Related Party Transactions

See Note 15 to our Consolidated Financial Statements included in Part IV of our 2017 Annual Report on Form 10-K for a complete discussion of our related party transactions.

Ownership of PAGP Class C Shares

As of September 30, 2018 and December 31, 2017, we owned 516,138,000 and 510,925,432, respectively, Class C shares of PAGP. The Class C shares represent a non-economic limited partner interest in PAGP that provides us, as the sole holder, a “pass-through” voting right through which our common unitholders and Series A preferred unitholders have the effective right to vote, pro rata with the holders of Class A and Class B shares of PAGP, for the election of eligible PAGP GP directors.

Transactions with Oxy

As of September 30, 2018, Oxy had a representative on the board of directors of PAGP GP and owned approximately 11% of the limited partner interests in AAP (which represents an approximate 4% indirect ownership interest in PAA). During the three and nine months ended September 30, 2018 and 2017, we recognized sales and transportation revenues and purchased petroleum products from Oxy. These transactions were conducted at posted tariff rates or prices that we believe approximate market. Included in these transactions was a crude oil buy/sell agreement that includes a multi-year minimum volume commitment. The impact to our Condensed Consolidated Statements of Operations from those transactions is included below (in millions):



	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Revenues	$	260		$	204		$	818		$	657

Purchases and related costs ⁽¹⁾	$	(22	)	$	(68	)	$	(184	)	$	(169	)


⁽¹⁾	Crude oil purchases that are part of inventory exchanges under buy/sell transactions are netted with the related sales, with any margin presented in “Purchases and related costs” in our Condensed Consolidated Statements of Operations.

We currently have a netting arrangement with Oxy. Our gross receivable and payable amounts with Oxy were as follows (in millions):



	September 30, 2018		December 31, 2017
Trade accounts receivable and other receivables	$	1,039	$	1,075

Accounts payable	$	976	$	990

Transactions with Equity Method Investees

We also have transactions with companies in which we hold an investment accounted for under the equity method of accounting. We recorded revenues of $3 million and $1 million during the three months ended September 30, 2018 and 2017, respectively, and $9 million and $3 million during the nine months ended September 30, 2018 and 2017, respectively, primarily related to transportation services. In addition, we utilized transportation services and purchased petroleum products provided by these companies. Costs related to these services and product purchases totaled $146 million and $124 million for the three months ended September 30, 2018 and 2017, respectively, and $411 million and $318 million for the nine months ended September 30, 2018 and 2017, respectively. These costs include amounts associated with a joint tariff administered by an equity method investee, of which $74 million and $57 million for the three months ended September 30, 2018 and 2017, respectively, and $213 million and $150 million for the nine months ended September 30, 2018 and 2017, respectively, were associated with a PAA wholly-owned pipeline. These transactions were conducted at posted tariff rates or contracted rates or prices that we believe approximate market.

Receivables from our equity method investees totaled $41 million and $26 million at September 30, 2018 and December 31, 2017, respectively, and primarily included amounts related to transportation services and amounts owed to us related to expansion projects where we serve as construction manager. Accounts payable to our equity method investees were $112 million and $41 million at September 30, 2018 and December 31, 2017, respectively, and primarily included amounts related to transportation services utilized and amounts advanced to us related to expansion projects where we serve as construction manager.

In addition, we have an agreement to transport crude oil at posted tariff rates on a pipeline that is owned by an equity method investee, in which we own a 50% interest. Our commitment to transport is supported by crude oil buy/sell agreements with third parties (including Oxy) with commensurate quantities.

During the nine months ended September 30, 2018, we made net investments in our equity method investees of $300 million (including amounts contributed to and received from Cactus II Pipeline LLC subsequent to its formation, as discussed further below). Such net investments are primarily related to funding our portion of the development, construction or capital expansion projects of such entities and are reflected in “Investments in unconsolidated entities” on our Condensed Consolidated Statement of Cash Flows.

Cactus II JV Formation. In the second quarter of 2018, a subsidiary of Oxy and another third party each exercised their purchase options for a 20% interest and a 15% interest, respectively, in Cactus II Pipeline LLC (“Cactus II”), which owns the Cactus II pipeline system that is currently under construction. Although we own a majority of Cactus II’s equity, we do not have a controlling financial interest in Cactus II because the other members have substantive participating rights. Therefore, we account for our ownership interest in Cactus II as an equity method investment. Following the exercise of the purchase options, we deconsolidated Cactus II resulting in a reduction of property and equipment of $74 million (which was representative of the costs incurred to date to construct the pipeline and equivalent to fair value), and we received $26 million of cash from Cactus II, which represented the other members’ portion of the property and equipment.

In addition, during the second quarter of 2018, we received a $100 million advance cash payment from Cactus II associated with pipeline capacity agreements, which is recorded as long-term deferred revenue within “Other long-term liabilities and deferred credits” on our Condensed Consolidated Balance Sheet. Such amount will be recognized in revenue ratably over the life of the contracts beginning once the Cactus II pipeline system has been placed into service.