2.	Summary of Significant Accounting Policies

Principles of consolidation. The consolidated financial statements include the accounts of all entities that the Partnership controls and the Partnership’s proportionate interest in the accounts of certain ventures in which we own an undivided interest. Management judgment is required to evaluate whether the Partnership controls an entity. Key areas of that evaluation include (i) determining whether an entity is a variable interest entity (“VIE”); (ii) determining whether the Partnership is the primary beneficiary of a VIE, including evaluating which activities of the VIE most significantly impact its economic performance and the degree of power that the Partnership and its related parties have over those activities through variable interests; (iii) identifying events that require reconsideration of whether an entity is a VIE and continuously evaluating whether the Partnership is a VIE’s primary beneficiary; and (iv) evaluating whether other owners in entities that are not VIEs are able to effectively participate in significant decisions that would be expected to be made in the ordinary course of business such that the Partnership does not have the power to control such entities.

The Partnership applies the equity method of accounting to investments in entities over which the Partnership exercises significant influence but does not control.

Use of estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosure of contingencies. Significant estimates include: (1) estimated useful lives of assets, which impacts depreciation and amortization; (2) accruals related to revenues, expenses and capital costs; (3) litigation-related contingencies; and (4) cost allocations. Although management believes these estimates are reasonable, actual results could differ from the Partnership’s estimates.

Cash and cash equivalents. For purposes of the consolidated financial statements, investments in all highly liquid instruments with original maturities of three months or less at date of purchase are considered to be cash equivalents. The Partnership had approximately $41.9 million and $17.2 million of cash and cash equivalents as of December 31, 2014 and 2013, respectively.

Accounts receivable. The majority of accounts receivable relate to gathering and treating activities. Accounts receivable are carried on a gross basis, with no discounting, less the allowance for doubtful accounts. The Partnership estimates the allowance for doubtful accounts based on existing economic conditions, the financial condition of the Partnership’s customers, and the amount and age of past due accounts. Receivables are considered past due if full payment is not received by the contractual due date. Past due accounts are generally written off against the allowance for doubtful accounts only after all collection attempts have been exhausted. At December 31, 2014 and 2013, the Partnership had no allowance for doubtful accounts.

Property, plant and equipment and depreciation. Property, plant and equipment are recorded at cost. Expenditures for maintenance and repairs that do not add capacity or extend the useful life of an asset are expensed as incurred. The carrying value of the assets is based on estimates, assumptions and judgments relative to useful lives and salvage values. As assets are disposed of, the cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is included in operating expenses in the statements of income.

Depreciation is calculated using the straight-line method, based on the assets’ estimated useful lives. These estimates are based on various factors including age (in the case of acquired assets), manufacturing specifications, technological advances and historical data concerning useful lives of similar assets. Amortization of assets recorded under capital leases is included in depreciation expense.

In July 2014, the Partnership reassessed the estimated useful lives of its gathering systems and related customer relationships, as well as the gathering systems of the investees which it operates. Following this assessment, the Partnership increased the useful lives of its gathering systems from 20 years to 30 years. Given the limited history of the assets at the Partnership’s inception, a 20 year useful life was deemed appropriate at the time based on the Partnership’s maintenance and pipeline integrity program in addition to the expectation that commercial quantities of oil and natural gas would continue to be produced in each operating area for that time period. As the Partnership’s experience in operating the assets and confidence in the operating basins and its maintenance and pipeline integrity program grew, it was determined that a 30 year useful life is a more appropriate measure of the investment recovery period. The Partnership also reassessed the estimated useful lives of its other fixed assets and increased or decreased lives where appropriate depending on the type of other fixed asset.

In accordance with FASB ASC 250, the Partnership determined that the change in depreciation method is a change in accounting estimate, and accordingly, the change will be applied on a prospective basis. The effect of this change in estimate resulted in a decrease in depreciation expense for the year ended December 31, 2014, of approximately $58.3 million, or approximately $0.29 per common unit. The effect of this change in estimate also resulted in an increase in income from unconsolidated affiliates for the year ended December 31, 2014, of approximately $9.4 million, or approximately $0.05 per common unit, for a total increase in net income for the year ended December 31, 2014, of approximately $67.7 million, or approximately $0.34 per common unit.

Impairment of long-lived assets. Long-lived assets, including property, plant and equipment and intangible assets, with recorded values that are not expected to be recovered through future cash flows are written down to estimated fair value. Assets are tested for impairment when events or circumstances indicate that the carrying value may not be recoverable. The carrying value of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. If the carrying value exceeds the sum of the undiscounted cash flows, an impairment loss equal to the amount that the carrying value exceeds the fair value of the asset is recognized. $11.7 million of impairment charges were recognized in 2014 related to certain materials and equipment held for sale. See Note 8 – Property, Plant and Equipment for more information.

