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Related Party Transactions | 9 Months Ended
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Sep. 30, 2021
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 with respect to the Tyler Refinery, the initial term was extended through 2026. Effective fourth quarter of 2018, the term of certain of our agreements with Delek Holdings were further extended pursuant to the requirements of the amended and restated DKL Credit Facility (as defined in Note 7). 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. 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 to throughput or from 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. See our Annual Report on Form 10-K for a more complete description of our material commercial agreements and other agreements with Delek Holdings. 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, Delek Logistics Operating, LLC, Lion Oil Company, LLC (formerly known as Lion Oil Company) 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 are reimbursed by Delek Holdings for certain capital expenditures. There were no reimbursements by Delek Holdings during the three and nine months ended September 30, 2021. During the three and nine months ended September 30, 2020, we were reimbursed by Delek Holdings for certain capital expenditures of a nominal amount and $0.6 million, 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 Agreeme nt. As of September 30, 2021, there was no receivable from related parties for these matters. These reimbursements are recorded as reductions to operating expense. We were reimbursed nominal amounts for these matters in each of the three and nine month periods ended September 30, 2021 and 2020. Other Transactions The Partnership manages long-term capital projects on behalf of Delek Holdings pursuant to a construction management and operating agreement (the "DPG Management Agreement") for the construction of gathering systems in the Permian Basin. The majority of the gathering systems have 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 $0.4 million and $1.2 million for the three and nine months ended September 30, 2021, respectively, and $0.4 million and $1.6 million for the three and nine months ended September 30, 2020, respectively, which are recorded in affiliate revenue in our condensed 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 "Prior Partnership Agreement", as amended and restated by the Partnership's Second Amended and Restated Agreement of Limited Partnership (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 Prior Partnership Agreement. The sale and issuance of the Additional Units (as defined below) 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"), a wholly owned subsidiary of Delek Holdings, 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 outstanding 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 common limited partner units (the “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, where 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 directors of the general partner adopted Amendment No. 2 (“Amendment No. 2”) to the Prior Partnership Agreement, effective upon adoption. Amendment No. 2 amended the Prior Partnership Agreement to provide for a waiver of distributions in respect of the 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. 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 a 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 Prior Partnership Agreement was amended and restated. Summary of Transactions Revenues from affiliates consist primarily of revenues from gathering, transportation, storage, offloading, Renewable Identification Numbers ("RINs"), 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):
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2021 |  | 2020 |  | 2021 |  | 2020
Revenues | $ | 123,519 |  |  | $ | 95,410 |  |  | $ | 308,435 |  |  | $ | 289,739 |
Purchases from Affiliates | $ | 89,852 |  |  | $ | 45,186 |  |  | $ | 229,810 |  |  | $ | 155,679 |
Operating and maintenance expenses | $ | 10,656 |  |  | $ | 10,330 |  |  | $ | 30,217 |  |  | $ | 33,397 |
General and administrative expenses | $ | 2,681 |  |  | $ | 3,250 |  |  | $ | 6,794 |  |  | $ | 9,322 |
Quarterly Cash Distributions 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 determined by the board of directors of our general partner in accordance with the terms and provisions of our Prior Partnership Agreement. Pursuant to the IDR Restructuring Transaction on August 13, 2020, the general partner will no longer receive any cash distributions. In February, May and August 2021, we paid quarterly cash distributions of $39.5 million, $40.0 million and $40.8 million, respectively, of which $31.6 million, $32.0 million and $32.7 million, respectively, were paid to Delek Holdings. In February, May and August 2020, we paid quarterly cash distributions of $30.6 million, $30.9 million and $36.0 million, respectively, of which $22.6 million, $23.2 million and $28.1 million, respectively, were paid to Delek Holdings and our general partner. On October 26, 2021, our board of directors declared a quarterly cash distribution totaling $41.3 million, based on the available cash as of the date of determination, for the end of the third quarter of 2021, payable on November 10, 2021, of which $33.0 million is expected to be paid to Delek Holdings.

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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/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 850 -SubTopic 10 -Section 50 -Paragraph 1 -Subparagraph (d) -URI http://asc.fasb.org/extlink&oid=6457730&loc=d3e39549-107864 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 850 -SubTopic 10 -Section 50 -Paragraph 1 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=6457730&loc=d3e39549-107864 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 850 -SubTopic 10 -Section 50 -Paragraph 1 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6457730&loc=d3e39549-107864 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 850 -URI http://asc.fasb.org/topic&trid=2122745 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 850 -SubTopic 10 -Section 50 -Paragraph 6 -URI http://asc.fasb.org/extlink&oid=6457730&loc=d3e39691-107864 + Details
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