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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2014
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-16417
NUSTAR ENERGY L.P.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
19003 IH-10 West
San Antonio, Texas
(Address of principal executive offices)
74-2956831
(I.R.S. Employer
Identification No.)
78257
(Zip Code)
Registrant’s telephone number, including area code (210) 918-2000
Securities registered pursuant to Section 12(b) of the Act: Common units representing partnership interests listed on the New
York Stock Exchange.
Securities registered pursuant to 12(g) of the Act: None.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [X] No
[ ]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes [ ] No [X]
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during
the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not
contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in
Rule12b-2 of the Exchange Act:
Large accelerated filer
[X]
Accelerated filer [ ]
Non-accelerated filer
[ ] (Do not check if a smaller reporting company) Smaller reporting company
[ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
The aggregate market value of the common units held by non-affiliates was approximately $4,194 million based on the last sales
price quoted as of June 30, 2014, the last business day of the registrant’s most recently completed second quarter.
The number of common units outstanding as of January 31, 2015 was 77,886,078.
Table of Contents
NUSTAR ENERGY L.P.
FORM 10-K
TABLE OF CONTENTS
PART I
Items 1., 1A. & 2.
Business, Risk Factors and Properties
Overview
Recent Developments
Organizational Structure
Segments
Employees
Rate Regulation
Environmental and Safety Regulation
Risk Factors
Properties
Unresolved Staff Comments
Legal Proceedings
Mine Safety Disclosures
Market for Registrant’s Common Units, Related Unitholder Matters and Issuer Purchases of
Common Units
PART II
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 1B.
Item 3.
Item 4.
Item 5.
Item 6.
Item 7.
Item 7A.
Quantitative and Qualitative Disclosures about Market Risk
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Item 15.
Signatures
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Directors, Executive Officers and Corporate Governance
PART III
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Unitholder
Matters
Certain Relationships and Related Transactions and Director Independence
Principal Accountant Fees and Services
PART IV
Exhibits and Financial Statement Schedules
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17
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31
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56
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160
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PART I
Unless otherwise indicated, the terms “NuStar Energy L.P.,” “the Partnership,” “we,” “our” and “us” are used in this report to
refer to NuStar Energy L.P., to one or more of our consolidated subsidiaries or to all of them taken as a whole. In this Form 10-
K, we make certain forward-looking statements, including statements regarding our plans, strategies, objectives, expectations,
intentions and resources. These forward-looking statements can generally be identified by the words “anticipates,” “believes,”
“expects,” “plans,” “intends,” “estimates,” “forecasts,” “budgets,” “projects,” “will,” “could,” “should,” “may” and similar
expressions. We do not undertake to update, revise or correct any of the forward-looking information. You are cautioned that
such forward-looking statements should be read in conjunction with our disclosures beginning on page 31 of this report under
the heading: “CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION.”
ITEM 1., 1A. and 2. BUSINESS, RISK FACTORS AND PROPERTIES
OVERVIEW
NuStar Energy L.P. (NuStar Energy), a Delaware limited partnership, was formed in 1999 and completed its initial public
offering of common units on April 16, 2001. Our common units are traded on the New York Stock Exchange (NYSE) under the
symbol “NS.” Our principal executive offices are located at 19003 IH-10 West, San Antonio, Texas 78257 and our telephone
number is (210) 918-2000.
We are engaged in the transportation of petroleum products and anhydrous ammonia, the terminalling and storage of petroleum
products and the marketing of petroleum products. The term “throughput” as used in this document generally refers to barrels
of crude oil or refined product or tons of ammonia, as applicable, that pass through our pipelines, terminals or storage tanks.
We divide our operations into the following three reportable business segments: pipeline, storage and fuels marketing. As of
December 31, 2014, our assets included:
•
•
•
•
5,463 miles of refined product pipelines with 21 associated terminals providing storage capacity of 4.9 million
barrels and two tank farms providing storage capacity of 1.4 million barrels;
2,000 miles of anhydrous ammonia pipelines;
1,180 miles of crude oil pipelines providing 3.5 million barrels of associated storage capacity; and
53 terminal and storage facilities providing 80.9 million barrels of storage capacity.
We conduct our operations through our wholly owned subsidiaries, primarily NuStar Logistics, L.P. (NuStar Logistics) and
NuStar Pipeline Operating Partnership L.P. (NuPOP). Our revenues include:
•
•
•
tariffs for transporting crude oil, refined products and anhydrous ammonia through our pipelines;
fees for the use of our terminal and storage facilities and related ancillary services; and
sales of crude oil and refined petroleum products.
Our goal is to increase per unit quarterly distributions to our partners. We strive to achieve this goal by:
•
•
•
•
enhancing our existing assets through strategic internal growth projects that expand our business with current and
new customers;
pursuing strategic expansion projects by constructing new assets;
improving our operations, including safety and environmental stewardship, cost control and asset reliability; and
identifying acquisition targets that meet our financial and strategic criteria.
Our internet website address is http://www.nustarenergy.com. Information contained on our website is not part of this report.
Our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K filed with (or furnished to)
the Securities and Exchange Commission (SEC) are available on our internet website, free of charge, as soon as reasonably
practicable after we file or furnish such material (select the “Investors” link, then the “SEC Filings” link). We also post our
corporate governance guidelines, code of business conduct and ethics, code of ethics for senior financial officers and the
charters of our board’s committees on our internet website free of charge (select the “Investors” link, then the “Corporate
Governance” link). Our governance documents are available in print to any unitholder that makes a written request to
Corporate Secretary, NuStar Energy L.P., 19003 IH-10 West, San Antonio, Texas 78257 or
corporatesecretary@nustarenergy.com.
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RECENT DEVELOPMENTS
On January 2, 2015, we acquired full ownership of a refined products terminal in Linden, NJ, for $142.5 million. Prior to the
acquisition, the terminal operated as a joint venture between ourselves and Linden Holding Corp, with each party owning 50
percent.
On September 25, 2014, we sold our 75% interest in our facility in Mersin, Turkey for proceeds of $13.4 million.
On February 26, 2014, we sold our then-remaining 50% ownership interest in NuStar Asphalt LLC, which constituted all equity
interests in that entity we retained after the first sale in 2012. Effective February 27, 2014, NuStar Asphalt LLC changed its
name to Axeon Specialty Products LLC (Axeon). The purchaser, Lindsay Goldberg LLC (Lindsay Goldberg), a private
investment firm, now owns 100% of Axeon, and we have completed our exit from the asphalt business. Please refer to Note 5
of the Notes to Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary Data” for additional
information regarding this sale.
ORGANIZATIONAL STRUCTURE
Our operations are managed by NuStar GP, LLC, the general partner of our general partner. NuStar GP, LLC, a Delaware
limited liability company, is a consolidated subsidiary of NuStar GP Holdings, LLC (NuStar GP Holdings) (NYSE: NSH).
The following chart depicts our organizational structure at December 31, 2014.
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SEGMENTS
Our three reportable business segments are pipeline, storage and fuels marketing. Detailed financial information about our
segments is included in Note 26 of the Notes to Consolidated Financial Statements in Item 8. “Financial Statements and
Supplementary Data.”
The following map depicts our operations at December 31, 2014.
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PIPELINE
Our pipeline operations consist of the transportation of refined petroleum products, crude oil and anhydrous ammonia. As of
December 31, 2014, we owned and operated:
•
•
•
•
refined product pipelines with an aggregate length of 3,113 miles and crude oil pipelines with an aggregate length
of 1,180 miles in Texas, Oklahoma, Kansas, Colorado and New Mexico (collectively, the Central West System);
a 1,910-mile refined product pipeline originating in southern Kansas and terminating at Jamestown, North
Dakota, with a western extension to North Platte, Nebraska and an eastern extension into Iowa (the East Pipeline);
a 440-mile refined product pipeline originating at Tesoro Corporation’s (Tesoro) Mandan, North Dakota refinery
and terminating in Minneapolis, Minnesota (the North Pipeline); and
a 2,000-mile anhydrous ammonia pipeline originating at the Louisiana delta area that travels north through the
midwestern United States forking east and west to terminate in Nebraska and Indiana (the Ammonia Pipeline).
We charge tariffs on a per barrel basis for transporting refined products, crude oil and other feedstocks in our refined product
and crude oil pipelines and on a per ton basis for transporting anhydrous ammonia in the Ammonia Pipeline. The following
table lists information about our pipeline assets as of December 31, 2014:
Region / Pipeline System
Central West System:
McKee System
Three Rivers System
Other
Central West Refined Products Pipelines
Eagle Ford System
McKee System
Ardmore System
Other
Central West Crude Oil Pipelines
Total Central West System
East Pipeline
North Pipeline
Ammonia Pipeline
Total
Throughput
For the year ended December 31,
Length
(Miles)
Tank Capacity
2014
2013
(Barrels)
(Barrels/Day)
2,276
377
460
3,113
438
598
87
57
1,180
4,293
1,910
440
2,000
8,643
—
—
—
—
1,600,000
1,050,000
824,000
—
3,474,000
3,474,000
4,916,000
1,437,000
—
9,827,000
164,589
78,177
51,698
294,464
230,665
140,402
66,690
—
437,757
732,221
134,816
45,641
35,816
948,494
148,541
76,512
50,826
275,879
168,718
130,081
66,950
—
365,749
641,628
132,475
45,991
32,676
852,770
Description of Pipelines
Central West System. The Central West System covers a total of 4,293 miles. The Central West System pipelines support shale
oil production and the refineries to which they are connected, including Valero Energy Corporation’s (Valero Energy) McKee,
Three Rivers and Ardmore refineries. The refined product pipelines have an aggregate length of 3,113 miles (Central West
Refined Products Pipelines), including 289 miles of temporarily idled 6-inch Amarillo, Texas to Albuquerque, New Mexico
refined product pipeline. The refined products transported in these pipelines include gasoline, distillates (including diesel and
jet fuel), natural gas liquids and other products produced at the refineries to which they are connected. The crude oil pipelines
have an aggregate length of 1,180 miles (Central West Crude Oil Pipelines), including 214 miles of temporarily idled Cheyenne
Wells, Colorado to McKee and Healdton to Ringling, Oklahoma crude oil pipelines. Our crude oil pipelines transport crude oil
and other feedstocks from various points to the refineries to which they are connected, and from the Eagle Ford Shale region to
our North Beach marine terminal in Corpus Christi, Texas.
East Pipeline. The East Pipeline covers 1,910 miles, including 111 miles that are temporarily idled, and moves refined products
and natural gas liquids north in pipelines ranging in diameter from 6 inches to 16 inches to NuStar Energy and third party
terminals along the system and to receiving pipeline connections in Kansas. The East Pipeline system includes 17 terminals,
discussed below, with storage capacity of approximately 3.5 million barrels and two tank farms with storage capacity of
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approximately 1.4 million barrels at McPherson and El Dorado, Kansas. Shippers on the East Pipeline obtain refined petroleum
products from refineries in Kansas, Oklahoma and Texas.
North Pipeline. The North Pipeline originates at Tesoro’s Mandan, North Dakota refinery and runs from west to east for
approximately 440 miles to its termination in the Minneapolis, Minnesota area. The North Pipeline system includes 4 terminals,
discussed below, with storage capacity of approximately 1.4 million barrels.
Pipeline-Related Terminals. The East and North Pipelines include 21 truck-loading terminals through which refined petroleum
products are delivered to storage tanks and then loaded into petroleum product transport trucks. Revenues earned at these
terminals relate solely to the volumes transported on the pipeline. Separate fees are not charged for the use of these terminals.
Instead, the terminalling fees are a portion of the transportation rate included in the pipeline tariff. As a result, these terminals
are included in this segment instead of the storage segment.
Ammonia Pipeline. The 2,000-mile pipeline, including 57 miles that are temporarily idled, originates in the Louisiana delta
area, where it has access to three third-party marine terminals and three anhydrous ammonia plants on the Mississippi River.
The line runs north through Louisiana and Arkansas into Missouri, where at Hermann, Missouri it splits and one branch goes
east into Illinois and Indiana, while the other branch continues north into Iowa and then turns west into Nebraska. The
Ammonia Pipeline is connected to multiple third-party-owned terminals, which include industrial facility delivery locations.
Product is supplied to the pipeline from anhydrous ammonia plants in Louisiana and imported product delivered through the
marine terminals. Anhydrous ammonia is primarily used as agricultural fertilizer. It is also used as a feedstock to produce other
nitrogen derivative fertilizers and explosives.
Pipeline Operations
Revenues for the pipelines are based upon origin-to-destination throughput volumes traveling through our pipelines and their
related tariff rates.
In general, a shipper on our refined petroleum product pipelines delivers products to the pipeline from refineries or third-party
pipelines. We charge our shippers tariff rates based on transportation from the origination point on the pipeline to the point of
delivery. We invoice our refined product shippers upon delivery for our Central West System and our North and Ammonia
Pipelines, and we invoice our shippers on our East Pipeline when their product enters the line.
Shippers on our crude oil pipelines deliver crude oil to our pipelines for transport to: (i) refineries that connect to our pipelines,
(ii) third-party pipelines and (iii) NuStar terminals for further delivery to marine vessels or third-party pipelines.
Our pipelines are subject to federal regulation by one or more of the following governmental agencies or laws: the Federal
Energy Regulatory Commission (the FERC), the Surface Transportation Board (the STB), the Department of Transportation
(DOT), the Environmental Protection Agency (EPA) and the Homeland Security Act. Additionally, the operations and integrity
of the pipelines are subject to the respective state jurisdictions.
The majority of our pipelines are common carrier and adopt market-based rates. Common carrier activities are those for which
transportation through our pipelines is available, at published tariffs filed, in the case of interstate petroleum product shipments,
with the FERC and the STB or, in the case of intrastate petroleum product shipments, with the relevant state authority, to any
shipper of petroleum products who requests such services and satisfies the conditions and specifications for transportation.
We use Supervisory Control and Data Acquisition remote supervisory control software programs to continuously monitor and
control our pipelines. The system monitors quantities of products injected in and delivered through the pipelines and
automatically signals the appropriate personnel upon deviations from normal operations that require attention.
Demand for and Sources of Refined Products and Crude Oil
Throughputs on our Central West Refined Product Pipelines and the East and North Pipelines depend on the level of demand
for refined products in the markets served by the pipelines and the ability and willingness of refiners and marketers having
access to the pipelines to supply such demand by deliveries through the pipelines.
The majority of the refined products delivered through the Central West Refined Product Pipelines and the North Pipeline are
gasoline and diesel fuel that originate at refineries connected to us. Demand for these products fluctuates as prices for these
products fluctuate. Prices fluctuate for a variety of reasons including the overall balance in supply and demand, which is
affected by general economic conditions, among other factors. Prices for gasoline and diesel fuel tend to increase in the warm
weather months when people tend to drive automobiles more often and further distances.
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Much of the refined products and natural gas liquids delivered through the East Pipeline and a portion of volumes on the North
Pipeline are ultimately used as fuel for railroads, ethanol denaturant or in agricultural operations, including fuel for farm
equipment, irrigation systems, trucks used for transporting crops and crop-drying facilities. Demand for refined products for
agricultural use, and the relative mix of products required, is affected by weather conditions in the markets served by the East
and North Pipelines. The agricultural sector is also affected by government agricultural policies and crop prices. Although
periods of drought suppress agricultural demand for some refined products, particularly those used for fueling farm equipment,
the demand for fuel for irrigation systems often increases during such times. The mix of refined products delivered for
agricultural use varies seasonally, with gasoline demand peaking in early summer, diesel fuel demand peaking in late summer
and propane demand higher in the fall.
Our refined product pipelines are also dependent upon adequate levels of production of refined products by refineries
connected to the pipelines, directly or through connecting pipelines. The refineries are, in turn, dependent upon adequate
supplies of suitable grades of crude oil. Certain of our Central West Refined Products Pipelines are subject to long-term
throughput agreements with Valero Energy. Valero Energy refineries connected directly to our pipelines obtain crude oil from a
variety of foreign and domestic sources. If operations at one of these refineries were discontinued or significantly reduced, it
could have a material adverse effect on our operations, although we would endeavor to minimize the impact by seeking
alternative customers for those pipelines.
The North Pipeline is heavily dependent on Tesoro’s Mandan, North Dakota refinery, which primarily runs North Dakota crude
oil (although it has the ability to process other crude oils). If operations at the Tesoro refinery were interrupted, it could have a
material effect on our operations. The majority of the refined products transported through the East Pipeline are produced at
three refineries located at McPherson and El Dorado, Kansas and Ponca City, Oklahoma, which are operated by the National
Cooperative Refining Association (NCRA), HollyFrontier Corporation (HollyFrontier) and Phillips 66, respectively. The
NCRA and HollyFrontier refineries are connected directly to the East Pipeline. The East Pipeline also has access to Gulf Coast
supplies of products through third party connecting pipelines that receive products originating on the Gulf Coast.
Other than the Valero Energy refineries described above and the Tesoro refinery, if operations at any one refinery were
discontinued, we believe (assuming unchanged demand for refined products in markets served by the refined product pipelines)
that the effects thereof would be short-term in nature and our business would not be materially adversely affected over the long-
term because such discontinued production could be replaced by other refineries or other sources.
Our crude oil pipelines depend upon the continued production of domestic crude oil in regions served by our crude oil pipelines
or connecting carriers. Our crude oil pipelines are also dependent on our customers’ continued access to sufficient foreign crude
oil and sufficient demand for refined products for our customers to operate their refineries. The supply of crude oil production
(domestic and foreign) could increase or decrease with the change in crude oil prices.
Demand for and Sources of Anhydrous Ammonia
The Ammonia Pipeline is one of two major anhydrous ammonia pipelines in the United States and the only one capable of
receiving foreign product directly into the system and transporting anhydrous ammonia into the nation’s corn belt.
Throughputs on our Ammonia Pipeline depend on overall nitrogen fertilizer use, management practices, the price of natural
gas, which is the primary component of anhydrous ammonia, and the level of demand for direct application of anhydrous
ammonia as a fertilizer for crop production (Direct Application). Demand for Direct Application is dependent on the weather,
as Direct Application is not effective if the ground is too wet or too dry.
Corn producers have fertilizer alternatives to anhydrous ammonia, such as liquid or dry nitrogen fertilizers. Liquid and dry
nitrogen fertilizers are both less sensitive to weather conditions during application but are generally more costly than anhydrous
ammonia. In addition, anhydrous ammonia has the highest nitrogen content of any nitrogen-derivative fertilizer.
Customers
The largest customer of our pipeline segment was Valero Energy, which accounted for approximately 35% of the total segment
revenues for the year ended December 31, 2014. In addition to Valero Energy, our customers include integrated oil companies,
refining companies, farm cooperatives, railroads and others. No other customer accounted for a significant portion of the total
revenues of the pipeline segment for the year ended December 31, 2014.
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Competition and Business Considerations
Because pipelines are generally the lowest-cost method for intermediate and long-haul movement of crude oil and refined
petroleum products, our more significant competitors are common carrier and proprietary pipelines owned and operated by
major integrated and large independent oil companies and other companies in the areas where we deliver products. Competition
between common carrier pipelines is based primarily on transportation charges, quality of customer service and proximity to
end users. Trucks may competitively deliver products in some of the areas served by our pipelines. However, trucking costs
render that mode of transportation uncompetitive for longer hauls or larger volumes.
Most of our refined product pipelines and certain of our crude oil pipelines within the Central West System are physically
integrated with and principally serve refineries owned by Valero Energy. As a result, we do not believe that we will face
significant competition for transportation services provided to the Valero Energy refineries we serve.
Our crude oil pipelines serve areas or refineries impacted by growing domestic shale oil production in the Eagle Ford, Permian
Basin and Granite Wash regions. This growing domestic production has reduced demand for imported crude oil and shifted
supply sources for refineries and markets served by our pipelines. Our pipelines also face competition from other crude oil
pipelines and truck transportation in these regions.
The East and North Pipelines compete with an independent common carrier pipeline system owned by Magellan Midstream
Partners, L.P. (Magellan) that operates approximately 100 miles east of and parallel to the East Pipeline and in close proximity
to the North Pipeline. Certain of the East Pipeline’s and the North Pipeline’s delivery terminals are in direct competition with
Magellan’s terminals. Competition with Magellan is based primarily on transportation charges, quality of customer service and
proximity to end users.
Competitors of the Ammonia Pipeline include the other major anhydrous ammonia pipeline, which originates in Oklahoma and
Texas and terminates in Minnesota. The competing pipeline has the same Direct Application demand and weather issues as the
Ammonia Pipeline but is restricted to domestically produced anhydrous ammonia. Midwest production facilities, nitrogen
fertilizer substitutes and barge and railroad transportation represent other forms of direct competition to the pipeline under
certain market conditions.
STORAGE
Our storage segment includes terminal and storage facilities that provide storage, handling and other services for petroleum
products, crude oil, specialty chemicals and other liquids. As of December 31, 2014, we owned and operated:
•
43 terminal and storage facilities in the United States, with total storage capacity of 49.2 million barrels;
• A terminal on the island of St. Eustatius with tank capacity of 14.4 million barrels and a transshipment facility;
• A terminal located in Point Tupper with tank capacity of 7.7 million barrels and a transshipment facility;
•
Six terminals located in the United Kingdom and one terminal located in Amsterdam, the Netherlands, with total
storage capacity of approximately 9.5 million barrels;
• A terminal located in Nuevo Laredo, Mexico.
Description of Major Terminal Facilities
St. Eustatius. We own and operate a 14.4 million barrel petroleum storage and terminalling facility located on the island of St.
Eustatius in the Caribbean, which is located at a point of minimal deviation from major shipping routes. This facility is capable
of handling a wide range of petroleum products, including crude oil and refined products, and it can accommodate heavy-laden
ultra large crude carriers, or ULCCs, for loading and discharging crude oil and other petroleum products. A two-berth jetty, a
two-berth monopile with platform and buoy systems, a floating hose station and an offshore single point mooring buoy with
loading and unloading capabilities serve the terminal’s customers’ vessels. The fuel oil and petroleum product facilities have in-
tank and in-line blending capabilities, while the crude tanks have tank-to-tank blending capability and in-tank mixers. In
addition to the storage and blending services at St. Eustatius, this facility has the flexibility to utilize certain storage capacity
for both feedstock and refined products to support our atmospheric distillation unit. This unit is capable of handling up to
25,000 barrels per day of feedstock, ranging from condensates to heavy crude oil. We own and operate all of the berthing
facilities at the St. Eustatius terminal. Separate fees apply for the use of the berthing facilities, as well as associated services,
including pilotage, tug assistance, line handling, launch service, emergency response services and other ship services.
St. James, Louisiana. Our St. James terminal, which is located on the Mississippi River near St. James, Louisiana, has a total
storage capacity of 9.2 million barrels. The facility is located on almost 900 acres of land, some of which is undeveloped. The
majority of the storage tanks and infrastructure are suited for light crude oil, with four tanks capable of fuel oil or heated crude
oil storage. Additionally, the facility has one barge dock and two ship docks. Our St. James terminal can receive product from
gathering pipelines in the Gulf of Mexico and deliver to connecting pipelines that supply refineries in the Gulf Coast and
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Midwest. The St. James terminal also has two unit train rail facilities and a manifest rail facility, which are served by the Union
Pacific Railroad and have a combined capacity of approximately 200,000 barrels per day.
Point Tupper. We own and operate a 7.7 million barrel terminalling and storage facility located at Point Tupper on the Strait of
Canso, near Port Hawkesbury, Nova Scotia. This facility is the deepest independent, ice-free marine terminal on the North
American Atlantic coast, with access to the East Coast, Canada and the Midwestern United States via the St. Lawrence Seaway
and the Great Lakes system. With one of the premier jetty facilities in North America, the Point Tupper facility can
accommodate heavy-laden ULCCs, for loading and discharging crude oil, petroleum products and petrochemicals. Crude oil
and petroleum product movements at the terminal are fully automated. Separate fees apply for the use of the jetty facility, as
well as associated services, including pilotage, tug assistance, line handling, launch service, emergency response services and
other ship services.
Amsterdam. Our Amsterdam terminal has a total storage capacity of 3.8 million barrels. This facility is located at the Port of
Amsterdam and primarily stores petroleum products including gasoline, diesel and fuel oil. This facility has two docks for
vessels and five docks for inland barges.
Linden, New Jersey. In 2014, we owned 50% of ST Linden Terminal LLC (Linden), which owns a terminal and storage facility
in Linden, New Jersey. On January 2, 2015, we acquired full ownership of Linden by purchasing the remaining ownership
interest from Linden Holding Corp for $142.5 million. The terminal is located on a 44-acre facility that provides it with deep-
water terminalling capabilities in the New York Harbor. This terminal primarily stores petroleum products, including gasoline,
jet fuel and fuel oils. The facility has a total storage capacity of 4.3 million barrels and can receive and deliver products via
ship, barge and pipeline. The terminal includes two dock facilities.
Terminal and Storage Facilities
The following table sets forth information about our terminal and storage facilities as of December 31, 2014:
Facility
Tank Capacity
(Barrels)
Primary Products Handled
Colorado Springs, CO
Denver, CO
Alamogordo, NM (a) (e)
Albuquerque, NM
Abernathy, TX
Amarillo, TX
Corpus Christi, TX
328,000 Petroleum products, ethanol
110,000 Petroleum products, ethanol
124,000 Petroleum products
251,000 Petroleum products, ethanol
160,000 Petroleum products
269,000 Petroleum products
329,000 Petroleum products
Corpus Christi, TX (North Beach)
1,721,000 Crude oil and feedstocks
Edinburg, TX
El Paso, TX (b)
Harlingen, TX
Laredo, TX
Placedo, TX (c)
San Antonio (East), TX
San Antonio (South), TX
Southlake, TX
Nuevo Laredo, Mexico
Central West Terminals
Pittsburg, CA
Rosario, NM
Catoosa, OK
Houston, TX
Asphalt Terminals
288,000 Petroleum products
428,000 Petroleum products, ethanol
286,000 Petroleum products
215,000 Petroleum products
100,000 Petroleum products
150,000 Petroleum products
225,000 Petroleum products
569,000 Petroleum products, ethanol
50,000 Petroleum products
5,603,000
398,000 Asphalt
166,000 Asphalt
358,000 Asphalt
86,000 Asphalt
1,008,000
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Facility
Blue Island, IL
Indianapolis, IN
Central East Terminals
Jacksonville, FL
St. James, LA
Texas City, TX
Texas City, TX
Tank Capacity
(Barrels)
Primary Products Handled
690,000 Petroleum products, ethanol
428,000 Petroleum products
1,118,000
2,593,000 Petroleum products, asphalt
9,190,000 Crude oil and feedstocks
128,000 Petroleum products
2,836,000 Chemicals, petroleum products
Gulf Coast Terminals
14,747,000
Andrews AFB, MD (a)
Baltimore, MD
Piney Point, MD
Linden, NJ
Linden, NJ (d)
Paulsboro, NJ
Virginia Beach, VA (a)
North East Terminals
Los Angeles, CA
Selby, CA
Stockton, CA
Portland, OR
Tacoma, WA
Vancouver, WA
Vancouver, WA
West Coast Terminals
Corpus Christi, TX
Texas City, TX
Benicia, CA
Refinery Storage Tanks
Grays, England
Eastham, England
Runcorn, England
Grangemouth, Scotland
Glasgow, Scotland
Belfast, Northern Ireland
United Kingdom Terminals
75,000 Petroleum products
818,000 Chemicals, asphalt, petroleum products
5,402,000 Petroleum products
389,000 Petroleum products
2,130,000 Petroleum products
74,000 Petroleum products
41,000 Petroleum products
8,929,000
608,000 Petroleum products
3,060,000 Petroleum products, ethanol
816,000 Petroleum products, ethanol, fertilizer
1,365,000 Petroleum products, ethanol
391,000 Petroleum products, ethanol
341,000 Chemicals
433,000 Petroleum products
7,014,000
4,030,000 Crude oil and feedstocks
3,141,000 Crude oil and feedstocks
3,683,000 Crude oil and feedstocks
10,854,000
1,958,000 Petroleum products
2,096,000 Chemicals, petroleum products
149,000 Molten sulfur
719,000 Petroleum products, chemicals
353,000 Petroleum products
408,000 Petroleum products
5,683,000
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Facility
St. Eustatius, the Netherlands
Amsterdam, the Netherlands
Point Tupper, Canada
Tank Capacity
(Barrels)
Primary Products Handled
14,396,000 Petroleum products, crude oil and feedstocks
3,834,000 Petroleum products
7,725,000 Petroleum products, crude oil and feedstocks
Total Terminals and Storage Facilities
80,911,000
(a)
(b)
(c)
(d)
(e)
Terminal facility also includes pipelines to U.S. government military base locations.
We own a 67% undivided interest in the El Paso refined product terminal. The tank capacity represents the
proportionate share of capacity attributable to our ownership interest.
The Placedo, TX terminal is temporarily idled.
As of December 31, 2014, we owned 50% of this terminal through a joint venture. The tank capacity represents the
proportionate share of capacity attributable to our ownership interest. On January 2, 2015, we purchased the other 50%
ownership interest.
On January 7, 2015, we sold the Alamogordo, NM terminal and the related pipeline.
Storage Operations
Revenues for the storage segment include fees for tank storage agreements, where a customer agrees to pay for a certain
amount of storage in a tank over a period of time (storage lease revenues), and throughput agreements, where a customer pays a
fee per barrel for volumes moving through our terminals (throughput revenues). Our terminals also provide blending, additive
injections, handling and filtering services for which we charge additional fees. We charge a fee for each barrel of crude oil and
certain other feedstocks that we deliver to Valero Energy’s Benicia, Corpus Christi West and Texas City refineries from our
crude oil storage tanks. Certain of our facilities charge fees to provide marine services such as pilotage, tug assistance, line
handling, launch service, emergency response services and other ship services.
Demand for Refined Petroleum Products and Crude Oil
The operations of our refined product terminals depend in large part on the level of demand for products stored in our terminals
in the markets served by those assets. The majority of products stored in our terminals are refined petroleum products. Demand
for our terminalling services will generally increase or decrease with demand for refined petroleum products, and demand for
refined petroleum products tends to increase or decrease with the relative strength of the economy. In addition, the forward
pricing curve can impact demand. For example, in a contango market (when the price for future storage is expected to exceed
current prices), demand for storage services will generally increase.
Crude oil delivered to our St. James terminal through our unit train facilities, and crude oil delivered to our Corpus Christi
North Beach terminal will generally increase or decrease with crude oil production rates in the Bakken and Eagle Ford shale
plays, respectively. In addition, the market price relationship between various grades of crude oil impacts the demand for our
unit train facilities at our St. James terminal, which can affect our profit sharing and volumes.
Customers
We provide storage and terminalling services for crude oil and refined petroleum products to many of the world’s largest
producers of crude oil, integrated oil companies, chemical companies, oil traders and refiners. In addition, our blending
capabilities in our storage assets have attracted customers who have leased capacity primarily for blending purposes. The
largest customer of our storage segment is Valero Energy, which accounted for approximately 19% of the total revenues of the
segment for the year ended December 31, 2014. No other customer accounted for a significant portion of the total revenues of
the storage segment for the year ended December 31, 2014.
Competition and Business Considerations
Many major energy and chemical companies own extensive terminal storage facilities. Although such terminals often have the
same capabilities as terminals owned by independent operators, they generally do not provide terminalling services to third
parties. In many instances, major energy and chemical companies that own storage and terminalling facilities are also
significant customers of independent terminal operators. Such companies typically have strong demand for terminals owned by
independent operators when independent terminals have more cost-effective locations near key transportation links, such as
deep-water ports. Major energy and chemical companies also need independent terminal storage when their owned storage
facilities are inadequate, either because of size constraints, the nature of the stored material or specialized handling
requirements.
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Independent terminal owners generally compete on the basis of the location and versatility of terminals, service and price. A
favorably located terminal will have access to various cost-effective transportation modes both to and from the terminal.
Transportation modes typically include waterways, railroads, roadways and pipelines.
Terminal versatility is a function of the operator’s ability to offer complex handling requirements for diverse products. The
services typically provided by the terminal include, among other things, the safe storage of the product at specified temperature,
moisture and other conditions, as well as receipt at and delivery from the terminal, all of which must be in compliance with
applicable environmental regulations. A terminal operator’s ability to obtain attractive pricing is often dependent on the quality,
versatility and reputation of the facilities owned by the operator. Although many products require modest terminal
modification, operators with versatile storage capabilities typically require less modification prior to usage, ultimately making
the storage cost to the customer more attractive.
Our St. Eustatius and Pt. Tupper terminals have historically functioned as “break bulk” facilities, which handled imports of
light crude from foreign sources into the U.S. to satisfy U.S. East Coast and Gulf Coast refinery demand for light crude. Light
crude suppliers brought the crude from the Middle East and other foreign regions on very large ships that are efficient for long
routes. These large ships, due to draft constraints, are unable to navigate far enough inland to deliver directly to U.S. shores,
which necessitate unloading these ships to storage and subsequent loading on the smaller ships that can bring the crude to the
refiners, a process referred to as “break bulk.” Both terminals are well located to provide this service.
As the supply of light crude from various U.S. shale formations has increased, U.S. demand for foreign light crude oil has
dropped substantially. This reduced demand for imported light crude has, in turn, dramatically changed oil trade flow patterns
around the world, thereby depressing the demand for break bulk services. At the same time, South American and Canadian
production of heavy crude has ramped up significantly. As demand for export of heavy crude and natural gas liquids (NGL) out
of South America, as well as from Canada, has risen, so has the demand for “build bulk” services. In order to reduce costs and
increase efficiencies for long routes to customers abroad, exporting producers need to consolidate their heavy oil cargos from
the small ships used to move the heavy crude off shore to a large vessel that is more efficient for long routes, a process referred
to as “build bulk.” Our St. Eustatius terminal’s location is well suited to build bulk for South American producers headed to
customers overseas, primarily in Asia. Our Point Tupper facility’s location is similarly well-positioned, in this case to build
bulk for heavy Canadian crude oil and NGL production.
We may face increased competition from new and/or expanding terminals near our locations, if those facilities offer either
break bulk or build bulk services, as demanded by the applicable oil trade flows, now and in the future.
Our crude oil refinery storage tanks are physically integrated with and serve refineries owned by Valero Energy. Additionally,
we have entered into various agreements with Valero Energy governing the usage of these tanks. As a result, we believe that we
will not face significant competition for our services provided to those refineries.
FUELS MARKETING
Fuels Marketing Operations
Our fuels marketing operations involve the purchase of crude oil, fuel oil, bunker fuel, fuel oil blending components and other
refined products for resale. These operations provide us the opportunity to generate additional gross margin while
complementing the activities of our storage segment. We utilize storage assets, including our own terminals and rail unloading
facilities, at our St. James, Texas City and St. Eustatius terminals. Rates charged by our storage segment to the fuels marketing
segment are consistent with rates charged to third parties.
Within our fuels marketing operations, we purchase crude oil and refined petroleum products for resale. The results of
operations for the fuels marketing segment depend largely on the margin between our cost and the sales prices of the products
we market. Therefore, the results of operations for this segment are more sensitive to changes in commodity prices compared to
the operations of the pipeline and storage segments.
Since our fuels marketing operations expose us to commodity price risk, we enter into derivative instruments to mitigate the
effect of commodity price fluctuations on our operations. The derivative instruments we use consist primarily of commodity
futures and swap contracts.
Customers
Fuels marketing customers include major integrated refiners and trading companies. Customers for our bunker fuel sales are
mainly ship owners, including cruise line companies. No customer accounted for a significant portion of the total revenues of
the fuels marketing segment for the year ended December 31, 2014.
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Competition and Business Considerations
Our fuels marketing operations have numerous competitors, including large integrated refiners, marketing affiliates of other
partnerships in our industry, as well as various international and domestic trading companies. In the sale of bunker fuel, we
compete with ports offering bunker fuels that are along the route of travel of the vessel.
EMPLOYEES
Our operations are managed by NuStar GP, LLC. As of December 31, 2014, NuStar GP, LLC had 1,227 domestic employees
and certain of our wholly owned subsidiaries had 397 employees performing services for our international operations. We
believe that NuStar GP, LLC and our subsidiaries each have satisfactory relationships with their employees.
RATE REGULATION
Several of our petroleum pipelines are interstate common carrier pipelines, which are subject to regulation by the FERC under
the Interstate Commerce Act (ICA) and the Energy Policy Act of 1992 (the EP Act). The ICA and its implementing regulations
give the FERC authority to regulate the rates charged for service on interstate common carrier pipelines and generally require
the rates and practices of interstate oil pipelines to be just, reasonable, not unduly discriminatory, and not unduly preferential.
The ICA also requires tariffs that set forth the rates a common carrier pipeline charges for providing transportation services on
its interstate common carrier liquids pipelines, as well as the rules and regulations governing these services, to be maintained
on file with the FERC and posted publicly. The EP Act deemed certain rates in effect prior to its passage to be just and
reasonable and limited the circumstances under which a complaint can be made against such “grandfathered” rates. The EP Act
and its implementing regulations also allow interstate common carrier oil pipelines to annually index their rates up to a
prescribed ceiling level. In addition, the FERC retains cost-of-service ratemaking, market-based rates and settlement rates as
alternatives to the indexing approach.
Our ammonia pipeline is subject to regulation by the Surface Transportation Board (STB) pursuant to the Interstate Commerce
Act applicable to such pipelines (which differs from the ICA applicable to interstate liquids pipelines). Under that regulation,
our ammonia pipeline’s rates, classifications, rules and practices related to the interstate transportation of anhydrous ammonia
must be reasonable and, in providing interstate transportation, our ammonia pipeline may not subject a person, place, port or
type of traffic to unreasonable discrimination.
Additionally, the rates and practices for our intrastate common carrier pipelines are subject to regulation by state commissions
in Colorado, Kansas, Louisiana, North Dakota and Texas. Although the applicable state statutes and regulations vary, they
generally require that intrastate pipelines publish tariffs setting forth all rates, rules and regulations applying to intrastate
service, and generally require that pipeline rates and practices be just, reasonable and nondiscriminatory.
Shippers may challenge tariff rates rules and regulations on our pipelines. In most instances, state commissions have not
initiated investigations of the rates or practices of pipelines in the absence of shipper complaints. There are no pending
challenges or complaints regarding our tariffs.
ENVIRONMENTAL AND SAFETY REGULATION
Our operations are subject to extensive federal, state and local environmental laws and regulations, including those relating to
the discharge of materials into the environment, waste management, pollution prevention measures, pipeline integrity and
operator qualifications, among others. Our operations are also subject to extensive federal and state health and safety laws and
regulations, including those relating to worker and pipeline safety. The principal environmental and safety risks associated with
our operations relate to unauthorized or unpermitted emissions into the air, unauthorized releases into soil, surface water or
groundwater, and personal injury and property damage. Compliance with these environmental, health and safety laws,
regulations and permits increases our capital expenditures and our overall cost of business, and violations of these laws,
regulations or permits can result in significant civil and criminal liabilities, injunctions or other penalties.
We have adopted policies, practices and procedures including in the areas of pollution control, pipeline integrity, operator
qualifications, public relations and education, process safety management, occupational health and the handling, storage, use
and disposal of hazardous materials, that are designed to prevent material environmental or other damage, to ensure the safety
of our pipelines, our employees, the public and the environment and to limit the financial liability that could result from such
events. Future governmental action and regulatory initiatives could result in changes to expected operating permits and
procedures, additional remedial actions or increased capital expenditures and operating costs that cannot be assessed with
certainty at this time. In addition, contamination resulting from spills of petroleum and other products occurs within the
industry. Risks of additional costs and liabilities are inherent within the industry, and there can be no assurances that significant
costs and liabilities will not be incurred in the future.
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Capital Expenditures Attributable to Compliance with Environmental Statutes and Regulations. It is possible that these statutes
and the related regulations may be revised to be more restrictive in the future, necessitating additional capital expense to ensure
our operations are in compliance. We are unable to estimate the effect on our financial condition or results of operations or the
amount and timing of such required expenditures. In 2014, our capital expenditures attributable to compliance with
environmental regulations were $9.7 million, and are currently estimated to be approximately $10.4 million for 2015.
RENEWABLE ENERGY AND ALTERNATIVE FUEL MANDATES
Several federal and state programs require, subsidize or encourage the purchase and use of renewable energy and alternative
fuels, such as battery-powered engines, biodiesel, wind energy, and solar energy. These programs may over time offset
projected increases or reduce the demand for refined petroleum products, particularly gasoline, in certain markets. The
increased production and use of biofuels may also create opportunities for additional pipeline transportation and additional
blending opportunities within the storage segment, although that potential cannot be quantified at present. Other legislative
changes may similarly alter the expected demand and supply projections for refined petroleum products in ways that cannot be
predicted.
WATER
The Federal Water Pollution Control Act of 1972, as amended, also known as the Clean Water Act, and analogous or more
stringent state and local statutes and regulations impose restrictions and strict controls regarding the discharge of pollutants into
state waters or waters of the United States. The discharge of pollutants into state waters or waters of the United States is
generally prohibited, except in accordance with the terms of a permit issued by applicable federal or state authorities. The Oil
Pollution Act, enacted in 1990, amends provisions of the Clean Water Act as they pertain to prevention, response to and liability
for oil spills. Spill prevention control and countermeasure requirements of the Clean Water Act and some state laws require
response plans and the use of dikes and similar structures to help prevent contamination of state waters or waters of the United
States in the event of an unauthorized discharge. Violations of any of these statutes and the related regulations could result in
significant costs and liabilities. It is possible that these statutes and the related regulations may be revised to be more restrictive
in the future, necessitating additional capital expense to ensure our operations are in compliance. We are unable to estimate the
effect on our financial condition or results of operations or the amount and timing of such required expenditures.
AIR
The Federal Clean Air Act, as amended, and analogous or more stringent state and local statutes and regulations impose
restrictions and strict controls regarding the discharge of pollutants into the air. The discharge of pollutants into the air is
generally prohibited, except in accordance with the terms of a permit issued by applicable federal or state authorities, and these
laws and related regulations regulate emissions of air pollutants from various sources, including some of our operations, and
also impose various monitoring and reporting requirements. Such laws and regulations may require a facility to obtain pre-
approval for the construction or modification of certain projects or facilities expected to produce air emissions or result in the
increase of existing air emissions, and obtain and strictly comply with the provisions of any air permits. Violations of any of
these statutes and the related regulations could result in significant costs and liabilities. It is possible that these statutes and the
related regulations may be revised to be more restrictive in the future, necessitating additional capital expense to ensure our
operations are in compliance. We are unable to estimate the effect on our financial condition or results of operations or the
amount and timing of such required expenditures.