Equity method investments. The equity method of accounting is used to account for the Partnership’s interest in Utica East Ohio Midstream LLC and Ranch Westex JV, LLC, which the Partnership acquired as part of the CMO Acquisition. The equity method is also used to account for the Partnership’s various ownership interests in 11 gas gathering systems in the Marcellus Shale. See Note 1 – Description of Business and Basis of Presentation for more information on the acquisitions.

Asset retirement obligations. Management recognizes a liability based on the estimated costs of retiring tangible long-lived assets. The liability is recognized at fair value measured using expected discounted future cash outflows of the asset retirement obligation when the obligation originates, which generally is when an asset is acquired or constructed. The carrying amount of the associated asset is increased commensurate with the liability recognized. Accretion expense is recognized over time as the discounted liability is accreted to the Partnership’s expected settlement value. Subsequent to the initial recognition, the liability is adjusted for any changes in the expected timing or amount of the retirement obligation (with a corresponding adjustment to property, plant and equipment) and for accretion of the liability due to the passage of time, until the obligation is settled.

Fair value. The fair-value-measurement standard defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The standard characterizes inputs used in determining fair value according to a hierarchy that prioritizes those inputs based upon the degree to which they are observable. The three levels of the fair value hierarchy are as follows:

Level 1 — inputs represent quoted prices in active markets for identical assets or liabilities.

Level 2 — inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly (for example, quoted market prices for similar assets or liabilities in active markets or quoted market prices for identical assets or liabilities in markets not considered to be active, inputs other than quoted prices that are observable for the asset or liability, or market-corroborated inputs).

Level 3 — inputs that are not observable from objective sources, such as management’s internally developed assumptions used in pricing an asset or liability (for example, an estimate of future cash flows used in management’s internally developed present value of future cash flows model that underlies the fair value measurement).

Nonfinancial assets and liabilities initially measured at fair value include third-party business combinations (see Note 9 – Acquisitions and Divestitures) and initial recognition of asset retirement obligations.

The fair value of debt is the estimated amount the Partnership would have to pay to repurchase its debt, including any premium or discount attributable to the difference between the stated interest rate and market rate of interest at the balance sheet date. Fair values are based on quoted market prices or average valuations of similar debt instruments at the balance sheet date for those debt instruments for which quoted market prices are not available. See Note 12 — Long-Term Debt and Interest Expense for disclosures regarding the fair value of debt.

	December 31, 2014				December 31, 2013
	Carrying amount		Fair Value		Carrying amount		Fair Value
			($ in thousands)
Financial liabilities				(Level 2)				(Level 2)
Revolving credit facility	$	640,000	$	640,000	$	343,500	$	343,500
2021 Notes		750,000		772,725		750,000		801,098
2022 Notes		750,000		798,833		750,000		804,848
2023 Notes		1,400,000		1,423,870		1,400,000		1,355,382
2024 Notes		750,000		760,181		—		—

Additional disclosure				(Level 3)				(Level 3)
Assets held for sale		1,092		1,092		—		—

The carrying amount of cash and cash equivalents, accounts receivable and accounts payable reported on the balance sheet approximates fair value.

As of December 31, 2014, certain materials and equipment was classified as held for sale, included in other current assets on the consolidated balance sheet. The estimated fair value (less cost to sell) of the equipment at December 31, 2014 was $1.1 million. The estimated fair value was determined by a market approach based on the Partnership’s analysis of information related to sales of similar pre-owned equipment in the principal market. This analysis resulted in an impairment charge of $11.7 million, which is included in the total loss on impairments and disposals of assets of $23.7 million, recorded in other operating expense (income) in the consolidated statement of income. This nonrecurring fair value measurement is classified within Level 3 of the fair value hierarchy.

Segments. The Partnership’s chief operating decision maker measures performance and allocates resources based on geographic segments. The Partnership’s operations are divided into eight operating segments: Barnett, Eagle Ford, Haynesville, Marcellus, Niobrara, Utica, Mid-Continent and Corporate.

Revenue Recognition. Revenues consist of fees recognized for the gathering, treating, compression and processing of natural gas. Revenues are recognized when the service is performed and is based upon non-regulated rates and the related gathering, treating, compression and processing volumes. Certain contracts include minimum volume commitments. Under such contracts, the customer is obligated to pay a fee equal to the applicable fee for each thousand cubic feet (“Mcf”) by which the applicable party’s minimum volume commitment exceeds the actual volumes gathered from such party’s production. Revenue associated with minimum volume commitments is recognized in the period in which the amount is fixed and no longer subject to future reduction or offset.

Deferred Loan Costs. External costs incurred in connection with the revolving credit facility and senior notes are capitalized as deferred loan costs and amortized over the life of the related agreement. Amortization is included in interest expense in the statement of income.

