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What changed in PLAINS ALL AMERICAN PIPELINE LP's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of PLAINS ALL AMERICAN PIPELINE LP's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+293 added−294 removedSource: 10-K (2025-02-28) vs 10-K (2024-02-29)

Top changes in PLAINS ALL AMERICAN PIPELINE LP's 2024 10-K

293 paragraphs added · 294 removed · 240 edited across 5 sections

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

118 edited+16 added−27 removed293 unchanged
Biggest changeSummary of Risk Factors Risks Related to Our Business Our business, results of operations, financial condition, cash flows and unit price can be adversely affected by many factors including but not limited to: • the volume of crude oil, natural gas and NGL shipped, processed, purchased, stored, fractionated and/or gathered at or through the use of our pipelines and facilities, which can be negatively impacted by a variety of factors outside of our control; • competition in our industry, including recontracting and other risks associated with the general capacity overbuild of midstream energy infrastructure in some of the areas where we operate; • changes in supply and demand for the products we handle and the services we provide, which can be caused by a variety of factors outside of our control; • natural disasters, catastrophes, terrorist attacks (including eco-terrorist attacks), process safety failures, equipment failures or other events, including pipeline or facility accidents and cyber or other attacks on our electronic and computer systems, could interrupt our operations, hinder our ability to fulfil our contractual obligations and/or result in severe personal injury, property damage and environmental damage; • cybersecurity attacks, data breaches and other disruptions affecting us, or our service providers, could materially and adversely affect our business, operations, reputation and financial results; • risks arising from climate change, energy conservation measures, or initiatives that stimulate demand for alternative forms of energy; • societal and political pressures from various groups, including opposition to the development or operation of our pipelines and facilities; • increased concern by financial stakeholders with respect to our governance structure and the perceived social and environmental cost of our industry; • the overall forward market for crude oil and NGL, and certain market structures, the absence of pricing volatility and other market factors; • an inability to fully implement or realize expected returns or other anticipated benefits associated with acquisitions, joint venture and joint ownership arrangements, divestitures and other projects; • entering into new businesses in connection with our strategy to participate in emerging energy opportunities; • pandemics, epidemics or other public health events; • loss of our investment grade credit rating or a significant reduction in our ability to receive open credit; • the credit risk of our customers and other counterparties we transact with in the ordinary course of business activities; • tightened capital markets or other factors that increase our cost of capital or otherwise limit our access to capital; • the insufficiency of, or non-compliance with, our risk policies; • our insurance coverage may not fully cover our losses and we may in the future encounter increased costs related to, and lack of availability of, insurance; • our current or future debt levels, or inability to borrow additional funds or capitalize on business opportunities; • changes in interest rates and currency exchange rates; • difficulties recruiting and retaining our workforce; • an impairment of long-term assets; • significant under-utilization of certain assets due to fixed costs incurred to obtain the right to use such assets; • the cost to repair and maintain our assets; • we do not own all of the land on which our pipelines and facilities are located, which could result in disruptions to our operations; • failure to obtain materials or commodities in the quantity and the quality we need, and at commercially acceptable prices, whether due to supply disruptions, inflation, tariffs, quotas or other factors; and 37 Table of Contents Index to Financial Statement s • the pace of development of natural gas infrastructure could have an adverse impact on expected crude oil production growth in the Permian Basin.
Biggest changeSummary of Risk Factors Risks Related to Our Business Our business, results of operations, financial condition, cash flows and unit price can be adversely affected by many factors including but not limited to: • the volume of crude oil, natural gas and NGL shipped, processed, purchased, stored, fractionated and/or gathered at or through the use of our pipelines and facilities, which can be negatively impacted by a variety of factors outside of our control; • competition in our industry, including recontracting and other risks associated with the general capacity overbuild of midstream energy infrastructure in some of the areas where we operate; • changes in supply and demand for the products we handle and the services we provide, which can be caused by a variety of factors outside of our control; • natural disasters, catastrophes, terrorist attacks (including eco-terrorist attacks), process safety failures, equipment failures or other events, including pipeline or facility accidents; • information or operations technology failures, including cybersecurity attacks, data breaches and other disruptions affecting us, or our service providers; • risks arising from climate change, energy conservation measures, or initiatives that stimulate demand for alternative forms of energy; • societal and political pressures from various groups, including opposition to the development or operation of our pipelines and facilities; • increased concern by financial stakeholders with respect to our governance structure and the perceived social and environmental cost of our industry; • the overall forward market for crude oil and NGL, and certain market structures, the absence of pricing volatility and other market factors; • an inability to fully implement or realize expected returns or other anticipated benefits associated with acquisitions/divestitures, joint venture and joint ownership arrangements, and other projects; • entering into new businesses in connection with our strategy to participate in emerging energy opportunities; • loss of our investment grade credit rating or a significant reduction in our ability to receive open credit; • the credit risk of our customers and other counterparties we transact with in the ordinary course of business activities; • tightened capital markets or other factors that increase our cost of capital or otherwise limit our access to capital; • the insufficiency of, or non-compliance with, our risk policies; • our insurance coverage may not fully cover our losses and we may in the future encounter increased costs related to, and lack of availability of, insurance; • trade tariffs, duties, quotas, inflation, supply disruptions or other factors affecting the commodities and materials we use in our business; • pandemics, epidemics or other public health events; • our current or future debt levels, or inability to borrow additional funds or capitalize on business opportunities; • changes in interest rates and currency exchange rates; • difficulties recruiting and retaining our workforce; • an impairment of long-term assets; • significant under-utilization of certain assets due to fixed costs incurred to obtain the right to use such assets; • the cost to repair and maintain our assets; • we do not own all of the land on which our pipelines and facilities are located, which could result in disruptions to our operations; and • the pace of development of natural gas infrastructure could have an adverse impact on expected crude oil production growth in the Permian Basin. 37 Table of Contents Index to Financial Statements Risks Related to Laws and Regulations Our business may be adversely impacted by existing or new laws, executive orders and regulations relating to protection of the environment and wildlife, operational safety, cross-border import/export and tax matters, financial and hedging activities, climate change and related matters.
Our business, results of operations, financial condition, cash flows and unit price can be adversely affected by pandemics, epidemics or other public health events. Our business, results of operations, financial condition, cash flows and unit price can be adversely affected by pandemics, epidemics or other public health events.
Our business, results of operations, financial condition, cash flows and unit price can be adversely affected by pandemics, epidemics or other public health events.
Similarly, we generally allocate certain deductions for (i) depreciation and amortization of capital additions, (ii) gain or loss realized on a sale or other disposition of our assets, and (iii) in the discretion of the general partner, any other extraordinary item of income, gain, loss or deduction based upon ownership on the Allocation Date.
Similarly, we generally allocate (i) certain deductions for depreciation and amortization of capital additions, (ii) gain or loss realized on a sale or other disposition of our assets, and (iii) in the discretion of the general partner, any other extraordinary item of income, gain, loss or deduction based upon ownership on the Allocation Date.
Our general partner will determine the amount and timing of such distributions and has broad discretion to establish and make additions to our reserves or the reserves of our operating partnerships in amounts the general partner determines in its reasonable discretion to be necessary or appropriate: • to provide for the proper conduct of our business and the businesses of our operating partnerships (including reserves for future capital expenditures and for our anticipated future credit needs); • to comply with applicable law or any loan agreement, security agreement, mortgage, debt instrument or other agreement or obligation; • to provide funds to make payments on the preferred units; or • to provide funds for distributions to our common unitholders for any one or more of the next four calendar quarters.
Our general partner will determine the amount and timing of such distributions and has broad discretion to establish and make additions to our reserves or the reserves of our operating partnerships in amounts the general partner determines in its reasonable discretion to be necessary or appropriate: • to provide for the proper conduct of our business and the businesses of our operating partnerships (including reserves for future capital expenditures and for our anticipated future credit needs); • to comply with applicable law or any loan agreement, security agreement, mortgage, debt instrument or other agreement or obligation; • to provide funds to make payments on the preferred unitholders; or • to provide funds for distributions to our common unitholders for any one or more of the next four calendar quarters.
Also, except with respect to some of our recently constructed long haul pipeline assets, third-party shippers generally do not have long-term contractual commitments to ship crude oil on our pipelines. A decision by a shipper to substantially reduce or cease to ship volumes of crude oil on our pipelines could cause a significant decline in our revenues.
Also, except with respect to some of our more recently constructed long haul pipeline assets, third-party shippers generally do not have long-term contractual commitments to ship crude oil on our pipelines. A decision by a shipper to substantially reduce or cease to ship volumes of crude oil on our pipelines could cause a significant decline in our revenues.
Unlike a corporation, our partnership agreement requires us to distribute, on a quarterly basis, 100% of our available cash to our unitholders of record. Available cash is generally defined as all of our cash and cash equivalents on hand at the end of each quarter less reserves established in the discretion of our general partner for future requirements.
Unlike a corporation, our partnership agreement requires us to distribute, on a quarterly basis, 100% of our available cash to our unitholders of record. Available cash is generally defined as all of our cash receipts and cash equivalents on hand at the end of each quarter less reserves established in the discretion of our general partner for future requirements.
We believe that we will have sufficient cash flow from operations and available borrowings under our bank credit facilities to service our indebtedness, although the principal amount of our debt securities will likely need to be refinanced at maturity in whole or in part.
We believe that we will have sufficient cash flow from operations and available borrowings under our bank credit facilities to service our indebtedness, although the principal amount of our debt securities will likely need to be refinanced at or prior to maturity in whole or in part.
Although our general partner may elect to have our unitholders and former unitholders take such audit adjustment into account and pay any resulting taxes (including applicable penalties or interest) in accordance with their interests in us during the tax year under audit, there can be no assurance that such election will be practical, permissible or effective in all circumstances.
Although our general partner may elect to have our unitholders and former unitholders take such audit adjustments into account and pay any resulting taxes (including applicable penalties or interest) in accordance with their interests in us during the tax year under audit, there can be no assurance that such election will be practical, permissible or effective in all circumstances.
Although we have credit risk management policies and procedures that are designed to mitigate and limit our exposure in this area, there can be no assurance that we have adequately assessed and managed the creditworthiness of our existing or future counterparties or that there will not be an unanticipated deterioration in their creditworthiness or unexpected instances of nonpayment or nonperformance, all of which could have an adverse impact on our cash flow and our ability to pay or increase our cash distributions to our partners. 45 Table of Contents Index to Financial Statement s We have a number of minimum volume commitment contracts that support our pipelines.
Although we have credit risk management policies and procedures that are designed to mitigate and limit our exposure in this area, there can be no assurance that we have adequately assessed and managed the creditworthiness of our existing or future counterparties or that there will not be an unanticipated deterioration in their creditworthiness or unexpected instances of nonpayment or nonperformance, all of which could have an adverse impact on our cash flow and our ability to pay or increase our cash distributions to our partners. 45 Table of Contents Index to Financial Statements We have a number of minimum volume commitment contracts that support our pipelines.
As of December 31, 2023, we had over $2.6 billion of liquidity available, including cash and cash equivalents and available borrowing capacity under our senior unsecured revolving credit facility and our senior secured hedged inventory facility, subject to continued covenant compliance. Lower Adjusted EBITDA could increase our leverage ratios and effectively reduce our ability to incur additional indebtedness.
As of December 31, 2024, we had over $2.6 billion of liquidity available, including cash and cash equivalents and available borrowing capacity under our senior unsecured revolving credit facility and our senior secured hedged inventory facility, subject to continued covenant compliance. Lower Adjusted EBITDA could increase our leverage ratios and effectively reduce our ability to incur additional indebtedness.
Such negative sentiment regarding the hydrocarbon energy industry could influence consumer preferences and government or regulatory actions, which could, in turn, have an adverse impact on our business. 42 Table of Contents Index to Financial Statement s Activists concerned about the potential effects of climate change have directed their attention towards sources of funding for hydrocarbon energy companies, which has resulted in certain financial institutions, funds and other sources of capital restricting or eliminating their investment in energy-related activities.
Such negative sentiment regarding the hydrocarbon energy industry could influence consumer preferences and government or regulatory actions, which could, in turn, have an adverse impact on our business. 42 Table of Contents Index to Financial Statements Activists concerned about the potential effects of climate change have directed their attention towards sources of funding for hydrocarbon energy companies, which has resulted in certain financial institutions, funds and other sources of capital restricting or eliminating their investment in energy-related activities.
Terrorists may target our physical facilities and hackers may attack our electronic and computer systems. 40 Table of Contents Index to Financial Statement s If one or more of our pipelines or other facilities, including electronic and computer systems, or any facilities or businesses that deliver products, supplies or services to us or that we rely on in order to operate our business, are damaged by severe weather or any other disaster, accident, catastrophe, terrorist attack or event, our operations could be significantly interrupted.
Terrorists may target our physical facilities and hackers may attack our electronic and computer systems. 40 Table of Contents Index to Financial Statements If one or more of our pipelines or other facilities, including electronic and computer systems, or any facilities or businesses that deliver products, supplies or services to us or that we rely on in order to operate our business, are damaged by severe weather or any other disaster, accident, catastrophe, terrorist attack or event, our operations could be significantly interrupted.
The amount of our current or future indebtedness could have significant effects on our operations, including, among other things: • a significant portion of our cash flow will be dedicated to the payment of principal and interest on our indebtedness and may not be available for other purposes, including the payment of distributions on our units and capital expenditures; • credit rating agencies may view our debt level negatively; • covenants contained in our existing debt arrangements will require us to continue to meet financial tests that may adversely affect our flexibility to plan for and react to changes in our business; • our ability to obtain additional financing for working capital, capital expenditures, acquisitions and general partnership purposes may be limited; • we may be at a competitive disadvantage relative to similar companies that have less debt; and • we may be more vulnerable to adverse economic and industry conditions as a result of our significant debt level.
The amount of our current or future indebtedness could have significant effects on our operations, including, among other things: • a significant portion of our cash flow will be dedicated to the payment of principal and interest on our indebtedness and may not be available for other purposes, including the payment of distributions on our units and capital expenditures; • credit rating agencies may view our debt level negatively; • covenants contained in our existing debt arrangements will require us to continue to meet financial tests that may adversely affect our flexibility to plan for and react to changes in our business; 48 Table of Contents Index to Financial Statements • our ability to obtain additional financing for working capital, capital expenditures, acquisitions and general partnership purposes may be limited; • we may be at a competitive disadvantage relative to similar companies that have less debt; and • we may be more vulnerable to adverse economic and industry conditions as a result of our significant debt level.
In the United States, the Endangered Species Act (“ESA”) and comparable state laws were established to protect endangered and threatened species. Under the ESA, if a species is listed as threatened or endangered, restrictions may be imposed on activities that have the potential to adversely affect that species’ habitat.
In the United States, the ESA and comparable state laws were established to protect endangered and threatened species. Under the ESA, if a species is listed as threatened or endangered, restrictions may be imposed on activities that have the potential to adversely affect that species’ habitat.
If we were to incur a significant liability for which we were not fully insured, or if we incurred costs in excess of reserves established for uninsured or self-insured risks, it could have a material adverse effect on our financial position, results of operations and cash flows. 41 Table of Contents Index to Financial Statement s Our and our customers’ operations are subject to various risks arising out of the threat of climate change.
If we were to incur a significant liability for which we were not fully insured, or if we incurred costs in excess of reserves established for uninsured or self-insured risks, it could have a material adverse effect on our financial position, results of operations and cash flows. 41 Table of Contents Index to Financial Statements Our and our customers’ operations are subject to various risks arising out of the threat of climate change.
