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Operating Segments | 12 Months Ended
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Dec. 31, 2019
Segment Reporting [Abstract] |
Operating Segments | Operating Segments We manage our operations through three operating segments: Transportation, Facilities and Supply and Logistics. See Note 3 for a summary of the types of products and services from which each segment derives its revenues. Our Chief Operating Decision Maker (“CODM”) (our Chief Executive Officer) evaluates segment performance based on measures including Segment Adjusted EBITDA (as defined below) and maintenance capital investment. The measure of Segment Adjusted EBITDA forms the basis of our internal financial reporting and is the primary performance measure used by our CODM in assessing performance and allocating resources among our operating segments. We define Segment Adjusted EBITDA as revenues and equity earnings in unconsolidated entities less (a) purchases and related costs, (b) field operating costs and (c) segment general and administrative expenses, plus our proportionate share of the depreciation and amortization expense of, and gains and losses on significant asset sales by, unconsolidated entities, and further adjusted for certain selected items including (i) gains and losses on derivative instruments that are related to underlying activities in another period (or the reversal of such adjustments from a prior period), gains and losses on derivatives that are related to investing activities (such as the purchase of linefill) and inventory valuation adjustments, as applicable, (ii) long-term inventory costing adjustments, (iii) charges for obligations that are expected to be settled with the issuance of equity instruments, (iv) amounts related to deficiencies associated with minimum volume commitments, net of the applicable amounts subsequently recognized into revenue and (v) other items that our CODM believes are integral to understanding our core segment operating performance. Segment Adjusted EBITDA excludes depreciation and amortization. As an MLP, we make quarterly distributions of our “available cash” (as defined in our partnership agreement) to our unitholders. We look at each period’s earnings before non-cash depreciation and amortization as an important measure of segment performance. The exclusion of depreciation and amortization expense could be viewed as limiting the usefulness of Segment Adjusted EBITDA as a performance measure because it does not account in current periods for the implied reduction in value of our capital assets, such as crude oil pipelines and facilities, caused by age-related decline and wear and tear. We compensate for this limitation by recognizing that depreciation and amortization are largely offset by repair and maintenance investments, which act to partially offset the aging and wear and tear in the value of our principal fixed assets. These maintenance investments are a component of field operating costs included in Segment Adjusted EBITDA or in maintenance capital, depending on the nature of the cost. Capital expenditures made to expand the existing operating and/or earnings capacity of our assets are classified as expansion capital. Capital expenditures for the replacement and/or refurbishment of partially or fully depreciated assets in order to maintain the operating and/or earnings capacity of our existing assets are classified as maintenance capital, which is deducted in determining “available cash”. Repair and maintenance expenditures incurred in order to maintain the day to day operation of our existing assets are charged to expense as incurred. The following tables reflect certain financial data for each segment (in millions):
| Transportation |  | Facilities |  | Supply and Logistics |  | Intersegment Adjustment |  | Total
Year Ended December 31, 2019 |  |  |  |  |  |  |  |  |
Revenues: |  |  |  |  |  |  |  |  |
External customers (1) | $ | 1,259 |  |  | $ | 609 |  |  | $ | 32,272 |  |  | $ | (471) |  |  | $ | 33,669 |
Intersegment (2) | 1,061 |  |  | 562 |  |  | 4 |  |  | 471 |  |  | 2,098 |
Total revenues of reportable segments | $ | 2,320 |  |  | $ | 1,171 |  |  | $ | 32,276 |  |  | $ | — |  |  | $ | 35,767 |
Equity earnings in unconsolidated entities | $ | 388 |  |  | $ | — |  |  | $ | — |  |  |  |  | $ | 388 |
Segment Adjusted EBITDA | $ | 1,722 |  |  | $ | 705 |  |  | $ | 803 |  |  |  |  | $ | 3,230 |
Capital expenditures (3) | $ | 1,127 |  |  | $ | 227 |  |  | $ | 33 |  |  |  |  | $ | 1,387 |
Maintenance capital | $ | 161 |  |  | $ | 97 |  |  | $ | 29 |  |  |  |  | $ | 287 |
As of December 31, 2019 |  |  |  |  |  |  |  |  |
Total assets | $ | 14,902 |  |  | $ | 7,336 |  |  | $ | 6,439 |  |  |  |  | $ | 28,677 |
Investments in unconsolidated entities | $ | 3,557 |  |  | $ | 126 |  |  | $ | — |  |  |  |  | $ | 3,683 |
| Transportation |  | Facilities |  | Supply and Logistics |  | Intersegment Adjustment |  | Total
Year Ended December 31, 2018 |  |  |  |  |  |  |  |  |
Revenues: |  |  |  |  |  |  |  |  |
