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Related Party Agreements and Transactions | 3 Months Ended
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Mar. 31, 2018
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.
• | MarkWest Utica EMG, in which MPLX LP has a 56 percent interest as of March 31, 2018. 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 March 31, 2018. 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 March 31, 2018. 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 81 percent total direct and indirect interest as of March 31, 2018. 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.
• | MarkWest EMG Jefferson Dry Gas Gathering Company, LLC (“Jefferson Dry Gas”), in which MPLX LP has a 67 percent interest as of March 31, 2018. Jefferson Dry Gas provides natural dry gas gathering and related services in the Utica Shale region of Ohio.
Related Party Agreements The Partnership has various long-term, fee-based commercial agreements with MPC. Under these agreements, the Partnership provides transportation, terminal, fuels distribution, marketing and storage services to MPC. 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. 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 three months ended March 31, 2018, the Partnership borrowed $452 million and repaid $838 million. At March 31, 2018 there was no outstanding balance for this loan on the Consolidated Balance Sheets. Borrowings were at an average interest rate of 3.073 percent, per annum, for the three months ended March 31, 2018. During the year ended December 31, 2017, the Partnership borrowed $2.4 billion and repaid $2.0 billion, resulting in $386 million outstanding balance at December 31, 2017. Borrowings were at an average interest rate of 2.777 percent, per annum, for the year ended December 31, 2017. 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, 2017. Refining Logistics and Fuels Distribution Agreements As discussed in Note 4, the Partnership acquired Refining Logistics and Fuels Distribution on February 1, 2018. Refining Logistics and Fuels Distribution, along with their subsidiaries, have various storage services agreements and a fuels distribution services agreement with MPC which were assumed by the Partnership with the closing of the transaction. The commercial agreements with MPC include: Fuels distribution services agreement – Fuels Distribution is a party to a services agreement with MPC in connection with the dropdown of the fuels distribution services. Under this agreement, Fuels Distribution provides services related to the scheduling and marketing of certain petroleum products to MPC. Fuels Distribution does not provide the same services to third parties without the prior written consent of MPC, and Fuels Distribution is MPC’s sole provider of these services. This agreement has an initial term of 10 years, subject to a five-year renewal period under terms to be renegotiated at that time. Under the Fuels Distribution Services Agreement, MPC pays Fuels Distribution a tiered monthly fee based on the volume of MPC’s products sold by Fuels Distribution each month, subject to a maximum annual volume. Fuels Distribution has agreed to use commercially reasonable efforts to sell not less than a minimum quarterly volume of MPC’s products during each calendar quarter. If Fuels Distribution sells less than the minimum quarterly volume of MPC’s products during any calendar quarter despite its commercially reasonable efforts, MPC will pay Fuels Distribution a deficiency payment equal to the volume deficiency multiplied by the applicable tiered fee. The dollar amount of actual sales volume of MPC’s products that exceeds the minimum quarterly volume (an “Excess Sale”) for a particular quarter will be applied as a credit, on a first-in-first-out basis, against any future deficiency payment owed by MPC to Fuels Distribution during the four calendar quarters immediately following the calendar quarter in which the Excess Sale occurs. Storage services agreements – Refining Logistics is party to multiple storage services agreements with each of MPC’s refineries in connection with the dropdown of the refining logistics assets. Under these agreements, the subsidiaries of Refining Logistics provide certain services exclusively to MPC related to the receipt, storage, throughput, custody and delivery of petroleum products in and through certain storage and logistical facilities and assets associated with MPC’s refineries. These agreements have initial terms of 10 years, subject to five-year renewal periods under terms to be renegotiated at that time. MPC pays Refining Logistics monthly fees for such storage and logistical services calculated as set forth in the agreements. The storage and logistical facilities subject to the agreements are to be allocated exclusively to MPC for the term of the agreement. Co-location services agreements – Refining Logistics is party to multiple co-location services agreements with each of MPC’s refineries in connection with the dropdown of the refining logistics assets. Under these agreements, MPC provides management, operational and other services to the subsidiaries of Refining Logistics. Refining Logistics pays MPC monthly fixed fees and direct reimbursements for such services calculated as set forth in the agreements. These agreements have initial terms of 50 years. Related Party Transactions Related party sales to MPC consisted of crude oil and refined products pipeline transportation services based on regulated tariff rates; storage, terminal, throughput and fuels distribution services based on contracted rates; and marine transportation services. Related party sales to MPC also consist of revenue related to volume deficiency credits. Revenue received from related parties related to service and product sales were as follows:
| Three Months Ended March 31,
(In millions) | 2018 |  | 2017
Service revenues |  |  |
MPC | $ | 471 |  |  | $ | 255 |
Rental income |  |  |
MPC | $ | 145 |  |  | $ | 67 |
Product sales(1) |  |  |
MPC | $ | 4 |  |  | $ | 2 |
(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 months ended March 31, 2018, these sales totaled $79 million. For the three months ended March 31, 2017, these sales totaled $57 million.