We compete against these companies on the basis of many factors, including geographic proximity to production areas, market access, rates, terms of service, connection costs and other factors. 39 Table of Contents Index to Financial Statement s With regard to our NGL operations, we compete with large oil, natural gas and natural gas liquids companies that may, relative to us, have greater financial resources and access to supplies of natural gas and NGL.
We compete against these companies on the basis of many factors, including geographic proximity to production areas, market access, rates, terms of service, connection costs and other factors. 39 Table of Contents Index to Financial Statements With regard to our NGL operations, we compete with large oil, natural gas and natural gas liquids companies that may, relative to us, have greater financial resources and access to supplies of natural gas and NGL.
Tax Risks to Common Unitholders and Series B Preferred Unitholders Our Common Units and Series B Preferred Units are subject to tax risks, which may adversely impact the value of or market for our units and may reduce our cash available for distribution or debt service, including but not limited to: • our status as a partnership for U.S. federal income tax purposes and not being subject to a material amount of entity-level taxation; • potential legislative, judicial or administrative changes or differing interpretations, possibly applied on a retroactive basis; • potential audit adjustments to our income tax returns for tax years beginning after December 31, 2017, by the IRS or state tax authorities; • IRS or Canada Revenue Agency (“CRA”) contests to the federal income tax positions or inter-country allocations we take; • our unitholders may be required to pay taxes on their share of our income even if they do not receive any cash distributions from us; • tax-exempt entities and non-U.S. unitholders face unique tax issues from owning our units; • taxable gain or loss on the disposition of our common units could be more or less than expected; • unitholders may be subject to limitation on their ability to deduct interest expense incurred by us; • our unitholders will likely be subject to state, local and non-U.S. taxes and return filing requirements in states and jurisdictions where they do not live as a result of investing in our units; and • the tax treatment of income attributable to distributions on our Series B Preferred Units as guaranteed payments for the use of capital creates a different tax treatment for the holders of our Series B Preferred Units than the holders of our common units and such income is not eligible for the 20% deduction for qualified publicly traded partnership income. 38 Table of Contents Index to Financial Statement s Risks Related to Our Business Our profitability depends on the volume of crude oil, natural gas and NGL shipped, processed, purchased, stored, fractionated and/or gathered at or through the use of our pipelines and facilities, which can be negatively impacted by a variety of factors outside of our control.
Tax Risks to Common Unitholders and Series B Preferred Unitholders Our Common Units and Series B Preferred Units are subject to tax risks, which may adversely impact the value of or market for our units and may reduce our cash available for distribution or debt service, including but not limited to: • our status as a partnership for U.S. federal income tax purposes and not being subject to a material amount of entity-level taxation; • potential legislative, judicial or administrative changes or differing interpretations, possibly applied on a retroactive basis, or expiration of existing provisions; • potential audit adjustments to our income tax returns by the IRS or state tax authorities; • IRS or Canada Revenue Agency (“CRA”) contests to the federal income tax positions or inter-country allocations we take; • our unitholders may be required to pay taxes on their share of our income even if they do not receive any cash distributions from us; • tax-exempt entities and non-U.S. unitholders face unique tax issues from owning our units; • taxable gain or loss on the disposition of our common units could be more or less than expected; • unitholders may be subject to limitation on their ability to deduct interest expense incurred by us; • our unitholders will likely be subject to state, local and non-U.S. taxes and return filing requirements in states and jurisdictions where they do not live as a result of investing in our units; and • the tax treatment of income attributable to distributions on our Series B Preferred Units as guaranteed payments for the use of capital creates a different tax treatment for the holders of our Series B Preferred Units than the holders of our common units and such income is not eligible for the 20% deduction for qualified publicly traded partnership income. 38 Table of Contents Index to Financial Statements Risks Related to Our Business Our profitability depends on the volume of crude oil, natural gas and NGL shipped, processed, purchased, stored, fractionated and/or gathered at or through the use of our pipelines and facilities, which can be negatively impacted by a variety of factors outside of our control.
Any new laws, executive orders or regulations, or changes to or interpretations of existing laws or regulations, adverse to us could have a material adverse effect on our financial position, results of operations and cash flows. 51 Table of Contents Index to Financial Statement s We have a history of making incremental additions to the miles of pipelines we own, both through acquisitions and investment capital projects.
Any new laws, executive orders or regulations, or changes to or interpretations of existing laws or regulations, adverse to us could have a material adverse effect on our financial position, results of operations and cash flows. 51 Table of Contents Index to Financial Statements We have a history of making incremental additions to the miles of pipelines we own, both through acquisitions and investment capital projects.
In the past, the results of such activities have varied significantly based on market conditions and these activities may continue to experience highly variable results as a result of future changes to the markets for crude oil and NGL. 43 Table of Contents Index to Financial Statement s Joint ventures, joint ownership arrangements and other projects pose unique challenges and we may not be able to fully implement or realize synergies, expected returns or other anticipated benefits associated with such projects.
In the past, the results of such activities have varied significantly based on market conditions and these activities may continue to experience highly variable results as a result of future changes to the markets for crude oil and NGL. 43 Table of Contents Index to Financial Statements Joint ventures, joint ownership arrangements and other capital projects pose unique challenges and we may not be able to fully implement or realize synergies, expected returns or other anticipated benefits associated with such projects.
In addition, the following provisions of our partnership agreement may discourage a person or group from attempting to remove our general partner or otherwise change our management: • generally, if a person acquires 20% or more of any class of units then outstanding other than from our general partner or its affiliates, the units owned by such person cannot be voted on any matter, except that such shares constituting up to 19.9% of the total shares outstanding may be voted in the election of PAGP GP directors; • the PAGP GP Board is composed of three classes of directors, which limits our unitholders’ ability to make significant changes to the board in any given year; and • limitations upon the ability of unitholders to call meetings or to acquire information about our operations, as well as other limitations upon the unitholders’ ability to influence the manner or direction of management.
In addition, the following provisions of our partnership agreement may discourage a person or group from attempting to remove our general partner or otherwise change our management: • generally, if a person acquires 20% or more of any class of units then outstanding other than from our general partner or its affiliates, the units owned by such person cannot be voted on any matter, except that such shares constituting up to 19.9% of the total shares outstanding may be voted in the election of PAGP GP directors; 55 Table of Contents Index to Financial Statements • the PAGP GP Board is composed of three classes of directors, which limits our unitholders’ ability to make significant changes to the board in any given year; and • limitations upon the ability of unitholders to call meetings or to acquire information about our operations, as well as other limitations upon the unitholders’ ability to influence the manner or direction of management.
In addition, although we believe that we currently maintain adequate insurance coverage, insurance will not cover many types of interruptions or events that might occur and will not cover all risks associated with our operations.
In addition, although we believe that we currently maintain adequate insurance coverage, insurance will not cover many types of interruptions or losses that might occur and will not cover all risks associated with our operations.
Significant increases in interest rates above current levels could adversely affect our results of operations, cash flows and financial position due to, among other things: 48 Table of Contents Index to Financial Statement s • Our exposure to market risk due to the short-term nature of our commercial paper borrowings and the floating interest rates on our credit facilities; • Any potential refinancing of our indebtedness at rates higher than historical amounts; • Increasing interest costs associated with the storage of hedged crude oil and NGL inventory in our merchant activities; and • Distributions payable on our Series B preferred units, which accumulate for each distribution period at a percentage of the liquidation preference equal to the applicable three-month Secured Overnight Financing Rate (SOFR), plus a credit spread adjustment of 0.2621%, plus 4.11% per annum.
Significant increases in interest rates above current levels could adversely affect our results of operations, cash flows and financial position due to, among other things: • Our exposure to market risk due to the short-term nature of our commercial paper borrowings and the floating interest rates on our credit facilities; • Any potential refinancing of our indebtedness at rates higher than historical amounts; • Increasing interest costs associated with the storage of hedged crude oil and NGL inventory in our merchant activities; and • Distributions payable on our Series B preferred units, which accumulate for each distribution period at a percentage of the liquidation preference equal to the applicable three-month Secured Overnight Financing Rate (SOFR), plus a credit spread adjustment of 0.26161%, plus 4.11% per annum.
Many of these projects involve numerous regulatory, environmental, commercial, economic, weather-related, political and legal uncertainties that are beyond our control, including the following: • We may be unable to realize our forecasted commercial, operational or administrative synergies in connection with our joint ventures and joint ownership arrangements, including the Plains Oryx Permian Basin LLC joint venture; • Joint ventures and other joint ownership arrangements may demand substantial internal resources and may divert resources and attention from other areas of our business; • We may construct pipelines, facilities or other assets in anticipation of market demand that dissipates or market growth that never materializes; • Despite the fact that we will expend significant amounts of capital during the construction phase of growth or expansion projects, revenues associated with these organic growth projects will not materialize until the projects have been completed and placed into commercial service, and the amount of revenue generated from these projects could be significantly lower than anticipated for a variety of reasons; • As these projects are undertaken, required approvals, permits and licenses may not be obtained, may be delayed, may be obtained with conditions that materially alter the expected return associated with the underlying projects or may be granted and then subsequently withdrawn; • We may face opposition to our planned projects from environmental groups, landowners, local groups and other advocates, including lawsuits or other actions designed to disrupt or delay our planned projects; • We may not be able to obtain, or we may be significantly delayed in obtaining, all of the rights of way or other real property interests we need to complete such projects, or the costs we incur in order to obtain such rights of way or other interests may be greater than we anticipated; • Due to unavailability or costs of materials, supplies, power, labor or equipment, including increased costs associated with any import duties or requirements to source certain supplies or materials from U.S. suppliers or manufacturers, the cost of completing these projects could turn out to be significantly higher than we budgeted and the time it takes to complete construction of these projects and place them into commercial service could be significantly longer than planned; and • The completion or success of our projects may depend on the completion or success of third-party facilities over which we have no control.
These projects can involve the expansion, modification, divestiture or combination of existing assets or the construction of new midstream energy infrastructure assets and involve numerous regulatory, environmental, commercial, economic, weather-related, political and legal uncertainties that are beyond our control, including the following: • We may be unable to realize our forecasted commercial, operational or administrative synergies in connection with our joint ventures and joint ownership arrangements, including the Permian JV; • Joint ventures and other joint ownership arrangements may demand substantial internal resources and may divert resources and attention from other areas of our business; • We may construct pipelines, facilities or other assets in anticipation of market demand that dissipates or market growth that never materializes; • Despite the fact that we will expend significant amounts of capital during the construction phase of growth or expansion projects, revenues associated with these organic growth projects will not materialize until the projects have been completed and placed into commercial service, and the amount of revenue generated from these projects could be significantly lower than anticipated for a variety of reasons; • As these projects are undertaken, required approvals, permits and licenses may not be obtained, may be delayed, may be obtained with conditions that materially alter the expected return associated with the underlying projects or may be granted and then subsequently withdrawn; • We may face opposition to our planned projects from environmental groups, landowners, local groups and other advocates, including lawsuits or other actions designed to disrupt or delay our planned projects; • We may not be able to obtain, or we may be significantly delayed in obtaining, all of the rights of way or other real property interests we need to complete such projects, or the costs we incur in order to obtain such rights of way or other interests may be greater than we anticipated; • Due to unavailability or costs of materials, supplies, power, labor or equipment, including increased costs associated with any import duties or requirements to source certain supplies or materials from U.S. suppliers or manufacturers, the cost of completing these projects could turn out to be significantly higher than we budgeted and the time it takes to complete construction of these projects and place them into commercial service could be significantly longer than planned; and • The completion or success of our projects may depend on the completion or success of third-party facilities over which we have no control.
The adoption and implementation of any international, federal, regional or state legislation, executive actions, regulations or other regulatory and policy initiatives that impose more stringent standards for GHG emissions, restrict the areas in which the oil and gas industry may produce crude oil and natural gas or generate GHG emissions, increase scrutiny of environmental permitting or delay such permitting reviews, or require enhanced disclosure of such GHG emission and other climate-related information, could result in reduced demand for crude oil and natural gas, and thus our services, as well as increase our compliance costs.
The adoption and implementation of any international, federal, regional or state legislation, executive actions, regulations or other regulatory and policy initiatives that impose more stringent standards for GHG emissions, restrict the areas in which the oil and gas industry may produce crude oil and natural gas or generate GHG emissions, increase scrutiny of environmental permitting or delay such permitting reviews, require enhanced disclosure of such GHG emission and other climate-related information, or promote and subsidize lower GHG-emitting, alternative energy products, could result in reduced demand for crude oil and natural gas, and thus our services, as well as increase our compliance costs.
Any significant increase in these expenditures could adversely affect our results of operations, financial position or cash flows, as well as our ability to make cash distributions to our unitholders. We do not own all of the land on which our pipelines and facilities are located, which could result in disruptions to our operations.
Any significant increase in these expenditures could adversely affect our results of operations, financial position or cash flows, as well as our ability to make cash distributions to our unitholders. 50 Table of Contents Index to Financial Statements We do not own all of the land on which our pipelines and facilities are located, which could result in disruptions to our operations.
As a result of these uncertainties, the anticipated benefits associated with our joint ventures and joint ownership arrangements may not be achieved or could be delayed.
As a result of these uncertainties, the anticipated benefits associated with our joint ventures, joint ownership arrangements and other capital projects may not be achieved or could be delayed.
Because our unitholders will be treated as partners to whom we will allocate taxable income that could be different in amount than the cash we distribute, they will be required to pay any U.S. federal income taxes and, in some cases, state and local income taxes on their share of our taxable income even if they receive no cash distributions from us.
Because our unitholders will be treated as partners to whom we will allocate taxable income, including gains and losses resulting from the sale of assets, that could be different in amount than the cash we distribute, they will be required to pay any U.S. federal income taxes and, in some cases, state and local income taxes on their share of our taxable income even if they receive no cash distributions from us.
Our operations involving the storage, treatment, processing, and transportation of liquid hydrocarbons, including crude oil, NGL and refined products, are subject to stringent federal, state, and local laws and regulations governing the discharge of materials into the environment.
Our operations involving the storage, treatment, processing, and transportation of liquid hydrocarbons, including crude oil, NGL and natural gas, are subject to stringent federal, state, and local laws and regulations governing the discharge of materials into the environment.
If the IRS were to treat us as a corporation for U.S. federal income tax purposes, or we become subject to entity-level taxation for state or foreign tax purposes, our cash available for distributions to our unitholders would be substantially reduced.
If the IRS were to treat us as a corporation for U.S. federal income tax purposes, or if we become subject to a material amount of entity-level or other form of taxation for state or foreign tax purposes, our cash available for distributions to our unitholders would be substantially reduced.
You are urged to consult with your own tax advisor with respect to the status of regulatory or administrative developments and proposals and their potential effect on your investment in our units. 60 Table of Contents Index to Financial Statement s Non-U.S. unitholders will be subject to U.S. taxes and withholding with respect to their income and gain from owning our units.
You are urged to consult with your own tax advisor with respect to the status of regulatory or administrative developments and proposals and their potential effect on your investment in our units. Non-U.S. unitholders will be subject to U.S. taxes and withholding with respect to their income and gain from owning our units.
We currently own property and conduct business in multiple states that currently impose a personal income tax on individuals and an income tax on corporations and other entities. It is our unitholders’ responsibility to file all U.S. federal, state, local and non-U.S. tax returns, as applicable.
We currently own property and conduct business in multiple states that currently impose a personal income tax on individuals and an income tax on corporations and other entities. It is our unitholders’ responsibility to file all U.S. federal, state, local and non-U.S. tax returns, as applicable, and pay any taxes due in these jurisdictions.
