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Related Party Agreements and Transactions | 6 Months Ended
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Jun. 30, 2017
Related Party Transactions [Abstract] |
Related Party Agreements and Transactions | Related Party Agreements and Transactions The Partnership’s material related parties include:
• | MPC, which refines, markets and transports crude oil and petroleum products, primarily in the Midwest, Gulf Coast, East Coast and Southeast regions of the United States.
• | Centennial Pipeline LLC (“Centennial”), in which MPC has a 50 percent interest as of June 30, 2017. Centennial owns a products pipeline and storage facility.
• | Muskegon Pipeline LLC (“Muskegon”), in which MPC has a 60 percent interest as of June 30, 2017. Muskegon owns a common carrier products pipeline.
• | MarkWest Utica EMG, in which MPLX LP has a 56 percent interest as of June 30, 2017. MarkWest Utica EMG is engaged in natural gas processing and NGL fractionation, transportation and marketing in Ohio.
• | Ohio Gathering, in which MPLX LP has a 34 percent indirect interest as of June 30, 2017. Ohio Gathering is a subsidiary of MarkWest Utica EMG providing natural gas gathering service in the Utica Shale region of eastern Ohio.
• | Sherwood Midstream, in which MPLX LP has a 50 percent interest as of June 30, 2017. Sherwood Midstream supports the development of Antero Resources Corporation’s Marcellus Shale acreage in the rich-gas corridor of West Virginia.
• | Sherwood Midstream Holdings, in which MPLX LP has an 86 percent total direct and indirect interest at June 30, 2017. Sherwood Midstream Holdings owns certain infrastructure at the Sherwood Complex that is shared by and supports the operation of both the Sherwood Midstream and MarkWest gas processing plants and deethanization facilities.
Related Party Agreements The Partnership has various long-term, fee-based commercial agreements with MPC. Under these agreements, the Partnership provides transportation, terminal and storage services to MPC, and MPC has committed to provide the Partnership with minimum quarterly throughput volumes on crude oil and refined products systems and minimum storage volumes of crude oil, refined products and butane. In addition, the Partnership is party to a loan agreement with MPC Investment, a wholly-owned subsidiary of MPC. Under the terms of the agreement, MPC Investment will make a loan or loans to the Partnership on a revolving basis as requested by the Partnership and as agreed to by MPC Investment, in an amount or amounts that do not result in the aggregate principal amount of all loans outstanding exceeding $500 million at any one time. The entire unpaid principal amount of the loan, together with all accrued and unpaid interest and other amounts (if any), shall become due and payable on December 4, 2020. MPC Investment may demand payment of all or any portion of the outstanding principal amount of the loan, together with all accrued and unpaid interest and other amounts (if any), at any time prior to December 4, 2020. Borrowings under the loan will bear interest at LIBOR plus 1.50 percent. During the six months ended June 30, 2017, the Partnership borrowed $12 million and repaid $12 million, resulting in no outstanding balance at June 30, 2017. Borrowings were at an average interest rate of 2.270 percent, per annum, for the six months ended June 30, 2017. During the year ended December 31, 2016, the Partnership borrowed $2.5 billion and repaid $2.5 billion, resulting in no outstanding balance at December 31, 2016. Borrowings were at an average interest rate of 1.939 percent, per annum, for the year ended December 31, 2016. For additional information regarding the Partnership’s commercial and other agreements with MPC, see Item 1. Business in the Annual Report on Form 10-K for the year ended December 31, 2016. The Partnership believes the terms and conditions under its agreements with MPC are generally comparable to those with unrelated parties. HST, WHC and MPLXT Agreements As discussed in Note 3, the Partnership acquired HST, WHC and MPLXT on March 1, 2017. HST, WHC and MPLXT have various operating, transportation services, terminal services, storage services and employee services agreements with MPC, which were assumed by the Partnership with the closing of the Transaction. HST is a party to a transportation services agreement with MPC dated January 1, 2015. Under this agreement, HST provides pipeline transportation of crude oil and refined products, as well as related services, for MPC. MPC pays HST for such services based on contractual rates related to MPC crude oil and refined product deliveries as