SUPPLEMENTAL INFORMATION

3 Months Ended

Mar. 31, 2014

Supplemental Cash Flow Elements [Abstract]

Supplemental Cash Flow Information (in thousands)



	Three Months Ended March 31,
	2014		2013
Supplemental Disclosures:
Cash paid for interest, net of amounts capitalized	$	2,776	$	2,478
Cash paid for taxes, net of refunds received	23		—
Supplemental schedule of non-cash investing and financing activities:
Accounts payable related to capital expenditures	1,628		22,996
Change in value recognized in other comprehensive income	11		69
Capital lease obligation	307		—
Accrued distribution equivalent rights (DERs) on the LTIP units	76		21

Capitalization of Interest Cost

We capitalize interest on projects during their construction period. Once a project is placed in service, capitalized interest, as a component of the total cost of the construction, is depreciated over the estimated useful life of the asset constructed.

We incurred the following interest costs (in thousands):



	Three Months Ended March 31,
	2014			2013
Total interest costs	$	3,072		$	2,649
Capitalized interest included in property, plant and equipment, net	(99		)	(602		)
Interest expense	$	2,973		$	2,047

Deferred Financing Costs

Deferred Financing costs are capitalized and amortized as interest expense under the effective interest method over the term of the related debt. The unamortized balance of deferred financing costs is included in other assets on the consolidated balance sheets. Changes in deferred financing costs are as follows (in thousands):



	2014
Deferred financing costs, January 1	$	5,237
Capitalization of deferred financing costs (1)	156
Less:
Amortization of deferred financing costs	(337		)
Deferred financing costs, March 31	$	5,056

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(1) See Note 6.

Southcross Assets Considered Leases to Third Parties

On March 6, 2014 we acquired natural gas pipelines and contracts related to these pipelines (See Note 2). The pipelines transport natural gas to two power plants in Nueces County, Texas under fixed-fee contracts. The contracts have a primary term through 2029 and an option to extend the agreements by an additional term of up to ten years. These contracts are considered operating leases under the applicable accounting guidance.

Future minimum annual demand payment receipts under these agreements as of March 31, 2014, were as follows: $3.7 million in 2014 of which a portion was paid prior to our acquisition, $5.6 million in 2015, $5.6 million in 2016, $5.6 million in 2017, $2.2 million in 2018, $2.2 million in 2019 and $15.3 million thereafter. The revenue recognized for the demand payments is recognized on a straight-line basis over the term of the contract. The demand fee revenues under the contracts were $0.2 million for the three months ended March 31, 2014 and have been included within transportation, gathering and processing fees within Note 12. The amounts do not include contingent fees based on the actual gas volumes delivered under the contracts. Contingent fees were $0.1 million for the three months ended March 31, 2014.