SOLID WASTE
The federal Resource Conservation and Recovery Act (RCRA) and analogous or more stringent state and local statutes and
regulations impose restrictions and strict controls regarding solid wastes, including hazardous wastes. We currently are not
required to comply with a substantial portion of RCRA requirements because we do not operate any waste treatment, storage or
disposal facilities. However, it is possible that additional wastes, which could include wastes currently generated during
operations, will also be designated as hazardous wastes. Hazardous wastes are subject to more rigorous and costly disposal
requirements than are non-hazardous wastes. Violations of any of these statutes and the related regulations could result in
significant costs and liabilities. It is possible that these statutes and the related regulations may be revised to be more restrictive
in the future, necessitating additional capital expense to ensure our operations are in compliance. We are unable to estimate the
effect on our financial condition or results of operations or the amount and timing of such required expenditures.
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HAZARDOUS SUBSTANCES
The federal Comprehensive Environmental Response, Compensation and Liability Act, referred to as CERCLA and also known
as Superfund, and analogous or more stringent state and local statutes and regulations impose restrictions and liability,
including joint and several liability, without regard to fault or the legality of the original act, on some classes of persons that
contributed to the release or threatened release of a hazardous substance into the environment. These classes of persons can
include the owner or operator of the facility and those that disposed or arranged for the disposal of the hazardous substances.
CERCLA also authorizes the EPA and, in some instances, third parties to act in response to threats that endanger public health
or the environment and to seek recovery from the responsible classes of persons for the costs that they incur. In the course of
our ordinary operations, we may generate and arrange for the disposal of wastes that fall within CERCLA’s definition of a
hazardous substance.
We currently own or lease, and have in the past owned or leased, properties where hazardous substances are being or have been
handled. Although we believe that we have utilized operating and disposal practices that were standard in the industry at the
time, substances may have been disposed of or released on or under the properties owned or leased by us or on or under other
locations where these wastes have been taken for disposal. In addition, we acquired many of these properties from third parties,
and we did not control those third parties’ treatment and disposal or release of hazardous substances. These properties and
substances disposed thereon may be subject to CERCLA, RCRA and analogous state and local statutes and regulations. Under
these laws, we could be required to remove or remediate previously disposed substances (including substances disposed of or
released by prior owners or operators), to clean up contaminated property (including contaminated groundwater) or to perform
remedial operations to prevent future contamination. In addition, we may be exposed to joint and several liability under
CERCLA for all or part of the costs required to clean up sites at which hazardous substances may have been disposed of or
released into the environment.
While remediation of subsurface contamination is in process at several of our facilities, based on current available information,
we believe that the cost of these activities will not materially affect our financial condition or results of operations. Such costs,
however, are often unpredictable and, therefore, there can be no assurances that the future costs will not become material.
Further, it is possible that these statutes and the related regulations may be revised to be more restrictive in the future,
necessitating additional capital expense to ensure compliance. We are unable to estimate the effect on our financial condition or
results of operations or the amount and timing of such required expenditures.
PIPELINE INTEGRITY AND SAFETY
Our pipelines are subject to extensive federal, state and local statutes and regulations governing pipeline integrity and safety,
including those in Title 49, Subchapter D of the Code of Federal Regulations. These statutes and regulations generally require
safe operation, maintenance, testing and corrosion control of pipelines, and qualification programs for pipeline operating
personnel. In addition, other requirements can include reviewing and updating existing pipeline safety public education
programs, providing information for the National Pipeline Mapping System, maintaining spill response plans, conducting spill
response training, implementing integrity management programs and managing pipeline control centers. Violations of any of
these statutes and the related regulations could result in significant costs and liabilities. It is possible that these statutes and the
related regulations may be revised to be more restrictive in the future, necessitating additional capital expense to ensure our
operations are in compliance. However, while compliance may affect our capital expenditures and operating expenses, we
believe that the cost of such compliance will not materially affect our competitive position or have a material effect on our
financial condition or results of operations.
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RISKS RELATED TO OUR BUSINESS
RISK FACTORS
We may not be able to generate sufficient cash from operations to enable us to pay quarterly distributions to our unitholders
at current levels.
The amount of cash that we can distribute to our unitholders each quarter principally depends upon the amount of cash we
generate from our operations, which will fluctuate from quarter to quarter based on, among other things:
•
•
•
•
throughput volumes transported in our pipelines;
lease renewals or throughput volumes in our terminals and storage facilities;
tariff rates and fees we charge and the returns we realize for our services;
the results of our marketing, trading and hedging activities, which fluctuate depending upon the relationship
between refined product prices and prices of crude oil and other feedstocks;
demand for and supply of crude oil, refined products and anhydrous ammonia;
•
the effect of worldwide energy conservation measures;
•
•
our operating costs;
• weather conditions;
•
•
domestic and foreign governmental regulations and taxes; and
prevailing economic conditions.
In addition, the amount of cash that we will have available for distribution will depend on other factors, including:
•
•
•
•
•
•
our debt service requirements and restrictions on distributions contained in our current or future debt agreements;
the sources of cash used to fund our acquisitions;
our capital expenditures;
fluctuations in our working capital needs;
issuances of debt and equity securities; and
adjustments in cash reserves made by our general partner, in its discretion.
Because of these factors, we may not have sufficient available cash each quarter to continue paying distributions at their current
level or at all. Furthermore, cash distributions to our unitholders depend primarily upon our cash flows, including cash flows
from financial reserves and working capital borrowings, and not solely on profitability, which is affected by non-cash items.
Therefore, we may make cash distributions during periods when we record net losses and may not make cash distributions
during periods when we record net income.
Failure to complete capital projects as planned could adversely affect our financial condition, results of operations and cash
flows.
Delays or cost increases related to capital spending programs involving construction of new facilities (or improvements and
repairs to our existing facilities) could adversely affect our ability to achieve forecasted operating results. Although we evaluate
and monitor each capital spending project and try to anticipate difficulties that may arise, such delays or cost increases may
arise as a result of factors that are beyond our control, including:
•
•
•
•
denial or delay in issuing requisite regulatory approvals and/or permits;
unplanned increases in the cost of construction materials or labor;
disruptions in transportation of modular components and/or construction materials;
severe adverse weather conditions, natural disasters or other events (such as equipment malfunctions, explosions,
fires or spills) affecting our facilities, or those of vendors and suppliers;
shortages of sufficiently skilled labor, or labor disagreements resulting in unplanned work stoppages;
•
• market-related increases in a project’s debt or equity financing costs; or
•
non-performance by, or disputes with, vendors, suppliers, contractors or sub-contractors involved with a project.
Our forecasted operating results are also based upon our projections of future market fundamentals that are not within our
control, including changes in general economic conditions, availability to our customers of attractively priced alternative
solutions for storage, transportation or supplies of crude oil and refined products and overall customer demand.
Our inability to develop and execute growth projects and acquire new assets could limit our ability to maintain and grow
quarterly distributions to our unitholders.
Our ability to maintain and grow our distributions to unitholders depends on the growth of our existing businesses and strategic
acquisitions. If we are unable to implement business development opportunities and finance such activities on economically
acceptable terms, our future growth will be limited, which could adversely impact our results of operations and cash flows and,
accordingly, result in reduced distributions over time.
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If we are unable to retain current, and attain new, customers through renewing or establishing leases and throughput
agreements at current or better rates or the utilization of our leased assets suffers a material decrease, our revenue and cash
flows could be reduced to levels that could adversely affect our ability to make quarterly distributions to our unitholders.
Our revenue and cash flows are generated primarily from our customers’ payments of fees under throughput contracts and lease
agreements. Failure to renew or enter into new contracts or our leasing customers’ material reduction of their utilization under
our existing leases could result from many factors, including:
•
•
•
•
•
•
•
•
a material decrease in the supply or price of crude oil;
a material decrease in demand for refined products in the markets served by our pipelines and terminals;
scheduled refinery turnarounds or unscheduled refinery maintenance;
operational problems or catastrophic events at a refinery or our assets;
environmental proceedings or other litigation that compel the cessation of all or a portion of the operations at a
refinery or our assets;
a decision by our current customers to redirect refined products transported in our pipelines to markets not served
by our pipelines or to transport crude oil or refined products by means other than our pipelines;
increasingly stringent environmental regulations; or
a decision by our current customers to sell one or more of the refineries we serve to a purchaser that elects not to
use our pipelines and terminals.
Competing midstream service providers, including certain major energy and chemical companies, possess, or have greater
financial resources to acquire, assets better suited to customer demand, which could undermine our ability to attain and
retain customers or reduce utilization of our leased assets, which could reduce our revenues and cash flows, thereby
reducing our ability to make our quarterly distributions to unitholders.
Our competitors include major energy and chemical companies, some of which have greater financial resources, more pipelines
or storage terminals, greater capacity pipelines or storage terminals and greater access to supply than we do. Certain of our
competitors also may have advantages in competing for acquisitions or other new business opportunities because of their
financial resources and synergies in operations. As a consequence of increased competition in the industry, some of our
customers may be reluctant to renew or enter into long-term contracts or contracts that provide for minimum throughput
amounts in the future. Our inability to renew or replace our current contracts as they expire, to enter into contracts for newly
constructed or expanded assets and to respond appropriately to changing market conditions could have a negative effect on our
revenue, cash flows and ability to make quarterly distributions to our unitholders.
Reduced demand for or supply of crude oil and refined products could affect our results of operations and ability to make
distributions at current levels to our unitholders.
Our business is dependent upon the demand for and supply of the crude oil and refined products transported by our pipelines
and stored in our terminals. Any sustained decrease in demand for refined products in the markets served by our pipelines,
terminals or fuels marketing operations could result in a significant reduction in throughputs in our pipelines, storage in our
terminals or earnings in our fuels marketing operations, which would reduce our cash flows and our ability to make
distributions at current levels to our unitholders. Factors that could lead to a decrease in market demand include:
•
•
•
•
•
•
a recession or other adverse economic condition that results in lower spending by consumers on gasoline, diesel
and travel;
higher fuel taxes or other governmental or regulatory actions that increase, directly or indirectly, the cost of
gasoline;
an increase in automotive engine fuel economy, whether as a result of a shift by consumers to more fuel-efficient
vehicles or technological advances by manufacturers;
an increase in the market price of crude oil that leads to higher refined product prices, which may reduce demand
for refined products and drive demand for alternative products. Market prices for crude oil and refined products,
including fuel oil, are subject to wide fluctuation in response to changes in global and regional supply that are
beyond our control, and increases in the price of crude oil may result in a lower demand for refined products that
we transport, store and market, including fuel oil;
a decrease in corn acres planted, which may reduce demand for anhydrous ammonia; and
the increased use of alternative fuel sources, such as battery-powered engines.
Similarly, any sustained decrease in the supply of crude oil and refined products could result in a significant reduction in
throughputs in our pipelines and storage in our terminals, which would reduce our cash flows and our ability to make
distributions at current levels to our unitholders. Factors that could lead to a decrease in supply to our pipelines and terminals
include:
•
prolonged periods of low prices for crude oil and refined products, which could lead to a decrease in exploration
and development activity and reduced production in markets served by our pipelines and storage terminals;
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•
•
changes in the regulatory environment, governmental policies or taxation that directly or indirectly delay
production or increase the cost of production of refined products; and
actions taken by foreign oil and gas producing nations that impact prices for crude oil and refined products.
Our future financial and operating flexibility may be adversely affected by our significant leverage, downgrades of our
credit ratings, restrictions in our debt agreements or disruptions in the financial markets.
As of December 31, 2014, our consolidated debt was $2.8 billion. In addition to any potential direct financial impact of debt, it
is possible that any material increase to our debt or other negative financial factors may be viewed negatively by credit rating
agencies, which could result in ratings downgrades and increased costs for us to access the capital markets. The ratings of
NuStar Logistics’ were downgraded to Ba1 by Moody’s Investor Service Inc. (Moody’s) in January 2013, BB+ by Standard &
Poor’s Ratings Services (S&P) in July 2012 and BB by Fitch, Inc. in November 2012. As a result of the S&P and Moody’s
downgrades, interest rates on borrowings under our five-year revolving credit agreement and our 7.65% senior notes due 2018
increased. Also, we may be required to post cash collateral under certain of our hedging arrangements, which we expect to
fund with borrowings under our revolving credit agreement. Any further downgrades in the future could result in additional
increases to the interest rates on borrowings under our credit facilities and the 7.65% senior notes due 2018, significantly
increase our capital costs and adversely affect our ability to raise capital in the future.
Our revolving credit agreement contains restrictive covenants, such as limitations on indebtedness, liens, mergers, asset
transfers and certain investing activities. In addition, the revolving credit agreement requires us to maintain, as of the end of
each rolling period, which consists of any period of four consecutive fiscal quarters, a consolidated debt coverage ratio
(consolidated debt to consolidated EBITDA, each as defined in the revolving credit agreement) not to exceed 5.00-to-1.00.
Failure to comply with any of the revolving credit agreement restrictive covenants or this coverage ratio will result in a default
and could result in acceleration of this agreement and possibly other indebtedness.
Debt service obligations, restrictive covenants in our credit facilities and the indentures governing our outstanding senior and
subordinated notes and maturities resulting from our leverage may adversely affect our ability to finance future operations,
pursue acquisitions, fund our capital needs and pay cash distributions to our unitholders at current levels. In addition, this
leverage may make our results of operations more susceptible to adverse economic or operating conditions. For example,
during an event of default under certain of our debt agreements, we would be prohibited from making cash distributions to our
unitholders. If our lenders file for bankruptcy or experience severe financial hardship, they may not honor their pro rata share
of our borrowing requests under the revolving credit agreement, which may significantly reduce our available borrowing
capacity and, as a result, materially adversely affect our financial condition and ability to pay distributions to our unitholders at
current levels. Additionally, we may not be able to access the capital markets in the future at economically attractive terms,
which may adversely affect our future financial and operating flexibility and our ability to pay cash distributions at current
levels.
We are exposed to counterparty credit risk. Nonpayment and nonperformance by our customers, vendors or derivative
counterparties could reduce our revenues, increase our expenses and otherwise have a negative impact on our ability to
conduct our business, our operating results, cash flows and ability to make distributions to our unitholders.
We are subject to risks of loss resulting from nonpayment or nonperformance by our customers to whom we extend credit. In
addition, nonperformance by vendors who have committed to provide us with critical products or services could raise our costs
or interfere with our ability to successfully conduct our business. Furthermore, nonpayment by the counterparties to any of our
outstanding commodity derivatives could expose us to additional commodity price risk. Weak economic conditions and
widespread financial stress could reduce the liquidity of our customers, vendors or counterparties, making it more difficult for
them to meet their obligations to us. Any substantial increase in the nonpayment and nonperformance by our customers,
vendors or counterparties could have a material adverse effect on our results of operations, cash flows and ability to make
distributions to unitholders.
Axeon’s failure to repay the Axeon Term Loan and any liability we incur as a result of the financing arrangements and
guarantees of Axeon required by that loan could have a material and adverse impact on our financial condition, results of
operations and cash flows and could adversely affect our ability to make quarterly distributions to our unitholders.
In connection with our sale of NuStar Asphalt LLC (now known as Axeon), our operating subsidiary, NuStar Logistics, agreed
to convert the revolving credit facility with Axeon into a $190 million term loan (the Axeon Term Loan). We also agreed to
continue to provide credit support to Axeon in the form of guarantees, letters of credit and cash collateral of up to $150 million
(the Credit Support) until February 2016, at which point the amount of Credit Support will begin to decline until the obligation
is terminated no later than September 2019.
Axeon was scheduled to repay amounts under the Axeon Term Loan to reduce the amount outstanding to $175 million by
December 31, 2014 and is scheduled to make further repayments to reduce the amount outstanding to $150 million by
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September 30, 2015, with repayment in full no later than September 2019 and earlier repayment possible, depending on the
amount of excess cash flows (if any) generated by Axeon. Any repayments of the Axeon Term Loan are subject to Axeon
meeting certain restrictive requirements contained in its third-party asset-based revolving credit facility (ABL Facility). Axeon
failed to make the scheduled repayment by December 31, 2014.
In the event that Axeon defaults on any of its obligations under the Axeon Term Loan, we would have available only those
measures available to an unsecured creditor with the rights and limitations provided in the Axeon Term Loan, and, to the extent
provided in the agreements, the ABL Facility lenders would be senior to those rights. In the event of a default on any of the
obligations underlying the Credit Support, we would be responsible for Axeon’s liabilities for the default and have only the
rights of repayment associated with that instrument. The failure by Axeon to make scheduled repayments under the Axeon
Term Loan or the default by Axeon of any of its obligations under the Axeon Term Loan or underlying the Credit Support may
have an adverse impact on our financial condition, results of operations, cash flows and ability to pay distributions to our
unitholders at current levels.
Increases in interest rates could adversely affect our business and the trading price of our units.
We have significant exposure to increases in interest rates. At December 31, 2014, we had approximately $2.8 billion of
consolidated debt, of which $1.8 billion was at fixed interest rates and $1.0 billion was at variable interest rates. In addition,
prior ratings downgrades on our existing indebtedness caused interest rates under our revolving credit agreement and our senior
notes due 2018 to increase effective January 2013, and future downgrades may cause such interest rates to increase further. Our
results of operations, cash flows and financial position could be materially adversely affected by significant increases in interest
rates above current levels. Further, the trading price of our units is sensitive to changes in interest rates and any rise in interest
rates could adversely impact such trading price.
Our operations are subject to operational hazards and unforeseen interruptions, and we do not insure against all potential
losses. Therefore, we could be seriously harmed by unexpected liabilities.
Our operations are subject to operational hazards and unforeseen interruptions such as natural disasters, adverse weather,
accidents, fires, explosions, hazardous materials releases, mechanical failures and other events beyond our control. These
events might result in a loss of equipment or life, injury or extensive property damage, as well as an interruption in our
operations. In the event any of our facilities are forced to shut down for a significant period of time, it may have a material
adverse effect on our earnings, our other results of operations and our financial condition as a whole.
We may not be able to maintain or obtain insurance of the type and amount we desire at reasonable rates. As a result of market
conditions, premiums and deductibles for certain of our insurance policies have increased substantially and could escalate
further. Certain insurance coverage could become unavailable or available only for reduced amounts of coverage and at higher
rates. For example, our insurance carriers require broad exclusions for losses due to terrorist acts. If we were to incur a
significant liability for which we are not fully insured, such a liability could have a material adverse effect on our financial
position and our ability to make distributions at current levels to our unitholders and to meet our debt service requirements.
A failure in our computer systems or a cyber-attack on us or third parties with whom we have a relationship may adversely
affect our operations and reputation.
We rely on the use of technology to conduct our business. Our business is dependent upon our operational and financial
computer systems to process the data necessary to conduct almost all aspects of our business, including operating our pipelines
and storage facilities, recording and reporting commercial and financial transactions and receiving and making payments. Our
systems and networks, as well as those of our customers, suppliers, vendors and counterparties, may become the target of
cyber-attacks or information security breaches, which in turn could result in the unauthorized release and misuse of confidential
and proprietary information as well as disrupt our operations, damage our facilities or those of third parties and harm our
reputation. Any failure or disruption of our systems could have an adverse effect on our revenues and increase our operating
and capital costs, which could reduce the amount of cash otherwise available for distributions. We also may be required to incur
additional costs to modify or enhance our systems in order to try to prevent or remediate any such attacks.
Potential future acquisitions and expansions, if any, may increase substantially the level of our indebtedness and contingent
liabilities, and we may be unable to integrate them effectively into our existing operations.
From time to time, we evaluate and acquire assets and businesses that we believe complement or diversify our existing assets
and businesses. Acquisitions may require substantial capital or the incurrence of substantial indebtedness. If we consummate
any future material acquisitions, our capitalization and results of operations may change significantly, and you will not have the
opportunity to evaluate the economic, financial and other relevant information that we will consider in connection with any
future acquisitions.
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Acquisitions and business expansions involve numerous risks, including difficulties in the assimilation of the assets and
operations of the acquired businesses, inefficiencies and difficulties that arise because of unfamiliarity with new assets and the
businesses associated with them and new geographic areas. Further, unexpected costs and challenges may arise whenever
businesses with different operations or management are combined. Successful business combinations will require our
management and other personnel to devote significant amounts of time to integrating the acquired businesses with our existing
operations. These efforts may temporarily distract their attention from day-to-day business, the development or acquisition of
new properties and other business opportunities. If we do not successfully integrate any past or future acquisitions, or if there is
any significant delay in achieving such integration, our business and financial condition could be adversely affected.
Moreover, part of our business strategy includes acquiring additional assets that complement our existing asset base and
distribution capabilities or provide entry into new markets. We may not be able to identify suitable acquisitions, or we may not
be able to purchase or finance any acquisitions on terms that we find acceptable. Additionally, we compete against other
companies for acquisitions, and we may not be successful in the acquisition of any assets or businesses appropriate for our
growth strategy.
We do not own all of the land on which our pipelines and facilities have been constructed, and we are therefore subject to
the possibility of increased costs or the inability to retain necessary land use.
We obtain the rights to construct and operate our pipelines, storage terminals and other facilities on land owned by third parties
and governmental agencies. Many of these rights-of-way or other property rights are perpetual in duration while others are for a
specific period of time. In addition, some of our facilities are located on leased premises. Our loss of these rights, through our
inability to renew right-of-way contracts or leases or otherwise, could adversely affect our operations and cash flows available
for distribution to unitholders.
In addition, the construction of additions to our existing assets may require us to obtain new rights-of-way or property rights
prior to construction. We may be unable to obtain such rights-of-way or other property rights to connect new supplies to our
existing pipelines, storage terminals or other facilities or to capitalize on other attractive expansion opportunities. Additionally,
it may become more expensive for us to obtain new rights-of-way or other property rights or to renew existing rights-of-way or
property rights. If the cost of obtaining new or renewing existing rights-of-way or other property rights increases, it may
adversely affect our operations and cash flows available for distribution to unitholders.
We may have liabilities from our assets that pre-exist our acquisition of those assets, but that may not be covered by
indemnification rights we may have against the sellers of the assets.
In some cases, we have indemnified the previous owners and operators of acquired assets. Some of our assets have been used
for many years to transport and store crude oil and refined products. Releases may have occurred in the past that could require
costly future remediation. If a significant release or event occurred in the past, the liability for which was not retained by the
seller, or for which indemnification by the seller is not available, it could adversely affect our financial position and results of
operations.
Climate change legislation and other regulatory initiatives may decrease demand for the products we store, transport and
sell and increase our operating costs.
Scientific studies have suggested that emissions of certain gases, commonly referred to as “greenhouse gases” and including
carbon dioxide and methane, may be contributing to warming of the Earth’s atmosphere. In response to such studies, the U.S.
Congress, European Union and other political bodies have considered legislation or regulation to reduce emissions of
greenhouse gases. In addition, several states and local governmental bodies, either individually or through multi-member
initiatives, have already taken legal measures to reduce emissions of greenhouse gases, including through the development of
greenhouse gas emission inventories and/or greenhouse gas cap and trade programs. As an alternative to reducing emission of
greenhouse gases under cap and trade programs, governmental bodies may consider the implementation of a program to tax the
emission of carbon dioxide and other greenhouse gases. Passage of climate change legislation or other regulatory initiatives in
areas in which we conduct business, could result in changes to the demand for the products we store, transport and sell, and
could increase the costs of our operations, including costs to operate and maintain our facilities, install new emission controls
on our facilities, acquire allowances to authorize our greenhouse gas emissions, pay any taxes related to our greenhouse gas
emissions or administer and manage a greenhouse gas emissions program. Even though we attempt to mitigate such lost
revenues or increased costs through the contracts we sign with our customers, we may be unable to recover those revenues or
mitigate the increased costs, and any such recovery may depend on events beyond our control, including the outcome of future
rate proceedings before the FERC, the STB or other regulators and the provisions of any final legislation or regulations.
Reductions in our revenues or increases in our expenses as a result of climate control or other initiatives could have adverse
effects on our business, financial position, results of operations and prospects.
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We operate a global business that exposes us to additional risk.
We operate in six foreign countries and a significant portion of our revenues come from our business in these countries. Our
operations outside the United States may be affected by changes in trade protection laws, policies and measures, and other
regulatory requirements affecting trade and investment, including the Foreign Corrupt Practices Act, the United Kingdom
Bribery Act and other foreign laws prohibiting corrupt payments, as well as import and export regulations. We have assets in
certain emerging markets, and the developing nature of these markets presents a number of risks. Deterioration of social,
political, labor or economic conditions, including the increasing threat of drug cartels, in a specific country or region and
difficulties in staffing and managing foreign operations may also adversely affect our operations or financial results.
Our operations are subject to federal, state and local laws and regulations, in the U.S. and in the foreign countries in which
we operate, relating to environmental protection and operational safety that could require us to make substantial
expenditures.
Our operations are subject to increasingly stringent environmental, health and safety laws and regulations. Transporting, storing
and distributing products, including petroleum products, produces a risk that these products may be released into the
environment, potentially causing substantial expenditures for a response action, significant government penalties, liability to
government agencies for damages to natural resources, personal injury or property damages to private parties and significant
business interruption. We own or lease a number of properties that have been used to transport, store or distribute products for
many years. Many of these properties were operated by third parties whose handling, disposal or release of products and wastes
was not under our control.
If we were to incur a significant liability pursuant to environmental, health or safety laws or regulations, such a liability could
have a material adverse effect on our financial position, our ability to make distributions to our unitholders at current levels and
our ability to meet our debt service requirements. Please read Item 3. “Legal Proceedings” and Note 16 of the Notes to
Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary Data.”
Our interstate common carrier pipelines are subject to regulation by the FERC.
The FERC regulates the tariff rates and terms and conditions of service for interstate oil movements on our common carrier
pipelines. FERC regulations require that these rates must be just and reasonable and that the pipeline not engage in undue
discrimination or undue preference with respect to any shipper. Under the ICA, FERC or shippers may challenge our pipeline
tariff filings, including rates and terms and conditions of service. Further, other than for rates set under market-based rate
authority, if a new rate is challenged by protest and investigated by the FERC, the FERC may suspend collection of such new
rate for up to seven months. If such new rate is found to be unjust and unreasonable, the FERC may order refunds of amounts
collected in excess of amounts generated by the just and reasonable rate determined by FERC. A successful rate challenge
could result in a common carrier paying refunds together with interest for the period that the rate was in effect. In addition,
shippers may challenge by complaint tariff rates and terms and conditions of service even after the rates and terms and
conditions of service are in effect. If the FERC, in response to such a complaint or on its own initiative, initiates an
investigation of rates that are already in effect, the FERC may order a carrier to change its rates prospectively. If existing rates
are challenged and are determined by the FERC to be in excess of a just and reasonable level, a shipper may obtain reparations
for damages sustained during the two years prior to the date the shipper filed a complaint.
We use various FERC-authorized rate change methodologies for our interstate pipelines, including indexing, cost-of-service
rates, market-based rates and settlement rates. Typically, we adjust our rates annually in accordance with FERC indexing
methodology, which currently allows a pipeline to change their rates within prescribed ceiling levels that are tied to an inflation
index. For the five-year period beginning July 1, 2011, the current index is measured by the year-over-year change in the
Bureau of Labor’s producer price index for finished goods, plus 2.65%. However, some of our newer projects that involved an
open season include negotiated indexation rate caps. These methodologies could result in changes in our revenue that do not
fully reflect changes in costs we incur to operate and maintain our pipelines. For example, our costs could increase more
quickly or by a greater amount than the negotiated indexation rate cap. Shippers may protest rate increases made within the
ceiling levels, but such protests must show that the portion of the rate increase resulting from application of the index is
substantially in excess of the pipeline’s change in costs from the previous year. However, if the index results in a negative
adjustment, we are required to reduce any rates that exceed the new maximum allowable rate. In addition, changes in the index
might not be large enough to fully reflect actual increases in our costs. If the FERC’s rate-making methodologies change, any
such change or new methodologies could result in rates that generate lower revenues and cash flow and could adversely affect
our ability to make distributions at current levels to our unitholders and to meet our debt service requirements. Additionally,
competition constrains our rates in various markets. As a result, we may from time to time be forced to reduce some of our rates
to remain competitive.
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Changes to FERC rate-making principles could have an adverse impact on our ability to recover the full cost of operating
our pipeline facilities and our ability to make distributions at current levels to our unitholders.
In May 2005, the FERC issued a statement of general policy stating it will permit pipelines to include in cost of service a tax
allowance to reflect actual or potential tax liability on their public utility income attributable to all partnership or limited
liability company interests, if the ultimate owner of the interest has an actual or potential income tax liability on such income.
Whether a pipeline’s owners have such actual or potential income tax liability will be reviewed by the FERC on a case-by-case
basis. Although this policy is generally favorable for pipelines that are organized as pass-through entities, it still entails rate risk
due to the case-by-case review requirement. This tax allowance policy and the FERC’s application of that policy were appealed
to the United States Court of Appeals for the District of Columbia Circuit (D.C. Court), and on May 29, 2007, the D.C. Court
issued an opinion upholding the FERC’s tax allowance policy.
In two proceedings involving SFPP, L.P., a refined products pipeline system, shippers again challenged the FERC’s income tax
allowance policy, alleging that it is unlawful for a pipeline organized as a tax-pass-through entity to be afforded an income tax
allowance and that the income tax allowance is unnecessary because an allowance for income taxes for such pipelines is
recovered indirectly through the rate of return on equity. The FERC rejected these shipper arguments in multiple orders.
Nonetheless, these issues are currently pending before the FERC on rehearing and, absent settlement, will likely be reviewed
by the D.C. Court. Because the extent to which an interstate oil pipeline is entitled to an income tax allowance is subject to a
case-by-case review at the FERC and is a matter under litigation, the level of income tax allowance to which we will ultimately
be entitled is not certain. Although the FERC’s current income tax allowance policy is generally favorable for pipelines that are
organized as pass-through entities, it still entails rate risks due to the case-by-case review requirement and the above-noted
pending litigation. How the FERC’s income tax allowance policy is applied in practice to pipelines owned by publicly traded
partnerships could impose limits on our ability to include a full income tax allowance in cost of service.
The rates that we may charge on our interstate ammonia pipeline are subject to regulation by the STB.
Our ammonia pipeline is subject to regulation under the ICA by the STB. Under that regulation our ammonia pipeline’s rates,
classifications, rules and practices related to the interstate transportation of anhydrous ammonia must be reasonable and, in
providing interstate transportation, our ammonia pipeline may not subject a person, place, port or type of traffic to unreasonable
discrimination.
Increases in natural gas and power prices could adversely affect our operating expenses and our ability to make
distributions at current levels to our unitholders.
Power costs constitute a significant portion of our operating expenses. For the year ended December 31, 2014, our power costs
equaled approximately $44.1 million, or 9.3% of our operating expenses for the year. We use mainly electric power at our
pipeline pump stations and terminals, and such electric power is furnished by various utility companies that use primarily
natural gas to generate electricity. Accordingly, our power costs typically fluctuate with natural gas prices. Increases in natural
gas prices may cause our power costs to increase further. If natural gas prices increase, our cash flows may be adversely
affected, which could adversely affect our ability to make distributions at current levels to our unitholders.
Terrorist attacks and the threat of terrorist attacks have resulted in increased costs to our business. Continued hostilities in
the Middle East or other sustained military campaigns may adversely impact our results of operations.
Increased security measures we have taken as a precaution against possible terrorist attacks have resulted in increased costs to
our business. Uncertainty surrounding continued hostilities in the Middle East or other sustained military campaigns may affect
our operations in unpredictable ways, including disruptions of crude oil supplies and markets for refined products, the
possibility that infrastructure facilities could be direct targets of, or indirect casualties of, an act of terror and instability in the
financial markets that could restrict our ability to raise capital.
Our cash distribution policy may limit our growth.
Consistent with the terms of our partnership agreement, we distribute our available cash to our unitholders each quarter. In
determining the amount of cash available for distribution, our management sets aside cash reserves, which we use to fund our
growth capital expenditures. Additionally, we have relied upon external financing sources, including commercial borrowings
and other debt and equity issuances, to fund our acquisition capital expenditures. Accordingly, to the extent we do not have
sufficient cash reserves or are unable to finance growth externally, our cash distribution policy will significantly impair our
ability to grow. In addition, to the extent we issue additional units in connection with any acquisitions or growth capital
expenditures, the payment of distributions on those additional units may increase the risk that we will be unable to maintain or
increase our current per unit distribution level.
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We could be subject to damages based on claims brought against us by our customers or lose customers as a result of the
failure of our products to meet certain quality specifications.
Certain of our products are produced to precise customer specifications. If a product fails to perform in a manner consistent
with the detailed quality specifications required by the customer, the customer could seek replacement of the product or
damages for costs incurred as a result of the product failing to perform as guaranteed. A successful claim or series of claims
against us could result in a loss of one or more customers.
The price volatility of crude oil and refined products can reduce our fuels marketing revenues and ability to make
distributions to our unitholders.
Revenues associated with our fuels marketing operations result primarily from our crude blending and trading operations and
fuel oil sales. We also maintain product inventory related to these activities. The price and market value of crude oil and refined
products is volatile. Our revenues will be adversely affected by this volatility during periods of decreasing prices because of the
reduction in the value and resale price of our inventory. Conversely, during periods of increasing petroleum product prices, our
revenues may be adversely affected because of the increased costs associated with obtaining our inventory. Future price
volatility could have an adverse impact on our results of operations, cash flows and ability to make distributions to our
unitholders.
Our purchase and sale of crude oil and petroleum products may expose us to trading losses and hedging losses, and non-
compliance with our risk management policies could result in significant financial losses.
In order to manage our exposure to commodity price fluctuations associated with our fuels marketing segment, we may engage
in crude oil and petroleum product hedges. As a result, our marketing and trading of crude oil and petroleum products may
expose us to price volatility risk for the purchase and sale of crude oil and petroleum products, including distillates and fuel oil.
We attempt to mitigate this volatility risk through hedging, but we are still exposed to basis risk. We may also be exposed to
inventory and financial liquidity risk due to the inability to trade certain products or rising costs of carrying some inventories.
Further, our marketing and trading activities, including any hedging activities, may cause volatility in our earnings. In addition,
we will be exposed to credit risk in the event of non-performance by counterparties.
Our risk management policies may not eliminate all price risk since open trading positions will expose us to price volatility.
Further, there is a risk that our risk management policies will not be complied with. Although we have designed procedures to
anticipate and detect non-compliance, we cannot assure you that these steps will detect and prevent all violations of our trading
policies and procedures, particularly if deception and other intentional misconduct are involved.
As a result of the risks described above, the activities associated with our marketing and trading business may expose us to
volatility in earnings and financial losses, which may adversely affect our financial condition and our ability to make our
quarterly distributions to our unitholders.
Hedging transactions may limit our potential gains or result in significant financial losses.
While intended to reduce the effects of volatile commodity prices, hedging transactions, depending on the hedging instrument
used, may limit our potential gains if petroleum product prices were to rise substantially over the price established by the
hedge. In addition, such transactions may expose us to the risk of financial loss in certain circumstances, including instances in
which:
•
•
the counterparties to our futures contracts fail to perform under the contracts; or
there is a change in the expected differential between the underlying price in the hedging agreement and the actual
prices received.
The accounting standards regarding hedge accounting are complex and, even when we engage in hedging transactions that are
effective economically, these transactions may not be considered effective for accounting purposes. Accordingly, our financial
statements will reflect increased volatility due to these hedges, even when there is no underlying economic impact at that point.
In addition, it is not possible for us to engage in a hedging transaction that completely mitigates our exposure to commodity
prices. Our financial statements may reflect a gain or loss arising from an exposure to commodity prices for which we are
unable to enter into an effective hedge.
NuStar GP Holdings may have conflicts of interest and limited fiduciary responsibilities, which may permit it to favor its
own interests to the detriment of our unitholders.
NuStar GP Holdings currently indirectly owns our general partner and as of December 31, 2014, an aggregate 12.9% limited
partner interest in us. Conflicts of interest may arise between NuStar GP Holdings and its affiliates, including our general
partner, on the one hand, and us and our limited partners, on the other hand. As a result of these conflicts, the general partner
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may favor its own interests and the interests of its affiliates over the interests of our unitholders. These conflicts include, among
others, the following situations:
• Our general partner is allowed to take into account the interests of parties other than us, such as NuStar GP
Holdings, in resolving conflicts of interest, which has the effect of limiting its fiduciary duty to the unitholders;
• Our general partner may limit its liability and reduce its fiduciary duties, while also restricting the remedies
available to unitholders. As a result of purchasing our common units, unitholders have consented to some actions
and conflicts of interest that might otherwise constitute a breach of fiduciary or other duties under applicable state
law;
• Our general partner determines the amount and timing of asset purchases and sales, capital expenditures,
borrowings, issuance of additional limited partner interests and reserves, each of which can affect the amount of
cash that is paid to our unitholders;
• Our general partner determines in its sole discretion which costs incurred by NuStar GP Holdings and its affiliates
are reimbursable by us;
• Our general partner may cause us to pay the general partner or its affiliates for any services rendered on terms that
are fair and reasonable to us or enter into additional contractual arrangements with any of these entities on our
behalf;
• Our general partner decides whether to retain separate counsel, accountants or others to perform services for us;
•
and
In some instances, our general partner may cause us to borrow funds in order to permit the payment of
distributions.
Our partnership agreement gives the general partner broad discretion in establishing financial reserves for the proper conduct of
our business, including interest payments. These reserves also will affect the amount of cash available for distribution.
We may issue an unlimited number of additional units, which will dilute existing interests of unitholders and may increase
the risk that we will be unable to maintain or increase our per unit distribution level.
Our partnership agreement allows us to issue additional units and certain other equity securities on the terms and conditions
established by our general partner and without the approval of other unitholders. There is no limit on the total number of units
and other equity securities we may issue. If we issue additional units or other equity securities, the proportionate partnership
interest of our existing common unitholders and the relative voting strength of the previously outstanding common units will
decrease. Any additional issuance may increase the risk that we will be unable to maintain or increase our per unit distribution
level and may negatively affect the market price of the units.
TAX RISKS TO OUR UNITHOLDERS
If we were treated as a corporation for federal or state income tax purposes, then our cash available for distribution to
unitholders would be substantially reduced.
The anticipated after-tax benefit of an investment in our units depends largely on our being treated as a partnership for federal
income tax purposes. We have not requested, and do not plan to request, a ruling from the Internal Revenue Service (the IRS)
on this matter.
If we were treated as a corporation for federal income tax purposes, we would pay federal income tax on our taxable income at
the corporate tax rate, which is currently a maximum of 35%. Distributions to unitholders would generally be taxed again as
corporate distributions, and no income, gains, losses, deductions or credits would flow through to unitholders. Thus, treatment
of us as a corporation would result in a material reduction in our anticipated cash flows and after-tax return to unitholders,
likely causing a substantial reduction in the value of our units.
Current law may change, causing us to be treated as a corporation for federal income tax purposes or otherwise subjecting us to
entity-level taxation. In addition, because of widespread state budget deficits and other reasons, several states are evaluating
ways to subject partnerships to entity level taxation through the imposition of state income, franchise or other forms of taxation.
Partnerships and limited liability companies, unless specifically exempted, are also subject to a state-level tax imposed on
revenues. Imposition of any entity-level tax on us by states in which we operate will reduce the cash available for distribution
to our unitholders.
A successful IRS contest of the federal income tax positions we take may adversely impact the market for our units, and the
costs of any contest will reduce cash available for distribution to our unitholders.
The IRS may adopt positions that differ from the positions we take, even positions taken with the advice of counsel. It may be
necessary to resort to administrative or court proceedings to sustain some or all of the positions we take. A court may not agree
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with all of the positions we take. Any contest with the IRS may materially and adversely impact the market for our units and
the prices at which they trade. Moreover, the costs of any contest between us and the IRS will result in a reduction in cash
available for distribution to our unitholders and thus will be borne indirectly by our unitholders and our general partner.
Even if unitholders do not receive any cash distributions from us, they will be required to pay taxes on their respective share
of our taxable income.
Unitholders will be required to pay federal income taxes and, in some cases, state and local income taxes on the unitholder’s
respective share of our taxable income, whether or not such unitholder receives cash distributions from us. Unitholders may not
receive cash distributions from us equal to the unitholder’s respective share of our taxable income or even equal to the actual
tax liability that results from the unitholder’s respective share of our taxable income.
The sale or exchange of 50% or more of our capital and profits interests, within a twelve-month period, will result in the
termination of our partnership for federal income tax purposes.
A termination would, among other things, result in the closing of our taxable year for all unitholders and would result in a
deferral of depreciation and cost recovery deductions allowable in computing our taxable income. If our partnership were
terminated for federal income tax purposes, a NuStar Energy unitholder would be allocated an increased amount of federal
taxable income for the year in which the partnership is considered terminated and the subsequent years as a percentage of the
cash distributed to the unitholder with respect to that period.
Tax gain or loss on the disposition of our units could be different than expected.
If a unitholder sells units, the unitholder will recognize a gain or loss equal to the difference between the amount realized and
that unitholder’s tax basis in those units. Prior distributions to the unitholder in excess of the total net taxable income the
unitholder was allocated for a unit, which decreased the tax basis in that unit, will, in effect, become taxable income to the
unitholder if the unit is sold at a price greater than the tax basis in that unit, even if the price the unitholder receives is less than
the original cost. A substantial portion of the amount realized, whether or not representing gain, may be ordinary income to the
selling unitholder.
Tax-exempt entities and foreign persons face unique tax issues from owning units that may result in adverse tax
consequences to them.
Investment in units by tax-exempt entities, such as individual retirement accounts (known as IRAs) and non-United States
persons raises issues unique to them. For example, virtually all of our income allocated to organizations exempt from federal
income tax, including individual retirement accounts and other retirement plans, will be unrelated business taxable income and
will be taxable to them. Distributions to non-United States persons will be reduced by withholding taxes at the highest
applicable effective tax rate, and non-United States persons will be required to file United States federal income tax returns and
pay tax on their share of our taxable income.
We will treat each purchaser of our units as having the same tax benefits without regard to the units purchased. The IRS
may challenge this treatment, which could adversely affect the value of our units.
Because we cannot match transferors and transferees of units, we will adopt depreciation and amortization positions that may
not conform to all aspects of existing Treasury regulations. A successful IRS challenge to those positions could adversely affect
the amount of tax benefits available to unitholders. It also could affect the timing of these tax benefits or the amount of gain
from any sale of units and could have a negative impact on the value of our units or result in audit adjustments to a unitholder’s
tax returns.
Unitholders will likely be subject to state and local taxes and return filing requirements as a result of investing in our units.
In addition to federal income taxes, unitholders will likely be subject to other taxes, such as state and local income taxes,
unincorporated business taxes and estate, inheritance or intangible taxes that are imposed by various jurisdictions in which we
do business or own property. Unitholders will likely be required to file state and local income tax returns and pay state and
local income taxes in some or all of these various jurisdictions. Further, unitholders may be subject to penalties for failure to
comply with those requirements. We may own property or conduct business in other states or foreign countries in the future. It
is each unitholder’s responsibility to file all federal, state or local tax returns.
We have adopted certain valuation methodologies that may result in a shift of income, gain, loss and deduction between the
general partner and the unitholders. The IRS may challenge this treatment, which could adversely affect the value of our
common units.
