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DERIVATIVES AND RISK MANAGEMENT ACTIVITIES | 3 Months Ended
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Mar. 31, 2014
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
DERIVATIVES AND RISK MANAGEMENT ACTIVITIES | DERIVATIVES AND RISK MANAGEMENT ACTIVITIES We utilize various derivative instruments to manage our exposure to commodity price risk and interest rate risk. Our risk management policies and procedures are designed to monitor interest rates, futures and swap positions and over-the-counter positions, as well as physical volumes, grades, locations and delivery schedules, to help ensure that our hedging activities address our market risks. Our risk management committee oversees our trading controls and procedures and certain aspects of commodity and trading risk management. Our risk management committee also reviews all new commodity and trading risk management strategies in accordance with our risk management policy, as approved by our board of directors. Interest Rate Risk We were a party to certain interest rate swap agreements to manage our exposure to changes in interest rates, which included forward-starting interest rate swap agreements related to the interest payments associated with forecasted probable debt issuances. These swaps qualified, and we designated them, as cash flow hedges. In 2013, we terminated our remaining forward-starting interest rate swap agreements. We recorded the effective portion of mark-to-market adjustments as a component of “Accumulated other comprehensive loss” (AOCI). The amount accumulated in AOCI is amortized into “Interest expense, net” over the term of the forecasted debt as the interest payments occur or if the interest payments are probable not to occur. As of March 31, 2014, we had no forward-starting interest rate swap agreements. Commodity Price Risk We are exposed to market risks related to the volatility of crude oil and refined product prices. In order to reduce the risk of commodity price fluctuations with respect to our crude oil and finished product inventories and related firm commitments to purchase and/or sell such inventories, we utilize commodity futures and swap contracts, which qualify and we designate as fair value hedges. Derivatives that are intended to hedge our commodity price risk, but fail to qualify as fair value or cash flow hedges, are considered economic hedges, and we record associated gains and losses in net income. The volume of commodity contracts is based on open derivative positions and represents the combined volume of our long and short open positions on an absolute basis, which totaled 14.1 million barrels and 15.2 million barrels as of March 31, 2014 and December 31, 2013, respectively. As of March 31, 2014 and December 31, 2013, we had $1.9 million and $3.3 million, respectively, of margin deposits related to our derivative instruments. The fair values of our derivative instruments included in our consolidated balance sheets were as follows:
|  |  | Asset Derivatives |  | Liability Derivatives
| Balance Sheet Location |  | March 31, 2014 |  | December 31, 2013 |  | March 31, 2014 |  | December 31, 2013
|  |  | (Thousands of Dollars)
Derivatives Designated as Hedging Instruments: |  |  |  |  |  |  |  |  |
Commodity contracts | Other current assets |  | $ | 402 |  |  | $ | — |  |  | $ | (13 | ) |  | $ | — |
Commodity contracts | Accrued liabilities |  | — |  |  | — |  |  | — |  |  | (130 | )
Total |  |  | 402 |  |  | — |  |  | (13 | ) |  | (130 | )
Derivatives Not Designated as Hedging Instruments: |  |  |  |  |  |  |  |  |
Commodity contracts | Other current assets |  | 17,941 |  |  | 16,168 |  |  | (13,056 | ) |  | (11,220 | )
Commodity contracts | Other long-term assets, net |  | 1,151 |  |  | 15,883 |  |  | (357 | ) |  | (8,906 | )
Commodity contracts | Accrued liabilities |  | 2,215 |  |  | 4,523 |  |  | (4,789 | ) |  | (6,626 | )
Commodity contracts | Other long-term liabilities |  | 4,568 |  |  | 5,448 |  |  | (4,979 | ) |  | (7,023 | )
Total |  |  | 25,875 |  |  | 42,022 |  |  | (23,181 | ) |  | (33,775 | )
Total Derivatives |  |  | $ | 26,277 |  |  | $ | 42,022 |  |  | $ | (23,194 | ) |  | $ | (33,905 | )
Certain of our derivative instruments are eligible for offset in the consolidated balance sheets and subject to master netting arrangements. Under our master netting arrangements, there is a legally enforceable right to offset amounts, and we intend to settle such amounts on a net basis. The following are the net amounts presented on the consolidated balance sheets:
Commodity Contracts |  | March 31, 2014 |  | December 31, 2013
|  | (Thousands of Dollars)
Net amounts of assets presented in the consolidated balance sheets |  | $ | 6,068 |  |  | $ | 11,925 |
