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DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (Tables)
 9 Months Ended
Sep. 30, 2017
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Summary of commodity derivative instruments outstanding
The following table summarizes our commodity derivative instruments outstanding at September 30, 2017 (amounts in thousands of gallons):
 
 
Volume (1)
 
 
Derivative Purpose 
 
Current
 
Long-Term
 
 
Derivatives NOT designated as hedging instruments:
 
 

 
 

 
 
Physical fixed-price derivative contracts
 
7,115

 
1,110

 
 
Physical index derivative contracts
 
35,385

 
—

 
 
Futures contracts for refined petroleum products
 
241

 
6,090

 
 
 
 
 
 
 
 
Hedge Type
Derivatives designated as hedging instruments:
 
 

 
 

 
 
Physical fixed-price derivative contracts
 
1,050

 
—

 
Cash Flow Hedge
Cash flow hedge futures contracts
 
13,104

 
8,400

 
Cash Flow Hedge
Futures contracts for refined petroleum products
 
100,632

 
4,494

 
Fair Value Hedge
                                                     
(1)
Volume represents absolute value of net notional volume position. All volumes represent net short positions, except for the physical fixed-price derivative contracts designated as a cash flow hedge.
Fair value of each classification of derivative instrument and their location in the unaudited consolidated balance sheet
The following table sets forth the fair value of each classification of derivative instruments and the locations of the derivative instruments on our unaudited condensed consolidated balance sheets at the dates indicated (in thousands):
 
September 30, 2017
 
Derivatives NOT Designated as Hedging Instruments
 
Derivatives Designated as Hedging Instruments
 
Derivative Carrying Value
 
Netting Balance Sheet Adjustment (1)
 
Net Total
Physical fixed-price derivative contracts
$
816

 
$
—

 
$
816

 
$
(95
)
 
$
721

Physical index derivative contracts
226

 
—

 
226

 
(2
)
 
224

Interest rates derivatives
—

 
49,939

 
49,939

 
—

 
49,939

Total current derivative assets
1,042

 
49,939

 
50,981

 
(97
)
 
50,884

Physical fixed-price derivative contracts
2

 
—

 
2

 
—

 
2

Total non-current derivative assets
2

 
—

 
2

 
—

 
2

Physical fixed-price derivative contracts
(3,558
)
 
(104
)
 
(3,662
)
 
95

 
(3,567
)
Physical index derivative contracts
(3
)
 
—

 
(3
)
 
2

 
(1
)
Total current derivative liabilities
(3,561
)
 
(104
)
 
(3,665
)
 
97

 
(3,568
)
Physical fixed-price derivative contracts
(84
)
 
—

 
(84
)
 
—

 
(84
)
Total non-current derivative liabilities
(84
)
 
—

 
(84
)
 
—

 
(84
)
Net derivative (liabilities) assets
$
(2,601
)
 
$
49,835

 
$
47,234

 
$
—

 
$
47,234

 
                                                      
(1)
Amounts represent the netting of physical fixed and index contracts’ assets and liabilities when a legal right of offset exists.  Futures contracts are subject to settlement through margin requirements and are additionally presented on a net basis.



 
December 31, 2016
 
Derivatives NOT Designated as Hedging Instruments
 
Derivatives Designated as Hedging Instruments
 
Derivative Carrying Value
 
Netting Balance Sheet Adjustment (1)
 
Net Total
Physical fixed-price derivative contracts
$
1,499

 
$
—

 
$
1,499

 
$
(306
)
 
$
1,193

Physical index derivative contracts
334

 
—

 
334

 
(1
)
 
333

Futures contracts for refined products
51,431

 
21

 
51,452

 
(51,452
)
 
—

Total current derivative assets
53,264

 
21

 
53,285

 
(51,759
)
 
1,526

Physical fixed-price derivative contracts
164

 
—

 
164

 
(5
)
 
159

Futures contracts for refined products
226

 
—

 
226

 
(226
)
 
—

Interest rates derivatives
—

 
62,609

 
62,609

 
—

 
62,609

Total non-current derivative assets
390

 
62,609

 
62,999

 
(231
)
 
62,768

Physical fixed-price derivative contracts
(4,517
)
 
—

 
(4,517
)
 
