Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2013 |
Use of Estimates | ' |
Use of Estimates |
Preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities in our consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
Cash and Cash Equivalents | ' |
Cash and Cash Equivalents |
We consider all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. |
Property, Plant and Equipment | ' |
Property, Plant and Equipment |
Property, plant and equipment consist of our ownership in coal fee mineral interests, our royalty interest in oil and natural gas wells, forestlands, processing facilities, gathering systems, compressor stations and related equipment. Property, plant and equipment are carried at cost and include expenditures for additions and improvements, such as roads and land improvements, which increase the productive lives of existing assets. Maintenance and repair costs are charged to expense as incurred. Renewals and betterments, which extend the useful life of the properties, are capitalized. We compute depreciation and amortization of property, plant and equipment using the straight-line method except for well connects, which generally are depreciated using the accelerated method. The estimated useful life of each asset is as follows: |
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| | Useful Life |
Gathering systems | | 7 – 20 years |
Compressor stations | | 3 – 15 years |
Processing plants | | 15 years |
Other property and equipment | | 3 – 20 years |
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Coal properties are depleted on an area-by-area basis at a rate based on the cost of the mineral properties and the number of tons of estimated proven and probable coal reserves contained therein. Proven and probable coal reserves have been estimated by our own geologists. Our estimates of coal reserves are updated periodically and may result in adjustments to coal reserves and depletion rates that are recognized prospectively. From time to time, we carry out core-hole drilling activities on our coal properties in order to ascertain the quality and quantity of the coal contained in those properties. These core-hole drilling activities are expensed as incurred. We deplete timber using a methodology consistent with the units-of-production method, which is based on the quantity of timber harvested. We determine depletion of oil and gas royalty interests by the units-of-production method and these amounts could change with revisions to estimated proved recoverable reserves. When we retire or sell an asset, we remove its cost and related accumulated depreciation and amortization from our consolidated balance sheet. Upon sale, we record the difference between the net book value, net of any assumed asset retirement obligation (“ARO”), and proceeds from disposition as a gain or loss. |
Intangible assets are primarily associated with assumed contracts, customer relationships and other. These intangible assets are amortized on a straight-line basis over periods of up to 26 years, the period in which benefits are derived from the contracts, customer relationships and other, and are reviewed for impairment along with their associated property, plant and equipment whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. |
Asset Retirement Obligations | ' |
Asset Retirement Obligations |
We recognize the fair value of a liability for an ARO in the period in which it is incurred. The determination of fair value is based upon regional market and specific facility type information. The associated asset retirement costs are capitalized as part of the carrying cost of the asset. The long-lived assets for which our AROs are recorded include compressor stations, gathering systems and coal processing plants. The amount of an ARO and the costs capitalized represent the estimated future cost to satisfy the abandonment obligation using current prices that are escalated by an assumed inflation factor after discounting the future cost back to the date that the abandonment obligation was incurred using a rate commensurate with the risk, which approximates our cost of funds. After recording these amounts, the ARO is accreted to its future estimated value using the same assumed rate, and the additional capitalized costs are depreciated over the productive life of the assets. Both the accretion and the depreciation are included in depreciation, depletion and amortization (“DD&A”) expense on our consolidated statements of operations. |
In connection with our natural gas midstream assets, we are obligated under federal regulations to perform limited procedures around the abandonment of pipelines. In some cases, we are unable to reasonably determine the fair value of such ARO because the settlement dates, or ranges thereof, are indeterminable. An ARO will be recorded in the period in which we can reasonably determine the settlement dates. |
Impairment of Long-Lived Assets | ' |
Impairment of Long-Lived Assets |
