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DERIVATIVES AND RISK MANAGEMENT ACTIVITIES | 12 Months Ended
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Dec. 31, 2013
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
DERIVATIVES AND RISK MANAGEMENT ACTIVITIES | DERIVATIVES AND RISK MANAGEMENT ACTIVITIES We utilize various derivative instruments to manage our exposure to commodity price risk and manage our exposure to interest rate risk. Our risk management policies and procedures are designed to monitor interest rates, futures and swap positions and over-the-counter positions, as well as physical volumes, grades, locations and delivery schedules to help ensure that our hedging activities address our market risks. Our risk management committee oversees our trading policies and procedures and certain aspects of commodity and trading risk management. Our risk management committee also reviews all new commodity and trading risk management strategies in accordance with our risk management policy, as approved by our board of directors. Interest Rate Risk We were a party to certain interest rate swap agreements to manage our exposure to changes in interest rates. We entered into fixed-to-floating interest rate swap agreements associated with a portion of our fixed-rate senior notes. We accounted for our fixed-to-floating interest rate swaps as fair value hedges. In 2012, we entered into and terminated fixed-to-floating interest rate swap agreements with an aggregate notional amount of $200.0 million related to NuStar Logistics’ 4.75% senior notes issued on February 2, 2012. Under the terms of these interest rate swap agreements, we received a fixed rate of 4.75% and paid a variable rate based on one month USD LIBOR plus a percentage that varied with each agreement. We also terminated fixed-to-floating interest rate swap agreements with an aggregate notional amount of $270.0 million associated with NuStar Logistics’ 4.80% senior notes. Under the terms of these interest rate swap agreements, we received a fixed rate of 4.8% and paid a variable rate based on one month USD LIBOR, plus a percentage that varies with each agreement. We received $19.7 million in connection with the terminations, which we are amortizing into “Interest expense, net” over the remaining lives of the 4.80% and 4.75% senior notes. The termination payments are included in cash flows from financing activities on the consolidated statements of cash flows. We had no fixed-to-floating interest rate swaps as of December 31, 2013 and 2012. We were also a party to forward-starting interest rate swap agreements related to the interest payments associated with forecasted probable debt issuances in 2013. Under the terms of the swaps, we paid a fixed rate and received a rate based on three month USD LIBOR. We entered into these swaps in order to hedge the risk of changes in the interest payments attributable to changes in the benchmark interest rate during the period from the effective date of the swap to the issuance of the forecasted debt. These swaps qualified, and we designated them, as cash flow hedges of future interest payments associated with forecasted debt issuances. In connection with the issuance of the 4.75% senior notes on February 2, 2012, we terminated forward-starting interest rate swap agreements with an aggregate notional amount of $225.0 million. We paid $25.4 million in connection with the terminations, which is being reclassified out of “Accumulated other comprehensive loss” and into “Interest expense, net” as the interest payments occur over the life of the 4.75% senior notes. In 2013, in connection with the maturity of the 6.05% senior notes due March 15, 2013 and 5.875% senior notes due June 1, 2013, we terminated forward-starting interest rate swap agreements with an aggregate notional amount of $275.0 million. We paid $33.7 million in connection with the terminations, which we reclassify out of “Accumulated other comprehensive loss” and into “Interest expense, net” as the interest payments occur or if the interest payments are probable not to occur. During the second quarter of 2013, we determined that one forecasted interest payment was probable not to occur, and we reclassified $2.0 million out of “Accumulated other comprehensive loss” to “Interest expense, net.” The termination payments are included in cash flows from financing activities on the consolidated statements of cash flows. We had no forward-starting interest rate swaps as of December 31, 2013, and the total aggregate notional amount of the forward-starting interest rate swaps was $275.0 million as of December 31, 2012. Commodity Price Risk We are exposed to market risks related to the volatility of crude oil and refined product prices. In order to reduce the risk of commodity price fluctuations with respect to our crude oil and finished product inventories and related firm commitments to purchase and/or sell such inventories, we utilize commodity futures and swap contracts, which qualify, and we designate as, fair value hedges. Derivatives that are intended to hedge our commodity price risk, but fail to qualify as