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Intangible Assets and Goodwill
 12 Months Ended
Dec. 31, 2019
Intangible Assets and Goodwill [Abstract]  
Intangible Assets and Goodwill
Note 6.  Intangible Assets and Goodwill

Identifiable Intangible Assets

The following table summarizes our intangible assets by business segment at the dates indicated:

 
  
December 31, 2019
    
December 31, 2018
  
 
  
Gross
Value
    
Accumulated
Amortization
    
Carrying
Value
    
Gross
Value
    
Accumulated
Amortization
    
Carrying
Value
  
NGL Pipelines & Services:
                                    
Customer relationship intangibles
  
$
447.8
    
$
(206.3
)
  
$
241.5
    
$
457.3
    
$
(201.9
)
  
$
255.4
  
Contract-based intangibles
    
162.6
      
(43.9
)
    
118.7
      
363.4
      
(238.7
)
    
124.7
  
Segment total
    
610.4
      
(250.2
)
    
360.2
      
820.7
      
(440.6
)
    
380.1
  
Crude Oil Pipelines & Services:
                                                
Customer relationship intangibles
    
2,203.5
      
(243.5
)
    
1,960.0
      
2,203.5
      
(174.1
)
    
2,029.4
  
Contract-based intangibles
    
276.9
      
(235.0
)
    
41.9
      
276.9
      
(211.7
)
    
65.2
  
Segment total
    
2,480.4
      
(478.5
)
    
2,001.9
      
2,480.4
      
(385.8
)
    
2,094.6
  
Natural Gas Pipelines & Services:
                                                
Customer relationship intangibles
    
1,350.3
      
(481.6
)
    
868.7
      
1,350.3
      
(447.8
)
    
902.5
  
Contract-based intangibles
    
468.0
      
(395.5
)
    
72.5
      
464.7
      
(387.9
)
    
76.8
  
Segment total
    
1,818.3
      
(877.1
)
    
941.2
      
1,815.0
      
(835.7
)
    
979.3
  
Petrochemical & Refined Products Services:
                                                
Customer relationship intangibles
    
181.4
      
(57.5
)
    
123.9
      
181.4
      
(51.8
)
    
129.6
  
Contract-based intangibles
    
46.0
      
(24.2
)
    
21.8
      
46.0
      
(21.2
)
    
24.8
  
Segment total
    
227.4
      
(81.7
)
    
145.7
      
227.4
      
(73.0
)
    
154.4
  
Total intangible assets
  
$
5,136.5
    
$
(1,687.5
)
  
$
3,449.0
    
$
5,343.5
    
$
(1,735.1
)
  
$
3,608.4
  

The following table presents the amortization expense of our intangible assets by business segment for the years indicated:

 
  
For the Year Ended December 31,
  
 
  
2019
    
2018
    
2017
  
NGL Pipelines & Services
  
$
31.9
    
$
34.7
    
$
28.9
  
Crude Oil Pipelines & Services
    
92.7
      
87.8
      
92.5
  
Natural Gas Pipelines & Services
    
41.4
      
39.1
      
36.2
  
Petrochemical & Refined Products Services
    
8.7
      
8.7
      
9.3
  
Total
  
$
174.7
    
$
170.3
    
$
166.9
  

The following table presents our forecast of amortization expense associated with existing intangible assets for the years indicated:

2020
    
2021
    
2022
    
2023
    
2024
  
$
164.8
    
$
167.0
    
$
164.0
    
$
162.4
    
$
158.9
  

Customer relationship intangible assets
Customer relationship intangible assets represent the estimated economic value assigned to commercial relationships acquired in connection with business combinations. Our customer relationship intangible assets are classified as either (i) basin-specific or (ii) general. Basin-specific customer relationships represent access to customers associated with a defined resource basin (e.g., customers using a natural gas gathering system serving a specific production field) and is analogous to having a franchise in a particular area. General customer relationships are associated with customers whose hydrocarbon volumes are not attributable to specific resource basins (e.g. customers at a marine terminal that handles volumes originating from multiple sources).

The estimated fair value of each customer relationship intangible asset was determined at the time of acquisition using a discounted cash flow analysis, which incorporates various assumptions regarding the acquired business. The assumptions may include Level 3 fair value inputs, including long-range cash flow forecasts that extend for the estimated economic life of the hydrocarbon resource base served by the asset network, anticipated service contract renewals, resource base depletion rates and expected customer attrition rates.

The recognition of customer relationships are supported by a variety of factors.  In general, midstream infrastructure requires a significant investment, both in terms of initial construction costs and ongoing maintenance, and is generally supported by long-term contracts that establish a customer base. The level of expenditures and regulatory requirements involved in constructing new midstream asset networks can create significant economic barriers to entry that may limit potential competition. Furthermore, efficient, continuous operation of the acquired fixed assets not only supports the commercial relationships existing at the time of the acquisition, but it provides us with opportunities to establish new ones.  These factors support the long-term value attributed to our customer relationship intangible assets.

With respect to amortization periods, the duration of a basin-specific customer relationship is limited to the estimated economic life of the associated resource basin. The duration of our other customer relationships is typically limited to the term of the underlying service contracts, including assumed renewals. Amortization expense attributable to customer relationships is recorded in a manner that closely resembles the pattern in which we expect to benefit from such relationships.