The Eastern Midstream, Midcontinent Midstream and Coal and Natural Resource Management segments have completed a number of acquisitions in recent years. In conjunction with our accounting for these acquisitions, it was necessary for us to estimate the values of the assets acquired and liabilities assumed, which involved the use of various assumptions. The most significant assumptions, and the ones requiring the most judgment, involve the estimated fair values of property, plant and equipment, intangibles and the resulting amount of goodwill, if any. Changes in operations, decreases in commodity prices, changes in the business environment or deteriorations of market conditions could substantially alter management’s assumptions and could result in lower estimates of values of acquired assets or of future cash flows. |
We review long-lived assets to be held and used, including definite-lived intangible assets, whenever triggering events or circumstances indicate that the carrying value of those assets may not be recoverable. Triggering events include, but are not limited to, changes in operations; decreases in commodity prices, the amounts of which may vary depending on the asset involved; changes in the business environment; or deteriorations of market conditions. When a triggering event occurs, we estimate the future cash flows of the related assets. Our estimates of future cash flows depend on our projections of revenues and expenses for future periods. These projections are driven by our estimates or evaluation of growth rates, changes in market conditions, and changes in prices received or paid, among other factors. When the carrying amount of an asset exceeds the sum of the undiscounted estimated future cash flows, we recognize an impairment loss equal to the difference between the carrying value and the fair value of the asset. Fair value is estimated to be the present value of future net cash flows from the asset, discounted using a rate commensurate with the risk and remaining life of the asset. |
Impairment of Goodwill | ' |
Impairment of Goodwill |
Goodwill recorded in connection with a business combination is not amortized, but tested for impairment at least annually. We have the option to make a qualitative assessment of whether it is more likely than not a reporting unit’s fair value is less than its carrying amount before applying the two-step goodwill impairment test. If we conclude it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, we do not need to perform the two-step impairment test. If the two-step impairment test is required, the first step of the impairment test is used to identify potential impairment by comparing the fair value of a reporting unit to the book value, including goodwill. If the fair value of a reporting unit exceeds its book value, goodwill of the reporting unit is not considered impaired, and the second step of the impairment test is not required. If the book value of a reporting unit exceeds its fair value, the second step of impairment test compares the implied fair value of the reporting unit’s goodwill with the book value of that goodwill. If the book value of the reporting unit’s goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. The annual impairment testing is performed in the fourth quarter. We quantitatively tested the Eastern Midstream segment, our only reporting unit with goodwill, and determined that no impairment charge was necessary. |
Equity Investments | ' |
Equity Investments |
We use the equity method of accounting to account for our membership interest in various joint ventures, recording the initial investment at cost. Subsequently, the carrying amounts of the investments are increased to reflect our share of income of the investees and capital contributions, and are reduced to reflect our share of losses of the investees or distributions received from the investees as the joint ventures report them. Our share of earnings or losses from these joint ventures is included in other revenues on the consolidated statements of operations. Other revenues also include amortization of the amount of the equity investments that exceed our portion of the underlying equity in net assets. We record this amortization over the life of the contracts acquired, 14 years. In the event of an impairment or a gain on sale of a joint venture, the impairment charge or gain is classified in the same line of the income statement as the equity earnings or loss are recorded, “Other revenues” in the consolidated statement of operations. |
Debt Issuance Costs | ' |
Debt Issuance Costs |
Debt issuance costs relating to long-term debt have been capitalized and are being amortized and recorded as interest expense over the term of the related debt instrument. |
Long-Term Prepaid Minimums | ' |
Long-Term Prepaid Minimums |
We lease a portion of our reserves from third parties that require monthly or annual minimum rental payments. The prepaid minimums are recoupable from future production and are deferred and charged to coal royalties expense as the coal is subsequently produced. We evaluate the recoverability of the prepaid minimums on a periodic basis; consequently, any prepaid minimums that cannot be recouped are charged to coal royalties expense. |
Environmental Liabilities | ' |
Environmental Liabilities |
Other liabilities include accruals for environmental liabilities that we either assumed in connection with certain acquisitions or recorded in operating expenses when it became probable that a liability had been incurred and the amount of that liability could be reasonably estimated. |
