Related Party Transactions

Commercial Agreements

The Partnership has various long-term, fee-based commercial agreements with Delek under which we provide crude oil gathering, crude oil, intermediate and refined products transportation and storage services and marketing, terminalling and offloading services to Delek. Each of these agreements include minimum quarterly volume or throughput commitments and have tariffs or fees indexed to inflation, provided that the tariffs or fees will not be decreased below the initial amount. Fees under each agreement are payable to us monthly by Delek or certain third parties to whom Delek has assigned certain of its rights. In most circumstances, if Delek or the applicable third party assignee fails to meet or exceed the minimum volume or throughput commitment during any calendar quarter, Delek, and not any third party assignee, will be required to make a quarterly shortfall payment to us equal to the volume of the shortfall multiplied by the applicable fee. Carry-over of any volumes in excess of such commitment to any subsequent quarter is not permitted. Exceptions to this requirement that Delek make minimum payments under a given agreement can exist if (i) there is an event of force majeure affecting our asset, or (ii) after the first three years of the applicable commercial agreement's term (a) there is an event of force majeure affecting the applicable Delek asset, or (b) if Delek shuts down the applicable refinery upon giving 12 months' notice, which such notice may only be given after the first two years of the applicable commercial agreement's term. In addition, Delek may terminate any of these agreements under certain circumstances.

Under each of these agreements, we are required to maintain the capabilities of our pipelines and terminals such that Delek may throughput and/or store, as the case may be, specified volumes of crude oil, intermediate and refined products. To the extent that Delek is prevented by our failure to maintain such capacities from throughputting or storing such specified volumes for more than 30 days per year, Delek's minimum throughput commitment will be reduced proportionately and prorated for the portion of the quarter during which the specified throughput capacity was unavailable, and/or the storage fee will be reduced, prorated for the portion of the month during which the specified storage capacity was unavailable. Such reduction would occur even if actual throughput or storage amounts were below the minimum volume commitment levels.

The tariffs, throughput fees and the storage fees under our agreements with Delek are subject to increase or decrease on July 1 of each year, by the amount of any change in the FERC oil pipeline index or, in the case of the east Texas marketing agreement, to the consumer price index and, in the case of the El Dorado Throughput and Tankage Agreement and the Tyler Throughput and Tankage Agreement, to other inflation-based indices; provided, however, that in no event will the fees be adjusted below the amount initially set forth in the applicable agreement.

Our material commercial agreements with Delek include the following:



Asset/Operation	Initiation Date	Initial/Maximum Term (years) ⁽¹⁾	Service	Minimum Throughput Commitment (bpd)	Fee (/bbl)
Lion Pipeline System and SALA Gathering System:
Crude Oil Pipelines (non-gathered)	November 2012	5 / 15	Crude oil and refined products transportation	46,000 ⁽²⁾	$ 0 .97 ⁽³⁾
Refined Products Pipelines	November 2012	5 / 15		40,000	$	0.11
SALA Gathering System	November 2012	5 / 15	Crude oil gathering	14,000	$ 2.56 ⁽³⁾
East Texas Crude Logistics System:
Crude Oil Pipelines	November 2012	5 / 15	Crude oil transportation and storage	35,000	$ 0.45 ⁽⁴⁾
Storage	November 2012	5 / 15		N/A	$ 284,090/month
East Texas Marketing	November 2012	10 ⁽⁵⁾	Marketing products for Tyler Refinery	50,000	$ 0.621/bbl ⁽⁵⁾
Big Sandy Terminal: ⁽⁶⁾
Refined Products Transportation	November 2012	5 / 15	Refined products transportation, dedicated terminalling services and storage for the Tyler Refinery	5,000	$	0.57
Terminalling	November 2012	5 / 15		5,000	$	0.57
Storage	November 2012	5 / 15		N/A	$ 56,768/month
Tyler Throughput and Tankage:
Refined Products Throughput	July 2013	8 / 16	Dedicated Terminalling and storage	50,000	$	0.35
Storage	July 2013	8 / 16		N/A	$ 829,902/month
Memphis Pipeline	October 2013	5	Refined Products Transportation	10,959	$ 1.38/bbl
El Dorado Throughput and Tankage:
Refined Products Throughput	February 2014	8 / 16	Dedicated terminalling and storage	11,000	$ 0.50/bbl
Storage	February 2014	8 / 16		N/A	$1,309,085/month
El Dorado Assets Throughput:
Light Crude Throughput	March 2015	9/15	Dedicated Offloading Services	N/A ⁽⁷⁾	$ 1.00
Heavy Crude Throughput	March 2015	9/15	Dedicated Offloading Services	N/A ⁽⁷⁾	$ 2.25