At December 31, 2019, the carrying value of our portfolio of customer relationship intangible assets was $3.2 billion, the principal components of which were as follows:

 a
  
Weighted
Average
Remaining
Amortization
Period
  
 
 
December 31, 2019
Gross
Value
  
Accumulated
Amortization
  
Carrying
Value
Basin-specific customer relationships:
                      
   EFS Midstream (acquired 2015)
  
22.4 years
  
$
 1,409.8
  
$
(160.1)
  
$
1,249.7
   State Line and Fairplay (acquired 2010)
  
27.2 years
    
895.0
    
(205.1)
    
689.9
   San Juan Gathering (acquired 2004)
  
19.8 years
    
331.3
    
(236.8)
    
94.5
General customer relationships:
                      
   Oiltanking (acquired 2014)
  
24.0 years
    
1,192.5
    
(122.2)
    
1,070.3

•
The EFS Midstream customer relationships provide us with long-term access to condensate and natural gas producers in the Eagle Ford Shale served by our EFS Midstream System.  The EFS Midstream System provides condensate gathering and processing services along with gathering, treating and compression services for associated natural gas. 

•
The State Line and Fairplay customer relationships provide us with long-term access to natural gas producers served by our Haynesville and Fairplay Gathering Systems. The Haynesville Gathering System gathers and treats natural gas produced from the Haynesville and Bossier Shale supply basins and the Cotton Valley and Taylor Sand formations in Louisiana and East Texas.  The Fairplay Gathering System gathers natural gas produced from the Cotton Valley formation in East Texas.

•
The San Juan Gathering customer relationships provide us with long-term access to natural gas producers in the San Juan Basin served by our San Juan Gathering System. 

•
The Oiltanking customer relationships provide us with long-term access to crude oil and refined products storage and terminal customers served at our Houston Ship Channel and Beaumont, Texas terminals.  

Contract-based intangible assets
Contract-based intangible assets represent specific commercial rights we acquired in connection with business combinations. These intangible assets are typically valued using an income approach that incorporate the terms of the agreements.  At December 31, 2019, the carrying value of our portfolio of contract-based intangible assets was $254.9 million, the principal components of which were as follows:


a
  
Weighted
Average
Remaining
Amortization
Period
  
 
 
December 31, 2019
Gross
Value
  
Accumulated
Amortization
  
Carrying
Value
Oiltanking customer contracts
  
3.6 years
  
$
293.3
  
$
(245.9)
  
$
47.4
Jonah natural gas gathering agreements
  
22.0 years
    
224.4
    
(171.4)
    
53.0
Delaware Basin natural gas processing contracts
  
7.0 years
    
82.6
    
(15.0)
    
67.6

•
The Oiltanking customer contracts represent the estimated value we assigned to crude oil storage and terminal agreements we acquired in 2014 associated with our Houston and Beaumont marine terminals. Amortization expense attributable to these contracts is recorded using a straight-line approach over the terms of the underlying contracts.

•
The Jonah natural gas gathering agreements represent the estimated value we assigned to natural gas gathering contracts acquired in 2001 associated with the Jonah Gathering System. Amortization expense attributable to these intangible assets is recorded using a units-of-production method based on gathering volumes.

•
The Delaware Basin natural gas processing contracts represent the estimated value we assigned to natural gas processing contracts we acquired in March 2018 in connection with our step acquisition of the remaining 50% member interest in Delaware Basin Gas Processing LLC (“Delaware Processing”) (see Note 12). Amortization expense attributable to these contracts is recorded using a straight-line approach over the terms of the underlying contracts.

Goodwill

At December 31, 2019 and 2018, our goodwill balance was $5.75 billion.  Goodwill represents the excess of the purchase price of an acquired business over the amounts assigned to assets acquired and liabilities assumed in the transaction.  Goodwill is not amortized; however, we evaluate goodwill for impairment on December 31 of each year or when impairment indicators (e.g., the loss of a significant customer, adverse long-term supply or demand trends, or technological obsolescence of assets) are present.  Testing goodwill for impairment involves a two-step process.  As Step 1 of the process, if impairment indicators are present, the estimated fair value of a reporting unit to which goodwill is assigned is determined and compared to its carrying value.  As Step 2 of the process, if the fair value of the reporting unit is less than its carrying value (including associated goodwill), a non-cash impairment charge to earnings is recorded to reduce the carrying value of the goodwill to its implied fair value.  

The results of our December 31, 2019 annual goodwill impairment test indicated that the estimated fair value of each applicable reporting unit exceeded its carrying value. Our fair value estimates are primarily based on the income approach to fair value, which relies on the use of discounted cash flows.  The fair value estimates are based on Level 3 inputs of the fair value hierarchy.  For example, the estimated fair values incorporate assumptions regarding the future economic prospects of the assets and operations that comprise each reporting unit including: (i) discrete financial forecasts for the assets classified within the reporting unit, which, in turn, rely on management’s estimates of long-term operating margins, throughput volumes and similar factors; (ii) long-term growth rates for cash flows beyond the discrete forecast period; and (iii) appropriate discount rates.  We believe that the assumptions we use in estimating reporting unit fair values are consistent with those that market participants would use in their fair value estimation process.

We did not record any goodwill impairment charges, or reclassify any goodwill amounts between business segments, during the years ended December 31, 2019, 2018 or 2017.  See Note 10 for our goodwill by segment balances.

In January 2017, the FASB issued ASU 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.” This ASU simplifies the accounting for goodwill impairment by removing Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. Goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill.  We adopted this guidance on January 1, 2020 for future goodwill impairment testing.