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 for identical assets or liabilities in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable, such as quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in markets that are not active; and Level 3, defined as unobservable inputs for 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.

Recurring Fair Value Measurements

The following assets and liabilities are measured at fair value on a recurring basis:



	March 31, 2018
	Level 1			Level 2			Level 3		Total
	(Thousands of Dollars)
Assets:
Other current assets:
Interest rate swaps	$	—		$	5,547		$	—	$	5,547
Other long-term assets, net:
Interest rate swaps	—			2,307			—		2,307
Total	$	—		$	7,854		$	—	$	7,854
Liabilities:
Accrued liabilities:
Commodity derivatives	$	(257	)	$	—		$	—	$	(257	)
Interest rate swaps	—			(114		)	—		(114		)
Other long-term liabilities:
Interest rate swaps	—			(307		)	—		(307		)
Total	$	(257	)	$	(421	)	$	—	$	(678	)



	December 31, 2017
	Level 1			Level 2			Level 3		Total
	(Thousands of Dollars)
Assets:
Other current assets:
Product imbalances	$	3,890		$	—		$	—	$	3,890
Liabilities:
Accrued liabilities:
Product imbalances	$	(1,534	)	$	—		$	—	$	(1,534	)
Commodity derivatives	(878		)	—			—		(878		)
Interest rate swaps	—			(5,394		)	—		(5,394		)
Other long-term liabilities:
Interest rate swaps	—			(4,594		)	—		(4,594		)
Total	$	(2,412	)	$	(9,988	)	$	—	$	(12,400	)

Product Imbalances. Pursuant to the new revenue recognition standard we adopted January 1, 2018, we no longer recognize the fair value of product imbalances on our consolidated balance sheets. Prior to adoption, we valued our assets and liabilities related to product imbalances using quoted market prices in active markets as of the reporting date; accordingly, we included these product imbalances in Level 1 of the fair value hierarchy.

Commodity Derivatives. We base the fair value of certain of our commodity derivative instruments on quoted prices on an exchange; accordingly, we include these items in Level 1 of the fair value hierarchy. We also had derivative instruments for which we determined fair value using industry pricing services and other observable inputs, such as quoted prices on an exchange for similar derivative instruments, and we included these derivative instruments in Level 2 of the fair value hierarchy. See Note 8 for a discussion of our derivative instruments.

Interest Rate Swaps. Because we estimate the fair value of our forward-starting interest rate swaps using discounted cash flows, which use observable inputs such as time to maturity and market interest rates, we include these interest rate swaps in Level 2 of the fair value hierarchy.

Fair Value of Financial Instruments

We recognize cash equivalents, receivables, payables and debt in our consolidated balance sheets at their carrying amounts. The fair values of these financial instruments, except for long-term debt, approximate their carrying amounts.

The estimated fair values and carrying amounts of long-term debt, including the current portion, were as follows:



	March 31, 2018		December 31, 2017
	(Thousands of Dollars)
Fair value	$	3,665,335	$	3,677,622
Carrying amount	$	3,656,066	$	3,613,059

We estimated the fair value of our publicly traded notes based upon quoted prices in active markets; therefore, we determined that the fair value of our publicly traded notes falls in Level 1 of the fair value hierarchy. For our other debt, for which a quoted market price is not available, we estimated the fair value using a discounted cash flow analysis using current incremental borrowing rates for similar types of borrowing arrangements and determined that the fair value falls in Level 2 of the fair value hierarchy.