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Commitments and Contingencies (Notes) | 6 Months Ended
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Jun. 30, 2014
Commitments and Contingencies Disclosure [Abstract] |
Commitments and Contingencies | Commitments and Contingencies Litigation In the ordinary conduct of our business, we are from time to time subject to lawsuits, investigations and claims, including environmental claims and employee-related matters. Although we cannot predict with certainty the ultimate resolution of lawsuits, investigations and claims asserted against us, including civil penalties or other enforcement actions, we do not believe that any currently pending legal proceeding or proceedings to which we are a party will have a material adverse effect on our business, financial condition or results of operations. Rate Regulation of Petroleum Pipelines The rates and terms and conditions of service on certain of our pipelines are subject to regulation by the Federal Energy Regulatory Commission (“FERC”) under the Interstate Commerce Act (“ICA”) and by the state regulatory commissions in the states in which we transport crude oil and refined products, including the Railroad Commission of Texas, the Louisiana Public Service Commission, and the Arkansas Public Service Commission. Certain of our pipeline systems are subject to such regulation and have filed tariffs with the appropriate entities. We also comply with the reporting requirements for these pipelines. Other of our pipelines have received a waiver from the application of FERC's tariff requirements but comply with other applicable regulatory requirements. FERC regulates interstate transportation under the ICA, the Energy Policy Act of 1992 and the rules and regulations promulgated under those laws. The ICA and its implementing regulations require that tariff rates for interstate service on oil pipelines, including pipelines that transport crude oil and refined products in interstate commerce (collectively referred to as “petroleum pipelines”), be just and reasonable and non-discriminatory and that such rates and terms and conditions of service be filed with FERC. Under the ICA, shippers may challenge new or existing rates or services. FERC is authorized to suspend the effectiveness of a challenged rate for up to seven months, though rates are typically not suspended for the maximum allowable period. Tariff rates are typically contractually subject to increase or decrease on July 1 of each year, beginning on July 1, 2013, by the amount of any change in FERC oil pipeline index or, in the case of the east Texas marketing agreement and the Tyler Throughput and Tankage Agreement, to other inflation-based indexes; provided, however, that in no event will the fees be adjusted below the amount initially set forth in the applicable agreement. While FERC regulates rates for shipments of crude oil or refined products in interstate commerce, state agencies may regulate rates and service for shipments in intrastate commerce. We own pipeline assets in Texas, Arkansas, and Louisiana. Environmental Health and Safety We are subject to various federal, state and local environmental and safety laws enforced by agencies including the U.S. Environmental Protection Agency (the "EPA"), the U.S. Department of Transportation ("DOT") / Pipeline and Hazardous Materials Safety Administration, the U.S. Department of Labor / Occupational Safety and Health Administration, the Texas Commission on Environmental Quality, the Texas Railroad Commission, the Arkansas Department of Environmental Quality (the "ADEQ"), the Louisiana Oil Spill Coordinating Office, the Louisiana Department of Environmental Quality, the Louisiana Department of Wildlife and Fisheries and the Tennessee Department of Environment and Conservation as well as other state and federal agencies. Numerous permits or other authorizations are required under these laws for the operation of our terminals, pipelines, and related operations, and may be subject to revocation, modification and renewal. These laws and permits raise potential exposure to future claims and lawsuits involving environmental and safety matters which could include soil and water contamination, air pollution, personal injury and property damage allegedly caused by substances which we manufactured, handled, used, released or disposed of, or that relate to pre-existing conditions for which we have assumed responsibility. We believe that our current operations are in substantial compliance with existing environmental and safety requirements. However, there have been and will continue to be ongoing discussions about environmental and safety matters between us and federal and state authorities, including notices of violations, citations and other enforcement actions, some of which have resulted or may result in changes to operating procedures and in capital expenditures. While it is often difficult to quantify future environmental or safety related expenditures, we anticipate that continuing capital investments and changes in operating procedures will be required for the foreseeable future to comply with existing and new requirements as well as evolving interpretations and more strict enforcement of existing laws and regulations. Crude Oil Releases We have detected several crude oil releases, including a release at our Magnolia Station in March 2013, a release near Macedonia, Arkansas in October 2013 and a release in Haynesville, Louisiana in April 2014. We incurred costs of $0.3 million during the six months ended June 30, 2013 related to the release at Magnolia Station. We also incurred costs of $0.3 million in the fourth quarter 2013 related to the release near Macedonia and $1.0 million during the three and six months ended June 30, 2014 related to the release in Haynesville. As of June 30, 2014, we have accrued $1.5 million and $2.5 million for additional remediation expenses expected to be incurred for the Macedonia and Haynesville spills, respectively. However, we do not believe the total costs associated with these events, whether alone or in the aggregate, including any fines or penalties and net of partial insurance reimbursement, will have a material adverse effect upon our business, financial condition or results of operations as Delek is required, pursuant to the terms of the Omnibus Agreement (as defined in Note 13), to pay to us any costs in excess of $0.3 million with respect to the releases at our Magnolia Station and near Macedonia, Arkansas and costs in excess of $1.0 million with respect to the release near Haynesville. Contracts and Agreements The majority of the petroleum products we sell in west Texas are purchased from Noble Petro, Inc. ("Noble Petro"). Under the terms of a supply contract (the "Abilene Contract") with Noble Petro, we have the right to purchase up to 20,350 bpd of petroleum products at the Abilene, Texas terminal, which we own, for sales at the Abilene and San Angelo terminals and to exchange barrels with third parties. We lease the Abilene and San Angelo, Texas terminals to Noble Petro, under a separate Terminal and Pipeline Lease and Operating Agreement, with a term that runs concurrent with that of the Abilene Contract. The Abilene Contract expires on December 31, 2017 and does not include any options for renewal. We also purchase spot barrels from various third parties and from Delek for sale to wholesale customers in west Texas. Letters of Credit As of June 30, 2014, we had in place letters of credit totaling approximately $13.5 million under the Amended and Restated Credit Agreement primarily securing obligations with respect to gasoline and diesel purchases. No amounts were drawn under these letters of credit at June 30, 2014. Operating Leases We lease certain equipment and have surface leases under various operating lease arrangements, most of which provide the option to renew after the initial lease term. None of these lease arrangements include fixed rental rate increases. Lease expense for all operating leases totaled $0.2 million and $0.4 million for the three and six months ended June 30, 2014, respectively, and $0.2 million and $0.4 million for the three and six months ended June 30, 2013, respectively. In connection with the Tyler Acquisition, we and Delek entered into a lease and access agreement with respect to the real property on which the Tyler Terminal and Tank Assets are located. Under this agreement, we lease such real property from Delek for a nominal amount paid annually, with an initial term of 50 years with automatic renewal for a maximum of four successive 10-year periods thereafter. In connection with the El Dorado Acquisition, we and Delek entered into a lease and access agreement with respect to the real property on which the El Dorado Terminal and Tank Assets are located. Under this agreement, we lease such real property from Delek for a nominal amount paid annually, with an initial term of 50 years with automatic renewal for a maximum of four successive 10-year periods thereafter. We have a ground lease agreement with Lion Oil for approximately seven acres of land on Lion Oil's refinery site, on which an above-ground storage tank and related facilities are located. The tank and related facilities are used for the storage and throughput of crude oil or other hydrocarbon substances or any resulting refined products. The fees paid to Lion Oil were nominal for the three and six months ended June 30, 2014. The term of this agreement is co-terminous with the El Dorado lease and access agreement discussed above.

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