External customers (1) | $ | 1,116 |  |  | $ | 588 |  |  | $ | 32,819 |  |  | $ | (468) |  |  | $ | 34,055 |
Intersegment (2) | 874 |  |  | 573 |  |  | 3 |  |  | 468 |  |  | 1,918 |
Total revenues of reportable segments | $ | 1,990 |  |  | $ | 1,161 |  |  | $ | 32,822 |  |  | $ | — |  |  | $ | 35,973 |
Equity earnings in unconsolidated entities | $ | 375 |  |  | $ | — |  |  | $ | — |  |  |  |  | $ | 375 |
Segment Adjusted EBITDA | $ | 1,508 |  |  | $ | 711 |  |  | $ | 462 |  |  |  |  | $ | 2,681 |
Capital expenditures (3) | $ | 1,631 |  |  | $ | 234 |  |  | $ | 23 |  |  |  |  | $ | 1,888 |
Maintenance capital | $ | 139 |  |  | $ | 100 |  |  | $ | 13 |  |  |  |  | $ | 252 |
As of December 31, 2018 |  |  |  |  |  |  |  |  |
Total assets | $ | 13,288 |  |  | $ | 7,200 |  |  | $ | 5,023 |  |  |  |  | $ | 25,511 |
Investments in unconsolidated entities | $ | 2,594 |  |  | $ | 108 |  |  | $ | — |  |  |  |  | $ | 2,702 |
| Transportation |  | Facilities |  | Supply and Logistics |  | Intersegment Adjustment |  | Total
Year Ended December 31, 2017 |  |  |  |  |  |  |  |  |
Revenues: |  |  |  |  |  |  |  |  |
External customers (1) | $ | 1,021 |  |  | $ | 555 |  |  | $ | 25,056 |  |  | $ | (409) |  |  | $ | 26,223 |
Intersegment (2) | 697 |  |  | 618 |  |  | 9 |  |  | 409 |  |  | 1,733 |
Total revenues of reportable segments | $ | 1,718 |  |  | $ | 1,173 |  |  | $ | 25,065 |  |  | $ | — |  |  | $ | 27,956 |
Equity earnings in unconsolidated entities | $ | 290 |  |  | $ | — |  |  | $ | — |  |  |  |  | $ | 290 |
Segment Adjusted EBITDA | $ | 1,287 |  |  | $ | 734 |  |  | $ | 60 |  |  |  |  | $ | 2,081 |
Capital expenditures (3) | $ | 2,126 |  |  | $ | 312 |  |  | $ | 20 |  |  |  |  | $ | 2,458 |
Maintenance capital | $ | 120 |  |  | $ | 114 |  |  | $ | 13 |  |  |  |  | $ | 247 |
As of December 31, 2017 |  |  |  |  |  |  |  |  |  |  |  |  |
Total assets | $ | 12,661 |  |  | $ | 7,313 |  |  | $ | 5,377 |  |  |  |  | $ | 25,351 |
Investments in unconsolidated entities | $ | 2,681 |  |  | $ | 75 |  |  | $ | — |  |  |  |  | $ | 2,756 |
(1)Transportation revenues from External customers include certain inventory exchanges with our customers where our Supply and Logistics segment has transacted the inventory exchange and serves as the shipper on our pipeline systems. See Note 3 for a discussion of our related accounting policy. We have included an estimate of the revenues from these inventory exchanges in our Transportation segment revenues from External customers presented above and adjusted those revenues out such that Total revenues from External customers reconciles to our Consolidated Statements of Operations. This presentation is consistent with the information provided to our CODM. (2)Segment revenues include intersegment amounts that are eliminated in Purchases and related costs and Field operating costs in our Consolidated Statements of Operations. Intersegment activities are conducted at posted tariff rates where applicable, or otherwise at rates similar to those charged to third parties or rates that we believe approximate market at the time the agreement is executed or renegotiated. (3)Expenditures for acquisition capital and expansion capital, including investments in unconsolidated entities. Segment Adjusted EBITDA Reconciliation The following table reconciles Segment Adjusted EBITDA to Net income attributable to PAA (in millions):
| Year Ended December 31, |  |  |  |
| 2019 |  | 2018 |  | 2017
Segment Adjusted EBITDA | $ | 3,230 |  |  | $ | 2,681 |  |  | $ | 2,081 |
Adjustments (1): |  |  |  |  |
Depreciation and amortization of unconsolidated entities (2) | (62) |  |  | (56) |  |  | (45) |
Gains/(losses) from derivative activities net of inventory valuation adjustments (3) | (160) |  |  | 519 |  |  | 46 |
Long-term inventory costing adjustments (4) | 20 |  |  | (21) |  |  | 24 |
Deficiencies under minimum volume commitments, net (5) | 18 |  |  | (7) |  |  | (2) |
Equity-indexed compensation expense (6) | (17) |  |  | (55) |  |  | (23) |
Net gain/(loss) on foreign currency revaluation (7) | (14) |  |  | (3) |  |  | 26 |
Line 901 incident (8) | (10) |  |  | — |  |  | (32) |
Significant acquisition-related expenses (9) | — |  |  | — |  |  | (6) |
Depreciation and amortization | (601) |  |  | (520) |  |  | (517) |
Gains/(losses) on asset sales and asset impairments, net | (28) |  |  | 114 |  |  | (109) |
Gain on investment in unconsolidated entities | 271 |  |  | 200 |  |  | — |
Interest expense, net | (425) |  |  | (431) |  |  | (510) |
Other income/(expense), net | 24 |  |  | (7) |  |  | (31) |
Income before tax | 2,246 |  |  | 2,414 |  |  | 902 |
Income tax expense | (66) |  |  | (198) |  |  | (44) |
Net income | 2,180 |  |  | 2,216 |  |  | 858 |
Net income attributable to noncontrolling interests | (9) |  |  | — |  |  | (2) |
Net income attributable to PAA | $ | 2,171 |  |  | $ | 2,216 |  |  | $ | 856 |