When we issue additional units or engage in certain other transactions, we determine the fair market value of our assets and
allocate any unrealized gain or loss attributable to our assets to the capital accounts of our unitholders and our general partner.
Our methodology may be viewed as understating the value of our assets. In that case, there may be a shift of income, gain, loss
and deduction between certain unitholders and the general partner, which may be unfavorable to such unitholders. Moreover,
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under our current valuation methods, subsequent purchasers of common units may have a greater portion of their Internal
Revenue Code Section 743(b) adjustment allocated to our tangible assets and a lesser portion allocated to our intangible assets.
The IRS may challenge our valuation methods, our allocation of the Section 743(b) adjustment attributable to our tangible and
intangible assets, and allocations of income, gain, loss and deduction between the general partner and certain of our
unitholders.
A successful IRS challenge to these methods or allocations could adversely affect the amount of taxable income or loss being
allocated to our unitholders. It also could affect the amount of gain from our unitholders’ sale of common units and could have
a negative impact on the value of the common units or result in audit adjustments to our unitholders’ tax returns without the
benefit of additional deductions.
A unitholder whose units are the subject of a securities loan (e.g., a loan to a “short seller” to cover a short sale of units)
may be considered as having disposed of those units. If so, the unitholder would no longer be treated for tax purposes as a
partner with respect to those units during the period of the loan and may recognize gain or loss from the disposition.
Because there are no specific rules governing the federal income tax consequences of loaning a partnership interest, a
unitholder whose units are the subject of a securities loan may be considered as having disposed of the loaned units. In that
case, the unitholder may no longer be treated for tax purposes as a partner with respect to those units during the period of the
loan to the short seller and the unitholder may recognize gain or loss from such disposition. Moreover, during the period of the
loan, any of our income, gain, loss or deduction with respect to those units may not be reportable by the unitholder and any
cash distributions received by the unitholder as to those units could be fully taxable as ordinary income. Unitholders desiring to
assure their status as partners and avoid the risk of gain recognition from a loan to a short seller are urged to consult a tax
advisor to discuss whether it is advisable to modify any applicable brokerage account agreements to prohibit their brokers from
borrowing their units.
PROPERTIES
Our principal properties are described above under the caption “Segments,” and that information is incorporated herein by
reference. We believe that we have satisfactory title to all of our assets. Although title to these properties is subject to
encumbrances in some cases, such as customary interests generally retained in connection with the acquisition of real property,
liens related to environmental liabilities associated with historical operations, liens for current taxes and other burdens and
easements, restrictions and other encumbrances to which the underlying properties were subject at the time of acquisition by us
or our predecessors, we believe that none of these burdens will materially detract from the value of these properties or from our
interest in these properties or will materially interfere with their use in the operation of our business. In addition, we believe
that we have obtained sufficient right-of-way grants and permits from public authorities and private parties for us to operate our
business in all material respects as described in this report. We perform scheduled maintenance on all of our pipelines,
terminals, crude oil tanks and related equipment and make repairs and replacements when necessary or appropriate. We believe
that our pipelines, terminals, crude oil tanks and related equipment have been constructed and are maintained in all material
respects in accordance with applicable federal, state and local laws and the regulations and standards prescribed by the
American Petroleum Institute, the DOT and accepted industry practice.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 3. LEGAL PROCEEDINGS
We are named as a defendant in litigation and are a party to other claims and legal proceedings relating to our normal business
operations, including regulatory and environmental matters. Due to the inherent uncertainty of litigation, there can be no
assurance that the resolution of any particular claim or proceeding would not have a material adverse effect on our results of
operations, financial position or liquidity.
We are insured against various business risks to the extent we believe is prudent; however, we cannot assure you that the nature
and amount of such insurance will be adequate, in every case, to protect us against liabilities arising from future legal
proceedings as a result of our ordinary business activity.
ENVIRONMENTAL AND SAFETY COMPLIANCE MATTERS
With respect to the environmental proceeding listed below, if it was decided against us, we believe that it would not have a
material effect on our consolidated financial position. However, it is not possible to predict the ultimate outcome of the
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proceeding or whether such ultimate outcome may have a material effect on our consolidated financial position. We are
reporting this proceeding to comply with Securities and Exchange Commission regulations, which require us to disclose
proceedings arising under federal, state or local provisions regulating the discharge of materials into the environment or
protecting the environment if we reasonably believe that such proceedings will result in monetary sanctions of $100,000 or
more.
In particular, our wholly owned subsidiary, Shore Terminals LLC (Shore), owns a refined product terminal in Portland, Oregon
located adjacent to the Portland Harbor. The EPA has classified portions of the Portland Harbor, including the portion adjacent
to our terminal, as a federal “Superfund” site due to sediment contamination (the Portland Harbor Site). Portland Harbor is
contaminated with metals (such as mercury), pesticides, herbicides, polynuclear aromatic hydrocarbons, polychlorinated
biphenyls, semi-volatile organics and dioxin/furans. Shore and more than 90 other parties have received a “General Notice” of
potential liability from the EPA relating to the Portland Harbor Site. The letter advised Shore that it may be liable for the costs
of investigation and remediation (which liability may be joint and several with other potentially responsible parties), as well as
for natural resource damages resulting from releases of hazardous substances to the Portland Harbor Site. We have agreed to
work with more than 90 other potentially responsible parties to attempt to negotiate an agreed method of allocating costs
associated with the cleanup. The precise nature and extent of any clean-up of the Portland Harbor Site, the parties to be
involved, the process to be followed for any clean-up and the allocation of any costs for the clean-up among responsible parties
have not yet been determined. It is unclear to what extent, if any, we will be liable for environmental costs or damages
associated with the Portland Harbor Site. It is also unclear to what extent natural resource damage claims or third party
contribution or damage claims will be asserted against Shore.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
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PART II
ITEM 5.
MARKET FOR REGISTRANT’S COMMON UNITS, RELATED UNITHOLDER MATTERS AND
ISSUER PURCHASES OF COMMON UNITS
Market Information, Holders and Distributions
Our common units are listed and traded on the New York Stock Exchange under the symbol “NS.” At the close of business on
February 9, 2015, we had 576 holders of record of our common units. The high and low sales prices (composite transactions)
by quarter for the years ended December 31, 2014 and 2013 were as follows:
Year 2014
4th Quarter
3rd Quarter
2nd Quarter
1st Quarter
Year 2013
4th Quarter
3rd Quarter
2nd Quarter
1st Quarter
Price Range of Common Unit
High
Low
$
$
66.94
$
68.33
62.88
55.15
53.69
$
46.52
54.95
53.45
50.91
61.02
53.76
47.51
39.52
36.15
42.31
43.40
Our partnership agreement requires that we distribute all “Available Cash” to our partners each quarter, and this term is defined
in the partnership agreement as cash on hand at the end of the quarter, plus certain permitted borrowings made subsequent to
the end of the quarter, less cash reserves determined by our board of directors. See Item 7. “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” for further information regarding our sources of cash to fund
distributions. The cash distributions applicable to each of the quarters in the years ended December 31, 2014 and 2013 were as
follows:
Year 2014
4th Quarter
3rd Quarter
2nd Quarter
1st Quarter
Year 2013
4th Quarter
3rd Quarter
2nd Quarter
1st Quarter
Record Date
Payment Date
Amount
Per Unit
February 9, 2015
February 13, 2015
$
November 10, 2014 November 14, 2014
August 6, 2014
August 11, 2014
May 7, 2014
May 12, 2014
February 10, 2014
February 14, 2014
$
November 11, 2013 November 14, 2013
August 5, 2013
August 9, 2013
May 6, 2013
May 10, 2013
1.095
1.095
1.095
1.095
1.095
1.095
1.095
1.095
Our general partner is entitled to incentive distributions if the amount that we distribute with respect to any quarter exceeds
specified target levels shown below:
Quarterly Distribution Amount per Unit
Up to $0.60
Above $0.60 up to $0.66
Above $0.66
29
Percentage of Distribution
Unitholders
General Partner
98%
90%
75%
2%
10%
25%
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Our general partner’s incentive distributions totaled $43.2 million for each of the years ended December 31, 2014 and 2013.
The general partner’s share of our distributions for the years ended December 31, 2014 and 2013 was 13.0% in each year due to
the impact of the incentive distributions.
The following table sets forth the purchases of our common units made during the quarter ended December 31, 2014 by or on
behalf of us or an affiliated purchaser:
Period
October 1 through October 31
November 1 through November 30
December 1 through December 31
Total
Total Number
of Units
Purchased(1)
Average
Price Paid
per Unit(1)
—
—
52.80
52.80
— $
—
25,000
25,000
$
Total Number of
Units Purchased as
Part of Publicly
Announced Plans or
Programs
Maximum Number (or
Approximate Dollar
Value) of Units that May
Yet Be Purchased Under
the Plans or Programs
—
—
—
—
— $
—
—
— $
(1) During the quarter ended December 31, 2014, NuStar GP, LLC, the general partner of our general partner, purchased
25,000 of our common units in the open market to satisfy NuStar GP, LLC’s obligations under its long-term incentive
plans.
ITEM 6. SELECTED FINANCIAL DATA
The following table contains selected financial data derived from our audited financial statements. On January 1, 2013, we sold
the San Antonio Refinery. As a result, we have presented the results of operations for the San Antonio Refinery and related
assets as discontinued operations for all periods presented. As of December 31, 2013, we reclassified certain storage assets as
“Assets held for sale” on the consolidated balance sheet. As a result, we have presented the results of operations for those
assets as discontinued operations for all periods presented.
Year Ended December 31,
2014
2013 (a)
2012 (a)
2011
2010
(Thousands of Dollars, Except Per Unit Data)
Statement of Income Data:
Revenues
Operating income (loss)
Income (loss) from continuing operations
Income (loss) from continuing operations per
unit applicable to limited partners
Cash distributions per unit applicable to
limited partners
$ 3,075,118
346,901
214,169
$ 3,463,732
(19,121)
(185,509)
$ 5,945,736
(18,168)
(166,001)
$ 6,257,629
310,883
218,674
$ 4,395,083
306,747
243,931
2.14
4.380
(2.89)
(2.79)
4.380
4.380
2.74
4.360
3.27
4.280
Balance Sheet Data:
Property, plant and equipment, net
Total assets
Long-term debt, less current portion
Total partners’ equity
2014
2013
2012
2011
2010
December 31,
(Thousands of Dollars)
$ 3,460,732
4,918,796
2,749,452
1,716,210
$ 3,310,653
5,032,186
2,655,553
1,903,794
$ 3,238,460
5,613,089
2,124,582
2,584,995
$ 3,430,468
5,881,190
1,928,071
2,864,335
$ 3,187,457
5,386,393
2,136,248
2,702,700
(a)
The losses for the years ended December 31, 2013 and 2012 are mainly due to goodwill and other asset impairment
charges. Please refer to Note 5 and Note 11 of the Notes to Consolidated Financial Statements in Item 8. “Financial
Statements and Supplementary Data” for a discussion of goodwill and other asset impairments.
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ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following review of our results of operations and financial condition should be read in conjunction with Items 1., 1A. and
2. “Business, Risk Factors and Properties” and Item 8. “Financial Statements and Supplementary Data” included in this report.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This Form 10-K contains certain estimates, predictions, projections, assumptions and other forward-looking statements that
involve various risks and uncertainties. While these forward-looking statements, and any assumptions upon which they are
based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will
almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future
performance suggested in this report. These forward-looking statements can generally be identified by the words “anticipates,”
“believes,” “expects,” “plans,” “intends,” “estimates,” “forecasts,” “budgets,” “projects,” “will,” “could,” “should,”
“may” and similar expressions. These statements reflect our current views with regard to future events and are subject to
various risks, uncertainties and assumptions. Please read Item 1A. “Risk Factors” for a discussion of certain of those risks,
uncertainties and assumptions.
If one or more of these risks or uncertainties materialize, or if the underlying assumptions prove incorrect, our actual results
may vary materially from those described in any forward-looking statement. Other unknown or unpredictable factors could
also have material adverse effects on our future results. Readers are cautioned not to place undue reliance on this forward-
looking information, which is as of the date of the Form 10-K. We do not intend to update these statements unless we are
required by the securities laws to do so, and we undertake no obligation to publicly release the result of any revisions to any
such forward-looking statements that may be made to reflect events or circumstances after the date of this report or to reflect
the occurrence of unanticipated events.
OVERVIEW
NuStar Energy L.P. (NuStar Energy) (NYSE: NS) is engaged in the transportation of petroleum products and anhydrous
ammonia, the terminalling and storage of petroleum products and the marketing of petroleum products. Unless otherwise
indicated, the terms “NuStar Energy,” “the Partnership,” “we,” “our” and “us” are used in this report to refer to NuStar Energy,
to one or more of our consolidated subsidiaries or to all of them taken as a whole. NuStar GP Holdings, LLC (NuStar GP
Holdings) (NYSE: NSH) owns our general partner, Riverwalk Logistics, L.P., and owns a 14.9% total interest in us as of
December 31, 2014. Our Management’s Discussion and Analysis of Financial Condition and Results of Operations is presented
in seven sections:
• Overview
• Results of Operations
• Trends and Outlook
• Liquidity and Capital Resources
• Related Party Transactions
• Critical Accounting Policies
• New Accounting Pronouncements
Dispositions and Acquisitions
Asphalt Dispositions. On September 28, 2012, we sold a 50% ownership interest (the 2012 Asphalt Sale) in NuStar Asphalt
LLC, previously a wholly owned subsidiary, to an affiliate of Lindsay Goldberg LLC (Lindsay Goldberg), a private investment
firm. NuStar Asphalt LLC owns and operates the asphalt refining assets that were previously wholly owned by NuStar Energy,
including an asphalt refinery located in Paulsboro, New Jersey and a terminal in Savannah, Georgia (collectively, the Asphalt
Operations). Lindsay Goldberg paid $175.0 million for the Class A equity interests (Class A Interests) of NuStar Asphalt LLC,
while we retained the Class B equity interests with a fair value of $52.0 million (Class B Interests). We also received $263.8
million from NuStar Asphalt LLC for inventory related to the Asphalt Operations. At closing, the fair value of the consideration
we received was less than the carrying amount of the assets of the Asphalt Operations, and we recognized a loss of $23.8
million in “Other income (expense), net” in the consolidated statements of income for the year ended December 31, 2012.
Upon closing, we deconsolidated NuStar Asphalt LLC and started reporting our remaining investment in NuStar Asphalt LLC
using the equity method of accounting.
On February 26, 2014, we sold our remaining 50% ownership interest in NuStar Asphalt LLC to Lindsay Goldberg (the 2014
Asphalt Sale). Effective February 27, 2014, NuStar Asphalt LLC changed its name to Axeon Specialty Products LLC (Axeon).
Lindsay Goldberg now owns 100% of Axeon. As a result of the 2014 Asphalt Sale, we ceased applying the equity method of
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accounting. Upon completion of the 2014 Asphalt Sale, the parties agreed to: (i) convert the $250.0 million unsecured
revolving credit facility provided by us to Axeon (the NuStar JV Facility) from a revolving credit agreement into a $190.0
million term loan (the Axeon Term Loan); (ii) terminate the terminal services agreements with respect to our terminals in
Rosario, NM, Catoosa, OK and Houston, TX; (iii) amend the terminal services agreements for our terminals in Baltimore, MD
and Jacksonville, FL; and (iv) transfer ownership of both the Wilmington, NC and Dumfries, VA terminals to Axeon, which
were categorized as assets held for sale at December 31, 2013. Please refer to Note 19 of the Notes to Consolidated Financial
Statements in Item 8. “Financial Statements and Supplementary Data” for a discussion of our agreements with Axeon.
As of December 31, 2013 and 2012, we presented our 50% ownership interest in Axeon as “Investment in joint ventures” on
the consolidated balance sheet. The consolidated statements of income include the results of operations for Axeon in “Equity in
earnings (loss) of joint ventures” from September 28, 2012 through February 25, 2014.
In anticipation of the 2012 Asphalt Sale, we evaluated the goodwill and other long-lived assets associated with the Asphalt
Operations for potential impairment. We determined the 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, we recorded an impairment loss of $244.2 million in the second quarter of 2012 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 are
reported in the fuels marketing segment. Please refer to Note 5 of the Notes to Consolidated Financial Statements in Item 8.
“Financial Statements and Supplementary Data” for a discussion of the 2012 Asphalt Sale, the related asset impairments and
associated fair value measurements.
Terminal Dispositions. As of December 31, 2013, in addition to the terminals located in Wilmington, NC and Dumfries, VA
that were transferred to Axeon as described above, we identified several non-strategic, underperforming terminal facilities and
decided to divest those facilities. As a result, we classified the property, plant and equipment associated with these assets as
“Assets held for sale” on the consolidated balance sheet. We presented the results of operations for those facilities as
discontinued operations for all periods presented, including an impairment loss of $102.5 million for the year ended
December 31, 2013. In September 2014, we sold our 75% interest in our facility in Mersin, Turkey for proceeds of $13.4
million (the Turkey Sale). We recognized a gain of $3.7 million, which is included in discontinued operations for the year
ended December 31, 2014. In June 2014, we sold three terminals located in Mobile, AL with an aggregate storage capacity of
1.8 million barrels for proceeds of $13.7 million. In April 2012, we sold five terminals in Georgia and Alabama with an
aggregate storage capacity of 1.8 million barrels for proceeds of $30.8 million.
San Antonio Refinery Disposition. On January 1, 2013, we sold our fuels refinery in San Antonio, Texas (the San Antonio
Refinery) and related assets for approximately $117.0 million (the San Antonio Refinery Sale). We have presented the results of
operations for the San Antonio Refinery and related assets as discontinued operations for all periods presented, including a gain
of $9.3 million on the sale.
TexStar Asset Acquisition. On December 13, 2012, we acquired the TexStar Crude Oil Assets (as defined below) from TexStar
Midstream Services, LP and certain of its affiliates (collectively, TexStar) for $325.4 million (the TexStar Asset Acquisition),
pursuant to an asset purchase agreement. The TexStar Crude Oil Assets consist of approximately 140 miles of crude oil
pipelines and gathering lines, as well as five terminals and storage facilities providing 0.6 million barrels of storage capacity.
The consolidated statements of income include the results of operations for the TexStar Asset Acquisition in the pipeline
segment commencing on December 13, 2012.
2013 Goodwill Impairment
In the fourth quarter of 2013, we recognized a $304.5 million goodwill impairment loss in the storage segment, which
represents the write-down of the carrying value of goodwill associated with our St. Eustatius and Point Tupper terminal
operations. Please refer to Note 11 of the Notes to Consolidated Financial Statements in Item 8. “Financial Statements and
Supplementary Data” for a discussion of the goodwill impairment loss.
Operations
We conduct our operations through our subsidiaries, primarily NuStar Logistics, L.P. (NuStar Logistics) and NuStar Pipeline
Operating Partnership L.P. (NuPOP). Our operations are divided into three reportable business segments: pipeline, storage and
fuels marketing. For a more detailed description of our segments, please refer to Segments under Item 1. “Business.”
Pipeline. We own refined product pipelines covering approximately 5,463 miles of pipelines, which consist of Central West
System refined product pipelines, the East Pipeline and the North Pipeline. The East and North Pipelines have storage capacity
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of approximately 6.3 million barrels. In addition, we own a 2,000 mile anhydrous ammonia pipeline and 1,180 miles of Central
West System crude oil pipelines including approximately 3.5 million barrels of storage capacity.
Storage. We own terminals and storage facilities in the United States, Canada, Mexico, the Netherlands, including St. Eustatius
in the Caribbean, and the United Kingdom (UK) providing approximately 80.9 million barrels of storage capacity.
Fuels Marketing. Within our fuels marketing operations, we purchase crude oil and refined petroleum products for resale. Our
fuels marketing segment includes our fuels marketing operations and, prior to the 2012 Asphalt Sale, the Asphalt Operations.
The results of operations for the fuels marketing segment depend largely on the margin between our cost and the sales prices of
the products we market. Therefore, the results of operations for this segment are more sensitive to changes in commodity prices
compared to the operations of the pipeline and storage segments.
We enter into derivative contracts to attempt to mitigate the effects of commodity price fluctuations. The derivative instruments
we use consist primarily of commodity futures and swap contracts. Not all of our derivative instruments qualify for hedge
accounting treatment under U.S. generally accepted accounting principles. In such cases, we record the changes in the fair
values of these derivative instruments in cost of product sales. The changes in the fair values of these derivative instruments
generally are offset, at least partially, by changes in the values of the hedged physical inventory. However, we do not recognize
those changes in the value of the hedged inventory until the physical sale of such inventory takes place. Therefore, our earnings
for a period may include the gain or loss related to derivative instruments without including the offsetting effect of the hedged
item, which could result in greater earnings volatility. In addition, we value our inventory at the lower of cost or market. If
changes in commodity markets cause market prices to fall below the cost of our inventory, we may be required to reduce the
value of our inventory to market.
Factors That Affect Results of Operations
The following factors affect the results of our operations:
•
•
•
•
•
company-specific factors, such as facility integrity issues and maintenance requirements that impact the
throughput rates of our assets;
seasonal factors that affect the demand for products transported by and/or stored in our assets and the demand for
products we sell;
industry factors, such as changes in the prices of petroleum products that affect demand and operations of our
competitors;
factors such as commodity price volatility that impact our fuels marketing segment; and
other factors, such as refinery utilization rates and maintenance turnaround schedules, that impact the operations
of refineries served by our pipeline and storage assets.
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RESULTS OF OPERATIONS
Year Ended December 31, 2014 Compared to Year Ended December 31, 2013
Financial Highlights
(Thousands of Dollars, Except Unit and Per Unit Data)
Year Ended December 31,
2014
2013
Change
Statement of Income Data:
Revenues:
Service revenues
Product sales
Total revenues
Costs and expenses:
Cost of product sales
Operating expenses
General and administrative expenses
Depreciation and amortization expense
Goodwill impairment loss
Total costs and expenses
Operating income (loss)
Equity in earnings (loss) of joint ventures
Interest expense, net
Interest income from related party
Other income, net
Income (loss) from continuing operations before income tax expense
Income tax expense
Income (loss) from continuing operations
Loss from discontinued operations, net of tax
Net income (loss)
Net income (loss) per unit applicable to limited partners:
Continuing operations
Discontinued operations
Total
$ 1,026,446
$
938,138
$
2,048,672
3,075,118
2,525,594
3,463,732
1,967,528
2,453,997
472,925
96,056
191,708
—
454,396
91,086
178,921
304,453
2,728,217
3,482,853
346,901
4,796
(132,281)
1,055
4,499
224,970
10,801
214,169
(3,791)
210,378
2.14
(0.04)
2.10
$
$
$
(19,121)
(39,970)
(127,119)
6,113
7,341
(172,756)
12,753
(185,509)
(99,162)
(284,671) $
(2.89) $
(1.11)
(4.00) $
$
$
$
Weighted-average limited partner units outstanding
77,886,078
77,886,078
88,308
(476,922)
(388,614)
(486,469)
18,529
4,970
12,787
(304,453)
(754,636)
366,022
44,766
(5,162)
(5,058)
(2,842)
397,726
(1,952)
399,678
95,371
495,049
5.03
1.07
6.10
—
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Segment Operating Highlights
(Thousands of Dollars, Except Barrel/Day Information)
Year Ended December 31,
2014
2013
Change
Pipeline:
Refined products pipelines throughput (barrels/day)
Crude oil pipelines throughput (barrels/day)
Total throughput (barrels/day)
Throughput revenues
Operating expenses
Depreciation and amortization expense
Segment operating income
Storage:
Throughput (barrels/day)
Throughput revenues
Storage lease revenues
Total revenues
Operating expenses
Depreciation and amortization expense
Goodwill impairment loss
Segment operating income (loss)
Fuels Marketing:
Product sales and other revenue
Cost of product sales
Gross margin
Operating expenses
Depreciation and amortization expense
Segment operating income (loss)
Consolidation and Intersegment Eliminations:
Revenues
Cost of product sales
Operating expenses
Total
Consolidated Information:
Revenues
Cost of product sales
Operating expenses
Depreciation and amortization expense
Goodwill impairment loss
Segment operating income
General and administrative expenses
Other depreciation and amortization expense
Consolidated operating income (loss)
510,737
437,757
948,494
477,030
154,106
77,691
245,233
887,607
123,051
441,455
564,506
277,554
103,848
—
183,104
$
$
$
$
$ 2,060,017
1,983,339
76,678
51,857
16
24,805
$
487,021
365,749
852,770
411,529
134,365
68,871
208,293
$
$
$
$
23,716
72,008
95,724
65,501
19,741
8,820
36,940
$
$
781,213
104,553
451,996
556,549
279,712
99,868
304,453
$ (127,484) $
106,394
18,498
(10,541)
7,957
(2,158)
3,980
(304,453)
310,588
$ 2,527,698
2,474,612
53,086
53,185
27
(126) $
$ (467,681)
(491,273)
23,592
(1,328)
(11)
24,931
$
$
$
(26,435) $
(15,811)
(10,592)
(32) $
(32,044) $
(20,615)
(12,866)
1,437
$
5,609
4,804
2,274
(1,469)
$ 3,463,732
2,453,997
454,396
168,766
304,453
82,120
91,086
10,155
(19,121) $
$ (388,614)
(486,469)
18,529
12,789
(304,453)
370,990
4,970
(2)
366,022
$
$ 3,075,118
1,967,528
472,925
181,555
—
453,110
96,056
10,153
346,901
$
35
Table of Contents
Annual Highlights
Segment operating income increased $371.0 million for the year ended December 31, 2014, compared to the year ended
December 31, 2013, mainly due to an operating loss of $127.5 million in the storage segment in 2013, which included a
goodwill impairment charge of $304.5 million. Segment operating income in the pipeline segment increased $36.9 million for
the year ended December 31, 2014 compared to the prior year, mainly due to increased throughputs on pipelines that serve
Eagle Ford Shale production in South Texas. The fuels marketing segment operating income increased by $24.9 million for the
year ended December 31, 2014, compared to the prior year, mainly due to improved product margins and lower operating
expense in our bunker fuel operations. Additionally, we recorded equity in earnings of joint ventures of $4.8 million for the
year ended December 31, 2014, compared to a loss in equity of joint ventures of $40.0 million for the year ended December 31,
2013, primarily due to losses from our investment in Axeon in 2013.
Loss from discontinued operations decreased $95.4 million for the year ended December 31, 2014, compared to the prior year,
mainly due to an asset impairment charge of $102.5 million in 2013 associated with certain storage assets. Therefore we
reported net income of $210.4 million for the year ended December 31, 2014, compared to a loss of $284.7 million for the year
ended December 31, 2013.
Pipeline
Revenues increased $65.5 million and throughputs increased 95,724 barrels per day for the year ended December 31, 2014,
compared to the year ended December 31, 2013, primarily due to:
•
•
•
•
an increase in revenues of $39.3 million and an increase in throughputs of 61,947 barrels per day on our South
Texas crude oil pipelines that serve Eagle Ford Shale production, primarily resulting from continued growth in the
region and the completion of expansion projects in 2014 and the third quarter of 2013 that increased our overall
capacity;
an increase in revenues of $9.1 million and an increase in throughputs of 26,369 barrels per day on pipelines
serving the McKee refinery mainly due to increased production by the McKee refinery in 2014;
an increase in revenues of $7.1 million and an increase in throughputs of 2,341 barrels per day on the East
Pipeline due to higher average tariffs resulting from the annual index adjustments and increased long-haul
deliveries, as well as higher demand due to favorable weather conditions during 2014 compared to last year; and
an increase in revenues of $4.9 million and an increase in throughputs of 3,140 barrels per day on the Ammonia
Pipeline mainly due to favorable weather conditions during 2014 compared to last year.
Operating expenses increased $19.7 million for the year ended December 31, 2014, compared to the year ended December 31,
2013, primarily due to:
•
•
•
an $8.0 million gain in 2013 for the reduction of the contingent consideration liability recorded in association with
the TexStar Asset Acquisition;
an increase of $6.3 million in maintenance and regulatory expenses, mainly associated with our East Pipeline and
Ammonia Pipeline; and
an increase of $5.0 million in power costs, mainly due to the increase in throughputs on pipelines that serve Eagle
Ford Shale production in South Texas and the East Pipeline.
Depreciation and amortization expense increased $8.8 million for the year ended December 31, 2014, compared to the year
ended December 31, 2013, mainly due to the completion of various projects that serve Eagle Ford Shale production.
Storage
Throughput revenues increased $18.5 million and throughputs increased 106,394 barrels per day for the year ended
December 31, 2014, compared to the year ended December 31, 2013, primarily due to:
•
•
•
an increase in revenues of $12.5 million and an increase in throughputs of 56,908 barrels per day at our Corpus
Christi North Beach terminal due to an increase in Eagle Ford Shale crude oil being shipped to Corpus Christi and
the completion of a new dock in the first quarter of 2014;
an increase in revenues of $3.0 million and an increase in throughputs of 37,822 barrels per day as a result of
turnarounds and operational issues during the first quarter of 2013 at the refineries served by our Corpus Christi
and Texas City crude oil storage tank facilities; and
an increase in revenues of $1.7 million and an increase in throughputs of 7,727 barrels per day at terminals
serving the McKee refinery due to higher demand in those markets.
Storage lease revenues decreased $10.5 million for the year ended December 31, 2014, compared to the year ended
December 31, 2013, primarily due to:
•
a decrease of $15.8 million at various domestic terminals, mainly as a result of reduced demand in several
markets, resulting in lower throughputs and storage fees;
36
Table of Contents
•
•
a decrease of $1.6 million at our Point Tupper, Canada terminal facility, mainly due to lower throughput and
related handling fees; and
a decrease of $0.9 million at our St. James terminal, mainly due to the narrowing price differential on two traded
crude oil grades (WTI and LLS) that reduced our profit sharing and volumes delivered to one of our unit train
offloading facilities. This decrease was partially offset by increased revenues resulting from the completion of
another unit train offloading facility in the fourth quarter of 2013, new contracts and rate increases.
The declines in storage lease revenues were partially offset by an increase of $5.5 million at our UK terminal facilities, mainly
due to the effect of foreign exchange rates and increased throughput and related handling fees. In addition, our asphalt
terminals increased $3.6 million due to renegotiating the storage contracts.
Operating expenses decreased $2.2 million for the year ended December 31, 2014, compared to the year ended December 31,
2013, primarily due to reduced maintenance and regulatory expenses of $2.8 million, mainly at our West Coast and Gulf Coast
terminals.
Depreciation and amortization expense increased $4.0 million for the year ended December 31, 2014, compared to the year
ended December 31, 2013, primarily due to the completion of a unit train offloading facility in the fourth quarter of 2013 at our
St. James terminal.
Fuels Marketing
Segment operating income increased $24.9 million for the year ended December 31, 2014, compared to the year ended
December 31, 2013, primarily due to higher earnings of $36.2 million from our bunker fuel operations, which benefitted from
improved product margins and decreased vessel lease and fuel costs. The increase in segment operating income from our
bunker fuel operations was partially offset by lower earnings of $7.6 million in fuel oil trading, mainly resulting from lower
product margins due to a lack of supply for blend components. In addition, operating expense in our bunker fuel and fuel oil
trading operations increased by $7.5 million related to an allowance for doubtful accounts recorded in the fourth quarter of
2014. We also recognized a $3.8 million lower of cost or market adjustment, mainly impacting fuel oil trading operations.
Consolidation and Intersegment Eliminations
Revenue and operating expense eliminations relate to storage fees charged to the fuels marketing segment by the storage
segment. Cost of product sales eliminations represent expenses charged to the fuels marketing segment for costs associated
with inventory that are expensed once the inventory is sold.
General
General and administrative expenses increased $5.0 million for the year ended December 31, 2014, compared to the year ended
December 31, 2013, primarily as a result of higher compensation expense associated with satisfying obligations under our long-
term incentive plans, which fluctuates with our unit price, and the termination of a services agreement between Axeon and
NuStar GP, LLC in June 2014, under which Axeon reimbursed us for certain corporate support services. These increases were
partially offset by reduced employee benefit costs.
We recorded equity in earnings of joint ventures of $4.8 million for the year ended December 31, 2014, compared to a loss in
equity of joint ventures of $40.0 million for the year ended December 31, 2013, primarily due to losses from our investment in
Axeon for the year ended December 31, 2013.
Interest expense, net increased $5.2 million for the year ended December 31, 2014, compared to the year ended December 31,
2013, mainly due to the issuance of the $300.0 million of 6.75% senior notes in August 2013. Interest income from related
party represents the interest earned on the NuStar JV Facility prior to the 2014 Asphalt Sale. Interest income from the Axeon
Term Loan after the 2014 Asphalt Sale is not a related party transaction and, therefore, is reported in “Interest expense, net” on
the consolidated statements of income.
Other income, net decreased by $2.8 million for the year ended December 31, 2014, compared to the year ended December 31,
2013, mainly due to changes in foreign exchange rates related to our foreign subsidiaries.
Income tax expense decreased $2.0 million for the year ended December 31, 2014, compared to the year ended December 31,
2013, mainly due to a decrease in the margin tax in Texas.
The loss from discontinued operations decreased $95.4 million for the year ended December 31, 2014, compared to the year
ended December 31, 2013, mainly due to the asset impairment charges of $102.5 million associated with certain storage
terminals, partially offset by a gain of $9.3 million related to the San Antonio Refinery Sale.
37
Table of Contents
Year Ended December 31, 2013 Compared to Year Ended December 31, 2012
Financial Highlights
(Thousands of Dollars, Except Unit and Per Unit Data)
Statement of Income Data:
Revenues:
Service revenues
Product sales
Total revenues
Costs and expenses:
Cost of product sales
Operating expenses
General and administrative expenses
Depreciation and amortization expense
Goodwill impairment loss
Asset impairment loss
Gain on legal settlement
Total costs and expenses
Operating loss
Equity in loss of joint ventures
Interest expense, net
Interest income from related party
Other income (expense), net
Loss from continuing operations before income tax expense
Income tax expense
Loss from continuing operations
Loss from discontinued operations, net of tax
Net loss
Net loss per unit applicable to limited partners:
Continuing operations
Discontinued operations
Total
Year Ended December 31,
2013
2012
Change
$
938,138
$
870,157
$
2,525,594
3,463,732
5,075,579
5,945,736
67,981
(2,549,985)
(2,482,004)
2,453,997
4,930,174
454,396
91,086
178,921
304,453
—
—
3,482,853
526,145
104,756
159,789
22,132
249,646
(28,738)
5,963,904
(2,476,177)
(71,749)
(13,670)
19,132
282,321
(249,646)
28,738
(2,481,051)
(19,121)
(39,970)
(127,119)
6,113
7,341
(172,756)
12,753
(185,509)
(99,162)
(284,671) $
(18,168)
(9,378)
(90,535)
1,219
(24,689)
(141,551)
24,450
(166,001)
(61,236)
(227,237) $
(953)
(30,592)
(36,584)
4,894
32,030
(31,205)
(11,697)
(19,508)
(37,926)
(57,434)
(2.89) $
(1.11)
(4.00) $
(2.79) $
(0.82)
(3.61) $
(0.10)
(0.29)
(0.39)
$
$
$
Weighted-average limited partner units outstanding
77,886,078
72,957,417
4,928,661
38
Table of Contents
Segment Operating Highlights
(Thousands of Dollars, Except Barrel/Day Information)
Pipeline:
Refined products pipelines throughput (barrels/day)
Crude oil pipelines throughput (barrels/day)
Total throughput (barrels/day)
Throughput revenues
Operating expenses
Depreciation and amortization expense
Segment operating income
Storage:
Throughput (barrels/day)
Throughput revenues
Storage lease revenues
Total revenues
Operating expenses
Depreciation and amortization expense
Goodwill and asset impairment loss
Segment operating (loss) income
Fuels Marketing:
Product sales and other revenue
Cost of product sales
Gross margin
Operating expenses
Depreciation and amortization expense
Goodwill and asset impairment loss
Segment operating loss
Consolidation and Intersegment Eliminations:
Revenues
Cost of product sales
Operating expenses
Total
Consolidated Information:
Revenues
Cost of product sales
Operating expenses
Depreciation and amortization expense
Goodwill and asset impairment loss
Segment operating income
General and administrative expenses
Other depreciation and amortization expense
Other asset impairment loss
Gain on legal settlement
Consolidated operating loss
39
Year Ended December 31,
2013
2012
Change
487,021
365,749
852,770
411,529
134,365
68,871
208,293
$
$
$
781,213
104,553
451,996
556,549
279,712
99,868
304,453
(127,484) $
$
$
$
$
498,321
345,648
843,969
340,455
128,987
52,878
158,590
765,556
95,612
482,454
578,066
288,881
88,217
2,126
198,842
$
$
$
$
(11,300)
20,101
8,801
71,074
5,378
15,993
49,703
15,657
8,941
(30,458)
(21,517)
(9,169)
11,651
302,327
(326,326)
$ 2,527,698
2,474,612
53,086
53,185
27
—
(126) $
$ 5,086,383
4,957,100
129,283
148,458
11,253
266,357
(296,785) $
$ (2,558,685)
(2,482,488)
(76,197)
(95,273)
(11,226)
(266,357)
296,659
$
$
$
(32,044) $
(20,615)
(12,866)
1,437
$
(59,168) $
(26,926)
(40,181)
7,939
$
27,124
6,311
27,315
(6,502)
$ 3,463,732
2,453,997
454,396
168,766
304,453
82,120
91,086
10,155
—
—
(19,121) $
$ 5,945,736
4,930,174
526,145
152,348
268,483
68,586
104,756
7,441
3,295
(28,738)
(18,168) $
$ (2,482,004)
(2,476,177)
(71,749)
16,418
35,970
13,534
(13,670)
2,714
(3,295)
28,738
(953)
$
Table of Contents
Annual Highlights
Operating loss for both years includes significant impairment charges. In 2013, we recognized a goodwill impairment charge of
$304.5 million associated with our St. Eustatius and Point Tupper terminal operations, while 2012 included an impairment
charge of $266.4 million related to the goodwill and long-lived assets of the Asphalt Operations. Segment operating income,
which includes these impairment charges, increased $13.5 million for the year ended December 31, 2013, compared to the year
ended December 31, 2012, primarily due to an increase of $49.7 million in the segment operating income of the pipeline
segment. This increase was mainly due to increased throughputs on pipelines that serve Eagle Ford Shale production in South
Texas and higher pipeline tariffs as a result of the annual index adjustment in July 2013.
Loss from continuing operations increased $19.5 million for the year ended December 31, 2013, compared to the year ended
December 31, 2012, primarily due to an increase of $36.6 million in interest expense, net and an increase of $30.6 million in
the equity in loss of joint ventures. Loss from discontinued operations, net of tax, increased $37.9 million for the year ended
December 31, 2013, compared to the year ended December 31, 2012, mainly due to asset impairment charges of $102.5 million
in 2013 associated with certain storage assets that were classified as “Assets held for sale” on the consolidated balance sheet as
of December 31, 2013. Discontinued operations also include the results of operations for the San Antonio Refinery and related
assets. As a result, we reported a net loss of $284.7 million for the year ended December 31, 2013, compared to a net loss of
$227.2 million for the year ended December 31, 2012.
Pipeline
Revenues increased $71.1 million and throughputs increased 8,801 barrels per day for the year ended December 31, 2013,
compared to the year ended December 31, 2012, primarily due to:
•
•
•
•
an increase in revenues of $57.4 million and an increase in throughputs of 49,855 barrels per day on crude oil
pipelines that serve Eagle Ford Shale production in South Texas, primarily resulting from the TexStar Asset
Acquisition and crude oil pipelines that were placed in service in the fourth quarter of 2012 and third quarter of
2013;
an increase in revenues of $6.3 million on the East Pipeline, despite lower throughputs of 2,997 barrels per day,
due to higher average tariffs resulting from the annual index adjustment in July 2013 and increased long-haul
deliveries;
an increase in revenues of $5.6 million and an increase in throughputs of 2,067 barrels per day on the North
Pipeline, mainly due to the completion of an expansion project at the Mandan refinery in June 2012; and
an increase in revenues of $5.2 million and an increase in throughputs of 4,210 barrels per day on refined product
and crude oil pipelines serving the McKee refinery resulting from increased volumes on pipelines with higher
tariffs.
Those higher throughputs were partially offset by a decrease in throughputs of 28,438 barrels per day on crude oil pipelines
serving the Ardmore refinery due to a new contract effective January 1, 2013 that combines two segments of a crude oil
pipeline serving the Ardmore refinery for which throughputs were previously reported separately. That change in reporting
throughputs did not adversely affect revenues, which increased by $0.4 million due to the new contract terms, despite a
turnaround at the Ardmore refinery during the first quarter of 2013.
Revenues decreased $3.9 million and throughputs decreased 5,613 barrels per day on the Ammonia Pipeline due to
unseasonably cold and wet weather in the second and fourth quarters of 2013. Also, revenues decreased $1.6 million and
throughputs decreased 6,731 barrels per day on the Houston pipeline as it is being converted to new service.
Operating expenses increased $5.4 million for the year ended December 31, 2013, compared to the year ended December 31,
2012, primarily due to an increase of $18.6 million on crude oil pipelines that serve Eagle Ford Shale production in South
Texas, mainly resulting from the TexStar Asset Acquisition and crude oil pipelines that were placed in service in the fourth
quarter of 2012.
This increase was partially offset by:
•
•
a decrease of $8.0 million resulting from the reduction of the contingent consideration liability recorded in
association with the TexStar Asset Acquisition; and
a decrease of $3.5 million due to temporary barge rental costs in 2012 needed to transport a customer’s product in
conjunction with an Eagle Ford Shale project.
Depreciation and amortization expense increased $16.0 million for the year ended December 31, 2013, compared to the year
ended December 31, 2012, mainly due to the TexStar Asset Acquisition in December 2012 and the completion of various
projects that serve Eagle Ford Shale production.
40
Table of Contents
Storage
Throughput revenues increased $8.9 million and throughputs increased 15,657 barrels per day for the year ended December 31,
2013, compared to the year ended December 31, 2012. Revenues increased $14.3 million and throughputs increased 73,741
barrels per day at our Corpus Christi crude storage tank facility due to increased volumes of Eagle Ford Shale crude oil being
shipped to Corpus Christi on our pipelines in South Texas. The TexStar Asset Acquisition in December 2012, the completion of
several pipeline capital projects in 2012 and 2013 and changing our Corpus Christi crude storage tank facility from a lease-
based to a throughput-based facility in the third quarter of 2012 were among the drivers for the increased volumes. These
increases were partially offset by decreased throughputs of 53,768 barrels per day and decreased revenues of $5.2 million
resulting from turnarounds, maintenance and operational issues in 2013 at the refineries served by our Corpus Christi, Texas
City and Benicia crude oil storage tanks and our Three Rivers refined products terminals.