306

 
(4,211
)
Physical index derivative contracts
(1
)
 
—

 
(1
)
 
1

 
—

Futures contracts for refined products
(57,828
)
 
(15,685
)
 
(73,513
)
 
51,452

 
(22,061
)
Total current derivative liabilities
(62,346
)
 
(15,685
)
 
(78,031
)
 
51,759

 
(26,272
)
Physical fixed-price derivative contracts
(61
)
 
—

 
(61
)
 
5

 
(56
)
Futures contracts for refined products
(4,384
)
 
—

 
(4,384
)
 
226

 
(4,158
)
Total non-current derivative liabilities
(4,445
)
 
—

 
(4,445
)
 
231

 
(4,214
)
Net derivative (liabilities) assets
$
(13,137
)
 
$
46,945

 
$
33,808

 
$
—

 
$
33,808

                                                      
(1)
Amounts represent the netting of physical fixed and index contracts’ assets and liabilities when a legal right of offset exists.  Futures contracts are subject to settlement through margin requirements and are additionally presented on a net basis.
Gains and losses on derivative instruments recognized in income
The gains and losses on our derivative instruments recognized in income were as follows for the periods indicated (in thousands):
 
 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
Location
 
2017
 
2016
 
2017
 
2016
Derivatives NOT designated as hedging instruments:
 
 
 

 
 

 
 

 
 

Physical fixed-price derivative contracts
Product sales
 
$
(7,209
)
 
$
301

 
$
(257
)
 
$
(7,263
)
Physical index derivative contracts
Product sales
 
57

 
142

 
58

 
130

Physical fixed-price derivative contracts
Cost of product sales
 
1,462

 
479

 
1,380

 
7,965

Physical index derivative contracts
Cost of product sales
 
115

 
30

 
453

 
193

Futures contracts for refined products
Cost of product sales
 
15,861

 
(307
)
 
15,061

 
4,326

 
 
 
 
 
 
 
 
 
 
Derivatives designated as fair value hedging instruments:
 
 
 
 
 

 
 

 
 

Futures contracts for refined products
Cost of product sales
 
$
(51,093
)
 
$
(635
)
 
$
1,758

 
$
(27,590
)
Physical inventory - hedged items
Cost of product sales
 
48,236

 
3,620

 
7,536

 
43,627

 
 
 
 
 
 
 
 
 
 
Ineffectiveness excluding the time value component on fair value hedging instruments:
 
 
 
 
 

 
 

 
 

Fair value hedge ineffectiveness (excluding time value)
Cost of product sales
 
$
(3,299
)
 
$
(4,262
)
 
$
(5,929
)
 
$
(4,275
)
Time value excluded from hedge assessment
Cost of product sales
 
442

 
7,247

 
15,223

 
20,312

Net (loss) gain in income
 
 
$
(2,857
)
 
$
2,985

 
$
9,294

 
$
16,037
(Loss) gain recognized in OCI and gains (losses) reclassified from AOCI to income
The change in value recognized in OCI and the gains and losses reclassified from AOCI to income attributable to our derivative instruments designated as cash flow hedges were as follows for the periods indicated (in thousands):
 
(Loss) Gain Recognized in OCI on Derivatives for the
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2017
 
2016
 
2017
 
2016
Derivatives designated as cash flow hedging instruments:
 

 
 

 
 

 
 

Interest rate contracts
$
(2,207
)
 
$
1,052

 
$
(12,670
)
 
$
1,052

Commodity derivatives
(3,557
)
 
—

 
675

 
—

Total
$
(5,764
)
 
$
1,052

 
$
(11,995
)
 
$
1,052


 
 
 
(Loss) Gain Reclassified from AOCI to Income (Effective Portion) for the
 
 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
Location
 
2017
 
2016
 
2017
 
2016
Derivatives designated as cash flow hedging instruments:
 
 
 

 
 

 
 

 
 

Interest rate contracts
Interest and debt expense
 
$
(3,038
)
 
$
(3,037
)
 
$
(9,113
)
 
$
(9,112
)
Commodity derivatives
Product Sales
 
—

 
—

 
—

 
1,266

Total
 
 
$
(3,038
)
 
$
(3,037
)
 
$
(9,113
)
 
$
(7,846
)