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Organization and Basis of Presentation
 12 Months Ended
Dec. 31, 2011
Organization and Basis of Presentation  
Organization and Basis of Presentation

Note 1—Organization and Basis of Presentation

 

Organization

 

Plains All American Pipeline, L.P. is a Delaware limited partnership formed in 1998. Our operations are conducted directly and indirectly through our primary operating subsidiaries. As used in this Form 10-K and unless the context indicates otherwise, the terms “Partnership,” “Plains,” “PAA,” “we,” “us,” “our,” “ours” and similar terms refer to Plains All American Pipeline, L.P. and its subsidiaries.

 

We engage in the transportation, storage, terminalling and marketing of crude oil and refined products, as well as in the processing, transportation, fractionation, storage and marketing of natural gas liquids (“NGL”).  The term NGL includes ethane and natural gasoline products as well as propane and butane, products which are also commonly referred to as liquid petroleum gas (“LPG”).  The terms NGL and LPG are sometimes used interchangeably within this document depending on the context. Through our general partner interest and majority equity ownership position in PAA Natural Gas Storage, L.P. (NYSE: PNG), we also own and operate natural gas storage facilities. Our business activities are conducted through three operating segments: (i) Transportation, (ii) Facilities and (iii) Supply and Logistics. See Note 13 for further discussion of our three operating segments.

 

Our 2% general partner interest is held by PAA GP LLC, a Delaware limited liability company, whose sole member is Plains AAP, L.P., a Delaware limited partnership. Plains All American GP LLC, a Delaware limited liability company, is Plains AAP, L.P.’s general partner. Plains All American GP LLC manages our operations and activities and employs our domestic officers and personnel. Our Canadian officers and personnel are employed by our subsidiary Plains Midstream Canada ULC. References to our “general partner,” as the context requires, include any or all of PAA GP LLC, Plains AAP, L.P. and Plains All American GP LLC. Plains AAP, L.P. and Plains All American GP LLC are essentially held by 18 owners with interests ranging from approximately 35% to less than 1%.

 

Definitions

 

Additional defined terms are used in the following notes and shall have the meanings indicated below:

 

AOCI

=

Accumulated other comprehensive income

Bcf

=

Billion cubic feet

Btu

=

British thermal unit

CAD

=

Canadian dollar

CERCLA

=

Federal Comprehensive Environmental Response, Compensation and Liability Act, as amended

DERs

=

Distribution equivalent rights

EBITDA

=

Earnings before interest taxes depreciation and amortization

FASB

=

Financial Accounting Standards Board

FERC

=

Federal Energy Regulatory Commission

GAAP

=

Generally accepted accounting principles in the United States

GATX

=

GATX Corporation

ICE

=

IntercontinentalExchange

IPO

=

Initial public offering

LIBOR

=

London Interbank Offered Rate

Link

=

Link Energy LLC

LLS

=

Light Louisiana Sweet

LTIP

=

Long-term incentive plan

Mcf

=

Thousand cubic feet

MLP

=

Master limited partnership

MTBE

=

Methyl tertiary-butyl ether

MQD

=

Minimum quarterly distribution

Nexen

=

Nexen Holdings U.S.A. Inc.

NJDEP

=

New Jersey Department of Environmental Protection

NPNS

=

Normal purchase normal sale

NYMEX

=

New York Mercantile Exchange

NYSE

=

New York Stock Exchange

PAA/Vulcan

=

PAA/Vulcan Gas Storage, LLC

Pacific

=

Pacific Energy Partners, L.P.

PLA

=

Pipeline loss allowance

PNG

=

PAA Natural Gas Storage, L.P.

PNGS

=

PAA Natural Gas Storage, LLC

PPT

=

Plains Products Terminals LLC (formerly known as Pacific Atlantic Terminals LLC)

Rainbow

=

Rainbow Pipe Line Company, Ltd.

