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REVENUE FROM CONTRACTS WITH CUSTOMERS | 6 Months Ended
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Jun. 30, 2018
Revenue from Contract with Customer [Abstract] |
Revenue from Contract with Customer [Text Block] | REVENUE FROM CONTRACTS WITH CUSTOMERS Transition On January 1, 2018, we adopted Accounting Standards Codification Topic 606, “Revenue from Contracts with Customers” (ASC Topic 606) using the modified retrospective method and applying ASC Topic 606 to all revenue contracts with customers. Results for reporting periods beginning after January 1, 2018 are presented under ASC Topic 606. In accordance with the modified retrospective approach, prior period amounts were not adjusted and are reported under ASC Topic 605, “Revenue Recognition.” The adoption of ASC Topic 606 affected our consolidated statements of comprehensive income as follows:
| As Reported |  | Without Adoption of ASC Topic 606 |  | Effect of Change Higher/(Lower)
| (Thousands of Dollars, Except Per Unit Data)
For the three months ended June 30, 2018: |  |  |  |  |
Revenues | $ | 486,204 |  |  | $ | 484,646 |  |  | $ | 1,558 |
Operating income | $ | 79,838 |  |  | $ | 78,280 |  |  | $ | 1,558 |
Net income | $ | 29,399 |  |  | $ | 27,841 |  |  | $ | 1,558 |
Basic net income per common unit | $ | 0.15 |  |  | $ | 0.13 |  |  | $ | 0.02 |
For the six months ended June 30, 2018: |  |  |  |  |
Revenues | $ | 962,085 |  |  | $ | 966,432 |  |  | $ | (4,347 | )
Operating income | $ | 178,318 |  |  | $ | 182,665 |  |  | $ | (4,347 | )
Net income | $ | 155,532 |  |  | $ | 159,879 |  |  | $ | (4,347 | )
Basic net income per common unit | $ | 1.30 |  |  | $ | 1.34 |  |  | $ | (0.04 | )
Revenue-Generating Activities Revenues for the pipeline segment are derived from interstate and intrastate pipeline transportation of refined products, crude oil and anhydrous ammonia and the applicable pipeline tariff. Revenues for the storage segment include fees for tank storage agreements, whereby a customer agrees to pay for a certain amount of storage in a tank over a period of time (storage terminal revenues), and throughput agreements, whereby a customer pays a fee per barrel for volumes moving through our terminals (throughput terminal revenues). Our terminals also provide blending, additive injections, handling and filtering services for which we charge additional fees, and certain of our facilities charge fees to provide marine services such as pilotage, tug assistance, line handling, launch service, emergency response services and other ship services (all of which are considered optional services). Revenues for the fuels marketing segment are derived from the sale of petroleum products. Within our pipeline and storage segments, we provide services on an uninterruptible and interruptible basis. Uninterruptible services within our pipeline segment typically result from contracts that contain take-or-pay minimum volume commitments (MVCs) from the customer. Contracts with MVCs obligate the customer to pay for that minimum amount. If a customer fails to meet its MVC for the applicable service period, the customer is obligated to pay a deficiency fee based upon the shortfall between the actual volumes transported or stored and the MVC for that service period (deficiency payments). In exchange, those contracts with MVCs obligate us to stand ready to transport volumes up to the customer’s MVC. Within our storage segment, uninterruptible services arise from contracts containing a fixed monthly fee for the portion of storage capacity reserved by the customer. These contracts require that the customer pay the fixed monthly fee, regardless of whether or not it uses our storage facility (i.e., take-or-pay obligation), and that we stand ready to store that volume. Interruptible services within our pipeline and storage segments are generally provided when and to the extent we determine the requested capacity is available. The customer typically pays a per-unit rate for the actual quantities of services it receives. Revenue Recognition After identifying a contract with a customer, ASC Topic 606 requires us to (i) identify the performance obligations in the contract; (ii) determine the transaction price; (iii) allocate the transaction price to the performance obligations; and (iv) recognize revenue when or as we satisfy a performance obligation. For the majority of our contracts, we recognize revenue in the amount to which we have a right to invoice. Generally, payment