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Related Party Transactions | 12 Months Ended
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Dec. 31, 2018
Related Party Transactions [Abstract] |
Related Party Transactions | Related Party Transactions Commercial Agreements The Partnership has a number of long-term, fee-based commercial agreements with Delek Holdings under which we provide various services, including crude oil gathering and crude oil, intermediate and refined products transportation and storage services, and marketing, terminalling and offloading services to Delek Holdings. Most of these agreements have an initial term ranging from five to ten years, which may be extended for various renewal terms at the option of Delek Holdings. In November 2017, Delek Holdings opted to renew certain of these agreements for subsequent five-year terms expiring in November 2022. In the case of our marketing agreement with Delek Holdings in respect to the Tyler Refinery, the initial term has been extended through 2026. The current term of certain of our agreements with Delek Holdings were required to be further extended pursuant to the amended and restated DKL Credit Facility (as defined in Note 11), which extensions were effective in the fourth quarter of 2018. The fees under each agreement are payable to us monthly by Delek Holdings or certain third parties to whom Delek Holdings has assigned certain of its rights and are generally subject to increase or decrease on July 1 of each year, by the amount of any change in various inflation-based indices, including the Federal Energy Regulatory Commission ("FERC") oil pipeline index or various iterations of the consumer price index ("CPI") and the producer price index ("PPI"); provided, however, that in no event will the fees be adjusted below the amount initially set forth in the applicable agreement. In most circumstances, if Delek Holdings or the applicable third party assignee fails to meet or exceed the minimum volume or throughput commitment during any calendar quarter, Delek Holdings, 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, subject to certain exceptions as specified in the applicable agreement. Carry-over of any volumes or revenue in excess of such commitment to any subsequent quarter is not permitted. Under each of these agreements, we are required to maintain the capabilities of our pipelines and terminals, such that Delek Holdings may throughput and/or store, as the case may be, specified volumes of crude oil, intermediate and refined products. To the extent that Delek Holdings is prevented by our failure to maintain such capacities from throughputting or storing such specified volumes for more than 30 days per year, Delek Holdings' 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. Our material commercial agreements with Delek Holdings 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 (2): |  |  |  |  |  |  |  |  |  |
Crude Oil Pipelines (non-gathered) |  | November 2012 |  | 5 / 15 |  | Crude oil and refined products transportation |  | 46,000 (3) |  | $0.99 (4)
Refined Products Pipelines |  | November 2012 |  | 5 / 15 |  |  |  | 40,000 |  | $0.12
SALA Gathering System |  | November 2012 |  | 5 / 15 |  | Crude oil gathering |  | 14,000 |  | $2.66 (4)
East Texas Crude Logistics System (2): |  |  |  |  |  |  |  |  |  |
Crude Oil Pipelines |  | November 2012 |  | 5 / 15 |  | Crude oil transportation and storage |  | 35,000 |  | $0.47 (5)
Storage |  | November 2012 |  | 5 / 15 |  |  |  | N/A |  | $291,220/month
East Texas Marketing |  | November 2012 |  | 10 (6) |  | Marketing products for Tyler Refinery |  | 50,000 |  | $0.80 (6)
Big Sandy Terminal: (2) (7) |  |  |  |  |  |  |  |  |  |
Refined Products Transportation |  | November 2012 |  | 5 / 15 |  | Refined products transportation, dedicated terminalling services and storage for the Tyler Refinery |  | 5,000 |  | $0.58
Terminalling |  | November 2012 |  | 5 / 15 |  |  |  | 5,000 |  | $0.58
Storage |  | November 2012 |  | 5 / 15 |  |  |  | N/A |  | $58,192/month
Tyler Throughput and Tankage (2): |  |  |  |  |  |  |  |  |  |
Refined Products Throughput |  | July 2013 |  | 8/ 16 |  | Dedicated Terminalling and storage |  | 50,000 |  | $0.37
Storage |  | July 2013 |  | 8/ 16 |  |  |  | N/A |  | $871,336/month
Memphis Pipeline |  | October 2013 |  | 5 |  | Refined Products Transportation |  | 10,959 |  | $1.41
El Dorado Throughput and Tankage (2): |  |  |  |  |  |  |  |  |  |
Refined Products Throughput |  | February 2014 |  | 8/ 16 |  | Dedicated terminalling and storage |  | 11,000 |  | $0.53
Storage |  | February 2014 |  | 8/ 16 |  |  |  | N/A |  | $1,363,985/month
El Dorado Assets Throughput: |  |  |  |  |  |  |  |  |  |
Light Crude Throughput |  | March 2015 |  | 9/15 |  | Dedicated Offloading Services |  | N/A (8) |  | $1.05
