Note 4—Inventory, Linefill and Base Gas and Long-term Inventory

Inventory primarily consists of crude oil, NGL and natural gas in pipelines, storage facilities and railcars that are valued at the lower of cost or market, with cost determined using an average cost method within specific inventory pools. At the end of each reporting period, we assess the carrying value of our inventory and make any adjustments necessary to reduce the carrying value to the applicable net realizable value. Any resulting adjustments are a component of “Purchases and related costs” on our accompanying Consolidated Statements of Operations. During the years ended December 31, 2015, 2014 and 2013, we recorded charges of $117 million, $289 million and $7 million, respectively, related to the writedown of our crude oil, NGL and natural gas inventory due to declines in prices. In addition, the charges recorded during the year ended December 31, 2014 included the writedown of our natural gas inventory that was purchased in conjunction with managing natural gas storage deliverability requirements during the extended period of severe cold weather in the first quarter of 2014. A portion of these adjustments was offset by the recognition of gains on derivative instruments being utilized to hedge the future sales of our crude oil and NGL inventory. Substantially all of such gains were recorded to “Supply and Logistics segment revenues” in our accompanying Consolidated Statement of Operations. See Note 11 for discussion of our derivative and risk management activities.

Linefill and base gas and minimum working inventory requirements in assets we own are recorded at historical cost and consist of crude oil, NGL and natural gas. We classify as linefill or base gas (i) our proportionate share of barrels used to fill a pipeline that we own such that when an incremental barrel is pumped into or enters a pipeline it forces product out at another location, (ii) barrels that represent the minimum working requirements in tanks and caverns that we own and (iii) natural gas required to maintain the minimum operating pressure of natural gas storage facilities we own. Linefill and base gas carrying amounts are reviewed for impairment in accordance with FASB guidance with respect to accounting for the impairment or disposal of long-lived assets. Carrying amounts that are not expected to be recoverable through future cash flows are written down to estimated fair value. See Note 5 for further discussion regarding impairment of long-lived assets. During 2015, 2014 and 2013, we did not recognize any impairments of linefill and base gas, but we did recognize gains of less than $1 million, $8 million and $7 million, respectively, on the sale of linefill and base gas for proceeds of $1 million, $24 million and $40 million, respectively.

Minimum working inventory requirements in third-party assets and other working inventory in our assets that are needed for our commercial operations are included within specific inventory pools in inventory (a current asset) in determining the average cost of operating inventory. At the end of each period, we reclassify the inventory not expected to be liquidated within the succeeding twelve months out of inventory, at the average cost of the applicable inventory pools, and into long-term inventory, which is reflected as a separate line item in “Other assets” on our Consolidated Balance Sheets.

Inventory, linefill and base gas and long-term inventory consisted of the following as of the dates indicated (barrels and natural gas volumes in thousands and carrying value in millions):

	December 31, 2015						December 31, 2014
	Volumes	Unit of Measure	Carrying Value		Price/ Unit (1)		Volumes	Unit of Measure	Carrying Value		Price/ Unit (1)
Inventory
Crude oil	16,345	barrels	$	608	$	37.20	6,465	barrels	$	304	$	47.02
NGL	13,907	barrels	218		$	15.68	13,553	barrels	454		$	33.50
Natural gas	22,080	Mcf	53		$	2.40	32,317	Mcf	102		$	3.16
Other	N/A		37		N/A		N/A		31		N/A
Inventory subtotal			916						891


Linefill and base gas
Crude oil	12,298	barrels	713		$	57.98	11,810	barrels	744		$	63.00
NGL	1,348	barrels	44		$	32.64	1,212	barrels	52		$	42.90
Natural gas	30,812	Mcf	141		$	4.58	28,612	Mcf	134		$	4.68

Linefill and base gas subtotal			898						930


Long-term inventory
Crude oil	3,417	barrels	106		$	31.02	2,582	barrels	136		$	52.67
NGL	1,652	barrels	23		$	13.92	1,681	barrels	50		$	29.74

Long-term inventory subtotal			129						186


Total			$	1,943					$	2,007

(1)

Price per unit of measure is comprised of a weighted average associated with various grades, qualities and locations. Accordingly, these prices may not coincide with any published benchmarks for such products.