RELATED-PARTY TRANSACTIONS

AFFILIATE AGREEMENTS

The Partnership has various long-term, fee-based commercial agreements with Tesoro, under which we provide pipeline transportation, trucking, terminal distribution and storage services to Tesoro. Tesoro typically commits to provide us with minimum monthly throughput volumes of crude oil and refined products. For the natural gas liquids that we handle under keep-whole agreements, the Partnership has a fee-based processing agreement with Tesoro which minimizes the impact of commodity price movements during the annual period subsequent to renegotiation of terms and pricing each year.

In addition, we have agreements for the provision of various general and administrative services by Tesoro. Under our partnership agreement, we are required to reimburse TLGP and its affiliates for all costs and expenses that they incur on our behalf for managing and controlling our business and operations. Except to the extent specified under our amended omnibus agreement (the “Amended Omnibus Agreement”) or our amended secondment agreement (the “Amended Secondment Agreement”), TLGP determines the amount of these expenses. The Amended Omnibus Agreement and the Amended Secondment Agreement were amended and restated in connection with the Alaska Storage and Terminalling Assets purchase. Under the terms of the Amended Omnibus Agreement as of March 31, 2017, we are required to pay Tesoro an annual corporate services fee of $11 million for the provision of various centralized corporate services, including executive management, legal, accounting, treasury, human resources, health, safety and environmental, information technology, certain insurance coverage, administration and other corporate services. Tesoro charged the Partnership $5 million pursuant to the Amended Secondment Agreement each of the three months ended March 31, 2017 and 2016. Additionally, pursuant to the Amended Omnibus Agreement and Amended Secondment Agreement, we reimburse Tesoro for any direct costs actually incurred by Tesoro in providing other operational services with respect to certain of our other assets and operations.

SUMMARY OF AFFILIATE TRANSACTIONS

SUMMARY OF REVENUE AND EXPENSE TRANSACTIONS WITH TESORO, INCLUDING PREDECESSORS (in millions)



	Three Months Ended March 31,
	2017		2016
Revenues (a)	$	203	$	169
Operating expenses (b)	39		35
General and administrative expenses	20		17


(a)	Tesoro accounted for 48% and 56% of our total revenues for the three months ended March 31, 2017 and 2016, respectively.


(b)	Includes imbalance settlement gains of $3 million and $1 million for the three months ended March 31, 2017 and 2016, respectively. Also includes reimbursements from Tesoro pursuant predominantly to the Amended Omnibus Agreement and the Carson Assets Indemnity Agreement of $2 million and $6 million for the three months ended March 31, 2017 and 2016, respectively.

PREDECESSOR TRANSACTIONS. Related-party transactions of our Predecessors were settled through equity. Our Predecessors did not record revenue for transactions with Tesoro in the Terminalling and Transportation segment.

DISTRIBUTIONS. In accordance with our partnership agreement, the unitholders of our common and general partner interests are entitled to receive quarterly distributions of available cash. During the three months ended March 31, 2017, we paid quarterly cash distributions of $77 million to Tesoro and TLGP, including incentive distribution rights (“IDRs”). On April 19, 2017, we declared a quarterly cash distribution of $0.94 per unit, which will be paid on May 15, 2017. The distribution will include payments of $71 million to Tesoro and TLGP, including IDRs. In connection with the North Dakota Gathering and Processing Assets acquisition, our general partner agreed to reduce its quarterly distributions with respect to incentive distribution rights by $12.5 million for each quarter in 2017 and 2018, including the three months ended March 31, 2017.