Significant Accounting Policy (Policies)

12 Months Ended

Dec. 31, 2012

Policy Text Block [Abstract]

Use of Estimates

(2)Significant Accounting Policies

(a) Management's Use of Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management of the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from these estimates.

Cash and Cash Equivalents

(b) Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.

Natual Gas and Natural Gas Liquids Inventory

(c) Natural Gas and Natural Gas Liquids Inventory

Inventories of products consist of natural gas and NGLs. The Company reports these assets at the lower of cost or market.

Property, Plant, and Equipment

(d) Property, Plant, and Equipment

Property, plant and equipment consist of intrastate gas transmission systems, gas gathering systems, NGL and crude oil pipelines, natural gas processing plants, NGL fractionation plants and brine disposal wells. Gas required to maintain pipeline minimum pressures is capitalized and classified as property, plant and equipment. Other property and equipment is primarily comprised of computer software and equipment, furniture, fixtures, leasehold improvements and office equipment. Property, plant and equipment are recorded at cost. Repairs and maintenance are charged against income when incurred. Renewals and betterments, which extend the useful life of the properties, are capitalized. Interest costs are capitalized to property, plant and equipment during the period the assets are undergoing preparation for intended use. Interest costs totaling $ 4.0million, $0.9million and $0.1million were capitalized for the years ended December 31, 2012, 2011 and 2010, respectively.

Depreciation is provided using the straight-line method based on the estimated useful life of each asset, as follows:

	Useful Lives
Transmission assets	20-30 years
Gathering systems	15-20 years
Gas processing plants	20 years
Other property and equipment	3-15 years

Depreciation expense of $98.2 million, $77.8million and $75.7million was recorded for the years ended December 31, 2012, 2011 and 2010, respectively. Depreciation expense also includes the amortization of assets classified as capital lease assets.

FASB ASC 360-10-05-4 requires long-lived assets to be reviewed whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. In order to determine whether an impairment has occurred, the Company compares the net book value of the asset to the undiscounted expected future net cash flows. If an impairment has occurred, the amount of such impairment is determined based on the expected future net cash flows discounted using a rate commensurate with the risk associated with the asset.

When determining whether impairment of one of our long-lived assets has occurred, we must estimate the undiscounted cash flows attributable to the asset. The Company's estimate of cash flows is based on assumptions regarding the purchase and resale margins on natural gas, volume of gas available to the asset, markets available to the asset, operating expenses, and future natural gas prices and NGL product prices. The amount of availability of gas to an asset is sometimes based on assumptions regarding future drilling activity, which may be dependent in part on natural gas prices. Projections of gas volumes and future commodity prices are inherently subjective and contingent upon a number of variable factors. Any significant variance in any of the above assumptions or factors could materially affect our cash flows, which could require us to record an impairment of an asset.

Goodwill and Intangible Assets

(e) Goodwill and Intangible Assets

The Partnership has approximately $152.6 million of goodwill at December 31, 2012 related to the acquisition of Clearfield Energy, Inc. and its wholly-owned subsidiaries (collectively, “Clearfield”)in July 2012. The goodwill recognized from the Clearfield acquisition results primarily from the value of opportunity created from the strategic asset positioning in the Utica and Marcellus shale plays which provides the Partnership with a substantial growth platform in a new geographic area. The goodwill is allocated to the ORV segment. Goodwill will be assessed at least annually for impairment beginning on July1, 2013.

Intangible assets consist of customer relationships and the value of the dedicated and non-dedicated acreage attributable to pipeline, gathering and processing systems. Intangible assets associated with customer relationships are amortized on a straight-line basis over the expected period of benefits of the customer relationships, which range from three to twenty years. The intangible assets associated with dedicated and non-dedicated acreage attributable to pipeline, gathering and processing systems are being amortized using the units of throughput method of amortization.

The following table represents the Partnership's total purchased intangible assets at years ended December 31, 2012 and2011 (in thousands):

		Gross Carrying		Accumulated		Net Carrying
		Amount		Amortization		Amount
2012
Customer relationships		$	292,658	$	(130,458)	$	162,200
Dedicated and non-dedicated acreage			395,652		(132,847)		262,805
	Total	$	688,310	$	(263,305)	$	425,005
2011
Customer relationships		$	255,058	$	(101,762)	$	153,296
Dedicated and non-dedicated acreage			395,652		(97,486)		298,166
	Total	$	650,710	$	(199,248)	$	451,462

The weighted average amortization period for intangible assets is 18.0 years. Amortization expense for intangibles was approximately $64.1million, $47.5million and $35.9million for the years ended December 31, 2012, 2011 and 2010, respectively.