The Partnership has operating agreements with MPC under which it receives a fee for operating MPC’s retained pipeline assets. The Partnership receives management fee revenue for engineering and construction and administrative services for operating certain of its equity method investments, and is also reimbursed for personnel services. The Partnership has an agreement with MPC under which it receives a fixed annual fee for providing oversight and management services required to run the marine business. The revenue received from these related parties, included in “Other income - related parties” on the Consolidated Statements of Income, was as follows:
| Three Months Ended March 31,
(In millions) | 2018 |  | 2017
MPC | $ | 10 |  |  | $ | 11 |
MarkWest Utica EMG | 4 |  |  | 4 |
Ohio Gathering | 4 |  |  | 4 |
Jefferson Dry Gas | 1 |  |  | 1 |
Sherwood Midstream | 3 |  |  | 1 |
Other | 1 |  |  | 1 |
Total | $ | 23 |  |  | $ | 22 |
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 March 31,
(In millions) | 2018 |  | 2017
Purchases - related parties | $ | 36 |  |  | $ | 15 |
General and administrative expenses | 16 |  |  | 8 |
Total | $ | 52 |  |  | $ | 23 |
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, net” were as follows:
| Three Months Ended March 31,
(In millions) | 2018 |  | 2017
MPC | $ | 22 |  |  | $ | 10 |
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 related to rental services are classified as “Rental cost of sales - related parties”. The costs of personnel directly involved in or supporting operations and maintenance activities related to other services 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. These charges were as follows:
| Three Months Ended March 31,
(In millions) | 2018 |  | 2017
Rental cost of sales - related parties | $ | 1 |  |  | $ | — |
Purchases - related parties | 114 |  |  | 92 |
General and administrative expenses | 23 |  |  | 25 |
Total | $ | 138 |  |  | $ | 117 |
The following table shows other purchases from MPC classified as “Purchases - related parties”. These purchases include product purchases, payments made to MPC in their capacity as general contractor to MPLX LP, and certain rent and lease agreements.
| Three Months Ended March 31,
(In millions) | 2018 |  | 2017
MPC | $ | 27 |  |  | $ | — |
Receivables from related parties were as follows:
(In millions) | March 31, 2018 |  | December 31, 2017
MPC | $ | 308 |  |  | $ | 153 |
MarkWest Utica EMG | 1 |  |  | 1 |
Ohio Gathering | 3 |  |  | 2 |
Jefferson Dry Gas | 1 |  |  | 2 |
Sherwood Midstream Holdings | 15 |  |  | — |
Other | 2 |  |  | 2 |
Total | $ | 330 |  |  | $ | 160 |
Long-term receivables with related parties, which includes straight-line rental income, were as follows:
(In millions) | March 31, 2018 |  | December 31, 2017
MPC | $ | 21 |  |  | $ | 20 |
Payables to related parties were as follows:
(In millions) | March 31, 2018 |  | December 31, 2017
MPC | $ | 115 |  |  | $ | 470 |
MarkWest Utica EMG | 20 |  |  | 29 |
Ohio Gathering | — |  |  | 8 |
Sherwood Midstream | 11 |  |  | 8 |
Other | — |  |  | 1 |
Total | $ | 146 |  |  | $ | 516 |
During the three months ended March 31, 2018 and the year ended December 31, 2017, MPC did not ship its minimum committed volumes on certain pipeline systems. 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 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 related party 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.” 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) | March 31, 2018 |  | December 31, 2017
Minimum volume deficiencies - MPC | $ | 46 |  |  | $ | 53 |
Project reimbursements - MPC | 46 |  |  | 33 |
Total | $ | 92 |  |  | $ | 86 |

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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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