terms do not exceed 30 days. Performance Obligations. The majority of our contracts contain a single performance obligation. For our pipeline segment, the single performance obligation encompasses multiple activities necessary to deliver our customers’ products to their destinations. Typically, we satisfy this performance obligation over time as the product volume is delivered in or out of the pipelines. Similarly, the performance obligation for our storage segment consists of multiple activities necessary to receive, store and deliver our customers’ products. We typically satisfy this performance obligation over time as the product volume is delivered in or out of the tanks (for throughput terminal revenues) or with the passage of time (for storage terminal revenues). Certain of our pipeline segment customer contracts include an incentive pricing structure, which provides a discounted rate for the remainder of the contract once the customer exceeds a cumulative volume. The ability to receive discounted future services represents a material right to the customer, which results in a second performance obligation in those contracts. Product sales contracts associated with our fuels marketing segment generally include a single performance obligation to deliver specified volumes of a commodity, which we satisfy at a point in time, when the product is delivered and the customer obtains control of the commodity. Optional services do not provide a material right to the customer, and are not considered a separate performance obligation in the contract. If and when a customer elects an optional service, it becomes part of the existing performance obligation. Transaction Price. For uninterruptible services, we determine the transaction price at contract inception based on the guaranteed minimum amount of revenue over the term of the contract. For interruptible services and optional services, we determine the transaction price based on our right to invoice the customer for the value of services provided to the customer for the applicable period. In certain instances, our customers reimburse us for capital projects, in arrangements referred to as contributions in aid of construction, or CIAC. Typically, in these instances, we receive upfront payments for future services, which are included in the transaction price of the underlying service contract. We collect taxes on certain revenue transactions to be remitted to governmental authorities, which may include sales, use, value-added and some excise taxes. These taxes are not included in the transaction price and are, therefore, excluded from revenues. Allocation of Transaction Price. We allocate the transaction price to the single performance obligation that exists in the vast majority of our contracts with customers. For the few contracts that have a second performance obligation, such as those that include an incentive pricing structure, we calculate an average rate based on the estimated total volumes to be delivered over the term of the contract and the resulting estimated total revenue to be billed using the applicable rates in the contract. We allocate the transaction price to the two performance obligations by applying the average rate to product volumes as they are delivered to the customer over the term of the contract. Determining the timing and amount of volumes subject to these incentive pricing contracts requires judgment that can impact the amount of revenue allocated to the two separate performance obligations. We base our estimates on our analysis of expected future production information available from our customers or other sources, which we update at least quarterly. Some of our MVC contracts include provisions that allow the customer to apply deficiency payments to future service periods (the carryforward period). In those instances, we have not satisfied our performance obligation as we still have the obligation to perform those services, subject to contractual and/or capacity constraints, at the customer’s request. At least quarterly, we assess the customer’s ability to utilize any deficiency payments during the carryforward period. If we receive a deficiency payment from a customer that we expect the customer to utilize during the carryforward period, we defer that amount as a contract liability. We will consider the performance obligation satisfied and allocate any deferred deficiency payments to our performance obligation when the customer utilizes the deficiency payment, the carryforward period ends or we determine the customer cannot or will not utilize the deficiency payment (i.e. breakage). If our contract does not allow the customer to apply deficiency payments to future service periods, we allocate the deficiency payment to the already satisfied portion of the performance obligation. Contract Assets and Liabilities The following table provides information about contract assets and contract liabilities from contracts with customers:
