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FAIR VALUE MEASUREMENTS
 12 Months Ended
Dec. 31, 2011
FAIR VALUE MEASUREMENTS [Abstract]  
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS
We segregate the inputs used in measuring fair value into three levels: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists. We consider
counterparty credit risk and our own credit risk in the determination of all estimated fair values.
Product Imbalances
We value our assets and liabilities related to product imbalances using quoted market prices as of the reporting date.
Interest Rate Swaps
We estimate the fair value of both our fixed-to-floating and forward-starting interest rate swaps using discounted cash flows, which use observable inputs such as time to maturity and market interest rates.
Commodity Derivatives
We base the fair value of certain of our commodity derivative instruments on quoted prices on an exchange; accordingly, we include these in Level 1 of the fair value hierarchy. We also have derivative instruments for which we determine fair value using industry pricing services and other observable inputs, such as quoted prices on an exchange for similar derivative instruments. Therefore, we include these derivative instruments in Level 2 of the fair value hierarchy. We have consistently applied these valuation techniques in all periods presented. See Note 15. Derivatives and Risk Management Activities for a discussion of our derivative instruments.
The following assets and liabilities are measured at fair value:
 
December 31, 2011
 
Level 1
 
Level 2
 
Level 3
 
Total
 
(Thousands of Dollars)
Other current assets:
 
 
 
 
 
 
 
Product imbalances
$
2,117

 
$
—

 
$
—

 
$
2,117

Commodity derivatives
10,282

 
1,830

 
—

 
12,112

Other long-term assets, net:
 
 
 
 
 
 
 
Commodity derivatives
—

 
27,084

 
—

 
27,084

Interest rate swaps
—

 
2,335

 
—

 
2,335

Accrued liabilities:
 
 
 
 
 
 
 
Product imbalances
(1,469
)
 
—

 
—

 
(1,469
)
Commodity derivatives
(5,424
)
 
—

 
—

 
(5,424
)
Interest rate swaps
—

 
(22,009
)
 
—

 
(22,009
)
Other long-term liabilities:
 
 
 
 
 
 
 
Interest rate swaps
—

 
(27,190
)
 
—

 
(27,190
)
Total
$
5,506

 
$
(17,950
)
 
$
—

 
$
(12,444
)

 
December 31, 2010
 
Level 1
 
Level 2
 
Level 3
 
Total
 
(Thousands of Dollars)
Other current assets:
 
 
 
 
 
 
 
Product imbalances
$
991

 
$
—

 
$
—

 
$
991

Other long-term assets, net:
 
 
 
 
 
 
 
Interest rate swaps
—

 
45,663

 
—

 
45,663

Accrued liabilities:
 
 
 
 
 
 
 
Product imbalances
(988
)
 
—

 
—

 
(988
)
Commodity derivatives
(14,741
)
 
—

 
—

 
(14,741
)
Other long-term liabilities:
 
 
 
 
 
 
 
Interest rate swaps
—

 
(29,483
)
 
—

 
(29,483
)
Total
$
(14,738
)
 
$
16,180

 
$
—

 
$
1,442



Fair Value of Financial Instruments
We do not record our outstanding debt at fair value in our consolidated balance sheet. The estimated fair value and carrying amount of our debt was as follows:
 
December 31,
 
2011
 
2010
 
(Thousands of Dollars)
Fair value
$
2,377,565

 
$
2,249,190

Carrying amount
$
2,293,030

 
$
2,137,080


We estimated the fair values of our debt using a discounted cash flow analysis using current incremental borrowing rates for similar types of borrowing arrangements.