⁽¹⁾	Maximum term gives effect to the extension of the commercial agreement pursuant to the terms thereof.


⁽²⁾	Excludes volumes gathered on the SALA Gathering System.


⁽³⁾	Volumes gathered on the SALA Gathering System will not be subject to an additional fee for transportation on our Lion Pipeline System to the El Dorado Refinery.


⁽⁴⁾	For any volumes in excess of 50,000 bpd, the throughput fee will be $0.682/bbl.


⁽⁵⁾	Following the primary term, the marketing agreement automatically renews for successive one-year terms unless either party provides notice of non-renewal 10 months prior to the expiration of the then-current term. An additional fee of 50% of the margin on products sold is also paid pursuant to the agreement. The fee shall not be less than $175,000 nor greater than $500,000 per quarter.

⁽⁶⁾

On July 19, 2013, we acquired the Hopewell Pipeline in order to effectively connect it with the Big Sandy Pipeline and thereby return the Big Sandy Terminal to operation. In connection with the acquisition, on July 25, 2013, we and Delek entered into the Amended and Restated Services Agreement (Big Sandy Terminal and Pipeline), which amended and restated the terminalling services agreement for the Big Sandy Terminal originally entered into in connection with the Offering.


⁽⁷⁾	The throughput agreement provides for a minimum throughput fee of $1.5 million per quarter for throughput of a combination of light and heavy crude.

Pursuant to an arrangement with Delek and Lion Oil, to which we are not a party, J. Aron & Company ("J. Aron") acquires and holds title to substantially all crude oil, intermediate and refined products transported on our Lion Pipeline System, SALA Gathering System and on pipeline capacity we lease from Enterprise TE Products Pipeline Company LLC that runs from the El Dorado Refinery to our Memphis Terminal (the "Memphis Pipeline"). J. Aron is therefore considered the shipper for the liquid it owns on the Lion Pipeline System, the SALA Gathering System and the Memphis Pipeline. J. Aron also has title to the refined products stored at our Memphis, North Little Rock and El Dorado terminals and in the El Dorado Storage Tanks. Under (i) our pipelines and storage agreement with Lion Oil relating to the Lion Pipeline System and the SALA Gathering System, (ii) our terminalling agreements with Lion Oil relating to the Memphis and North Little Rock terminals and (iii) our throughput and tankage agreement relating to the El Dorado Terminal and Tank Assets, Lion Oil has assigned to J. Aron certain of its rights under these agreements, including the right to have J. Aron's crude oil and intermediate and refined products stored in or transported on or through these systems, Memphis and North Little Rock terminals and the El Dorado Terminal and Tank Assets, with Lion Oil acting as J. Aron's agent for scheduling purposes. Accordingly, even though this is effectively a financing arrangement for Delek whereby J. Aron sells the product back to Delek, J. Aron is technically our primary customer under each of these agreements. J. Aron will retain these storage and transportation rights for the term of its arrangement with Delek and Lion Oil, which currently runs through April 30, 2017, and J. Aron will pay us for the transportation, throughput and storage services we provide to it. The rights assigned to J. Aron will not alter Lion Oil's obligations to meet certain throughput minimum volumes under our agreements with respect to the transportation, throughputting and storage of crude oil, intermediate and refined products through our facilities, but J. Aron's throughput will be credited toward Lion Oil's minimum throughput commitments. Accordingly, Lion Oil will be responsible for making any shortfall payments incurred under the pipelines and storage agreement or the terminalling agreement which may result from minimum throughputs or volumes not being met.