Heavy Crude Throughput |  | March 2015 |  | 9/15 |  | Dedicated Offloading Services |  | N/A (8) |  | $2.36
Pipelines, Storage and Throughput Facilities Agreement (Big Spring): |  |  |  |  |  |  |  |  |  |
Crude Oil and Refined Products Throughput |  | March 1, 2018 |  | 10/15 |  | Pipeline throughput |  | 104,300 |  | 0.05
Rail Offloading |  | March 1, 2018 |  | 10/15 |  | Offloading services |  | 4,500 |  | 0.4
Terminalling |  | March 1, 2018 |  | 10/15 |  | Dedicated Terminalling |  | 29,250 |  | 0.66
Storage |  | March 1, 2018 |  | 10/15 |  | Storage |  | NA |  | $1,374,630/month
Asset/Operation |  | Initiation Date |  | Initial/Maximum Term (years) (1) |  | Service |  | Minimum Throughput Commitment (bpd) |  | Fee (/bbl)
Asphalt Services Agreement (Big Spring): |  |  |  |  |  |  |  |  |  |
Terminalling |  | March 1, 2018 |  | 10/15 |  | Dedicated Asphalt Terminalling and Storage |  | 1,020 to 2,380 based on seasonality |  | 8.3
Storage |  | March 1, 2018 |  | 10/15 |  |  | N/A |  | $456,490/month
Marketing Agreement (Big Spring): |  |  |  |  |  |  |  |  |  |
Marketing Services |  | March 1, 2018 |  | 10/15 |  | Dedicated Marketing and Selling |  | 65,000 |  | $0.50 - $0.71
(1) Maximum term gives effect to the extension of the commercial agreement pursuant to the terms thereof. (2) The current term of the agreement was extended through March 31, 2024 in connection with the amendment and restatement of the DKL Credit Facility (as defined in Note 11). While the current terms of the agreement were extended, the upcoming renewal terms were reduced. Therefore, the overall duration of the maximum term above remains unchanged. (3) Excludes volumes gathered on the SALA Gathering System. (4) 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. (5) For any volumes in excess of 50,000 bpd, the throughput fee will be $0.700/bbl. (6) For any volumes in excess of 50,000 bpd, the throughput fee will be $0.750/bbl. Following the primary term, the marketing agreement automatically renews for successive one-year term, unless either party provides notice of non-renewal 10 months prior to the expiration of the then-current term. The initial primary term for the marketing agreement has been extended through 2027. (7) 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 Holdings 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 November 2012. (8) 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 Holdings and Lion Oil Company ("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 terminal and tank assets at and adjacent to the El Dorado Refinery, 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 terminal and tank assets at and adjacent to the El Dorado Refinery, with Lion Oil acting as J. Aron's agent for scheduling purposes. Pursuant to a similar arrangement with Delek Holdings and Alon USA, LP, hereinafter referred to as "Big Spring Refining," J. Aron acquires and holds either title to or a lien on a portion of the crude oil, intermediate and refined products shipped on pipelines or stored at the terminal and storage tanks acquired in the Big Spring Logistic Assets Acquisition. Under (i) our pipelines, storage and throughput facilities agreement with Big Spring Refining relating to certain storage tanks, pipelines and a terminal in Duncan, Oklahoma and (ii) our asphalt services agreement with Big Spring Refining relating to asphalt storage and terminalling near the Big Spring Refinery, Big Spring Refining 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 storage and terminalling assets at or adjacent to the Big Spring Refinery, with Big Spring Refining acting as J. Aron's agent for scheduling purposes. Accordingly, even though this is effectively a financing arrangement for Delek Holdings and its subsidiaries whereby J. Aron sells the product back to Delek Holdings and its subsidiaries, J. Aron is technically our primary customer under each of these agreements. J. Aron retains these storage and transportation rights for the term of its arrangement with Lion Oil, which currently runs through April 30, 2020, and for the term of its arrangement with Big Spring Refining, which currently runs through May 31, 2021, unless terminated earlier pursuant to the terms of the arrangement. J. Aron pays us for the transportation, throughput and storage services we provide to it. The rights assigned to J. Aron do not alter the obligations of Lion Oil or Big Spring Refining 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 is credited toward minimum throughput commitments of Lion Oil and Big Spring. Accordingly, Lion Oil and Big Spring are 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. Big Spring Pipeline, Storage and Throughput Facilities Agreement In connection with the Big Spring Logistic Assets Acquisition, Alon