Storage lease revenues decreased $30.5 million for the year ended December 31, 2013, compared to the year ended
December 31, 2012, primarily due to:
•
•
•
•
•
•
a decrease of $26.6 million at various domestic terminals, mainly as a result of reduced demand in several
markets, resulting in lower throughputs, storage fees and reimbursable revenues;
a decrease of $7.7 million at our UK and Amsterdam terminals, mainly due to reduced demand for storage and the
effect of foreign exchange rates;
a decrease of $7.6 million at our St. Eustatius terminal facility, mainly due to reduced demand for storage and
decreased reimbursable revenue;
a decrease of $6.2 million at our Corpus Christi crude storage tank facility due to the change to throughput-based
fees in July 2012;
a decrease of $3.8 million at asphalt terminals under storage agreements with Axeon, which we entered into
simultaneously with the 2012 Asphalt Sale; and
a decrease of $2.9 million due to the sale of five refined product terminals in April 2012.
Those declines in storage lease revenues were partially offset by an increase in storage lease revenues of $19.2 million resulting
from a completed unit train offloading facility at our St. James terminal and completed tank expansion projects at our St. James
and St. Eustatius terminals. In addition, revenues increased $5.2 million as a result of our acquisition of a lease at the Red Fish
Bay terminal in conjunction with the TexStar Asset Acquisition.
Operating expenses decreased $9.2 million for the year ended December 31, 2013, compared to the year ended December 31,
2012, primarily due to:
•
•
a decrease of $9.0 million associated with cancelled capital projects, mainly at our St. James and St. Eustatius
terminals in 2012; and
a decrease of $6.3 million in reimbursable expenses, mainly for tank cleanings at our Piney Point terminal and
maintenance expenses at our St. Eustatius terminal. Reimbursable expenses are charged back to our customers
and are offset by reimbursable revenues.
These decreases were partially offset by an increase of $3.9 million in salaries and wages due to a collective labor agreement
that became effective in mid-2012 associated with our St. Eustatius terminal, our acquisition of a lease at the Redfish Bay
terminal in conjunction with the TexStar Asset Acquisition, and higher employee benefit and temporary labor costs.
Depreciation and amortization expense increased $11.7 million for the year ended December 31, 2013, compared to the year
ended December 31, 2012, primarily due to completion of a dock optimization project at our Corpus Christi crude storage tank
facility, unit train and tank expansion projects at our St. James terminal and a tank expansion project at our St. Eustatius
terminal.
The asset impairment loss of $304.5 million for the year ended December 31, 2013 represents the write-down of the carrying
value of goodwill associated with our St. Eustatius and Point Tupper terminal operations. Please refer to Note 11 of the Notes
to Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary Data” for further discussion of this
goodwill impairment.
Fuels Marketing
The consolidated statements of income (loss) include the results of operations for Axeon in “Equity in earnings (loss) of joint
ventures” commencing on September 28, 2012. Previously, we reported the results of operations for our Asphalt Operations in
the fuels marketing segment. For the year ended December 31, 2013, this segment mainly includes refined products marketing,
crude oil trading, fuel oil trading and bunkering operations.
41
Table of Contents
The following table presents pro forma financial information that removes the historical financial information for our Asphalt
Operations from the segment results for the year ended December 31, 2012 in order to provide a more meaningful comparison
of the segment’s results.
Year Ended
December 31, 2013
Actual
Asphalt
Operations
Pro Forma
Change
Year Ended December 31, 2012
Product sales
Cost of product sales
Gross margin
Operating expenses
Depreciation and amortization expense
Asset and goodwill impairment loss
(Thousands of Dollars)
$
2,527,698
$ 5,086,383
$ 1,315,986
$ 3,770,397
2,474,612
4,957,100
1,258,308
3,698,792
53,086
53,185
27
—
129,283
148,458
11,253
57,678
89,969
11,138
266,357
(296,785) $
266,357
(309,786) $
71,605
58,489
115
—
13,001
$ (1,242,699)
(1,224,180)
(18,519)
(5,304)
(88)
—
(13,127)
$
Segment operating (loss) income
$
(126) $
Sales and cost of product sales decreased $1,242.7 million and $1,224.2 million, respectively, resulting in a decrease in total
gross margin of $18.5 million for the year ended December 31, 2013, compared to the year ended December 31, 2012. The
decrease in total gross margin was primarily due to a positive gross margin of $12.0 million from crude oil trading in 2012, as
compared to a gross margin loss of $0.3 million in 2013. In 2012, higher volumes were traded in the first part of 2012 to benefit
from the price differential on two traded crude oil grades (WTI and LLS). In addition, the gross margin from bunker fuel sales
decreased $9.8 million for the year ended December 31, 2013, compared to the year ended December 31, 2012, mainly at our
St. Eustatius and Texas City facilities. Reduced demand for bunker fuels and increased competition in the Caribbean and the
U.S. Gulf Coast has negatively impacted our sales prices and resulted in lower gross margins as compared to the same period
last year. These decreases were partially offset by an increase of $3.7 million in the gross margin from fuel oil trading
attributable to lower costs that outweighed falling sales prices compared to the same period last year.
Operating expenses decreased $5.3 million for the year ended December 31, 2013, compared to the year ended December 31,
2012, mainly due to a decrease in operating expenses from our bunker fuel operations as we exited certain U.S. markets.
Consolidation and Intersegment Eliminations
Revenue and operating expense eliminations primarily relate to storage and transportation fees charged to the fuels marketing
segment by the storage and pipeline segments. Revenue and operating expense eliminations changed by $27.1 million and
$27.3 million, respectively, for the year ended December 31, 2013, compared to the year ended December 31, 2012, mainly due
to the 2012 Asphalt Sale. Cost of product sales eliminations represent expenses charged to the fuels marketing segment for
costs associated with inventory that are expensed once the inventory is sold.
General
General and administrative expenses decreased $13.7 million for the year ended December 31, 2013, compared to the year
ended December 31, 2012, primarily due to the early termination of a lease for our previous corporate office and expenses that
were reimbursed by Axeon for corporate support services under a services agreement between Axeon and NuStar GP, LLC. In
addition, general and administrative expenses in the second quarter of 2012 included costs that resulted from a Canadian
income tax audit.
Other depreciation and amortization expense increased $2.7 million for the year ended December 31, 2013, compared to the
year ended December 31, 2012, mainly due to the completion of our corporate office in the fourth quarter of 2012.
The other asset impairment loss of $3.3 million for the year ended December 31, 2012 represents the write-down of the
carrying value of certain corporate assets we sold in 2013.
The gain on legal settlement of $28.7 million for the year ended December 31, 2012 represents the settlement of a legal matter
in the second quarter of 2012.
Equity in loss of joint ventures increased $30.6 million for the year ended December 31, 2013, compared to the year ended
December 31, 2012, primarily due to a $49.6 million loss from our investment in Axeon in 2013, which continued to suffer
from weak asphalt margins.
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Interest expense, net increased $36.6 million for the year ended December 31, 2013, compared to the year ended December 31,
2012, mainly due to the issuance of the $402.5 million of 7.625% fixed-to-floating rate subordinated notes in January 2013.
Interest income from related party increased $4.9 million for the year ended December 31, 2013, compared to the year ended
December 31, 2012, as a result of a full year of borrowings by Axeon under the NuStar JV Facility that we entered into with
Axeon in connection with the 2012 Asphalt Sale on September 28, 2012. Please refer to Note 19 of the Notes to Consolidated
Financial Statements in Item 8. “Financial Statements and Supplementary Data” for additional information on our agreements
with Axeon.
Other income (expense), net changed by $32.0 million for the year ended December 31, 2013, compared to the year ended
December 31, 2012, mainly due to a loss of $23.8 million associated with the 2012 Asphalt Sale and changes in foreign
exchange rates related to our foreign subsidiaries.
Income tax expense decreased $11.7 million for the year ended December 31, 2013, compared to the year ended December 31,
2012, mainly due to tax expense of $10.1 million related to the $28.7 million gain on legal settlement recognized in the second
quarter of 2012.
For the year ended December 31, 2013, we recorded a loss from discontinued operations of $99.2 million, compared to a loss
from discontinued operations of $61.2 million for the year ended December 31, 2012. For the year ended December 31, 2013,
the loss from discontinued operations includes asset impairment charges of $102.5 million associated with certain storage
terminals that were classified as “Assets held for sale” on the consolidated balance sheet as of December 31, 2013. Please refer
to Note 5 of the Notes to Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary Data” for
further discussion of these asset impairment charges. This loss was partially offset by a gain of $9.3 million related to the San
Antonio Refinery Sale.
For the year ended December 31, 2012, the loss from discontinued operations includes losses of $49.1 million from the San
Antonio Refinery, mainly due to hedge losses and falling sales prices coupled with high weighted-average costs, which resulted
in an overall negative gross margin.
TRENDS AND OUTLOOK
Pipeline Segment
We expect the first quarter of 2015 to continue to benefit from expansion projects we completed in the first half of 2014, which
increased our system’s overall capacity. We expect earnings for the pipeline segment to be higher than the first quarter of 2014
and comparable to the fourth quarter of 2014.
We expect our full-year earnings for 2015 to exceed 2014 mainly due to the planned completion in the first half of 2015 of
pipeline expansion projects, as well as reduced turnaround activity at our customers’ refineries and the July 1, 2015 tariff
increase on our pipelines subject to regulation by the Federal Energy Regulatory Commission. Although the drop in crude
prices in late 2014 and early 2015 has not reduced the demand for our transportation services so far, continued weak crude oil
prices could have a negative impact on demand in the future, which could cause our earnings to decline.
Storage Segment
We expect storage segment earnings for the first quarter of 2015 and the full-year of 2015 to exceed the comparable periods in
2014 mainly due to our January 2015 purchase of the remaining 50% interest in the former joint venture terminal in Linden,
New Jersey and higher throughputs at our North Beach terminal as a result of the increase in Eagle Ford Shale crude oil being
shipped to Corpus Christi.
Fuels Marketing Segment
We expect first quarter of 2015 results for our fuels marketing segment to be comparable to the first quarter of 2014, although
higher than the fourth quarter of 2014. We expect the full-year 2015 results in this segment to be comparable to 2014 results.
However, earnings in this segment, as in any margin-based business, are subject to many factors that can increase or reduce
margins, which may cause the segment’s actual results to vary significantly from our forecast.
Our outlook for the partnership, both overall and for any of our segments, may change, as we base our expectations on our
continuing evaluation of a number of factors, many of which are outside our control, including the price of crude oil, the state
of the economy, changes to refinery maintenance schedules, demand for crude oil, refined products and ammonia, demand for
our transportation and storage services, and changes in laws or regulations affecting our assets.
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LIQUIDITY AND CAPITAL RESOURCES
Overview
Primary Cash Requirements. Our primary cash requirements are for distributions to our partners, working capital (including
inventory purchases), debt service, capital expenditures, including reliability capital, a financing agreement with Axeon,
acquisitions and operating expenses.
Our partnership agreement requires that we distribute all “Available Cash” to our partners each quarter, and this term is defined
in the partnership agreement as cash on hand at the end of the quarter, plus certain permitted borrowings made subsequent to
the end of the quarter, less cash reserves determined by our board of directors.
Sources of Funds. Each year, we work to fund our annual total operating expenses, interest expense, reliability capital
expenditures and distribution requirements with our net cash provided by operating activities during that year. If we do not
generate sufficient cash from operations to meet those requirements, we utilize other sources of cash flow, which in the past
have included borrowings under our revolving credit agreement, sales of non-strategic assets and, to the extent necessary, funds
raised through equity or debt offerings under our shelf registration statements. Additionally, we typically fund our strategic
capital expenditures and acquisitions from external sources, primarily borrowings under our revolving credit agreement or
funds raised through equity or debt offerings. However, our ability to raise funds by issuing debt or equity depends on many
factors beyond our control. Our risk factors in Item 1A. “Risk Factors” describe the risks inherent to these sources of funding
and the availability thereof.
During periods that our cash flow from operations is less than our distribution and reliability capital requirements, we may
maintain our distribution level because we can utilize other sources of Available Cash, as provided in our partnership
agreement, including borrowing under our revolving credit agreement and the proceeds from the sales of assets. Our risk
factors in Item 1A. “Risk Factors” describe the risks inherent in our ability to maintain or grow the distribution.
Cash Requirements and Sources. For the year ended December 31, 2012, we did not generate sufficient cash from operations
to exceed our distribution and reliability capital requirements. The shortfall in cash from operations resulted primarily from
our fuels marketing segment. Poor margins in the segment drove our earnings down sharply, thus reducing our net cash
provided by operating activities below our distribution and reliability capital requirements. In 2012, we embarked on a
strategic redirection (i) to focus on our core, fee-based segments, pipeline and storage and (ii) to reduce earnings volatility and
working capital requirements stemming from the fuels marketing segment.
For the years ended December 31, 2014 and 2013, our cash flow from operations exceeded our distributions to our partners and
our reliability capital expenditures, mainly due to our strategic redirection discussed above. For 2015, we currently expect to
continue to produce cash from operations in excess of our distribution and reliability capital expenditures.
Cash Flows for the Years Ended December 31, 2014, 2013 and 2012
The following table summarizes our cash flows from operating, investing and financing activities:
Net cash provided by (used in):
Operating activities
Investing activities
Financing activities
Effect of foreign exchange rate changes on cash
Net (decrease) increase in cash and cash equivalents
Year Ended December 31,
2014
2013
2012
(Thousands of Dollars)
$
$
$
518,523
(340,231)
(188,185)
(2,938)
(12,831) $
485,219
(310,961)
(149,350)
(7,767)
17,141
$
$
299,203
(345,800)
110,669
2,033
66,105
Net cash provided by operating activities for the year ended December 31, 2014 was $518.5 million, compared to $485.2
million for the year ended December 31, 2013, or an increase of $33.3 million. For the year ended December 31, 2014, we
reported net income of $210.4 million, compared to a net loss of $284.7 million for the year ended December 31, 2013, which
included $407.0 million of non-cash goodwill and asset impairment charges. We recorded equity in earnings of joint ventures
of $4.8 million for the year ended December 31, 2014, compared to a loss in equity of joint ventures of $40.0 million for the
year ended December 31, 2013, primarily due to losses from our investment in Axeon in 2013. Changes in working capital
provided cash flow of $82.4 million for the year ended December 31, 2014, compared to $112.8 million for the year ended
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December 31, 2013. Please refer to the Working Capital Requirements section below for a discussion of the changes in working
capital.
For the year ended December 31, 2014, net cash provided by operating activities was used to fund our distributions to
unitholders and our general partner in the aggregate amount of $392.2 million and to fund $28.6 million of reliability capital
expenditures. The proceeds from debt borrowings, net of repayments, combined with net cash provided by operating activities
and proceeds from the sales of assets, were used to fund strategic capital expenditures primarily related to our pipeline and
storage segments and advances to Axeon under the NuStar JV Facility.
Net cash provided by operating activities for the year ended December 31, 2013 was $485.2 million, compared to $299.2
million for the year ended December 31, 2012, or an increase of $186.0 million. For the year ended December 31, 2013, we
reported a net loss of $284.7 million, which included $407.0 million of non-cash goodwill and asset impairment charges, while
the net loss for the year ended December 31, 2012 of $227.2 million included $271.8 million of non-cash asset impairment
charges. Equity in loss of joint ventures increased to $40.0 million for the year ended December 31, 2013, compared to $9.4
million for the year ended December 31, 2012, mainly due to losses from our investment in Axeon. Changes in working capital
provided cash flow of $112.8 million for the year ended December 31, 2013, compared to $90.2 million for the year ended
December 31, 2012.
For the year ended December 31, 2013, net cash provided by operating activities exceeded our distribution requirements and
reliability capital expenditures. Proceeds from the San Antonio Refinery Sale and proceeds from long-term debt borrowings,
net of repayments, combined with net cash provided by operating activities, were used to fund our strategic capital
expenditures and advances to Axeon under the NuStar JV Facility.
For the year ended December 31, 2012, net cash provided by operating activities, proceeds from long-term debt borrowings,
net of repayments, proceeds from our issuance of common units and proceeds from the 2012 Asphalt Sale were used to fund
our distributions to unitholders and our general partner, the TexStar Asset Acquisition and strategic and reliability capital
expenditures.
Revolving Credit Agreement
On October 29, 2014, NuStar Logistics amended and restated its $1.5 billion five-year revolving credit agreement (Revolving
Credit Agreement), which matures on October 29, 2019. The Revolving Credit Agreement includes an option allowing NuStar
Logistics to request an aggregate increase in the commitments from the lenders of up to $250.0 million (after which increase
the aggregate commitment from all lenders shall not exceed $1.75 billion). The Revolving Credit Agreement also includes the
ability to borrow up to the equivalent of $250.0 million in Euros and up to the equivalent of $250.0 million in British Pounds
Sterling. Obligations under the Revolving Credit Agreement are guaranteed by NuStar Energy and NuPOP. NuPOP will be
released from its guarantee of the Revolving Credit Agreement when it no longer guarantees indebtedness of NuStar Energy or
its subsidiaries in an aggregate principal amount exceeding $200.0 million.
The Revolving Credit Agreement contains customary restrictive covenants, such as limitations on indebtedness, liens, mergers,
asset transfers and certain investing activities. In addition, the Revolving Credit Agreement requires us to maintain, as of the
end of each rolling period of four consecutive fiscal quarters, a consolidated debt coverage ratio (consolidated debt to
consolidated EBITDA, each as defined in the Revolving Credit Agreement) not to exceed 5.00-to-1.00. If we consummate an
acquisition for an aggregate net consideration of at least $50.0 million, the maximum consolidated debt coverage ratio will
increase to 5.50-to-1.00 for two rolling periods. The Revolving Credit Agreement permits unlimited investments in joint
ventures and unconsolidated subsidiaries, provided that no default exists and we would be in compliance with the consolidated
debt coverage ratio, but limits the amount of cash distributions for such joint ventures and unconsolidated subsidiaries included
in the calculation of the consolidated debt coverage ratio to 20% of consolidated EBITDA. The requirement not to exceed a
maximum consolidated debt coverage ratio may limit the amount we can borrow under the Revolving Credit Agreement to an
amount less than the total amount available for borrowing. As of December 31, 2014, our consolidated debt coverage ratio was
4.0x, and we had $842.3 million available for borrowing.
Letters of credit issued under our Revolving Credit Agreement totaled $56.2 million as of December 31, 2014. Letters of credit
are limited to $750.0 million (including up to the equivalent of $25.0 million in Euros and up to the equivalent of $25.0 million
in British Pounds Sterling) and also restrict the amount we can borrow under the Revolving Credit Agreement.
Please refer to Note 14 of the Notes to Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary
Data” for a more detailed discussion of our long-term debt agreements.
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Short-term Lines of Credit
In 2014, we entered into two short-term line of credit agreements with an aggregate uncommitted borrowing capacity of up to
$80.0 million. These agreements allow us to better manage the fluctuations in our daily cash requirements and minimize our
excess cash balances. The interest rate and maturity vary and are determined at the time of the borrowing. We had $77.0
million outstanding under these short-term lines of credit as of December 31, 2014.
Gulf Opportunity Zone Revenue Bonds
In 2008, 2010 and 2011, the Parish of St. James, where our St. James, Louisiana, terminal is located, issued Revenue Bonds
(NuStar Logistics, L.P. Project) Series 2008, Series 2010, Series 2010A, Series 2010B and Series 2011 associated with our St.
James terminal expansion pursuant to the Gulf Opportunity Zone Act of 2005 (collectively, the Gulf Opportunity Zone
Revenue Bonds). The interest rates on these bonds are based on a weekly tax-exempt bond market interest rate, and interest is
paid monthly. Following the issuance, the proceeds were deposited with a trustee and are disbursed to us upon our request for
reimbursement of expenditures related to our St. James terminal expansion. The amount remaining in trust is included in “Other
long-term assets, net,” and the amount of bonds issued is included in “Long-term debt, less current portion” in our consolidated
balance sheets.
NuStar Logistics is solely obligated to service the principal and interest payments associated with the Gulf Opportunity Zone
Revenue Bonds. Letters of credit were issued on our behalf to guarantee the payment of interest and principal on the bonds. All
letters of credit rank equally with existing senior unsecured indebtedness of NuStar Logistics. The letters of credit issued by
individual banks do not restrict the amount we can borrow under the Revolving Credit Agreement.
The following table summarizes the Gulf Opportunity Zone Revenue Bonds outstanding as of December 31, 2014:
Date Issued
Maturity Date
Amount
Outstanding
Amount of
Letter of
Credit
Amount
Received from
Trustee
Amount
Remaining in
Trust
Average Annual
Interest Rate
(Thousands of Dollars)
June 26, 2008
July 15, 2010
June 1, 2038
July 1, 2040
$
55,440
$
56,169
$
55,440
$
100,000
101,315
100,000
October 7, 2010
October 1, 2040
December 29, 2010
December 1, 2040
August 29, 2011
August 1, 2041
50,000
85,000
75,000
50,658
86,118
75,986
35,760
27,689
75,000
—
—
14,240
57,311
—
Total
$
365,440
$
370,246
$
293,889
$
71,551
0.1%
0.1%
0.1%
0.1%
0.1%
Issuance of Debt
On August 19, 2013, NuStar Logistics issued $300.0 million of 6.75% senior notes due February 1, 2021 (the 6.75% Senior
Notes). We received net proceeds of approximately $296.0 million, which we used for general partnership purposes, including
repayment of outstanding borrowings under our Revolving Credit Agreement.
On January 22, 2013, NuStar Logistics issued $402.5 million of 7.625% fixed-to-floating rate subordinated notes due
January 15, 2043 (the Subordinated Notes), including the underwriters’ option to purchase up to an additional $52.5 million
principal amount of the notes, which was exercised in full. We received net proceeds of approximately $390.9 million, which
we used for general partnership purposes, including repayment of outstanding borrowings under our Revolving Credit
Agreement. The Subordinated Notes bear interest at a fixed annual rate of 7.625%, payable quarterly in arrears beginning on
April 15, 2013 and ending on January 15, 2018. Thereafter, the Subordinated Notes will bear interest at an annual rate equal to
the sum of the three-month LIBOR rate for the related quarterly interest period, plus 6.734% payable quarterly, commencing
April 15, 2018, unless payment is deferred in accordance with the terms of the notes.
On February 2, 2012, NuStar Logistics issued $250.0 million of 4.75% senior notes due February 1, 2022. The net proceeds of
$247.4 million were used to repay the outstanding principal amount of NuPOP’s $250.0 million 7.75% senior notes due
February 15, 2012.
Please refer to Note 14 of the Notes to Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary
Data” for a more detailed discussion of our debt agreements.
Issuance of Common Units
On September 10, 2012, we issued 7,130,000 common units representing limited partner interests at a price of $48.94 per unit.
We used the net proceeds from this offering of $343.9 million, including a contribution of $7.1 million from our general partner
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to maintain its 2% general partner interest, for general partnership purposes, including repayments of outstanding borrowings
under our Revolving Credit Agreement and working capital purposes.
If the capital markets become more volatile, our access to the capital markets may be limited, or we could face increased costs.
In addition, it is possible that our ability to access the capital markets may be limited at a time when we would like or need
access, which could have an impact on our ability to refinance maturing debt and/or react to changing economic and business
conditions.
Capital Requirements
Our operations require significant investments to maintain, upgrade or enhance the operating capacity of our existing assets.
Our capital expenditures consist of:
•
•
reliability capital expenditures, such as those required to maintain equipment reliability and safety; and
strategic capital expenditures, such as those to expand and upgrade pipeline capacity or terminal facilities and to
construct new pipelines, terminals and storage tanks. In addition, strategic capital expenditures may include
acquisitions of pipelines, terminals or storage tank assets, as well as certain capital expenditures related to support
functions.
During the year ended December 31, 2014, our reliability capital expenditures totaled $28.6 million, primarily related to
maintenance upgrade projects at our terminals. Strategic capital expenditures for the year ended December 31, 2014 totaled
$328.3 million and were primarily related to projects associated with Eagle Ford Shale production in South Texas and the
reactivation and conversion of our 200-mile pipeline between Mont Belvieu and Corpus Christi, Texas.
During the year ended December 31, 2013, our reliability capital expenditures totaled $41.3 million, primarily related to
maintenance upgrade projects at our terminals. Strategic capital expenditures for the year ended December 31, 2013 totaled
$302.0 million and were primarily related to projects in the Eagle Ford Shale region in South Texas and projects at our St.
James, Louisiana terminal.
For 2015, we expect to incur approximately $440.0 million to $470.0 million of capital expenditures, including approximately
$40.0 million to $50.0 million for reliability capital expenditures and $400.0 million to $420.0 million for strategic capital
expenditures, including acquisitions. We continue to evaluate our capital budget and make changes as economic conditions
warrant, and our actual capital expenditures for 2015 may increase or decrease from the budgeted amounts. We believe cash
generated from operations, combined with other sources of liquidity previously described, will be sufficient to fund our capital
expenditures in 2015, and our internal growth projects can be accelerated or scaled back depending on the condition of the
capital markets.
Working Capital Requirements
Our fuels marketing operations require us to make investments in working capital. Those working capital requirements may
vary with fluctuations in the commodity prices and with the seasonality of demand for the products we market. This seasonality
in demand affects our accounts receivable and accounts payable balances, which vary depending on timing of payments.
Inventories decreased $82.1 million during the year ended December 31, 2014, primarily due to a steep decline in crude oil
market price during the fourth quarter of 2014. We also continued a bunker fuel supply strategy that further reduced the
inventory carried in our bunker fuel operations and we reduced inventories associated with our heavy fuel oil trading
operations. During the year ended December 31, 2014, accounts receivable decreased $72.3 million and accounts payable
decreased $153.7 million mainly due to the bunker fuel supply strategy and less crude oil trading activity. In addition, the
termination of the crude oil supply agreement with Axeon on January 1, 2014 caused a decrease in both accounts payable and
the receivable from related parties.
Within working capital, inventories decreased $32.0 million during the year ended December 31, 2013, primarily as a result of
a new bunker fuel supply agreement that reduced the inventory carried in our St. Eustatius bunker fuel operations. In addition,
accounts receivable decreased $107.2 million and accounts payable decreased $96.3 million during the year ended
December 31, 2013, primarily due to less crude oil trading and bunker fuel operations activity in 2013 and the San Antonio
Refinery Sale. Accounts payable also decreased due to timing of payments for crude oil purchases related to Axeon, which
corresponds with the decrease in the receivable from related parties of $58.7 million during the year ended December 31, 2013.
Axeon Term Loan and Credit Support
The Axeon Term Loan includes scheduled repayments to reduce the outstanding amount from $190.0 million to $175.0 million
as of December 31, 2014 and then to $150.0 million on September 30, 2015. Any repayments of the Axeon Term Loan,
including those scheduled in 2014 and 2015, are subject to Axeon meeting certain restrictive requirements contained in its
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third-party asset-based revolving credit facility. Axeon failed to make a scheduled repayment by December 31, 2014, which
will increase the interest rate until Axeon makes the repayment. While the Axeon Term Loan does not provide for any other
scheduled payments, Axeon is required to use all of its excess cash, as defined in the Axeon Term Loan, to repay the Axeon
Term Loan. The Axeon Term Loan must be repaid in full on September 28, 2019. The Axeon Term Loan bears interest based on
either an alternative base rate or a LIBOR-based rate. We recognize interest income over the term of the loan in “Interest
expense, net” on the consolidated statements of income. As of December 31, 2014, the interest rate was 3.1%.
We will continue to provide credit support, such as guarantees, letters of credit and cash collateral, as applicable, of up to
$150.0 million. Our obligation to provide credit support will be reduced by a minimum of $25.0 million beginning February
2016 and will terminate in full no later than September 28, 2019. As of December 31, 2014, we provided guarantees for Axeon
with an aggregate maximum potential exposure of $25.3 million, plus two guarantees to suppliers that do not specify a
maximum amount, but for which we believe any amounts due would be minimal. As of December 31, 2014, we have also
provided $50.1 million in letters of credit on behalf of Axeon. In the event we are obligated to perform under any of these
guarantees or letters of credit, the amount paid by us will be treated as additional borrowings under the Axeon Term Loan.
Distributions
NuStar Energy’s partnership agreement, as amended, determines the amount and priority of cash distributions that our common
unitholders and general partner may receive. The general partner receives a 2% distribution with respect to its general partner
interest. The general partner is also entitled to incentive distributions if the amount we distribute with respect to any quarter
exceeds $0.60 per unit. For a detailed discussion of the incentive distribution targets, please read Item 5. “Market for
Registrant’s Common Units, Related Unitholder Matters and Issuer Purchases of Common Units.”
The following table reflects the allocation of total cash distributions to the general and limited partners applicable to the period
in which the distributions were earned:
General partner interest
General partner incentive distribution
Total general partner distribution
Limited partners’ distribution
Total cash distributions
Cash distributions per unit applicable to limited partners
Year Ended December 31,
2014
2013
2012
(Thousands of Dollars, Except Per Unit Data)
7,844
$
7,844
$
43,220
51,064
341,140
392,204
4.380
$
$
43,220
51,064
341,140
392,204
4.380
$
$
7,486
41,242
48,728
325,526
374,254
4.380
$
$
$
Actual distribution payments are made within 45 days after the end of each quarter as of a record date that is set after the end of
each quarter. The following table summarizes information related to our quarterly cash distributions:
Quarter Ended
December 31, 2014 (a)
September 30, 2014
June 30, 2014
March 31, 2014
Cash
Distributions
Per Unit
Total Cash
Distributions
(Thousands of
Dollars)
Record Date
Payment Date
$
$
$
$
1.095
1.095
1.095
1.095
$
$
$
$
98,051
February 9, 2015
February 13, 2015
98,051 November 10, 2014
November 14, 2014
98,051
98,051
August 6, 2014
August 11, 2014
May 7, 2014
May 12, 2014
(a) The distribution was announced on January 30, 2015.
Debt Obligations
As of December 31, 2014, we were a party to the following debt agreements:
•
•
the Revolving Credit Agreement due October 29, 2019, with a balance of $601.5 million as of December 31,
2014;
7.65% senior notes due April 15, 2018 with a face value of $350.0 million; 4.80% senior notes due September 1,
2020 with a face value of $450.0 million; 6.75% senior notes due February 1, 2021 with a face value of $300.0
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million; 4.75% senior notes due February 1, 2022 with a face value of $250.0 million; and 7.625% subordinated
notes due January 15, 2043 with a face value of $402.5 million;
•
•
$365.4 million Gulf Opportunity Zone Revenue Bonds due from 2038 to 2041; and
$80.0 million line of credit agreements with $77.0 million outstanding as of December 31, 2014.
In 2013, we repaid NuStar Logistics’ $229.9 million of 6.05% senior notes due March 15, 2013, NuPOP’s $250.0 million of
5.875% senior notes due June 1, 2013, and NuStar Terminals Limited’s £21 million amended and restated term loan, which
matured on December 10, 2013, with borrowings under the Revolving Credit Agreement.
Management believes that, as of December 31, 2014, we are in compliance with all ratios and covenants of the Revolving
Credit Agreement. Our other debt obligations do not contain any financial covenants that differ from those contained in the
Revolving Credit Agreement. However, a default under any of our debt instruments would be considered an event of default
under all of our debt instruments. Please refer to Note 14 of the Notes to Consolidated Financial Statements in Item 8.
“Financial Statements and Supplementary Data” for a more detailed discussion of our debt agreements.
Credit Ratings
The following table reflects the current outlook and ratings that have been assigned to our debt:
Ratings
Outlook
Standard & Poor’s
Ratings Services
Moody’s Investor
Service Inc.
BB+
Stable
Ba1
Stable
Fitch, Inc.
BB
Stable
The interest rate payable on the senior notes and the Revolving Credit Agreement is subject to adjustment if our debt rating is
downgraded (or upgraded) by certain credit rating agencies. We may also be required to provide additional credit support for
certain contracts, although as of December 31, 2014, we have not been required to provide any additional credit support.
Long-Term Contractual Obligations
The following table presents our long-term contractual obligations and commitments and the related payments due, in total and
by period, as of December 31, 2014:
Payments Due by Period
2015
2016
2017
2018
2019
Thereafter
Total
(Thousands of Dollars)
Long-term debt maturities
$
— $
— $
— $ 350,000
$ 601,496
$ 1,767,940
$ 2,719,436
Interest payments
Operating leases
Purchase obligations
129,861
129,861
30,179
6,294
26,135
3,880
129,861
21,885
694
121,794
19,536
216
106,213
1,092,595
1,710,185
13,297
—
66,635
—
177,667
11,084
The interest payments calculated for our variable-rate debt are based on the outstanding borrowings and the interest rate as of
December 31, 2014. The interest payments on our fixed-rate debt are based on the stated interest rates, the outstanding balances
as of December 31, 2014 and interest payment dates.
Our operating leases consist primarily of leases for tugs and barges utilized at our St. Eustatius and land leases at various
terminal facilities.
A purchase obligation is an enforceable and legally binding agreement to purchase goods or services that specifies significant
terms, including (i) fixed or minimum quantities to be purchased, (ii) fixed, minimum or variable price provisions, and (iii) the
approximate timing of the transaction.
In November 2013, we came to a mutual agreement with PDVSA-Petróleo S.A. (PDVSA) to terminate that certain Crude
Oil Sales Agreement dated effective as of March 1, 2008. The termination was effective January 1, 2014, and in connection
therewith, we also terminated our crude oil supply agreement with Axeon effective January 1, 2014.
Environmental, Health and Safety
We are subject to extensive federal, state and local environmental and safety laws and regulations, including those relating to
the discharge of materials into the environment, waste management, pollution prevention measures, pipeline integrity and
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operator qualifications, among others. Because more stringent environmental and safety laws and regulations are continuously
being enacted or proposed, the level of future expenditures required for environmental, health and safety matters is expected to
increase.
The balance of and changes in our accruals for environmental matters as of and for the years ended December 31, 2014 and
2013 are included in Note 15 of the Notes to Consolidated Financial Statements in Item 8. “Financial Statements and
Supplemental Data.” We believe that we have adequately accrued for our environmental exposures.
Contingencies
We are subject to certain loss contingencies, the outcomes of which could have an adverse effect on our cash flows and results
of operations, as further disclosed in Note 16 of the Notes to Consolidated Financial Statements in Item 8. “Financial
Statements and Supplemental Data.”
RELATED PARTY TRANSACTIONS
The following table summarizes information pertaining to related party transactions:
Revenues
Operating expenses
General and administrative expenses
Interest income
Revenues included in discontinued operations, net of tax
Expenses included in discontinued operations, net of tax
Year Ended December 31,
2014
2013
2012
(Thousands of Dollars)
$
$
$
$
$
$
929
125,736
66,910
1,055
528
1,680
$
$
$
$
$
$
14,897
122,677
58,602
6,113
3,720
6,051
$
$
$
$
$
$
1,990
133,654
62,490
1,219
3,390
14,328
NuStar GP, LLC
Our operations are managed by NuStar GP, LLC, the general partner of our general partner. Under the services agreement
described below, employees of NuStar GP, LLC provide services to both NuStar Energy and NuStar GP Holdings; therefore,
we reimburse NuStar GP, LLC for all costs related to its employees, other than costs associated with NuStar GP Holdings.
NuStar Energy and NuStar GP, LLC entered into a services agreement effective January 1, 2008 (the GP Services Agreement).
On July 19, 2006, we entered into a non-compete agreement with NuStar GP Holdings, Riverwalk Logistics, L.P., and NuStar
GP, LLC effective on December 22, 2006 (the Non-Compete Agreement). Please refer to Note 19 of the Notes to Consolidated
Financial Statements in Item 8. “Financial Statements and Supplementary Data” for a more detailed discussion of agreements
with NuStar GP Holdings.
We had a payable to NuStar GP, LLC of $15.1 million and $8.3 million as of December 31, 2014 and 2013, respectively, with
both amounts representing payroll, employee benefit plan expenses and unit-based compensation. We also had a long-term
payable to NuStar GP, LLC as of December 31, 2014 and 2013 of $33.5 million and $41.1 million, respectively, for amounts
payable for retiree medical benefits and other post-employment benefits.
Axeon
As a result of the 2014 Asphalt Sale, we ceased reporting transactions between us and Axeon as related party transactions in
our consolidated financial statements on February 26, 2014.
CRITICAL ACCOUNTING POLICIES
The preparation of financial statements in accordance with U.S. generally accepted accounting principles requires management
to select accounting policies and to make estimates and assumptions related thereto that affect the amounts reported in the
consolidated financial statements and accompanying notes. Actual results could differ from those estimates. The accounting
policies below are considered critical due to judgments made by management and the sensitivity of these estimates to
deviations of actual results from management’s assumptions. The critical accounting policies should be read in conjunction
with Note 2 of the Notes to the Consolidated Financial Statements in Item 8. “Financial Statements and Supplemental Data,”
which summarizes our significant accounting policies.
Depreciation
We calculate depreciation expense using the straight-line method over the estimated useful lives of our property, plant and
equipment. Due to the expected long useful lives of our property, plant and equipment, we depreciate our property, plant and
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equipment over periods ranging from 10 years to 40 years. Changes in the estimated useful lives of our property, plant and
equipment could have a material adverse effect on our results of operations.
Impairment of Long-Lived Assets
We test long-lived assets for recoverability whenever events or changes in circumstances indicate that the carrying amount of
the asset may not be recoverable. We evaluate recoverability using undiscounted estimated net cash flows generated by the
related asset or asset group. If the results of that evaluation indicate that the undiscounted cash flows are less than the carrying
amount of the asset (i.e, the asset is not recoverable) we perform an impairment analysis. If our intent is to hold the asset for
continued use, we determine the amount of impairment as the amount by which the net carrying value exceeds its fair value. If
our intent is to sell the asset, and the criteria required to classify an asset as held for sale are met, we determine the amount of
impairment as the amount by which the net carrying amount exceeds its fair value less costs to sell.
Impairment of Goodwill
We perform an assessment of goodwill annually or more frequently if events or changes in circumstances warrant. Our
qualitative annual assessment includes, among other things, industry and market considerations, overall financial performance,
other entity-specific events and events affecting individual reporting units. If after assessing the totality of events or
circumstances for each reporting unit, we determine that it is more likely than not that the carrying value exceeds its fair value,
then we perform an impairment test for that reporting unit.
We assess goodwill, and, if necessary, measure impairment for each reporting unit to which goodwill has been allocated,
consisting of the following:
•
•
•
•
crude oil pipelines;
refined product pipelines;
refined product terminals, excluding our St. Eustatius and Point Tupper facilities; and
bunkering activity at our St. Eustatius and Point Tupper facilities.
We recognize an impairment of goodwill if the estimated fair value of goodwill exceeds its carrying value. In order to estimate
the fair value of goodwill, management must make certain estimates and assumptions that affect the total fair value of the
reporting unit including, among other things, an assessment of market conditions, projected cash flows, discount rates and
growth rates. Management’s estimates of projected cash flows related to the reporting unit include, but are not limited to, future
earnings of the reporting unit, assumptions about the use or disposition of the asset, estimated remaining life of the asset, and
future expenditures necessary to maintain the asset’s existing service potential.
We calculate the estimated fair value of each of our reporting units using a weighted-average of values calculated using an
income approach and a market approach. The income approach involves estimating the fair value of each reporting unit by
discounting its estimated future cash flows using a discount rate, consistent with a market participant’s assumption. The market
approach bases the fair value measurement on information obtained from observed stock prices of public companies and recent
merger and acquisition transaction data of comparable entities.
We determined that no impairment charges resulted from our October 1, 2014 impairment assessment. Furthermore, our
assessment did not reflect any reporting units at risk of failing step one of the goodwill impairment test, which compares the
fair value of the reporting unit to its carrying value including goodwill.
Derivative Financial Instruments
We utilize various derivative instruments to manage our exposure to commodity price risk and interest rate risk. We record
derivative instruments in the consolidated balance sheets at fair value, and apply hedge accounting when appropriate. We
record changes to the fair values of derivative instruments in earnings for fair value hedges or as part of “Accumulated other
comprehensive income” (AOCI) for the effective portion of cash flow hedges. We reclassify the effective portion of cash flow
hedges from AOCI to earnings when the underlying forecasted transaction occurs or becomes probable not to occur. We
recognize ineffectiveness resulting from our derivatives immediately in earnings. With respect to cash flow hedges, we must
exercise judgment to assess the probability of the forecasted transaction, which, among other things, depends upon market
factors and our ability to reliably operate our assets.
Environmental Liabilities
Environmental remediation costs are expensed and an associated accrual is established when site restoration and environmental
remediation and cleanup obligations are either known or considered probable and can be reasonably estimated. These
environmental obligations are based on estimates of probable undiscounted future costs over a 20-year time period using
currently available technology and applying current regulations, as well as our own internal environmental policies. The
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environmental liabilities have not been reduced by possible recoveries from third parties. Environmental costs include initial
site surveys, costs for remediation and restoration and ongoing monitoring costs, as well as fines, damages and other costs,
when estimable. Adjustments to initial estimates are recorded, from time to time, to reflect changing circumstances and
estimates based upon additional information developed in subsequent periods. Environmental liabilities are difficult to assess
and estimate due to unknown factors, such as the timing and extent of remediation, the determination of our liability in
proportion to other parties, improvements in cleanup technologies and the extent to which environmental laws and regulations
may change in the future. We believe that we have adequately accrued for our environmental exposures.
Contingencies
We accrue for costs relating to litigation, claims and other contingent matters, including tax contingencies, when such liabilities
become probable and reasonably estimable. Such estimates may be based on advice from third parties or on management’s
judgment, as appropriate. Due to the inherent uncertainty of litigation, actual amounts paid may differ from amounts estimated,
and such differences will be charged to income in the period when final determination is made.
NEW ACCOUNTING PRONOUNCEMENTS
Please refer to Note 3 of the Notes to Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary
Data” for a discussion of new accounting pronouncements.
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ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk
We manage our exposure to changing interest rates principally through the use of a combination of fixed-rate debt and variable-
rate debt. From time to time, we have also utilized forward-starting interest rate swap agreements to lock in the rate on the
interest payments related to forecasted debt issuances and fixed-to-floating interest rate swap agreements to manage a portion
of the exposure to changing interest rates by converting certain fixed-rate debt to variable-rate debt. Borrowings under the
Revolving Credit Agreement, the Gulf Opportunity Zone Revenue Bonds and the short-term lines of credit expose us to
increases in applicable interest rates.
We had no forward-starting or fixed-to-floating interest rate swap agreements outstanding as of December 31, 2014 and 2013.
Please refer to Note 2 and Note 18 of the Notes to Consolidated Financial Statements in Item 8. “Financial Statements and
Supplemental Data” for a more detailed discussion of our interest rate swaps.
The following tables present principal cash flows and related weighted-average interest rates by expected maturity dates for our
long-term debt.
