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Related Party Transactions
 12 Months Ended
Dec. 31, 2020
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 (the "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. With the exception of the Big Spring T&D Agreement executed in March 2020, 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/OperationInitiation Date
Initial/Maximum Term (years) (1)
ServiceMinimum Throughput Commitment (bpd) Fee (/bbl)
El Dorado Assets and El Dorado Gathering System (2):
Crude Oil Pipelines (non-gathered)November 2012
5 / 15
Crude oil and refined products transportation
    46,000 (3)
$1.05 (4)
Refined Products PipelinesNovember 2012
5 / 15
40,000
$0.12
El Dorado Gathering SystemNovember 2012
5 / 15
Crude oil gathering
14,000
$2.83 (4)
East Texas Crude Logistics System (2):
Crude Oil PipelinesNovember 2012
5 / 15
Crude oil transportation and storage
35,000
$0.50 (5)
StorageNovember 2012
5 / 15
N/A
$309,892/month
East Texas MarketingNovember 2012
10 (6)
Marketing products for Tyler Refinery
50,000
$0.82 (6)
Big Sandy Terminal: (2)
Refined Products TransportationNovember 2012
5 / 15
Refined products transportation, dedicated terminalling services and storage for the Tyler Refinery
5,000
$0.62
TerminallingNovember 2012
5 / 15
5,000
$0.62
Storage November 2012
5 / 15
N/A
$61,923/month
Tyler Throughput and Tankage (2):
Refined Products Throughput July 2013
8 / 16
Dedicated Terminalling and storage
50,000
$0.38
Storage July 2013
8 / 16
N/A
$894,648/month
Memphis PipelineJune 1, 2018
5
Refined Products Transportation
11,000
$1.28
El Dorado Throughput and Tankage (2):
Refined Products Throughput February 2014
8 / 16
Dedicated terminalling and storage
11,000
$0.54
Storage February 2014
8 / 16
N/A
$1,400,478/month
El Dorado Assets Throughput:
Light Crude Throughput March 2015
9 / 15
Dedicated Offloading Services
N/A (7)
$1.08
Heavy Crude Throughput March 2015
9 / 15
Dedicated Offloading Services
N/A (7)
$2.43
Pipelines, Storage and Throughput Facilities Agreement (Big Spring Logistics Assets):
Crude Oil and Refined Products ThroughputMarch 1, 2018
10 / 15
Pipeline throughput
104,300
$0.05
Rail OffloadingMarch 1, 2018
10 / 15
Offloading services
4,500
$0.41
TerminallingMarch 1, 2018
10 / 15
Dedicated Terminalling
29,250
$0.68
StorageMarch 1, 2018
10 / 15
StorageNA
$1,411,406/month
Asphalt Services Agreement (Big Spring Logistics Assets):
Terminalling March 1, 2018
10 / 15
Dedicated Asphalt Terminalling and Storage
1,020 to 2,380 based on seasonality
$8.52
Storage March 1, 2018
10 / 15
N/A
$468,703/month
Marketing Agreement (Big Spring Logistics Assets):
Marketing ServicesMarch 1, 2018
10 / 15
Dedicated Marketing and Selling
65,000
$0.51 - $0.73
Throughput and Deficiency Agreement (Big Spring Gathering Assets)
Gathering SystemMarch 31, 2020
10 / 20
Gathering and Transportation Services
120,000
$0.70
Re-delivery SystemMarch 30, 2020
10 / 20
50,000
$0.25
Pipelines, Throughput and Offloading Facilities Agreement (Big Spring Logistics Assets)
Fintex / Magellen PipelineApril 1, 2020
2
Refined Products
20,000
$0.63
Crude Oil OffloadingJanuary 1, 2020
2
Crude Oil Offloading
15,120
$0.90
StorageApril 1, 2020
2
StorageN/A
$240,000/month
LPG RackJanuary 1, 2020
2
Truck Unloading Facility
4,500
$5.00
Transportation Services Agreement
Trucking ServicesMay 1, 2020
10 / 14
Transportation ServicesN/A
$39,000,000/Minimum Annual Revenue Commitment
(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 remains unchanged.
