Property and Equipment

12 Months Ended

Dec. 31, 2015

Note 5—Property and Equipment

In accordance with our capitalization policy, expenditures made to expand the existing operating and/or earnings capacity of our assets are capitalized. We also capitalize certain costs directly related to the construction of such assets, including related internal labor costs, engineering costs and interest costs. For the years ended December 31, 2015, 2014 and 2013, capitalized interest was $57 million, $48 million and $38 million, respectively. We also capitalize expenditures for the replacement of partially or fully depreciated assets in order to maintain the operating and/or earnings capacity of our existing assets. Repair and maintenance expenditures incurred in order to maintain the day to day operation of our existing assets are expensed as incurred.

Property and equipment, net is stated at cost and consisted of the following as of the dates indicated (in millions):

	Estimated Useful	December 31,
	Lives (Years)	2015			2014
Pipelines and related facilities	10 - 70	$	8,395		$	7,003
Storage, terminal and rail facilities	30 - 70	5,012			4,853
Trucking equipment and other	3 - 15	392			198
Construction in progress	—	1,217			1,545
Office property and equipment	2 - 50	196			156
Land and other	N/A	442			423

		15,654			14,178
Accumulated depreciation		(2,180		)	(1,906		)

Property and equipment, net		$	13,474		$	12,272

We calculate our depreciation using the straight-line method, based on estimated useful lives and salvage values of our assets. Depreciation expense for the years ended December 31, 2015, 2014 and 2013 was $380 million, $319 million and $259 million, respectively. We also classify gains and losses on sales of assets and asset impairments as a component of “Depreciation and amortization” in our Consolidated Statements of Operations. See “Impairment of Long-Lived Assets” below for a discussion of our policy for the recognition of asset impairments.

Impairment of Long-Lived Assets

Long-lived assets with recorded values that are not expected to be recovered through future cash flows are written down to estimated fair value in accordance with FASB guidance with respect to the accounting for the impairment or disposal of long-lived assets. Under this guidance, a long-lived asset is tested for impairment when events or circumstances indicate that its carrying value may not be recoverable. The carrying value of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. If the carrying value exceeds the sum of the undiscounted cash flows, an impairment loss equal to the amount by which the carrying value exceeds the fair value of the asset is recognized.

We periodically evaluate property and equipment and other long-lived assets for impairment when events or circumstances indicate that the carrying value of these assets may not be recoverable. The evaluation is highly dependent on the underlying assumptions of related cash flows. The subjective assumptions used to determine the existence of an impairment in carrying value include:

whether there is an indication of impairment;

the grouping of assets;

the intention of “holding,” “abandoning” or “selling” an asset;

the forecast of undiscounted expected future cash flow over the asset’s estimated useful life; and

if an impairment exists, the fair value of the asset or asset group.

We did not recognize any impairments during the year ended December 31, 2015. During the years ended December 31, 2014 and 2013, we recognized impairments of $10 million and $20 million, respectively, primarily related to assets that were taken out of service.