| Contract Assets |  | Contract Liabilities
| (Thousands of Dollars)
Balance as of January 1, 2018 | $ | 2,127 |  |  | $ | (60,464 | )
Additions | 879 |  |  | (20,820 | )
Transfer to accounts receivable | (2,397 | ) |  | — |
Transfer to revenues | — |  |  | 28,466 |
Total activity | (1,518 | ) |  | 7,646 |
Balance as of June 30, 2018 | 609 |  |  | (52,818 | )
Less current portion | 327 |  |  | (18,149 | )
Noncurrent portion | $ | 282 |  |  | $ | (34,669 | )
Contract assets relate to performance obligations satisfied in advance of scheduled billings. Current contract assets are included in “Other current assets” and noncurrent contract assets are included in “Other long-term assets, net” on the consolidated balance sheet. Contract liabilities relate to payments received in advance of satisfying performance obligations under a contract, which mainly result from contracts with MVCs, contracts with an incentive pricing structure and CIAC payments. Current contract liabilities are included in “Accrued liabilities” and noncurrent contract liabilities are included in “Other long-term liabilities” on the consolidated balance sheet. In the second quarter of 2018, our customer, for whom we had recorded a contract liability to perform future services, elected not to extend the term of its terminal storage contract, thus reducing our future performance obligation. As a result, we adjusted the related contract liability and recognized $9.0 million in revenue. Remaining Performance Obligations The following table presents our estimated revenue from contracts with customers for remaining performance obligations that has not yet been recognized, representing our contractually committed revenue as of June 30, 2018 (in thousands of dollars):
2018 (remaining) |  | $ | 260,929 |
2019 |  | 377,617 |
2020 |  | 229,327 |
2021 |  | 168,290 |
2022 |  | 130,220 |
Thereafter |  | 412,921 |
Total |  | $ | 1,579,304 |
Our contractually committed revenue, for purposes of the tabular presentation above, is generally limited to service customer contracts that have fixed pricing and fixed volume terms and conditions, generally including contracts with minimum volume commitment payment obligations. Disaggregation of Revenue The following table disaggregates our revenues:
| Three Months Ended June 30, |  | Six Months Ended June 30,
| 2018 |  | 2017 |  | 2018 |  | 2017
| (Thousands of Dollars)
Pipeline segment: |  |  |  |  |  |  |
Crude oil pipelines (excluding lessor revenues) | $ | 60,507 |  |  | $ | 47,039 |  |  | $ | 113,944 |  |  | $ | 83,786 |
Refined products and ammonia pipelines | 89,769 |  |  | 79,701 |  |  | 173,068 |  |  | 164,194 |
Total pipeline segment revenues from contracts with customers | 150,276 |  |  | 126,740 |  |  | 287,012 |  |  | 247,980 |
Lessor revenues | — |  |  | — |  |  | 54 |  |  | — |
Total pipeline segment revenues | 150,276 |  |  | 126,740 |  |  | 287,066 |  |  | 247,980 |
Storage segment: |  |  |  |  |  |  |
Throughput terminals | 20,141 |  |  | 22,122 |  |  | 40,157 |  |  | 42,812 |
Storage terminals (excluding lessor revenues) | 127,347 |  |  | 126,655 |  |  | 252,697 |  |  | 243,615 |
Total storage segment revenues from contracts with customers | 147,488 |  |  | 148,777 |  |  | 292,854 |  |  | 286,427 |
Lessor revenues | 9,962 |  |  | 9,782 |  |  | 19,924 |  |  | 19,563 |
Total storage segment revenues | 157,450 |  |  | 158,559 |  |  | 312,778 |  |  | 305,990 |
Fuels marketing segment revenues from contracts with customers | 180,483 |  |  | 153,918 |  |  | 366,321 |  |  | 376,620 |
Consolidation and intersegment eliminations | (2,005 | ) |  | (3,729 | ) |  | (4,080 | ) |  | (7,672 | )
Total revenues | $ | 486,204 |  |  | $ | 435,488 |  |  | $ | 962,085 |  |  | $ | 922,918 |

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- Definition The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -URI http://asc.fasb.org/topic&trid=2122369 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -URI http://asc.fasb.org/topic&trid=49130388 + Details
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