Fair Value Measurements

6 Months Ended

Jun. 30, 2011

Fair Value Measurements

Fair Value Measurements

Note 13. Fair Value Measurements

Certain of the Partnership’s assets and liabilities are measured at fair value.  Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date.  The Financial Accounting Standards Board (“FASB”) established a fair value hierarchy, which prioritizes the inputs used in measuring fair value into the following three levels:

Level 1	—	Observable inputs such as quoted prices in active markets for identical assets or liabilities.
Level 2	—	Inputs other than the quoted prices in active markets that are observable for assets or liabilities, either directly or indirectly.  These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in inactive markets.
Level 3	—	Unobservable inputs based on the entity’s own assumptions.

The following table presents those financial assets and financial liabilities measured at fair value on a recurring basis as of June 30, 2011 and December 31, 2010 (in thousands):

	Fair Value as of June 30, 2011											Fair Value as of December 31, 2010
	Total			Level 1			Level 2			Level 3		Total			Level 1			Level 2			Level 3
Assets:
Hedged inventories	$	629,427		$	—		$	629,427		$	—	$	585,323		$	—		$	585,323		$	—
Fair value of forward fixed price contracts	1,361			—			1,361			—		1,942			—			1,942			—
Swap agreements and options	702			499			203			—		211			152			59			—
Interest rate cap	940			—			940					—			—			—			—
Total	$	632,430		$	499		$	631,931		$	—	$	587,476		$	152		$	587,324		$	—
Liabilities:
Obligations on forward fixed price contracts	$	(1,196	)	$	—		$	(1,196	)	$	—	$	(9,157	)	$	—		$	(9,157	)	$	—
Swap agreements and option contracts	(520		)	(121		)	(399		)	—		(2,446		)	(150		)	(2,296		)	—
Interest rate collar and forward starting swap	(14,098		)	—			(14,098		)	—		(13,338		)	—			(13,338		)	—
Total liabilities	$	(15,814	)	$	(121	)	$	(15,693	)	$	—	$	(24,941	)	$	(150	)	$	(24,791	)	$	—

The majority of the Partnership’s derivatives outstanding are reported at fair value based market quotes that are deemed to be observable inputs in an active market for similar assets and liabilities and are considered Level 2 inputs for purposes of fair value disclosures.  Specifically, the fair values of the Partnership’s financial assets and financial liabilities provided above were derived from NYMEX and New York Harbor quotes for the Partnership’s hedged inventories, forward fixed price contracts, swap agreements and option contracts and from the LIBOR rates for the Partnership’s interest rate collar, forward starting swap and interest rate cap.  The Partnership has not changed its valuation techniques or inputs during the three month period ended June 30, 2011.

For assets and liabilities measured on a non-recurring basis during the period, accounting guidance requires quantitative disclosures about the fair value measurements separately for each major category.  See Note 10 for acquired assets and liabilities measured on a non-recurring basis during the fiscal year ended December 31, 2010.  There were no assets or liabilities measured at fair value on a non-recurring basis during the quarter ended June 30, 2011.

Financial Instruments

The fair value of the Partnership’s financial instruments approximated the carrying value as of June 30, 2011 and December 31, 2010, in each case due to the short-term and the variable interest rate nature of the financial instruments.