USA, LP, a Texas limited partnership and an indirect, wholly-owned subsidiary of Delek Holdings (“Alon USA, LP”), and DKL Big Spring, LLC, a Delaware limited liability company and a wholly-owned subsidiary of the Partnership, entered into the Pipelines, Storage and Throughput Facilities Agreement (Big Spring Refinery Logistic Assets and Duncan Terminal) (the “Logistics Agreement”). Under the Logistics Agreement, the Partnership will provide storage and throughput services at certain of the Big Spring Logistic Assets for Alon USA, LP. The Partnership will act as bailee of crude oil and refined petroleum products owned by Alon USA, LP or its assignee held in such assets owned and operated by the Partnership. The Partnership will charge fees to Alon USA, LP based on throughput volumes received or delivered ranging from $0.05 to $0.66 per barrel and related storage fees depending on the type of service or product. The fees under the Logistics Agreement may be adjusted annually for inflation. The initial term of the Logistics Agreement is ten years; the Partnership has a one-time option to extend the Logistics Agreement for up to five additional years; and the Logistics Agreement will continue on a year-to-year basis following such renewal term unless terminated by either party. Big Spring Asphalt Services Agreement In connection with the Big Spring Logistic Assets Acquisition, Alon USA, LP and the Partnership entered into the Big Spring Asphalt Services Agreement (the “Asphalt Services Agreement”). Under the Asphalt Services Agreement, the Partnership will provide asphalt storage and handling services at certain of the Big Spring Logistic Assets (such assets, the “Asphalt Facilities”). The Partnership will provide services to Alon USA, LP at the Asphalt Facilities and serve as bailee of all raw materials, and other hydrocarbons, used to make asphalt products owned by Alon USA, LP or its assignee held in the Asphalt Facilities. The Partnership will charge fees to Alon USA, LP based on throughput volumes delivered of $8.30 per barrel and related storage fees. The fees under the Asphalt Services Agreement may be adjusted annually for inflation. The initial term of the Asphalt Services Agreement is ten years; the Partnership has a one-time option to extend the Asphalt Services Agreement for up to five additional years; and the Asphalt Services Agreement will continue on a year-to-year basis following such renewal term unless terminated by either party. Big Spring Marketing Agreement Concurrent with the Big Spring Logistic Assets Acquisition, Alon USA, LP and the Partnership entered into the Marketing Agreement (the “Marketing Agreement”). Under the Marketing Agreement, the Partnership will provide Alon USA, LP with services for the marketing and selling of certain refined petroleum products that are produced or sold from the Big Spring Refinery. The Partnership will charge Alon USA, LP fees for such marketing and selling services of $0.50 to $0.71 per barrel depending on the type of product. The fees under the Marketing Agreement may be adjusted annually for inflation. The initial term of the Marketing Agreement is ten years; Alon USA, LP has a one-time option to extend the Marketing Agreement for up to five additional years; and the Marketing Agreement will continue on a year-to-year basis following such renewal term unless terminated by either party. Other Agreements with Delek Holdings In addition to the commercial agreements described above, the Partnership has entered into the following agreements with Delek Holdings: Omnibus Agreement The Partnership entered into an omnibus agreement with Delek Holdings, our general partner, Delek Logistics Operating, LLC, Lion Oil Company and certain of the Partnership’s and Delek Holdings' other subsidiaries on November 7, 2012, which was subsequently amended and restated on July 26, 2013, February 10, 2014, March 31, 2015 and August 3, 2015 and was further amended effective March 1, 2018 in connection with the Big Spring Logistic Assets Acquisition (collectively, as amended, the "Omnibus Agreement"). The Omnibus Agreement governs the provision of certain operational services and reimbursement obligations, among other matters, between the Partnership and Delek Holdings. In conjunction with the March 1, 2018 amendment, our obligation to pay an annual fee to Delek Holdings for its provision of centralized corporate services to the Partnership was increased to $3.9 million. Pursuant to the terms of the Omnibus Agreement, we were reimbursed by Delek Holdings for certain capital expenditures in the amount of $5.0 million, $4.3 million and $1.9 million, during the years ended December 31, 2018, 2017 and 2016, respectively. These amounts are recorded in other long-term liabilities and are amortized to revenue over