Concentration of Credit Risk | ' |
Concentration of Credit Risk |
In 2013, 51% of our total consolidated revenues and 51% of our December 31, 2013 consolidated accounts receivable resulted from seven of our natural gas midstream customers. Within the Eastern Midstream segment for 2013, 55% of the segment’s revenues and 54% of the December 31, 2013 accounts receivable for the segment resulted from three customers. Within the Midcontinent Midstream segment for 2013, 57% of the segment’s revenues and 54% of the December 31, 2013 accounts receivable for the segment resulted from four customers. No significant uncertainties related to the collectability of amounts owed to us exist in regard to these natural gas midstream customers. These customer concentrations increase our exposure to credit risk on our receivables, since the financial insolvency of these customers could have a significant impact on our results of operations. As of December 31, 2013, we had recorded a $0.3 million allowance for doubtful accounts in the Midcontinent Midstream segment. |
Revenues | ' |
Revenues |
Natural Gas Midstream Revenues. We recognize revenues from the sale of natural gas liquids (“NGLs”) and residue gas when we sell the NGLs and residue gas produced at our gas processing plants. We recognize gathering and trunkline revenues based upon actual volumes delivered. Due to the time needed to gather information from various purchasers and measurement locations and then calculate volumes delivered, the collection of natural gas midstream revenues may take up to 30 days following the month of production. Therefore, we make accruals for revenues and accounts receivable and the related cost of midstream gas purchased and accounts payable based on estimates of natural gas purchased and NGLs and residue gas sold. We record any differences, which historically have not been significant, between the actual amounts ultimately received or paid and the original estimates in the period they become finalized. |
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Coal Royalties Revenues and Deferred Income. We recognize coal royalties revenues on the basis of tons of coal sold by our lessees and the corresponding revenues from those sales. Since we do not operate any coal mines, we do not have access to actual production and revenues information until approximately 30 days following the month of production. Therefore, our financial results include estimated revenues and accounts receivable for the month of production. We record any differences, which historically have not been significant, between the actual amounts ultimately received or paid and the original estimates in the period they become finalized. Most of our lessees must make minimum monthly or annual payments that are generally recoupable over certain time periods. These minimum payments are recorded as deferred income. If the lessee recoups a minimum payment through production, the deferred income attributable to the minimum payment is recognized as coal royalties revenues. If a lessee fails to meet its minimum production for certain pre-determined time periods, the deferred income attributable to the minimum payment is recognized as minimum rental revenues, which is a component of other revenues on our consolidated statements of operations. Other liabilities on the balance sheet also include deferred unearned income from a coal services facility lease, which is recognized as other income as it is earned. |
Derivative Instruments | ' |
Derivative Instruments |
From time to time, we enter into derivative financial instruments to mitigate our exposure to natural gas, crude oil and NGL price volatility. The derivative financial instruments, which are placed with financial institutions that we believe are acceptable credit risks, take the form of collars and swaps. All derivative financial instruments are recognized in our consolidated financial statements at fair value. The fair values of our derivative instruments are determined based on discounted cash flows derived from quoted forward prices. All derivative transactions are subject to our risk management policy, which has been reviewed and approved by the board of directors of our general partner. We do not use hedge accounting for commodity derivatives; thus, the open positions are recorded at fair value with the change in value recorded to earnings. |
We have experienced and could continue to experience significant changes in the estimate of unrealized derivative gains or losses recognized due to fluctuations in the value of these commodity derivative contracts. The lack of hedge accounting has no impact on our reported cash flows, although our results of operations are affected by the volatility of mark- to-market gains and losses and changes in fair value, which fluctuate with changes in natural gas, crude oil and NGL prices. These fluctuations could be significant in a volatile pricing environment. |
At December 31, 2013 and 2012, we had no open derivative contracts to hedge commodity prices. Therefore, no derivative assets or liabilities were reported as of December 31, 2013 and 2012. |
