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Fair Value Measurements

9 Months Ended

Sep. 30, 2020

Certain assets and liabilities are recorded at fair value in the Condensed Consolidated Balance Sheets and are categorized based upon the level of judgment associated with the inputs used to measure their value. The Partnership determines the appropriate level for each financial asset and liability on a quarterly basis and recognizes transfers between levels at the end of the reporting period. For the three and nine months ended September 30, 2020, there were no transfers between levels. As of September 30, 2020, there were no contracts classified as Level 3.

Estimated Fair Value of Financial Instruments

The fair values of all accounts receivable, notes receivable, accounts payable, commercial paper and other such financial instruments on the Condensed Consolidated Balance Sheets are estimated to be approximately equivalent to their carrying amounts due to their short-term nature and have been excluded from the table below.

The following table summarizes the fair value and carrying amount of the Partnership’s financial instruments.


	September 30, 2020				December 31, 2019
	Carrying Amount		Fair Value		Carrying Amount		Fair Value

	(In millions)
Debt
Revolving Credit Facility (Level 2) (1)	$	—	$	—	$	—	$	—
2019 Term Loan Agreement (Level 2)	800		800		800		800

2024 Notes (Level 2)	600		591		600		614
2027 Notes (Level 2)	698		674		698		698
2028 Notes (Level 2)	795		784		795		811
2029 Notes (Level 2)	546		505		549		526
2044 Notes (Level 2)	531		448		550		506
EOIT Senior Notes (Level 2)	—		—		251		252

____________________

(1) Borrowing capacity is effectively reduced by our borrowings outstanding under the commercial paper program. $334 million and $155 million of commercial paper was outstanding as of September 30, 2020 and December 31, 2019, respectively.

The fair value of the Partnership’s Revolving Credit Facility, 2019 Term Loan Agreement, 2024 Notes, 2027 Notes, 2028 Notes, 2029 Notes, 2044 Notes and EOIT Senior Notes is based on quoted market prices and estimates of current rates available for similar issues with similar maturities and is classified as Level 2 in the fair value hierarchy.

Non-Financial Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Certain assets and liabilities are measured at fair value on a nonrecurring basis; that is, the assets and liabilities are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (e.g., when there is evidence of impairment). As of September 30, 2020, no material fair value adjustments or fair value measurements were required for these non-financial assets or liabilities, other than those discussed in Note 7 and Note 8.

Based upon review of forecast undiscounted cash flows as of September 30, 2020, all of the asset groups were considered recoverable, other than those discussed in Note 7. Based upon review for other than temporary declines in fair value, the investment in equity method affiliate was considered recoverable, other than as discussed in Note 8. Future price declines, throughput declines, contracted capacity declines, cost increases, regulatory or political environment changes and other changes in market conditions, including the oversupply of crude oil, NGLs and natural gas as well as the ongoing COVID-19 pandemic and the economic effects of the pandemic, could reduce forecast undiscounted cash flows for the asset groups and result in other than temporary declines in the fair value of the investment in equity method affiliate.

Contracts with Master Netting Arrangements

As of September 30, 2020, the Partnership’s Level 2 interest rate derivatives are recorded as liabilities with no netting adjustments.

The following tables summarize the Partnership’s other assets and liabilities that are measured at fair value on a recurring basis.


September 30, 2020	Commodity Contracts				Gas Imbalances (1)
	Assets		Liabilities		Assets (2)		Liabilities (3)

	(In millions)
Quoted market prices in active market for identical assets (Level 1)	$	1	$	22	$	—	$	—
Significant other observable inputs (Level 2)	21		6		16		11

Total fair value	22		28		16		11
Netting adjustments	(22)		(22)		—		—
Total	$	—	$	6	$	16	$	11


December 31, 2019	Commodity Contracts				Gas Imbalances (1)
	Assets		Liabilities		Assets (2)		Liabilities (3)

	(In millions)
Quoted market prices in active market for identical assets (Level 1)	$	5	$	31	$	—	$	—
Significant other observable inputs (Level 2)	44		7		14		11

Total fair value	49		38		14		11
Netting adjustments	(37)		(37)		—		—
Total	$	12	$	1	$	14	$	11

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(1)The Partnership uses the market approach to fair value its gas imbalance assets and liabilities at individual, or where appropriate an average of, current market indices applicable to the Partnership’s operations, not to exceed net realizable value. There were no netting adjustments as of September 30, 2020 and December 31, 2019.

(2)Gas imbalance assets exclude fuel reserves for under retained fuel due from shippers of $22 million and $21 million at September 30, 2020 and December 31, 2019, respectively, which fuel reserves are based on the value of natural gas at the time the imbalance was created, and which are not subject to revaluation at fair market value.

(3)Gas imbalance liabilities exclude fuel reserves for over retained fuel due to shippers of $3 million and $8 million at September 30, 2020 and December 31, 2019, respectively, which fuel reserves are based on the value of natural gas at the time the imbalance was created, and which are not subject to revaluation at fair market value.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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