Organization and Description of Business

Organization

Unless indicated otherwise, the terms “our,” “we,” “us” and similar language refer to Magellan Midstream Partners, L.P. together with its subsidiaries. We are a Delaware limited partnership and our limited partner units trade on the New York Stock Exchange under the ticker symbol “MMP.” Magellan GP, LLC, a wholly owned Delaware limited liability company, serves as our general partner.

We operate and report in three business segments: refined products, crude oil and marine storage. Our reportable segments offer different products and services and are managed separately because each requires different marketing strategies and business knowledge.

Description of Business

Refined Products. Our refined products segment includes the operations of our refined products pipeline, our independent terminals, our ammonia pipeline as well as our blending and fractionation activities, each of which is briefly described below:

•

Our refined products pipeline consists of approximately 9,500 miles of pipeline and 53 terminals that provide transportation, storage and distribution services. Our refined products pipeline covers a 15-state area from the Gulf Coast across the central U.S. The products transported on our pipeline are primarily gasoline, distillates, aviation fuels and liquefied petroleum gases. Product originates on our pipeline from direct connections to refineries, at our terminals and through interconnections with other interstate pipelines for transportation and ultimate distribution to retail gasoline stations, truck stops, railroads, airports and other end users. Our refined products pipeline also generates fees from ancillary services including ethanol and biodiesel loading and unloading, additive injection, custom blending, terminalling, laboratory testing and data services. Our blending activities involve purchasing liquefied petroleum gases and blending them into gasoline, which creates gasoline available for us to sell. Our fractionation activities include two fractionators along our pipeline system that separate transmix, an unusable mixture of various petroleum products, into gasoline and diesel fuel. We generate transmix from the commingling of products between different product batches during the transportation process on our pipelines. We also purchase transmix from third parties;


•	Our 27 independent terminals are part of a distribution network located principally throughout the southeastern U.S. We earn revenue at our independent terminals primarily from fees we charge based on the volumes of refined products distributed from these locations and from ancillary services such as additive injections and ethanol blending; and


•	Our ammonia pipeline consists of 1,100 miles of pipeline that transports and distributes ammonia from production facilities in Texas and Oklahoma to various distribution points in the Midwest for use as an agricultural fertilizer. We generate revenue principally from volume-based fees for the transportation of ammonia on our pipeline system.

Crude Oil. Our crude oil segment is comprised of approximately 1,100 miles of crude oil pipelines and storage facilities with an aggregate storage capacity of approximately 18 million barrels, of which 12 million is used for leased storage. A brief description of these operations is as follows:


•	Our Longhorn crude oil pipeline consists of approximately 450 miles of pipeline which originates from Crane, Texas for deliveries to Houston-area refineries and pipelines;


•	Our Houston-area crude oil distribution system originates at our East Houston, Texas terminal and other points in the Houston area for delivery to nearby refineries and other pipeline systems;


•	Our terminal in Cushing, Oklahoma, one of the largest crude oil trading hubs in the U.S., consists of approximately 10 million barrels used for leased storage. This terminal principally serves refiners, marketers and traders. We earn revenue primarily from leasing tanks as well as from throughput fees;


•	Our terminal at East Houston, Texas includes approximately one million barrels of crude oil storage used for leased storage and our terminal at Corpus Christi, Texas includes approximately one million barrels of condensate storage used for leased storage; and


•	We own approximately 300 miles of pipeline in Kansas and Oklahoma currently used for crude oil service. A majority of these pipelines are leased to third parties, and we earn revenue from these pipeline segments for capacity reserved even if not used by the customers.

Our crude oil segment also includes ownership interests in the following joint ventures:


•	a 50% interest in Osage Pipe Line Company LLC (“Osage”), which owns a 135-mile pipeline that transports crude oil from Cushing, Oklahoma to refineries in El Dorado, Kansas;


•	a 50% interest in Double Eagle Pipeline LLC (“Double Eagle”), which transports condensate from the Eagle Ford shale formation in South Texas via a 195-mile pipeline to our terminal in Corpus Christi; and


•	a 50% interest in BridgeTex Pipeline Company, LLC (“BridgeTex”), which is constructing 450 miles of pipeline and related infrastructure that is being constructed to transport crude oil from Colorado City, Texas for delivery to the Houston and Texas City, Texas refineries. This pipeline is expected to begin service in mid-2014.

Marine Storage. Our marine storage segment is comprised of storage terminals, which store and distribute refined products. Our storage terminals are comprised of five facilities that have marine access in New Haven, Connecticut, Wilmington, Delaware, Marrero, Louisiana, and Corpus Christi and Galena Park, Texas that are located near major refining hubs along the U.S. Gulf and East Coasts. Our marine storage terminals have an aggregate storage capacity of approximately 26 million barrels of wholly-owned storage. Because the rates charged at these terminals are unregulated, the marketplace determines the prices we can charge for our services. We earn revenue through storage and ancillary fees, including product heating, blending, mixing and additive injection for refiners and other large end users of refined products. We have a 50% interest in a refined products storage company, Texas Frontera, LLC ("Texas Frontera"), that owns approximately one million barrels of storage located at our terminal in Galena Park, Texas, which is included in our aggregate storage capacity.