3. Variable Interest Entity

Variable Interest Entity MarkWest Utica EMG

In February 2013, the Partnership and EMG Utica, LLC (“EMG Utica”) (together the “Members”) entered into the Amended and Restated Limited Liability Company Agreement of MarkWest Utica EMG (the “Amended Utica LLC Agreement”) which replaced the original agreement discussed in Note 4 to the Consolidated Financial Statements included in Item 8 of the Partnership’s Form 10-K for the 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 was 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 was required to fund all capital until the Minimum EMG Investment was satisfied which occurred in May 2013. As EMG Utica has funded the Minimum EMG Investment, the Partnership will be required to fund, as needed, 100% of future 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. As of September 30, 2013, the Partnership has contributed $279.9 million, net of distributions related to temporary contributions discussed below, to MarkWest Utica EMG.

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 received a special non-cash allocation of income of approximately $8.3 million and $14.7 million for the three and nine months ended September 30, 2013, respectively.

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 September 30, 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 was retained by MarkWest Utica EMG and is 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 MarkWest Utica EMG’s inability to fund its planned activities without additional subordinated financial support. The Partnership has concluded that it is the primary beneficiary of MarkWest Utica EMG. As the primary beneficiary of MarkWest Utica EMG, the Partnership consolidates the entity and recognizes non-controlling interest and redeemable non-controlling interest. The Partnership’s decision to consolidate MarkWest Utica EMG is evaluated on a quarterly basis based on the capital structure and rights and obligations of the respective members.

The assets of MarkWest Utica EMG are the property of the entity and are not available to the Partnership for any other purpose, including as collateral for its secured debt (see Notes 10 and 16). MarkWest Utica EMG’s asset balances can only be used to settle its own obligations. The liabilities of MarkWest Utica EMG do not represent additional claims against the Partnership’s general assets, and the creditors or beneficial interest holders of MarkWest Utica EMG 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 MarkWest Utica EMG 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. Other than temporary funding due to the timing of the administrative process associated with capital calls in the beginning of 2013, the Partnership did not provide any financial support to MarkWest Utica EMG that it was not contractually obligated to provide during the nine months ended September 30, 2013 and 2012. The Partnership was reimbursed for its temporary funding except for $15 million that was retained and treated as a capital contribution from the Partnership as discussed above.

The results of operations of MarkWest Utica EMG and its subsidiaries are shown separately as the Utica segment (see Note 15).

MarkWest Pioneer — Restatement

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 the fiscal year ended December 31, 2012, the Partnership had determined that MarkWest Pioneer was a VIE and the Partnership was the primary beneficiary. Therefore, MarkWest Pioneer has historically been included as a consolidated subsidiary by the Partnership. Based on further consideration of the facts and circumstances, MarkWest Pioneer should not have been consolidated and should have been accounted for under the equity method since the Partnership sold 50% of its interests to Arkoma Pipeline Partners, L.L.C. in 2009. Under the equity method, the Partnership would have recognized an impairment of its investment in MarkWest Pioneer of approximately $39.2 million ($35.4 million, net of provision for income tax) in the year ended December 31, 2009.

The Partnership determined that the consolidation error and impairment were immaterial to the prior periods included in the accompanying Condensed Consolidated Financial Statements. Correcting the cumulative effect of the error in the three months ended September 30, 2013, could have had a significant effect on the results of operations for the full year, therefore, the Partnership has restated the accompanying Condensed Consolidated Balance Sheet as of December 31, 2012 (including the parenthetical disclosure of VIE balances), the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2012, and the Condensed Consolidated Statement of Cash Flows and Condensed Consolidated Statement of Changes in Equity for the nine months ended September 30, 2012. The impact of the misstatement is shown in the tables below (in thousands).

	December 31, 2012
Balance Sheet	As previously reported			As restated
Cash and cash equivalents	$	347,899		$	345,756
Receivables, net	198,769			197,977
Other current assets	35,053			34,871
Total current assets	656,639			653,522

Property, plant and equipment	5,700,176			5,542,316
Less: accumulated depreciation	(624,548		)	(602,698		)
Total property, plant and equipment, net	5,075,628			4,939,618

Investment in unconsolidated affiliates	31,179			63,054
Other long-term assets	2,242			2,140
Total assets	6,835,716			6,728,362

Accounts payable	320,645			320,627
Accrued liabilities	391,352			390,178
Total current liabilities	739,226			738,034

Deferred income taxes	191,318			189,428
Other long-term liabilities	134,340			134,261

Common units	2,134,714			2,097,404
Non-controlling interest in consolidated subsidiaries	328,346			261,463

Total equity	3,215,591			3,111,398
Total liabilities and equity	6,835,716			6,728,362

	Three months ended September 30, 2012						Nine months ended September 30, 2012
Statement of Operations	As previously reported			As restated			As previously reported			As restated
Revenue	$	320,137		$	316,976		$	1,029,304		$	1,019,709
Total revenue	283,737			280,576			1,080,256			1,070,661

Facility expenses	53,293			52,883			150,671			149,438
Selling, general and administrative expenses	21,922			21,723			69,025			68,471
Depreciation	48,136			46,554			132,199			127,472
Accretion of asset retirement obligations	141			140			540			536
Total operating expenses	274,175			271,983			760,353			753,835

Income from operations	9,562			8,593			319,903			316,826
Equity in earnings from unconsolidated affiliates	246			706			788			2,254
(Loss) income before provision for income tax	(22,176		)	(22,685		)	230,251			228,640
Net (loss) income	(14,756		)	(15,265		)	188,653			187,042
Net loss (income) attributable to non-controlling interest	416			925			(65		)	1,546

	Nine months ended September 30, 2012
Statement of Cash Flows	As previously reported			As restated
Cash flows from operating activities:
Net income	$	188,653		$	187,042
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	132,199			127,472
Accretion of asset retirement obligations	540			536
Equity in earnings from unconsolidated affiliate	(788		)	(2,254		)
Distributions from unconsolidated affiliate	2,200			6,624
Receivables	32,739			32,248
Other current assets	(12,707		)	(12,866		)
Accounts payable and accrued liabilities	36,737			36,837
Net cash provided by operating activities	389,718			385,784

Cash flows from investing activities:
Capital expenditures	(1,240,866		)	(1,239,705		)
Investment in unconsolidated affiliates	—			(839		)
Net cash flows used in investing activities	(1,746,071		)	(1,745,749		)

Cash flows from financing activities:
Contributions from non-controlling interest	56,940			56,101
Payment of distributions to non-controlling interest	(4,495		)	(71		)
Net cash flows provided by financing activities	1,654,401			1,657,986

Net increase in cash and cash equivalents	298,048			298,021
Cash and cash equivalents at beginning of year	117,016			114,332
Cash and cash equivalents at end of period	415,064			412,353

	Common Units						Non-controlling Interest						Total Equity
Statement of Changes in Equity	As previously reported			As restated			As previously reported			As restated			As previously reported			As restated
December 31, 2011	$	679,309		$	642,522		$	70,227		$	189		$	1,502,067		$	1,395,242
Distributions paid	(244,169		)	(244,169		)	(4,495		)	(71		)	(248,664		)	(244,240		)
Contributions from non-controlling interest	—			—			56,940			56,101			56,940			56,101
Deferred income tax impact from changes in equity	(74,855		)	(75,248		)	—			—			(74,855		)	(75,248		)
Net income (loss)	188,588			188,588			65			(1,546		)	188,653			187,042
September 30, 2012	1,745,672			1,708,492			122,737			54,673			2,620,940			2,515,696