Historically, we have entered into interest rate swap agreements (the “Interest Rate Swaps”) to mitigate our exposure to debt interest expense. During the year ended December 31, 2012, we reclassified a total net gain of $0.7 million from accumulated other comprehensive income (“AOCI”) to earnings related the Interest Rate Swaps. At December 31, 2012, no gain or loss remained in AOCI to be recognized in the Derivatives line as the Interest Rate Swaps settled. At December 31, 2013 and 2012, we had no open derivative contracts to hedge interest rates. |
Income Taxes | ' |
Income Taxes |
As a partnership, we are not subject to federal income tax. The taxable income and losses of the Partnership are includable in the federal and state income tax returns of our partners. Net income for financial statement purposes may differ significantly from taxable income reportable to partners as a result of differences between the tax bases and financial reporting bases of assets and liabilities and the taxable income allocation requirements under our partnership agreement. |
Net Income (Loss) per Limited Partner Unit | ' |
Net Income (Loss) per Limited Partner Unit |
We are required to allocate earnings or losses for a reporting period to our limited partners and the participating securities using the two-class method to compute earnings per unit. The two-class method is an earnings allocation formula that treats participating securities as having rights to earnings that otherwise would have been available to common unitholders. Participating securities may participate in undistributed earnings with common units, whether that participation is conditioned upon the occurrence of a specified event or not. The form of such participation does not have to be a dividend, that is, any form of participation in undistributed earnings would constitute participation by that security, regardless of whether the payment to the security holder was referred to as a dividend. Under this method, our net income (loss) for a reporting period is reduced (or increased) by the amount that has been or will be distributed to our participating security holders. Unvested unit-based payment awards that contain non-forfeitable rights to distributions or distribution equivalents are participating securities and, therefore, are included in the computation of net income (loss) allocable to limited partners pursuant to the two-class method of computing earnings per unit. Class B Units and Special Units participate in the allocation of income, gains and losses with the common units; therefore, these forms of equity are participating securities. Thus, our securities consist of publicly traded common units held by limited partners and participating securities as a result of unit-based compensation and issuance of other classes of equity. |
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During 2013, 2012 and 2011, service-based and performance-based phantom units were granted to employees. We have determined that our unvested service-based phantom unit awards generally contain non-forfeitable rights to distributions and, therefore, are participating securities. The performance based phantom units contain forfeitable rights to distributions and, therefore, are not participating securities. |
Basic and diluted net income (loss) per limited partner unit is computed by dividing net income (loss) allocable to limited partners by the weighted average number of limited partner units outstanding during the period. Diluted net income (loss) per limited partner unit is computed by dividing net income (loss) allocable to limited partners by the weighted average number of limited partner units outstanding during the period and, when dilutive, phantom units, Class B Units and Special Units. |
Unit-Based Compensation | ' |
Unit-Based Compensation |
Our long-term incentive plan permits the grant of awards to directors and employees of our general partner and employees of its affiliates who perform services for us. Awards under our long-term incentive plan can be in the form of common units, restricted units, unit options, phantom units and deferred common units. Our long-term incentive plan is administered by the compensation and benefits committee of our general partner’s board of directors. We recognize compensation expense over the vesting period of the awards. |
Authoritative accounting literature establishes standards for transactions in which an entity exchanges its equity instruments for goods and services. This standard requires us to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. See Note 16, “Unit-Based Payments,” for a more detailed description of our long-term incentive plan. |
New Accounting Standards | ' |
New Accounting Standards |
During the first quarter of 2013, we adopted Accounting Standard Update (“ASU”) 2013-02, Comprehensive Income (Topic 220). The new ASU requires us to disclose in a single location (either on the face of the statement of operations or in the notes) the effects of reclassifications out of accumulated other comprehensive income (“AOCI”). The new disclosure requirements were effective for the first quarter 2013 and apply prospectively. All of our AOCI amounts were reclassified in 2012 and no amounts remained as of December 31, 2012. Therefore, adoption of this ASU does not have an effect on our financials. |