fair value or cash flow hedges, are considered economic hedges, and we record associated gains and losses in net income. We entered into commodity swap contracts to hedge the price risk associated with the San Antonio Refinery. These contracts fixed the purchase price of crude oil and sales prices of refined products for a portion of the expected production of the San Antonio Refinery, thereby attempting to mitigate the risk of volatility of future cash flows associated with hedged volumes. These contracts qualified, and we designated them, as cash flow hedges. During the fourth quarter of 2011, we decided to adjust the refinery’s operations, which caused a shift in the future production yields of the San Antonio Refinery. This change caused certain forecasted sales of gasoline products to be replaced with distillate sales; therefore, we concluded that these forecasted gasoline sales were probable not to occur, and we discontinued cash flow hedging treatment for the related commodity contracts. We recorded gains of $16.4 million related to these contracts for the year ended December 31, 2011, including $15.1 million which we reclassified from accumulated other comprehensive loss. In anticipation of the San Antonio Refinery Sale, we concluded that all of the forecasted sales were probable not to occur. Therefore, we discontinued cash flow hedging treatment for the related commodity contracts in December 2012 and incurred a loss of $21.7 million, which we reclassified from accumulated other comprehensive loss to “(Loss) income from discontinued operations, net of tax.” The volume of commodity contracts is based on open derivative positions and represents the combined volume of our long and short positions on an absolute basis, which totaled 15.2 million barrels and 22.7 million barrels as of December 31, 2013 and 2012, respectively. As of December 31, 2013 and 2012, we had $3.3 million and $6.2 million, respectively, of margin deposits related to our derivative instruments. The fair values of our derivative instruments included in our consolidated balance sheets were as follows:
|  |  | Asset Derivatives |  | Liability Derivatives
| Balance Sheet Location |  | December 31,
|  | 2013 |  | 2012 |  | 2013 |  | 2012
|  |  | (Thousands of Dollars)
Derivatives Designated as Hedging Instruments: |  |  |  |  |  |  |  |  |
Commodity contracts | Other current assets |  | $ | — |  |  | $ | 1,471 |  |  | $ | — |  |  | $ | (811 | )
Commodity contracts | Accrued liabilities |  | — |  |  | — |  |  | (130 | ) |  | — |
Interest rate swaps | Accrued liabilities |  | — |  |  | — |  |  | — |  |  | (40,911 | )
Total |  |  | — |  |  | 1,471 |  |  | (130 | ) |  | (41,722 | )
Derivatives Not Designated as Hedging Instruments: |  |  |  |  |  |  |  |  |
Commodity contracts | Other current assets |  | 16,168 |  |  | 22,269 |  |  | (11,220 | ) |  | (13,571 | )
Commodity contracts | Other long-term assets, net |  | 15,883 |  |  | 39,322 |  |  | (8,906 | ) |  | (30,116 | )
Commodity contracts | Accrued liabilities |  | 4,523 |  |  | 17,406 |  |  | (6,626 | ) |  | (36,616 | )
Commodity contracts | Other long-term liabilities |  | 5,448 |  |  | — |  |  | (7,023 | ) |  | — |
Total |  |  | 42,022 |  |  | 78,997 |  |  | (33,775 | ) |  | (80,303 | )
Total Derivatives |  |  | $ | 42,022 |  |  | $ | 80,468 |  |  | $ | (33,905 | ) |  | $ | (122,025 | )
Certain of our derivative instruments are eligible for offset in the consolidated balance sheets and subject to master netting arrangements. Under our master netting arrangements, there is a legally enforceable right to offset amounts, and we intend to settle such amounts on a net basis. The following are the net amounts presented on the consolidated balance sheets:
|  | December 31,
Commodity Contracts |  | 2013 |  | 2012
|  | (Thousands of Dollars)
Net amounts of assets presented in the consolidated balance sheets |  | $ | 11,925 |  |  | $ | 18,564 |
Net amounts of liabilities presented in the consolidated balance sheets |  | $ | (3,808 | ) |  | $ | (19,210 | )
The earnings impact of our derivative activity was as follows:
Derivatives Designated as Fair Value Hedging Instruments |  | Income Statement Location |  | Amount of Gain (Loss) Recognized in Income on Derivative (Effective Portion) |  | Amount of Gain (Loss) Recognized in Income on Hedged Item |  | Amount of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion)
|  |  |  | (Thousands of Dollars)
Year ended December 31, 2013: |  |  |  |  |  |
Commodity contracts |  | Cost of product sales |  | $ | 3,964 |  |  | $ | (6,327 | ) |  | $ | (2,363 | )
Year ended December 31, 2012: |  |  |  |  |  |
Interest rate swaps |  | Interest expense, net |  | $ | 17,345 |  |  | $ | (17,345 | ) |  | $ | — |
Commodity contracts |  | Cost of product sales |  | (10,505 | ) |  | 12,139 |  |  | 1,634 |
Total |  |  |  | $ | 6,840 |  |  | $ | (5,206 | ) |  | $ | 1,634 |
Year ended December 31, 2011: |  |  |  |  |  |
Interest rate swaps |  | Interest expense, net |  | $ | (55,183 | ) |  | $ | 54,588 |  |  | $ | (595 | )
Commodity contracts |  | Cost of product sales |  | (10,228 | ) |  | 9,004 |  |  | (1,224 | )