Other Agreements with Delek

In addition to the commercial agreements described above, the Partnership has entered into the following agreements with Delek:

Omnibus Agreement

Omnibus Agreement. The Partnership entered into an omnibus agreement with Delek, our general partner, OpCo, Lion Oil Company and certain of the Partnership’s and Delek’s other subsidiaries on November 7, 2012, which was subsequently amended and restated on July 26, 2013, February 10, 2014 and March 31, 2015 in connection with our subsequent acquisitions from Delek (collectively, the "Omnibus Agreement"). The third amendment and restatement occurring on March 31, 2015 provided for the following: (i) revisions of the schedules to include the El Dorado Assets and the Tyler Assets, (ii) revisions of certain provisions and schedules with respect to certain environmental matters, (iii) the addition of DKL Transportation, LLC as a party to the agreement, (iv) the elimination of certain provisions under the Omnibus Agreement that had expired, and (v) updating the annual administrative fee payable by us to Delek for general corporate and administrative services that Delek and its affiliates provide to us to reflect the inflationary increase provided under the Omnibus Agreement, from $3.3 million to $3.4 million, which is prorated and payable monthly. The Partnership entered into an amendment to the third amended and restated omnibus agreement on August 3, 2015, with an effective date of April 1, 2015 (the third amended and restated omnibus agreement between the Partnership, Delek and the general partner, as amended, is referred to as the "Third Restated Omnibus Agreement"). This amendment eliminated a $1.0 million per event deductible that applied to certain asset failures before Delek was required to reimburse the Partnership. During the years ended December 31, 2015, 2014 and 2013, we were reimbursed $5.2 million, $1.6 million and $0.8 million, respectively, for certain capital expenditures pursuant to the terms of the Omnibus Agreement. Additionally, we were reimbursed or indemnified, as the case may be, for costs incurred in excess of certain amounts for environmental matters pursuant to the terms of the Omnibus Agreement. We incurred costs of $1.0 million and $0.6 million related to these matters during the years ended December 31, 2014 and 2013.

Operation and Management Services Agreement

Our general partner operates our business on our behalf and is entitled under our partnership agreement to be reimbursed for the cost of providing those services. Prior to the Tyler Acquisition, we and our general partner entered into an operation and management services agreement with Delek, pursuant to which our general partner uses employees of Delek to provide operation and management services with respect to our pipelines, storage and terminalling facilities and related assets. We and/or our general partner reimbursed Delek for such services under the operation and management services agreement for the period beginning November 7, 2012 and ending July 26, 2013, at which time our general partner and Delek Logistics Services Company terminated the operation and management services agreement in connection with the Tyler Acquisition. We and our subsidiaries paid Delek approximately $5.9 million pursuant to this agreement during the year ended December 31, 2013. Subsequent to the termination of the agreement, we continued to reimburse our general partner for the services it provides to us under our partnership agreement. We reimbursed our general partner $22.8 million, $12.3 million and $6.5 million pursuant to the partnership agreement during the years ended December 31, 2015, 2014 and 2013, respectively.

Other Agreements

Paline Pipeline System Capacity Reservation. Prior to the Partnership's acquisition of Paline Pipeline Company, LLC, Paline had entered into a contract with an unrelated third party for such company to exclusively use 100% of the southbound capacity of our Paline Pipeline. This agreement expired by its terms on December 31, 2014. During the year ended December 31, 2013, our customer did not pay 100% of the full monthly fee for the lease of capacity on the Paline Pipeline System. Pursuant to the Omnibus Agreement, Delek indemnified us $0.9 million during the year ended December 31, 2013 for lost service fees attributable to the failure of our customer to pay the full monthly fee pursuant to the agreement. We were not indemnified for lost service fees during the years ended December 31, 2015 and 2014, as we received the entire monthly amount payable to us from our customer during these periods.

