Plains All American Pipeline, L.P. is a publicly traded master limited partnership (“MLP”) engaged in the transportation, storage, terminalling and marketing of crude oil, refined products and LPG. We are also engaged in the development and operation of natural gas storage facilities through our direct and indirect ownership of PAA Natural Gas Storage, L.P. ("PNG"). We own PNG's general partner, PNGS GP LLC, which holds a 2.0% general partner interest in PNG and all of its incentive distribution rights. We also own an approximate 62% limited partner interest in PNG.
We own and operate a diversified portfolio of strategically located assets that play a vital role in the movement of U.S. and Canadian energy supplies. On average we handle over 3 million barrels per day of crude oil, refined products and LPG through our extensive network of assets located in key North American producing basins and transportation gateways. We are headquartered in Houston, Texas, and our common units are traded on the New York Stock Exchange under the symbol "PAA."
Our operations can be categorized into three primary business activities:
Transportation— Our transportation segment operations generally consist of fee-based activities associated with transporting crude oil and refined products on pipelines, gathering systems, trucks and barges. We generate revenue through a combination of tariffs, third party leases of pipeline capacity and transportation fees. Our transportation segment also includes our equity earnings from our investments in Butte, Frontier, Settoon Towing and White Cliffs in which we own noncontrolling interests.
As of December 31, 2010, we employed a variety of owned or leased long-term physical assets throughout the United States and Canada in this segment, including approximately:
16,000 miles of active crude oil and refined product pipelines and gathering systems;
25 million barrels of active, above-ground tank capacity used primarily to facilitate pipeline throughput;
56 trucks and 352 trailers;
65 transport and storage barges and 39 transport tugs through our interest in Settoon Towing
Facilities— Our facilities segment operations generally consist of fee-based activities associated with providing storage, terminalling and throughput services for crude oil, refined products, LPG and natural gas, as well as LPG fractionation and isomerization services. We generate revenue through a combination of month-to-month and multi-year leases and processing arrangements. Revenues generated in this segment include (i) storage fees that are generated when we lease storage capacity, (ii) terminalling fees, or throughput fees, that are generated when we receive crude oil, refined products, LPG or natural gas from one connecting pipeline and redeliver the applicable product to another connecting carrier, (iii) hub service fees for the movement of natural gas across our header systems, and (iv) fees from LPG fractionation and isomerization services.
As of December 31, 2010, we owned and employed a variety of long-term physical assets throughout the United States and Canada in this segment, including:
~59 million barrels of crude oil and refined products capacity primarily at our terminalling and storage locations;
~6 million barrels of LPG storage capacity;
~50 Bcf of natural gas storage capacity (including benefit of expansions and Southern Pines acquisition, 71 Bcf of projected average 2011 capacity*); and
~11 Bcf of base gas in storage facilities ownnatural gas storage capacity;
a fractionation plant in Canada with a processing capacity of 4,400 barrels per day, and a fractionation and isomerization facility in California with an aggregate processing capacity of 26,000 barrels per day.
Our facilities segment includes our investment in PNG. PNG currently owns and operates natural gas storage capacity, as described above, at its Bluewater facility in Michigan and Pine Prairie facility in South Louisiana.
Supply and Logistics — Our supply and logistics segment operations generally consist of the following merchant activities:
the purchase of U.S. and Canadian crude oil at the wellhead and the bulk purchase of crude oil at pipeline and terminal facilities, as well as the purchase of foreign cargoes at their load port and various other locations in transit;
the storage of inventory during contango market conditions and the seasonal storage of LPG;
the purchase of refined products and LPG from producers, refiners and other marketers;
the resale or exchange of crude oil, refined products and LPG at various points along the distribution chain to refiners or other resellers to maximize profits; and
the transportation of crude oil, refined products and LPG on trucks, barges, railcars, pipelines and ocean-going vessels to our terminals and third-party terminals.
The majority of activities that are carried out within our supply and logistics segment are designed to produce a stable baseline of results in a variety of market conditions, while at the same time providing upside potential associated with opportunities inherent in volatile market conditions. These activities utilize storage facilities at major interchange and terminalling locations and various hedging strategies to provide a balance. The tankage that is used to support our arbitrage activities positions us to capture margins in a contango market or when the market switches from contango to backwardation.
Except for pre-defined inventory positions, our policy is generally (i) to purchase only product for which we have a market, (ii) to structure our sales contracts so that price fluctuations do not materially affect the segment profit we receive, and (iii) not to acquire and hold physical inventory, futures contracts or other derivative products for the purpose of speculating on outright commodity price changes.
In addition to substantial working inventories associated with its merchant activities, as of December 31, 2010, our supply and logistics segment also owned significant volumes of crude oil and LPG classified as long-term assets for linefill or minimum inventory requirements under service arrangements with transportation carriers and terminalling providers. The supply and logistics segment also employs a variety of owned or leased physical assets throughout the United States and Canada, including approximately:
9 million barrels of crude oil and LPG linefill in pipelines owned by us;
2 million barrels of crude oil and LPG linefill in pipelines owned by third parties and other long-term inventory;
530 trucks and 607 trailers; and
In connection with its operations, the supply and logistics segment secures transportation and facilities services from our other two segments as well as third-party service providers under month-to-month and multi-year arrangements.
Intersegment sales are based on posted tariff rates, rates similar to those charged to third parties or rates that we believe approximate market rates. However, certain terminalling and storage rates recognized within our facilities segment are discounted to our marketing segment to reflect the fact that these services may be canceled on short notice to enable the facilities segment to provide services to third parties.
We purchase crude oil and LPG from multiple producers under constracts and believe that we have established long-term, broadbased relationships with the crude oil and LPG producers in our areas of operations. Supply and logistics activities involve relatively large volumes of transactions, often with lower overall margins than transportation and facilities operations. Supply and logistics activities for LPG typically consist of smaller volumes per transaction relative to crude oil.
*Based on midpoint guidance furnished via Form 8K on February 9, 2011.