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Fair Value Measurements
 12 Months Ended
Dec. 31, 2011
Fair Value Measurements  
Fair Value Measurements

10. Fair Value Measurements

The following table presents information about our assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2011 and 2010, respectively (in thousands):

 
   Level 1
   Level 2
   Level 3
   Sub-Total
   Netting and Collateral
   Total
 
2011                         
Assets:                        
Commodity contracts   $14,038   $51,033   $—   $65,071   $(43,275)   $21,796
Foreign currency contracts   —   2,994   —   2,994   (893)   2,101
Hedged item inventories   —   3,216   —   3,216   —   3,216
Hedged item commitments   —   206   —   206   —   206
 
Total   $14,038   $57,449   $—   $71,487   $(44,168)   $27,319
 

Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
Commodity contracts   $10,148   $46,754   $—   $56,902   $(43,291)   $13,611
Foreign currency contracts   —   1,018   —   1,018   (893)   125
Hedged item commitments   —   24   —   24   —   24
Earn-out   —   —   4,194   4,194   —   4,194
 
Total   $10,148   $47,796   $4,194   $62,138   $(44,184)   $17,954
 

 
 
 
 
 
 
 
 
 
 
 
 
 
2010                          
Assets:                        
Cash equivalents   $32   $—   $—   $32   $—   $32
Commodity contracts   753   14,139   123   15,015   (7,000)   8,015
Foreign currency contracts   —   461   —   461   (277)   184
Hedged item inventories   —   2,518   —   2,518   —   2,518
Hedged item commitments   —   797   —   797   (265)   532
 
Total   $785   $17,915   $123   $18,823   $(7,542)   $11,281
 

Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
Commodity contracts   $2,226   $14,926   $33   $17,185   $(8,391)   $8,794
Foreign currency contracts   —   574   —   574   (277)   297
Hedged item commitments   —   361   —   361   (265)   96
Earn-out   —   —   5,012   5,012   —   5,012
 
Total   $2,226   $15,861   $5,045   $23,132   $(8,933)   $14,199
 

Fair value of commodity contracts and hedged item commitments is derived using forward prices that take into account commodity prices, basis differentials, interest rates, credit risk ratings, option volatility and currency rates. Fair value of hedged item inventories is derived using spot commodity prices and basis differentials. Fair value of foreign currency forwards is derived using forward prices that take into account interest rates, credit risk ratings, and currency rates.

For our derivative related contracts, we may enter into master netting, collateral and offset agreements with counterparties. These agreements provide us the ability to offset a counterparty's rights and obligations, request additional collateral when necessary or liquidate the collateral in the event of counterparty default. We net fair value cash collateral paid or received against fair value amounts recognized for net derivative related positions executed with the same counterparty under the same master netting or offset agreement.

As of December 31, 2011, included within netting and collateral in the above table, the amounts recognized for the obligation to return cash collateral and the right to reclaim cash collateral that have been offset against fair value assets and fair value liabilities were $1.0 million and $0.8 million, respectively. As of December 31, 2010, there were no amounts recognized for the obligation to return cash collateral and the right to reclaim cash collateral that have been offset against fair value assets and fair value liabilities.

The following table presents information about our assets and liabilities that are measured at fair value on a recurring basis that utilized Level 3 inputs for the periods presented (in thousands):

 
   Beginning
of Period,
Assets
(Liabilities)
   Realized
and
Unrealized
Gains
Included
in Earnings
   Settlements
   End of
Period,
Assets
(Liabilities)
   Change in
Unrealized
Gains
Relating to
Instruments
Still Held
at end
of Period
 
2011                     
Commodity contracts, net   $90   $—   $(90)   $—   $—
Earn-out   (5,012)   818   —   (4,194)   818
 
    $(4,922)   $818   $(90)   $(4,194)   $818
 

2010  
 
 
 
 
 
 
 
 
 
 
Commodity contracts, net   $(2)   $90   $2   $90   $90
Foreign currency contracts, net   (152)   —   152   —   —
Earn-out   (6,728)   1,716   —   (5,012)   1,716
 
    $(6,882)   $1,806   $154   $(4,922)   $1,806
 

Our policy is to recognize transfers between Level 1, 2 or 3 as of the beginning of the reporting period in which the event or change in circumstances caused the transfer to occur. There were no transfers between Level 1, 2 or 3 during the periods presented. In addition, there were no Level 3 purchases, sales or issuances for the periods presented.