Equity Method Investments

12 Months Ended

Dec. 31, 2018

Equity Method Investments and Joint Ventures [Abstract]

EQUITY METHOD INVESTMENTS

Our equity method investments consist of the following (in thousands):



	December 31,
	2018		2017
White Cliffs	$	255,043	$	266,362
NGL Energy	18,966		18,919
Total equity method investments	$	274,009	$	285,281

Our earnings from equity method investments consist of the following (in thousands):



	Year Ended December 31,
	2018		2017			2016
White Cliffs	$	57,625	$	59,851		$	69,007
Glass Mountain	—		7,494			2,562
NGL Energy⁽¹⁾	47		(14		)	2,188
Total earnings from equity method investments	$	57,672	$	67,331		$	73,757

(1) Excluding a loss on issuance of common units of $41.0 thousand for the year ended December 31, 2016.

Cash distributions received from equity method investments consist of the following (in thousands):



	Year Ended December 31,
	2018		2017		2016
White Cliffs	$	76,725	$	77,511	$	88,839
Glass Mountain	—		18,011		10,456
NGL Energy	—		—		4,873
Total cash distributions received from equity method investments	$	76,725	$	95,522	$	104,168

White Cliffs

We own a 51% interest in White Cliffs, which we account for under the equity method. The equity in earnings of White Cliffs for the years ended December 31, 2018, 2017 and 2016, reported in our consolidated statements of operations and comprehensive income (loss), is less than 51% of the net income of White Cliffs for the same period. This is primarily due to certain general and administrative expenses we incur in managing the operations of White Cliffs that the other members are not obligated to share. In addition, our equity in earnings is also impacted by the elimination of revenue on the sale of inventory to White Cliffs. Revenue related to inventory transactions with White Cliffs is deferred until a sale of the inventory has been made with a third party.

The members of White Cliffs are required to contribute capital to White Cliffs to fund various projects. For the years ended December 31, 2018, 2017 and 2016, we contributed $6.5 million, $1.4 million and $2.2 million, respectively, to fund White Cliffs capital projects. In 2018, we announced that we will convert one of the White Cliffs 12-inch carrier pipelines from crude service to natural gas liquids service. Remaining contributions related to the conversion project will be paid in 2019 and are expected to total $27.2 million. The project is expected to be completed during the fourth quarter of 2019.

Our membership interest in White Cliffs is significant as defined by Securities and Exchange Commission’s Regulation S-X Rule 1-02(w). Accordingly, as required by Regulation S-X Rule 3-09, we have included the audited financial statements of White Cliffs as of December 31, 2018 and 2017 and for each of the three years in the period ended December 31, 2018 as an exhibit to this Form 10-K.

Glass Mountain

On December 22, 2017, we completed the sale of our equity method investment in Glass Mountain for $300 million, subject to working capital and other adjustments. For the year ended December 31, 2017, we recorded a pre-tax gain on disposal of $150.3 million, which was reported in "loss (gain) on disposal or impairment, net" in our consolidated statement of operations and comprehensive income (loss). Proceeds from the sale were used to repay borrowings on SemGroup's revolving credit facility. For the year ended December 31, 2018, we recorded an incremental gain of $1.1 million related to customary post-closing adjustments related to the prior year sale of our equity interest in Glass Mountain.

NGL Energy

At December 31, 2018, we held an 11.78% interest in the general partner of NGL Energy which is being accounted for under the equity method in accordance with ASC 323-30-S99-1, as our ownership is in excess of the 3 to 5 percent interest which is generally considered to be more than minor.

The general partner of NGL Energy is not a publicly traded company. The information below pertains to our general partner interest, and previously held limited partner interest, in NGL Energy.

NGL Energy unit issuance and sale of NGL Energy units

During the year ended December 31, 2016, we sold 4,652,568 NGL Energy limited partner units for $13.00 per unit, or $60.5 million, and recorded a $9.1 million gain on disposal. Subsequent to this disposal, we no longer hold a limited partner interest in NGL Energy. Gain on disposal of NGL Energy limited partner units is included in "loss on sale or impairment of non-operated equity method investment" in our consolidated statements of operations and comprehensive income (loss).

During the year ended December 31, 2016, our limited partnership interest was diluted in connection with an NGL Energy common unit issuance. Accordingly, we recorded a non-cash loss of $41.0 thousand for the year ended December 31, 2016 related to this transaction, which is included in "loss on issuance of common units by equity method investee" in our consolidated statements of operations and comprehensive income (loss).

Other-than-temporary impairment of equity method investment in NGL Energy

During the year ended 2016, we recorded an impairment of $39.8 million to our investment in the limited partner units of NGL Energy subsequent to NGL Energy's April 21, 2016 announcement of a reduction in its quarterly distribution and lowering of financial performance guidance. These units were subsequently sold in the second quarter of 2016. The impairment was included in "loss on sale or impairment of non-operated equity method investment" in our consolidated statements of operations and comprehensive income (loss).