The following table summarizes the Company's estimated aggregate amortization expense for the next five years (in thousands):

2013	$	48,156
2014		45,129
2015		43,319
2016		43,429
2017		42,375
Thereafter		202,597
Total	$	425,005

Investment in Limited Liability Company

(f) Investment in Limited Liability Company

On June 22, 2011, the Partnership entered into a limited liability agreement with Howard Energy Partners (“HEP”) for an initial capital contribution of $35.0 million in exchange for an individual ownership interest in HEP. In 2012, the Partnership made an additional capital contribution of $52.3 million to HEP related to HEP's acquisition of substantially all of Meritage Midstream Services' natural gas gathering assets in south Texas. HEP owns midstream assets and provides midstream services to Eagle Ford Shale producers. The Partnership owns 30.6 percent of HEP and accounts for this investment under the equity method of accounting. This investment is reflected on the balance sheet as “Investment in limited liability company.” The Partnership's proportional share of earnings is recorded as an increase to this investment account and recorded as equity in earnings of limited liability company.

Other Assets

(g) Other Assets

Unamortized debt issuance costs totaling $26.0 millionand $24.2 million as of December 31, 2012 and 2011, respectively, are included in other assets, net. Debt issuance costs are amortized into interest expenseusing the straight-line method over the terms of the debt.

Gas Imbalance Accounting

(h) Gas Imbalance Accounting

Quantities of natural gas and NGLs over-delivered or under-delivered related to imbalance agreements are recorded monthly as receivables or payables using weighted average prices at the time of the imbalance. These imbalances are typically settled with deliveries of natural gas or NGLs. The Company had imbalance payables of $2.3million and $2.3million at December 31, 2012 and 2011, respectively, which approximate the fair value of these imbalances. The Company had imbalance receivables of $1.5million and $1.7million at December 31, 2012 and 2011, respectively, which are carried at the lower of cost or market value.

Asset Retirement Obligations

(i) Asset Retirement Obligations

FASB ASC 410-20-25-16 was issued in March 2005, which became effective at December 31, 2005. FASB ASC 410-20-25-16 clarifies that the term “conditional asset retirement obligation” as used in FASB ASC 410-20, refers to a 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. Since the obligation to perform the asset retirement activity is unconditional, FASB ASC 410-20-25-16 provides that a liability for the fair value of a conditional asset retirement activity should be recognized if that fair value can be reasonably estimated, even though uncertainty exists about the timing and/or method of settlement. FASB ASC 410-20-25-16 also clarifies when an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation under FASB ASC 410-20. The Company providedan asset retirement obligation of $0.5 million as of December 31, 2012related to the discontinued use of the Sabine Pass plant. The Company did not provide any asset retirement obligations as of2011 because it did not have sufficient information as set forth in FASB ASC 410-20-25-16 to reasonably estimate such obligations, and the Company had nointention of discontinuing use of any significant assets. See Note 2 “Acquisition, Disposition, and Impairments” for further discussion of the Sabine Pass plant.

Revenue Recognition

(j) Revenue Recognition

The Company recognizes revenue for sales or services at the time the natural gas, NGLs or crude oil are delivered or at the time the service is performed. The Company generally accrues one month of sales and the related gas purchases and reverses these accruals when the sales and purchases are actually invoiced and recorded in the subsequent months. Actual results could differ from the accrual estimates. Purchaseand sale arrangements are generally reported in revenues and costs on a gross basis in the consolidated statement of operations in accordance with FASB ASC 605-45-45-1. Except for fee based arrangements, the Partnership acts as the principal in these purchase and sale transactions, has the risk and reward of ownership as evidenced by title transfer, schedules the transportation and assumes credit risk.The Partnership conducts “off-system” gas marketing operations as a service to producers on systems that it does not own. It refers to these activities as part of energy trading activities. In some cases, the Partnership earns an agency fee from the producer for arranging the marketing of the producer's natural gas. In other cases, the Partnership purchases the natural gas from the producer and enters into a sales contract with another party to sell the natural gas. The revenue and cost of sales for these activities are included in revenue on a net basis in the consolidated statement of operations.

The Company accounts for taxes collected from customers attributable to revenue transactions and remitted to government authorities on a net basis (excluded from revenues).

Derivative

(k) Derivatives

The Partnership uses derivatives to hedge against changes in cash flows related to product price, as opposed to their use for trading purposes. FASB ASC 815 requires that all derivatives be recorded on the balance sheet at fair value. It generally determines the fair value of futures contracts and swap contracts based on the difference between the derivative's fixed contract price and the underlying market price at the determination date. The asset or liability related to the derivative instruments is recorded on the balance sheet in fair value of derivative assets or liabilities.

