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Fair Value Measurements | 9 Months Ended
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Sep. 30, 2016
Fair Value Disclosures [Abstract] |
FAIR VALUE MEASUREMENTS |
12. | FAIR VALUE MEASUREMENTS
General U.S. GAAP requires or permits certain assets and liabilities to be measured at fair value on a recurring or nonrecurring basis in our balance sheets, and those assets and liabilities are presented below under “Recurring Fair Value Measurements” and “Nonrecurring Fair Value Measurements.” Assets and liabilities measured at fair value on a recurring basis, such as derivative financial instruments, are measured at fair value at the end of each reporting period. Assets and liabilities measured at fair value on a nonrecurring basis, such as the impairment of property, plant and equipment, are measured at fair value in particular circumstances. U.S. GAAP also requires the disclosure of the fair values of financial instruments when an option to elect fair value accounting has been provided, but such election has not been made. A debt obligation is an example of such a financial instrument. The disclosure of the fair values of financial instruments not recognized at fair value in our balance sheet is presented below under “Other Financial Instruments.” U.S. GAAP provides a framework for measuring fair value and establishes a three-level fair value hierarchy that prioritizes inputs to valuation techniques based on the degree to which objective prices in external active markets are available to measure fair value. Following is a description of each of the levels of the fair value hierarchy.
• | Level 1 - Observable inputs, such as unadjusted quoted prices in active markets for identical assets or liabilities.
• | Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
• | Level 3 - Unobservable inputs for the asset or liability. Unobservable inputs reflect our own assumptions about what market participants would use to price the asset or liability. The inputs are developed based on the best information available in the circumstances, which might include occasional market quotes or sales of similar instruments or our own financial data such as internally developed pricing models, discounted cash flow methodologies, as well as instruments for which the fair value determination requires significant judgment.
Recurring Fair Value Measurements The tables below present information (in millions) about our assets and liabilities recognized at their fair values in our balance sheets categorized according to the fair value hierarchy of the inputs utilized by us to determine the fair values as of September 30, 2016 and December 31, 2015. We have elected to offset the fair value amounts recognized for multiple similar derivative contracts executed with the same counterparty, including any related cash collateral assets or obligations as shown below; however, fair value amounts by hierarchy level are presented in the tables below on a gross basis. We have no derivative contracts that are subject to master netting arrangements that are reflected gross on the balance sheet.
| September 30, 2016
|  |  | Total Gross Fair Value |  | Effect of Counter- party Netting |  | Effect of Cash Collateral Netting |  | Net Carrying Value on Balance Sheet |  | Cash Collateral Paid or Received Not Offset
| Fair Value Hierarchy |
| Level 1 |  | Level 2 |  | Level 3 |
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commodity derivative contracts | $ | 753 |  |  | $ | 25 |  |  | $ | — |  |  | $ | 778 |  |  | $ | (706 | ) |  | $ | — |  |  | $ | 72 |  |  | $ | — |
Physical purchase contracts | — |  |  | 1 |  |  | — |  |  | 1 |  |  | n/a |  |  | n/a |  |  | 1 |  |  | n/a |
Foreign currency contracts | 1 |  |  | — |  |  | — |  |  | 1 |  |  | n/a |  |  | n/a |  |  | 1 |  |  | n/a |
Investments of certain benefit plans | 57 |  |  | — |  |  | 11 |  |  | 68 |  |  | n/a |  |  | n/a |  |  | 68 |  |  | n/a |
Total | $ | 811 |  |  | $ | 26 |  |  | $ | 11 |  |  | $ | 848 |  |  | $ | (706 | ) |  | $ | — |  |  | $ | 142 |  |  |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commodity derivative contracts | $ | 706 |  |  | $ | 18 |  |  | $ | — |  |  | $ | 724 |  |  | $ | (706 | ) |  | $ | (18 | ) |  | $ | — |  |  | $ | (86 | )
Environmental credit obligations | — |  |  | 63 |  |  | — |  |  | 63 |  |  | n/a |  |  | n/a |  |  | 63 |  |  | n/a |
Physical purchase contracts | — |  |  | 11 |  |  | — |  |  | 11 |  |  | n/a |  |  | n/a |  |  | 11 |  |  | n/a |
Total | $ | 706 |  |  | $ | 92 |  |  | $ | — |  |  | $ | 798 |  |  | $ | (706 | ) |  | $ | (18 | ) |  | $ | 74 |  |  |
| December 31, 2015
|  |  | Total Gross Fair Value |  | Effect of Counter- party Netting |  | Effect of Cash Collateral Netting |  | Net Carrying Value on Balance Sheet |  | Cash Collateral Paid or Received Not Offset
| Fair Value Hierarchy |  |  |  |  |
| Level 1 |  | Level 2 |  | Level 3 |  |  |  |  |
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commodity derivative contracts | $ | 649 |  |  | $ | 33 |  |  | $ | — |  |  | $ | 682 |  |  | $ | (557 | ) |  | $ | (12 | ) |  | $ | 113 |  |  | $ | — |
Foreign currency contracts | 3 |  |  | — |  |  | — |  |  | 3 |  |  | n/a |  |  | n/a |  |  | 3 |  |  | n/a |
Investments of certain benefit plans | 64 |  |  | — |  |  | 11 |  |  | 75 |  |  | n/a |  |  | n/a |  |  | 75 |  |  | n/a |
Total | $ | 716 |  |  | $ | 33 |  |  | $ | 11 |  |  | $ | 760 |  |  | $ | (557 | ) |  | $ | (12 | ) |  | $ | 191 |  |  |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commodity derivative contracts | $ | 522 |  |  | $ | 35 |  |  | $ | — |  |  | $ | 557 |  |  | $ | (557 | ) |  | $ | — |  |  | $ | — |  |  | $ | (31 | )
Environmental credit obligations | — |  |  | 2 |  |  | — |  |  | 2 |  |  | n/a |  |  | n/a |  |  | 2 |  |  | n/a |
Physical purchase contracts | — |  |  | 6 |  |  | — |  |  | 6 |  |  | n/a |  |  | n/a |  |  | 6 |  |  | n/a |
Total | $ | 522 |  |  | $ | 43 |  |  | $ | — |  |  | $ | 565 |  |  | $ | (557 | ) |  | $ | — |  |  | $ | 8 |  |  |  |
A description of our assets and liabilities recognized at fair value along with the valuation methods and inputs we used to develop their fair value measurements are as follows:
• | Commodity derivative contracts consist primarily of exchange-traded futures and swaps, and as disclosed in Note 13, some of these contracts are designated as hedging instruments. These contracts are measured at fair value using the market approach. Exchange-traded futures are valued based on quoted prices from the exchange and are categorized in Level 1 of the fair value hierarchy. Swaps are priced using third-party broker quotes, industry pricing services, and exchange-traded curves, with appropriate consideration of counterparty credit risk, but because they have contractual terms that are not identical to exchange-traded futures instruments with a comparable market price, these financial instruments are categorized in Level 2 of the fair value hierarchy.
