Variable Interest Entities

6 Months Ended

Jun. 30, 2011

Variable Interest Entities

Variable Interest Entities

4. Variable Interest Entities

MarkWest Liberty Midstream

MarkWest Liberty Midstream operates in the natural gas midstream business in and around the Marcellus Shale in western Pennsylvania and northern West Virginia. Effective January 1, 2011, equity interests in the entity are owned 51% by the Partnership and 49% by M&R MWE Liberty, LLC (“M&R”), an affiliate of The Energy & Minerals Group and its affiliated funds.

As of June 30, 2011, the capital contributed to MarkWest Liberty Midstream is disproportionate to each member’s respective ownership interest. The cumulative capital contributed by M&R exceeded its ownership interest by $7.8 million. Under the terms of the joint venture agreement, M&R received a special $1.3 million allocation of net income from MarkWest Liberty Midstream during the first six months of 2011 due to its excess contributions. The non-cash allocation is recorded in Net income attributable to non-controlling interest.

MarkWest Pioneer

MarkWest Pioneer is the owner and operator of the Arkoma Connector Pipeline. Equity interests in the entity are shared equally by the Partnership and Arkoma Pipeline Partners, LLC.

Financial Statement Impact of VIEs

As the primary beneficiary of MarkWest Liberty Midstream and MarkWest Pioneer, the Partnership consolidates the entities and recognizes non-controlling interests. The following tables show the consolidated assets and liabilities attributable to VIEs, excluding intercompany balances, as of June 30, 2011 and December 31, 2010 (in thousands):

	As of June 30, 2011
	MarkWest Liberty Midstream		MarkWest Pioneer		Total
ASSETS
Cash and cash equivalents	$	20,491	$	2,372	$	22,863
Receivables, net	11,311		1,328		12,639
Inventories	12,511		—		12,511
Other current assets	746		—		746
Property, plant and equipment, net of accumulated depreciation of $43,944 and $12,425, respectively	811,555		143,921		955,476
Restricted cash	28,100		—		28,100
Other long-term assets	267		103		370
Total assets	$	884,981	$	147,724	$	1,032,705
LIABILITIES
Accounts payable	$	14,532	$	35	$	14,567
Accrued liabilities	48,177		901		49,078
Other long-term liabilities	90		71		161
Total liabilities	$	62,799	$	1,007	$	63,806

	As of December 31, 2010
	MarkWest Liberty Midstream		MarkWest Pioneer		Total
ASSETS
Cash and cash equivalents	$	—	$	2,913	$	2,913
Receivables, net	42,181		1,602		43,783
Inventories	8,431		—		8,431
Other current assets	271		1		272
Property, plant and equipment, net of accumulated depreciation of $28,869 and $9,300, respectively	664,778		147,039		811,817
Restricted cash	28,001		—		28,001
Other long-term assets	281		102		383
Total assets	$	743,943	$	151,657	$	895,600
LIABILITIES
Accounts payable	$	5,945	$	—	$	5,945
Accrued liabilities	63,450		1,263		64,713
Other long-term liabilities	86		68		154
Total liabilities	$	69,481	$	1,331	$	70,812

The assets of the VIEs are the property of the respective entities and are not available to the Partnership for any other purpose, including as collateral for its secured debt (see Note 9 and Note 16). VIE asset balances can only be used to settle obligations of each respective VIE. The liabilities of the VIEs do not represent additional claims against the Partnership’s general assets, and the creditors or beneficial interest holders of the VIE do not have recourse to the general credit of the Partnership. The Partnership’s Liberty segment includes the results of operations of MarkWest Liberty Midstream and the Partnership’s Southwest segment includes the results of operations of MarkWest Pioneer (see Note 15). The cash flow information for MarkWest Liberty Midstream and MarkWest Pioneer comprise substantially all of the cash flow information of the Partnership’s non-guarantor subsidiaries (see Note 16). The Partnership’s maximum exposure to loss as a result of its involvement with the VIEs includes its equity investment, any additional capital contribution commitments and any operating expense incurred by the subsidiary operator in excess of its compensation received for the performance of the operating services. The Partnership did not provide any financial support to the VIEs that it was not contractually obligated to provide during the six months ended June 30, 2011 and 2010.