Realized and unrealized gains and losses on commodity related derivatives that are not designated as hedges, as well as the ineffective portion of hedge derivatives, are recorded as gain or loss on derivatives in the consolidated statement of operations. Realized and unrealized gains and losses on interest rate derivatives that are not designated as hedges are included in interest expense in the consolidated statement of operations. Unrealized gains and losses on effective cash flow hedge derivatives are recorded as a component of accumulated other comprehensive income. When the hedged transaction occurs, the realized gain or loss on the hedge derivative is transferred from accumulated other comprehensive income to earnings. Realized gains and losses on commodity hedge derivatives are recognized in revenues, and realized gains and losses on interest hedge derivatives are recorded as adjustments to interest expense. Settlements of derivatives are included in cash flows from operating activities.

Comprehensive Income (Loss)

(l) Comprehensive Income (Loss)

Comprehensive income includes net income (loss) and other comprehensive income, which includes unrealized gains and losses on derivative financial instruments. Pursuant to FASB ASC 815, the Company records deferred hedge gains and losses on its derivative financial instruments that qualify as cash flow hedges as other comprehensive income.

Legal Costs Expected to be Incurred

(m) Legal Costs Expected to be Incurred in Connection with a Loss Contingency

Legal costs incurred in connection with a loss contingency are expensed as incurred.

Concentrations of Credit Risk

(n) Concentrations of Credit Risk

Financial instruments, which potentially subject the Partnership to concentrations of credit risk, consist primarily of trade accounts receivable and derivative financial instruments. Management believes the risk is limited since the Partnership's customers represent a broad and diverse group of energy marketers and end users. In addition, the Partnership continually monitors and reviews credit exposure to its marketing counter-parties and letters of credit or other appropriate security are obtained as considered necessary to limit the risk of loss. The Partnership's records reserves for uncollectible accounts on a specific identification basis since there is not a large volume of late paying customers. The Partnership had a reserve for uncollectible receivables as of December 31, 2012, 2011 and 2010 of $0.5million, $0.4million and $0.2million, respectively.

During the years ended December 31, 2012 and 2011, the Partnership had only one customer that represented greater than 10.0% individually of its revenue. The customer is located in the LIG segment and represented 10.5% and 12.3% of the consolidated revenue for each of the years ended December 31, 2012 and 2011, respectively. During the year ended December 31, 2010, three customers accounted for 14.5%, 10.6%, and 10.2% of consolidated revenue. As the Partnership continues to grow and expand, the relationship between individual customer sales and consolidated total sales is expected to continue to change. While these customers represent a significant percentage of revenues, the loss of these customers would not have a material adverse impact on the Partnership's results of operations because the gross operating margin received from transactions with these customers are not material to the Partnership's gross operating margin.

Environmental Costs

(o) Environmental Costs

Environmental expenditures are expensed or capitalized as appropriate, depending on the nature of the expenditures and their future economic benefit. Expenditures that related to an existing condition caused by past operations that do not contribute to current or future revenue generation are expensed. Liabilities for these expenditures are recorded on an undiscounted basis (or a discounted basis when the obligation can be settled at fixed and determinable amounts) when environmental assessments or clean-ups are probable and the costs can be reasonably estimated. For the years ended December 31, 2012, 2011 and 2010, such expenditures were not significant.

Share-Based Awards

(p) Share-Based Awards

The Company recognizes compensation cost related to all stock-based awards, including stock options, in its consolidated financial statements in accordance with FASB ASC 718. The Partnership and CEI each have similar unit or share-based payment plans for employees, which are described below. Share-based compensation associated with CEI's share-based compensation plans awarded to officers and employees of the general partner of the Partnership are recorded by the Partnership since CEI has no operating activities other than its interest in the Partnership. Amounts recognized in the consolidated financial statements with respect to these plans are as follows (in thousands):

		Years Ended December 31,
		2012		2011		2010
Cost of share-based compensation charged to general and administrative
	expense	$	8,240	$	6,405	$	8,246
Cost of share-based compensation charged to operating expense			1,243		1,151		1,323
Total amount charged to income		$	9,483	$	7,556	$	9,569
Interest of non-controlling partners in share-based compensation		$	3,813	$	3,052	$	3,900
Amount of related income tax benefit recognized in income		$	2,102	$	1,670	$	2,038

The fair value of each option is estimated on the date of grant using the Black Scholes option-pricing model as disclosed in Note 9— Employee Incentive Plans.

Recent Accounting Pronouncements

(q) Recent Accounting Pronouncements

We have reviewed recently issued accounting pronouncements that became effective during the year endedDecember 31, 2012, and have determined that none would have a material impact on our Consolidated Financial Statements.