For example, if the U.S. dollar appreciates against the Canadian dollar, the U.S. dollar value of our Canadian dollar denominated earnings is reduced for U.S. reporting purposes. Our business requires the retention and recruitment of a skilled workforce, and difficulties retaining and recruiting our workforce could result in a failure to implement our business plans.
For example, if the U.S. dollar appreciates against the Canadian dollar, the U.S. dollar value of our Canadian dollar denominated earnings is reduced for U.S. reporting purposes. 49 Table of Contents Index to Financial Statements Our business requires the retention and recruitment of a skilled workforce, and difficulties retaining and recruiting our workforce could result in a failure to implement our business plans.
The enactment and implementation of derivatives legislation could have an adverse impact on our ability to use derivative instruments to reduce the effect of commodity price, interest rate and other risks associated with our business and increase the amount of working capital required to conduct these hedging activities.
Existing or future derivatives legislation and regulations could have an adverse impact on our ability to use derivative instruments to reduce the effect of commodity price, interest rate and other risks associated with our business and increase the amount of working capital required to conduct these hedging activities.
We can give no assurance that we would be able to refinance our debt securities. We do not have the same flexibility as other types of organizations to accumulate cash, which may limit cash available to service our debt securities or to repay them at maturity.
We can give no assurance that we would be able to refinance our debt securities. 58 Table of Contents Index to Financial Statements We do not have the same flexibility as other types of organizations to accumulate cash, which may limit cash available to service our debt securities or to repay them at maturity.
Despite such efforts, we can provide no assurance that the FERC and other agencies that regulate our business will not issue future orders or declarations that increase our costs or otherwise adversely affect our operations. Our Canadian pipelines are subject to regulation by the CER and by provincial authorities.
Despite such efforts, we can provide no assurance that the FERC and other agencies that regulate our business will not issue future orders or declarations that increase our costs or otherwise adversely affect our operations. 52 Table of Contents Index to Financial Statements Our Canadian pipelines are subject to regulation by the CER and by provincial authorities.
As of December 31, 2023, the face value of our consolidated debt was approximately $7.8 billion (excluding unamortized discounts and debt issuance costs of approximately $41 million), substantially all of which was at fixed interest rates.
As of December 31, 2024, the face value of our consolidated debt was approximately $7.7 billion (excluding unamortized discounts and debt issuance costs of approximately $42 million), substantially all of which was at fixed interest rates.
The failure to comply with any such laws and regulations could result in the assessment of administrative, civil, and criminal penalties, the imposition of investigatory or remedial obligations or the incurrence of capital expenditures.
The failure to comply with any such laws and regulations could result in the assessment of administrative, civil, and criminal penalties, the imposition of investigatory or remedial obligations or the incurrence of capital expenditures, the costs of which may be substantial.
However, for taxable years beginning after December 31, 2017, our deduction for “business interest” is limited to the sum of our business interest income and 30% of our “adjusted taxable income.” For the purposes of this limitation, our adjusted taxable income is computed without regard to any business interest expense or business interest income.
However, our deduction for “business interest” is limited to the sum of our business interest income and 30% of our “adjusted taxable income.” For the purposes of this limitation, our adjusted taxable income is computed without regard to any business interest expense or business interest income.
As of December 31, 2023, the face value of our consolidated debt outstanding was approximately $7.8 billion (excluding unamortized discounts and debt issuance costs of approximately $41 million), consisting of approximately $7.3 billion face value of long-term debt (including senior notes and finance lease obligations) and approximately $446 million of short-term borrowings.
As of December 31, 2024, the face value of our consolidated debt outstanding was approximately $7.7 billion (excluding unamortized discounts and debt issuance costs of approximately $42 million), consisting of approximately $7.3 billion face value of long-term debt (including senior notes and finance lease obligations) and approximately $408 million of short-term borrowings.
At December 31, 2023, we had approximately $15.8 billion of net property and equipment, $976 million of linefill, $2.8 billion of investments accounted for under the equity method of accounting and approximately $1.9 billion of net intangible assets capitalized on our balance sheet.
At December 31, 2024, we had approximately $15.4 billion of net property and equipment, $968 million of linefill, $2.8 billion of investments accounted for under the equity method of accounting and approximately $1.7 billion of net intangible assets capitalized on our balance sheet.
Therefore, cash distributions might be made during periods when we record losses and might not be made during periods when we record profits. 55 Table of Contents Index to Financial Statement s Our preferred units have rights, preferences and privileges that are not the same as, and are preferential to, the rights of holders of our common units.
Therefore, cash distributions might be made during periods when we record losses and might not be made during periods when we record profits. Our preferred units have rights, preferences and privileges that are not the same as, and are preferential to, the rights of holders of our common units.
It also could affect the amount of gain from our unitholders’ sale of common units and could have a negative impact on the value of the common units or result in audit adjustments to our unitholders’ tax returns without the benefit of additional deductions.
It also could affect the timing of these tax benefits or the amount of gain from the sale of common units and could have a negative impact on the value of our common units or result in audit adjustments to our unitholders’ tax returns.
The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) established federal oversight and regulation of derivative markets and entities, such as us, that participate in those markets. The Dodd-Frank Act requires the CFTC and the SEC to promulgate rules and regulations implementing the Dodd-Frank Act.
The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) established federal oversight and regulation of derivative markets and entities, such as us, that participate in those markets. The CFTC has promulgated implementing regulations with respect to the Dodd-Frank Act.
Deferred revenue associated with non-performance by shippers under minimum volume contracts could be significant and could adversely affect our profitability and earnings. In addition, in those cases in which we provide division order services for crude oil purchased at the wellhead, we may be responsible for distribution of proceeds to all parties.
Deferred revenue associated with movements by shippers of volumes that are less than minimum volume commitments could be significant and could adversely affect our profitability and earnings. In addition, in those cases in which we provide division order services for crude oil purchased at the wellhead, we may be responsible for distribution of proceeds to all parties.
In addition, our costs of any contest with the IRS or CRA and any incremental taxes required to be paid will be borne indirectly by our unitholders and our general partner because the costs will reduce our cash available for distribution or debt service.
In addition, our costs of any contest with the IRS or CRA and any incremental taxes required to be paid will be borne indirectly by our unitholders and our general partner because the costs will reduce our cash available for distribution or debt service. See Note 14 for additional information regarding CRA challenge of intercompany transactions.
For taxable years beginning after December 31, 2017 and ending on or before December 31, 2025, an individual unitholder is generally allowed a deduction equal to 20% of our “qualified publicly traded partnership income” that is allocated to such unitholder.
Taxable income from our non-U.S. businesses is not eligible for the 20% deduction for qualified publicly traded partnership income. For taxable years beginning after December 31, 2017 and ending on or before December 31, 2025, an individual unitholder is generally allowed a deduction equal to 20% of our “qualified publicly traded partnership income” that is allocated to such unitholder.
Generally, it is our policy to establish a margin for crude oil or other products we purchase by selling such products for physical delivery to third-party users, or by entering into a future delivery obligation under derivative contracts.
Generally, it is our policy to establish a margin for crude oil or other products we purchase by selling such products for physical delivery to third-party users, or by entering into futures or derivative contracts that require future delivery or financial settlement, as applicable.
At December 31, 2023, the face value of our total outstanding long-term debt was approximately $7.3 billion, and the face value of our total outstanding short-term debt was approximately $446 million. We will be prohibited from making cash distributions during an event of default under any of our indebtedness.
Our leverage is significant in relation to our partners’ capital. At December 31, 2024, the face value of our total outstanding long-term debt was approximately $7.3 billion, and the face value of our total outstanding short-term debt was approximately $408 million. We will be prohibited from making cash distributions during an event of default under any of our indebtedness.
For example, virtually all of our income allocated to organizations that are exempt from U.S. federal income tax, including IRAs and other retirement plans, will be unrelated business taxable income and will be taxable to them. Tax-exempt entities should consult a tax advisor before investing in our common units.
For example, virtually all of our income allocated to organizations that are exempt from U.S. federal income tax, including IRAs and other retirement plans, will be unrelated business taxable income and will be taxable to them.
The DOT regulations include requirements for the establishment of pipeline integrity management programs and for protection of HCAs where a pipeline leak or rupture could produce significant adverse consequences. Pipeline safety regulations are revised frequently.
We currently devote substantial resources to comply with DOT-mandated pipeline integrity rules. The DOT regulations include requirements for the establishment of pipeline integrity management programs and for protection of HCAs where a pipeline leak or rupture could produce significant adverse consequences. Pipeline safety regulations are revised frequently.
However, no ruling has been or will be requested regarding our treatment as a partnership for U.S. federal income tax purposes. Failing to meet the qualifying income requirement or a change in current law could cause us to be treated as a corporation for U.S. federal income tax purposes or otherwise subject us to taxation as an entity.
Failing to meet the qualifying income requirement or a change in current law could cause us to be treated as a corporation for U.S. federal income tax purposes or otherwise subject us to taxation as an entity.
Our business also depends on having access to significant amounts of electricity and other commodities. If we are unable to obtain commodities sufficient to operate and maintain our assets, or only able to do so at commercially unreasonable prices, it could materially and adversely affect our business.
If we are unable to obtain commodities sufficient to operate and maintain our assets, or only able to do so at commercially unreasonable prices, it could materially and adversely affect our business.
Our leverage may also make our results of operations more susceptible to adverse economic and industry conditions by limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate and may place us at a competitive disadvantage as compared to our competitors that have less debt. 58 Table of Contents Index to Financial Statement s The ability to transfer our debt securities may be limited by the absence of an organized trading market.
Our leverage may also make our results of operations more susceptible to adverse economic and industry conditions by limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate and may place us at a competitive disadvantage as compared to our competitors that have less debt.
The pace of development of natural gas infrastructure could have an adverse impact on expected crude oil production growth in the Permian Basin. In certain areas where we operate (e.g., the Permian Basin), development of natural gas infrastructure is or may be required to increase accessible supply in order to meet projected demand.
In certain areas where we operate (e.g., the Permian Basin), development of natural gas infrastructure is or may be required to increase accessible supply in order to meet projected demand.
With regard to our physical purchases and sales of crude oil, natural gas or NGL and any related hedging activities that we undertake, we are required to observe the market-related regulations enforced by these agencies, which hold substantial enforcement authority. Our purchases and sales may also be subject to certain reporting and other requirements.
These agencies have imposed broad regulations prohibiting fraud and manipulation of such markets. With regard to our physical purchases and sales of crude oil, natural gas or NGL and any related hedging activities that we undertake, we are required to observe the market-related regulations enforced by these agencies, which hold substantial enforcement authority.
If we experience a shortage in the supply of these materials or are unable to source sufficient quantities of high quality materials at acceptable prices and in a timely manner, it could materially and adversely affect our ability to construct new infrastructure and maintain our existing assets.
If we experience a shortage in the supply of these materials or are unable to source sufficient quantities of high quality materials at acceptable prices and in a timely manner, it could materially and adversely affect our ability to construct new infrastructure and maintain our existing assets. 47 Table of Contents Index to Financial Statements Our business also depends on having access to significant amounts of electricity and other commodities.
If funding is not available when needed, or is available only on unfavorable terms, we may be unable to implement our development plans, enhance our existing business, complete strategic projects and transactions, take advantage of business opportunities or respond to competitive pressures, any of which could have a material adverse effect on our cash flows and results of operations.
If funding is not available when needed, or is available only on unfavorable terms, we may be unable to implement our development plans, enhance our existing business, complete strategic projects and transactions, take advantage of business opportunities or respond to competitive pressures, any of which could have a material adverse effect on our cash flows and results of operations. 46 Table of Contents Index to Financial Statements Our risk policies cannot eliminate all risks and the insufficiency of, or non-compliance with our risk policies could result in significant financial losses.
Hydraulic fracturing is an important and common practice that is used to stimulate production of hydrocarbons from unconventional geological formations. The process involves the injection of water, sand and chemicals under pressure into the formation to fracture the surrounding rock and stimulate production, and it is typically regulated by state and provincial oil and gas commissions.
The process involves the injection of water, sand and chemicals under pressure into the formation to fracture the surrounding rock and stimulate production, and it is typically regulated by state and provincial oil and gas commissions.
Pursuant to the Bipartisan Budget Act of 2015, for tax years beginning after December 31, 2017, if the IRS makes audit adjustments to our income tax returns, it (and some states) may assess and collect any taxes (including any applicable penalties and interest) resulting from such audit adjustments directly from us.
If the IRS makes audit adjustments to our income tax returns, it (and some states) may assess and collect any taxes (including any applicable penalties and interest) resulting from such audit adjustments directly from us.
If, as a result of any such audit adjustment, we are required to make payments of taxes, penalties and interest, our cash available for distribution to our unitholders might be substantially reduced. These rules are not applicable for tax years beginning on or prior to December 31, 2017.
If, as a result of any such audit adjustment, we are required to make payments of taxes, penalties and interest, our cash available for distribution to our unitholders might be substantially reduced.
Additionally, to the extent that we enter into transportation contracts with pipelines that are subject to FERC regulation, we are subject to FERC requirements related to the use of such capacity.
Our purchases and sales may also be subject to certain reporting and other requirements. Additionally, to the extent that we enter into transportation contracts with pipelines that are subject to FERC regulation, we are subject to FERC requirements related to the use of such capacity.
In the taxable period in which a unitholder sells its units, such unitholder may recognize ordinary income from our allocations of income and gain to such unitholder prior to the sale and from recapture items that generally cannot be offset by any capital loss recognized upon the sale of units.
In the taxable period in which a unitholder sells its units, such unitholder may recognize ordinary income from our allocations of income and gain to such unitholder prior to the sale and from recapture items that generally cannot be offset by any capital loss recognized upon the sale of units. 61 Table of Contents Index to Financial Statements Unitholders may be subject to limitation on their ability to deduct interest expense incurred by us.
In the event of the insolvency, bankruptcy, liquidation, reorganization, dissolution or winding up of the business of a subsidiary, other than a subsidiary that may guarantee our debt securities in the future, creditors of that subsidiary would generally have the right to be paid in full before any distribution is made to us or the holders of our debt securities.
In the event of the insolvency, bankruptcy, liquidation, reorganization, dissolution or winding up of the business of a subsidiary, other than a subsidiary that may guarantee our debt securities in the future, creditors of that subsidiary would generally have the right to be paid in full before any distribution is made to us or the holders of our debt securities. 57 Table of Contents Index to Financial Statements Our leverage may limit our ability to borrow additional funds, comply with the terms of our indebtedness or capitalize on business opportunities.
Our debt securities are not listed for trading on any securities exchange or stock market and we do not currently intend to apply for any such listing.
The ability to transfer our debt securities may be limited by the absence of an organized trading market. Our debt securities are not listed for trading on any securities exchange or stock market and we do not currently intend to apply for any such listing.
The issuance of additional common units or other equity securities of equal or senior rank may have the following effects: • an existing unitholder’s proportionate ownership interest in the Partnership will decrease; • the amount of cash available for distribution on each unit may decrease; • the ratio of taxable income to distributions may increase; • the relative voting strength of each previously outstanding unit may be diminished; and • the market price of the common units may decline. 56 Table of Contents Index to Financial Statement s In addition, our Series A preferred units are convertible into common units at any time by the holders of such units, or under certain circumstances, at our option.
The issuance of additional common units or other equity securities of equal or senior rank may have the following effects: • an existing unitholder’s proportionate ownership interest in the Partnership will decrease; • the amount of cash available for distribution on each unit may decrease; • the ratio of taxable income to distributions may increase; • the relative voting strength of each previously outstanding unit may be diminished; and • the market price of the common units may decline.
