SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Notes)

9 Months Ended

Sep. 30, 2022

Significant Accounting Policies [Text Block]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Our accompanying unaudited Consolidated Financial Statements have been prepared pursuant to the rules and regulations of the SEC. These statements have been prepared in accordance with GAAP and reflect all adjustments that, in our opinion, are necessary for a fair statement of the results for the interim periods presented. All such adjustments are of a normal recurring nature. The 2021 year-end Consolidated Balance Sheet data was derived from our audited Consolidated Financial Statements but does not include all disclosures required by GAAP. Certain reclassifications have been made in the prior year Consolidated Financial Statements to conform to the current year presentation. These unaudited Consolidated Financial Statements should be read in conjunction with our audited Consolidated Financial Statements in our Annual Report.

Goodwill Impairment Review - We assess our goodwill for impairment at least annually as of July 1, unless events or changes in circumstances indicate an impairment may have occurred before that time. At July 1, 2022, we assessed qualitative factors to determine whether it was more likely than not that the fair value of reporting units with goodwill are less than their carrying amount. After assessing qualitative factors (including macroeconomic conditions, industry and market considerations, costs and overall financial performance), we determined that it was more likely than not that the fair value of the Natural Gas Pipelines and Natural Gas Liquids reporting units were not less than their respective carrying value, that no further testing was necessary and that goodwill was not considered impaired.

Medford Incident - On July 9, 2022, a fire occurred at our 210 MBbl/d Medford, Oklahoma, natural gas liquids fractionation facility. All personnel were safe and accounted for with evacuations of local residents taken as a precautionary measure. While the facility remains inoperable, we continue to provide midstream services through our integrated NGL pipeline system between the Mid-Continent and Gulf Coast regions, along with our fractionation and storage assets and arrangements with industry peers. We are cooperating with government agencies, as applicable, and we continue our efforts to determine the cause of the event and expect the Medford facility to remain out of service for an extended period. Subject to the terms and conditions of our insurance policies and any applicable sub-limits, we have property damage and business interruption coverage with a combined per occurrence limit of $2 billion and deductibles of $5 million per occurrence for property damage and a 45-day waiting period per occurrence for business interruption coverage. As a result of our insurance coverage, we do not expect the Medford incident will have a material effect on our financial condition, results of operations or cash flows. However, the timing of insurance proceeds may impact our results in a given quarter or year.

In September 2022, we received notice that our insurers agreed to pay an unallocated first installment of insurance proceeds of $100 million. As of November 2, 2022, we have received approximately $45 million of this amount and expect to receive the remainder within the next 30 days. We have applied the cash received to the outstanding insurance receivables discussed below.

In third quarter 2022, we recorded a partial impairment charge of $6.7 million, which represents the value associated with certain Medford facility property, based on our limited assessments to date and related estimates and assumptions. We recorded a receivable of $6.7 million that was probable of recovery and fully offsets our property losses. Any insurance proceeds attributable to property damage in excess of our recognized property losses are considered a gain contingency and not recognized until realizable.

Our business interruption insurance provides coverage including, but not limited to (i) incurred costs and losses that are either unavoidable or incurred to mitigate or reduce losses and (ii) lost earnings. We record receivables for incurred costs and losses related to our business interruption coverage for the amount probable of recovery, not to exceed the actual losses incurred. Lost earnings claims under our business interruption coverage are considered a gain contingency and not recognized until realizable. In the three and nine months ended September 30, 2022, we recorded receivables of $21.7 million, related primarily to third-party fractionation costs incurred subsequent to the 45-day business interruption waiting period, that are probable of recovery, with an offset to the income statement where the actual losses incurred were recorded. The following table sets forth the impact of this business interruption insurance by income statement caption for the three and nine months ended September 30, 2022:


	September 30, 2022
	(Thousands of dollars)
Commodity sales revenue (a)	$	17,618
Services revenue	$	1,249
Cost of sales and fuel	$	2,856

(a) - Represents third-party fractionation costs. Pursuant to ASC 606 our third-party fractionation agreements are considered commodity sales contracts as a third-party assumed control of the NGL raw feed prior to performing the fractionation services. Therefore, incurred costs associated with these third-party fractionation agreements were recorded as a reduction of the commodity sales price in commodity sales rather than as costs of sales and fuel.Recently Issued Accounting Standards Update - Changes to GAAP are established by the Financial Accounting Standards Board (FASB) in the form of ASUs to the FASB Accounting Standards Codification. We consider the applicability and impact of all ASUs. ASUs not discussed herein or in our Annual Report were assessed and determined to be either not applicable or clarifications of ASUs previously issued. There have been no new accounting pronouncements that have become effective or have been issued that are of significance or potential significance to us.