ASSETS HELD FOR SALE AND ASSET IMPAIRMENTS

Asphalt Operations. On July 3, 2012, we entered into an agreement with an affiliate of Lindsay Goldberg LLC (Lindsay Goldberg), a private investment firm, to create a joint venture that will own and operate NuStar Energy’s asphalt refining assets, including the asphalt refineries located in Paulsboro, New Jersey and Savannah, Georgia (collectively, the Asphalt Operations). NuStar Energy and Lindsay Goldberg will each have a 50% voting interest in NuStar Asphalt LLC (Asphalt JV), currently a wholly owned subsidiary of NuStar Energy, which was formed for the purpose of entering into this joint venture and which will own all the assets of the Asphalt Operations. Lindsay Goldberg will pay $175.0 million for the Class A equity interests (Class A Interests) of Asphalt JV, while we will retain the Class B equity interests (Class B Interests) of Asphalt JV. The Class A Interests will have a distribution preference over the Class B Interests, as well as a liquidation preference.

At the time of closing, Asphalt JV will purchase the inventory of the Asphalt Operations from NuStar Energy at market prices. Asphalt JV intends to fund the purchase of those inventories with proceeds from borrowings under a third-party asset-based revolving credit facility (Third-Party Financing) and an unsecured revolving credit facility provided by NuStar Energy (NuStar Facility). The NuStar Facility will also be available to fund working capital needs of Asphalt JV in an aggregate principal amount not to exceed $250.0 million for a term of seven years. In addition, during the term of the NuStar Facility, NuStar Energy has agreed to provide guarantees or credit support, as applicable, of up to $150.0 million for operating contracts assumed by Asphalt JV related to the Asphalt Operations. NuStar Energy also expects to enter into an administrative services agreement, a terminal lease agreement and a crude oil supply agreement with Asphalt JV.

This transaction is expected to close in the third quarter of 2012, subject to the consummation of the Third-Party Financing and the NuStar Facility, as well as the satisfaction of certain other customary closing conditions, such as regulatory approval. Upon closing, we expect to deconsolidate Asphalt JV and prospectively report our remaining investment in Asphalt JV using the equity method of accounting. Therefore, as of June 30, 2012, we have presented the assets related to the Asphalt Operations as “Assets held for sale” on the consolidated balance sheet. Because of our expected continued involvement with Asphalt JV discussed above, we have not presented the results of operations for the Asphalt Operations as discontinued operations.

Asset Impairments. In connection with our expected sale of 50% of Asphalt JV, we evaluated the goodwill and other long-lived assets associated with the Asphalt Operations for potential impairment. As of June 30, 2012, we estimated the fair value of the Asphalt Operations reporting unit as the sum of (i) the purchase price to be paid by Lindsay Goldberg for the Class A Interests of Asphalt JV, (ii) the fair value of the Class B Interests of Asphalt JV that we would retain and (iii) the fair value of the working capital, primarily inventory. We determined the fair value of the Class B Interests using a combination of estimated discounted future cash flows and a pricing model. The fair value of the working capital was based on estimated current market prices. The estimated fair value of the Asphalt Operations reporting unit was less than its carrying value, which resulted in the recognition of a goodwill impairment loss of $22.1 million in the second quarter of 2012. In addition, in the second quarter of 2012, we recorded an asset impairment loss of $244.2 million in order to write-down the carrying value of long-lived assets related to the Asphalt Operations, including fixed assets, intangible assets and other long-term assets to their estimated fair value. The goodwill impairment loss and the asset impairment loss related to the Asphalt Operations is reported in the asphalt and fuels marketing segment.

In the second quarter of 2012, we reduced the carrying value of the fixed assets of one of our refined product terminals to its estimated fair value and recorded an asset impairment loss of $2.1 million. The impairment loss resulted from changing market conditions that reduced the estimated cash flows for that terminal. The impairment loss associated with this refined product terminal was reported in the storage segment. In addition, we recorded an asset impairment loss of $3.3 million in the second quarter of 2012 in order to reduce the carrying value of certain corporate assets we intend to sell to their estimated sales price.

The total asset impairment loss consisted of the following:



	Three and Six Months Ended June 30, 2012
	(Thousands of Dollars)
Asphalt Operations
Property, plant and equipment, net	$	232,759
Intangible assets, net	6,564
Other long-term assets, net	4,902
Asset impairment loss	244,225

Other
Property, plant and equipment, net	5,421
Total asset impairment loss	$	249,646

Assets Held for Sale. As of June 30, 2012, we reclassified the assets of the Asphalt Operations and certain corporate assets we intend to sell as “Assets held for sale” on the consolidated balance sheet. The total assets held for sale consisted of the following:



	June 30, 2012
	(Thousands of Dollars)
Asphalt Operations
Inventories	$	410,977
Other current assets	135
Property, plant and equipment, net	204,946
Other long-term assets, net	22,054
Assets held for sale	638,112

Other
Property, plant and equipment, net	2,847
Total assets held for sale	$	640,959