7. VARIABLE INTEREST ENTITIES

Principles of Consolidation

On January 1, 2016, we adopted Accounting Standards Update No. 2015-02, which amended consolidation guidance to, among other things, eliminate the specialized consolidation model and guidance for limited partnerships, including the presumption that the general partner should consolidate a limited partnership. As a result, we have determined that certain entities that we historically consolidated under this presumption are variable interest entities, or VIEs. Further, we determined that we are the primary beneficiary for these VIEs and will continue to consolidate these entities under the amended guidance. While the amended guidance did not impact our conclusion that such entities should be consolidated, because such entities are now considered VIEs, additional disclosures are necessary. We have applied this amended guidance retrospectively to our disclosures.

The consolidated financial statements include our accounts, and accounts of our subsidiaries and VIEs for which we are the primary beneficiary. Upon inception of a contractual agreement, we perform an assessment to determine whether the arrangement contains a variable interest in a legal entity and whether that legal entity is a VIE. Where we conclude we are the primary beneficiary of a VIE, we consolidate the accounts of that entity.

We assess all aspects of our interests in an entity and use judgment when determining if we are the primary beneficiary. The primary beneficiary has both the power to direct the activities of the VIE that most significantly impact the entity’s economic performance and the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE. Other qualitative factors that are considered include decision-making responsibilities, the VIE capital structure, risk and rewards sharing, contractual agreements with the VIE, voting rights and level of involvement of other parties. A reassessment of the primary beneficiary conclusion is conducted when there are changes in the facts and circumstances related to a VIE.

All significant intercompany accounts and transactions are eliminated upon consolidation. Ownership interests in subsidiaries represented by other parties that do not control the entity are presented in the consolidated financial statements as activities and balances attributable to noncontrolling interests. Investments and entities over which we exercise significant influence are accounted for using the equity method.

Midcoast Energy Partners, L.P.

MEP is a publicly-traded Delaware limited partnership. As of March 31, 2016, we owned a 51.9% direct limited partner interest in MEP. In addition, we own MEP’s general partner, Midcoast Holdings GP, L.L.C. The public owns the remaining interests in MEP. We are the primary beneficiary of MEP because (1) through our ownership of MEP’s general partner and our majority limited partner interest, we have the power to direct the activities that most significantly impact MEP’s economic performance; and (2) we have the obligation to absorb losses and the right to receive residual returns that potentially could be significant to MEP.

As of March 31, 2016 and December 31, 2015, our consolidated statements of financial position include total assets of $5,140.3 million and $5,227.2 million, respectively, and total liabilities of $1,144.8 million and $1,220.7 million, respectively, related to MEP. The assets of MEP can only be used to settle their obligations. We do not have an obligation to provide financial support to MEP other than through certain contractual obligations, as prescribed by the terms of certain indemnities and guarantees, to pay specified liabilities of MEP.

Midcoast Operating, L.P.

Midcoast Operating is a Texas limited partnership. As of March 31, 2016, we and MEP owned 48.4% and 51.6%, respectively, of direct limited partner interest in Midcoast Operating. In addition, MEP owns Midcoast Operating’s general partner, Midcoast OLP GP, L.L.C. MEP is the primary beneficiary of Midcoast Operating because (1) through MEP’s ownership in Midcoast Operating’s general partner and majority limited partner interest, MEP has the power to direct the activities that most significantly impact Midcoast Operating’s economic performance; and (2) MEP has the obligation to absorb losses and the right to receive residual returns that potentially could be significant to Midcoast Operating. In addition, MEP is the entity within the related party group that is most closely associated with Midcoast Operating. As such, MEP consolidates Midcoast Operating. As discussed above, we consolidate MEP, and by extension also consolidate Midcoast Operating.

Enbridge Energy, Limited Partnership

Enbridge Energy, Limited Partnership, or OLP, is a Delaware limited partnership that has established several series of partnership interests. As of March 31, 2016, we owned, directly or indirectly, 100% of the general partner interests in each series of OLP, as well as 100% of the Series LH and Series AC limited partner interests in OLP. In addition, including our ownership of the general partner interests, we directly and indirectly owned 25% of the Series EA and Series ME interests in OLP. Our General Partner owns the remaining 75% interests in Series EA and Series ME in OLP. We are the primary beneficiary of OLP because (1) through our ownership of the general partner interests in each of the OLP’s series and our limited partner interests in each series, we have the power to direct the activities that most significantly impact OLP’s economic performance; and (2) we have the obligation to absorb losses and the right to receive residual returns that potentially could be significant to OLP. In addition, we are the entity within the related party group that is most closely associated with OLP.

As of March 31, 2016 and December 31, 2015, our consolidated statements of financial position include total assets of $11,228.4 million and $11,074.9 million, respectively, and total liabilities of $857.7 million and $998.2 million, respectively, related to OLP. Only the assets of OLP can be used to settle OLP’s obligations. We currently do not have any obligation to provide financial support to OLP, although from time to time, we may provide certain indemnities and guarantees for payment of specified liabilities to third parties in the event that OLP becomes in default under contracts with those third parties.

North Dakota Pipeline Company, L.L.C.

North Dakota Pipeline Company, L.L.C., or NPDC, is a Delaware limited liability company. As of March 31, 2016, we directly owned 100% of the Class A units and 62.5% of the Class B units in NDPC. Williston Basin Pipeline LLC, or Williston, an affiliate of Marathon Petroleum Corporation, or MPC, owns the remaining 37.5% of Class B units in NDPC, which are used to fund the Sandpiper Project. We are the primary beneficiary of NDPC because (1) through our 100% ownership in NDPC’s Class A units and majority ownership in its Class B units, we have the power to direct the activities that most significantly impact NDPC’s economic performance; and (2) we have the obligation to absorb losses and the right to receive residual returns that potentially could be significant to NDPC.

As of March 31, 2016 and December 31, 2015, our consolidated statements of financial position include total assets of $1,753.9 million and $1,746.3 million, respectively, and total liabilities of $52.3 million and $84.8 million, respectively, related to NDPC. Only the assets of NDPC can be used to settle NDPC’s obligations. We currently do not have any obligation to provide financial support to NDPC, although from time to time we may provide certain indemnities and guarantees for payment of specified liabilities to third parties in the event that NDPC becomes in default under contracts with those third parties.

The following table includes assets to be used to settle liabilities of our consolidated VIEs and liabilities of our consolidated VIEs for which creditors do not have recourse to our general credit as the primary beneficiary. These assets and liabilities are included in our consolidated balance sheet.


	March 31, 2016		December 31, 2015
	(unaudited; in millions)
ASSETS
Cash and cash equivalents	$	116.2	$	108.7
Restricted cash	$	14.6	$	20.6
Receivables, trade and other, net	$	14.7	$	22.8
Due from General Partner and affiliates	$	85.8	$	51.9
Accrued receivables	$	41.2	$	77.4
Inventory	$	15.3	$	35.1
Other current assets	$	137.9	$	165.3
Property, plant and equipment, net	$	16,918.7	$	16,766.6
Intangible assets, net	$	274.4	$	279.8
Other assets, net	$	503.8	$	520.2
LIABILITIES
Due to General Partner and affiliates	$	128.5	$	123.4
Accounts payable and other	$	358.9	$	534.2
Environmental liabilities	$	107.9	$	95.7
Accrued purchases	$	112.9	$	144.1
Interest payable	$	8.2	$	8.7
Property and other taxes payable	$	98.1	$	100.5
Long-term debt	$	1,037.5	$	1,087.4
Other long-term liabilities	$	202.8	$	209.7