December 31, 2014
Expected Maturity Dates
2015
2016
2017
2018
2019
There-
after
Total
Fair
Value
(Thousands of Dollars, Except Interest Rates)
$ — $ — $ — $ 350,000
$
— $1,402,500
$1,752,500
$1,796,536
—
—
—
8.2%
—
6.0%
6.4%
$ — $ — $ — $
— $ 601,496
$ 365,440
$ 966,936
$ 967,706
—
—
—
—
2.0%
0.1%
1.2%
December 31, 2013
Expected Maturity Dates
2014
2015
2016
2017
2018
There-
after
Total
Fair
Value
(Thousands of Dollars, Except Interest Rates)
$ — $ — $ — $
— $ 350,000
$1,402,500
$1,752,500
$1,767,759
—
—
—
—
8.2%
6.0%
6.4%
$ — $ — $ — $ 503,036
$
— $ 365,440
$ 868,476
$ 868,975
—
—
—
2.2%
—
0.1%
1.3%
Long-term Debt:
Fixed rate
Weighted-average
interest rate
Variable rate
Weighted-average
interest rate
Long-term Debt:
Fixed rate
Weighted-average
interest rate
Variable rate
Weighted-average
interest rate
Commodity Price Risk
Since the operations of our fuels marketing segment expose us to commodity price risk, we use derivative instruments to
attempt to mitigate the effects of commodity price fluctuations. The derivative instruments we use consist primarily of
commodity futures and swap contracts. Please refer to our derivative financial instruments accounting policy in Note 2 of the
Notes to Consolidated Financial Statements in Item 8. “Financial Statements and Supplemental Data” for further information.
We have a risk management committee that oversees our trading policies and procedures and certain aspects of risk
management. Our risk management committee also reviews all new risk management strategies in accordance with our risk
management policy, which was approved by our board of directors.
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The commodity contracts disclosed below represent only those contracts exposed to commodity price risk at the end of the
period. Please refer to Note 18 of the Notes to Consolidated Financial Statements in Item 8. “Financial Statements and
Supplemental Data” for the volume and related fair value of all commodity contracts.
Fair Value Hedges:
Futures – long:
(crude oil)
Futures – short:
(crude oil)
Swaps – long:
Contract
Volumes
(Thousands
of Barrels)
December 31, 2014
Weighted Average
Pay Price
Receive Price
Fair Value of
Current
Asset (Liability)
(Thousands of
Dollars)
162
$
59.82
N/A $
(1,060)
169
N/A $
59.56
$
1,064
(crude oil and refined products)
251
$
48.86
N/A $
(1,341)
Swaps – short:
(crude oil and refined products)
1,005
N/A $
55.66
$
11,861
Economic Hedges and Other Derivatives:
Futures – long:
(refined products)
Swaps – long:
(refined products)
Swaps – short:
(crude oil and refined products)
Forward purchase contracts:
(crude oil)
Forward sales contracts:
(crude oil)
Total fair value of open positions exposed to
commodity price risk
$
$
24
106
50
75.91
44.97
N/A $
26
N/A $
(120)
N/A $
54.98
$
553
812
$
65.81
N/A $
(11,624)
812
N/A $
65.95
$
12,109
$
11,468
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Fair Value Hedges:
Futures – long:
(refined products)
Futures – short:
(refined products)
Economic Hedges and Other Derivatives:
Futures – long:
Contract
Volumes
(Thousands
of Barrels)
December 31, 2013
Weighted Average
Pay Price
Receive Price
Fair Value of
Current
Asset (Liability)
(Thousands of
Dollars)
7
$
128.38
N/A $
3
40
N/A $
124.50
$
(170)
(crude oil and refined products)
245
$
95.67
N/A $
682
Futures – short:
(crude oil and refined products)
179
N/A $
115.09
$
(200)
Swaps – long:
(refined products)
Swaps – short:
(refined products)
Forward purchase contracts:
(crude oil)
Forward sales contracts:
(crude oil)
95
$
92.39
N/A $
(76)
1,377
N/A $
91.18
$
(522)
1,015
$
97.79
N/A $
3,171
1,015
N/A $
98.39
$
(2,561)
Total fair value of open positions exposed to
commodity price risk
$
327
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining effective internal control over financial reporting as defined in
Rule 13a-15(f) under the Securities Exchange Act of 1934. Our management assessed the effectiveness of NuStar Energy L.P’s
internal control over financial reporting as of December 31, 2014. In its evaluation, management used the criteria set forth by
the Committee of Sponsoring Organization of the Treadway Commission (COSO) in Internal Control-Integrated Framework
(2013). Based on this assessment, management believes that, as of December 31, 2014, our internal control over financial
reporting was effective based on those criteria.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore,
even those systems determined to be effective can provide only reasonable assurance with respect to financial statement
preparation and presentation.
The effectiveness of internal control over financial reporting as of December 31, 2014 has been audited by KPMG LLP, the
independent registered public accounting firm who audited our consolidated financial statements included in this Form 10-K.
KPMG LLP’s attestation on the effectiveness of our internal control over financial reporting appears on page 58.
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Report of Independent Registered Public Accounting Firm
The Board of Directors of NuStar GP, LLC
and Unitholders of NuStar Energy L.P.:
We have audited the accompanying consolidated balance sheets of NuStar Energy L.P. (a Delaware limited partnership) and
subsidiaries (the Partnership) as of December 31, 2014 and 2013, and the related consolidated statements of income (loss),
comprehensive income (loss), partners’ equity, and cash flows for each of the years in the three-year period ended
December 31, 2014. These consolidated financial statements are the responsibility of the Partnership’s management. Our
responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of NuStar Energy L.P. and subsidiaries as of December 31, 2014 and 2013, and the results of their operations and their
cash flows for each of the years in the three-year period ended December 31, 2014, in conformity with U.S. generally accepted
accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
NuStar Energy L.P. and subsidiaries’ internal control over financial reporting as of December 31, 2014, based on criteria
established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO), and our report dated February 26, 2015 expressed an unqualified opinion on the effectiveness
of the Partnership’s internal control over financial reporting.
/s/ KPMG LLP
San Antonio, Texas
February 26, 2015
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Report of Independent Registered Public Accounting Firm
The Board of Directors of NuStar GP, LLC
and Unitholders of NuStar Energy L.P.:
We have audited NuStar Energy L.P. (a Delaware limited partnership) and subsidiaries’ (the Partnership’s) internal control over
financial reporting as of December 31, 2014, based on criteria established in Internal Control – Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Partnership’s management is
responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of
internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over
Financial Reporting. Our responsibility is to express an opinion on the Partnership’s internal control over financial reporting
based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal
control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design
and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other
procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our
opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, NuStar Energy L.P. and subsidiaries maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2014, based on criteria established in Internal Control – Integrated Framework (2013) issued by
COSO.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
the consolidated balance sheets of NuStar Energy L.P. and subsidiaries as of December 31, 2014 and 2013, and the related
consolidated statements of income (loss), comprehensive income (loss), partners’ equity, and cash flows for each of the years in
the three-year period ended December 31, 2014, and our report dated February 26, 2015 expressed an unqualified opinion on
those consolidated financial statements.
/s/ KPMG LLP
San Antonio, Texas
February 26, 2015
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NUSTAR ENERGY L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars, Except Unit Data)
Current assets:
Assets
Cash and cash equivalents
Accounts receivable, net of allowance for doubtful accounts of $7,808 and $1,224
as of December 31, 2014 and 2013, respectively
Receivable from related parties
Inventories
Other current assets
Assets held for sale
Total current assets
Property, plant and equipment, at cost
Accumulated depreciation and amortization
Property, plant and equipment, net
Intangible assets, net
Goodwill
Investment in joint ventures
Deferred income tax asset
Note receivable from related party, net
Other long-term assets, net
Total assets
Liabilities and Partners’ Equity
Current liabilities:
Accounts payable
Payable to related party
Short-term debt
Accrued interest payable
Accrued liabilities
Taxes other than income tax
Income tax payable
Total current liabilities
Long-term debt
Long-term payable to related party
Deferred income tax liability
Other long-term liabilities
Commitments and contingencies (Note 16)
Partners’ equity:
Limited partners (77,886,078 common units outstanding
as of December 31, 2014 and 2013)
General partner
Accumulated other comprehensive loss
Total NuStar Energy L.P. partners’ equity
Noncontrolling interest
Total partners’ equity
Total liabilities and partners’ equity
See Notes to Consolidated Financial Statements.
59
December 31,
2014
2013
$
87,912
$
100,743
208,314
164
55,713
35,944
1,100
389,147
4,815,396
(1,354,664)
3,460,732
58,670
617,429
74,223
4,429
—
314,166
4,918,796
162,056
15,128
77,000
33,345
61,025
14,121
2,517
365,192
2,749,452
33,537
27,308
27,097
$
$
281,310
51,084
138,147
40,278
21,987
633,549
4,500,837
(1,190,184)
3,310,653
71,249
617,429
68,735
5,769
165,440
159,362
5,032,186
298,751
8,325
—
33,113
38,632
9,745
4,006
392,572
2,655,553
41,139
27,350
11,778
1,744,810
39,312
(67,912)
1,716,210
—
1,716,210
4,918,796
$
1,921,726
43,804
(63,394)
1,902,136
1,658
1,903,794
5,032,186
$
$
$
NUSTAR ENERGY L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(Thousands of Dollars, Except Unit and Per Unit Data)
Table of Contents
Revenues:
Service revenues
Product sales
Total revenues
Costs and expenses:
Cost of product sales
Operating expenses:
Third parties
Related party
Total operating expenses
General and administrative expenses:
Third parties
Related party
Total general and administrative expenses
Depreciation and amortization expense
Goodwill impairment loss
Asset impairment loss
Gain on legal settlement
Total costs and expenses
Operating income (loss)
Equity in earnings (loss) of joint ventures
Interest expense, net
Interest income from related party
Other income (expense), net
Income (loss) from continuing operations before income tax expense
Income tax expense
Income (loss) from continuing operations
Loss from discontinued operations, net of tax
Net income (loss)
Less loss attributable to noncontrolling interest
Net income (loss) attributable to NuStar Energy L.P.
Net income (loss) per unit applicable to limited partners:
Continuing operations
Discontinued operations
Total (Note 23)
Year Ended December 31,
2014
2013
2012
$ 1,026,446
2,048,672
3,075,118
$
938,138
2,525,594
3,463,732
$
870,157
5,075,579
5,945,736
1,967,528
2,453,997
4,930,174
347,189
125,736
472,925
29,146
66,910
96,056
191,708
—
—
—
2,728,217
346,901
4,796
(132,281)
1,055
4,499
224,970
10,801
214,169
(3,791)
210,378
(395)
210,773
2.14
(0.04)
2.10
$
$
$
331,719
122,677
454,396
32,484
58,602
91,086
178,921
304,453
—
—
3,482,853
(19,121)
(39,970)
(127,119)
6,113
7,341
(172,756)
12,753
(185,509)
(99,162)
(284,671)
(10,901)
(273,770) $
392,491
133,654
526,145
42,266
62,490
104,756
159,789
22,132
249,646
(28,738)
5,963,904
(18,168)
(9,378)
(90,535)
1,219
(24,689)
(141,551)
24,450
(166,001)
(61,236)
(227,237)
(621)
(226,616)
(2.89) $
(1.11)
(4.00) $
(2.79)
(0.82)
(3.61)
$
$
$
Weighted-average limited partner units outstanding
77,886,078
77,886,078
72,957,417
See Notes to Consolidated Financial Statements.
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NUSTAR ENERGY L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Thousands of Dollars)
Net income (loss)
Other comprehensive loss:
Foreign currency translation adjustment, net of income tax expense of
$0, $0 and $414
Net unrealized gain (loss) on cash flow hedges
Net loss reclassified into income on cash flow hedges
Total other comprehensive loss
Comprehensive income (loss)
Less comprehensive (loss) income attributable to noncontrolling interest
Comprehensive income (loss) attributable to NuStar Energy L.P.
$
Year Ended December 31,
2014
$
210,378
$
2013
(284,671) $
2012
(227,237)
(15,614)
—
10,663
(4,951)
(19,364)
7,213
7,570
(4,581)
10,677
(94,269)
53,232
(30,360)
205,427
(828)
206,255
$
(289,252)
(10,953)
(278,299) $
(257,597)
477
(258,074)
See Notes to Consolidated Financial Statements.
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NUSTAR ENERGY L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
Cash Flows from Operating Activities:
Net income (loss)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization expense
Amortization of debt related items
(Gain) loss on sale or disposition of assets
Asset and goodwill impairment loss
Gain on legal settlement
Deferred income tax expense (benefit)
Equity in (earnings) loss of joint ventures
Distributions of equity in earnings of joint ventures
Changes in current assets and current liabilities (Note 24)
Other, net
Net cash provided by operating activities
Cash Flows from Investing Activities:
Capital expenditures
Change in accounts payable related to capital expenditures
Acquisitions
Investment in other long-term assets
Proceeds from sale or disposition of assets
Increase in note receivable from related party
Other, net
Net cash used in investing activities
Cash Flows from Financing Activities:
Proceeds from long-term debt borrowings
Proceeds from short-term debt borrowings
Proceeds from note offering, net of issuance costs
Long-term debt repayments
Short-term debt repayments
Proceeds from issuance of common units, net of issuance costs
Contributions from general partner
Distributions to unitholders and general partner
Payments for termination of interest rate swaps
Other, net
Net cash (used in) provided by financing activities
Effect of foreign exchange rate changes on cash
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents as of the beginning of the period
Cash and cash equivalents as of the end of the period
Year Ended December 31,
2014
2013
2012
$
210,378
$
(284,671) $
(227,237)
191,708
8,969
(3,853)
4,201
—
3,467
(4,796)
7,587
82,418
18,444
518,523
(356,965)
4,903
—
—
26,012
(13,328)
(853)
(340,231)
743,719
574,900
—
(623,770)
(497,900)
—
—
(392,204)
—
7,070
(188,185)
(2,938)
(12,831)
100,743
184,363
4,329
(7,829)
406,982
—
(6,739)
39,970
7,956
112,776
28,082
485,219
(343,320)
(5,384)
—
—
119,006
(80,961)
(302)
(310,961)
170,651
(7,016)
26,902
271,778
(28,738)
1,542
9,378
6,364
90,247
(14,668)
299,203
(410,595)
—
(315,810)
(2,610)
478,926
(95,711)
—
(345,800)
1,738,451
2,549,145
—
71,880
686,863
(2,150,743)
—
—
—
(392,204)
(33,697)
1,980
(149,350)
(7,767)
17,141
83,602
247,398
(2,648,475)
(71,880)
336,415
7,121
(365,279)
(5,678)
(9,978)
110,669
2,033
66,105
17,497
83,602
$
87,912
$
100,743
$
See Notes to Consolidated Financial Statements.
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Balance as of
January 1, 2012
Net (loss) income
Other comprehensive
(loss) income
Cash distributions
to partners
Issuance of common
units, including
contribution from
general partner
Other
Balance as of
December 31, 2012
Net (loss) income
Other comprehensive
loss
Cash distributions
to partners
Other
Balance as of
December 31, 2013
Net income (loss)
Other comprehensive
loss
Cash distributions
to partners
Other
Balance as of
December 31, 2014
—
—
—
—
—
—
—
—
—
—
—
NUSTAR ENERGY L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF PARTNERS’ EQUITY
Years Ended December 31, 2014, 2013 and 2012
(Thousands of Dollars, Except Unit Data)
Limited Partners
Units
Amount
General
Partner
Accumulated
Other
Comprehensive
Loss
Total NuStar
Energy L.P.
Partners’
Equity
Noncontrolling
Interest
Total
Partners’
Equity
70,756,078
$ 2,817,069
$
62,539
$
(262,502)
35,886
(27,407) $ 2,852,201
(226,616)
—
$
12,134
(621)
$ 2,864,335
(227,237)
—
—
(31,458)
(31,458)
1,098
(30,360)
(317,719)
(47,560)
—
(365,279)
—
(365,279)
7,130,000
—
336,739
(324)
77,886,078
2,573,263
(310,652)
7,121
—
57,986
36,882
—
—
343,860
(324)
—
—
343,860
(324)
(58,865)
—
2,572,384
(273,770)
12,611
(10,901)
2,584,995
(284,671)
—
—
(4,529)
(4,529)
(52)
(4,581)
(341,140)
255
(51,064)
—
—
—
(392,204)
255
—
—
(392,204)
255
77,886,078
1,921,726
164,201
43,804
46,572
(63,394)
—
1,902,136
210,773
1,658
(395)
1,903,794
210,378
—
—
(4,518)
(4,518)
(433)
(4,951)
(341,140)
23
(51,064)
—
—
—
(392,204)
23
—
(830)
(392,204)
(807)
77,886,078
$ 1,744,810
$
39,312
$
(67,912) $ 1,716,210
$
— $ 1,716,210
See Notes to Consolidated Financial Statements.
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NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2014, 2013 and 2012
1. ORGANIZATION AND OPERATIONS
Organization
NuStar Energy L.P. (NuStar Energy) (NYSE: NS) is engaged in the transportation of petroleum products and anhydrous
ammonia, the terminalling and storage of petroleum products and the marketing of petroleum products. Unless otherwise
indicated, the terms “NuStar Energy L.P.,” “the Partnership,” “we,” “our” and “us” are used in this report to refer to NuStar
Energy L.P., to one or more of our consolidated subsidiaries or to all of them taken as a whole. NuStar GP Holdings, LLC
(NuStar GP Holdings) (NYSE: NSH) owns our general partner, Riverwalk Logistics, L.P., and owns a 14.9% total interest in us
as of December 31, 2014.
Operations
We conduct our operations through our subsidiaries, primarily NuStar Logistics, L.P. (NuStar Logistics) and NuStar Pipeline
Operating Partnership L.P. (NuPOP). We have three business segments: pipeline, storage and fuels marketing.
Pipeline. We own refined product pipelines covering approximately 5,463 miles, which consist of Central West System refined
product pipelines, the East Pipeline and the North Pipeline. The East and North Pipelines have storage capacity of
approximately 6.3 million barrels. In addition, we own a 2,000 mile anhydrous ammonia pipeline (the Ammonia Pipeline) and
1,180 miles of Central West System crude oil pipelines including approximately 3.5 million barrels of storage capacity. We
charge tariffs on a per barrel basis for transporting refined products, crude oil and other feedstocks in our refined product and
crude oil pipelines and on a per ton basis for transporting anhydrous ammonia in the Ammonia Pipeline.
Storage. We own terminal and storage facilities in the United States, Canada, Mexico, the Netherlands, including St. Eustatius
in the Caribbean, and the United Kingdom providing approximately 80.9 million barrels of storage capacity. Our terminal and
storage facilities provide storage, handling and other services on a fee basis for petroleum products, crude oil, specialty
chemicals and other liquids.
Fuels Marketing. Within our fuels marketing operations, we purchase crude oil and refined petroleum products for resale. Our
fuels marketing segment included asphalt operations prior to the sale of a 50% ownership interest in NuStar Asphalt LLC on
September 28, 2012. Please refer to Note 5 for a discussion of the asphalt sales. The activities of the fuels marketing segment
expose us to the risk of fluctuations in commodity prices, which has a direct impact on the segment’s results of operations. We
enter into derivative contracts to attempt to mitigate the effect of commodity price fluctuations.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation
The accompanying consolidated financial statements represent the consolidated operations of the Partnership and our
subsidiaries. Noncontrolling interests are separately disclosed on the financial statements. Inter-partnership balances and
transactions have been eliminated in consolidation. The operations of certain pipelines and terminals in which we own an
undivided interest are proportionately consolidated in the accompanying consolidated financial statements.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles (GAAP)
requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from those estimates. On an ongoing basis, management
reviews their estimates based on currently available information. Management may revise estimates due to changes in facts and
circumstances.
Cash and Cash Equivalents
Cash equivalents are all highly liquid investments with an original maturity of three months or less when acquired.
Restricted Cash
Restricted cash is cash held in escrow restricted to use under certain contractual obligations. Restricted cash is included in
“Other current assets” in the consolidated balance sheets.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Accounts Receivable
Accounts receivable represent valid claims against non-affiliated customers for products sold or services rendered. We extend
credit terms to certain customers after review of various credit indicators, including the customer’s credit rating. Outstanding
customer receivable balances are regularly reviewed for possible non-payment indicators and allowances for doubtful accounts
are recorded based upon management’s estimate of collectability at the time of their review.
Inventories
Inventories consist of crude oil, refined petroleum products, and materials and supplies. Inventories, except those associated
with a qualifying fair value hedge, are valued at the lower of cost or market. Cost is determined using the weighted-average
cost method. Our inventory, other than materials and supplies, consists of one end-product category, petroleum products, which
we include in the fuels marketing segment. Accordingly, we determine lower of cost or market adjustments on an aggregate
basis. Inventories associated with qualifying fair value hedges are valued at current market prices. Materials and supplies are
valued at the lower of average cost or market.
Property, Plant and Equipment
We record additions to property, plant and equipment, including reliability and strategic capital expenditures, at cost.
Reliability capital expenditures are capital expenditures to replace partially or fully depreciated assets to maintain the existing
operating capacity of existing assets and extend their useful lives. Strategic capital expenditures are capital expenditures to
expand or upgrade the operating capacity, increase efficiency or increase the earnings potential of existing assets, whether
through construction or acquisition, along with certain capital expenditures related to support functions. Repair and
maintenance costs associated with existing assets that are minor in nature and do not extend the useful life of existing assets are
charged to operating expenses as incurred.
Depreciation of property, plant and equipment is recorded on a straight-line basis over the estimated useful lives of the related
assets. Gains or losses on sales or other dispositions of property are recorded in income and are reported in “Other income
(expense), net” in the consolidated statements of income. When property or equipment is retired or otherwise disposed of, the
difference between the carrying value and the net proceeds is recognized in the year retired.
Goodwill and Intangible Assets
Goodwill acquired in a business combination is not amortized. Instead, we assess goodwill for impairment annually on October
1, or more frequently if events or changes in circumstances indicate it might be impaired. We have the option to first assess
qualitative factors to determine whether it is necessary to perform a quantitative goodwill impairment test. We performed a
quantitative goodwill impairment test as of October 1, 2014 and 2013, and we determined that no impairment charges resulted
from our October 1, 2014 impairment assessment. See Note 11 for a discussion of the goodwill impairment recognized in 2013.
As of October 1, 2012, based on our review of the qualitative factors present, we determined that a quantitative goodwill
impairment test was not necessary, and no goodwill impairment had occurred.
We calculate the estimated fair value of each of our reporting units using a weighted-average of values calculated using an
income approach and a market approach. The income approach involved estimating the fair value of each reporting unit by
discounting its estimated future cash flows using a discount rate, consistent with a market participant’s assumption. The market
approach bases the fair value measurement on information obtained from observed stock prices of public companies and recent
merger and acquisition transaction data of comparable entities.
Our reporting units to which goodwill has been allocated consist of the following:
•
•
•
•
crude oil pipelines;
refined product pipelines;
refined product terminals, excluding our St. Eustatius and Point Tupper facilities; and
bunkering activity at our St. Eustatius and Point Tupper facilities.
The quantitative impairment test for goodwill consists of a two-step process. Step 1 compares the fair value of the reporting
unit to its carrying value including goodwill. The carrying value of each reporting unit equals the total identified assets
(including goodwill) less the sum of each reporting unit’s identified liabilities. We used reasonable and supportable methods to
assign the assets and liabilities to the appropriate reporting units in a consistent manner. If the carrying value exceeds fair value,
there is a potential impairment and step 2 must be performed to determine the amount of goodwill impairment. Step 2
compares the carrying value of the reporting unit’s goodwill to its implied fair value using a hypothetical allocation of the
reporting unit’s fair value. If the goodwill carrying value exceeds its implied fair value, the excess is reported as impairment.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Intangible assets are recorded at cost and are assets that lack physical substance (excluding financial assets). Our intangible
assets are amortized on a straight-line basis over 10 to 47 years.
Investment in Joint Ventures
We account for our investment in the joint ventures using the equity method of accounting. We report our ownership interest in
our equity method investments within “Investment in joint ventures” on the consolidated balance sheet and our portion of the
results of operations for our equity method investments in “Equity in earnings (loss) of joint ventures” in the consolidated
statements of income (loss). See Note 12 for a discussion of our investments in ST Linden Terminal, LLC and NuStar Asphalt
LLC (now known as Axeon Specialty Products LLC, or Axeon).
Note Receivable from Related Party
The note receivable from related party consisted of the amounts due to us from Axeon under a $250.0 million unsecured
revolving credit facility. We recognized interest income ratably over the term of the facility in “Interest income from related
party” on the consolidated statements of income. Effective upon the sale of our remaining 50% ownership interest in Axeon,
this revolving credit facility was converted into a term loan, and its carrying value is now included in “Other long-term assets”
on the consolidated balance sheet. The revolving credit facility and term loan are both recorded at the outstanding principal
amount, adjusted for equity losses from our investment in Axeon that exceeded the carrying value of our investment in Axeon,
and for the fair value of guarantees issued on behalf of Axeon. We recognize interest income for the term loan ratably over the
term of the loan in “Interest expense, net” on the consolidated statements of income (loss). See Note 5 and Note 19 for
additional information on our agreements with Axeon.
Other Long-Term Assets
“Other long-term assets, net” primarily include the following:
•
•
•
•
•
the term loan to Axeon (see Note 17 for additional information);
funds deposited with a trustee related to revenue bonds issued by the Parish of St. James associated with our St.
James terminal expansion (see Note 14 for additional information on the Gulf Opportunity Zone Revenue Bonds);
ammonia pipeline linefill and tank heel inventory;
deferred financing costs amortized over the life of the related debt obligation using the effective interest method;
and
long-term derivative assets.
Impairment of Long-Lived Assets
We review long-lived assets, including property, plant and equipment and investment in joint ventures, for impairment
whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. We evaluate
recoverability using undiscounted estimated net cash flows generated by the related asset or asset group. If the results of that
evaluation indicate that the undiscounted cash flows are less than the carrying amount of the asset (i.e, the asset is not
recoverable) we perform an impairment analysis. If our intent is to hold the asset for continued use, we determine the amount
of impairment as the amount by which the net carrying value exceeds its fair value. If our intent is to sell the asset, and the
criteria required to classify an asset as held for sale are met, we determine the amount of impairment as the amount by which
the net carrying amount exceeds its fair value less costs to sell. We believe that the carrying amounts of our long-lived assets as
of December 31, 2014 are recoverable. See Note 5 for a discussion of impairments of long-lived assets.
Taxes Other than Income Taxes
Taxes other than income taxes include liabilities for ad valorem taxes, franchise taxes, sales and use taxes, excise fees and taxes
and value added taxes.
Income Taxes
We are a limited partnership and generally are not subject to federal or state income taxes. Accordingly, our taxable income or
loss, which may vary substantially from income or loss reported for financial reporting purposes, is generally included in the
federal and state income tax returns of our partners. For transfers of publicly held units subsequent to our initial public offering,
we have made an election permitted by Section 754 of the Internal Revenue Code (the Code) to adjust the common unit
purchaser’s tax basis in our underlying assets to reflect the purchase price of the units. This results in an allocation of taxable
income and expenses to the purchaser of the common units, including depreciation deductions and gains and losses on sales of
assets, based upon the new unitholder’s purchase price for the common units.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
We conduct certain of our operations through taxable wholly owned corporate subsidiaries. We account for income taxes
related to our taxable subsidiaries using the asset and liability method. Under this method, we recognize deferred tax assets and
liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. We measure deferred taxes using enacted tax rates expected to
apply to taxable income in the year those temporary differences are expected to be recovered or settled.
We recognize a tax position if it is more-likely-than-not that the tax position will be sustained, based on the technical merits of
the position, upon examination. We record uncertain tax positions in the financial statements at the largest amount of benefit
that is more-likely-than-not to be realized. We had no unrecognized tax benefits as of December 31, 2014 and 2013.
NuStar Energy and certain of its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state and
foreign jurisdictions. For U.S. federal and state purposes, as well as for our major non-U.S. jurisdictions, tax years subject to
examination are 2010 through 2013, according to standard statute of limitations.
Asset Retirement Obligations
We record a liability for asset retirement obligations at the fair value of the estimated costs to retire a tangible long-lived asset
at the time we incur that liability, which is generally when the asset is purchased, constructed or leased, when we have a legal
obligation to incur costs to retire the asset and when a reasonable estimate of the fair value of the obligation can be made. If a
reasonable estimate cannot be made at the time the liability is incurred, we record the liability when sufficient information is
available to estimate the fair value.
We have asset retirement obligations with respect to certain of our assets due to various legal obligations to clean and/or
dispose of those assets at the time they are retired. However, these assets can be used for an extended and indeterminate period
of time as long as they are properly maintained and/or upgraded. It is our practice and current intent to maintain our assets and
continue making improvements to those assets based on technological advances. As a result, we believe that our assets have
indeterminate lives for purposes of estimating asset retirement obligations because dates or ranges of dates upon which we
would retire these assets cannot reasonably be estimated at this time. When a date or range of dates can reasonably be estimated
for the retirement of any asset, we estimate the costs of performing the retirement activities and record a liability for the fair
value of these costs.
We also have legal obligations in the form of leases and right-of-way agreements, which require us to remove certain of our
assets upon termination of the agreement. However, these lease or right-of-way agreements generally contain automatic
renewal provisions that extend our rights indefinitely or we have other legal means available to extend our rights. We have
recorded a liability of approximately $0.8 million and $0.6 million as of December 31, 2014 and 2013, respectively, which is
included in “Other long-term liabilities” in the consolidated balance sheets, for conditional asset retirement obligations related
to the retirement of terminal assets with lease and right-of-way agreements.
Environmental Remediation Costs
Environmental remediation costs are expensed and an associated accrual established when site restoration and environmental
remediation and cleanup obligations are either known or considered probable and can be reasonably estimated. These
environmental obligations are based on estimates of probable undiscounted future costs over a 20-year time period using
currently available technology and applying current regulations, as well as our own internal environmental policies. The
environmental liabilities have not been reduced by possible recoveries from third parties. Environmental costs include initial
site surveys, costs for remediation and restoration and ongoing monitoring costs, as well as fines, damages and other costs,
when estimable. Adjustments to initial estimates are recorded, from time to time, to reflect changing circumstances and
estimates based upon additional information developed in subsequent periods.
Product Imbalances
We incur product imbalances as a result of variances in pipeline meter readings and volume fluctuations within the East
Pipeline system due to pressure and temperature changes. We use quoted market prices as of the reporting date to value our
assets and liabilities related to product imbalances. Product imbalance liabilities are included in “Accrued liabilities” and
product imbalance assets are included in “Other current assets” in the consolidated balance sheets.
Revenue Recognition
Revenues for the pipeline segment are derived from interstate and intrastate pipeline transportation of refined product, crude oil
and anhydrous ammonia. Transportation revenues (based on pipeline tariffs) are recognized as the refined product, crude oil or
anhydrous ammonia is delivered out of the pipelines.
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NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Revenues for the storage segment include fees for tank storage agreements, whereby a customer agrees to pay for a certain
amount of storage in a tank over a period of time (storage lease revenues), and throughput agreements, whereby a customer
pays a fee per barrel for volumes moving through our terminals for which we charge additional fees (throughput revenues). Our
terminals also provide blending, additive injections, handling and filtering services for which we charge additional fees. Certain
of our facilities charge fees to provide marine services such as pilotage, tug assistance, line handling, launch service,
emergency response services and other ship services. Storage lease revenues are recognized when services are provided to the
customer. Throughput revenues are recognized as refined products or crude oil are received in or delivered out of our terminal
and as crude oil and certain other refinery feedstocks are received by the related refinery. Revenues for marine services are
recognized as those services are provided.
Revenues from the sale of petroleum products, which are included in our fuels marketing segment, are recognized when
product is delivered to the customer and title and risk pass to the customer.
We collect taxes on certain revenue transactions to be remitted to governmental authorities, which may include sales, use, value
added and some excise taxes. These taxes are not included in revenue.
Income Allocation
Our net income for each quarterly reporting period is first allocated to the general partner in an amount equal to the general
partner’s incentive distribution calculated based upon the declared distribution for the respective reporting period. We allocate
the remaining net income among the limited and general partners in accordance with their respective 98% and 2% interests.
Net Income per Unit Applicable to Limited Partners
We have identified the general partner interest and incentive distribution rights as participating securities and use the two-class
method when calculating the net income per unit applicable to limited partners, which is based on the weighted-average
number of common units outstanding during the period. Basic and diluted net income per unit applicable to limited partners are
the same as we have no potentially dilutive securities outstanding.
Comprehensive Income
Comprehensive income consists of net income and other gains and losses affecting partners’ equity that are excluded from net
income, such as foreign currency translation adjustments and mark-to-market adjustments on derivative instruments designated
and qualifying as cash flow hedges.
Derivative Financial Instruments
We formally document all relationships between hedging instruments and hedged items. This process includes identification of
the hedging instrument and the hedged transaction, the nature of the risk being hedged and how the hedging instrument’s
effectiveness will be assessed. To qualify for hedge accounting, at inception of the hedge we assess whether the derivative
instruments that are used in our hedging transactions are expected to be highly effective in offsetting changes in cash flows or
the fair value of the hedged items. Throughout the designated hedge period and at least quarterly, we assess whether the
derivative instruments are highly effective and continue to qualify for hedge accounting. To assess the effectiveness of the
hedging relationship both prospectively and retrospectively, we use regression analysis to calculate the correlation of the
changes in the fair values of the derivative instrument and related hedged item.
We record commodity derivative instruments in the consolidated balance sheets at fair value. We recognize mark-to-market
adjustments for derivative instruments designated and qualifying as fair value hedges (Fair Value Hedges) and the related
change in the fair value of the associated hedged physical inventory or firm commitment within “Cost of product sales.” For
derivative instruments designated and qualifying as cash flow hedges (Cash Flow Hedges), we record the effective portion of
mark-to-market adjustments as a component of “Accumulated other comprehensive income” (AOCI) until the underlying
hedged forecasted transactions occur and are recognized in income. Any hedge ineffectiveness is recognized immediately in
“Cost of product sales.” Once a hedged transaction occurs, we reclassify the effective portion from AOCI to “Cost of product
sales.” If it becomes probable that a hedged transaction will not occur, then the associated gains or losses are reclassified from
AOCI to “Cost of product sales” immediately. For derivative instruments that have associated underlying physical inventory
but do not qualify for hedge accounting (Economic Hedges and Other Derivatives), we record the mark-to-market adjustments
in “Cost of product sales.”
We terminated all forward-starting interest rate swaps during the years ended December 31, 2013 and 2012. Prior to
December 31, 2013, we were a party to forward-starting interest rate swap agreements for the purpose of hedging the interest
rate risk associated with forecasted interest payments of probable debt issuances. Under the terms of these swap agreements,
we paid a fixed rate and received a variable rate. We entered into the swaps in order to hedge the risk of changes in the interest
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NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
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. We accounted for the forward-starting interest rate swaps as Cash Flow Hedges, and we
recognized the fair value of each interest rate swap in the consolidated balance sheets. We recorded the effective portion of
mark-to-market adjustments as a component of AOCI, and any hedge ineffectiveness was recognized immediately in “Interest
expense, net.” The amount accumulated in AOCI is amortized into “Interest expense, net” as the forecasted interest payments
occur or if the interest payments are probable not to occur.
We classify cash flows associated with our derivative instruments as operating cash flows in the consolidated statements of
cash flows, except for receipts or payments associated with terminated forward-starting interest rate swap agreements, which
are included in cash flows from financing activities.
We terminated all fixed-to-floating interest rate swaps during the year ended December 31, 2012. Prior to December 31, 2012,
we entered into fixed-to-floating interest rate swap agreements associated with a portion of our fixed-rate senior notes. Under
the terms of these swap agreements, we received a fixed rate and paid a variable rate that varied with each agreement. We
accounted for the fixed-to-floating interest rate swaps as Fair Value Hedges and recognized the fair value of each interest rate
swap in the consolidated balance sheets. The interest rate swap agreements qualified for the shortcut method of accounting. As
a result, changes in the fair value of the swaps completely offset the changes in the fair value of the underlying hedged debt.
Although we no longer enter into commodity derivatives without underlying physical inventory, in 2012 we entered into
derivative commodity instruments based on our analysis of market conditions in order to attempt to profit from market
fluctuations. These derivative instruments were financial positions entered into without underlying physical inventory and are
not considered hedges. We recorded these derivatives in the consolidated balance sheets as assets or liabilities at fair value with
mark-to-market adjustments recorded in “Product sales.”
See Note 18 for additional information regarding our derivative financial instruments.
Operating Leases
We recognize rent expense on a straight-line basis over the lease term, including the impact of both scheduled rent increases
and free or reduced rents (commonly referred to as “rent holidays”).
Unit-based Compensation
NuStar GP, LLC, a wholly owned subsidiary of NuStar GP Holdings, has adopted various long-term incentive plans that
provide the Compensation Committee of the Board of Directors of NuStar GP, LLC with the right to grant employees and
directors of NuStar GP, LLC providing services to NuStar Energy the right to receive NS common units. NuStar GP, LLC
accounts for awards of NS common unit options, restricted units and performance awards at fair value as a derivative, whereby
a liability for the award is recorded at inception. Subsequent changes in the fair value of the award are included in the
determination of net income. NuStar GP, LLC determines the fair value of NS unit options using the Black-Scholes model at
each reporting date. NuStar GP, LLC determines the fair value of NS restricted units and performance awards using the market
price of NS common units at each reporting date. However, performance awards are earned only upon NuStar Energy’s
achievement of an objective performance measure. NuStar GP, LLC records compensation expense each reporting period such
that the cumulative compensation expense recognized equals the current fair value of the percentage of the award that has
vested. NuStar GP, LLC records compensation expense related to NS unit options until such options are exercised, and
compensation expense related to NS restricted units until the date of vesting.
NuStar GP Holdings has adopted a long-term incentive plan that provides the Compensation Committee of the Board of
Directors of NuStar GP Holdings with the right to grant employees, consultants and directors of NuStar GP Holdings and its
affiliates, including NuStar GP, LLC, rights to receive NSH common units. NuStar GP Holdings accounts for awards of NSH
restricted units and unit options granted to its directors or employees of NuStar GP, LLC at fair value. The fair value of NSH
unit options is determined using the Black-Scholes model at the grant date, and the fair value of the NSH restricted unit equals
the market price of NSH common units at the grant date. NuStar GP Holdings recognizes compensation expense for NSH
restricted units and unit options ratably over the vesting period based on the fair value of the units at the grant date.
Under these long-term incentive plans, certain awards provide that the grantee’s award vests immediately upon retirement.
Compensation expense is recognized immediately if these awards are granted to retirement-eligible employees, as defined in
each award. In addition, if, during a vesting period of a grant, the grantee will become retirement-eligible, then compensation
expense associated with the grant is recognized from the grant date through the grantee’s retirement eligibility date.
We reimburse NuStar GP, LLC for the expenses resulting from grants of NS and NSH awards under our long-term incentive
plans to employees and directors of NuStar GP, LLC. We include such compensation expense in “General and administrative
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
expenses” on the consolidated statements of income. We do not reimburse NuStar GP, LLC for the expense resulting from NSH
awards to non-employee directors of NuStar GP Holdings.
Margin Deposits
Margin deposits relate to our exchange-traded derivative contracts and generally vary based on changes in the value of the
contracts. Margin deposits are included in “Other current assets” in the consolidated balance sheets.
Foreign Currency Translation
The functional currencies of our foreign subsidiaries are the local currency of the country in which the subsidiary is located,
except for our subsidiaries located in St. Eustatius in the Caribbean (formerly the Netherlands Antilles), whose functional
currency is the U.S. dollar. The assets and liabilities of our foreign subsidiaries with local functional currencies are translated to
U.S. dollars at period-end exchange rates, and income and expense items are translated to U.S. dollars at weighted-average
exchange rates in effect during the period. These translation adjustments are included in “Accumulated other comprehensive
loss” in the equity section of the consolidated balance sheets. Gains and losses on foreign currency transactions are included in
“Other income (expense), net” in the consolidated statements of income.
3. NEW ACCOUNTING PRONOUNCEMENTS
Consolidation
In February 2015, the Financial Accounting Standards Board (FASB) issued new consolidation guidance that modifies the
criterion involved in a reporting organization’s evaluation of whether certain legal entities are subject to consolidation under the
standard. The standard is effective for public companies for annual and interim reporting periods beginning after December 15,
2015, with early adoption permitted. We are currently assessing the impact of this new guidance on our financial statements
and disclosures.
Revenue Recognition
In May 2014, the FASB and the International Accounting Standards Board jointly issued a comprehensive new revenue
recognition standard. The standard is effective for public entities for annual and interim periods beginning after December 15,
2016, using one of two retrospective transition methods. Early adoption is not permitted for public entities. We are currently
assessing the impact of this new guidance on our financial statements and disclosures, and we have not yet selected a transition
method.
Discontinued Operations
In April 2014, the FASB amended the disclosure requirements for discontinued operations. Under the amended guidance, a
discontinued operation is defined as the disposal of a component that represents a strategic shift that has (or will have) a major
effect on an entity's operations and financial results. The amended guidance also requires expanded disclosures about
discontinued operations and disposals of a significant part of an entity that do not qualify as discontinued operations. The
amended guidance is effective prospectively to new disposals and new classifications of assets held for sale in annual periods
beginning after December 15, 2014, and interim periods within those annual periods. Accordingly, we adopted the amended
guidance on January 1, 2015.
4. ACQUISITIONS
TexStar Asset Acquisition. On December 13, 2012, we acquired the TexStar Crude Oil Assets (as defined below) from TexStar
Midstream Services, LP and certain of its affiliates (collectively, TexStar) for $325.4 million (the TexStar Asset Acquisition),
pursuant to an asset purchase agreement. The TexStar Crude Oil Assets consist of approximately 140 miles of crude oil
pipelines and gathering lines, as well as five terminals and storage facilities providing 0.6 million barrels of storage capacity.
The consolidated statements of income include the results of operations for the TexStar Asset Acquisition in the pipeline
segment commencing on December 13, 2012.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
We accounted for the TexStar Asset Acquisition using the acquisition method. The fair value of the consideration transferred
was allocated based on the estimated fair values of the individual assets acquired and liabilities assumed at the date of
acquisition. The purchase price and purchase price allocation was as follows (in thousands of dollars):
Cash paid for the TexStar Asset Acquisition
Fair value of liabilities assumed
Purchase price
Accounts receivable
Property, plant and equipment
Goodwill
Intangible assets
Purchase price allocation
$
$
$
$
315,810
9,600
325,410
537
125,614
131,359
67,900
325,410
5. DISPOSITIONS AND DISCONTINUED OPERATIONS
Dispositions
2012 Asphalt Sale. On September 28, 2012, we sold a 50% ownership interest (the 2012 Asphalt Sale) in NuStar Asphalt LLC,
previously a wholly owned subsidiary, to an affiliate of Lindsay Goldberg LLC (Lindsay Goldberg), a private investment firm.