A change of control may result in defaults under certain of our debt instruments and the triggering of payment obligations under compensation arrangements. Our general partner may transfer its general partner interest to a third party in a merger or in a sale of all or substantially all of its assets without the consent of our unitholders.
The control of our general partner may be transferred to a third party without unitholder consent. A change of control may result in defaults under certain of our debt instruments and the triggering of payment obligations under compensation arrangements.
Although it is not possible at this time to predict how legislation or new regulations that may be adopted to address GHG emissions and climate change could impact our business, any such future laws and regulations could have a material adverse effect on our business, demand for our services, financial condition, results of operations and cash flows. 54 Table of Contents Index to Financial Statement s Legislation, executive orders and regulatory initiatives relating to hydraulic fracturing or other hydrocarbon development activities could reduce domestic production of crude oil and natural gas.
Although it is not possible at this time to predict how legislation or new regulations that may be adopted to address GHG emissions and climate change could impact our business, any such future laws and regulations could have a material adverse effect on our business, demand for our services, financial condition, results of operations and cash flows.
Additionally, the designation of previously unprotected species or the re-designation of under-protected species as threatened or endangered in areas where we or our customers conduct operations could cause us to incur increased costs arising from species protection measures or could result in delays, restrictions or prohibitions on our customers’ development and production activities that could have a material adverse effect on our results of operations.
Additionally, the designation of previously unprotected species or the re-designation of under-protected species as threatened or endangered in areas where we or our customers conduct operations could cause us to incur increased costs arising from species protection measures or could result in delays, restrictions or prohibitions on our customers’ development and production activities that could have a material adverse effect on our results of operations. 54 Table of Contents Index to Financial Statements Risks Inherent in an Investment in Us Cost reimbursements due to our general partner may be substantial and will reduce our cash available for distribution to unitholders.
Agreements or contracts between us and our general partner (and its affiliates) are not necessarily the result of arms length negotiations; and • the general partner would not breach our partnership agreement by exercising its call rights to purchase limited partnership interests or by assigning its call rights to one of its affiliates or to us. 57 Table of Contents Index to Financial Statement s The control of our general partner may be transferred to a third party without unitholder consent.
Agreements or contracts between us and our general partner (and its affiliates) are not necessarily the result of arms length negotiations; and • the general partner would not breach our partnership agreement by exercising its call rights to purchase limited partnership interests or by assigning its call rights to one of its affiliates or to us.
Any loss of rights with respect to real property, through our inability to renew right-of-way contracts or otherwise, could have a material adverse effect on our business, results of operations, and financial position.
Any loss of rights with respect to real property, through our inability to renew right-of-way contracts or otherwise, could have a material adverse effect on our business, results of operations, and financial position. The pace of development of natural gas infrastructure could have an adverse impact on expected crude oil production growth in the Permian Basin.
Although our payment obligations to our unitholders are subordinate to our payment obligations to debtholders, the value of our units may decrease in direct correlation with decreases in the amount we distribute per unit.
Although our payment obligations to our unitholders are subordinate to our payment obligations to debtholders, the value of our units may decrease in direct correlation with decreases in the amount we distribute per unit. Accordingly, if we experience a liquidity problem in the future, we may not be able to issue equity to recapitalize.
Unitholders may be subject to limitation on their ability to deduct interest expense incurred by us. In general, we are entitled to a deduction for interest paid or accrued on indebtedness properly allocable to our trade or business during our taxable year.
In general, we are entitled to a deduction for interest paid or accrued on indebtedness properly allocable to our trade or business during our taxable year.
In March 2022, the SEC issued a proposed rule that would mandate extensive disclosure of climate-related risks, including financial impacts, physical and transition risks, climate-related governance and strategy, and GHG emissions, for all U.S.-listed public companies.
In March 2024, the SEC finalized a set of climate disclosure rules that would mandate extensive disclosure of climate-related risks, including financial impacts, physical and transition risks, climate-related governance and strategy, and GHG emissions, for all U.S.-listed public companies. Several states, including California, have passed or proposed bills requiring similar, or more extensive, climate disclosure rules.
Delaware law provides that for a period of three years from the date of an impermissible distribution, limited partners who received the distribution and who knew at the time of the distribution that it violated Delaware law will be liable to the limited partnership for the distribution amount.
Delaware law provides that for a period of three years from the date of an impermissible distribution, limited partners who received the distribution and who knew at the time of the distribution that it violated Delaware law will be liable to the limited partnership for the distribution amount. 56 Table of Contents Index to Financial Statements Conflicts of interest could arise among our general partner and us or the unitholders.
Tax Risks to Series B Preferred Unitholders Treatment of income attributable to distributions on our Series B Preferred Units as guaranteed payments for the use of capital creates a different tax treatment for the holders of our Series B Preferred Units than the holders of our common units and such income is not eligible for the 20% deduction for qualified publicly traded partnership income.
Because our non-U.S. business operations earn income that is not effectively connected with a U.S. trade or business, unitholders may not apply the 20% deduction for qualified publicly traded partnership income to that portion of our income. 63 Table of Contents Index to Financial Statements Tax Risks to Series B Preferred Unitholders Treatment of income attributable to distributions on our Series B Preferred Units as guaranteed payments for the use of capital creates a different tax treatment for the holders of our Series B Preferred Units than the holders of our common units and such income is not eligible for the 20% deduction for qualified publicly traded partnership income.
We and certain of our service providers have, from time to time, been subject to cyberattacks. The frequency and magnitude of cyberattacks is expected to increase and attackers are becoming more sophisticated.
If we are unable to implement, use and maintain effective IT systems, it could have a material adverse effect on our business. We and certain of our service providers have, from time to time, been subject to cyberattacks. The frequency and magnitude of cyberattacks is expected to increase and attackers are becoming more sophisticated.
Our cross border activities subject us to regulatory matters, including import and export licenses, tariffs, Canadian and U.S. customs and tax issues and toxic substance certifications. Such regulations include the Short Supply Controls of the EAA, the USMCA and the TSCA.
Our cross border activities subject us to regulatory matters, including import and export licenses, trade tariffs, Canadian and U.S. customs and tax issues and toxic substance certifications. Such regulations include the USMCA and the TSCA. Violations of these licensing, trade tariff and tax reporting requirements could result in the imposition of significant administrative, civil and criminal penalties.
Risks of nonpayment and nonperformance by customers or other counterparties are a significant consideration in our business.
We are exposed to the credit risk of our customers and other counterparties we transact with in the ordinary course of our business activities. Risks of nonpayment and nonperformance by customers or other counterparties are a significant consideration in our business.
Tax Risks to Common Unitholders If the IRS makes audit adjustments to our income tax returns for tax years beginning after December 31, 2017, it (and some states) may assess and collect any taxes (including any applicable penalties and interest) resulting from such audit adjustments directly from us, in which case our cash available for distribution to our unitholders might be substantially reduced.
Current and prospective foreign unitholders should consult their tax advisors regarding the impact of these rules on an investment in our units. 60 Table of Contents Index to Financial Statements Tax Risks to Common Unitholders If the IRS makes audit adjustments to our income tax returns, it (and some states) may assess and collect any taxes (including any applicable penalties and interest) resulting from such audit adjustments directly from us, in which case our cash available for distribution to our unitholders might be substantially reduced.
The anticipated after-tax economic benefit of an investment in our units depends largely on our being treated as a partnership for U.S. federal income tax purposes.
The anticipated after-tax economic benefit of an investment in our units depends largely on our being treated as a partnership for U.S. federal income tax purposes. A publicly traded partnership such as us may be treated as a corporation for U.S. federal income tax purposes unless it satisfies a “qualifying income” requirement, as defined in Section 7704 of the Code.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur cybersecurity leadership team also receives comprehensive reports on security incidents, threat intelligence, and vulnerability assessments from our cybersecurity team. 65 Table of Contents Index to Financial Statement s Our cybersecurity leadership team is made up of highly experienced professionals with an extensive background in information security, risk management, and incident response.
Biggest changeOur cybersecurity leadership team also receives comprehensive reports on security incidents, threat intelligence, and vulnerability assessments from our cybersecurity team. Our cybersecurity leadership team is made up of highly experienced professionals with an extensive background in information security, risk management, and incident response. This background includes more than 50 years of collective experience in infrastructure, cybersecurity and telecommunications.
Cybersecurity Program Governance Our cybersecurity program is led by our Vice President of Information Security, North America, who reports directly to our CFO and oversees the dedicated team responsible for executing our cybersecurity strategy, including the primary assessment and management of cybersecurity risks.
Cybersecurity Program Governance Our cybersecurity program is led by our Vice President of Information Services, North America, who reports directly to our CFO and oversees the dedicated team responsible for executing our cybersecurity strategy, including the primary assessment and management of cybersecurity risks.
The cybersecurity leadership team is supported by a dedicated team of skilled cybersecurity professionals, each bringing diverse expertise in areas such as network security, data protection, and threat intelligence.
The cybersecurity leadership team is supported by a dedicated team of skilled cybersecurity professionals, each bringing diverse expertise in areas such as network security, data protection, and threat intelligence. 65 Table of Contents Index to Financial Statements
This background includes more than 50 years of collective experience in infrastructure, cybersecurity and telecommunications. In addition to having the requisite training, knowledge, skills and abilities required for their respective positions, the cybersecurity leadership team collectively holds various relevant U.S. and Canadian information security certifications.
In addition to having the requisite training, knowledge, skills and abilities required for their respective positions, the cybersecurity leadership team collectively holds various relevant U.S. and Canadian information security certifications.
Our cybersecurity leadership team also includes our Senior Director, Technology, Infrastructure & Cyber Defense and our Senior Director, Security & Strategy. The Board receives quarterly updates on material security incidents, detection, monitoring, security culture scores, and other key initiatives and notable events from our cybersecurity leadership team.
Our cybersecurity leadership team also includes our Director, Technology Risk and Cybersecurity, our Senior Director, Strategic Planning, our Senior Director, North American Solution Delivery and our Senior Director, Enterprise Technology. The Board receives quarterly updates on material security incidents (if applicable), detection, monitoring, security culture scores, and other key initiatives and notable events from our cybersecurity leadership team.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

3 edited+0 added−0 removed6 unchanged
Biggest changeThe graph assumes that $100 was invested in our common units and each comparison index beginning on December 31, 2018 and that all distributions were reinvested on a quarterly basis. 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 PAA $ 100.00 $ 97.72 $ 48.06 $ 58.72 $ 79.65 $ 110.89 S&P 500 $ 100.00 $ 131.49 $ 155.68 $ 200.37 $ 164.08 $ 207.21 AMNA $ 100.00 $ 124.04 $ 95.06 $ 131.58 $ 159.92 $ 182.34 67 Table of Contents Index to Financial Statement s This information shall not be deemed to be “soliciting material” or to be “filed” with the Commission or subject to Regulation 14A or 14C under the Exchange Act, other than as provided in Item 201(e) of Regulation S-K, or to the liabilities of Section 18 of the Exchange Act, and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that we specifically request that such information be treated as soliciting material or specifically incorporate it by reference into a filing under the Securities Act or the Exchange Act.
Biggest changeThe graph assumes that $100 was invested in our common units and each comparison index beginning on December 31, 2019 and that all distributions were reinvested on a quarterly basis. 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 PAA $ 100.00 $ 48.06 $ 58.72 $ 79.65 $ 110.89 $ 134.73 S&P 500 $ 100.00 $ 155.68 $ 200.37 $ 164.08 $ 207.21 $ 259.05 AMNA $ 100.00 $ 95.06 $ 131.58 $ 159.92 $ 182.34 $ 263.52 67 Table of Contents Index to Financial Statements This information shall not be deemed to be “soliciting material” or to be “filed” with the Commission or subject to Regulation 14A or 14C under the Exchange Act, other than as provided in Item 201(e) of Regulation S-K, or to the liabilities of Section 18 of the Exchange Act, and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that we specifically request that such information be treated as soliciting material or specifically incorporate it by reference into a filing under the Securities Act or the Exchange Act.
The following table presents cash distributions per common unit pertaining to the quarter presented, which were declared and paid in the following calendar quarter (see the “Cash Distribution Policy” section below for a discussion of our policy regarding distribution payments): First Quarter Second Quarter Third Quarter Fourth Quarter 2023 $ 0.2675 $ 0.2675 $ 0.2675 $ 0.3175 2022 $ 0.2175 $ 0.2175 $ 0.2175 $ 0.2675 Our common units are also used as a form of compensation to our employees.
The following table presents cash distributions per common unit pertaining to the quarter presented, which were declared and paid in the following calendar quarter (see the “Cash Distribution Policy” section below for a discussion of our policy regarding distribution payments): First Quarter Second Quarter Third Quarter Fourth Quarter 2024 $ 0.3175 $ 0.3175 $ 0.3175 $ 0.3800 2023 $ 0.2675 $ 0.2675 $ 0.2675 $ 0.3175 Our common units are also used as a form of compensation to our employees.
Market for Registrant’s Common Units, Related Unitholder Matters and Issuer Purchases of Equity Securities Market Information, Holders and Distributions Our common units are listed and traded on The Nasdaq Global Select Market under the symbol “PAA.” As of February 16, 2024, there were 701,071,031 common units outstanding and approximately 105,000 record holders and beneficial owners (held in street name).
Item 5. Market for Registrant’s Common Units, Related Unitholder Matters and Issuer Purchases of Equity Securities Market Information, Holders and Distributions Our common units are listed and traded on Nasdaq under the symbol “PAA.” As of February 14, 2025, there were 703,775,950 common units outstanding and approximately 109,000 record holders and beneficial owners (held in street name).

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

106 edited+37 added−27 removed99 unchanged
Biggest changeVariations in our operating results are also caused by changes in volumes, prices, exchange rates, mechanical interruptions, acquisitions, divestitures, investment capital projects and numerous other factors as discussed, as applicable, in “—Analysis of Operating Segments.” 74 Table of Contents Index to Financial Statement s The following tables set forth the reconciliation of the non-GAAP financial performance measures Adjusted EBITDA, Adjusted EBITDA attributable to PAA and Implied DCF from Net Income (in millions): Year Ended December 31, Variance 2023 2022 $ % Net income $ 1,502 $ 1,228 $ 274 22 % Interest expense, net 386 405 (19) (5) % Income tax expense 121 189 (68) (36) % Depreciation and amortization 1,048 965 83 9 % (Gains)/losses on asset sales and asset impairments, net (152) 269 (421) (157) % (Gains)/losses on investments in unconsolidated entities, net (28) (346) 318 92 % Depreciation and amortization of unconsolidated entities (1) 87 85 2 2 % Selected Items Impacting Comparability: Derivative activities and inventory valuation adjustments 159 (280) 439 ** Long-term inventory costing adjustments 35 (4) 39 ** Deficiencies under minimum volume commitments, net 12 7 5 ** Equity-indexed compensation expense 36 32 4 ** Foreign currency revaluation 24 4 20 ** Line 901 incident 10 95 (85) ** Transaction-related expenses 1 — 1 ** Selected Items Impacting Comparability - Segment Adjusted EBITDA (2) 277 (146) 423 ** Mark-to-market adjustment of Preferred Distribution Rate Reset Option embedded derivative (3) (58) 189 (247) ** Foreign currency revaluation (4) (16) 37 (53) ** Selected Items Impacting Comparability - Adjusted EBITDA (5) 203 80 123 ** Adjusted EBITDA (5) $ 3,167 $ 2,875 $ 292 10 % Adjusted EBITDA attributable to noncontrolling interests (6) (456) (365) (91) (25) % Adjusted EBITDA attributable to PAA $ 2,711 $ 2,510 $ 201 8 % Year Ended December 31, Variance 2023 2022 $ % Adjusted EBITDA (5) (7) $ 3,167 $ 2,875 $ 292 10 % Interest expense, net of certain non-cash items (8) (367) (391) 24 6 % Maintenance capital (9) (231) (211) (20) (9) % Investment capital of noncontrolling interests (10) (87) (69) (18) (26) % Current income tax expense (145) (84) (61) (73) % Distributions from unconsolidated entities in excess of/(less than) adjusted equity earnings (11) (37) (28) (9) ** Distributions to noncontrolling interests (12) (333) (298) (35) (12) % Implied DCF $ 1,967 $ 1,794 $ 173 10 % Preferred unit cash distributions (12) (241) (198) Implied DCF Available to Common Unitholders $ 1,726 $ 1,596 Common unit cash distributions (12) (748) (584) Implied DCF Excess (13) $ 978 $ 1,012 ** Indicates that variance as a percentage is not meaningful. 75 Table of Contents Index to Financial Statement s (1) We exclude our proportionate share of the depreciation and amortization expense (including write-downs related to cancelled projects and impairments) of unconsolidated entities when reviewing Adjusted EBITDA, similar to our consolidated assets.