Net amounts of liabilities presented in the consolidated balance sheets |  | $ | (2,985 | ) |  | $ | (3,808 | )
The earnings impact of our derivative activity was as follows:
Derivatives Designated as Fair Value Hedging Instruments |  | Income Statement Location |  | Amount of Gain (Loss) Recognized in Income on Derivative (Effective Portion) |  | Amount of Gain (Loss) Recognized in Income on Hedged Item |  | Amount of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion)
|  |  |  | (Thousands of Dollars)
Three months ended March 31, 2014: |  |  |  |  |  |  |  |
Commodity contracts |  | Cost of product sales |  | $ | 1,213 |  |  | $ | (2,097 | ) |  | $ | (884 | )
Three months ended March 31, 2013: |  |  |  |  |  |  |  |
Commodity contracts |  | Cost of product sales |  | $ | (1,276 | ) |  | $ | 1,636 |  |  | $ | 360 |
Derivatives Designated as Cash Flow Hedging Instruments |  | Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion) |  | Income Statement Location (a) |  | Amount of Gain (Loss) Reclassified from AOCI into Income (Effective Portion) |  | Amount of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion)
|  | (Thousands of Dollars) |  |  |  | (Thousands of Dollars)
Three months ended March 31, 2014: |  |  |  |  |  |  |  |
Interest rate swaps |  | $ | — |  |  | Interest expense, net |  | $ | (2,766 | ) |  | $ | — |
Three months ended March 31, 2013: |  |  |  |  |  |  |  |
Interest rate swaps |  | $ | 4,687 |  |  | Interest expense, net |  | $ | (487 | ) |  | $ | — |
(a) | Amounts are included in specified location for both the gain (loss) reclassified from accumulated other comprehensive income (OCI) into income (effective portion) and the gain (loss) recognized in income on derivative (ineffective portion).
Derivatives Not Designated as Hedging Instruments |  | Income Statement Location |  | Amount of Gain (Loss) Recognized in Income
|  |  |  | (Thousands of Dollars)
Three months ended March 31, 2014: |  |  |  |
Commodity contracts |  | Cost of product sales |  | $ | 32 |
Three months ended March 31, 2013: |  |  |  |
Commodity contracts |  | Cost of product sales |  | $ | (6,827 | )
Commodity contracts |  | Operating expenses |  | (1 | )
Commodity contracts |  | (Loss) income from discontinued operations |  | (218 | )
Total |  |  |  | $ | (7,046 | )
For derivatives designated as cash flow hedging instruments, once a hedged transaction occurs, we reclassify the effective portion from AOCI to “Cost of product sales” or “Interest expense, net.” As of March 31, 2014, we expect to reclassify a loss of $10.4 million to “Interest expense, net” within the next twelve months.

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=7668309&loc=d3e80748-113994 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=7476318&loc=d3e41635-113959 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4K -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5708775-113959 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 25 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6886632&loc=d3e76258-113986 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4A -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5618551-113959 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 45 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6441202&loc=d3e80720-113993 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(n)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4H -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624258-113959 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4B -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624163-113959 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4E -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624181-113959 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4J -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5708773-113959 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=7668309&loc=d3e80784-113994 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=7476318&loc=d3e41620-113959 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4D -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624177-113959 Reference 15: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1A -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5579245-113959 Reference 16: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1B -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5580258-113959 Reference 17: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5579240-113959 Reference 18: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=7476318&loc=d3e41641-113959 Reference 19: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=7476318&loc=d3e41638-113959 Reference 20: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4C -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624171-113959 + Details
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