(3) Excludes volumes gathered on the El Dorado Gathering System (the "El Dorado Gathering System").
(4) Volumes gathered on the El Dorado Gathering System will not be subject to an additional fee for transportation on our El Dorado Assets (the "El Dorado Assets") to the El Dorado Refinery.
(5) For any volumes in excess of 50,000 bpd, the throughput fee will be $0.74/bbl.
(6) For any volumes in excess of 50,000 bpd, the throughput fee will be $0.78/bbl. Following the primary term, the marketing agreement automatically renews for a 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) The throughput agreement provides for a minimum throughput fee of $1.6 million per quarter for throughput of a combination of light and heavy crude.
Pursuant to financing arrangements between Delek Holdings and its subsidiaries, Lion Oil Company, LLC, Lion Oil Trading & Transportation, LLC and Alon USA LP, (all hereinafter referred to together as "Delek Holdings"), to which we are not a party, and J. Aron & Company ("J. Aron"), Delek Holdings assigned to J. Aron certain of its rights under our specific terminalling agreements, pipelines, storage and throughput facilities agreements, and asphalt services agreements. Accordingly, even though this is effectively a financing arrangement for Delek Holdings whereby J. Aron sells the product back to Delek Holdings, J. Aron is technically our primary customer under each of these agreements. J. Aron retains these storage and transportation rights for the term of the financing arrangement, which currently runs through December 30, 2022, with J. Aron having the sole discretion to further extend to May 30, 2025, by giving at least six months prior notice to the maturity date. 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 Delek Holding to meet certain throughput minimum volumes under our agreements with respect to the transportation, gathering and storage of crude oil, intermediate and refined products through our facilities, but J. Aron's throughput is credited toward minimum throughput commitments of Delek Holdings. Accordingly, Delek Holdings is 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 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, LLC and certain of the Partnership’s and Delek Holdings' other subsidiaries on November 7, 2012, which has been amended from time to time in connection with acquisitions from Delek Holdings (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, and obligates us to pay an annual fee of $4.7 million to Delek Holdings for its provision of centralized corporate services to the Partnership.
Pursuant to the terms of the Omnibus Agreement, we were reimbursed by Delek Holdings for certain capital expenditures in the amount of $0.6 million, $3.7 million and $5.0 million during the years ended December 31, 2020, 2019 and 2018, 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, 2020 and 2019, we have recorded a nominal receivable from related parties for these matters for which we expect to be reimbursed. These reimbursements are recorded as reductions
to operating expenses. We were reimbursed $0.1 million, $6.3 million and $8.2 million for these matters during the year ended December 31, 2020, 2019 and 2018, 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 $29.4 million, $25.0 million and $21.1 million pursuant to the Partnership Agreement during the years ended December 31, 2020, 2019 and 2018, respectively. These amounts are included in operating expenses in the accompanying consolidated statements of income and comprehensive income.
Other Transactions
The Partnership manages a long-term capital project on behalf of Delek Holdings pursuant to a construction management and operating agreement (the "DPG Management Agreement") for the construction of a 250-mile gathering system in the Permian Basin. The majority of the gathering system has been constructed, however, additional costs pertaining to a pipeline connection that was not acquired by the Partnership continue to be incurred and are still subject to the terms of the DPG Management Agreement. The Partnership is also considered the operator for the project and is responsible for oversight of the project design, procurement and construction of project segments and provides 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 were $2.0 million and $6.1 million for the years ended December 31, 2020 and 2019, respectively, which are recorded in affiliate revenue in our consolidated statements of income. 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.
Unregistered Sale of Equity Securities
In connection with the Partnership's issuance of the common limited partner units under the Big Spring Gathering Assets Acquisition and in accordance with the Partnership's First Amended and Restated Agreement of Limited Partnership, as amended (the "Partnership Agreement"), the Partnership issued general partner units to the general partner in an amount necessary to maintain its 2% general partner interest as defined in the Partnership Agreement. The sale and issuance of the Additional Units and such general partner units in connection with the Big Spring Gathering Assets Acquisition is exempt from registration under Section 4(a)(2) of the Securities Act of 1933, as amended.