• | Physical purchase contracts represent the fair value of fixed-price corn purchase contracts. The fair values of these purchase contracts are measured using a market approach based on quoted prices from the commodity exchange or an independent pricing service and are categorized in Level 2 of the fair value hierarchy.
• | Investments of certain benefit plans consist of investment securities held by trusts for the purpose of satisfying a portion of our obligations under certain U.S. nonqualified benefit plans. The assets categorized in Level 1 of the fair value hierarchy are measured at fair value using a market approach based on quoted prices from national securities exchanges. The assets categorized in Level 3 of the fair value hierarchy represent insurance contracts, the fair value of which is provided by the insurer.
• | Foreign currency contracts consist of foreign currency exchange and purchase contracts entered into for our international operations to manage our exposure to exchange rate fluctuations on transactions denominated in currencies other than the local (functional) currencies of those operations. These contracts are valued based on quoted prices from the exchange and are categorized in Level 1 of the fair value hierarchy.
• | Environmental credit obligations represent our liability for the purchase of (i) biofuel credits (primarily Renewable Identification Numbers (RINs) in the U.S.) needed to satisfy our obligation to blend biofuels into the products we produce and (ii) emission credits under the California Global Warming Solutions Act (the California cap-and-trade system, also known as AB 32) and Quebec’s Regulation respecting the cap-and-trade system for greenhouse gas emission allowances (the Quebec cap-and-trade system), (collectively, the cap-and-trade systems). To the degree we are unable to blend biofuels (such as ethanol and biodiesel) at percentages required under the biofuel programs, we must purchase biofuel credits to comply with these programs. Under the cap-and-trade systems, we must purchase emission credits to comply with these systems. These programs are further described in Note 13 under “Environmental Compliance Program Price Risk.” The liability for environmental credits is based on our deficit for such credits as of the balance sheet date, if any, after considering any credits acquired or under contract, and is equal to the product of the credits deficit and the market price of these credits as of the balance sheet date. The environmental credit obligations are categorized in Level 2 of the fair value hierarchy and are measured at fair value using the market approach based on quoted prices from an independent pricing service.
There were no transfers between levels for assets and liabilities held as of September 30, 2016 and December 31, 2015 that were measured at fair value on a recurring basis. There was no activity during the three and nine months ended September 30, 2016 and 2015 related to the fair value amounts categorized in Level 3 as of September 30, 2016 and December 31, 2015. Nonrecurring Fair Value Measurements As discussed in Note 2, we concluded that the Aruba Terminal was impaired as of June 30, 2016, which resulted in an asset impairment loss of $56 million that was recorded in June 2016. The fair value of the Aruba Terminal was determined using an income approach and was classified in Level 3. We employed a probability-weighted approach to possible future cash flow scenarios, including transferring ownership of the business to the GOA or continuing to operate. There were no assets or liabilities that were measured at fair value on a nonrecurring basis as of September 30, 2016 and December 31, 2015. Other Financial Instruments Financial instruments that we recognize in our balance sheets at their carrying amounts are shown in the table below along with their associated fair values (in millions):
| September 30, 2016 |  | December 31, 2015
| Carrying Amount |  | Fair Value |  | Carrying Amount |  | Fair Value
Financial assets: |  |  |  |  |  |  |
Cash and temporary cash investments | $ | 5,949 |  |  | $ | 5,949 |  |  | $ | 4,114 |  |  | $ | 4,114 |
Financial liabilities: |  |  |  |  |  |  |
Debt (excluding capital leases) | 8,875 |  |  | 10,005 |  |  | 7,292 |  |  | 7,759 |
The methods and significant assumptions used to estimate the fair value of these financial instruments are as follows:
• | The fair value of cash and temporary cash investments approximates the carrying value due to the low level of credit risk of these assets combined with their short maturities and market interest rates (Level 1).
• | The fair value of debt is determined primarily using the market approach based on quoted prices provided by third-party brokers and vendor pricing services (Level 2).

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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/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=66048111&loc=d3e19207-110258 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 30 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14172-108612 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 28 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14064-108612 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=73719730&loc=d3e13537-108611 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 16 -URI http://asc.fasb.org/extlink&oid=73719730&loc=d3e13504-108611 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=73719730&loc=d3e13433-108611 + Details
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