Environmental Expenditures. Liabilities for loss contingencies, including environmental remediation costs, arising from claims, assessments, litigation, fines, and penalties and other sources are charged to expense when it is probable that a liability has been incurred and the amount of the assessment and/or remediation can be reasonably estimated. There are no liabilities reflected in the accompanying financial statements at December 31, 2014 and 2013.

Equity Based Compensation. Certain employees of the Partnership’s general partner receive equity-based compensation through the Partnership’s equity-based compensation programs. The fair value of the awards issued is determined based on the fair market value of the shares on the date of grant. This value is amortized over the vesting period, which is generally four years from the date of grant.

Certain key members of management have been designated as participants in the Management Incentive Compensation Plan (“MICP”) which is made up of two components. The first component is an annual cash bonus based on “excess” cash distributions made by the Partnership above a specified target amount with respect to each fiscal quarter during which the award is outstanding. The second component is based on an increase in value of the Partnership’s common units at the end of a specified five-year period beginning on the award commencement date. As a result of the Williams Acquisition, both components of the MICP vested on July 1, 2014, resulting in total cash payments to MICP participants of $88.8 million and compensation expense of $41.1 million during 2014.

Included in operating expense, general and administrative expense, and income from unconsolidated affiliates is MICP compensation and LTIP equity-based compensation of $113.8 million, $35.0 million and $9.0 million for the Partnership during the years ended December 31, 2014, 2013 and 2012, respectively.

The Long-Term Incentive Plan (“LTIP”) provides for an aggregate of 3.5 million common units to be awarded to employees, directors and consultants of the Partnership’s general partner and its affiliates through various award types, including unit awards, restricted units, phantom units, unit options, unit appreciation rights and other unit-based awards. The LTIP has been designed to promote the interests of the Partnership and its unitholders by strengthening its ability to attract, retain and motivate qualified individuals to serve as employees, directors and consultants. As a result of the Williams Acquisition, all unit awards outstanding under the LTIP at June 30, 2014, vested on July 1, 2014, resulting in total compensation expense of $38.5 million. On July 16, 2014, the Partnership issued to certain key employees, equity retention awards that have various vesting periods between one and four years. As of December 31, 2014, measured but unrecognized unit-based compensation was $65.2 million, which does not include the effect of estimated forfeitures of $6.0 million. These amounts are expected to be recognized over a weighted-average period of 2.3 years.

The following table summarizes LTIP award activity for the year ended December 31, 2014:

	Units			Value per Unit
Restricted units unvested at beginning of period		1,182,288		$	36.11
Granted		1,621,910		$	58.67
Vested		(882,784	)	$	39.69
Forfeited		(614,954	)	$	41.09
Restricted units unvested at end of period		1,306,460		$	59.35

Intangible Assets. Intangible assets are amortized on a straight-line basis over their estimated useful lives. The estimated useful life is the period over which the assets are expected to contribute directly or indirectly to the Partnership’s future cash flows. The estimated useful life of the customer relationship acquired with the Springridge gathering system and Appalachia Midstream is 15 years and 20 years, respectively. As of December 31, 2014, the carrying value of the Partnership’s intangible assets was $348.7 million, net of $69.7 million of accumulated amortization. The Partnership estimates that it will record $23.6 million of intangible asset amortization for each of the next five years. As of December 31, 2013, the carrying value of the Partnership’s intangible assets was $372.4 million, net of $46.0 million of accumulated amortization. Amortization expense was $23.7 million, $24.0 million and $11.3 million for the years ended December 31, 2014, 2013 and 2012, respectively, for the Partnership.

Business Combinations. The Partnership makes various assumptions in developing models for determining the fair values of assets and liabilities associated with business acquisitions. These fair value models, developed with the assistance of outside consultants, apply discounted cash flow approaches to expected future operating results, considering expected growth rates, development opportunities, and future pricing assumptions to arrive at an economic value for the business acquired. The Partnership then determines the fair value of the tangible assets based on estimates of replacement costs less obsolescence. Identifiable intangible assets acquired consist primarily of customer contracts, customer relationships, trade names, and licenses and permits. The Partnership values customer relationships using a discounted cash flow model.

Income taxes. As a master limited partnership, the Partnership is a pass-through entity and also not subject to federal income taxes and most state income taxes with the exception of Texas Franchise Tax. The tax on net income is generally borne by individual partners. Net income for financial statement purposes may differ significantly from taxable income of unitholders as a result of differences between the tax basis and financial reporting basis of assets and liabilities and the taxable income allocation requirements under the partnership agreement. The aggregated difference in the basis of the Partnership’s net assets for financial and tax reporting purposes cannot be readily determined because information regarding each partner’s tax attributes in the Partnership is not available to the Partnership.