Biggest changeVariations in our operating results are also caused by changes in volumes, prices, exchange rates, mechanical interruptions, acquisitions, divestitures, investment capital projects and numerous other factors as discussed, as applicable, in “—Analysis of Operating Segments.” 74 Table of Contents Index to Financial Statements The following tables set forth the reconciliation of the non-GAAP financial performance measures Adjusted EBITDA, Adjusted EBITDA attributable to PAA and Implied DCF from Net Income (in millions): Year Ended December 31, Variance 2024 2023 $ % Net income $ 1,113 $ 1,502 $ (389) (26) % Interest expense, net of certain items (1) 382 386 (4) (1) % Income tax expense 167 121 46 38 % Depreciation and amortization 1,026 1,048 (22) (2) % (Gains)/losses on asset sales, asset impairments and other, net 160 (152) 312 205 % Gain on investments in unconsolidated entities, net (15) (28) 13 46 % Depreciation and amortization of unconsolidated entities (2) 84 87 (3) (3) % Selected Items Impacting Comparability: Derivative activities and inventory valuation adjustments 85 159 (74) ** Long-term inventory costing adjustments (9) 35 (44) ** Deficiencies under minimum volume commitments, net (31) 12 (43) ** Equity-indexed compensation expense 36 36 — ** Foreign currency revaluation (27) 24 (51) ** Line 901 incident 345 10 335 ** Transaction-related expenses — 1 (1) ** Selected Items Impacting Comparability - Segment Adjusted EBITDA (3) 399 277 122 ** Mark-to-market adjustment of Preferred Distribution Rate Reset Option embedded derivative (4) — (58) 58 ** Foreign currency revaluation (5) 10 (16) 26 ** Selected Items Impacting Comparability - Adjusted EBITDA (6) 409 203 206 ** Adjusted EBITDA (6) $ 3,326 $ 3,167 $ 159 5 % Adjusted EBITDA attributable to noncontrolling interests (7) (547) (456) (91) (20) % Adjusted EBITDA attributable to PAA $ 2,779 $ 2,711 $ 68 3 % Year Ended December 31, Variance 2024 2023 $ % Adjusted EBITDA (6) (8) $ 3,326 $ 3,167 $ 159 5 % Interest expense, net of certain non-cash and other items (9) (365) (367) 2 1 % Maintenance capital (10) (261) (231) (30) (13) % Investment capital of noncontrolling interests (11) (86) (87) 1 1 % Current income tax expense (195) (145) (50) (34) % Distributions from unconsolidated entities in excess of/(less than) adjusted equity earnings (12) 11 (37) 48 ** Distributions to noncontrolling interests (13) (425) (333) (92) (28) % Implied DCF $ 2,005 $ 1,967 $ 38 2 % Preferred unit cash distributions (13) (254) (241) Implied DCF Available to Common Unitholders $ 1,751 $ 1,726 Common unit cash distributions (13) (891) (748) Implied DCF Excess (14) $ 860 $ 978 ** Indicates that variance as a percentage is not meaningful.
As one of the largest midstream service providers in North America, we own an extensive network of pipeline transportation, terminalling, storage and gathering assets in key crude oil and NGL producing basins (including the Permian Basin) and transportation corridors and at major market hubs in the United States and Canada.
As one of the largest crude oil midstream service providers in North America, we own an extensive network of pipeline transportation, terminalling, storage and gathering assets in key crude oil and NGL producing basins (including the Permian Basin) and transportation corridors and at major market hubs in the United States and Canada.
Liquidity Measures Management uses the non-GAAP financial measures Adjusted Free Cash Flow and Adjusted Free Cash Flow after Distributions to assess the amount of cash that is available for distributions, debt repayments, common equity repurchases and other general partnership purposes.
Non-GAAP Financial Liquidity Measures Management uses the non-GAAP financial liquidity measures Adjusted Free Cash Flow and Adjusted Free Cash Flow after Distributions to assess the amount of cash that is available for distributions, debt repayments, common equity repurchases and other general partnership purposes.
We define Segment Adjusted EBITDA as revenues and equity earnings in unconsolidated entities less (a) purchases and related costs, (b) field operating costs and (c) segment general and administrative expenses, plus (d) our proportionate share of the depreciation and amortization expense (including write-downs related to cancelled projects and impairments) of unconsolidated entities, further adjusted (e) for certain selected items including (i) gains and losses on derivative instruments that are related to underlying activities in another period (or the reversal of such adjustments from a prior period), gains and losses on derivatives that are either related to investing activities (such as the purchase of linefill) or purchases of long-term inventory, and inventory valuation adjustments, as applicable, (ii) long-term inventory costing adjustments, (iii) charges for obligations that are expected to be settled with the issuance of equity instruments, (iv) amounts related to deficiencies associated with minimum volume commitments, net of the applicable amounts subsequently recognized into revenue and (v) other items that our CODM believes are integral to understanding our core segment operating performance and (f) to exclude the portion of all preceding items that is attributable to noncontrolling interests (“Segment amounts attributable to noncontrolling interests”).
We define Segment Adjusted EBITDA as revenues and equity earnings in unconsolidated entities less (a) significant segment expenses including: (i) purchases and related costs, (ii) field operating costs and (iii) segment general and administrative expenses, plus (b) our proportionate share of the depreciation and amortization expense (including write-downs related to cancelled projects and impairments) of unconsolidated entities, further adjusted (c) for certain selected items including (i) gains and losses on derivative instruments that are related to underlying activities in another period (or the reversal of such adjustments from a prior period), gains and losses on derivatives that are either related to investing activities (such as the purchase of linefill) or purchases of long-term inventory, and inventory valuation adjustments, as applicable, (ii) long-term inventory costing adjustments, (iii) charges for obligations that are expected to be settled with the issuance of equity instruments, (iv) amounts related to deficiencies associated with minimum volume commitments, net of the applicable amounts subsequently recognized into revenue and (v) other items that our CODM believes are integral to understanding our core segment operating performance and (d) to exclude the portion of all preceding items that is attributable to noncontrolling interests (“Segment amounts attributable to noncontrolling interests”).
Crude Oil Segment Our Crude Oil segment operations generally consist of gathering and transporting crude oil using pipelines, gathering systems, trucks and at times on barges or railcars, in addition to providing terminalling, storage and other related services utilizing our integrated assets across the United States and Canada.
Crude Oil Segment Our Crude Oil segment operations generally consist of gathering and transporting crude oil using pipelines (including gathering systems), trucks and, at times, on barges or railcars, in addition to providing terminalling, storage and other related services utilizing our integrated assets across the United States and Canada.
See Note 19 to our Consolidated Financial Statements for a reconciliation of Segment Adjusted EBITDA to Net income attributable to PAA. 76 Table of Contents Index to Financial Statement s In connection with our merchant activities, our Crude Oil and NGL segments may enter into intersegment transactions for the purchase or sale of products, along with services such as the transportation, terminalling or storage of products.
See Note 19 to our Consolidated Financial Statements for a reconciliation of Segment Adjusted EBITDA to Net income attributable to PAA. 76 Table of Contents Index to Financial Statements In connection with our merchant activities, our Crude Oil and NGL segments may enter into intersegment transactions for the purchase or sale of products, along with services such as the transportation, terminalling or storage of products.
Our NGL revenues are primarily derived from a combination of (i) providing gathering, fractionation, storage, and/or terminalling services to third-party customers for a fee, and (ii) extracting NGL mix from the gas stream processed at our Empress straddle plant facility as well as acquiring NGL mix, which is then transported, stored and fractionated into finished products and sold to customers.
Our NGL revenues are primarily derived from a combination of (i) providing gathering, fractionation, storage, and/or terminalling services to third-party customers for a fee, and (ii) our merchant activities of extracting NGL mix from the gas stream processed at our Empress straddle plant facility as well as acquiring NGL mix, which is then transported, stored and fractionated into finished products and sold to customers.
We believe reliable, affordable, and responsible energy resources are all critical components to maintain energy security and global stability, requiring all sources of energy including both hydrocarbons and renewables. 69 Table of Contents Index to Financial Statement s Consistent with the forecast from the EIA’s Short-Term Energy Outlook (as depicted in the chart above), we expect crude oil demand to continue to increase, driven largely by our view that hydrocarbon-based fuels are the most efficient fuels for the transportation of people and goods, and hydrocarbon-based products provide the building blocks for modern civilization such as fertilizers, plastics and cement.
We believe reliable, affordable, and responsible energy resources are all critical components to maintain energy security and global stability, requiring all sources of energy including both hydrocarbons and renewables. 69 Table of Contents Index to Financial Statements Consistent with the forecast from the EIA’s Short-Term Energy Outlook (as depicted in the chart above), we expect crude oil demand to continue to increase, driven largely by our view that hydrocarbon-based fuels are the most efficient fuels for the transportation of people and goods, and hydrocarbon-based products provide the building blocks for modern civilization such as fertilizers, plastics and cement.
Holders of our Series B preferred units are entitled to receive, when, as and if declared by our general partner out of legally available funds for such purpose, cumulative cash distributions, as applicable. Distributions on the Series B preferred units accumulate based on the applicable three-month SOFR, plus a credit spread adjustment of 0.26121%, plus 4.11% per annum.
Holders of our Series B preferred units are entitled to receive, when, as and if declared by our general partner out of legally available funds for such purpose, cumulative cash distributions, as applicable. Distributions on the Series B preferred units accumulate based on the applicable three-month SOFR, plus a credit spread adjustment of 0.26161%, plus 4.11% per annum.
(2) For a more detailed discussion of these selected items impacting comparability, see the footnotes to the Segment Adjusted EBITDA Reconciliation table in Note 19 to our Consolidated Financial Statements. (3) The Preferred Distribution Rate Reset Option of our Series A preferred units was accounted for as an embedded derivative and recorded at fair value in our Consolidated Financial Statements.
(3) For a more detailed discussion of these selected items impacting comparability, see the footnotes to the Segment Adjusted EBITDA Reconciliation table in Note 19 to our Consolidated Financial Statements. (4) The Preferred Distribution Rate Reset Option of our Series A preferred units was accounted for as an embedded derivative and recorded at fair value in our Consolidated Financial Statements.
We have filed with the SEC a universal shelf registration statement that, subject to effectiveness at the time of use, allows us to issue up to a specified amount of debt or equity securities (“Traditional Shelf”), under which we had approximately $1.1 billion of unsold securities available at December 31, 2023.
We have filed with the SEC a universal shelf registration statement that, subject to effectiveness at the time of use, allows us to issue up to a specified amount of debt or equity securities (“Traditional Shelf”), under which we had approximately $1.1 billion of unsold securities available at December 31, 2024.
Our estimates for contingent liability accruals are increased or decreased as additional information is obtained or resolution is achieved. A hypothetical variance of 5% in our aggregate estimate for the accruals and contingent liabilities discussed above would have an impact on earnings of up to approximately $14 million.
Our estimates for contingent liability accruals are increased or decreased as additional information is obtained or resolution is achieved. A hypothetical variance of 5% in our aggregate estimate for the accruals and contingent liabilities discussed above would have an impact on earnings of up to approximately $13 million.
Additionally, we estimate the upcoming liquidation timing of the inventory. Changes in assumptions made as to the timing of a sale can materially impact net realizable value. During the years ended December 31, 2023, 2022 and 2021, we did not record any charges related to the valuation adjustment of our inventory.
Additionally, we estimate the upcoming liquidation timing of the inventory. Changes in assumptions made as to the timing of a sale can materially impact net realizable value. During the years ended December 31, 2024, 2023 and 2022, we did not record any charges related to the valuation adjustment of our inventory.
(9) Maintenance capital expenditures are defined as capital expenditures for the replacement and/or refurbishment of partially or fully depreciated assets in order to maintain the operating and/or earnings capacity of our existing assets. (10) Investment capital expenditures attributable to noncontrolling interests that reduce Implied DCF available to PAA common unitholders.
(10) Maintenance capital expenditures are defined as capital expenditures for the replacement and/or refurbishment of partially or fully depreciated assets in order to maintain the operating and/or earnings capacity of our existing assets. (11) Investment capital expenditures attributable to noncontrolling interests that reduce Implied DCF available to PAA common unitholders.
Distributions to Noncontrolling Interests Distributions to noncontrolling interests represent amounts paid on interests in consolidated entities that are not owned by us. As of December 31, 2023, noncontrolling interests in our subsidiaries consisted of (i) a 35% interest in the Permian JV, (ii) a 30% interest in Cactus II and (iii) a 33% interest in Red River.
Distributions to Noncontrolling Interests Distributions to noncontrolling interests represent amounts paid on interests in consolidated entities that are not owned by us. As of December 31, 2024, noncontrolling interests in our subsidiaries consisted of (i) a 35% interest in the Permian JV, (ii) a 30% interest in Cactus II and (iii) a 33% interest in Red River.
Uncertainties that impact these estimates include the costs associated with these activities and the timing of incurring such costs. A hypothetical variance of 5% in our aggregate estimate for the retirement obligations discussed above would have an impact on earnings of up to approximately $6 million.
Uncertainties that impact these estimates include the costs associated with these activities and the timing of incurring such costs. A hypothetical variance of 5% in our aggregate estimate for the retirement obligations discussed above would have an impact on earnings of up to approximately $7 million.
(11) Comprised of cash distributions received from unconsolidated entities less equity earnings in unconsolidated entities (adjusted for our proportionate share of depreciation and amortization, including write-downs related to cancelled projects, and selected items impacting comparability of unconsolidated entities). (12) Cash distributions paid during the period presented.
(12) Comprised of cash distributions received from unconsolidated entities less equity earnings in unconsolidated entities (adjusted for our proportionate share of depreciation and amortization, including write-downs related to cancelled projects, and selected items impacting comparability of unconsolidated entities). (13) Cash distributions paid during the period presented.
Purchase Obligations In the ordinary course of doing business, we purchase crude oil and NGL from third parties under contracts, the majority of which range in term from thirty-day evergreen to five years, with a limited number of contracts with remaining terms extending up to 11 years.
Purchase Obligations In the ordinary course of doing business, we purchase crude oil and NGL from third parties under contracts, the majority of which range in term from thirty-day evergreen to five years, with a limited number of contracts with remaining terms extending up to 10 years.