Additionally, in March 2020, Delek Marketing & Supply, LLC ("Delek Marketing") repurchased 451,822 common limited partner units from an unaffiliated investor pursuant to a Common Unit Purchase Agreement between Delek Marketing and such investor. The purchase price of the units amounted to approximately $5.0 million. As a result of the transaction, Delek Holdings' ownership in our common limited partner units increased to 64.5% from 62.6%. Delek Holdings' ownership in our common limited partner units was further increased to 70.5% as a result of the issuance of 5.0 million Additional Units in connection with the Big Spring Gathering Assets Acquisition described above.
In August 2020, Delek Holdings ownership in our common limited partner units was further increased to approximately 80.0% in connection with the IDR Restructuring Transaction, when the Partnership issued 14.0 million of the Partnership's newly issued common limited partner units to Delek Holdings.
Amendment No. 2 to the First Amended and Restated Agreement of Limited Partnership of Delek Logistics Partners, LP
On March 31, 2020, in connection with the completion of the Big Spring Gathering Assets Acquisition, the Board of the general partner adopted Amendment No. 2 (“Amendment No. 2”) to the Partnership Agreement, effective upon adoption. Amendment No. 2 amended the Partnership Agreement to provide for a waiver of distributions in respect of the Incentive Distribution Rights ("IDRs") for General Partner Additional Units ("GP Additional Units") associated with the 5.0 million Additional Units for at least two years, through at least the distribution for the quarter ending March 31, 2022 (the “IDR Waiver”). The IDR Waiver essentially reduced the distribution made to the holders of the IDRs during this period, as the holders would not receive a share of the distribution made on the GP Additional Units. Subsequently, the IDRs were eliminated in the IDR Restructuring Transaction on August 13, 2020.
Conversion of GP Economic Interest and Elimination of IDRs
On August 13, 2020, we closed the transaction contemplated by a definitive exchange agreement with Delek Holdings to eliminate all of the IDRs held by the general partner and convert the 2% general partner economic interest into a non-economic general partner interest, all in exchange for 14.0 million of the Partnership's newly issued common limited partner units and $45.0 million cash. Contemporaneously, Delek Holdings purchased a 5.2% ownership interest in our general partner from certain affiliates who were also members of our general partner's management and board of directors. Delek Holdings now owns 100% interest in the general partner and owns approximately
34.7 million common limited partner units, representing approximately 80% of the Partnership's outstanding common limited partner units. To implement the transaction, our Partnership Agreement was amended and restated.
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 expenses. 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,
202020192018
Revenues$382,666 $261,014 $240,809 
Purchases from Affiliates$205,581 $285,539 $349,089 
Operating and maintenance expenses
$43,985 $49,904 $36,182 
General and administrative expenses
$12,557 $7,977 $8,250 
Quarterly Cash Distribution
Prior to August 13, 2020, our common and general partner unitholders and the holders of IDRs were entitled to receive quarterly distributions of available cash as it was determined by the board of directors of our general partner in accordance with the terms and provisions of our Partnership Agreement. Pursuant to the IDR Restructuring Transaction on August 13, 2020, the general partner will no longer receive any cash distributions. During the years ended December 31, 2020, 2019 and 2018, we paid quarterly cash distributions of $136.8 million, $113.7 million and $97.7 million, respectively, of which $105.3 million, $83.0 million and $70.1 million, respectively, were paid to Delek Holdings and our general partner. On January 22, 2021, our board of directors declared a quarterly cash distribution totaling $39.5 million based on the available cash as of the date of determination for the end of the fourth quarter of 2020. The distribution was paid on February 9, 2021 to unitholders of record on February 2, 2021, of which $31.6 million was paid to Delek Holdings