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Fair Value Measurements | 9 Months Ended
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Sep. 30, 2019
Fair Value Disclosures [Abstract] |
Fair Value Measurements | FAIR VALUE MEASUREMENTS Fair Values—Recurring The following tables present assets and liabilities accounted for at fair value on a recurring basis as of September 30, 2019 and December 31, 2018 by fair value hierarchy level. We have elected to offset the fair value amounts recognized for multiple derivative contracts executed with the same counterparty, including any related cash collateral as shown below; however, fair value amounts by hierarchy level are presented on a gross basis in the following tables.
| September 30, 2019
| Fair Value Hierarchy |  |  |  |  |  |
(In millions) | Level 1 |  | Level 2 |  | Level 3 |  | Netting and Collateral(a) |  | Net Carrying Value on Balance Sheet(b) |  | Collateral Pledged Not Offset
Assets: |  |  |  |  |  |  |  |  |  |  |
Commodity contracts | $ | 176 |  |  | $ | 9 |  |  | $ | — |  |  | $ | (161 | ) |  | $ | 24 |  |  | $ | 77 |
Liabilities: |  |  |  |  |  |  |  |  |  |  |
Commodity contracts | $ | 165 |  |  | $ | 12 |  |  | $ | — |  |  | $ | (176 | ) |  | $ | 1 |  |  | $ | — |
Embedded derivatives in commodity contracts | — |  |  | — |  |  | 54 |  |  | — |  |  | 54 |  |  | — |
| December 31, 2018
| Fair Value Hierarchy |  |  |  |  |  |
(In millions) | Level 1 |  | Level 2 |  | Level 3 |  | Netting and Collateral(a) |  | Net Carrying Value on Balance Sheet(b) |  | Collateral Pledged Not Offset
Assets: |  |  |  |  |  |  |  |  |  |  |
Commodity contracts | $ | 370 |  |  | $ | 31 |  |  | $ | — |  |  | $ | (323 | ) |  | $ | 78 |  |  | $ | 2 |
Liabilities: |  |  |  |  |  |  |  |  |  |  |
Commodity contracts | $ | 255 |  |  | $ | 37 |  |  | $ | — |  |  | $ | (284 | ) |  | $ | 8 |  |  | $ | — |
Embedded derivatives in commodity contracts | — |  |  | — |  |  | 61 |  |  | — |  |  | 61 |  |  | — |
(a) | Represents the impact of netting assets, liabilities and cash collateral when a legal right of offset exists. As of September 30, 2019, cash collateral of $15 million was netted with the mark-to-market derivative liabilities. As of December 31, 2018, cash collateral of $52 million was netted with mark-to-market derivative assets and $13 million was netted with mark-to-market derivative liabilities.
(b) | We have no derivative contracts that are subject to master netting arrangements reflected gross on the balance sheet.
Commodity derivatives in Level 1 are exchange-traded contracts for crude oil and refined products measured at fair value with a market approach using the close-of-day settlement prices for the market. Commodity derivatives are covered under master netting agreements with an unconditional right to offset. Collateral deposits in futures commission merchant accounts covered by master netting agreements related to Level 1 commodity derivatives are classified as Level 1 in the fair value hierarchy. Level 2 instruments are valued based on quoted prices for similar assets and liabilities in active markets, and inputs other than quoted prices, such as liquidity, that are observable for the asset or liability. Commodity derivatives in Level 2 are OTC contracts, which are valued using market quotations from independent price reporting agencies, third-party brokers and commodity exchange price curves that are corroborated with market data. Level 3 instruments are OTC NGL contracts and embedded derivatives in commodity contracts. The embedded derivative liability relates to a natural gas purchase agreement embedded in a keep‑whole processing agreement. The fair value calculation for these Level 3 instruments at September 30, 2019 used significant unobservable inputs including: (1) NGL prices interpolated and extrapolated due to inactive markets ranging from $0.41 to $1.07 per gallon and (2) the probability of renewal of 93 percent for the first five-term and 82.5 percent for the second five-term of the natural gas purchase agreement and the related keep-whole processing agreement. For these contracts, increases in forward NGL prices result in a decrease in the fair value of the derivative assets and an increase in the fair value of the derivative liabilities. Increases or decreases in the fractionation spread result in an increase or decrease in the fair value of the embedded derivative liability. An increase in the probability of renewal would result in an increase in the fair value of the related embedded derivative liability. The following is a reconciliation of the beginning and ending balances recorded for net liabilities classified as Level 3 in the fair value hierarchy.
| Three Months Ended September 30, |  | Nine Months Ended September 30,
(In millions) | 2019 |  | 2018 |  | 2019 |  | 2018
Beginning balance | $ | 65 |  |  | $ | 68 |  |  | $ | 61 |  |  | $ | 66 |
Unrealized and realized losses included in net income | (9 | ) |  | 20 |  |  | (2 | ) |  | 29 |
Settlements of derivative instruments | (2 | ) |  | (4 | ) |  | (5 | ) |  | (11 | )
Ending balance | $ | 54 |  |  | $ | 84 |  |  | $ | 54 |  |  | $ | 84 |
The amount of total losses for the period included in earnings attributable to the change in unrealized losses relating to assets still held at the end of period: | $ | (9 | ) |  | $ | 21 |  |  | $ | (5 | ) |  | $ | 22 |
Fair Values – Reported We believe the carrying value of our other financial instruments, including cash and cash equivalents, receivables, accounts payable and certain accrued liabilities, approximate fair value. Our fair value assessment incorporates a variety of considerations, including the short-term duration of the instruments and the expected insignificance of bad debt expense, which includes an evaluation of counterparty credit risk. The borrowings under our revolving credit facilities and term loan facility, which include variable interest rates, approximate fair value. The fair value of our fixed and floating rate long-term debt is based on prices from recent trade activity and is categorized in level 3 of the fair value hierarchy. The carrying and fair values of our debt were approximately $28.3 billion and $30.2 billion at September 30, 2019, respectively, and approximately $27.0 billion and $26.5 billion at December 31, 2018, respectively. These carrying and fair values of our debt exclude the unamortized issuance costs which are netted against our total debt.

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- 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. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=117815213&loc=d3e19207-110258 + Details
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