These include our $1.35 billion senior unsecured revolving credit facility maturing in 2028 (excluding a commitment of $64 million, which matures in 2027), $1.35 billion senior secured hedged inventory facility maturing in 2026 and $2.7 billion unsecured commercial paper program that is backstopped by our revolving credit facility and our hedged inventory facility.
These include our $1.35 billion senior unsecured revolving credit facility maturing in 2029 (excluding a commitment of $64 million, which matures in 2027), $1.35 billion senior secured hedged inventory facility maturing in 2027 (excluding a commitment of $64 million, which matures in 2026) and $2.7 billion unsecured commercial paper program that is backstopped by our revolving credit facility and our hedged inventory facility.
(13) Excess DCF is retained to establish reserves for debt repayment, future distributions, common equity repurchases, capital expenditures and other partnership purposes. Analysis of Operating Segments We manage our operations through two operating segments: Crude Oil and NGL.
(14) Excess DCF is retained to establish reserves for debt repayment, future distributions, common equity repurchases, capital expenditures and other partnership purposes. Analysis of Operating Segments We manage our operations through two operating segments: Crude Oil and NGL.
(4) During the periods presented, there were fluctuations in the value of CAD to USD, resulting in the realization of foreign exchange gains and losses on the settlement of foreign currency transactions as well as the revaluation of monetary assets and liabilities denominated in a foreign currency.
(5) During the periods presented, there were fluctuations in the value of CAD to USD, resulting in the realization of foreign exchange gains and losses on the settlement of foreign currency transactions as well as the revaluation of monetary assets and liabilities denominated in a foreign currency.
As long as we are in compliance with the provisions in our credit agreements, our ability to make distributions of available cash is not restricted. We were in compliance with the covenants contained in our credit agreements and indentures as of December 31, 2023.
As long as we are in compliance with the provisions in our credit agreements, our ability to make distributions of available cash is not restricted. We were in compliance with the covenants contained in our credit agreements and indentures as of December 31, 2024.
The following is a more detailed discussion of the significant factors impacting Segment Adjusted EBITDA for the year ended December 31, 2023 compared to the year ended December 31, 2022. Net Revenues and Equity Earnings.
The following is a more detailed discussion of the significant factors impacting Segment Adjusted EBITDA for the year ended December 31, 2024 compared to the year ended December 31, 2023. Net Revenues and Equity Earnings.
(3) Represents adjustments included in the performance measure utilized by our CODM in the evaluation of segment results. See Note 19 to our Consolidated Financial Statements for additional discussion of such adjustments.
(4) Represents adjustments included in the performance measure utilized by our CODM in the evaluation of segment results. See Note 19 to our Consolidated Financial Statements for additional discussion of such adjustments.
(3) Represents adjustments included in the performance measure utilized by our CODM in the evaluation of segment results. See Note 19 to our Consolidated Financial Statements for additional discussion of such adjustments.
(4) Represents adjustments included in the performance measure utilized by our CODM in the evaluation of segment results. See Note 19 to our Consolidated Financial Statements for additional discussion of such adjustments.
Adjusted Free Cash Flow is defined as Net cash provided by operating activities, less Net cash provided by/(used in) investing activities, which primarily includes acquisition, investment and maintenance capital expenditures, investments in unconsolidated entities and the impact from the purchase and sale of linefill, net of proceeds from the sales of assets and further impacted by distributions to and contributions from noncontrolling interests.
Adjusted Free Cash Flow is defined as Net cash provided by operating activities, less Net cash provided by/(used in) investing activities, which primarily includes acquisition, investment and maintenance capital expenditures, investments in unconsolidated entities and related party notes and the net impact from the purchase and sale of linefill, net of proceeds from the sales of assets and further impacted by distributions to and contributions from noncontrolling interests and proceeds from the issuance of related party notes.
The chart below depicts the relationship between global supply of crude oil and other petroleum liquids and demand since the beginning of 2019 and the U.S. Energy Information Administration’s (“EIA”) Short-Term Energy Outlook as of January 2024: World Liquid Fuels Production and Consumption Balance (1) (in millions of barrels per day) (1) Barrels produced and consumed per quarter.
The chart below depicts the relationship between global supply of crude oil and other petroleum liquids and demand since the beginning of 2020 and the U.S. Energy Information Administration’s (“EIA”) Short-Term Energy Outlook as of January 2025: World Liquid Fuels Production and Consumption Balance (1) (in millions of barrels per day) (1) Barrels produced and consumed per quarter.
None of these entities had debt outstanding as of December 31, 2023. We may elect at any time to make additional capital contributions to any of these entities.
None of these entities had debt outstanding as of December 31, 2024. We may elect at any time to make additional capital contributions to any of these entities.
In addition, when we evaluate property and equipment and other long-lived assets for recoverability, it may also be necessary to review related depreciation estimates and methods. 90 Table of Contents Index to Financial Statement s Investments in unconsolidated entities accounted for under the equity method of accounting are assessed for impairment when events or circumstances suggest that a decline in value may be other than temporary.
In addition, when we evaluate property and equipment and other long-lived assets for recoverability, it may also be necessary to review related depreciation estimates and methods. 91 Table of Contents Index to Financial Statements Investments in unconsolidated entities accounted for under the equity method of accounting are assessed for impairment when events or circumstances suggest that a decline in value may be other than temporary.
At December 31, 2023 and 2022, we had outstanding letters of credit of approximately $205 million and $102 million, respectively. Off-Balance Sheet Arrangements We have no off-balance sheet arrangements as defined by Item 303 of Regulation S-K. Investments in Unconsolidated Entities We have invested in entities that are not consolidated in our financial statements.
At December 31, 2024 and 2023, we had outstanding letters of credit of approximately $90 million and $205 million, respectively. Off-Balance Sheet Arrangements We have no off-balance sheet arrangements as defined by Item 303 of Regulation S-K. Investments in Unconsolidated Entities We have invested in entities that are not consolidated in our financial statements.
(1) Revenues and costs and expenses include intersegment amounts. (2) Segment general and administrative expenses reflect direct costs attributable to each segment and an allocation of other expenses to the segments. The proportional allocations by segment require judgment by management and are based on the business activities that exist during each period.
(1) Revenues and costs and expenses include intersegment amounts. (2) Represents components of significant segment expenses. (3) Segment general and administrative expenses reflect direct costs attributable to each segment and an allocation of other expenses to the segments. The proportional allocations by segment require judgment by management and are based on the business activities that exist during each period.
(1) Revenues and costs and expenses include intersegment amounts. (2) Segment general and administrative expenses reflect direct costs attributable to each segment and an allocation of other expenses to the segments. The proportional allocations by segment require judgment by management and are based on the business activities that exist during each period.
(1) Revenues and costs and expenses include intersegment amounts. (2) Represents components of significant segment expenses. (3) Segment general and administrative expenses reflect direct costs attributable to each segment and an allocation of other expenses to the segments. The proportional allocations by segment require judgment by management and are based on the business activities that exist during each period.
Generally, our segment results are impacted by (i) increases or decreases in our NGL sales volumes, (ii) volatility in commodity prices, the differential between the price of natural gas and the extracted NGL (“frac spread”), as well as location differentials and time spreads, and (iii) the volume of natural gas transported on third-party assets through our Empress straddle plant. 79 Table of Contents Index to Financial Statement s Our NGL operations are sensitive to weather-related demand, particularly during the approximate five-month peak heating season of November through March, and temperature differences from period-to-period may have a significant effect on NGL demand and thus our financial performance as well as the impact of comparative performance between financial reporting periods that bisect the five-month peak heating season.
Generally, our segment results are impacted by (i) increases or decreases in our NGL sales volumes, (ii) volatility in commodity price differentials, primarily the differential between the price of natural gas and the extracted NGL (“frac spread”), as well as location differentials and time spreads, (iii) the quality and volume of natural gas transported on third-party assets through our Empress straddle plant and (iv) our share of the NGL received from a third-party straddle plant. 79 Table of Contents Index to Financial Statements Our NGL operations are sensitive to weather-related demand, particularly during the approximate five-month peak heating season of November through March, and temperature differences from period-to-period may have a significant effect on NGL demand, and thus our financial performance, as well as the impact of comparative performance between financial reporting periods that bisect the five-month peak heating season.
The proceeds from divestitures for the year ended December 31, 2023 are primarily from the sale of our 21% non-operated/undivided joint interest in the Keyera Fort Saskatchewan facility in February 2023. See Note 7 to our Consolidated Financial Statements for additional information.
The proceeds from divestitures for the year ended December 31, 2023 are primarily from the sale of our 21% non-operated/UJI in the Keyera Fort Saskatchewan facility in February 2023. See Note 7 to our Consolidated Financial Statements for additional information.
Fees for our terminalling and storage services are based on capacity leases and throughput volumes. Generally, results from our merchant activities are impacted by (i) increases or decreases in our lease gathering crude oil purchases volumes and (ii) volatility in commodity prices, as well as grade and regional differentials and time spreads.
Fees for our terminalling and storage services are based on capacity leases and throughput volumes. Generally, results from our merchant activities are impacted by (i) increases or decreases in our lease gathering crude oil purchases volumes and (ii) volatility in commodity price differentials, particularly grade and location differentials, as well as time spreads.
Our discussion and analysis includes the following: • Executive Summary • Results of Operations • Liquidity and Capital Resources • Critical Accounting Policies and Estimates • Recent Accounting Pronouncements 68 Table of Contents Index to Financial Statement s A comparative discussion of our 2022 to 2021 operating results and performance measures can be found in Item 7.
Our discussion and analysis includes the following: • Executive Summary • Results of Operations • Liquidity and Capital Resources • Critical Accounting Policies and Estimates • Recent Accounting Pronouncements 68 Table of Contents Index to Financial Statements A comparative discussion of our 2023 to 2022 operating results and performance measures can be found in Item 7.
The actual physical volume purchased and actual settlement prices will vary from the assumptions used in the table. Uncertainties involved in these estimates include levels of production at the wellhead, weather conditions, changes in market prices and other conditions beyond our control. 87 Table of Contents Index to Financial Statement s Letters of Credit.
The actual physical volume purchased and actual settlement prices will vary from the assumptions used in the table. Uncertainties involved in these estimates include levels of production at the wellhead, weather conditions, changes in market prices and other conditions beyond our control. 88 Table of Contents Index to Financial Statements Letters of Credit.
The following table summarizes the proceeds received from divestitures during the last two years (in millions): Year Ended December 31, 2023 2022 Proceeds from divestitures (1) $ 328 $ 60 (1) Represents proceeds, including working capital adjustments, net of transaction costs.
The following table summarizes the proceeds received from divestitures during the last two years (in millions): Year Ended December 31, 2024 2023 Proceeds from divestitures (1) $ 13 $ 328 (1) Represents proceeds, including working capital adjustments, net of transaction costs.
For further information on all of our significant accounting policies, see Note 2 to our Consolidated Financial Statements. 88 Table of Contents Index to Financial Statement s Fair Value of Assets and Liabilities Acquired and Identification of Associated Goodwill and Intangible Assets.
For further information on all of our significant accounting policies, see Note 2 to our Consolidated Financial Statements. 89 Table of Contents Index to Financial Statements Fair Value of Assets and Liabilities Acquired and Identification of Associated Goodwill and Intangible Assets.
Quantitative and Qualitative Disclosures About Market Risk and Note 12 to our Consolidated Financial Statements for a discussion regarding our derivatives and risk management activities. 89 Table of Contents Index to Financial Statement s Accruals and Contingent Liabilities.
Quantitative and Qualitative Disclosures About Market Risk and Note 12 to our Consolidated Financial Statements for a discussion regarding our derivatives and risk management activities. 90 Table of Contents Index to Financial Statements Accruals and Contingent Liabilities.
Additionally, maintenance capital for 2024 is currently projected to be approximately $250 million ($230 million net to our interest). We expect to fund our 2024 investment and maintenance capital expenditures primarily with retained cash flow. Divestitures Proceeds from the sale of assets have generally been used to fund our investment capital projects and reduce debt levels.
Additionally, maintenance capital for 2025 is currently projected to be approximately $260 million ($240 million net to our interest). We expect to fund our 2025 investment and maintenance capital expenditures primarily with retained cash flow. Divestitures Proceeds from the sale of assets have historically generally been used to fund our investment capital projects and reduce debt levels.
We have estimated that the aggregate total costs we have incurred or will incur with respect to the Line 901 incident will be approximately $750 million, which includes actual and projected emergency response and clean-up costs, natural resource damage assessments, fines and penalties payable pursuant to the Consent Decree, certain third-party claims settlements, and estimated costs associated with our remaining Line 901 lawsuits and claims, as well as estimates for certain legal fees and statutory interest where applicable.
As of December 31, 2024, we have estimated that the aggregate total costs we have incurred or will incur with respect to the Line 901 incident will be approximately $870 million, which includes actual and projected emergency response and clean-up costs, natural resource damage assessments, fines and penalties incurred, certain third-party claims settlements, and estimated costs associated with our remaining Line 901 lawsuits and claims, as well as estimates for certain legal fees and statutory interest where applicable.
Non-GAAP Financial Measures To supplement our financial information presented in accordance with GAAP, management uses additional measures known as “non-GAAP financial measures” in its evaluation of past performance and prospects for the future and to assess the amount of cash that is available for distributions, debt repayments, common equity repurchases and other general partnership purposes.
See Note 7 to our Consolidated Financial Statements for additional information. 73 Table of Contents Index to Financial Statements Non-GAAP Financial Measures To supplement our financial information presented in accordance with GAAP, management uses additional measures known as “non-GAAP financial measures” in its evaluation of past performance and prospects for the future and to assess the amount of cash that is available for distributions, debt repayments, common equity repurchases and other general partnership purposes.
“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on March 1, 2023.
“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on February 29, 2024.
(4) Average daily volumes in thousands of barrels per day calculated as the total volumes (attributable to our interest for assets owned by unconsolidated entities or through undivided joint interests) for the year divided by the number of days in the year.
(5) Average daily volumes in thousands of barrels per day calculated as the total volumes (attributable to our interest for assets owned by unconsolidated entities or through UJIs) for the year divided by the number of days in the year.
As of December 31, 2023, although we had a working capital deficit of $90 million, we had over $2.6 billion of liquidity available to meet our ongoing operating, investing and financing needs, subject to continued covenant compliance, as noted below (in millions): As of December 31, 2023 Availability under senior unsecured revolving credit facility (1) (2) $ 1,350 Availability under senior secured hedged inventory facility (1) (2) 1,279 Amounts outstanding under commercial paper program (433) Subtotal 2,196 Cash and cash equivalents (3) 444 Total $ 2,640 (1) Represents availability prior to giving effect to borrowings outstanding under our commercial paper program, which reduce available capacity under the facilities.
As of December 31, 2024, although we had a working capital deficit of $148 million, we had over $2.6 billion of liquidity available to meet our ongoing operating, investing and financing needs, subject to continued covenant compliance, as noted below (in millions): As of December 31, 2024 Availability under senior unsecured revolving credit facility (1) (2) $ 1,350 Availability under senior secured hedged inventory facility (1) (2) 1,333 Amounts outstanding under commercial paper program (393) Subtotal 2,290 Cash and cash equivalents (3) 347 Total $ 2,637 (1) Represents availability prior to giving effect to borrowings outstanding under our commercial paper program, which reduce available capacity under the facilities.
See Note 18 to our Consolidated Financial Statements for further discussion regarding the Line 901 incident and our related insurance receivable. 91 Table of Contents Index to Financial Statement s Recent Accounting Pronouncements See Note 2 to our Consolidated Financial Statements for information regarding the effect of recent accounting pronouncements on our Consolidated Financial Statements.