NuStar Asphalt LLC owns and operates the asphalt refining assets that were previously wholly owned by NuStar Energy,
including an asphalt refinery located in Paulsboro, New Jersey and a terminal in Savannah, Georgia (collectively, the Asphalt
Operations). Lindsay Goldberg paid $175.0 million for the Class A equity interests (Class A Interests) of NuStar Asphalt LLC,
while we retained the Class B equity interests with a fair value of $52.0 million (Class B Interests). We also received $263.8
million from NuStar Asphalt LLC for inventory related to the Asphalt Operations. At closing, the fair value of the consideration
we received was less than the carrying amount of the net assets of the Asphalt Operations and we recognized a loss of $23.8
million in “Other income (expense), net” in the consolidated statements of income for the year ended December 31, 2012. Upon
closing, we deconsolidated NuStar Asphalt LLC and started reporting our remaining investment in NuStar Asphalt LLC using
the equity method of accounting.
2014 Asphalt Sale. On February 26, 2014, we sold our remaining 50% ownership interest in NuStar Asphalt LLC to Lindsay
Goldberg (the 2014 Asphalt Sale). Effective February 27, 2014, NuStar Asphalt LLC changed its name to Axeon Specialty
Products LLC (Axeon). Lindsay Goldberg now owns 100% of Axeon. As a result of the 2014 Asphalt Sale, we ceased applying
the equity method of accounting. Therefore, the results of our investment in Axeon were reported in “Equity in earnings (loss)
of joint ventures” in the consolidated statements of income from September 28, 2012 through February 26, 2014. Upon
completion of the 2014 Asphalt Sale, the parties agreed to: (i) convert the $250.0 million unsecured revolving credit facility
provided by us to Axeon (the NuStar JV Facility) from a revolving credit agreement into a $190.0 million term loan (the Axeon
Term Loan); (ii) terminate the terminal services agreements with respect to our terminals in Rosario, NM, Catoosa, OK and
Houston, TX; (iii) amend the terminal services agreements for our terminals in Baltimore, MD and Jacksonville, FL; and (iv)
transfer ownership of both the Wilmington, NC and Dumfries, VA terminals to Axeon, which were categorized as assets held
for sale at December 31, 2013. We have presented transactions between us and Axeon as related party transactions in the
consolidated financial statements from September 28, 2012 through February 25, 2014.
The Axeon Term Loan includes scheduled repayments to reduce the outstanding amount from $190.0 million to $175.0 million
as of December 31, 2014 and then to $150.0 million on September 30, 2015. Any repayments of the Axeon Term Loan,
including those scheduled in 2014 and 2015, are subject to Axeon meeting certain restrictive requirements contained in its third-
party asset-based revolving credit facility. Axeon failed to make a scheduled repayment by December 31, 2014, which will
increase the interest rate until Axeon makes the repayment. While the Axeon Term Loan does not provide for any other
scheduled payments, Axeon is required to use all of its excess cash, as defined in the Axeon Term Loan, to repay the Axeon
Term Loan. The Axeon Term Loan must be repaid in full on September 28, 2019. The carrying value of the Axeon Term Loan is
included in “Other long-term assets, net” on the consolidated balance sheet as of December 31, 2014.
We will continue to provide credit support, such as guarantees, letters of credit and cash collateral, as applicable, of up to
$150.0 million. Our obligation to provide credit support will be reduced by a minimum of $25.0 million beginning February
2016 and will terminate in full no later than September 28, 2019. As of December 31, 2014, we provided guarantees for
commodity purchases, lease obligations and certain utilities for Axeon with an aggregate maximum potential exposure of $25.3
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
million, plus two guarantees to suppliers that do not specify a maximum amount. A majority of these guarantees have no
expiration date. As of December 31, 2014, we have also provided $50.1 million in letters of credit on behalf of Axeon. In the
event we are obligated to perform under any of these guarantees or letters of credit, the amount paid by us will be treated as
additional borrowings under the Axeon Term Loan. See Note 17 for a discussion on the fair value of these guarantees.
Asphalt Operations Impairments. In anticipation of the 2012 Asphalt Sale, we evaluated the goodwill and other long-lived
assets associated with the Asphalt Operations for potential impairment. 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 were reported in the fuels marketing segment.
The Asphalt Operations asset impairment loss consisted of the following:
Property, plant and equipment, net
Intangible assets, net
Other long-term assets, net
Asset impairment loss
Year Ended
December 31, 2012
(Thousands of Dollars)
$
$
232,759
6,564
4,902
244,225
Discontinued Operations
Terminals Dispositions. As of December 31, 2013, in addition to the terminals located in Wilmington, NC and Dumfries, VA
that were transferred to Axeon as described above, we identified several non-strategic, underperforming terminal facilities and
decided to divest those facilities. As a result, we classified the associated assets as “Assets held for sale” on the consolidated
balance sheet. As of December 31, 2014 and 2013, assets held for sale consisted of property, plant and equipment of $1.1
million and $22.0 million, respectively. We presented the results of operations for those facilities, which were previously
reported in the storage segment, as discontinued operations for all periods presented. We allocated interest expense of $0.8
million, $1.4 million and $0.8 million for the years ended December 31, 2014, 2013 and 2012, respectively, to discontinued
operations based on the ratio of net assets discontinued to consolidated net assets.
In connection with the plan for disposal, we determined that the estimated fair value, less cost to sell, was less than the carrying
amount of each disposal group, resulting in an impairment loss of $102.5 million. Since these terminal facilities met the
required criteria to be classified as assets held for sale on the consolidated balance sheet, we recorded the impairment loss in
“Loss from discontinued operations, net of tax” on the consolidated statement of income for the year ended December 31, 2013.
The impairment loss consisted of the following:
Property, plant and equipment, net
Intangible assets, net (customer relationships)
Goodwill
Asset impairment loss
Year Ended
December 31, 2013
(Thousands of Dollars)
$
$
68,213
6,856
27,460
102,529
In September 2014, we sold our 75% interest in our facility in Mersin, Turkey for proceeds of $13.4 million. We recognized a
gain of $3.7 million, which is included in discontinued operations for the year ended December 31, 2014. In June 2014, we
sold three terminals located in Mobile, AL with an aggregate storage capacity of 1.8 million barrels for proceeds of $13.7
million. In April 2012, we sold five terminals in Georgia and Alabama with an aggregate storage capacity of 1.8 million barrels
for proceeds of $30.8 million.
San Antonio Refinery Disposition. On January 1, 2013, we sold our fuels refinery in San Antonio, Texas (the San Antonio
Refinery) and related assets for approximately $117.0 million (the San Antonio Refinery Sale). We have presented the results of
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
operations for the San Antonio Refinery and related assets as discontinued operations for all periods presented. We allocated
interest expense of $3.9 million for the year ended December 31, 2012 to discontinued operations based on the ratio of net
assets discontinued to consolidated net assets. We recognized a gain of $9.3 million on the sale, which is included in
discontinued operations for the year ended December 31, 2013.
The following table summarizes the results from discontinued operations for the terminal dispositions and the San Antonio
Refinery:
Revenues
Loss before income tax expense
Year Ended December 31,
2014
2013
2012
(Thousands of Dollars)
4,265
$
7,758
$
571,071
(3,791) $
(106,033) $
(63,165)
$
$
6. ALLOWANCE FOR DOUBTFUL ACCOUNTS
The changes in the allowance for doubtful accounts consisted of the following:
Balance as of beginning of year
Increase in allowance
Accounts charged against the allowance, net of recoveries
Foreign currency translation
Balance as of end of year
7. INVENTORIES
Inventories consisted of the following:
Crude oil
Finished products
Materials and supplies
Total
Year Ended December 31,
2014
2013
2012
(Thousands of Dollars)
$
$
1,224
7,649
(1,065)
—
7,808
$
$
808
1,039
(625)
2
1,224
$
$
2,147
27
(1,367)
1
808
December 31,
2014
2013
(Thousands of Dollars)
$
$
3,527
43,206
8,980
55,713
$
$
6,485
123,656
8,006
138,147
Our finished products consist of intermediates, gasoline, distillates and other petroleum products. Materials and supplies mainly
consist of blending and additive chemicals and maintenance materials used in our pipeline and storage segments.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
8. OTHER CURRENT ASSETS
Other current assets consisted of the following:
December 31,
2014
2013
Prepaid expenses
Restricted cash
Derivative assets
Margin deposits
Product advances
Other
Other current assets
9. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, at cost, consisted of the following:
Land
Land and leasehold improvements
Buildings
Pipelines, storage and terminals
Rights-of-way
Construction in progress
Total
Less accumulated depreciation and amortization
Property, plant and equipment, net
$
$
$
$
Estimated Useful
Lives
(Years)
—
-
-
-
-
—
40
40
40
40
5
15
20
20
$
(Thousands of Dollars)
16,140
—
16,362
—
2,392
1,050
35,944
$
16,487
9,316
4,948
3,285
3,076
3,166
40,278
December 31,
2014
2013
$
(Thousands of Dollars)
120,351
160,283
134,857
3,963,134
160,008
276,763
4,815,396
(1,354,664)
3,460,732
129,731
142,122
133,531
3,787,499
155,833
152,121
4,500,837
(1,190,184)
3,310,653
$
Capitalized interest costs added to property, plant and equipment totaled $5.7 million, $4.5 million and $7.7 million for the
years ended December 31, 2014, 2013 and 2012, respectively. Depreciation and amortization expense for property, plant and
equipment totaled $177.3 million, $168.8 million and $157.8 million for the years ended December 31, 2014, 2013 and 2012,
respectively, which includes depreciation expense included in “Loss from discontinued operations, net of tax” on the
consolidated statements of income (loss).
10. INTANGIBLE ASSETS
Intangible assets consisted of the following:
December 31, 2014
December 31, 2013
Cost
Accumulated
Amortization
Cost
Accumulated
Amortization
Customer relationships
Other
Total
$
$
126,566
2,359
128,925
$
$
74
(Thousands of Dollars)
(69,711) $
(544)
(70,255) $
127,614
2,359
129,973
$
$
(58,230)
(494)
(58,724)
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NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
All of our intangible assets are subject to amortization. Amortization expense for intangible assets was $12.6 million, $13.8
million and $7.8 million for the years ended December 31, 2014, 2013 and 2012, respectively. The estimated aggregate
amortization expense for the next five years is as follows:
2015
2016
2017
2018
2019
11. GOODWILL
Amortization Expense
(Thousands of Dollars)
$
$
$
$
$
9,709
6,840
6,840
6,840
6,840
Changes in the carrying amount of goodwill by segment were as follows:
Balances as of January 1, 2013:
Goodwill
Accumulated impairment losses
Net goodwill
Activity for the year ended December 31, 2013:
TexStar Asset Acquisition final purchase price allocation
Other (a)
Impairment losses
Balances as of December 31, 2013 and 2014:
Goodwill
Accumulated impairment losses
Net goodwill
(a) Includes foreign currency translation adjustments.
Pipeline
Storage
Fuels
Marketing
Total
(Thousands of Dollars)
$
302,744
$
617,157
$
—
—
302,744
617,157
$
53,255
(22,132)
31,123
973,156
(22,132)
951,024
3,463
—
—
—
(5,145)
(331,913)
—
—
—
3,463
(5,145)
(331,913)
306,207
—
$
306,207
$
612,012
(331,913)
280,099
$
53,255
(22,132)
31,123
$
971,474
(354,045)
617,429
2013 Goodwill Impairment
The estimated fair value of the Statia Terminals reporting unit was less than its carrying value. To determine the amount of
goodwill impairment loss, we first considered whether any other assets assigned to the Statia Terminals reporting unit were
impaired. The only significant assets of this reporting unit, other than goodwill, consist of property, plant and equipment, which
we determined were fully recoverable. The hypothetical fair value allocation for the Statia Terminals reporting unit indicated
the estimated fair value of goodwill was $0. As a result, we recognized a $304.5 million goodwill impairment charge in the
fourth quarter of 2013, which represented all of the goodwill allocated to the Statia Terminals reporting unit.
The goodwill impairment charge resulted from changes in demand for storage at our St. Eustatius and Point Tupper terminal
locations. Increased supply from various shale formations within the U.S. has reduced the need for storage at these locations,
which historically functioned as break bulk facilities for light crude moving from foreign sources into the U.S. These changes in
crude flow patterns, as well as the backwardation of the forward pricing curve, reduced demand at these terminals. Primarily
resulting from those factors, a customer at our St. Eustatius terminal vacated a significant portion of its storage in the fourth
quarter of 2013.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
12. INVESTMENT IN JOINT VENTURES
ST Linden Terminal, LLC. The 44-acre facility provides deep-water terminalling capabilities in the New York Harbor and
primarily stores petroleum products, including gasoline, jet fuel and fuel oils. As part of our acquisition of Kaneb Pipeline
Partners, L.P. and Kaneb Services LLC in July 2005 (the Kaneb Acquisition), we acquired a 50% ownership interest in ST
Linden Terminal, LLC (Linden), with the remaining 50% owned by Linden Holding Corp. In connection with the Kaneb
Acquisition, we recorded our investment in Linden at fair value, which exceeded our 50% share of its members’ equity. This
excess totaled $42.3 million and $42.6 million as of December 31, 2014 and 2013, respectively, a portion of which is being
amortized into expense over the average life of the assets held by Linden, or 25 years. The remaining balance not amortized
represents goodwill of Linden. On January 2, 2015, we acquired full ownership of Linden by purchasing the remaining
ownership interest from Linden Holding Corp for $142.5 million.
Axeon. Axeon was owned 50% by the Partnership and 50% by Lindsay Goldberg. On February 26, 2014, we sold our remaining
50% ownership interest in Axeon. See Note 5 for additional discussion.
13. ACCRUED LIABILITIES
Accrued liabilities consisted of the following:
Derivative liabilities
Employee wages and benefit costs
Unearned income
TexStar Asset Acquisition contingent consideration
Other
Accrued liabilities
14. DEBT
Long-term debt consisted of the following:
$1.5 billion revolving credit agreement
4.75% senior notes
6.75% senior notes
4.80% senior notes
7.65% senior notes
7.625% subordinated notes
Gulf Opportunity Zone revenue bonds
Net fair value adjustments and unamortized discounts
Total long-term debt
December 31,
2014
2013
(Thousands of Dollars)
4,623
32,349
10,884
—
13,169
61,025
$
$
2,233
16,698
8,225
1,318
10,158
38,632
$
$
December 31,
Maturity
2014
2013
(Thousands of Dollars)
2019
2022
2021
2020
2018
2043
2038 thru 2041
N/A
$
601,496
$
250,000
300,000
450,000
350,000
402,500
365,440
30,016
503,036
250,000
300,000
450,000
350,000
402,500
365,440
34,577
$
2,749,452
$
2,655,553
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The long-term debt repayments are due as follows (in thousands):
2015 - 2017
2018
2019
Thereafter
Total repayments
Net fair value adjustments and unamortized discounts
Total long-term debt
$
$
—
350,000
601,496
1,767,940
2,719,436
30,016
2,749,452
Interest payments totaled $135.0 million, $118.3 million and $118.4 million for the years ended December 31, 2014, 2013 and
2012, respectively.
Revolving Credit Agreement
On October 29, 2014, NuStar Logistics amended and restated its $1.5 billion five-year revolving credit agreement (the
Revolving Credit Agreement), which matures on October 29, 2019. The Revolving Credit Agreement includes an option
allowing NuStar Logistics to request an aggregate increase in the commitments from the lenders of up to $250.0 million (after
which increase the aggregate commitment from all lenders shall not exceed $1.75 billion). The Revolving Credit Agreement
also includes the ability to borrow up to the equivalent of $250.0 million in Euros and up to the equivalent of $250.0 million in
British Pounds Sterling. Obligations under the Revolving Credit Agreement are guaranteed by NuStar Energy and NuPOP.
NuPOP will be released from its guarantee of the Revolving Credit Agreement when it no longer guarantees indebtedness of
NuStar Energy or its subsidiaries in an aggregate principal amount exceeding $200.0 million. For the year ended December 31,
2014, we recorded deferred issuance costs of $4.8 million associated with the Revolving Credit Agreement to “Other long-term
assets, net” on the consolidated balance sheet.
The Revolving Credit Agreement bears interest, at our option, based on an alternative base rate, a LIBOR-based rate or a
EURIBOR-based rate. The interest rate on the Revolving Credit Agreement is subject to adjustment if our debt rating is
downgraded (or upgraded) by certain credit rating agencies. As of December 31, 2014, our weighted-average interest rate was
2.0%. During the year ended December 31, 2014, the weighted-average interest rate related to borrowings under the Revolving
Credit Agreement was 2.2%.
The Revolving Credit Agreement contains customary restrictive covenants, such as limitations on indebtedness, liens, mergers,
asset transfers and certain investing activities. In addition, the Revolving Credit Agreement requires us to maintain, as of the
end of each rolling period of four consecutive fiscal quarters, a consolidated debt coverage ratio (consolidated debt to
consolidated EBITDA, each as defined in the Revolving Credit Agreement) not to exceed 5.00-to-1.00. If we consummate an
acquisition for an aggregate net consideration of at least $50.0 million, the maximum consolidated debt coverage ratio will
increase to 5.50-to-1.00 for two rolling periods. The Revolving Credit Agreement permits unlimited investments in joint
ventures and unconsolidated subsidiaries, provided that no default exists and we would be in compliance with the consolidated
debt coverage ratio, but limits the amount of cash distributions for such joint ventures and unconsolidated subsidiaries included
in the calculation of the consolidated debt coverage ratio to 20% of consolidated EBITDA. The requirement not to exceed a
maximum consolidated debt coverage ratio may limit the amount we can borrow under the Revolving Credit Agreement to an
amount less than the total amount available for borrowing. As of December 31, 2014, our consolidated debt coverage ratio was
4.0x, and we had $842.3 million available for borrowing.
Letters of credit issued under our Revolving Credit Agreement totaled $56.2 million as of December 31, 2014. Letters of credit
are limited to $750.0 million (including up to the equivalent of $25.0 million in Euros and up to the equivalent of $25.0 million
in British Pounds Sterling) and also may restrict the amount we can borrow under the Revolving Credit Agreement.
Notes
NuStar Logistics’ Senior Notes. On August 19, 2013, NuStar Logistics issued $300.0 million of 6.75% senior notes due
February 1, 2021. We received net proceeds of approximately $296.0 million, which we used for general partnership purposes,
including repayment of outstanding borrowings under our Revolving Credit Agreement. Interest is payable semi-annually in
arrears for the $250.0 million of 4.75% senior notes, $300.0 million of 6.75% senior notes, $450.0 million of 4.80% senior
notes and $350.0 million of 7.65% senior notes (collectively, the NuStar Logistics Senior Notes). The interest rate payable on
the 7.65% senior notes is subject to adjustment if our debt rating is downgraded (or upgraded) by certain credit rating agencies
and is at 8.2% as of December 31, 2014. The NuStar Logistics Senior Notes do not have sinking fund requirements. These
notes rank equally with existing senior unsecured indebtedness of NuStar Logistics and contain restrictions on NuStar
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Logistics’ ability to incur secured indebtedness unless the same security is also provided for the benefit of holders of the NuStar
Logistics Senior Notes. In addition, the NuStar Logistics Senior Notes limit NuStar Logistics’ ability to incur indebtedness
secured by certain liens and to engage in certain sale-leaseback transactions. At the option of NuStar Logistics, the NuStar
Logistics Senior Notes may be redeemed in whole or in part at any time at a redemption price, which includes a make-whole
premium, plus accrued and unpaid interest to the redemption date.
The NuStar Logistics Senior Notes are fully and unconditionally guaranteed by NuStar Energy and NuPOP. NuPOP will be
released from its guarantee of senior notes issued by NuStar Logistics when it no longer guarantees any obligations of NuStar
Energy, or any of its subsidiaries, including NuStar Logistics, under any bank facility or public debt instrument.
In 2013, we repaid Nustar Logistics’ $229.9 million of 6.05% senior notes due March 15, 2013 and NuPOP’s $250.0 million of
5.875% senior notes due June 1, 2013, both with borrowings under the Revolving Credit Agreement.
NuStar Logistics’ 7.625% Fixed-to-Floating Rate Subordinated Notes. NuStar Logistics’ $402.5 million of 7.625% fixed-to-
floating rate subordinated notes are due January 15, 2043 (the Subordinated Notes). The Subordinated Notes are fully and
unconditionally guaranteed on an unsecured and subordinated basis by NuStar Energy and NuPOP. The Subordinated Notes
bear interest at a fixed annual rate of 7.625%, payable quarterly in arrears beginning on April 15, 2013 and ending on January
15, 2018. Thereafter, the Subordinated Notes will bear interest at an annual rate equal to the sum of the three-month LIBOR
rate for the related quarterly interest period, plus 6.734% payable quarterly, commencing April 15, 2018, unless payment is
deferred in accordance with the terms of the notes. NuStar Logistics may elect to defer interest payments on the Subordinated
Notes on one or more occasions for up to five consecutive years. Deferred interest will accumulate additional interest at a rate
equal to the interest rate then applicable to the Subordinated Notes until paid. If NuStar Logistics elects to defer interest
payments, NuStar Energy cannot declare or make cash distributions to its unitholders during the period interest is deferred.
The Subordinated Notes do not have sinking fund requirements and are subordinated to existing senior unsecured indebtedness
of NuStar Logistics and NuPOP. The Subordinated Notes do not contain restrictions on NuStar Logistics’ ability to incur
additional indebtedness, including debt that ranks senior in priority of payment to the notes. In addition, the Subordinated Notes
do not limit NuStar Logistics’ ability to incur indebtedness secured by liens or to engage in certain sale-leaseback transactions.
At the option of NuStar Logistics, the Subordinated Notes may be redeemed in whole or in part at any time at a redemption
price, which may include a make-whole premium, plus accrued and unpaid interest to the redemption date.
Gulf Opportunity Zone Revenue Bonds
In 2008, 2010 and 2011, the Parish of St. James, where our St. James, Louisiana, terminal is located, issued Revenue Bonds
(NuStar Logistics, L.P. Project) Series 2008, Series 2010, Series 2010A, Series 2010B and Series 2011 associated with our St.
James terminal expansion pursuant to the Gulf Opportunity Zone Act of 2005 (collectively, the Gulf Opportunity Zone
Revenue Bonds). The interest rates on these bonds are based on a weekly tax-exempt bond market interest rate, and interest is
paid monthly. Following the issuance, the proceeds were deposited with a trustee and are disbursed to us upon our request for
reimbursement of expenditures related to our St. James terminal expansion. We include the amount remaining in trust in “Other
long-term assets, net,” and we include the amount of bonds issued in “Long-term debt” in our consolidated balance sheets. For
the years ended December 31, 2014 and 2013, the amount received from the trustee totaled $11.9 million and $43.1 million,
respectively.
NuStar Logistics is solely obligated to service the principal and interest payments associated with the Gulf Opportunity Zone
Revenue Bonds. Letters of credit were issued on our behalf to guarantee the payment of interest and principal on the bonds. All
letters of credit rank equally with existing senior unsecured indebtedness of NuStar Logistics. The letters of credit issued by
individual banks do not restrict the amount we can borrow under the Revolving Credit Agreement.
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NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The following table summarizes the Gulf Opportunity Zone Revenue Bonds outstanding as of December 31, 2014:
Date Issued
Maturity Date
Amount
Outstanding
Amount of
Letter of
Credit
Amount
Received from
Trustee
Amount
Remaining in
Trust
Average Annual
Interest Rate
(Thousands of Dollars)
June 26, 2008
July 15, 2010
June 1, 2038
July 1, 2040
$
55,440
$
56,169
$
55,440
$
100,000
101,315
100,000
October 7, 2010
October 1, 2040
December 29, 2010
December 1, 2040
August 29, 2011
August 1, 2041
50,000
85,000
75,000
50,658
86,118
75,986
35,760
27,689
75,000
—
—
14,240
57,311
—
Total
$
365,440
$
370,246
$
293,889
$
71,551
0.1%
0.1%
0.1%
0.1%
0.1%
UK Term Loan
In 2013, we repaid our UK subsidiary, NuStar Terminals Limited’s, £21 million amended and restated term loan, which
matured on December 10, 2013, with borrowings under the Revolving Credit Agreement.
Short-term Lines of Credit
In 2014, we entered into two short-term line of credit agreements with an aggregate uncommitted borrowing capacity of up to
$80.0 million. The agreements allow us to better manage fluctuations in our daily cash requirements and minimize our excess
cash balances. The interest rate and maturity vary and are determined at the time of the borrowing. We had $77.0 million
outstanding under these lines of credit as of December 31, 2014. The weighted-average interest rate related to outstanding
borrowings under these short-term lines of credit during the year ended December 31, 2014 was 1.8%.
15. HEALTH, SAFETY AND ENVIRONMENTAL MATTERS
Our operations are subject to extensive federal, state and local environmental laws and regulations, including those relating to
the discharge of materials into the environment, waste management, pollution prevention measures, pipeline integrity and
operator qualifications, among others. Our operations are also subject to extensive federal and state health and safety laws and
regulations, including those relating to worker and pipeline safety. The principal environmental and safety risks associated with
our operations relate to unauthorized or unpermitted emissions into the air, unauthorized releases into soil, surface water or
groundwater, and personal injury and property damage. Compliance with these environmental, health and safety laws,
regulations and permits increases our capital expenditures and our overall cost of business, and violations of these laws,
regulations or permits can result in significant civil and criminal liabilities, injunctions or other penalties.
Most of our pipelines are subject to federal regulation by one or more of the following governmental agencies or laws: the
Federal Energy Regulatory Commission (the FERC), the Surface Transportation Board (the STB), the Department of
Transportation (DOT), the Environmental Protection Agency (EPA) and the Homeland Security Act. Additionally, the
operations and integrity of the pipelines are subject to the respective state jurisdictions along the route of the systems.
We have adopted policies, practices and procedures including in the areas of pollution control, pipeline integrity, operator
qualifications, public relations and education, process safety management, occupational health and the handling, storage, use
and disposal of hazardous materials, that are designed to prevent material environmental or other damage, to ensure the safety
of our pipelines, our employees, the public and the environment and to limit the financial liability that could result from such
events. Future governmental action and regulatory initiatives could result in changes to expected operating permits and
procedures, additional remedial actions or increased capital expenditures and operating costs that cannot be assessed with
certainty at this time. In addition, contamination resulting from spills of petroleum and other products occurs within the
industry. Risks of additional costs and liabilities are inherent within the industry, and there can be no assurances that significant
costs and liabilities will not be incurred in the future.
Environmental and safety exposures and liabilities are difficult to assess and estimate due to unknown factors such as the
timing and extent of remediation, the determination of our liability in proportion to other parties, improvements in cleanup
technologies and the extent to which environmental and safety laws and regulations may change in the future. Although
environmental and safety costs may have a significant impact on the results of operations for any single period, we believe that
such costs will not have a material adverse effect on our financial position.
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NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The balance of and changes in the accruals for environmental matters were as follows:
Balance as of the beginning of year
Additions to accrual
Payments
San Antonio Refinery Sale
Foreign currency translation
Balance as of the end of year
Year Ended December 31,
2014
2013
(Thousands of Dollars)
6,233
$
3,292
(2,878)
—
(49)
6,598
$
13,451
3,623
(2,940)
(7,910)
9
6,233
$
$
Accruals for environmental matters are included in the consolidated balance sheets as follows:
Accrued liabilities
Other long-term liabilities
Accruals for environmental matters
16. COMMITMENTS AND CONTINGENCIES
December 31,
2014
2013
(Thousands of Dollars)
$
$
3,518
3,080
6,598
$
$
3,299
2,934
6,233
Contingencies
We have contingent liabilities resulting from various litigation, claims and commitments. We record accruals for loss
contingencies when losses are considered probable and can be reasonably estimated. Legal fees associated with defending the
Partnership in legal matters are expensed as incurred. As of December 31, 2014, we have accrued $2.1 million for contingent
losses. The amount that will ultimately be paid related to these matters may differ from the recorded accruals, and the timing of
such payments is uncertain. In addition, due to the inherent uncertainty of litigation, there can be no assurance that the
resolution of any particular claim or proceeding would not have a material adverse effect on our results of operations, financial
position or liquidity.
Commitments
Future minimum rental payments applicable to all noncancellable operating leases and purchase obligations as of December 31,
2014 are as follows:
2015
2016
2017
2018
2019
There-
after
Total
Payments Due by Period
(Thousands of Dollars)
Operating leases
Purchase obligations
$
30,179
$
26,135
$
21,885
$
19,536
$
13,297
$
66,635
$
177,667
6,294
3,880
694
216
—
—
11,084
Rental expense for all operating leases totaled $46.1 million, $52.9 million and $73.9 million for the years ended December 31,
2014, 2013 and 2012, respectively, including rental expense included in “Loss from discontinued operations, net of tax” on the
consolidated statements of income. Our operating leases consist primarily of the following:
•
•
a ten-year lease for tugs and barges utilized at our St. Eustatius facility for bunker fuel sales, with two five-year
renewal options; and
land leases at various terminal facilities.
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NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
17. FAIR VALUE MEASUREMENTS
We segregate the inputs used in measuring fair value into three levels: Level 1, defined as observable inputs such as quoted
prices for identical assets or liabilities in active markets; Level 2, defined as inputs other than quoted prices in active markets
that are either directly or indirectly observable, such as quoted prices for similar assets or liabilities in active markets or quoted
prices for identical assets or liabilities in markets that are not active; and Level 3, defined as unobservable inputs in which little
or no market data exists. We consider counterparty credit risk and our own credit risk in the determination of all estimated fair
values.
Recurring Fair Value Measurements
The following assets and liabilities are measured at fair value on a recurring basis:
Assets:
Other current assets:
Product imbalances
Commodity derivatives
Total
Liabilities:
Accrued liabilities:
Product imbalances
Commodity derivatives
Other long-term liabilities:
Guarantee liability
Total
Assets:
Other current assets:
Product imbalances
Commodity derivatives
Other long-term assets, net:
Commodity derivatives
Total
Liabilities:
Accrued liabilities:
Product imbalances
Commodity derivatives
Contingent consideration
Other long-term liabilities:
Commodity derivatives
Guarantee liability
Total
December 31, 2014
Level 1
Level 2
Level 3
Total
(Thousands of Dollars)
117
11,009
11,126
$
$
— $
5,353
5,353
$
— $
—
— $
117
16,362
16,479
(1,388) $
—
— $
(4,623)
—
(1,388) $
—
(4,623) $
— $
—
(580)
(580) $
(1,388)
(4,623)
(580)
(6,591)
December 31, 2013
Level 1
Level 2
Level 3
Total
(Thousands of Dollars)
1,980
$
— $
— $
—
—
4,948
6,977
—
—
1,980
$
11,925
$
— $
(2,190) $
(1,433)
—
—
—
(3,623) $
— $
— $
(800)
—
—
(1,318)
(1,575)
—
(2,375) $
—
(1,880)
(3,198) $
1,980
4,948
6,977
13,905
(2,190)
(2,233)
(1,318)
(1,575)
(1,880)
(9,196)
$
$
$
$
$
$
$
$
Product Imbalances. We value our assets and liabilities related to product imbalances using quoted market prices in active
markets as of the reporting date.
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NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Commodity Derivatives. We base the fair value of certain of our commodity derivative instruments on quoted prices on an
exchange; accordingly, we include these in Level 1 of the fair value hierarchy. We also have derivative instruments for which
we determine fair value using industry pricing services and other observable inputs, such as quoted prices on an exchange for
similar derivative instruments. Therefore, we include these derivative instruments in Level 2 of the fair value hierarchy. See
Note 18 for a discussion of our derivative instruments.
Contingent Consideration. In connection with the TexStar Asset Acquisition, we could have been obligated to pay additional
consideration to TexStar, depending upon the cost of work required to complete certain assets and obtain outstanding real estate
rights (collectively, the Contingent Consideration). In August 2014, we settled with TexStar and reduced the associated liability
to $0.
Guarantees. As of December 31, 2014 and 2013, we recorded a liability of $0.6 million and $1.9 million, respectively,
representing the fair value of guarantees we have issued on behalf of Axeon. We estimated the fair value considering the
probability of default by Axeon and an estimate of the amount we would be obligated to pay under the guarantees at the time of
default. We calculated the fair value based on the guarantees outstanding as of December 31, 2014 and 2013, totaling $25.3
million and $79.7 million, respectively, plus two guarantees that do not specify a maximum amount. Our estimate of the fair
value is based on significant inputs not observable in the market and thus falls within Level 3 of the fair value hierarchy. See
Note 5 for a discussion of our financing agreements with Axeon.
In the event we are obligated to perform under these guarantees, that amount paid by us will be treated as additional borrowings
under the Axeon Term Loan. As a result, we increased the carrying value of the note receivable from Axeon by the same
amount as the increase to the liability for the fair value of the guarantees outstanding as of December 31, 2014.
The following table summarizes the activity in our Level 3 liabilities:
Beginning balance
Amounts settled
Adjustment to guarantee liability
Changes in fair value recorded in earnings:
Operating expenses
Ending balance
Year Ended
December 31, 2014
(Thousands of Dollars)
$
$
3,198
(870)
(1,300)
(448)
580
Non-recurring Fair Value Measurements
We classified the property, plant and equipment associated with certain terminals as “Assets held for sale” on the consolidated
balance sheet and recorded those assets at fair value, less costs to sell. As of December 31, 2014, the fair value totaled $1.1
million, based on the sales price of the terminal. We estimated the fair value of $22.0 million as of December 31, 2013, using a
weighted-average of values calculated using an income approach and a market approach. The income approach calculates fair
value by discounting the estimated net cash flows generated by the related terminal. The market approach involves estimating
the fair value measurement on an earnings multiple based on public company transaction data. Our estimate of the fair value is
based on significant inputs not observable in the market and thus falls within Level 3 of the fair value hierarchy.
Fair Value of Financial Instruments
We recognize cash equivalents, receivables, note receivables, payables and debt in our consolidated balance sheets at their
carrying amounts. The fair values of these financial instruments, except for a note receivable from Axeon and long-term debt,
approximate their carrying amounts. The estimated fair values and carrying amounts of the debt and note receivable were as
follows:
Long-term debt
Note receivable from Axeon
December 31, 2014
December 31, 2013
Fair Value
Carrying Amount
Fair Value
Carrying Amount
(Thousands of Dollars)
$
$
2,764,242
164,386
$
$
2,749,452
169,235
$
$
2,636,734
133,416
$
$
2,655,553
165,440
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NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
We estimated the fair value of our publicly-traded senior notes based upon quoted prices in active markets; therefore, we
determined the fair value of our publicly-traded senior notes falls in Level 1 of the fair value hierarchy. For our other debt, for
which a quoted market price is not available, we estimated the fair value using a discounted cash flow analysis using current
incremental borrowing rates for similar types of borrowing arrangements and determined the fair value falls in Level 2 of the
fair value hierarchy.
We estimated the fair value of the note receivable using discounted cash flows, which use observable inputs such as time to
maturity and market interest rates, and determined the fair value falls in Level 2 of the fair value hierarchy. See Note 5 for
additional information on the note receivable from Axeon.
As of December 31, 2014, the carrying amount of the note receivable from Axeon is $169.2 million, consisting of the
following: (i) the outstanding principal amount from the Axeon Term Loan of $190.0 million; (ii) plus the fair value of
guarantees of $0.6 million; and (iii) less equity losses from our investment in Axeon of $21.3 million incurred prior to the 2014
Asphalt Sale and after the carrying value of our equity investment in Axeon was reduced to zero.
18. DERIVATIVES AND RISK MANAGEMENT ACTIVITIES
We utilize various derivative instruments to manage our exposure to commodity price risk and 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 controls 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 our 4.75% senior notes issued on February 2,
2012. We also terminated fixed-to-floating interest rate swap agreements with an aggregate notional amount of $270.0 million
associated with 4.80% senior notes. Under the terms of these interest rate swap agreements, we received a fixed rate of 4.75%
and 4.80% 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 are amortizing into “Interest expense, net” over the
remaining lives of the 4.75% and 4.80% 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,
2014 and 2013.
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 from “Accumulated other comprehensive loss” 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
from “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, 2014 and 2013.
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NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
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 sale 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. In anticipation of the San Antonio Refinery Sale, we
concluded that all of the remaining 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 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 open positions on an absolute basis, which totaled 4.7 million barrels and 15.2 million barrels as of December 31, 2014
and 2013, respectively.
As of December 31, 2013, we had $3.3 million of margin deposits related to our derivative instruments and none as of
December 31, 2014.
The fair values of our derivative instruments included in our consolidated balance sheets were as follows:
Derivatives Designated as
Hedging Instruments:
Commodity contracts
Commodity contracts
Total
Derivatives Not Designated
as Hedging Instruments:
Commodity contracts
Commodity contracts
Commodity contracts
Commodity contracts
Total
Total Derivatives
Asset Derivatives
Liability Derivatives
December 31,
Balance Sheet Location
2014
2013
2014
2013
(Thousands of Dollars)
Other current assets
Accrued liabilities
$
5,609
$
— $
— $
—
5,609
—
—
—
—
—
(130)
(130)
Other current assets
Other long-term assets, net
Accrued liabilities
Other long-term liabilities
38,704
—
13,081
—
51,785
16,168
15,883
4,523
5,448
42,022
(27,951)
—
(17,704)
—
(45,655)
(11,220)
(8,906)
(6,626)
(7,023)
(33,775)
$
57,394
$
42,022
$ (45,655) $
(33,905)
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:
Commodity Contracts
Net amounts of assets presented in the consolidated balance sheets
Net amounts of liabilities presented in the consolidated balance sheets
December 31,
2014
2013
(Thousands of Dollars)
$
$
16,362
$
(4,623) $
11,925
(3,808)
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NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The earnings impact of our derivative activity was as follows:
Derivatives Designated as Fair
Value Hedging Instruments
Income Statement
Location
Year ended December 31, 2014:
Commodity contracts
Cost of product sales
Year ended December 31, 2013:
Commodity contracts
Cost of product sales
Year ended December 31, 2012:
Interest rate swaps
Commodity contracts
Interest expense, net
Cost of product sales
Total
Amount of Gain
(Loss) Recognized
in Income on Derivative
(Effective Portion)
Amount of Gain (Loss)
Recognized in Income
on Hedged Item
(Thousands of Dollars)
Amount of Gain
(Loss) Recognized in
Income on Derivative
(Ineffective Portion)
$
$
$
$
21,951
$
(21,587) $
364
3,964
$
(6,327) $
(2,363)
17,345
(10,505)
6,840
$
$
(17,345) $
12,139
(5,206) $
—
1,634
1,634
Derivatives Designated as Cash
Flow Hedging Instruments
Year ended December 31, 2014:
Interest rate swaps
Year ended December 31, 2013:
Interest rate swaps
Year ended December 31, 2012:
Interest rate swaps
Commodity contracts
Total
Amount of Gain
(Loss) Recognized
in OCI on Derivative
(Effective Portion)
(Thousands of Dollars)
Income Statement
Location (a)
Amount of Gain
(Loss) Reclassified
from
Accumulated OCI
into Income
(Effective Portion)
Amount of Gain
(Loss)
Recognized
in Income on
Derivative
(Ineffective Portion)
(Thousands of Dollars)
$
$
$
$
— Interest expense, net
$
(10,663) $
7,213
Interest expense, net
$
(7,570) $
(17,069)
Interest expense, net
$
(1,749) $
—
—
—
Loss from
discontinued
operations
(77,200)
(94,269)
$
(51,483)
(53,232) $
4,010
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).
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NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Derivatives Not Designated as Hedging Instruments
Income Statement Location
Year ended December 31, 2014:
Commodity contracts
Year ended December 31, 2013:
Commodity contracts
Commodity contracts
Total
Year ended December 31, 2012:
Commodity contracts
Commodity contracts
Commodity contracts
Total
Cost of product sales
Cost of product sales
Loss from discontinued operations
Revenues
Cost of product sales
Loss from discontinued operations
Amount of Gain (Loss)
Recognized in Income
(Thousands of Dollars)
$
$
$
$
$
18,407
(5,323)
(218)
(5,541)
(7,654)
20,138
6,176
18,660
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 “Loss from discontinued
operations, net of tax” for our commodity contracts associated with the San Antonio Refinery. As of December 31, 2014, we
expect to reclassify a loss of $9.8 million to “Interest expense, net” within the next twelve months.
19. RELATED PARTY TRANSACTIONS
The following table summarizes information pertaining to related party transactions:
Revenues
Operating expenses
General and administrative expenses
Interest income
Revenues included in discontinued operations, net of tax
Expenses included in discontinued operations, net of tax
Year Ended December 31,
2014
2013
2012
(Thousands of Dollars)
$
$
$
$
$
$
929
125,736
66,910
1,055
528
1,680
$
$
$
$
$
$
14,897
122,677
58,602
6,113
3,720
6,051
$
$
$
$
$
$
1,990
133,654
62,490
1,219
3,390
14,328
NuStar GP, LLC
Our operations are managed by NuStar GP, LLC, the general partner of our general partner. Under a services agreement
between NuStar Energy and NuStar GP, LLC, employees of NuStar GP, LLC perform services for our U.S. operations. Certain
of our wholly owned subsidiaries employ persons who perform services for our international operations.
GP Services Agreement. NuStar Energy and NuStar GP, LLC entered into a services agreement effective January 1, 2008 (the
GP Services Agreement). The GP Services Agreement provides that NuStar GP, LLC will furnish administrative and certain
operating services necessary to conduct the business of NuStar Energy. All employees providing services to both NuStar GP
Holdings and NuStar Energy are employed by NuStar GP, LLC; therefore, NuStar Energy reimburses NuStar GP, LLC for all
employee costs, other than the expenses allocated to NuStar GP Holdings (the Holdco Administrative Services Expense). The
GP Services Agreement had an original termination date of December 31, 2014, which was subsequently renewed
automatically and will continue to renew automatically every two years unless terminated by either party upon six months’
prior written notice.
We had a payable to NuStar GP, LLC of $15.1 million and $8.3 million as of December 31, 2014 and 2013, respectively, with
both amounts representing payroll, employee benefit plan expenses and unit-based compensation. We also had a long-term
payable to NuStar GP, LLC as of December 31, 2014 and 2013 of $33.5 million and $41.1 million, respectively, for amounts
payable for retiree medical benefits and other post-employment benefits.
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Non-Compete Agreement. On July 19, 2006, we entered into a non-compete agreement with NuStar GP Holdings, Riverwalk
Logistics, L.P. and NuStar GP, LLC (the Non-Compete Agreement). The Non-Compete Agreement became effective on
December 22, 2006 when NuStar GP Holdings ceased to be subject to the Amended and Restated Omnibus Agreement, dated
March 31, 2006. Under the Non-Compete Agreement, we will have a right of first refusal with respect to the potential
acquisition of assets that relate to the transportation, storage or terminalling of crude oil, feedstocks or refined petroleum
products (including petrochemicals) in the United States and internationally. NuStar GP Holdings will have a right of first
refusal with respect to the potential acquisition of general partner and other equity interests in publicly traded partnerships
under common ownership with the general partner interest. With respect to any other business opportunities, neither the
Partnership nor NuStar GP Holdings are prohibited from engaging in any business, even if the Partnership and NuStar GP
Holdings would have a conflict of interest with respect to such other business opportunity.