the life of the underlying revenue agreement corresponding to the asset. Additionally, we are reimbursed or indemnified, as the case may be, for costs incurred in excess of certain amounts related to certain asset failures, pursuant to the terms of the Omnibus Agreement. As of December 31, 2018, we have recorded a receivable from related parties of $1.6 million for these matters for which we expect to be reimbursed, which reimbursements are recorded as reductions to operating expense. We were reimbursed $8.2 million, $0.3 million and $1.2 million for these matters during the year ended December 31, 2018 2017 and 2016, respectively. Other Agreements 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, which include certain labor related costs. We and our subsidiaries paid Delek Holdings approximately $21.1 million, $18.8 million and $15.7 million pursuant to the Partnership Agreement during the years ended December 31, 2018, 2017 and 2016, respectively. These amounts are included in operating expenses in the accompanying consolidated statements of income and comprehensive income. Other Transactions The Partnership is currently managing a long-term capital project on behalf of Delek Holdings pursuant to a construction management and operating services agreement (the "DPG Management Agreement") for the construction of a 250-mile gathering system in the Permian Basin (the "Delek Permian Gathering Project"). The Partnership is also considered the operator for the project and will oversee functions such as oversight of project design, procurement and construction of project segments and provide other related services. Pursuant to the terms of the DPG Management Agreement, the Partnership receives a monthly operating services fee and a construction services fee, which includes the Partnership's direct costs of managing the project plus an additional percentage fee of the construction costs of each project segment. The agreement extends through December 2022. Total fees paid to the Partnership for the year ended December 31, 2018 were $4.8 million. Additionally, the Partnership incurs the costs in connection with the construction of the assets and is subsequently reimbursed by Delek Holdings. Amounts reimbursable by Delek Holdings are recorded in accounts receivable from related parties. Summary of Transactions Revenues from affiliates consist primarily of revenues from gathering, transportation, storage, offloading, Renewable Identification Numbers, wholesale marketing and products terminalling services provided primarily to Delek Holdings based on regulated tariff rates or contractually based fees and product sales. Affiliate operating expenses are primarily comprised of amounts we reimburse Delek Holdings, or our general partner, as the case may be, for the services provided to us under the Partnership Agreement. These expenses could also include reimbursement and indemnification amounts from Delek Holdings, as provided under the Omnibus Agreement. Additionally, the Partnership is required to reimburse Delek Holdings for direct or allocated costs and expenses incurred by Delek Holdings on behalf of the Partnership and for charges Delek Holdings 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 refined products and bulk biofuels from Delek Holdings, the costs of which are included in cost of materials and other. A summary of revenue, purchases from affiliates and expense transactions with Delek Holdings and its affiliates are as follows (in thousands):
|  | Year Ended December 31,
|  | 2018 |  | 2017 |  | 2016
Revenues |  | $ | 240,809 |  |  | $ | 156,280 |  |  | $ | 149,564 |
Purchases from Affiliates |  | $ | 349,089 |  |  | $ | 54,982 |  |  | $ | 32,514 |
Operating and maintenance expenses |  | $ | 36,182 |  |  | $ | 29,483 |  |  | $ | 27,668 |
General and administrative expenses |  | $ | 8,250 |  |  | $ | 7,492 |  |  | $ | 6,254 |
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, 2018, 2017 and 2016, we paid quarterly cash distributions of $101.9 million, $87.9 million and $75.0 million, respectively, of which $70.1 million, $60.1 million and $47.0 million, respectively, were paid to Delek Holdings and our general partner. On January 24, 2019, our general partner's board of directors declared a quarterly cash distribution totaling $26.9 million based on the available cash as of the date of determination for the end of the fourth quarter of 2018, which was paid on February 12, 2019 to unitholders of record on February 4, 2019. The distribution included $19.6 million paid to both Delek Holdings and our general partner, including the distribution as holder of the IDRs.

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 850 -URI http://asc.fasb.org/topic&trid=2122745 + Details
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