See Note 18 to our Consolidated Financial Statements for further discussion regarding the Line 901 incident and our related insurance receivable. Recent Accounting Pronouncements See Note 2 to our Consolidated Financial Statements for information regarding the effect of recent accounting pronouncements on our Consolidated Financial Statements.
Various factors could impact the timing and amount of recovery of our insurance receivable, including future developments that adversely impact our assessment of the strength of our coverage claims, the outcome of any dispute resolution proceedings with respect to our coverage claims and the extent to which insurers may become insolvent in the future.
However, at that time we also noted that various factors could impact the timing and amount of recovery of our insurance receivable, including future developments that adversely impacted our assessment of the strength of our coverage claims, the outcome of any dispute resolution proceedings with respect to our coverage claims (including arbitration proceedings) and the extent to which insurers may become insolvent in the future.
The following table summarizes our investment, maintenance and acquisition capital expenditures (in millions): Year Ended December 31, 2023 2022 Investment capital (1) (2) (3) $ 399 $ 334 Maintenance capital (1) (3) 231 211 Acquisition capital (2) (4) 431 284 $ 1,061 $ 829 (1) Capital expenditures made to expand the existing operating and/or earnings capacity of our assets are classified as “Investment capital.” Capital expenditures for the replacement and/or refurbishment of partially or fully depreciated assets in order to maintain the operating and/or earnings capacity of our existing assets are classified as “Maintenance capital.” (2) Contributions to unconsolidated entities, accounted for under the equity method of accounting, that are related to investment capital projects by such entities are recognized in “Investment capital.” Acquisitions of initial investments or additional interests in unconsolidated entities are included in “Acquisition capital.” (3) Investment capital and maintenance capital, net to our 65% interest in the Permian JV, was approximately $310 million and $214 million, respectively, for 2023, and approximately $265 million and $202 million, respectively, for 2022.
The following table summarizes our investment, maintenance and acquisition capital expenditures (in millions): Year Ended December 31, 2024 2023 Investment capital (1) (2) (3) $ 415 $ 399 Maintenance capital (1) (3) 261 231 Acquisition capital (2) (4) 254 431 $ 930 $ 1,061 (1) Capital expenditures made to expand the existing operating and/or earnings capacity of our assets are classified as “Investment capital.” Capital expenditures made to replace and/or refurbish partially or fully depreciated assets in order to maintain the operating and/or earnings capacity of our existing assets are classified as “Maintenance capital.” (2) Contributions to unconsolidated entities, accounted for under the equity method of accounting, that are related to investment capital projects by such entities are recognized in “Investment capital.” Acquisitions of initial investments or additional interests in unconsolidated entities are included in “Acquisition capital.” (3) Investment capital and maintenance capital, net to our 65% interest in the Permian JV, was approximately $329 million and $242 million, respectively, for 2024, and approximately $310 million and $214 million, respectively, for 2023.
Overview of Operating Results We recognized net income attributable to PAA of $1.230 billion for the year ended December 31, 2023 compared to net income attributable to PAA of $1.037 billion for the year ended December 31, 2022.
Overview of Operating Results We recognized net income attributable to PAA of $772 million for the year ended December 31, 2024 compared to net income attributable to PAA of $1.230 billion for the year ended December 31, 2023.
Our CODM (our Chief Executive Officer) evaluates segment performance based on a variety of measures including Segment Adjusted EBITDA, segment volumes and maintenance capital investment.
Our Chief Operating Decision Maker (“CODM”) (our Chief Executive Officer) evaluates segment performance based on a variety of measures including Segment Adjusted EBITDA, segment volumes and maintenance capital investment.
The total distribution of $223 million was paid to common unitholders of record as of January 31, 2024, with respect to the quarter ended December 31, 2023. See Note 11 to our Consolidated Financial Statements for details of distributions paid during the three years ended December 31, 2023.
The total distribution of $267 million was paid to common unitholders of record as of January 31, 2025, with respect to the quarter ended December 31, 2024. 87 Table of Contents Index to Financial Statements See Note 11 to our Consolidated Financial Statements for details of distributions paid during the three years ended December 31, 2024.
Holders of our Series A preferred units are entitled to receive quarterly distributions, subject to customary anti-dilution adjustments, of $0.615 per unit ($2.46 per unit annualized). 86 Table of Contents Index to Financial Statement s Distributions to our Series B preferred unitholders.
Holders of our Series A preferred units are entitled to receive quarterly distributions, subject to customary anti-dilution adjustments, of $0.615 per unit ($2.46 per unit annualized). Distributions to our Series B preferred unitholders.
(4) Average daily volumes are calculated as total volumes (attributable to our interest for assets owned through undivided joint interests) for the year divided by the number of days in the year.
(5) Average daily volumes are calculated as total volumes (attributable to our interest for assets owned through UJIs) for the year divided by the number of days in the year.
Segment Adjusted EBITDA Crude Oil Segment Adjusted EBITDA increased for the year ended December 31, 2023 compared to the year ended December 31, 2022 primarily due to higher tariff volumes, tariff escalations and contributions from acquisitions. These items were partially offset by fewer market-based opportunities for our merchant activities.
Segment Adjusted EBITDA Crude Oil Segment Adjusted EBITDA increased for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to higher tariff volumes on our pipelines, tariff escalations and contributions from acquisitions, partially offset by fewer market-based opportunities.
During 2023 and 2022, we repaid the following senior unsecured notes in full (in millions): Year Description Repayment Date 2023 $700 million 3.85% Senior Notes due October 2023 October 2023 (1) 2023 $400 million 2.85% Senior Notes due January 2023 January 2023 (1) 2022 $750 million 3.65% Senior Notes due June 2022 March 2022 (1) (1) We repaid these senior notes with cash on hand and borrowings under our commercial paper program.
During 2024 and 2023, we repaid the following senior unsecured notes in full (in millions): Year Description Repayment Date 2024 $750 million 3.60% Senior Notes due November 2024 November 2024 (1) 2023 $700 million 3.85% Senior Notes due October 2023 October 2023 (2) 2023 $400 million 2.85% Senior Notes due January 2023 January 2023 (2) (1) We repaid these senior notes with proceeds from our 5.70% senior notes issued in June 2024, cash on hand and borrowings under our commercial paper program.
(4) Acquisition capital for 2023 primarily includes the acquisition by the Permian JV of (i) the remaining 43% interest in OMOG JV Holdings LLC and (ii) gathering assets in the Southern and Northern Delaware Basins.
(4) Acquisition capital for 2024 primarily includes the acquisitions of additional ownership interests in equity method investees. Acquisition capital for 2023 primarily includes the acquisition by the Permian JV of (i) the remaining 43% interest in OMOG JV Holdings LLC and (ii) gathering assets in the Southern and Northern Delaware Basins.
We also have access to a universal shelf registration statement (“WKSI Shelf”), which provides us with the ability to offer and sell an unlimited amount of debt and equity securities, subject to market conditions and our capital needs.
We did not conduct any offerings under our Traditional Shelf during the year 2024. We also have access to a universal shelf registration statement (“WKSI Shelf”), which provides us with the ability to offer and sell an unlimited amount of debt and equity securities, subject to market conditions and our capital needs.
Usage of our credit facilities, which provide the financial backstop for our commercial paper program, is subject to ongoing compliance with covenants, as discussed further below. Our borrowing capacity and borrowing costs are also impacted by our credit rating. See Item 1A.
(3) Excludes restricted cash of $1 million. 81 Table of Contents Index to Financial Statements Usage of our credit facilities, which provide the financial backstop for our commercial paper program, is subject to ongoing compliance with covenants, as discussed further below. Our borrowing capacity and borrowing costs are also impacted by our credit rating. See Item 1A.
(2) The activity during the periods presented was primarily related to the impact from the change in the United States Dollar to Canadian dollar exchange rate on the portion of our intercompany net investment that is not long-term in nature.
(2) The activity during the periods presented was primarily related to the impact from the change in the United States Dollar to Canadian dollar exchange rate on the portion of our intercompany net investment that is not long-term in nature. (3) See Note 12 to our Consolidated Financial Statements for additional information.
Borrowings and Repayments Under Credit Arrangements During the year ended December 31, 2023, we had net borrowings under our commercial paper program of $433 million. The net borrowings resulted primarily from borrowings during the year related to funding needs for capital investments, inventory purchases and other general partnership purposes.
During the year ended December 31, 2023, we had net borrowings under our commercial paper program of $433 million. The net borrowings resulted primarily from borrowings during the year related to funding needs for capital investments, inventory purchases and other general partnership purposes. Senior Notes Issuances of Senior Notes. We did not issue any senior unsecured notes during 2023.
Our assets serve third parties and are also supported by our merchant activities. Our merchant activities include the purchase of crude oil supply and the movement of this supply on our assets or third-party assets to sales locations, including our terminals, third-party connecting carriers, regional hubs or to refineries.
Our assets provide services to third parties as well as to our merchant activities. Our merchant activities include the purchase of crude oil supply and the movement of this supply on our assets or third-party assets to sales locations, including our terminals, third-party connecting carriers, regional hubs or to refineries. Our merchant activities are governed by our risk management policies.
The Permian Basin continues to be one of the most prolific basins in the world and was the predominant driver of U.S. production growth in 2023. The remainder of the U.S. unconventional plays continue to see modest growth.
The Permian Basin continues to be one of the most prolific basins in the world and was the predominant driver of U.S. production growth in 2024.
The majority of this investment capital consists of highly-contracted projects that complement our broader system capabilities and support the long-term needs of the upstream and downstream sectors of the industry value chain.
Investment Capital Projects Our investment capital programs consist of investments in midstream infrastructure projects that build upon our core assets and operations. The majority of this investment capital consists of highly-contracted projects that complement our broader system capabilities and support the long-term needs of the upstream and downstream sectors of the industry value chain.
Gains/(Losses) on Investments in Unconsolidated Entities, Net In the third quarter of 2023, we recognized a gain of $29 million related to the Permian JV’s acquisition of the remaining 43% interest in OMOG. See Note 7 to our Consolidated Financial Statements for additional information regarding this transaction.
In the third quarter of 2023, we recognized a gain of $29 million related to the Permian JV’s acquisition of the remaining 43% interest in OMOG JV Holdings LLC. See Note 7 to our Consolidated Financial Statements for additional information regarding these transactions.
Commitments See Note 10 to our Consolidated Financial Statements for information regarding our debt obligations and Note 18 for information regarding our leases and other commitments.
Contingencies For a discussion of contingencies that may impact us, see Note 18 to our Consolidated Financial Statements. Commitments See Note 10 to our Consolidated Financial Statements for information regarding our debt obligations and Note 18 for information regarding our leases and other commitments.
The increase in field operating costs for the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily due to (i) an increase in unrealized mark-to-market losses on power hedges (which impact our field operating costs but are excluded from Segment Adjusted EBITDA and thus are reflected as an “Adjustment” in the table above) and (ii) increased utilities-related costs largely as a result of the increase in our Empress ownership in the fourth quarter of 2022 and higher prices.
The decrease in field operating costs for the year ended December 31, 2024 compared to the year ended December 31, 2023 was primarily due to (i) decreased utilities-related costs largely as a result of lower prices and (ii) a decrease in unrealized mark-to-market losses on power hedges (which impact our field operating costs, but are excluded from Segment Adjusted EBITDA, and thus are reflected as a component of “Other segment items” in the table above), partially offset by (iii) higher maintenance and repairs.
The following table summarizes our investment in capital projects (in millions): Year Ended December 31, Projects 2023 2022 Complementary Permian Basin Projects (1) $ 266 $ 191 Permian Basin Takeaway Pipeline Projects (2) 34 33 Selected Facilities/Downstream Projects (3) 71 28 Other Projects 28 82 Total $ 399 $ 334 (1) Includes projects associated with assets included in the Permian JV.
The following table summarizes our investment in capital projects (in millions): Year Ended December 31, Projects 2024 2023 Complementary Permian Basin Projects (1) $ 249 $ 266 Selected Facilities/Downstream Projects (2) 107 71 Other Projects 59 62 Total $ 415 $ 399 (1) Includes projects associated with assets included in the Permian JV. (2) Includes projects at our St.
(2) Available capacity under our senior unsecured revolving credit facility and senior secured hedged inventory facility was reduced by outstanding letters of credit issued under these facilities of less than $1 million and $71 million, respectively. 81 Table of Contents Index to Financial Statement s (3) Excludes restricted cash of $6 million.
(2) Available capacity under our senior unsecured revolving credit facility and senior secured hedged inventory facility was reduced by outstanding letters of credit issued under these facilities of less than $1 million and $17 million, respectively.
The following tables set forth our operating results from our NGL segment: Operating Results (1) (in millions) Year Ended December 31, Variance 2023 2022 $ % Revenues $ 1,935 $ 2,761 $ (826) (30) % Purchases and related costs (1,123) (1,587) 464 29 % Field operating costs (372) (312) (60) (19) % Segment general and administrative expenses (2) (79) (75) (4) (5) % Adjustments (3) : Derivative activities 142 (269) 411 ** Long-term inventory costing adjustments 13 (1) 14 ** Equity-indexed compensation expense 1 — 1 ** Foreign currency revaluation 5 1 4 ** Segment Adjusted EBITDA $ 522 $ 518 $ 4 1 % Maintenance capital expenditures $ 86 $ 99 $ (13) (13) % Year Ended December 31, Variance Average Volumes (in thousands of barrels per day) (4) 2023 2022 Volumes % NGL fractionation 115 137 (22) (16) % NGL pipeline tariff 180 192 (12) (6) % Propane and butane sales 86 94 (8) (9) % ** Indicates that variance as a percentage is not meaningful.
The following tables set forth our operating results from our NGL segment: Operating Results (1) (in millions) Year Ended December 31, Variance 2024 2023 $ % Revenues $ 1,724 $ 1,935 $ (211) (11) % Purchases and related costs (2) (898) (1,123) 225 20 % Field operating costs (2) (328) (372) 44 12 % Segment general and administrative expenses (2) (3) (83) (79) (4) (5) % Other segment items (4) : Derivative activities 80 142 (62) ** Long-term inventory costing adjustments (10) 13 (23) ** Equity-indexed compensation expense — 1 (1) ** Foreign currency revaluation (5) 5 (10) ** Segment Adjusted EBITDA $ 480 $ 522 $ (42) (8) % Maintenance capital expenditures $ 78 $ 86 $ (8) (9) % Year Ended December 31, Variance Average Volumes (in thousands of barrels per day) (5) 2024 2023 Volumes % NGL fractionation 132 115 17 15 % NGL pipeline tariff 213 180 33 18 % Propane and butane sales 92 86 6 7 % ** Indicates that variance as a percentage is not meaningful.
The distribution rate for the quarterly distribution paid on February 15, 2024 was 9.75093% per annum ($24.92 per Series B preferred unit). Distributions to our common unitholders. On February 14, 2024, we paid a quarterly distribution of $0.3175 per common unit ($1.27 per common unit on an annualized basis).
The distribution rate for the quarterly distribution paid on February 18, 2025 was 8.89507% per annum ($22.73 per Series B preferred unit). Distributions to our common unitholders. On February 14, 2025, we paid a quarterly distribution of $0.38 per common unit ($1.52 per common unit on an annualized basis).