Axeon
As a result of the 2014 Asphalt Sale, we ceased reporting transactions between us and Axeon as related party transactions in our
consolidated financial statements on February 26, 2014.
Terminal Service Agreements. Simultaneously with the 2012 Asphalt Sale, we entered into four terminal service agreements
with Axeon for our terminals in Wilmington, NC, Rosario, NM, Catoosa, OK and Houston, TX. Pursuant to the terms of the
agreements, we provided aggregate storage capacity of 0.8 million barrels and blending services to Axeon for a service charge
of $1.5 million per year. In addition, we had terminal service agreements with Axeon for our terminals in Jacksonville, FL,
Dumfries, VA, and Baltimore, MD. Pursuant to the terms of the agreements, we provided aggregate storage capacity of
approximately 0.6 million barrels to Axeon for a storage charge of approximately $6.3 million per year, plus applicable
throughput and handling fees. As a result of the 2014 Asphalt Sale, these terminal service agreements were either amended or
terminated. See Note 5 of the Notes to Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary
Data” for additional discussion.
Crude Oil Supply Agreement. We were a party to a crude oil supply agreement with Axeon (the Axeon Crude Oil Supply
Agreement) that committed Axeon to purchase from us a minimum number of barrels of crude oil in a given year. The Axeon
Crude Oil Supply Agreement terminated effective January 1, 2014. As of December 31, 2013, we had a receivable from Axeon
of $50.7 million, mainly associated with crude oil sales under the Axeon Crude Oil Supply Agreement.
Services Agreements. NuStar GP, LLC and Axeon were a party to a services agreement, which provided that NuStar GP, LLC
would furnish certain administrative and other operating services necessary to conduct the business of Axeon for an annual fee
totaling $10.0 million, subject to adjustment (the Axeon Services Agreement). The Axeon Services Agreement terminated on
June 30, 2014. In addition, NuStar GP, LLC and Axeon were a party to an employee services agreement, which provided that
certain of NuStar GP, LLC employees provide employee-services to Axeon (the Axeon Employee Services Agreement). In
exchange, Axeon reimbursed NuStar GP, LLC for the compensation expense of those employees. The Axeon Employee
Services Agreement terminated on December 31, 2012, and effective January 1, 2013, those employees became employees of
Axeon.
20. EMPLOYEE BENEFIT PLANS AND LONG-TERM INCENTIVE PLANS
Employee Benefit Plans
We rely on employees of NuStar GP, LLC to provide the necessary services to conduct our U.S. operations. NuStar GP, LLC
sponsors various employee benefit plans.
The NuStar Pension Plan (the Pension Plan) is a qualified non-contributory defined benefit pension plan that provides eligible
employees with retirement income as calculated under a cash balance formula. Under the cash balance formula, benefits are
based on age, service and interest credits, and employees become fully vested in their benefits upon attaining three years of
vesting service. Prior to January 1, 2014, eligible employees were covered under either a cash balance formula or a final
average pay formula (FAP). Effective January 1, 2014, the Pension Plan was amended to freeze the FAP benefits as of
December 31, 2013, and going forward, all eligible employees are covered under the cash balance formula discussed above.
NuStar GP, LLC also maintains an excess pension plan (the Excess Pension Plan) which is a nonqualified deferred
compensation plan that provides benefits to a select group of management or other highly compensated employees of NuStar
GP, LLC. The supplemental executive retirement plan terminated in 2014.
The NuStar Thrift Plan (the Thrift Plan) is a qualified defined contribution plan that became effective June 26, 2006.
Participation in the Thrift Plan is voluntary and is open to substantially all NuStar GP, LLC employees upon their date of hire.
Thrift Plan participants can contribute from 1% up to 30% of their total annual compensation to the Thrift Plan in the form of
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
pre-tax and/or after tax employee contributions. NuStar GP, LLC makes matching contributions in an amount equal to 100% of
each participant’s employee contributions up to a maximum of 6% of the participant’s total annual compensation.
NuStar GP, LLC also maintains an excess thrift plan (the Excess Thrift Plan) that became effective July 1, 2006. The Excess
Thrift Plan is a nonqualified deferred compensation plan that provides benefits to those employees of NuStar GP, LLC whose
compensation and/or annual contributions under the Thrift Plan are subject to the limitations applicable to qualified retirement
plans under the Code.
Neither the Excess Thrift Plan nor the Excess Pension Plan is intended to constitute either a qualified plan under the provisions
of Section 401 of the Code or a funded plan subject to the Employee Retirement Income Security Act.
NuStar GP, LLC also sponsors a contributory medical benefits plan for employees that retired prior to April 1, 2014. For
employees that retire on or after April 1, 2014, NuStar GP, LLC provides partial reimbursement for eligible third-party health
care premiums.
We also maintain several other defined contribution plans for certain international employees located in Canada, the
Netherlands and the United Kingdom. For the years ended December 31, 2014, 2013 and 2012, our costs for these plans totaled
$2.7 million, $2.5 million and $2.6 million, respectively.
Long-Term Incentive Plans
NuStar GP, LLC sponsors the following:
• The Fourth Amended and Restated 2000 Long-Term Incentive Plan (the 2000 LTIP), under which NuStar GP,
LLC may award up to 3,250,000 NS common units. Awards under the 2000 LTIP can include NS unit options,
restricted units, performance awards, distribution equivalent rights (DER) and contractual rights to receive
common units. As of December 31, 2014, NS common units that remained available to be awarded totaled
1,441,988 under the 2000 LTIP.
• The 2006 Long-Term Incentive Plan (the 2006 LTIP) under which NuStar GP Holdings may award up to
2,000,000 NSH units to employees, consultants and directors of NuStar GP Holdings and its affiliates, including
us. Awards under the 2006 LTIP can include NSH unit options, performance awards, DER, restricted units,
phantom units, unit grants and unit appreciation rights. As of December 31, 2014, a total of 1,527,164 NSH units
remained available to be awarded under the 2006 LTIP.
The 2003 Employee Unit Incentive Plan (the UIP), under which NuStar GP, LLC awarded NS common units to employees of
NuStar GP, LLC or its affiliates, terminated on June 16, 2013. The 2002 Unit Option Plan (the UOP), under which NuStar GP,
LLC awarded NS unit options to officers and directors of NuStar GP, LLC or its affiliates, terminated on March 22, 2012.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The number of awards granted under the above-described plans were as follows:
2000 LTIP:
Performance awards
Restricted units (b)
Restricted units (grants to non-
employee directors of NuStar GP,
LLC)
UIP:
Restricted units (c)
2006 LTIP:
Restricted units
Restricted units (grants to non-
employee directors of NuStar GP
Holdings) (d)
2014
2013
2012
Granted
Vesting
Granted
Vesting
Granted
Vesting
Year Ended December 31,
28,841
(a)
38,786
(a)
33,445
(a)
208,714
1/5 per year
269,182
1/5 per year
231,855
1/5 per year
7,009
1/3 per year
8,904
1/3 per year
8,170
1/3 per year
—
—
—
—
15,382
1/5 per year
16,895
1/5 per year
18,620
1/5 per year
25,640
1/5 per year
8,911
1/3 per year
13,183
1/3 per year
10,601
1/3 per year
(a)
(b)
(c)
(d)
Performance awards vest 1/3 per year if certain performance measures are met, as defined in the award
agreements.
The 2000 LTIP restricted unit grants include 2,844 and 3,882 restricted unit awards granted to certain
international employees for the years ended December 31, 2014 and 2013, respectively, that vest 1/3 per year,
as defined in the award agreements.
The UIP restricted unit grants include 3,392 restricted unit awards granted to certain international employees
for the year ended December 31, 2012, that vest 1/3 per year, as defined in the award agreements.
We do not reimburse NuStar GP, LLC for compensation expense relating to these awards.
Our share of compensation expense related to the benefit plans and long-term incentive plans sponsored by NuStar GP, LLC
described above is as follows:
Benefit plans
Long-term incentive plans
21. OTHER INCOME (EXPENSE)
Other income (expense) consisted of the following:
Foreign exchange gains (losses)
Gain (loss) from sale or disposition of assets
Loss on deconsolidation of Axeon
Other, net
Other income (expense), net
Year Ended December 31,
2014
2013
2012
(Thousands of Dollars)
11,385
10,934
$
$
27,741
7,369
$
$
32,003
5,831
Year Ended December 31,
2014
2013
2012
(Thousands of Dollars)
2,057
$
642
—
1,800
$
7,707
(524)
—
158
4,499
$
7,341
$
(1,429)
(1,522)
(23,800)
2,062
(24,689)
$
$
$
$
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NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
22. PARTNERS’ EQUITY
Issuance of Common Units
In September 2012, we issued 7,130,000 common units representing limited partner interests at a price of $48.94 per unit. We
used the net proceeds from this offering of $343.9 million, including a contribution of $7.1 million from our general partner to
maintain its 2% general partner interest, for general partnership purposes, including repayments of outstanding borrowings
under our Revolving Credit Agreement and working capital purposes.
Accumulated Other Comprehensive Income (Loss)
The balance of and changes in the components included in “Accumulated other comprehensive income (loss)” were as follows:
Balance as of January 1, 2012
Other comprehensive income (loss) before reclassifications
Net loss reclassified into interest expense, net
Net loss reclassified into loss from discontinued operations
Other comprehensive income (loss)
Balance as of December 31, 2012
Other comprehensive (loss) income before reclassifications
Net loss reclassified into interest expense, net
Other comprehensive (loss) income
Balance as of December 31, 2013
Other comprehensive loss before reclassifications
Net loss reclassified into interest expense, net
Other comprehensive (loss) income
Foreign
Currency
Translation
Cash Flow
Hedges
Total
(Thousands of Dollars)
$
(3,925) $
9,579
—
—
9,579
5,654
(19,312)
—
(19,312)
(13,658)
(15,181)
—
(15,181)
(23,482) $
(94,269)
1,749
51,483
(41,037)
(64,519)
7,213
7,570
14,783
(49,736)
—
10,663
10,663
(27,407)
(84,690)
1,749
51,483
(31,458)
(58,865)
(12,099)
7,570
(4,529)
(63,394)
(15,181)
10,663
(4,518)
Balance as of December 31, 2014
$
(28,839) $
(39,073) $
(67,912)
Other comprehensive loss attributable to the noncontrolling interest consisted of foreign currency translation adjustment losses
of $0.4 million, $0.1 million and gains of $1.1 million, for the years ended December 31, 2014, 2013 and 2012, respectively.
Allocations of Net Income
General Partner. 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.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The following table details the calculation of net income applicable to the general partner:
Year Ended December 31,
2014
2013
2012
(Thousands of Dollars)
Net income (loss) attributable to NuStar Energy L.P.
$
210,773
$
Less general partner incentive distribution
Net income (loss) after general partner incentive distribution
General partner interest
General partner allocation of net income (loss) after general partner
incentive distribution
General partner incentive distribution
Net income applicable to general partner
43,220
167,553
2%
3,352
43,220
46,572
$
$
(273,770)
43,220
(316,990)
2%
(226,616)
41,242
(267,858)
2%
(6,338)
43,220
$
36,882
$
(5,356)
41,242
35,886
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:
Quarterly Distribution Amount per Unit
Up to $0.60
Above $0.60 up to $0.66
Above $0.66
Percentage of Distribution
Unitholders
General Partner
98%
90%
75%
2%
10%
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 were earned:
General partner interest
General partner incentive distribution
Total general partner distribution
Limited partners’ distribution
Total cash distributions
Cash distributions per unit applicable to limited partners
Year Ended December 31,
2014
2013
2012
(Thousands of Dollars, Except Per Unit Data)
$
$
$
7,844
$
7,844
$
43,220
51,064
341,140
392,204
4.380
$
$
43,220
51,064
341,140
392,204
4.380
$
$
7,486
41,242
48,728
325,526
374,254
4.380
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NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The following table summarizes information related to our quarterly cash distributions:
Quarter Ended
December 31, 2014 (a)
September 30, 2014
June 30, 2014
March 31, 2014
Cash
Distributions
Per Unit
Total Cash
Distributions
(Thousands of
Dollars)
Record Date
Payment Date
$
$
$
$
1.095
1.095
1.095
1.095
$
$
$
$
98,051
February 9, 2015
February 13, 2015
98,051 November 10, 2014
November 14, 2014
98,051
98,051
August 6, 2014
August 11, 2014
May 7, 2014
May 12, 2014
(a) The distribution was announced on January 30, 2015.
23. NET INCOME (LOSS) PER UNIT
The following table details the calculation of earnings per unit:
Net income (loss) attributable to NuStar Energy L.P.
Less general partner distribution (including incentive distribution
rights)
Less limited partner distribution
Distributions greater than earnings
General partner earnings:
Distributions
Allocation of distributions greater than earnings (2%)
Total
Limited partner earnings:
Distributions
Allocation of distributions greater than earnings (98%)
Total
Weighted-average limited partner units outstanding
Net income (loss) per unit applicable to limited partners
Year Ended December 31,
2014
2013
2012
(Thousands of Dollars, Except Per Unit Data)
210,773
$
(273,770) $
(226,616)
51,064
51,064
341,140
(181,431) $
341,140
(665,974) $
48,728
325,526
(600,870)
51,064
(3,630)
47,434
341,140
(177,801)
163,339
$
$
$
$
51,064
(13,318)
37,746
$
$
48,728
(12,019)
36,709
$
341,140
(652,656)
(311,516) $
325,526
(588,851)
(263,325)
77,886,078
77,886,078
72,957,417
2.10
$
(4.00) $
(3.61)
$
$
$
$
$
$
$
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
24. STATEMENTS OF CASH FLOWS
Changes in current assets and current liabilities were as follows:
Year Ended December 31,
2014
2013
2012
(Thousands of Dollars)
Decrease (increase) in current assets:
Accounts receivable
Receivable from related parties
Inventories
Income tax receivable
Other current assets
Increase (decrease) in current liabilities:
Accounts payable
Payable to related party
Accrued interest payable
Accrued liabilities
Taxes other than income tax
Income tax payable
$
72,298
$
107,209
$
50,918
82,075
(24)
3,809
(153,671)
837
303
22,980
4,341
(1,448)
82,418
58,692
31,975
414
25,725
(96,330)
6,922
9,370
(32,452)
(87)
1,338
$
112,776
$
160,435
(113,018)
112,589
2,921
(26,050)
(43,451)
(5,339)
(6,092)
11,259
(2,444)
(563)
90,247
Changes in current assets and current liabilities
$
The above changes in current assets and current liabilities differ from changes between amounts reflected in the applicable
consolidated balance sheets due to:
•
•
•
•
the changes in assets held for sale being reflected in the line items to which the changes relate in the table above;
current assets and current liabilities acquired and disposed during the period;
the change in the amount accrued for capital expenditures; and
the effect of foreign currency translation.
Non-cash investing and financing activities for the years ended December 31, 2013 and 2012 mainly consist of changes in the
fair values of our fixed-to-floating and forward-starting interest rate swaps.
Cash flows related to interest and income taxes were as follows:
Cash paid for interest, net of amount capitalized
Cash paid for income taxes, net of tax refunds received
$
$
129,377
6,699
$
$
113,805
11,386
$
$
110,679
21,032
Year Ended December 31,
2014
2013
2012
(Thousands of Dollars)
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25. INCOME TAXES
NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Components of income tax expense related to certain of our continuing operations conducted through separate taxable wholly
owned corporate subsidiaries were as follows:
Current:
U.S.
Foreign
Total current
Deferred:
U.S.
Foreign
Total deferred
Year Ended December 31,
2014
2013
2012
(Thousands of Dollars)
$
(182) $
7,516
7,334
$
3,098
9,273
12,371
1,889
1,578
3,467
1,687
(1,305)
382
4,416
16,480
20,896
7,494
(3,940)
3,554
Total income tax expense
$
10,801
$
12,753
$
24,450
The difference between income tax expense recorded in our consolidated statements of income and income taxes computed by
applying the statutory federal income tax rate (35% for all years presented) to income before income tax expense is due to the
fact that the majority of our income is not subject to federal income tax due to our status as a limited partnership.
The tax effects of significant temporary differences representing deferred income tax assets and liabilities were as follows:
Deferred income tax assets:
Net operating losses
Environmental and legal reserves
Allowance for bad debt
Other
Total deferred income tax assets
Less: Valuation allowance
Net deferred income tax assets
Deferred income tax liabilities:
Property, plant and equipment
Net deferred income tax liability
Reported on the consolidated balance sheets as:
Deferred income tax asset
Deferred income tax liability
Net deferred income tax liability
December 31,
2014
2013
(Thousands of Dollars)
$
35,698
664
1,261
1,827
39,450
(14,532)
24,918
28,945
433
—
1,772
31,150
(12,237)
18,913
(47,797)
(40,494)
(22,879) $
(21,581)
$
4,429
(27,308)
(22,879) $
5,769
(27,350)
(21,581)
$
$
$
$
As of December 31, 2014, our U.S. and foreign corporate operations have net operating loss carryforwards for tax purposes
totaling approximately $90.0 million and $14.0 million, respectively, which are subject to various limitations on use and expire
in years 2019 through 2024 for U.S. losses and in years 2018 and 2019 for foreign losses.
As of December 31, 2014 and 2013, we recorded a valuation allowance of $14.5 million and $12.2 million, respectively, related
to our deferred tax assets. We estimate the amount of valuation allowance based upon our expectations of taxable income in the
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
various jurisdictions in which we operate and the period over which we can utilize those future deductions. The valuation
allowance reflects uncertainties related to our ability to utilize certain net operating loss carryforwards before they expire. In
2014, the valuation allowance for the U.S. net operating loss remained the same and we increased the foreign net operating loss
by $2.3 million, due to changes in our estimates of the amount of those loss carryforwards that will be realized, based upon
future taxable income.
The realization of net deferred income tax assets recorded as of December 31, 2014 is dependent upon our ability to generate
future taxable income in the United States. We believe it is more likely than not that the deferred income tax assets as of
December 31, 2014 will be realized, based on expected future taxable income.
Grace Energy Corporation Matter
In connection with the settlement of a legal matter, we recognized a pre-tax gain of $28.7 million in 2012 within one of our
taxable subsidiaries. As a result, we recorded related income tax expense of $10.1 million, resulting from the reduction of the
related deferred income tax asset.
Canadian Income Tax Audit
During the second quarter of 2012, we recorded $1.0 million of additional income tax liability and $2.2 million of interest and
penalties associated with an ongoing Canadian income tax audit for the years 2006 through 2011. We also recorded $1.3
million of Canadian withholding tax and $0.7 million of interest and penalties associated with the withholding tax liability
related to interest payments made from our Canadian subsidiaries to a United States entity from 2003 to 2009. We believe that
adequate provisions for uncertainties related to the Canadian audits have been reflected in the financial statements.
We settled Canadian income tax audits for the years 2006 through 2009.
St. Eustatius Tax Agreement
On February 22, 2006, we entered into a Tax and Maritime Agreement with the governments of St. Eustatius and the
Netherlands Antilles (the 2005 Tax Agreement). The 2005 Tax Agreement was effective beginning January 1, 2005 and expired
on December 31, 2014. Under the terms of the 2005 Tax Agreement, we agreed to make a one-time payment of 5.0 million
Netherlands Antilles guilders (approximately $2.8 million) in full and final settlement of all of our liabilities, taxes, fees, levies,
charges, or otherwise (including settlement of audits) due or potentially due to St. Eustatius. The 2005 Tax Agreement provides
for annual minimum profit tax of 1.0 million Netherlands Antilles guilders (approximately $0.6 million), beginning as of
January 1, 2005. To the extent the minimum annual profit tax exceeds 2% of taxable profit (as defined in the 2005 Tax
Agreement), we can carry forward that excess to offset future tax liabilities. If the minimum annual profit tax is less than 2% of
taxable profit, we agreed to pay that difference.
Effective January 1, 2011, the Netherlands Antilles ceased to exist, and St. Eustatius became part of the Netherlands. The
Netherlands Tax Ministry (the Ministry) contends that as of January 2011, we are subject to real estate tax rather than profit tax
as expressed in our 2005 Tax Agreement. In 2013, the Ministry issued a property tax assessment for years 2011 through 2012.
We objected to and appealed the assessment. The Ministry later issued property tax assessments for the years 2013 and 2014,
to which we have or will file similar objections. In 2013, we filed a lawsuit in the Netherlands civil court seeking to enforce
the terms of our existing 2005 Tax Agreement. In 2014, the Netherlands civil court determined that it did not have jurisdiction
and deferred to the jurisdiction of the tax court. We have appealed this decision. In the tax court proceeding, a hearing was
held in late 2014, and we expect a ruling in 2015. We believe it is likely that we will prevail.
26. SEGMENT INFORMATION
Our reportable business segments consist of pipeline, storage and fuels marketing. Our segments represent strategic business
units that offer different services and products. We evaluate the performance of each segment based on its respective operating
income, before general and administrative expenses and certain non-segmental depreciation and amortization expense. General
and administrative expenses are not allocated to the operating segments since those expenses relate primarily to the overall
management at the entity level. Our principal operations include the transportation of petroleum products and anhydrous
ammonia, the terminalling and storage of petroleum products and the marketing of petroleum products. Intersegment revenues
result from storage agreements with wholly owned subsidiaries of NuStar Energy at lease rates consistent with rates charged to
third parties for storage. Related party revenues mainly result from storage agreements with our joint ventures.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Results of operations for the reportable segments were as follows:
Revenues:
Pipeline:
Third parties
Storage:
Third parties
Intersegment
Related party
Total storage
Fuels marketing:
Third parties
Related party
Total fuels marketing
Consolidation and intersegment eliminations
Total revenues
Depreciation and amortization expense:
Pipeline
Storage
Fuels marketing
Total segment depreciation and amortization expense
Other depreciation and amortization expense
Total depreciation and amortization expense
Operating income (loss):
Pipeline
Storage
Fuels marketing
Consolidation and intersegment eliminations
Total segment operating income
Less general and administrative expenses
Less other depreciation and amortization expense
Other asset impairment loss
Gain on legal settlement
Total operating income (loss)
Year Ended December 31,
2014
2013
2012
(Thousands of Dollars)
$
477,030
$
411,529
$
340,455
$
$
$
$
537,142
26,435
929
564,506
518,253
32,044
6,252
556,549
517,699
59,168
1,199
578,066
2,060,017
2,519,053
5,085,592
—
2,060,017
(26,435)
3,075,118
$
8,645
2,527,698
(32,044)
3,463,732
$
791
5,086,383
(59,168)
5,945,736
77,691
$
68,871
$
103,848
16
181,555
10,153
99,868
27
168,766
10,155
52,878
88,217
11,253
152,348
7,441
191,708
$
178,921
$
159,789
245,233
$
183,104
24,805
(32)
453,110
96,056
10,153
—
—
$
158,590
208,293
(127,484)
(126)
1,437
82,120
91,086
10,155
—
—
(19,121) $
198,842
(296,785)
7,939
68,586
104,756
7,441
3,295
(28,738)
(18,168)
$
346,901
$
96
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NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Revenues by geographic area are shown in the table below.
United States
Netherlands
Other
Consolidated revenues
Year Ended December 31,
2014
2013
2012
(Thousands of Dollars)
$
$
2,276,609
$
2,340,694
$
4,230,607
705,207
93,302
1,027,260
95,778
1,438,297
276,832
3,075,118
$
3,463,732
$
5,945,736
For the years ended December 31, 2014, 2013 and 2012, Valero Energy Corporation accounted for approximately 9%, or
$282.9 million, 15%, or $534.2 million, and 11%, or $668.1 million, of our consolidated revenues, respectively. These revenues
were included in all of our reportable business segments. No other single customer accounted for 10% or more of our
consolidated revenues.
Total amounts of property, plant and equipment, net by geographic area were as follows:
United States
Netherlands
Other
Consolidated long-lived assets
Total assets by reportable segment were as follows:
Pipeline
Storage
Fuels marketing
Total segment assets
Other partnership assets
Total consolidated assets
December 31,
2014
2013
(Thousands of Dollars)
$
$
2,809,462
$
2,635,792
451,564
199,706
467,660
207,201
3,460,732
$
3,310,653
December 31,
2014
2013
(Thousands of Dollars)
$
1,962,821
$
1,797,698
2,241,573
227,642
4,432,036
486,760
2,275,183
445,882
4,518,763
513,423
$
4,918,796
$
5,032,186
Capital expenditures, including acquisitions and investments in other noncurrent assets, by reportable segment were as follows:
Pipeline
Storage
Fuels marketing
Other partnership assets
Total capital expenditures
Year Ended December 31,
2014
2013
2012
(Thousands of Dollars)
244,713
$
165,096
$
108,457
—
3,795
170,637
69
7,518
493,028
161,672
20,333
53,982
356,965
$
343,320
$
729,015
$
$
97
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NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
27. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
NuStar Energy has no operations, and its assets consist mainly of its investments in NuStar Logistics and NuPOP, both wholly
owned subsidiaries. The senior and subordinated notes issued by NuStar Logistics are fully and unconditionally guaranteed by
NuStar Energy and NuPOP. As a result, the following condensed consolidating financial statements are presented as an
alternative to providing separate financial statements for NuStar Logistics and NuPOP.
Condensed Consolidating Balance Sheets
December 31, 2014
(Thousands of Dollars)
NuStar
Energy
NuStar
Logistics
NuPOP
Non-Guarantor
Subsidiaries
Eliminations
Consolidated
Assets
Cash and cash equivalents
Receivables, net
Inventories
Other current assets
Assets held for sale
Intercompany receivable
Total current assets
Property, plant and equipment, net
Intangible assets, net
Goodwill
Investment in wholly owned
subsidiaries
Investment in joint venture
Deferred income tax asset
Other long-term assets, net
Total assets
Liabilities and Partners’ Equity
Payables
Short-term debt
Accrued interest payable
Accrued liabilities
Taxes other than income tax
Income tax payable
Intercompany payable
Total current liabilities
Long-term debt
Long-term payable to related party
Deferred income tax liability
Other long-term liabilities
Total partners’ equity
Total liabilities and
partners’ equity
$
$
6
923
47,038
—
1,998
—
10,403
—
—
—
— 1,438,675
923
1,498,120
— 1,820,126
55,801
—
149,453
—
$
— $
18,347
3,768
418
—
—
22,533
559,808
—
170,652
86,983
143,093
49,989
25,239
1,100
$
— $
—
(42)
(116)
—
— (1,438,675)
(1,438,833)
87,912
208,478
55,713
35,944
1,100
—
389,147
— 3,460,732
58,670
—
617,429
—
306,404
1,080,798
2,869
297,324
2,289,673
—
—
673
$ 2,291,269
37,179
—
—
279,058
$ 3,839,737
910,394
—
—
26,329
$ 1,689,716
913,343
74,223
4,429
8,106
$ 2,687,496
(4,150,589)
—
—
—
—
74,223
4,429
314,166
$(5,589,422) $ 4,918,796
$
$
— $
—
—
862
125
—
506,160
507,147
60,687
77,000
33,340
32,178
7,896
—
—
211,101
— 2,749,452
28,094
—
—
528
13,681
—
836,881
1,784,122
8,211
—
—
6,965
3,099
4
751,023
769,302
—
—
22
6,963
913,429
$
108,286
—
5
21,020
3,001
2,629
181,492
316,433
—
5,443
26,758
6,453
2,332,409
$
— $
—
—
—
—
(116)
(1,438,675)
(1,438,791)
177,184
77,000
33,345
61,025
14,121
2,517
—
365,192
— 2,749,452
33,537
—
27,308
—
27,097
—
(4,150,631)
1,716,210
$ 2,291,269
$ 3,839,737
$ 1,689,716
$ 2,687,496
$(5,589,422) $ 4,918,796
98
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NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Condensed Consolidating Balance Sheets
December 31, 2013
(Thousands of Dollars)
NuStar
Energy
NuStar
Logistics
NuPOP
Non-Guarantor
Subsidiaries
Eliminations
Consolidated
Assets
Cash and cash equivalents
Receivables, net
Inventories
Other current assets
Assets held for sale
Intercompany receivable
Total current assets
Property, plant and equipment, net
Intangible assets, net
Goodwill
Investment in wholly owned
subsidiaries
Investment in joint ventures
Deferred income tax asset
Note receivable from related
party, net
Other long-term assets, net
Total assets
Liabilities and Partners’ Equity
Payables
Accrued interest payable
Accrued liabilities
Taxes other than income tax
Income tax payable
Intercompany payable
Total current liabilities
Long-term debt
Long-term payable to related party
Deferred income tax liability
Other long-term liabilities
Total partners’ equity
Total liabilities and
partners’ equity
$
$
22,307
904
87,899
—
2,083
—
18,109
—
—
—
— 1,521,552
1,651,950
904
— 1,556,893
16,993
—
149,453
—
2,469,331
—
—
177,961
—
—
$
— $
13,281
2,879
2,334
—
—
18,494
573,694
—
170,652
860,787
—
—
77,532
231,220
133,195
19,835
21,987
$
— $
(6)
(10)
—
—
— (1,521,552)
(1,521,568)
100,743
332,394
138,147
40,278
21,987
—
633,549
— 3,310,653
71,249
—
617,429
—
483,769
1,180,066
54,256
297,324
918,339
68,735
5,769
(4,426,418)
—
—
—
68,735
5,769
—
611
$ 2,470,846
165,440
118,254
$ 3,836,944
—
26,331
$ 1,649,958
—
14,166
$ 3,022,424
—
—
165,440
159,362
$(5,947,986) $ 5,032,186
$
$
123
—
585
125
—
504,483
505,316
84,533
33,066
18,850
6,272
618
—
143,339
— 2,655,553
35,696
—
—
—
4,961
—
997,395
1,965,530
$
7,517
—
6,133
2,873
6
714,847
731,376
—
—
—
306
918,276
$
214,909
47
13,064
475
3,382
302,222
534,099
—
5,443
27,350
6,511
2,449,021
$
(6) $
—
—
—
—
(1,521,552)
(1,521,558)
307,076
33,113
38,632
9,745
4,006
—
392,572
— 2,655,553
41,139
—
27,350
—
11,778
—
(4,426,428)
1,903,794
$ 2,470,846
$ 3,836,944
$ 1,649,958
$ 3,022,424
$(5,947,986) $ 5,032,186
99
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NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Revenues
Costs and expenses
Operating (loss) income
Equity in earnings (loss)
of subsidiaries
Equity in (loss) earnings of
joint ventures
Interest (expense) income, net
Other income (expense), net
Income from continuing
operations before income
tax expense
Income tax expense
Income from continuing
operations
Loss from discontinued
operations, net of tax
Net income
Less net loss attributable to
noncontrolling interest
Net income attributable to
NuStar Energy L.P.
Condensed Consolidating Statements of Income
For the Year Ended December 31, 2014
(Thousands of Dollars)
NuStar
Energy
NuStar
Logistics
NuPOP
Non-Guarantor
Subsidiaries
$
— $
510,833
$
229,211
$ 2,344,750
$
1,753
(1,753)
287,614
223,219
149,955
79,256
2,298,540
46,210
Eliminations
Consolidated
(9,676) $ 3,075,118
(9,645)
2,728,217
(31)
346,901
212,527
(12,798)
62,946
142,238
(404,913)
—
—
—
—
(8,278)
(132,274)
511
—
89
(37)
13,074
959
4,025
—
—
—
4,796
(131,226)
4,499
210,774
70,380
142,254
1
5
23
206,506
10,772
(404,944)
—
224,970
10,801
210,773
70,375
142,231
195,734
(404,944)
214,169
—
210,773
(169)
70,206
—
142,231
(3,622)
192,112
—
(404,944)
(3,791)
210,378
—
—
—
(395)
—
(395)
$
210,773
$
70,206
$
142,231
$
192,507
$ (404,944) $
210,773
100
Table of Contents
NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Condensed Consolidating Statements of Income (Loss)
For the Year Ended December 31, 2013
(Thousands of Dollars)
NuStar
Energy
NuStar
Logistics
NuPOP
Non-Guarantor
Subsidiaries
Revenues
Costs and expenses
Operating (loss) income
Equity in (loss) earnings
of subsidiaries
Equity in (loss) earnings of
joint ventures
Interest (expense) income, net
Other (expense) income, net
(Loss) income from continuing
operations before income
tax expense
Income tax expense
(Loss) income from continuing
operations
Loss from discontinued
operations, net of tax
Net (loss) income
Less net loss attributable to
noncontrolling interest
Net (loss) income attributable to
NuStar Energy L.P.
$
— $
415,128
$
218,591
$ 2,864,160
$
1,908
(1,908)
242,743
172,385
147,117
71,474
3,125,253
(261,093)
Eliminations
Consolidated
(34,147) $ 3,463,732
(34,168)
3,482,853
(19,121)
21
(271,862)
16,531
(347,808)
(281,327)
884,466
—
—
—
—
(49,599)
(116,624)
(115)
—
(4,851)
(127)
9,629
469
7,583
—
—
—
(39,970)
(121,006)
7,341
(273,770)
—
22,578
579
(281,312)
8
(524,739)
12,166
884,487
—
(172,756)
12,753
(273,770)
21,999
(281,320)
(536,905)
884,487
(185,509)
—
(273,770)
(12,317)
9,682
—
(281,320)
(86,845)
(623,750)
—
884,487
(99,162)
(284,671)
—
—
—
(10,901)
—
(10,901)
$ (273,770) $
9,682
$ (281,320) $
(612,849) $
884,487
$ (273,770)
101
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NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Condensed Consolidating Statements of Income (Loss)
For the Year Ended December 31, 2012
(Thousands of Dollars)
NuStar
Energy
NuStar
Logistics
NuPOP
Non-Guarantor
Subsidiaries
Revenues
Costs and expenses
Operating (loss) income
Equity in (loss) earnings
of subsidiaries
Equity in (loss) earnings of
joint ventures
Interest expense, net
Other (expense) income, net
(Loss) income from continuing
operations before income
tax expense
Income tax expense
(Loss) income from continuing
operations
Loss from discontinued
operations, net of tax
Net (loss) income
Less net loss attributable to
noncontrolling interest
Net (loss) income attributable to
NuStar Energy L.P.
$
— $
362,451
$
210,712
$ 5,397,626
$
1,699
(1,699)
216,159
146,292
151,185
59,527
5,620,326
(222,700)
Eliminations
Consolidated
(25,053) $ 5,945,736
(25,465)
5,963,904
(18,168)
412
(224,917)
(361,830)
65,505
112,818
408,424
—
—
—
—
(16,117)
(76,311)
(26,596)
—
(12,546)
1,679
6,739
(459)
228
—
—
—
(9,378)
(89,316)
(24,689)
(226,616)
—
(334,562)
255
114,165
1,329
(103,374)
22,866
408,836
—
(141,551)
24,450
(226,616)
(334,817)
112,836
(126,240)
408,836
(166,001)
—
(226,616)
(2,085)
(336,902)
—
112,836
(58,765)
(185,005)
(386)
408,450
(61,236)
(227,237)
—
—
—
(621)
—
(621)
$ (226,616) $ (336,902) $
112,836
$
(184,384) $
408,450
$ (226,616)
102
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NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Condensed Consolidating Statements of Comprehensive Income
For the Year Ended December 31, 2014
(Thousands of Dollars)
Net income
$
210,773
$
70,206
$
142,231
$
192,112
NuStar
Energy
NuStar
Logistics
NuPOP
Non-Guarantor
Subsidiaries
Eliminations
$ (404,944) $
Consolidated
210,378
Other comprehensive income (loss):
Foreign currency translation
adjustment
Net loss reclassified into
income on cash flow hedges
Total other comprehensive income
(loss)
—
—
—
3,723
10,663
14,386
—
—
—
(19,337)
—
(19,337)
—
—
—
(15,614)
10,663
(4,951)
Comprehensive income
210,773
84,592
142,231
172,775
(404,944)
205,427
Less comprehensive loss
attributable to noncontrolling
interest
Comprehensive income
attributable to NuStar Energy L.P.
—
—
—
(828)
—
(828)
$
210,773
$
84,592
$
142,231
$
173,603
$ (404,944) $
206,255
103
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NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Condensed Consolidating Statements of Comprehensive Income (Loss)
For the Year Ended December 31, 2013
(Thousands of Dollars)
Net (loss) income
$ (273,770) $
9,682
$ (281,320) $
(623,750) $
884,487
NuStar
Energy
NuStar
Logistics
NuPOP
Non-Guarantor
Subsidiaries
Eliminations
Consolidated
$ (284,671)
Other comprehensive income (loss):
Foreign currency translation
adjustment
Net unrealized gain on cash
flow hedges
Net loss reclassified into
income on cash flow hedges
Total other comprehensive
income (loss)
—
—
—
—
(3,090)
7,213
7,570
11,693
—
—
—
—
(16,274)
—
—
(16,274)
—
—
—
—
(19,364)
7,213
7,570
(4,581)
Comprehensive (loss) income
(273,770)
21,375
(281,320)
(640,024)
884,487
(289,252)
Less comprehensive loss
attributable to noncontrolling
interest
Comprehensive (loss) income
attributable to NuStar Energy L.P.
—
—
—
(10,953)
—
(10,953)
$ (273,770) $
21,375
$ (281,320) $
(629,071) $
884,487
$ (278,299)
104
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NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Condensed Consolidating Statements of Comprehensive Income (Loss)
For the Year Ended December 31, 2012
(Thousands of Dollars)
Net (loss) income
$ (226,616) $ (336,902) $
112,836
$
(185,005) $
408,450
NuStar
Energy
NuStar
Logistics
NuPOP
Non-Guarantor
Subsidiaries
Eliminations
Consolidated
$ (227,237)
Other comprehensive loss:
Foreign currency translation
adjustment
Net unrealized loss on cash
flow hedges
Net loss reclassified into
income on cash flow hedges
Total other comprehensive loss
—
—
—
—
—
(17,069)
1,749
(15,320)
—
—
—
—
10,677
(77,200)
51,483
(15,040)
—
—
—
—
10,677
(94,269)
53,232
(30,360)
Comprehensive (loss) income
(226,616)
(352,222)
112,836
(200,045)
408,450
(257,597)
Less comprehensive income
attributable to noncontrolling
interest
Comprehensive (loss) income
attributable to NuStar Energy L.P.
—
—
—
477
—
477
$ (226,616) $ (352,222) $
112,836
$
(200,522) $
408,450
$ (258,074)
105
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NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Condensed Consolidating Statements of Cash Flows
For the Year Ended December 31, 2014
(Thousands of Dollars)
Net cash provided by operating
activities
Cash flows from investing activities:
Capital expenditures
Change in accounts payable
related to capital expenditures
Proceeds from sale or disposition
of assets
Increase in note receivable from
related party
Investment in subsidiaries
Other, net
Net cash used in investing activities
Cash flows from financing activities:
Debt borrowings
Debt repayments
Distributions to unitholders and
general partner
Contributions from
(distributions to) affiliates
Net intercompany borrowings
(repayments)
Other, net
Net cash (used in) provided by
financing activities
Effect of foreign exchange rate
changes on cash
Net increase (decrease) in cash and
cash equivalents
Cash and cash equivalents as of the
beginning of the period
Cash and cash equivalents as of the
end of the period
NuStar
Energy
NuStar
Logistics
NuPOP
Non-Guarantor
Subsidiaries
Eliminations
Consolidated
$ 390,543
$
221,422
$
111,931
$
333,936
$ (539,309) $
518,523
—
—
—
—
(23)
23
—
(273,785)
(14,625)
(68,555)
8,741
651
(13,328)
—
(45)
(277,766)
789
(4,627)
22
—
13,340
—
(474)
25,339
—
—
(831)
(48,674)
—
—
—
—
(13,317)
—
(13,317)
(356,965)
4,903
26,012
(13,328)
—
(853)
(340,231)
— 1,318,619
— (1,121,670)
—
—
—
—
— 1,318,619
— (1,121,670)
(392,204)
(245,127)
(147,077)
(147,105)
539,309
(392,204)
—
1,680
—
—
—
(13,340)
13,340
83,387
(1,166)
35,620
—
(120,687)
8,259
—
(23)
—
—
7,070
(390,524)
34,043
(111,457)
(272,873)
552,626
(188,185)
—
19
—
(22,301)
904
22,307
—
—
—
(2,938)
9,451
77,532
—
—
—
(2,938)
(12,831)
100,743
$
923
$
6
$
— $
86,983
$
— $
87,912
106
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NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Condensed Consolidating Statements of Cash Flows
For the Year Ended December 31, 2013
(Thousands of Dollars)
Net cash provided by operating
activities
Cash flows from investing activities:
Capital expenditures
Change in accounts payable
related to capital expenditures
Proceeds from sale or disposition
of assets
Increase in note receivable from
related party
Investment in subsidiaries
Other, net
Net cash used in investing activities
Cash flows from financing activities:
Debt borrowings
Debt repayments
Proceeds from note offerings,
net of issuance costs
Distributions to unitholders and
general partner
Payments for termination of
interest rate swaps
Contributions from
(distributions to) affiliates
Net intercompany (repayments)
borrowings
Other, net
Net cash (used in) provided by
financing activities
Effect of foreign exchange rate
changes on cash
Net (decrease) increase in cash and
cash equivalents
Cash and cash equivalents as of the
beginning of the period
Cash and cash equivalents as of the
end of the period
NuStar
Energy
NuStar
Logistics
NuPOP
Non-Guarantor
Subsidiaries
Eliminations
Consolidated
$ 390,002
$
210,742
$
84,490
$
192,228
$ (392,243) $
485,219
—
—
—
—
(302)
302
—
(224,798)
(19,049)
(99,473)
(9,700)
824
3,492
118,806
(80,961)
527
(604)
(196,730)
35
—
—
165
—
3
—
(18,190)
—
(95,813)
—
—
—
—
(228)
—
(228)
(343,320)
(5,384)
119,006
(80,961)
—
(302)
(310,961)
— 1,738,451
— (1,866,282)
—
(250,000)
—
(34,461)
— 1,738,451
— (2,150,743)
—
686,863
(392,204)
(392,204)
—
—
(33,697)
302
—
—
—
—
—
—
686,863
(39)
392,243
(392,204)
—
(530)
—
228
—
—
(33,697)
—
—
1,980
(3,880)
(47)
(128,277)
2,027
183,700
—
(51,543)
—
(396,131)
7,183
(66,300)
(86,573)
392,471
(149,350)
—
—
(6,129)
21,195
7,033
1,112
—
—
—
(7,767)
2,075
75,457
—
—
—
(7,767)
17,141
83,602
$
904
$
22,307
$
— $
77,532
$
— $
100,743
107
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NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Condensed Consolidating Statements of Cash Flows
For the Year Ended December 31, 2012
(Thousands of Dollars)
Net cash provided by operating
activities
Cash flows from investing activities:
Capital expenditures
Acquisitions
Investment in other long-term assets
Proceeds from sale or disposition
of assets
Increase in note receivable from
related party
Investment in subsidiaries
Net cash used in investing activities
Cash flows from financing activities:
Debt borrowings
Debt repayments
Proceeds from note offering,
net of issuance costs
Proceeds from issuance of common
units, net of issuance costs
Contributions from general partner
Distributions to unitholders and
general partner
Payments for termination of
interest rate swaps
Contributions from
(distributions to) affiliates
Net intercompany borrowings
(repayments)
Other, net
Net cash (used in) provided by
financing activities
Effect of foreign exchange rate
changes on cash
Net increase in cash and
cash equivalents
Cash and cash equivalents as of the
beginning of the period
Cash and cash equivalents as of the
end of the period
NuStar
Energy
NuStar
Logistics
NuPOP
Non-Guarantor
Subsidiaries
Eliminations
Consolidated
$ 363,639
$
86,333
$
81,700
$
149,369
$ (381,838) $
299,203
—
—
—
—
—
(337,123)
(337,123)
(292,873)
(201,610)
—
(16,114)
—
—
(101,608)
(114,200)
(2,610)
441,442
4,537
32,947
(95,711)
(114,200)
(262,952)
—
—
(11,577)
—
(34)
(185,505)
—
—
—
—
—
451,357
451,357
(410,595)
(315,810)
(2,610)
478,926
(95,711)
—
(345,800)
— 2,621,025
— (2,470,355)
—
(250,000)
—
247,398
336,415
7,121
—
—
(365,279)
(365,279)
—
—
(5,678)
337,123
—
—
—
—
—
—
—
—
—
—
—
— 2,621,025
— (2,720,355)
—
—
—
247,398
336,415
7,121
(16,567)
381,846
(365,279)
—
—
(5,678)
114,234
(451,357)
—
2,254
(133)
(177,851)
(9,845)
179,877
—
(4,272)
—
(8)
—
—
(9,978)
(19,622)
176,538
(70,123)
93,395
(69,519)
110,669
—
6,894
139
1,179
1,098
14
—
—
—
854
58,113
17,344
—
—
—
2,033
66,105
17,497
$
7,033
$
1,112
$
— $
75,457
$
— $
83,602
108
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NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
28. QUARTERLY FINANCIAL DATA (UNAUDITED)
The following table summarizes quarterly financial data for the years ended December 31, 2014 and 2013:
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Total
(Thousands of Dollars, Except Per Unit Data)
2014:
Revenues
Operating income
Income from continuing operations
(Loss) income from discontinued
operations, net of tax
Net income
Net income (loss) per unit applicable to limited
partners:
Continuing operations
Discontinued operations
Total
Cash distributions per unit applicable to limited
partners
2013:
Revenues
Operating income (loss)
Income (loss) from continuing operations
Income (loss) from discontinued
operations, net of tax
Net income (loss)
Net income (loss) per unit applicable to limited
partners:
Continuing operations
Discontinued operations
Total
Cash distributions per unit applicable to limited
partners
$
$
$
$
$
$
$
$
$
$
$
$
$
$
849,213
81,103
42,996
(3,359)
39,637
0.40
(0.04)
0.36
$
$
$
$
$
$
749,745
89,354
57,187
(1,788)
55,399
0.58
(0.02)
0.56
$
$
$
$
$
$
681,738
$ 3,075,118
794,422
95,098
59,117
$
$
$
81,346
54,869
$
$
$
$
$
346,901
214,169
(3,791)
210,378
2.14
(0.04)
2.10
2,831
61,948
$
(1,475)
53,394
0.61
0.03
0.64
$
$
0.55
(0.01)
0.54
1.095
$
1.095
$
1.095
$
1.095
$
4.380
998,186
63,358
19,599
$
$
$
902,014
76,972
34,712
4,805
24,404
$
(1,743)
32,969
0.10
0.07
0.17
$
$
0.30
(0.02)
0.28
$
$
$
$
$
$
778,145
68,751
$
785,387
$ (228,202) $
$ 3,463,732
(19,121)
35,682
$ (275,502) $ (185,509)
(2,446)
33,236
(99,778)
(99,162)
$ (375,280) $ (284,671)
0.31
(0.03)
0.28
$
$
(3.60) $
(1.13)
(4.73) $
(2.89)
(1.11)
(4.00)
1.095
$
1.095
$
1.095
$
1.095
$
4.380
109
Table of Contents
ITEM 9.
