Derivative Instruments

3 Months Ended

Mar. 31, 2013

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments

Derivative Instruments

Commodity Risk Management

The Company uses derivative instruments to reduce price volatility risk on raw materials and products as a substantial portion of its raw materials and products are commodities whose prices fluctuate as market supply and demand fundamentals change. Business strategies to protect against such instability include ethylene product feedstock flexibility and moving downstream into the olefins and vinyls products where pricing is more stable. The Company does not use derivative instruments to engage in speculative activities.

For derivative instruments that are designated and qualify as fair value hedges, the gains or losses on the derivative instruments, as well as the offsetting losses or gains on the hedged items attributable to the hedged risk, were included in cost of sales in the consolidated statements of operations for the three months ended March 31, 2013 and 2012. As of March 31, 2013, the Company had 32,130,000 gallons of feedstock forward contracts designated as fair value hedges.

Gains and losses from changes in the fair value of derivative instruments that are not designated as hedging instruments were included in cost of sales in the consolidated statements of operations for the three months ended March 31, 2013 and 2012.

The exposure on commodity derivatives used for price risk management includes the risk that the counterparty will not pay if the market declines below the established fixed price. In such case, the Company would lose the benefit of the derivative differential on the volume of the commodities covered. In any event, the Company would continue to receive the market price on the actual volume hedged. The Company also bears the risk that it could lose the benefit of market improvements over the fixed derivative price for the term and volume of the derivative instruments (as such improvements would accrue to the benefit of the counterparty).

The fair values of derivative instruments in the Company's consolidated balance sheets were as follows:

	Derivative Assets
	Balance Sheet Location	Fair Value as of
		March 31, 2013		December 31, 2012
Designated as hedging instruments
Commodity forward contracts	Accounts receivable, net	$	8,299	$	13,032
Not designated as hedging instruments
Commodity forward contracts	Accounts receivable, net	1,903		1,395
Total derivative assets		$	10,202	$	14,427

	Derivative Liabilities
	Balance Sheet Location	Fair Value as of
		March 31, 2013		December 31, 2012
Designated as hedging instruments
Commodity forward contracts	Accrued liabilities	$	—	$	399
Not designated as hedging instruments
Commodity forward contracts	Accrued liabilities	9,843		13,295
Total derivative liabilities		$	9,843	$	13,694

The following tables reflect the impact of derivative instruments designated as fair value hedges and the related hedged item on the Company's consolidated statements of operations. For the three months ended March 31, 2013 and 2012, there was no material ineffectiveness with regard to the Company's qualifying fair value hedges.

Derivatives in Fair Value    Hedging Relationships	Location of Gain (Loss) Recognized in  Income on Derivative	Three Months Ended March 31,
		2013			2012
Commodity forward contracts	Cost of sales	$	(1,643	)	$	10,463
Hedged Items in Fair Value    Hedging Relationships	Location of Gain (Loss) Recognized in  Income on Hedged Items	Three Months Ended March 31,
		2013			2012
Firm commitment designated as the hedged item	Cost of sales	$	1,395		$	(11,664	)

The impact of derivative instruments that have not been designated as hedges on the Company's consolidated statements of operations were as follows:

Derivatives Not Designated as    Hedging Instruments	Location of Gain (Loss) Recognized in  Income on Derivative	Three Months Ended March 31,
		2013		2012
Commodity forward contracts	Cost of sales	$	7,335	$	560

See Note 10 for the fair value of the Company's derivative instruments.

Disclosure about Offsetting Asset and Liability Derivatives

Certain of the Company's derivative instruments are executed under an International Swaps and Derivatives Association ("ISDA") Master Agreement, which permit the Company and a counterparty to aggregate the amounts owed by each party under multiple transactions and replace them with a single net amount payable by one party to the other. The following tables present the Company's derivative assets and derivative liabilities reported on the consolidated balance sheets and derivative assets and derivative liabilities subject to enforceable master netting arrangements.

	Derivative Assets
	March 31, 2013		December 31, 2012
Derivative assets subject to enforceable master netting arrangements	$	—	$	—
Derivative assets not subject to enforceable master netting arrangements	9,057		13,032
Total derivative assets	$	9,057	$	13,032

	March 31, 2013							December 31, 2012
Offsetting of Derivative Assets	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Consolidated Balance Sheet			Net Amounts of Assets Presented in the Consolidated Balance Sheet		Gross Amounts of Recognized Assets		Gross Amounts Offset in the Consolidated Balance Sheet			Net Amounts of Assets Presented in the Consolidated Balance Sheet
Commodity forward contracts	$	1,145	$	(1,145	)	$	—	$	1,395	$	(1,395	)	$	—

	Derivative Liabilities
	March 31, 2013		December 31, 2012
Derivative liabilities subject to enforceable master netting arrangements	$	697	$	1,774
Derivative liabilities not subject to enforceable master netting arrangements	8,001		10,525
Total derivative liabilities	$	8,698	$	12,299

	March 31, 2013							December 31, 2012
Offsetting of Derivative Liabilities	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Consolidated Balance Sheet			Net Amounts of Liabilities Presented in the Consolidated Balance Sheet		Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Consolidated Balance Sheet			Net Amounts of Liabilities Presented in the Consolidated Balance Sheet
Commodity forward contracts	$	1,842	$	(1,145	)	$	697	$	3,169	$	(1,395	)	$	1,774

	March 31, 2013						December 31, 2012
Derivative Liabilities by Counterparty	Net Amounts of Liabilities Presented in the Consolidated Balance Sheet		Gross Amounts Not Offset in the Consolidated Balance Sheet		Net Amount		Net Amounts of Liabilities Presented in the Consolidated Balance Sheet		Gross Amounts Not Offset in the Consolidated Balance Sheet		Net Amount
Counterparty A	$	463	$	—	$	463	$	1,128	$	—	$	1,128
Counterparty B	234		—		234		646		—		646
Total	$	697	$	—	$	697	$	1,774	$	—	$	1,774