The segment results also include the direct fixed and variable field costs of operating the crude oil assets, as well as an allocation of indirect operating costs. 77 Table of Contents Index to Financial Statement s The following tables set forth our operating results from our Crude Oil segment: Operating Results (1) (in millions) Year Ended December 31, Variance 2023 2022 $ % Revenues $ 47,174 $ 55,080 $ (7,906) (14) % Purchases and related costs (43,805) (52,088) 8,283 16 % Field operating costs (1,053) (1,003) (50) (5) % Segment general and administrative expenses (2) (271) (250) (21) (8) % Equity earnings in unconsolidated entities 369 403 (34) (8) % Adjustments (3) : Depreciation and amortization of unconsolidated entities 87 85 2 2 % Derivative activities and inventory valuation adjustments 17 (11) 28 ** Long-term inventory costing adjustments 22 (3) 25 ** Deficiencies under minimum volume commitments, net 12 7 5 ** Equity-indexed compensation expense 35 32 3 ** Foreign currency revaluation 19 3 16 ** Line 901 incident 10 95 (85) ** Transaction-related expenses 1 — 1 ** Segment amounts attributable to noncontrolling interests (454) (364) (90) ** Segment Adjusted EBITDA $ 2,163 $ 1,986 $ 177 9 % Maintenance capital expenditures $ 145 $ 112 $ 33 29 % Average Volumes Year Ended December 31, Variance 2023 2022 Volumes % Crude oil pipeline tariff (by region) (4) Permian Basin (5) 6,356 5,638 718 13 % Other (5) 2,104 1,927 177 9 % Total crude oil pipeline tariff 8,460 7,565 895 12 % Commercial crude oil storage capacity (5) (6) 72 72 — — % Crude oil lease gathering purchases (4) (7) 1,452 1,382 70 5 % ** Indicates that variance as a percentage is not meaningful.
The segment results also include the direct fixed and variable field costs of operating the crude oil assets, as well as an allocation of indirect operating costs. 77 Table of Contents Index to Financial Statements The following tables set forth our operating results from our Crude Oil segment: Operating Results (1) (in millions) Year Ended December 31, Variance 2024 2023 $ % Revenues $ 48,720 $ 47,174 $ 1,546 3 % Purchases and related costs (2) (45,033) (43,805) (1,228) (3) % Field operating costs (2) (1,440) (1,053) (387) (37) % Segment general and administrative expenses (2) (3) (298) (271) (27) (10) % Equity earnings in unconsolidated entities 452 369 83 22 % Other segment items (4) : Depreciation and amortization of unconsolidated entities 84 87 (3) (3) % Derivative activities and inventory valuation adjustments 5 17 (12) ** Long-term inventory costing adjustments 1 22 (21) ** Deficiencies under minimum volume commitments, net (31) 12 (43) ** Equity-indexed compensation expense 36 35 1 ** Foreign currency revaluation (22) 19 (41) ** Line 901 incident 345 10 335 ** Transaction-related expenses — 1 (1) ** Segment amounts attributable to noncontrolling interests (543) (454) (89) ** Segment Adjusted EBITDA $ 2,276 $ 2,163 $ 113 5 % Maintenance capital expenditures $ 183 $ 145 $ 38 26 % Average Volumes Year Ended December 31, Variance 2024 2023 Volumes % Crude oil pipeline tariff (by region) (5) Permian Basin (6) 6,731 6,356 375 6 % Rocky Mountain (6) 474 372 102 27 % Other (6) 1,729 1,732 (3) — % Total crude oil pipeline tariff 8,934 8,460 474 6 % Commercial crude oil storage capacity (6) (7) 72 72 — — % Crude oil lease gathering purchases (5) (8) 1,586 1,452 134 9 % ** Indicates that variance as a percentage is not meaningful.
Noncontrolling Interests The increase in amounts attributable to noncontrolling interests for the year ended December 31, 2023 compared to the year ended December 31, 2022 was due to (i) higher net income recognized by the Permian JV in the 2023 period and (ii) the consolidation of Cactus II in November 2022.
Noncontrolling Interests The increase in amounts attributable to noncontrolling interests for the year ended December 31, 2024 compared to the year ended December 31, 2023 was due to higher net income recognized by the Permian JV and Cactus II related to higher volumes, as well as contributions from acquisitions completed by the Permian JV.
Total investment capital for the year ending December 31, 2024 is currently projected to be approximately $465 million ($375 million net to our interest). Approximately half of our projected investment capital expenditures are expected to be invested in the Permian JV assets.
James and Fort Saskatchewan terminals. 84 Table of Contents Index to Financial Statements Projected 2025 Capital Expenditures. Total investment capital for the year ending December 31, 2025 is currently projected to be approximately $500 million ($400 million net to our interest). Approximately half of our projected investment capital expenditures are expected to be invested in the Permian JV assets.
The increase in maintenance capital spending for the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily due to ongoing facility maintenance investments, tractor trailer leases, integrity projects and tank maintenance. NGL Segment Our NGL segment operations involve natural gas processing and NGL fractionation, storage, transportation and terminalling.
The increase in maintenance capital spending for the year ended December 31, 2024 compared to the year ended December 31, 2023 was primarily due to (i) an increase in integrity management, maintenance and repairs and replacement projects and (ii) more trucking lease buyouts. NGL Segment Our NGL segment operations involve natural gas processing and NGL fractionation, storage, transportation and terminalling.
The following table includes our best estimate and the timing of these payments as of December 31, 2023 (in millions): 2024 2025 2026 2027 2028 2029 and Thereafter Total Crude oil, NGL and other purchases (1) $ 22,938 $ 19,743 $ 17,910 $ 15,817 $ 12,795 $ 30,341 $ 119,544 (1) Amounts are primarily based on estimated volumes and market prices based on average activity during December 2023.
The following table includes our best estimate of the amount and timing of these payments as of December 31, 2024 (in millions): 2025 2026 2027 2028 2029 2030 and Thereafter Total Crude oil, NGL and other purchases (1) $ 24,727 $ 20,369 $ 17,980 $ 15,049 $ 13,711 $ 26,360 $ 118,196 (1) Amounts are primarily based on estimated volumes and market prices based on average activity during December 2024.
See the “—Results of Operations” section below for further discussion. 70 Table of Contents Index to Financial Statement s Results of Operations Consolidated Results The following table sets forth an overview of our consolidated financial results calculated in accordance with GAAP (in millions, except per unit data): Year Ended December 31, Variance 2023 2022 $ % Product sales revenues $ 46,974 $ 55,948 $ (8,974) (16) % Services revenues 1,738 1,394 344 25 % Purchases and related costs (44,531) (53,176) 8,645 16 % Field operating costs (1,425) (1,315) (110) (8) % General and administrative expenses (350) (325) (25) (8) % Depreciation and amortization (1,048) (965) (83) (9) % Gains/(losses) on asset sales and asset impairments, net 152 (269) 421 157 % Equity earnings in unconsolidated entities 369 403 (34) (8) % Gains/(losses) on investments in unconsolidated entities, net 28 346 (318) (92) % Interest expense, net (386) (405) 19 5 % Other income/(expense), net 102 (219) 321 147 % Income tax expense (121) (189) 68 36 % Net income 1,502 1,228 274 22 % Net income attributable to noncontrolling interests (272) (191) (81) (42) % Net income attributable to PAA $ 1,230 $ 1,037 $ 193 19 % Basic and diluted net income per common unit $ 1.40 $ 1.19 $ 0.21 ** Basic and diluted weighted average common units outstanding 699 701 (2) ** ** Indicates that variance as a percentage is not meaningful.
See the “—Results of Operations” section below for further discussion. 70 Table of Contents Index to Financial Statements Results of Operations Consolidated Results The following table sets forth an overview of our consolidated financial results calculated in accordance with GAAP (in millions, except per unit data): Year Ended December 31, Variance 2024 2023 $ % Product sales revenues $ 48,254 $ 46,974 $ 1,280 3 % Services revenues 1,819 1,738 81 5 % Purchases and related costs (45,560) (44,531) (1,029) (2) % Field operating costs (1,768) (1,425) (343) (24) % General and administrative expenses (381) (350) (31) (9) % Depreciation and amortization (1,026) (1,048) 22 2 % Gains/(losses) on asset sales, asset impairments and other, net (160) 152 (312) (205) % Equity earnings in unconsolidated entities 452 369 83 22 % Gain on investments in unconsolidated entities, net 15 28 (13) (46) % Interest expense, net (1) (430) (386) (44) (11) % Other income, net (1) 65 102 (37) (36) % Income tax expense (167) (121) (46) (38) % Net income 1,113 1,502 (389) (26) % Net income attributable to noncontrolling interests (341) (272) (69) (25) % Net income attributable to PAA $ 772 $ 1,230 $ (458) (37) % Basic and diluted net income per common unit $ 0.73 $ 1.40 $ (0.67) ** Basic and diluted weighted average common units outstanding 702 699 3 ** ** Indicates that variance as a percentage is not meaningful.
Adjusted Free Cash Flow is further reduced by cash distributions paid to our preferred and common unitholders to arrive at Adjusted Free Cash Flow after Distributions. 82 Table of Contents Index to Financial Statement s The following table sets forth the reconciliation of the non-GAAP financial liquidity measures Adjusted Free Cash Flow and Adjusted Free Cash Flow after Distributions from Net Cash Provided by Operating Activities (in millions): Year Ended December 31, 2023 2022 Net cash provided by operating activities $ 2,727 $ 2,408 Adjustments to reconcile net cash provided by operating activities to adjusted free cash flow: Net cash used in investing activities (702) (526) Cash contributions from noncontrolling interests 106 26 Cash distributions paid to noncontrolling interests (1) (333) (298) Adjusted Free Cash Flow $ 1,798 $ 1,610 Cash distributions (2) (989) (782) Adjusted Free Cash Flow after Distributions $ 809 $ 828 (1) Cash distributions paid during the period presented.
Adjusted Free Cash Flow is further reduced by cash distributions paid to our preferred and common unitholders to arrive at Adjusted Free Cash Flow after Distributions. 82 Table of Contents Index to Financial Statements The following table sets forth the reconciliation of the non-GAAP financial liquidity measures Adjusted Free Cash Flow and Adjusted Free Cash Flow after Distributions from Net Cash Provided by Operating Activities (in millions): Year Ended December 31, 2024 2023 Net cash provided by operating activities $ 2,490 $ 2,727 Adjustments to reconcile net cash provided by operating activities to adjusted free cash flow: Net cash used in investing activities (1) (1,504) (702) Cash contributions from noncontrolling interests 57 106 Cash distributions paid to noncontrolling interests (2) (425) (333) Proceeds from the issuance of related party notes (1) 629 — Adjusted Free Cash Flow $ 1,247 $ 1,798 Cash distributions (3) (1,145) (989) Adjusted Free Cash Flow after Distributions (4) $ 102 $ 809 (1) PAA and certain Plains entities have issued promissory notes by and among such entities to facilitate financing.
Revenues and Purchases Fluctuations in our consolidated revenues and purchases and related costs are primarily associated with our merchant activities and generally explained in large part by changes in commodity prices.
Revenues and Purchases Fluctuations in our consolidated revenues and purchases and related costs are primarily associated with our merchant activities and are generally explained by changes in commodity prices and the impact of gains and losses related to derivative instruments used to manage our commodity price exposure.
(6) Reflects amounts attributable to noncontrolling interests in the Permian JV, Cactus II and Red River. (7) See the table above for a reconciliation from Net Income to Adjusted EBITDA. (8) Excludes certain non-cash items impacting interest expense such as amortization of debt issuance costs and terminated interest rate swaps.
(7) Reflects amounts attributable to noncontrolling interests in the Permian JV, Cactus II and Red River. (8) See the table above for a reconciliation from Net Income to Adjusted EBITDA.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThe fair value of our commodity derivatives and the change in fair value as of December 31, 2023 that would be expected from a 10% price increase or decrease is shown in the table below (in millions): Fair Value Effect of 10% Price Increase Effect of 10% Price Decrease Crude oil $ (2) $ (49) $ 49 Natural gas (66) $ 12 $ (12) NGL and other 68 $ (51) $ 51 Total fair value $ — 92 Table of Contents Index to Financial Statement s The fair values presented in the table above reflect the sensitivity of the derivative instruments only and do not include the effect of the underlying hedged commodity.
Biggest changeSee Note 12 to our Consolidated Financial Statements for further discussion regarding our hedging strategies and objectives. 93 Table of Contents Index to Financial Statements The fair value of our commodity derivatives and the change in fair value as of December 31, 2024 that would be expected from a 10% price increase or decrease is shown in the table below (in millions): Fair Value Effect of 10% Price Increase Effect of 10% Price Decrease Crude oil $ 7 $ (3) $ 5 Natural gas (22) $ 6 $ (6) NGL and other (61) $ (46) $ 46 Total fair value $ (76) The fair values presented in the table above reflect the sensitivity of the derivative instruments only and do not include the effect of the underlying hedged commodity.
Based upon the Series B preferred units outstanding at December 31, 2023 and the liquidation preference of $1,000 per unit, a change of 100 basis points in interest rates would increase or decrease the annual distributions on the Series B preferred units by approximately $8 million.
Based upon the Series B preferred units outstanding at December 31, 2024 and the liquidation preference of $1,000 per unit, a change of 100 basis points in interest rates would increase or decrease the annual distributions on the Series B preferred units by approximately $8 million.
A 10% decrease in the forward SOFR curve as of December 31, 2023 would have resulted in a decrease of $18 million to the fair value of our interest rate derivatives. See Note 12 to our Consolidated Financial Statements for a discussion of our interest rate risk hedging activities. Series B Preferred Units .
A 10% decrease in the forward SOFR curve as of December 31, 2024 would have resulted in a decrease of $13 million to the fair value of our interest rate derivatives. See Note 12 to our Consolidated Financial Statements for a discussion of our interest rate risk hedging activities. Series B Preferred Units .
See Note 11 to our Consolidated Financial Statements for additional information on the Series B preferred units. Item 8. Financial Statements and Supplementary Data See “Index to the Consolidated Financial Statements” on page F-1. Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure None.
See Note 11 to our Consolidated Financial Statements for additional information regarding our Series B preferred unit distributions. Item 8. Financial Statements and Supplementary Data See “Index to the Consolidated Financial Statements” on page F-1. Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure None.
A 10% increase in the forward SOFR curve as of December 31, 2023 would have resulted in an increase of $18 million to the fair value of our interest rate derivatives.
A 10% increase in the forward SOFR curve as of December 31, 2024 would have resulted in an increase of $13 million to the fair value of our interest rate derivatives.
The average interest rate on variable rate debt that was outstanding during the year ended December 31, 2023 was 5.8%, based upon rates in effect during the year. The fair value of our interest rate derivatives was an asset of $55 million as of December 31, 2023.
The average interest rate on variable rate debt that was outstanding during the year ended December 31, 2024 was 5.6%, based upon rates in effect during the year. The fair value of our interest rate derivatives was a net asset of $27 million as of December 31, 2024.
All of our senior notes are fixed rate notes and thus are not subject to interest rate risk. Our variable rate debt outstanding at December 31, 2023, approximately $433 million, was subject to interest rate resets that generally range from less than one week to approximately one month.
All of our senior notes are fixed rate notes and thus are not subject to interest rate risk. Our variable rate debt outstanding at December 31, 2024, approximately $393 million, was subject to interest rate resets that generally occur within one week or less.
Our objectives for these derivatives include hedging anticipated purchases and sales and stored inventory. We manage these exposures with various instruments including futures, forwards, swaps and options. See Note 12 to our Consolidated Financial Statements for further discussion regarding our hedging strategies and objectives.
Our objectives for these derivatives include hedging anticipated purchases and sales and stored inventory. We manage these exposures with various instruments including futures, forwards, swaps and options.

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