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 net realizable value, 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, 2017, 2016 and 2015, we recorded charges of $35 million, $3 million and $117 million, respectively, related to the writedown of our crude oil, NGL and natural gas inventory due to declines in prices. A portion of these inventory valuation adjustments was offset by the recognition of gains on derivative instruments being utilized to hedge future sales of our crude oil and NGL inventory. Such gains were recorded to “Supply and Logistics segment revenues” in our accompanying Consolidated Statement of Operations. See Note 12 for discussion of our derivative and risk management activities.

Linefill and base gas 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 2017, 2016 and 2015, we did not recognize any impairments of linefill and base gas.

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 (barrels and natural gas volumes in thousands and carrying value in millions):



	December 31, 2017						December 31, 2016
	Volumes	Unit of Measure	Carrying Value		Price/ Unit ⁽¹⁾		Volumes	Unit of Measure	Carrying Value		Price/ Unit ⁽¹⁾
Inventory
Crude oil	7,800	barrels	$	402	$	51.54	23,589	barrels	$	1,049	$	44.47
NGL	10,774	barrels	294		$	27.29	13,497	barrels	242		$	17.93
Natural gas	—	Mcf	—		$	—	14,540	Mcf	32		$	2.20
Other	N/A		17		N/A		N/A		20		N/A
Inventory subtotal			713						1,343

Linefill and base gas
Crude oil	12,340	barrels	719		$	58.27	12,273	barrels	710		$	57.85
NGL	1,597	barrels	45		$	28.18	1,660	barrels	45		$	27.11
Natural gas	24,976	Mcf	108		$	4.32	30,812	Mcf	141		$	4.58
Linefill and base gas subtotal			872						896

Long-term inventory
Crude oil	1,870	barrels	105		$	56.15	3,279	barrels	163		$	49.71
NGL	2,167	barrels	59		$	27.23	1,418	barrels	30		$	21.16
Long-term inventory subtotal			164						193

Total			$	1,749					$	2,432


⁽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.