Total |  |  |  | $ | (65,411 | ) |  | $ | 63,592 |  |  | $ | (1,819 | )
Derivatives Designated as Cash Flow Hedging Instruments |  | Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion) |  | Income Statement Location (a) |  | Amount of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) (b) |  | Amount of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion)
|  | (Thousands of Dollars) |  |  |  | (Thousands of Dollars)
Year ended December 31, 2013: |  |  |  |  |  |
Interest rate swaps |  | $ | 7,213 |  |  | Interest expense, net |  | $ | (7,570 | ) |  | $ | — |
Year ended December 31, 2012: |  |  |  |  |  |
Interest rate swaps |  | $ | (17,069 | ) |  | Interest expense, net |  | $ | (1,749 | ) |  | $ | — |
Commodity contracts |  | (77,200 | ) |  | (Loss) income from discontinued operations |  | (51,483 | ) |  | 4,010 |
Total |  | $ | (94,269 | ) |  |  |  | $ | (53,232 | ) |  | $ | 4,010 |
Year ended December 31, 2011: |  |  |  |  |  |
Interest rate swaps |  | $ | (84,199 | ) |  | Interest expense, net |  | $ | — |  |  | $ | — |
Commodity contracts |  | 30,747 |  |  | (Loss) income from discontinued operations |  | 5,030 |  |  | (4,010 | )
Total |  | $ | (53,452 | ) |  |  |  | $ | 5,030 |  |  | $ | (4,010 | )
(a) | Amounts are included in specified location for both the gain (loss) reclassified from accumulated OCI into income (effective portion) and the gain (loss) recognized in income on derivative (ineffective portion).
Derivatives Not Designated as Hedging Instruments |  | Income Statement Location |  | Amount of Gain (Loss) Recognized in Income
|  |  |  | (Thousands of Dollars)
Year ended December 31, 2013: |  |  |  |
Commodity contracts |  | Cost of product sales |  | $ | (5,323 | )
Commodity contracts |  | (Loss) income from discontinued operations |  | (218 | )
Total |  |  |  | $ | (5,541 | )
Year ended December 31, 2012: |  |  |  |
Commodity contracts |  | Revenues |  | $ | (7,654 | )
Commodity contracts |  | Cost of product sales |  | 20,138 |
Commodity contracts |  | (Loss) income from discontinued operations |  | 6,176 |
Total |  |  |  | $ | 18,660 |
Year ended December 31, 2011: |  |  |  |
Commodity contracts |  | Revenues |  | $ | 235 |
Commodity contracts |  | Cost of product sales |  | (11,661 | )
Commodity contracts |  | Operating expenses |  | 46 |
Commodity contracts |  | (Loss) income from discontinued operations |  | 7,207 |
Total |  |  |  | $ | (4,173 | )
For derivatives designated as cash flow hedging instruments, once a hedged transaction occurs, we reclassify the effective portion from AOCI to “Interest expense, net” for our forward-starting interest rate swaps or to “Income (loss) from discontinued operations, net of tax” for our commodity contracts associated with the San Antonio Refinery. As of December 31, 2013, we expect to reclassify a loss of $10.7 million to “Interest expense, net” within the next twelve months.

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4K -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5708775-113959 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4B -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624163-113959 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(n)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4J -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5708773-113959 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 25 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6886632&loc=d3e76258-113986 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=7476318&loc=d3e41635-113959 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4H -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624258-113959 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4A -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5618551-113959 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 45 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6441202&loc=d3e80720-113993 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=7668309&loc=d3e80748-113994 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4E -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624181-113959 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=7668309&loc=d3e80784-113994 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=7476318&loc=d3e41620-113959 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4D -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624177-113959 Reference 15: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1A -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5579245-113959 Reference 16: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1B -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5580258-113959 Reference 17: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5579240-113959 Reference 18: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=7476318&loc=d3e41641-113959 Reference 19: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=7476318&loc=d3e41638-113959 Reference 20: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4C -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624171-113959 + Details
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