Predecessors' Transactions

Related-party transactions of the Predecessors were settled through division equity. Revenues from affiliates consist of revenues from gathering, pipeline transportation, storage, wholesale marketing and products terminalling services to Delek and its affiliates based on regulated tariff rates or contractually based fees.

Costs related specifically to us have been identified and included in the accompanying consolidated statements of income and comprehensive income. Prior to the Acquisitions from Delek, we were not allocated certain corporate costs. These costs were primarily allocated based on a percentage of salaries expense and property, plant and equipment costs. In the opinion of management, the methods for allocating these costs are reasonable. It is not practicable to estimate the costs that would have been incurred by us if we had been operated on a stand-alone basis.

Summary of Transactions

Revenues from affiliates consist of revenues from gathering, pipeline transportation, storage, wholesale marketing and products terminalling services provided primarily to Delek and its affiliates based on regulated tariff rates or contractually based fees, as well as product sales to Alon USA Energy, Inc., an equity method investee of Delek. Affiliate operating expenses are primarily comprised of amounts we reimburse Delek, or our general partner, as the case may be, for the services provided to us under our partnership agreement. These expenses could also include reimbursement and indemnification amounts from Delek, as provided under the Third Restated Omnibus Agreement. Additionally, the Partnership is required to reimburse Delek for direct or allocated costs and expenses incurred by Delek on behalf of the Partnership and for charges Delek incurred for the management and operation of our logistics assets, including an annual fee for various centralized corporate services, which are included in general and administrative services. In addition to these transactions, we purchase finished products and bulk biofuels from Delek, the costs of which are included in cost of goods sold.

A summary of revenue and expense transactions with Delek and its affiliates, including expenses directly charged and allocated to our Predecessors, are as follows (in thousands):



	Year Ended December 31,
	2015		2014		2013
Revenues	$	152,564	$	114,583	$	78,173
Cost of Goods Sold	$	105,461	$	56,045	$	80,129
Operating and maintenance expenses⁽¹⁾	$	31,636	$	20,889	$	16,331
General and administrative expenses⁽²⁾	$	6,356	$	5,799	$	4,010

⁽¹⁾

Operating and maintenance expenses include costs allocated to our Predecessors for operating support provided by Delek, including certain labor related costs, property and liability insurance costs and certain other operating expenses. With respect to the Tyler Predecessor, the costs that were allocated to us by Delek were $1.4 million for the year ended December 31, 2013. With respect to the El Dorado Predecessor, the costs that were allocated to us by Delek were $0.4 million and $1.4 million for the years ended December 31, 2014 and 2013, respectively. With respect to the Logistics Assets, the costs that were allocated to us by Delek were $0.2 million, $0.7 million, and $0.3 million for the years ended December 31, 2015, 2014 and 2013, respectively.

⁽²⁾

General and administrative expenses include costs allocated to our Predecessors for general and administrative support provided by Delek, including services such as corporate management, risk management, accounting and human resources. With respect to the Tyler Predecessor, the costs that were allocated to us by Delek were $0.5 million for the year ended December 31, 2013. With respect to the El Dorado Predecessor, the costs that were allocated to us by Delek were $0.1 million and $0.7 million for the years ended December 31, 2014 and 2013, respectively. No costs were allocated to the Logistics Assets Predecessor by Delek for the years ended December 31, 2015, 2014 and 2013.

Quarterly Cash Distribution

Our common and general partner unitholders and the holders of IDRs are entitled to receive quarterly distributions of available cash as it is determined by the board of directors of our general partner in accordance with the terms and provisions of our partnership agreement. During the years ended December 31, 2015, 2014 and 2013, we paid quarterly cash distributions, of which $35.9 million and $28.1 million and $21.5 million respectively, were paid to Delek and our general partner. On January 25, 2016, our general partner's board of directors declared a quarterly cash distribution totaling $16.1 million, based on the available cash as of the date of determination for the end of the fourth quarter of 2015, which was paid on February 12, 2016 to unitholders of record on February 5, 2016. The distribution included $9.7 million, paid to both Delek and our general partner, including the distribution as holder of the IDRs.