transaction is treated as a financing arrangement under GAAP. The Partnership imputes interest on the SMR Liability at 9.35% annually, its incremental borrowing rate at transaction consummation. The accrued interest on the SMR Liability was capitalized until the SMR commenced operations and the Partnership began payment of the processing fee under the product supply agreement. Each processing fee payment has multiple elements: reduction of principal of the SMR Liability, interest expense associated with the SMR Liability, and facility expense related to the operation of the SMR. As of December 31, 2012 and 2011, the following amounts related to the SMR are included in the accompanying Consolidated Balance Sheets (in thousands):

	December 31, 2012		December 31, 2011
ASSETS
Property, plant and equipment, net of accumulated depreciation of $14,926 and $9,658, respectively	$	90,437	$	95,705
LIABILITIES
Accrued liabilities	$	2,259	$	2,058
Other long-term liabilities		89,592		91,851