(1)Represents adjustments utilized by our CODM in the evaluation of segment results. (2)Includes our proportionate share of the depreciation and amortization of, and gains and losses on significant asset sales by, unconsolidated entities. (3)We use derivative instruments for risk management purposes and our related processes include specific identification of hedging instruments to an underlying hedged transaction. Although we identify an underlying transaction for each derivative instrument we enter into, there may not be an accounting hedge relationship between the instrument and the underlying transaction. In the course of evaluating our results, we identify the earnings that were recognized during the period related to derivative instruments for which the identified underlying transaction does not occur in the current period and exclude the related gains and losses in determining Segment Adjusted EBITDA. In addition, we exclude gains and losses on derivatives that are related to investing activities, such as the purchase of linefill. We also exclude the impact of corresponding inventory valuation adjustments, as applicable. (4)We carry crude oil and NGL inventory that is comprised of minimum working inventory requirements in third-party assets and other working inventory that is needed for our commercial operations. We consider this inventory necessary to conduct our operations and we intend to carry this inventory for the foreseeable future. Therefore, we classify this inventory as long-term on our balance sheet and do not hedge the inventory with derivative instruments (similar to linefill in our own assets). We exclude the impact of changes in the average cost of the long-term inventory (that result from fluctuations in market prices) and writedowns of such inventory that result from price declines from Segment Adjusted EBITDA. (5)We have certain agreements that require counterparties to deliver, transport or throughput a minimum volume over an agreed upon period. Substantially all of such agreements were entered into with counterparties to economically support the return on our capital expenditure necessary to construct the related asset. Some of these agreements include make-up rights if the minimum volume is not met. We record a receivable from the counterparty in the period that services are provided or when the transaction occurs, including amounts for deficiency obligations from counterparties associated with minimum volume commitments. If a counterparty has a make-up right associated with a deficiency, we defer the revenue attributable to the counterparty’s make-up right and subsequently recognize the revenue at the earlier of when the deficiency volume is delivered or shipped, when the make-up right expires or when it is determined that the counterparty’s ability to utilize the make-up right is remote. We include the impact of amounts billed to counterparties for their deficiency obligation, net of applicable amounts subsequently recognized into revenue, as a selected item impacting comparability. Our CODM views the inclusion of the contractually committed revenues associated with that period as meaningful to Segment Adjusted EBITDA as the related asset has been constructed, is standing ready to provide the committed service and the fixed operating costs are included in the current period results. (6)Includes equity-indexed compensation expense associated with awards that will or may be settled in units. (7)Includes gains and losses realized on the settlement of foreign currency transactions as well as the revaluation of monetary assets and liabilities denominated in a foreign currency. (8)Includes costs recognized during the period related to the Line 901 incident that occurred in May 2015, net of amounts we believe are probable of recovery from insurance. See Note 19 for additional information regarding the Line 901 incident. (9)Includes acquisition-related expenses associated with the ACC Acquisition. See Note 7 for additional discussion. An adjustment for these non-recurring expenses is included in the calculation of Segment Adjusted EBITDA for the year ended December 31, 2017 as our CODM does not view such expenses as integral to understanding our core segment operating performance. Geographic Data We have operations in the United States and Canada. Set forth below are revenues and long-lived assets attributable to these geographic areas (in millions):
|  | Year Ended December 31, |  |  |  |
Revenues (1) |  | 2019 |  | 2018 |  | 2017
United States |  | $ | 27,162 |  |  | $ | 28,362 |  |  | $ | 21,443 |
Canada |  | 6,507 |  |  | 5,693 |  |  | 4,780 |
|  | $ | 33,669 |  |  | $ | 34,055 |  |  | $ | 26,223 |
(1)Revenues are primarily attributed to each region based on where the services are provided or the product is shipped.
|  | December 31, |  |
Long-Lived Assets (1) |  | 2019 |  | 2018
United States |  | $ | 17,565 |  |  | $ | 15,885 |
Canada |  | 3,935 |  |  | 3,542 |
|  | $ | 21,500 |  |  | $ | 19,427 |
(1)Excludes long-term derivative assets, long-term deferred tax assets and goodwill.

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- Definition The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -URI http://asc.fasb.org/topic&trid=2134510 + Details
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