PARTNERS’ EQUITY

Issuance of Common Units

On December 9, 2011, we issued 6,037,500 common units representing limited partner interests at a price of $53.45 per unit. We used the net proceeds from this offering of $318.0 million, including a contribution of $6.6 million from our general partner to maintain its 2% general partner interest, mainly to reduce outstanding borrowings under our 2007 Revolving Credit Agreement.

Our shelf registration statement on Form S-3 became effective on April 29, 2011, which permits us to offer and sell various types of securities, including NuStar Energy common units and debt securities of NuStar Logistics and NuPOP, having an aggregate value of up to $200.0 million (the 2011 Shelf Registration Statement). On May 23, 2011, in connection with the 2011 Shelf Registration Statement, we entered into an Equity Distribution Agreement (the Equity Distribution Agreement) with Citigroup Global Markets Inc. (Citigroup). Under the Equity Distribution Agreement, we may from time to time sell an aggregate of up to $200.0 million NuStar Energy common units representing limited partner interests, using Citigroup as our sales agent. In September and October 2011, we issued 108,029 NuStar Energy common units under the Equity Distribution Agreement for net proceeds of $6.0 million, including a contribution of $0.1 million from our general partner to maintain its 2% general partner interest.

On May 19, 2010, we issued 4,400,000 common units representing limited partner interests at a price of $56.55 per unit. We used the net proceeds from this offering of $245.2 million, including a contribution of $5.1 million from our general partner to maintain its 2% general partner interest, mainly to reduce outstanding borrowings under our 2007 Revolving Credit Agreement and for the Asphalt Holdings Acquisition.

On November 13, 2009, we issued 5,750,000 common units representing limited partner interests at a price of $52.45 per unit. We used the net proceeds from this offering of $294.9 million, including a contribution of $6.2 million from our general partner to maintain its 2% general partner interest, mainly to reduce the outstanding principal balance under our 2007 Revolving Credit Agreement.

Accumulated Other Comprehensive Income (Loss)

The balance of and changes in the components included in “Accumulated other comprehensive income (loss)” were as follows:



	Foreign Currency Translation			Cash Flow Hedges			Accumulated Other Comprehensive Income (Loss)
	(Thousands of Dollars)
Balance as of January 1, 2009	$	(14,266	)	$	—		$	(14,266	)
Activity	22,316			(240		)	22,076
Balance as of December 31, 2009	8,050			(240		)	7,810
Activity	3,450			35,240			38,690
Balance as of December 31, 2010	11,500			35,000			46,500
Activity	(15,425		)	(58,482		)	(73,907		)
Balance as of December 31, 2011	$	(3,925	)	$	(23,482	)	$	(27,407	)

For the year ended December 31, 2011, other comprehensive loss attributable to the noncontrolling interest consisted of foreign currency translation adjustments totaling $3.0 million. We did not have a noncontrolling interest for the years ended December 31, 2010 and 2009.

Allocations of Net Income

Our partnership agreement, as amended, sets forth the calculation to be used to determine the amount and priority of cash distributions that the common unitholders and general partner will receive. The partnership agreement also contains provisions for the allocation of net income and loss to the unitholders and the general partner. For purposes of maintaining partner capital accounts, the partnership agreement specifies that items of income and loss shall be allocated among the partners in accordance with their respective percentage interests. Normal allocations according to percentage interests are made after giving effect to priority income allocations, if any, in an amount equal to incentive cash distributions allocated 100% to the general partner. The following table details the calculation of net income applicable to the general partner:



	Year Ended December 31,
	2011			2010			2009
	(Thousands of Dollars)
Net income attributable to NuStar Energy L.P.	$	221,461		$	238,970		$	224,875
Less general partner incentive distribution (a)	36,319			33,304			28,712
Net income after general partner incentive distribution	185,142			205,666			196,163
General partner interest	2		%	2		%	2		%
General partner allocation of net income after general partner incentive distribution	3,703			4,113			3,924
General partner incentive distribution	36,319			33,304			28,712
Net income applicable to general partner	$	40,022		$	37,417		$	32,636


(a)	The net income allocation to the general partner's incentive distribution is less than the actual distribution made with respect to 2011, which is shown in the distribution table below, due to the issuance of common units after the end of the third quarter but before the record date.

Cash Distributions

We make quarterly distributions of 100% of our available cash, generally defined as cash receipts less cash disbursements and cash reserves established by the general partner, in its sole discretion. These quarterly distributions are declared and paid within 45 days subsequent to each quarter-end. The limited partner unitholders are entitled to receive a minimum quarterly distribution of $0.60 per unit each quarter ($2.40 annualized). Our cash is first distributed 98% to the limited partners and 2% to the general partner until the amount distributed to our unitholders is equal to the minimum quarterly distribution and arrearages in the payment of the minimum quarterly distribution for any prior quarter. Cash in excess of the minimum quarterly distributions is distributed to our unitholders and our general partner based on the percentages shown below.

Our general partner is entitled to incentive distributions if the amount we distribute with respect to any quarter exceeds specified target levels shown below:



	Percentage of Distribution
Quarterly Distribution Amount per Unit	Unitholders	General Partner
Up to $0.60	98%	2%
Above $0.60 up to $0.66	90%	10%
Above $0.66	75%	25%

The following table reflects the allocation of total cash distributions to our general and limited partners applicable to the period in which the distributions are earned:



	Year Ended December 31,
	2011		2010		2009
	(Thousands of Dollars, Except Per Unit Data)
General partner interest	$	6,630	$	6,227	$	5,430
General partner incentive distribution	36,326		33,304		28,712
Total general partner distribution	42,956		39,531		34,142
Limited partners’ distribution	288,550		271,847		237,308
Total cash distributions	$	331,506	$	311,378	$	271,450

Cash distributions per unit applicable to limited partners	$	4.360	$	4.280	$	4.245

In January 2012, we declared a quarterly cash distribution of $1.095 that was paid on February 10, 2012 to unitholders of record on February 7, 2012. This distribution related to the fourth quarter of 2011 and totaled $89.1 million, of which $11.6 million represented our general partner’s interest and incentive distribution.