3. Variable Interest Entities

MarkWest Utica EMG

In February 2013, the Partnership and EMG Utica, LLC (“EMG Utica”) entered into the Amended and Restated Limited Liability Company Agreement of MarkWest Utica EMG (“Amended Utica LLC Agreement”) which replaces the original agreements discussed in Note 4 to the Consolidated Financial Statements included in Item 8 of the Partnership’s Form 10-K for year ended December 31, 2012. Pursuant to the Amended Utica LLC Agreement, the aggregate funding commitment of EMG Utica has increased from $500 million to $950 million (the “Minimum EMG Investment”). As part of this commitment, EMG Utica is required to fund, as needed, all capital required for MarkWest Utica EMG until such time as EMG Utica has contributed aggregate capital equal to $750 million (the “Tier 1 EMG Contributions”). Following the funding of the Tier 1 EMG Contributions, the Partnership had the one time right to elect to fund up to 60% of all capital required for MarkWest Utica EMG until such time as EMG Utica has contributed aggregate capital equal to the Minimum EMG Investment. The Partnership elected not to fund the 60% and therefore EMG Utica will be required to fund all capital until the Minimum EMG Investment has been satisfied. Once EMG Utica has funded the Minimum EMG Investment, the Partnership will be required to fund, as needed, 100% of all capital for MarkWest Utica EMG until such time as the aggregate capital that has been contributed by the Partnership and EMG Utica equals $2 billion. After such time, and until such time as the investment balances of the Partnership and EMG Utica are in the ratio of 70% and 30%, respectively (such time being referred to as the “Second Equalization Date”), EMG Utica will have the right, but not the obligation, to fund up to 10% of each capital call for MarkWest Utica EMG, and the Partnership will be required to fund all remaining capital not elected to be funded by EMG Utica. After the Second Equalization Date, the Partnership and EMG Utica will have the right, but not the obligation, to fund its pro rata portion (based on the respective investment balances) of any additional required capital and may also fund additional capital which the other party elects not to fund.

Under the Amended Utica LLC Agreement, after EMG Utica has contributed more than $500 million to MarkWest Utica EMG, and prior to December 31, 2016, EMG Utica’s investment balance will also be increased by a quarterly special non-cash allocation of income (“Preference Amount”) that is based upon the amount of capital contributed by EMG Utica in excess of $500 million. No Preference Amount will accrue to EMG Utica’s investment balance after December 31, 2016. EMG Utica did not receive a special allocation of income during the three months ended March 31, 2013 because EMG Utica’s weighted average investment balance was less than $500 million.

If the Partnership’s investment balance does not equal at least 51% of the aggregate investment balances of both Members as of December 31, 2016, then EMG Utica may require that the Partnership purchase membership interests from EMG Utica so that, following the purchase, the Partnership’s investment balance equals 51% of the aggregate investment balances of the Members. The purchase price payable would equal the investment balance associated with the membership interests so acquired from EMG Utica. If EMG Utica makes this election, the Partnership would be required to purchase the membership interests on or prior to March 1, 2017, but effective as of January 1, 2017. The amount of non-controlling interest subject to the redemption option as of March 31, 2013 is reported as redeemable non-controlling interest in the mezzanine equity section of our Condensed Consolidated Balance Sheets.

Under the Amended Utica LLC Agreement, the Partnership will continue to receive 60% of cash generated by MarkWest Utica EMG that is available for distribution until the earlier of December 31, 2016 and the date on which the Partnership’s investment balance equals 60% of the aggregate investment balances of the Partnership and EMG Utica. After the earlier to occur of those dates, cash generated by MarkWest Utica EMG that is available for distribution will be allocated to the Partnership and EMG Utica in proportion to their respective investment balances.

In contemplation of executing the Amended Utica LLC Agreement, the Partnership and EMG Utica had executed an amendment to the original agreement in January 2013 that obligated the Partnership to temporarily fund MarkWest Utica EMG while EMG Utica completed efforts to raise additional capital to fund its remaining $150 million capital commitment under the original agreement. In February 2013, the Partnership contributed approximately $76.2 million to MarkWest Utica EMG and subsequently received a distribution of $61.2 million as reimbursement for the temporary funding. The remaining $15 million has been retained by MarkWest Utica EMG and treated as a capital contribution from the Partnership under the terms of the Amended Utica LLC Agreement.

The Partnership has determined that MarkWest Utica EMG is a VIE primarily due to the Partnership’s disproportionate economic interests as compared to its stated ownership interests and voting interests. The Partnership’s 60% ownership interest in the entity is disproportionate to its economic interest due to the timing of the capital funding requirements described above. The Partnership has concluded that it is the primary beneficiary of MarkWest Utica EMG.

MarkWest Pioneer

MarkWest Pioneer is the owner and operator of the Arkoma Connector Pipeline. The Partnership and Arkoma Pipeline Partners, LLC share the equity interests in MarkWest Pioneer equally (50% and 50%). As discussed in Note 4 to the Consolidated Financial Statements in Item 8 of the Partnership’s Form 10-K for year ended December 31, 2012, the Partnership determined that MarkWest Pioneer is a VIE and the Partnership is the primary beneficiary.

Financial Statement Impact of VIEs

As the primary beneficiary of MarkWest Pioneer and MarkWest Utica EMG, the Partnership consolidates the entities and recognizes non-controlling interests. The following tables show the consolidated assets and liabilities attributable to MarkWest Pioneer and MarkWest Utica EMG, excluding intercompany balances, as of March 31, 2013 and December 31, 2012, respectively (in thousands):

	As of March 31, 2013
	MarkWest Pioneer		MarkWest Utica EMG		Total
ASSETS
Cash and cash equivalents	$	2,661	$	148,067	$	150,728
Restricted cash	—		500		500
Receivables, net	1,088		160		1,248
Other current assets	131		1,463		1,594
Property, plant and equipment, net of accumulated depreciation of $23,429 and $7,241, respectively	134,429		723,303		857,732
Other long-term assets	102		—		102
Total assets	$	138,411	$	873,493	$	1,011,904

LIABILITIES
Accounts payable	$	14	$	81,978	$	81,992
Accrued liabilities	1,117		135,677		136,794
Other long-term liabilities	80		—		80
Total liabilities	$	1,211	$	217,655	$	218,866

	As of December 31, 2012
	MarkWest Pioneer		MarkWest Utica EMG		Total
ASSETS
Cash and cash equivalents	$	2,143	$	31,584	$	33,727
Restricted cash	—		500		500
Receivables, net	1,188		403		1,591
Other current assets	182		82		264
Property, plant and equipment, net of accumulated depreciation of $21,849 and $2,787, respectively	136,009		407,418		543,427
Other long-term assets	102		—		102
Total assets	$	139,624	$	439,987	$	579,611

LIABILITIES
Accounts payable	$	18	$	73,865	$	73,883
Accrued liabilities	1,174		109,572		110,746
Other long-term liabilities	79		—		79
Total liabilities	$	1,271	$	183,437	$	184,708

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 7 and Note 13). 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 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 may temporarily fund MarkWest Utica EMG for certain projects due to the timing of the capital call process. The Partnership will receive distributions as reimbursement for any temporary funding. Other than temporary funding, the Partnership did not provide any financial support to the VIEs that it was not contractually obligated to provide during the three months ended March 31, 2013 and 2012.

The results of operations of MarkWest Utica EMG and its subsidiaries are shown separately as the Utica segment and MarkWest Pioneer results are included in the Partnership’s Southwest segments (see Note 12). The result of operations and cash flows for MarkWest Pioneer are not material to the Partnership.