well as any viscosity surcharges, loading, handling, transfers or other related charges. This agreement is set to expire on December 31, 2026 and automatically renews for two additional renewal terms of four years each unless terminated by either party. On January 1, 2015, HST entered into various three-year term storage services agreements with MPC. Under the storage services agreements, HST receives a monthly fee from MPC based on a contractual rate per barrel multiplied by the total commitment volume respective to each storage tank. The contractual rate per barrel is subject to an annual review and adjustment for inflation. HST is not obligated to measure volume gains and losses per the terms of these agreements. On January 1, 2015, WHC entered into a long-term, fee-based storage and services agreement with MPC related to storage at its butane and propane caverns with an initial term of 10 years. Under this storage and services agreement, WHC receives a monthly fee from MPC based on a contractual rate per barrel multiplied by the total commitment volume respective to each storage cavern. The contractual rate per barrel includes utilization of the caverns and related services. The agreement is subject to an annual review and adjustment for inflation. Under the storage services agreements with both HST and WHC, the Partnership is obligated to make available to MPC, on a firm basis, the available storage capacity at the tank farms and butane and propane caverns and MPC pays the Partnership a per-barrel fee for such storage capacity regardless of whether MPC fully utilizes the available capacity. MPLXT is a party to a terminal services agreement with MPC, dated March 1, 2017. Under this agreement, MPLXT provides terminal storage for refined petroleum products, as well as related services, for MPC. MPC pays MPLXT monthly for such services based on contractual fees relating to MPC product deliveries as well as any viscosity surcharges, loading, handling, transfers or other related charges. This agreement is set to expire on March 31, 2026 and automatically renews for two additional renewal terms of five years each unless terminated by either party. The Partnership is party to various employee services agreements with MPC under which the Partnership reimburses MPC for employee benefit expenses, along with the provision of operational and management services, including those in support of HST, WHC and MPLXT. Related Party Transactions Sales to related parties were as follows:
| Three Months Ended June 30, |  | Six Months Ended June 30,
(In millions) | 2017 |  | 2016 |  | 2017 |  | 2016
Service revenues |  |  |  |  |  |  |
MPC | $ | 270 |  |  | $ | 246 |  |  | $ | 525 |  |  | $ | 423 |
Rental income |  |  |  |  |  |  |
MPC | $ | 70 |  |  | $ | 66 |  |  | $ | 137 |  |  | $ | 104 |
Product sales(1) |  |  |  |  |  |  |
MPC | $ | 2 |  |  | $ | 3 |  |  | $ | 4 |  |  | $ | 6 |
(1) | There were additional product sales to MPC that net to zero within the consolidated financial statements as the transactions are recorded net due to the terms of the agreements under which such product was sold. For the three and six months ended June 30, 2017, these sales totaled $53 million and $110 million, respectively. For the three and six months ended June 30, 2016, these sales totaled $7 million and $12 million, respectively.
Related party sales to MPC consist of crude oil and refined products pipeline transportation services based on regulated tariff rates, storage services based on contracted rates and transportation services provided by HSM. Under the Partnership’s pipeline transportation services agreements, if MPC fails to transport its minimum throughput volumes during any quarter, then MPC will pay the Partnership a deficiency payment equal to the volume of the deficiency multiplied by the tariff rate then in effect. The deficiency amounts are recorded as Deferred revenue-related parties. MPC may then apply the amount of any such deficiency payments as a credit for volumes transported on the applicable pipeline system in excess of its minimum volume commitment during the following four or eight quarters under the terms of the applicable transportation services agreement. The Partnership recognizes revenues for the deficiency payments when credits are used for volumes transported in excess of minimum quarterly volume commitments, when it becomes impossible to physically transport volumes necessary to utilize the credits or upon the expiration of the credits. The use or expiration of the credits is a decrease in Deferred revenue-related parties. The revenue received from related parties, included in Other income-related parties on the Consolidated Statements of Income, was as follows:
| Three Months Ended June 30, |  | Six Months Ended June 30,
(In millions) | 2017 |  | 2016 |  | 2017 |  | 2016
MPC | $ | 10 |  |  | $ | 12 |  |  | $ | 21 |  |  | $ | 26 |
MarkWest Utica EMG | 4 |  |  | 5 |  |  | 8 |  |  | 7 |
Ohio Gathering | 4 |  |  | 3 |  |  | 8 |  |  | 7 |
Other | 7 |  |  | 4 |  |  | 10 |  |  | 5 |
Total | $ | 25 |  |  | $ | 24 |  |  | $ | 47 |  |  | $ | 45 |
MPC provides executive management services and certain general and administrative services to the Partnership under the terms of an omnibus agreement. Expenses incurred under this agreement are shown in the table below by the income statement line where they were recorded. Charges for services included in Purchases-related parties primarily relate to services that support the Partnership’s operations and maintenance activities, as well as compensation expenses. Charges for services included in General and administrative expenses primarily relate to services that support the Partnership’s executive management, accounting and human resources activities. These charges were as follows:
| Three Months Ended June 30, |  | Six Months Ended June 30,
(In millions) | 2017 |  | 2016 |  | 2017 |  | 2016
Purchases - related parties | $ | 18 |  |  | $ | 11 |  |  | $ | 33 |  |  | $ | 18 |
General and administrative expenses | 11 |  |  | 12 |  |  | 19 |  |  | 22 |
Total | $ | 29 |  |  | $ | 23 |  |  | $ | 52 |  |  | $ | 40 |
Also under terms of the omnibus agreement, some service costs related to engineering services are associated with assets under construction. These costs added to Property, plant and equipment were as follows:
| Three Months Ended June 30, |  | Six Months Ended June 30,
(In millions) | 2017 |  | 2016 |  | 2017 |  | 2016
MPC | $ | 12 |  |  | $ | 12 |  |  | $ | 22 |  |  | $ | 22 |
MPLX LP obtains employee services from MPC under employee services agreements. Expenses incurred under these agreements are shown in the table below by the income statement line where they were recorded. The costs of personnel directly involved in or supporting operations and maintenance activities are classified as Purchases-related parties. The costs of personnel involved in executive management, accounting and human resources activities are classified as General and administrative expenses in the Consolidated Statements of Income. Employee services expenses from related parties were as follows:
| Three Months Ended June 30, |  | Six Months Ended June 30,
(In millions) | 2017 |  | 2016 |  | 2017 |  | 2016
Purchases - related parties | $ | 91 |  |  | $ | 88 |  |  | $ | 183 |  |  | $ | 159 |
General and administrative expenses | 24 |  |  | 27 |  |  | 49 |  |  | 48 |
Total | $ | 115 |  |  | $ | 115 |  |  | $ | 232 |  |  | $ | 207 |
Receivables from related parties, which include reimbursements from the MarkWest Merger to be provided by MPC for the conversion of Class B units, were as follows:
(In millions) | June 30, 2017 |  | December 31, 2016
MPC | $ | 167 |  |  | $ | 242 |
MarkWest Utica EMG | 1 |  |  | 2 |
Ohio Gathering | 2 |  |  | 2 |
Other | 3 |  |  | 1 |
Total | $ | 173 |  |  | $ | 247 |
Long-term receivables with related parties, which includes straight-line rental income, were as follows:
(In millions) | June 30, 2017 |  | December 31, 2016
MPC | $ | 16 |  |  | $ | 11 |
Payables to related parties were as follows:
(In millions) | June 30, 2017 |  | December 31, 2016
MPC | $ | 74 |  |  | $ | 63 |
MarkWest Utica EMG | 15 |  |  | 24 |
Other | 4 |  |  | — |
Total | $ | 93 |  |  | $ | 87 |
During the six months ended June 30, 2017 and the year ended December 31, 2016, MPC did not ship its minimum committed volumes on certain pipeline systems. In addition, capital projects the Partnership is undertaking at the request of MPC are reimbursed in cash and recognized in income over the remaining term of the applicable agreements. The Deferred revenue-related parties balance associated with the minimum volume deficiencies and project reimbursements were as follows:
(In millions) | June 30, 2017 |  | December 31, 2016
Minimum volume deficiencies - MPC | $ | 51 |  |  | $ | 48 |
Project reimbursements - MPC | 21 |  |  | 9 |
Total | $ | 72 |  |  | $ | 57 |

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- Definition The entire disclosure for related party transactions. Examples of related party transactions include transactions between (a) a parent company and its subsidiary; (b) subsidiaries of a common parent; (c) and entity and its principal owners; and (d) affiliates. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 850 -URI http://asc.fasb.org/topic&trid=2122745 + Details
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