RCRA

=

Federal Resource Conservation and Recovery Act, as amended

SG Resources

=

SG Resources Mississippi, LLC

SLC Pipeline

=

SLC Pipeline LLC

SOP

=

Shell Oil Products

TNM

=

Texas New Mexico

USD

=

United States dollar

Velocity

=

Velocity South Texas Gathering, LLC

White Cliffs

=

White Cliffs Pipeline, LLC

WTI

=

West Texas Intermediate

WTS

=

West Texas Sour

 

Basis of Consolidation and Presentation

 

The accompanying financial statements and related notes present and discuss our consolidated financial position as of December 31, 2011 and 2010, and the consolidated results of our operations, cash flows, changes in partners’ capital, comprehensive income and changes in accumulated other comprehensive income for the years ended December 31, 2011, 2010 and 2009. All significant intercompany transactions have been eliminated in consolidation, and certain reclassifications have been made to information from previous years to conform to the current presentation. These reclassifications do not affect net income attributable to Plains. The accompanying consolidated financial statements include Plains and all of its wholly owned subsidiaries. Investments in entities over which we have significant influence but not control are accounted for by the equity method. We evaluate our equity investments for impairment in accordance with FASB guidance with respect to the equity method of accounting for investments in common stock. An impairment of an equity investment results when factors indicate that the investment’s fair value is less than its carrying value and the reduction in value is other than temporary in nature.

 

Subsequent events have been evaluated through the financial statements issuance date and have been included within the following footnotes where applicable.

 

Revision of Prior Period Financial Statements

 

Limited Partner and General Partner Income Allocation

 

During 2011, we identified an error in the manner in which we allocate net income to our limited partners and general partner.  Previously, we calculated net income available to limited partners based on the distribution paid during the period by first allocating the incentive distribution paid during the period to the general partner and then allocating the remaining net income based on ownership interests (98% limited partner and 2% general partner).  We have revised this allocation to utilize the distributions pertaining to the period, a portion of which are paid in the subsequent period.  This revision does not impact Net Income, Net Income Attributable to Plains, Net Income Per Limited Partner Unit or total Partners’ Capital.  We have determined that the impact of this error is not material to the previously issued financial statements.  We have presented these changes retrospectively in the Consolidated Balance Sheet, the Consolidated Statement of Operations and the Consolidated Statements of Changes in Partners’ Capital, which resulted in the following changes (in millions):

 

 

 

As

 

As

 

 

 

Reported

 

Revised

 

Net Income Attributable to Plains

 

 

 

 

 

For the Year Ended December 31, 2009:

 

 

 

 

 

Limited Partners

 

$

443

 

$

434

 

General Partner

 

136

 

145

 

 

 

$

579

 

$

579

 

 

 

 

 

 

 

For the Year Ended December 31, 2010:

 

 

 

 

 

Limited Partners

 

$

338

 

$

330

 

General Partner

 

167

 

175

 

 

 

$

505

 

$

505

 

 

 

 

 

 

 

Partners’ Capital

 

 

 

 

 

As of December 31, 2008:

 

 

 

 

 

Limited Partners

 

$

3,469

 

$

3,441

 

General Partner

 

83

 

111

 

 

 

$

3,552

 

$

3,552

 

 

 

 

 

 

 

As of December 31, 2009:

 

 

 

 

 

Limited Partners

 

$

4,002

 

$

3,965

 

General Partner

 

94

 

131

 

 

 

$

4,096

 

$

4,096

 

 

 

 

 

 

 

As of December 31, 2010:

 

 

 

 

 

Limited Partners

 

$

4,234

 

$

4,189

 

General Partner

 

108

 

153

 

 

 

$

4,342

 

$

4,342

 

 

Revision of Prior Period Consolidated Statement of Cash Flows

 

During the second quarter of 2010, PNG completed its IPO of 13.5 million common units representing limited partner interests for net proceeds of approximately $268 million. Additionally, during the first quarter of 2009, a third party contributed approximately $26 million in cash for a 25% ownership interest in SLC Pipeline, a joint venture. The proceeds from these sales to noncontrolling interests were presented in our financial statements for the years ended December 31, 2010 and 2009 as cash flows from investing activities. Upon further evaluation, we now believe that this activity should have been presented as cash flows from financing activities.  We have determined that the impact of this reclassification on our consolidated statement of cash flows for the years ended December 31, 2010 and 2009 is not material.

 

The following captions within the prior period consolidated statements of cash flows were impacted (in millions):

 

 

 

Amounts Previously Reported

 

 

As Revised

 

 

 

Year Ended December 31,

 

 

Year Ended December 31,

 

 

 

2010

 

2009

 

 

2010

 

2009

 

Net cash used in investing activities

 

$

(583

)

$

(660

)

 

$

(851

)

$

(686

)

Net cash provided by financing activities

 

$

336

 

$

312

 

 

$

604

 

$

338

 

Net

 

$

(247

)

$

(348

)

 

$

(247

)

$

(348

)