None.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
ITEM 9A.
CONTROLS AND PROCEDURES
DISCLOSURE CONTROLS AND PROCEDURES.
Our management has evaluated, with the participation of the principal executive officer and principal financial officer of
NuStar GP, LLC, the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities
Exchange Act of 1934 (the Exchange Act)) as of the end of the period covered by this report, and has concluded that our
disclosure controls and procedures were effective as of December 31, 2014.
INTERNAL CONTROL OVER FINANCIAL REPORTING.
(a)
Management’s Report on Internal Control over Financial Reporting.
Management’s report on NuStar Energy L.P.’s internal control over financial reporting required by Item 9A. appears in Item 8.
of this report, and is incorporated herein by reference.
(b)
Attestation Report of the Registered Public Accounting Firm.
The report of KPMG LLP on NuStar Energy L.P.’s internal control over financial reporting appears in Item 8. of this Form 10-
K, and is incorporated herein by reference.
(c)
Changes in Internal Controls over Financial Reporting.
There has been no change in our internal control over financial reporting that occurred during our last fiscal quarter that has
materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B.
OTHER INFORMATION
None.
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PART III
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
DIRECTORS AND EXECUTIVE OFFICERS OF NUSTAR GP, LLC
We do not have directors or officers. The directors and officers of NuStar GP, LLC, the general partner of our general partner,
Riverwalk Logistics, L.P., perform all of our management functions. NuStar GP Holdings, LLC (NuStar GP Holdings), the sole
member of NuStar GP, LLC, selects the directors of NuStar GP, LLC (the Board). Officers of NuStar GP, LLC are appointed by
its directors.
Set forth below is certain information concerning the directors and executive officers of NuStar GP, LLC, effective as of
February 25, 2015.
Name
William E. Greehey
Bradley C. Barron
J. Dan Bates
Dan J. Hill
Rodman D. Patton
W. Grady Rosier
Mary Rose Brown
Thomas R. Shoaf
Jorge A. del Alamo
Amy L. Perry
Karen M. Thompson
Age
78
49
70
74
71
66
58
56
45
46
47
Position Held with NuStar GP, LLC
Chairman of the Board
President, Chief Executive Officer and Director
Director
Director
Director
Director
Executive Vice President and Chief Administrative Officer
Executive Vice President and Chief Financial Officer
Senior Vice President and Controller
Senior Vice President, General Counsel-Corporate & Commercial
Law and Corporate Secretary
Senior Vice President and General Counsel-Litigation, Regulatory
& Environmental
As a limited partnership, we are not required by the NYSE rules to have a nominating committee, and the Board has
historically performed the functions served by a nominating committee. However, in 2013, the Board created a Nominating/
Governance & Conflicts Committee to identify candidates for membership on the Board. The members of the Nominating/
Governance & Conflicts Committee are Mr. Rosier (Chairman), Mr. Bates, Mr. Hill and Mr. Patton. In accordance with our
Corporate Governance Guidelines, individuals are considered for membership on the Board based on their character, judgment,
integrity, diversity, age, skills (including financial literacy), independence and experience in the context of the overall needs of
the Board. Our directors are also selected based on their knowledge about our industry and their respective experience leading
or advising large companies. We require that our directors have the ability to work collegially, exercise good judgment and
think critically. In addition, we ask that our directors commit to working hard for our company. The Nominating/Governance &
Conflicts Committee strives to find the best possible candidates to represent the interests of NuStar Energy L.P. and its
unitholders. As part of its annual self-assessment process, the Board and each of its committees evaluates the mix of
independent and non-independent directors, as well as the performance of the directors and the committees, and the Board
annually elects a presiding director.
The Board is led by its Chairman, Mr. Greehey. The Board has determined that separating the roles of Chairman and CEO is in
the best interest of unitholders at this time. In addition, the Board has appointed Mr. Hill as its presiding director to serve as a
point of contact for unitholders wishing to communicate with the Board and to lead executive sessions of the non-management
directors.
Mr. Greehey became Chairman of the Board in January 2002. He also has been the Chairman of the board of directors of
NuStar GP Holdings since March 2006. Mr. Greehey served as Chairman of the board of directors of Valero Energy
Corporation (Valero Energy) from 1979 through January 2007. Mr. Greehey was CEO of Valero Energy from 1979 through
December 2005, and President of Valero Energy from 1998 until January 2003.
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Mr. Barron became Chief Executive Officer, President and a director of NuStar GP, LLC and NuStar GP Holdings in January
2014. He served as Executive Vice President and General Counsel of NuStar GP, LLC and NuStar GP Holdings from February
2012 until his promotion in January 2014. From April 2007 to February 2012, he served as Senior Vice President and General
Counsel of NuStar GP, LLC and NuStar GP Holdings. Mr. Barron also served as Secretary of NuStar GP, LLC and NuStar GP
Holdings from April 2007 to February 2009. He served as Vice President, General Counsel and Secretary of NuStar GP, LLC
from January 2006 until April 2007 and as Vice President, General Counsel and Secretary of NuStar GP Holdings from March
2006 until his promotion in April 2007. He has been with NuStar GP, LLC since July 2003 and, prior to that, was with Valero
Energy from January 2001 to July 2003.
Mr. Bates became a director of NuStar GP, LLC in April 2006. He served as President and CEO of the Southwest Research
Institute from 1997 until October 2014 and continues to serve as a director and as President Emeritus of Southwest Research
Institute. Mr. Bates also serves as a director of Signature Science L.L.C., Broadway Bank and Broadway Bankshares, Inc. He
served as Chairman or Vice Chairman of the board of directors of the Federal Reserve Bank of Dallas’ San Antonio Branch
from January 2005 through December 2009.
Mr. Hill became a director of NuStar GP, LLC in July 2004. From February 2001 through May 2004, he served as a consultant
to El Paso Corporation. Prior to that, he served as President and CEO of Coastal Refining and Marketing Company. In 1978,
Mr. Hill was named as Senior Vice President of the Coastal Corporation and President of Coastal States Crude Gathering. In
1971, he began managing Coastal’s NGL business. Previously, Mr. Hill worked for Amoco and Mobil.
Mr. Patton became a director of NuStar GP, LLC in June 2001. He retired from Merrill Lynch & Co. in 1999 where he had
served as Managing Director in the Energy Group since 1993. Prior to that, he served in investment banking and corporate
finance positions with Credit Suisse First Boston (1981 - 1993) and Blyth Eastman Paine Webber (1971 - 1981). He also has
served as a director of Apache Corporation since 1999 and is a member of its audit committee.
Mr. Rosier became a director of NuStar GP, LLC in March 2013. He has been the President and Chief Executive Officer of
McLane Company, Inc., a $44 billion supply chain services company and subsidiary of Berkshire Hathaway, Inc., since
February 1995. Mr. Rosier has been with McLane Company, Inc. since 1984, serving in various senior management positions
prior to his current position. Mr. Rosier also has served as a director of NVR, Inc. since December 2008. He was formerly a
director of Tandy Brands Accessories, Inc. from February 2006 to October 2011, serving as the lead director from October 2009
to October 2010.
Ms. Brown became Executive Vice President and Chief Administrative Officer of NuStar GP, LLC and NuStar GP Holdings in
April 2013. She served as Executive Vice President - Administration of NuStar GP, LLC and NuStar GP Holdings from
February 2012 until her promotion in April 2013. Ms. Brown served as Senior Vice President - Administration of NuStar GP,
LLC from April 2008 through February 2012. She served as Senior Vice President - Corporate Communications of NuStar GP,
LLC from April 2007 through April 2008. Prior to her service to NuStar GP, LLC, Ms. Brown served as Senior Vice President
- Corporate Communications for Valero Energy from September 1997 to April 2007.
Mr. Shoaf became Executive Vice President and Chief Financial Officer of NuStar GP, LLC and NuStar GP Holdings in
January 2014. He served as Senior Vice President and Controller of NuStar GP, LLC and NuStar GP Holdings from February
2012 until his promotion in January 2014. Mr. Shoaf served as Vice President and Controller of NuStar GP, LLC from July
2005 to February 2012 and Vice President and Controller of NuStar GP Holdings from March 2006 until February 2012. He
served as Vice President - Structured Finance for Valero Corporate Services Company, a subsidiary of Valero Energy, from
2001 until his appointment with NuStar GP, LLC.
Mr. del Alamo became Senior Vice President and Controller of NuStar GP, LLC and NuStar GP Holdings in July 2014. Prior
thereto, he served as Vice President and Controller of NuStar GP, LLC and NuStar GP Holdings since January 2014. He served
as Vice President and Assistant Controller of NuStar GP, LLC from July 2010 until his promotion in January 2014. From April
2008 to July 2010 he served as Assistant Controller of NuStar GP, LLC. Prior to his service at NuStar GP, LLC, Mr. del Alamo
served as Director-Sarbanes Oxley Compliance to Valero Energy.
Ms. Perry became Senior Vice President, General Counsel-Corporate & Commercial Law and Corporate Secretary of NuStar
GP, LLC and NuStar GP Holdings in January 2014. She served as Vice President, Assistant General Counsel and Corporate
Secretary of NuStar GP, LLC and as Corporate Secretary of NuStar GP Holdings from February 2010 until her promotion in
January 2014. From June 2005 to February 2010 she served as Assistant General Counsel and Assistant Secretary of NuStar
GP, LLC and, from March 2006 to February 2010, Assistant Secretary of NuStar GP Holdings. Prior to her service at NuStar
GP, LLC, Ms. Perry served as Counsel to Valero Energy.
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Ms. Thompson became Senior Vice President, General Counsel-Litigation, Regulatory & Environmental of NuStar GP, LLC
and NuStar GP Holdings in January 2014. She served as Vice President, Assistant General Counsel and Assistant Secretary of
NuStar GP, LLC from February 2010 until her promotion in January 2014. From May 2007 to February 2010 she served as
Assistant General Counsel and Assistant Secretary of NuStar GP, LLC. Prior to her service at NuStar GP, LLC, Ms. Thompson
served as Counsel to Valero Energy.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires directors, executive officers and persons who beneficially own more than 10% of
NuStar Energy’s equity securities to file certain reports with the Securities and Exchange Commission (SEC) concerning their
beneficial ownership of NuStar Energy’s equity securities within two business days. We believe that our executive officers,
directors and greater than 10% unitholders timely filed all Section 16(a) reports during or with respect to the year ended
December 31, 2014, except for one late Form 4 with respect to one transaction for Ms. Thompson, which was untimely due to
an administrative oversight by NuStar Energy L.P.
CODE OF ETHICS OF SENIOR FINANCIAL OFFICERS
NuStar GP, LLC has adopted a Code of Ethics for Senior Financial Officers that applies to NuStar GP, LLC’s principal
executive officer, principal financial officer and controller. This code charges the senior financial officers with responsibilities
regarding honest and ethical conduct, the preparation and quality of the disclosures in documents and reports NuStar GP, LLC
files with the SEC, compliance with applicable laws, rules and regulations, adherence to the code and reporting of violations of
the code.
AUDIT COMMITTEE
CORPORATE GOVERNANCE
The Audit Committee reviews and reports to the Board on various auditing and accounting matters, including the quality,
objectivity and performance of NuStar Energy’s internal and external accountants and auditors, the adequacy of its financial
controls and the reliability of financial information reported to the public. The Audit Committee also monitors NuStar Energy’s
compliance with environmental laws and regulations. The Board has adopted a written charter for the Audit Committee, a copy
of which is available on NuStar Energy’s website at www.nustarenergy.com. The members of the Audit Committee are Mr.
Bates (Chairman), Mr. Hill, Mr. Patton and Mr. Rosier. The Board has determined that Mr. Bates and Mr. Patton are “audit
committee financial experts” (as defined by the SEC), and that each of the members of the Audit Committee is “independent”
as that term is used in the NYSE Listing Standards and described below in Item 13. The Audit Committee met eight times
during 2014. For further information, see the “Audit Committee Report” below.
AUDIT COMMITTEE REPORT
Management of NuStar GP, LLC is responsible for NuStar Energy’s internal controls and the financial reporting process.
KPMG LLP (KPMG), NuStar Energy’s independent registered public accounting firm for the year ended December 31, 2014,
is responsible for performing an independent audit of NuStar Energy’s consolidated financial statements in accordance with the
standards of the Public Company Accounting Oversight Board (PCAOB) and generally accepted auditing standards, and an
audit of NuStar Energy’s internal control over financial reporting in accordance with the standards of the PCAOB, and issuing a
report thereon. The Audit Committee monitors and oversees these processes and approves the selection and appointment of
NuStar Energy’s independent registered public accounting firm and recommends the ratification of such selection and
appointment to the Board.
The Audit Committee has reviewed and discussed NuStar Energy’s audited consolidated financial statements with management
and KPMG. The Audit Committee has discussed with KPMG the matters required to be discussed by Statement on Auditing
Standards No. 61, as amended (AICPA Professional Standards, Vol. 1 AU Section 380) as adopted by the PCAOB in Rule
3200T. The Audit Committee has received written disclosures and the letter from KPMG required by applicable requirements
of the PCAOB concerning independence and has discussed with KPMG its independence.
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Based on the foregoing review and discussions and such other matters the Audit Committee deemed relevant and appropriate,
the Audit Committee recommended to the Board that the audited consolidated financial statements of NuStar Energy be
included in NuStar Energy’s Annual Report on Form 10-K for the year ended December 31, 2014.
Members of the Audit Committee:
J. Dan Bates (Chairman)
Dan J. Hill
Rodman D. Patton
W. Grady Rosier
RISK OVERSIGHT
Although it is the job of management to assess and manage our risk, the Board of Directors and its Audit Committee (each
where applicable) discuss the guidelines and policies that govern the process by which risk assessment and management is
undertaken and evaluate reports from various functions with the management team on risk assessment and management. The
Board interfaces regularly with management and receives periodic reports that include updates on operational, financial, legal
and risk management matters. The Audit Committee assists the Board in oversight of the integrity of NuStar Energy’s financial
statements and NuStar Energy’s compliance with legal and regulatory requirements, including those related to the health, safety
and environmental performance of our company. The Audit Committee also reviews and assesses the performance of NuStar
Energy’s internal audit function and its independent auditors. The Board receives regular reports from the Audit Committee.
For a description of our evaluation of compensation risk, see “Evaluation of Compensation Risk” in Item 11 below.
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ITEM 11. EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE
The Compensation Committee reviews and reports to the Board on matters related to compensation strategies, policies and
programs, including certain personnel policies and policy controls, management development, management succession and
benefit programs. The Compensation Committee also approves and administers NuStar Energy’s equity compensation plans and
incentive bonus plan. The Board has adopted a written charter for the Compensation Committee. The members of the
Compensation Committee are Mr. Hill (Chairman), Mr. Bates, Mr. Patton and Mr. Rosier, none of whom is a current or former
employee or officer of NuStar GP, LLC and each of whom has been determined by the Board to be “independent,” as described
below in Item 13. The Compensation Committee met four times in 2014.
COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management. Based
on its review and discussion and such other matters the Compensation Committee deemed relevant and appropriate, the
Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Annual
Report on Form 10-K.
Members of the Compensation Committee:
Dan J. Hill (Chairman)
J. Dan Bates
Rodman D. Patton
W. Grady Rosier
Executive Compensation Philosophy
COMPENSATION DISCUSSION AND ANALYSIS
Our philosophy for compensating our named executive officers (NEOs) is based on the belief that a significant portion of
executive compensation should be incentive-based and determined by both NuStar Energy’s and the executive’s performance
objectives. Our executive compensation programs are designed to accomplish the following long-term objectives:
•
•
•
•
•
increase value to unitholders, while practicing good corporate governance;
support our business strategy and business plan by clearly communicating what is expected of executives with respect to
goals and results;
provide the Compensation Committee with the flexibility to respond to the continually changing environment in which
NuStar Energy operates;
align executive incentive compensation with NuStar Energy’s short- and long-term performance results; and
provide market-competitive compensation and benefits to enable us to recruit, retain and motivate the executive talent
necessary to produce sustainable, superior growth for our unitholders.
Compensation for our NEOs primarily consists of base salary, an annual incentive bonus and long-term, equity-based incentives.
Our executives participate in the same group benefit programs available to our salaried employees in the United States. In
addition, see “Post-Employment Benefits” below in this Compensation Discussion and Analysis. Our executives do not have
employment or severance agreements, other than the change of control severance agreements described below under “Potential
Payments Upon Termination or Change of Control” in this Item 11. The Compensation Committee targets base salary for our
NEOs, as well as annual incentive bonus and long-term incentive opportunities (expressed, in each case, as a percentage of base
salary), with reference to median practices of our peer companies and information from survey sources. Each NEO’s incentive
bonus is awarded in accordance with the same bonus plan and metric that we use for each of our other employees. In determining
total compensation, as well as each component thereof, we consider the unique responsibilities of each individual’s position, as
well as his or her experience and performance, together with the market information.
Our NEOs for the year ended December 31, 2014 were: Bradley C. Barron, Thomas R. Shoaf, Mary Rose Brown, Amy L. Perry
and Karen M. Thompson. On January 1, 2014, Mr. Barron, formerly Executive Vice President (EVP) & General Counsel (GC),
was named President & Chief Executive Officer (CEO) and Thomas R. Shoaf, formerly Senior Vice President (SVP) &
Controller, was named EVP & Chief Financial Officer (CFO). Also on January 1, 2014, Amy L. Perry, formerly Vice President
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(VP), Assistant GC-Corporate and Commercial Law & Corporate Secretary, was named SVP, GC-Corporate and Commercial
Law & Corporate Secretary and Karen M. Thompson, formerly VP & Assistant GC-Litigation, was named SVP & GC-Litigation,
Regulatory and Environmental.
Administration of Executive Compensation Programs
Our executive compensation programs are administered by our Board’s Compensation Committee. The Compensation Committee
is composed of four independent directors who are not participants in our executive compensation programs. Policies adopted by
the Compensation Committee are implemented by our compensation and benefits staff.
Annually, the Compensation Committee reviews market trends in compensation, including the practices of identified competitors,
and the alignment of the compensation program with NuStar Energy’s strategy. Specifically, for executive officers, the
Compensation Committee:
•
•
•
•
•
establishes and approves target compensation levels for each executive officer;
approves company performance measures and goals;
determines the mix between cash and equity compensation, short-term and long-term incentives and benefits;
verifies the achievement of previously established performance goals; and
approves the resulting cash or equity awards to executives.
In making determinations about total compensation for executives, the Compensation Committee takes into account a number of
factors, including: the competitive market for talent; compensation paid at peer companies; industry-wide trends; NuStar Energy’s
performance; the particular executive’s role, responsibilities, experience and performance; and retention. The Compensation
Committee also considers other equitable factors such as the role, contribution and performance of an individual executive
relative to the executive’s peers at the company. The Compensation Committee does not assign specific weight to these factors,
but rather makes a subjective judgment taking all of these factors into account.
The Compensation Committee has retained BDO USA, LLP (BDO) as its independent compensation consultant for BDO’s
expertise and guidance with respect to executive compensation matters. In its role as advisor to the Compensation Committee,
BDO was retained directly by the Compensation Committee, which has the authority to select, retain and/or terminate its
relationship with a consulting firm. The Compensation Committee determined that there are no conflicts of interest between the
Company, the Committee and BDO because BDO provides no other services to NuStar Energy; fees paid to BDO represent less
than a fraction of 1% of BDO’s worldwide revenues; BDO has policies in place to prevent a conflict of interest, including a policy
that no employee of BDO may own NuStar Energy units; and there is no business or personal relationship between BDO’s
consultant and any of NuStar Energy’s officers or directors.
Selection of Compensation Comparative Data
The Compensation Committee has relied upon two primary sources of data in developing competitive market reference points for
base salaries and annual cash incentive and long-term incentive targets: a group of master limited partnerships and other
companies in our industry and broader survey data on comparably sized entities.
To establish compensation for the NEOs, including the CEO, the Compensation Committee, in consultation with management and
BDO, identified a specific peer group to evaluate competitive levels of compensation. Historically, our peer group was composed
of master limited partnerships and independent, regional refining companies against which we felt that we competed for executive
talent at the time (the Historical Compensation Comparative Group). During 2013, we sold our refining assets and, during 2014,
we sold our remaining 50% interest in the asphalt business. Accordingly, during 2014, the Compensation Committee, in
consultation with management and BDO, reevaluated our peer group. Beginning in July 2014, our peer group (the Current
Compensation Comparative Group) is composed entirely of master limited partnerships against which we believe we compete for
executive talent. The competitive data for the companies in the Historical Compensation Comparative Group and the Current
Compensation Comparative Group is derived from their respective publicly filed annual proxy statements or Annual Reports on
Form 10-K.
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The companies included in the Historical Compensation Comparative Group are listed below:
Company
1. Boardwalk Pipeline Partners, LP
2. Buckeye Partners L.P.
3. EnLink Midstream Partners, LP (formerly Crosstex Energy L.P.)
4. Enbridge Energy Partners, L.P.
5. Energy Transfer Partners, L.P.
6. Enterprise Product Partners L.P.
7. Kinder Morgan Energy Partners, L.P.
8. Magellan Midstream Partners, L.P.
9. MarkWest Energy Partners, L.P.
10. ONEOK Partners, L.P.
11. Plains All American Pipeline, L.P.
12. Regency Energy Partners LP
13. Sunoco Logistics Partners L.P.
14. HollyFrontier Corporation
15. Western Refining, Inc.
Ticker
BWP
BPL
ENLK (formerly XTEX)
EEP
ETP
EPD
KMP
MMP
MWE
OKS
PAA
RGP
SXL
HFC
WNR
The companies included in the Current Compensation Comparative Group are listed below:
Company
1. Access Midstream Partners LP
2. Arc Logistics Partners LP
3. Atlas Pipeline Partners, L.P.
4. Boardwalk Pipeline Partners, LP
5. Buckeye Partners, L.P.
6. Enable Midstream Partners LP
7. Enbridge Energy Partners, L.P.
8. Energy Transfer Partners L.P.
9. EnLink Midstream Partners, LP
10. Enterprise Product Partners L.P.
11. Genesis Energy, L.P.
12. Holly Energy Partners, L.P.
13. Kinder Morgan Energy Partners LP
14. Magellan Midstream Partners, L.P.
15. MarkWest Energy Partners LP
16. MPLX LP
17. Phillips 66 Partners LP
18. Plains All American Pipeline, L.P.
19. Regency Energy Partners LP
20. Sunoco Logistics Partners L.P.
21. Targa Resources Partners LP
22. Tesoro Logistics LP
23. Valero Energy Partners LP
24. Western Refining Logistics LP
Ticker
ACMP
ARCX
APL
BWP
BPL
ENBL
EEP
ETP
ENLK
EPD
GEL
HEP
KMP
MMP
MWE
MPLX
PSXP
PAA
RGP
SXL
NGLS
TLLP
VLP
WNRL
Periodically, at the Compensation Committee’s request, BDO reviews survey data reported on a position-by-position basis to
obtain additional information regarding compensation of comparable positions. The survey data consists of general industry data
for executive positions reported in the Towers Watson General Industry Executive Compensation database, a proprietary
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compensation database of more than 400 U.S. industrial companies that is updated each year. We refer to the competitive survey
data, together with the Historical Compensation Comparative Group data or the Current Compensation Comparative Group data,
as applicable, as the “Compensation Comparative Data.”
Process and Timing of Compensation Decisions
The Compensation Committee reviews and approves all compensation for the NEOs. Recommendations regarding compensation
for NEOs other than the CEO are developed by the CEO in consultation with our Human Resources department and with BDO.
In making these recommendations, the CEO considers the Compensation Comparative Data and evaluates the individual
performance of each NEO and their respective contributions to the Company. The recommendations are then reviewed by the
Compensation Committee, which may accept the recommendations or may make adjustments to the recommended compensation
based on their own assessment of the individual’s performance and contributions to NuStar Energy.
As required by the Compensation Committee’s charter, the compensation of the CEO is reviewed and approved by the
Compensation Committee based on the Compensation Comparative Data and other factors. Discretionary adjustments may be
made based upon their independent evaluation of the CEO’s performance and contributions.
Each July, the Compensation Committee reviews the NEOs’ total compensation, including base salary and the target levels of
annual incentive and long-term incentive compensation. The review includes a comparison with competitive market data provided
by BDO, an evaluation of the total compensation of the executive officer group from an internal equity perspective and reviews of
reports on the compensation history of each executive. Based on these reviews and evaluations, the Compensation Committee
establishes annual salary rates for executive officer positions for the upcoming 12-month period and sets target levels of annual
incentive and long-term incentive compensation. Although the target levels are established in July, the long-term incentives are
reviewed again at the time of grant, typically in the fourth quarter for restricted units and in the first quarter for performance units.
The Compensation Committee also may review salaries or grant long-term incentive awards at other times during the year
because of new appointments, promotions or other extraordinary circumstances.
The following table summarizes the typical timing of some of our significant compensation events:
Event
Timing
Establish financial performance objectives for current year’s annual incentive bonus;
evaluate achievement of bonus metrics in prior year
Review and certify financial performance for performance units granted in prior years;
grant performance units
Review base salaries for executive officers for the current year and targets for annual
incentive bonus and long-term incentive grants
Consider grants of restricted units to employees and officers and grant restricted units to
directors
Set meeting dates for action by the Compensation Committee for the upcoming year
First quarter
First quarter
Third quarter
Fourth quarter
Fourth quarter
Additional information regarding the timing of 2014 long-term incentive grants is discussed below under “Performance Units”
and “Restricted Units.”
Elements of Executive Compensation
Our executive compensation programs currently consist of the following material elements:
•
•
•
base salaries;
annual incentive bonuses;
long-term equity-based incentives, including:
•
•
performance units; and
restricted units; and
• medical and other insurance benefits, retirement benefits and other perquisites.
We use base salary as the foundation for our executive compensation program. We believe that base salary should provide a fixed
level of competitive pay that reflects the executive officer’s primary duties and responsibilities, as well as a foundation for
incentive opportunities and benefit levels. Our annual incentive bonuses are designed to focus our executives on improving
NuStar Energy’s distributable cash flow (DCF), a non-GAAP measure of financial performance, which is widely regarded among
the master limited partnership (MLP) investment community as a significant determinant of an MLP’s unit price. Our long-term
equity incentive awards are designed to directly tie an executive’s financial reward opportunities with the rewards to unitholders
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on both an absolute and relative basis, as measured by long-term unit price performance and payment of distributions. Throughout
this Item 11, we use the term “Total Direct Compensation” to refer to the sum of an executive officer’s base salary, annual
incentive bonus and long-term incentive awards for a particular fiscal year. We also offer group medical benefits to provide our
employees (including NEOs) affordable coverage at group rates, as well as pension benefits that reward continued service and a
thrift plan that provides a tax-advantaged savings opportunity.
Relative Size of Primary Elements of Compensation
In setting executive compensation, the Compensation Committee considers the aggregate amount of compensation payable to an
executive officer and the form of the compensation. The Compensation Committee seeks to achieve the appropriate balance
between salary, cash rewards earned for the achievement of company and personal objectives and long-term incentives that align
the interests of our executive officers with those of our unitholders. The size of each element is based on competitive market
practices, as well as company and individual performance.
The level of incentive compensation typically increases in relation to an executive officer’s responsibilities, with the level of
incentive compensation for more senior executive officers being a greater percentage of total compensation than for less senior
executives. The Compensation Committee believes that tying a significant portion of an executive officer’s incentive
compensation to NuStar Energy’s performance more closely aligns the executive officer’s interests with those of our unitholders.
Because we place such a large proportion of our total executive compensation at risk in the form of variable pay (i.e. annual and
long-term incentives), the Compensation Committee does not adjust current compensation based upon realized gains or losses
from prior incentive awards. For example, we will not reduce the size of a target long-term incentive grant in a particular year
solely because NuStar Energy’s unit price performed well during the immediately preceding years. We believe that adopting a
policy of making such adjustments would penalize management’s current compensation for NuStar Energy’s prior success.
The following table summarizes the relative size of base salary and incentive compensation targets for 2014 for each of our
NEOs:
Name
Barron
Shoaf
Brown
Perry
Thompson
Target Percentage of Total Direct Compensation
Annual
Incentive Bonus (%)
23
19
19
22
22
Long-Term
Incentives (%)
51
48
48
39
39
Base Salary (%)
26
32
32
39
39
TOTAL (%) (1)
100
100
100
100
100
(1) The sum of the Base Salary, Annual Incentive Bonus and Long-Term Incentive percentages may vary slightly from 100%
due to rounding.
Individual Performance and Personal Objectives
The Compensation Committee evaluates our NEOs’ individual performance and personal objectives with input from our CEO.
Our CEO’s performance is evaluated by the Compensation Committee in consultation with other members of the Board.
Assessment of individual performance may include objective criteria, but is a largely subjective process. The criteria used to
measure an individual’s performance may include use of quantitative criteria (e.g., execution of projects within budget, improving
an operating unit’s profitability, or timely completion of an acquisition or divestiture), as well as more qualitative factors, such as
the executive officer’s ability to lead, ability to communicate and successful adherence to NuStar’s core values (i.e.,
environmental and workplace safety, integrity, work commitment, effective communication and teamwork). There are no specific
weights given to any of these various elements of individual performance.
We use our evaluation of individual performance to supplement our objective compensation criteria and adjust an executive
officer’s recommended compensation. For example, although an individual officer’s indicated bonus may be calculated to be
$100,000 based on NuStar Energy’s performance, an individual performance evaluation might result in a reduction or increase in
that amount.
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Base Salaries
The base salaries for our executive officers are reviewed annually by the Compensation Committee based on recommendations of
our CEO, with input from BDO and our compensation and benefits staff. Our CEO’s base salary is reviewed and approved by the
Compensation Committee based on its review of recommendations by BDO, our Chairman and our compensation and benefits
staff.
The competitiveness of base salaries for each executive position is determined by an evaluation of the compensation data
described above. Base salaries may be adjusted to achieve what is determined to be a reasonably competitive level or to reflect
promotions, the assignment of additional responsibilities, individual performance or the performance of NuStar Energy. Salaries
are also periodically adjusted to remain competitive with the Compensation Comparative Data.
Based on recommendations from BDO, the Chairman (in the case of the CEO’s base salary) and the CEO (in the case of the base
salaries for Mr. Shoaf, Ms. Perry and Ms. Thompson), the Compensation Committee raised the base salaries of each of Mr.
Barron, Mr. Shoaf, Ms. Perry and Ms. Thompson effective January 1, 2014 to reflect their respective promotions and increased
responsibilities, as provided in the table below.
Name
Annualized Base Salary at
January 1, 2014 ($)
January 1, 2014 Increase to Prior
Annualized Salary ($)
Barron
Shoaf
Perry
Thompson
430,000
320,000
240,000
240,000
85,430
57,660
21,755
22,068
In July 2014, BDO performed a comprehensive review of our NEOs’ Total Direct Compensation. After consultation with BDO,
the Chairman (in the case of the CEO’s base salary) and the CEO (in the case of the base salaries for each other NEO), the
Compensation Committee raised the base salaries of each of the NEOs effective July 1, 2014 to remain competitive with the
Compensation Comparative Data, as provided in the table below.
Name
Annualized Base Salary at
December 31, 2014 ($)
July 1, 2014 Increase to Prior
Annualized Salary ($)
Barron
Shoaf
Brown
Perry
Thompson
Annual Incentive Bonus
490,000
329,600
355,000
260,000
260,000
60,000
9,600
10,430
20,000
20,000
Our NEOs participate in the annual incentive plan in which all domestic company employees participate. Under the plan,
participants can earn annual incentive bonuses based on the following three factors:
• The individual’s position, which is used to determine a targeted percentage of annual base salary that may be awarded as
incentive bonus. Generally, the target amount for the NEOs is set following the analysis of market practices in the
Compensation Comparative Group with reference to the median bonus target available to comparable executives in those
companies;
• NuStar Energy’s attainment of specific quantitative financial goals, which are established by the Compensation
Committee during the first quarter of the year; and
• A discretionary evaluation by the Compensation Committee of both NuStar Energy’s performance and, in the case of the
NEOs, the individual executive’s performance.
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The Compensation Committee raised the annual incentive bonus target of each of Mr. Barron, Mr. Shoaf, Ms. Perry and Ms.
Thompson effective January 1, 2014 to reflect their respective promotions and increased responsibilities, as provided in the table
below.
Name
Barron
Shoaf
Perry
Thompson
Annual Incentive Bonus Target
(% of Eligible Earnings)
Effective January 1, 2014
90
60
50
50
Prior Annual Incentive Bonus Target
(% of Eligible Earnings)
60
55
35
35
In July 2014, BDO performed a comprehensive review of our NEOs’ Total Direct Compensation. After consultation with BDO
and the CEO, the Compensation Committee raised the annual incentive bonus targets for Ms. Perry and Ms. Thompson from 50%
to 55%. The following table shows each NEO’s annual bonus target for the fiscal year ended December 31, 2014.
Name
Barron
Shoaf
Brown
Perry
Thompson
Annual Incentive Bonus Target
(% of Eligible Earnings)
90
60
60
55
55
Determination of Annual Incentive Target Opportunities
As illustrated in the table above, each NEO has an annual incentive opportunity generally based on a stated percentage of his or
her salary paid that year. The target amount is awarded for achieving a 100% score on our stated financial goal under the bonus
plan. For example, in a year with a 100% score, an executive paid $200,000 and a target annual incentive opportunity equal to
60% of his Eligible Earnings would receive a bonus of $120,000.
Once the financial goals have been reviewed and measured, the Compensation Committee has the authority to exercise its
discretion in evaluating NuStar Energy’s performance. In exercising this discretionary judgment, the Compensation Committee
considers such relevant performance factors as growth, attainment of strategic objectives, acquisitions and divestitures, safety and
environmental compliance, and other considerations. This discretionary judgment may result in an increase or decrease in the
aggregate earned award for all employees based upon the attainment of the financial goals noted above.
The CEO develops individual incentive bonus recommendations for the other NEOs based upon the methodology described
above. In addition, both the CEO and the Compensation Committee may make adjustments to the recommended incentive bonus
amounts based upon an assessment of an individual’s performance and contributions to NuStar Energy. The CEO and the
Compensation Committee also review and discuss each executive bonus on a case-by-case basis, considering such factors as
teamwork, leadership, individual accomplishments and initiative, and may adjust the bonus awarded to reflect these factors.
The bonus target for the CEO is decided solely by the Compensation Committee, and the Compensation Committee may make
discretionary adjustments to the calculated level of bonus based upon its independent evaluation of the CEO’s performance and
contributions.
Company Performance Objectives
In 2014, as in prior years, the Compensation Committee approved a DCF-based metric for NuStar Energy’s bonus metric, based
on management’s recommendations and input from BDO. In the MLP investment community, DCF is widely regarded as a
significant determinant of unit price. As such, the Compensation Committee believes the measure appropriately aligns our
management’s interest with our unitholders’ interest in continuously increasing distributions in a prudent manner.
We derive DCF from our financial statements by adjusting our net income for depreciation and amortization expense, equity
earnings from joint ventures and unrealized gains and losses arising from certain derivative contracts. Additionally, we subtract
our aggregate annual reliability capital expenditures and add the aggregate annual amount of cash distributions received from
equity investments in joint ventures.
Each year, the Compensation Committee establishes a target DCF for NuStar Energy to achieve for the year and establishes
corresponding levels of performance for which the incentive opportunity would be paid. The Compensation Committee has
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discretion to raise or lower the incentive opportunity resulting from this calculation by 25%. In addition, the budgeted DCF may
be adjusted during the year in order to account for acquisitions or other significant changes not anticipated at the time the target
was determined. For 2014, the Compensation Committee determined that a bonus pool for all employees would be established
with DCF in excess of the amount needed to attain a distribution coverage ratio of 1.0 times. After achieving a 100% bonus,
incremental DCF earned would be divided between the bonus pool and NuStar Energy until employees achieve a 200% bonus.
Determination of Awards
For the 2014 annual incentive bonus determination, the Compensation Committee reviewed NuStar Energy’s DCF against the
established target of attaining a coverage ratio of 1.0 times and considered the performance of each officer to determine the
amount of incentive award earned. Based on this review, the Compensation Committee set the bonus award for our NEOs at
165%. Actual bonuses awarded are shown in the following table:
Name
Barron
Shoaf
Brown
Perry
Thompson
Long-Term Incentive Awards
Bonuses Paid For 2014 ($)
683,100
321,552
346,287
226,875
226,875
We provide unit-based, long-term incentive compensation for employees, including executives, and directors through our Fourth
Amended and Restated 2000 Long-Term Incentive Plan (the 2000 LTIP), effective as of January 1, 2014. The 2000 LTIP provides
for a variety of unit and unit-based awards, including unit options, restricted units and performance units. Performance units vest
(become nonforfeitable) upon the achievement of an objective performance goal. Long-term incentive awards vest over a period
determined by the Compensation Committee.
Under the design of our long-term incentive awards, each plan participant, including each NEO, is designated a target long-term
incentive award expressed as a percentage of base salary. This percentage reflects the fair value of the awards to be granted.
The Compensation Committee raised the long-term incentive targets for 2014 (expressed as a percent of base salary) for each of
Mr. Barron, Mr. Shoaf, Ms. Perry and Ms. Thompson effective January 1, 2014 to reflect their respective promotions and
increased responsibilities, as provided in the table below.
Name
Barron
Shoaf
Perry
Thompson
Long-Term Incentive Target
(% of Base Salary)
Effective January 1, 2014
175
125
60
60
Prior Long-Term Incentive Target
(% of Base Salary)
125
110
39
39
In July 2014, BDO performed a comprehensive review of our NEOs’ Total Direct Compensation. After consultation with BDO,
the Chairman (in the case of the CEO’s long-term incentive target) and the CEO (in the case of the long-term incentive targets for
each other NEO), the Compensation Committee raised the long-term incentive target for each of our NEOs. The following table
shows each NEO’s long-term incentive target for 2014 (expressed as a percent of base salary).
Name
Barron
Shoaf
Brown
Perry
Thompson
Long-Term Incentive Target
(% of base salary)
200
150
150
100
100
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The Compensation Committee allocates a percentage of long-term incentive award value to performance-based awards and a
percentage to awards that focus on retention and increasing ownership levels of executive officers. Beginning with the long-term
incentive award in the fourth quarter of 2011, the target levels were allocated in the following manner for each individual:
•
•
35% of the targeted long-term incentive dollar value is awarded to the executive in a grant of performance units. The
number of performance units granted is based upon the expected fair value of a single performance unit at the time of
grant; and
65% of the targeted long-term incentive dollar value is awarded to the executive in the form of restricted units. The
number of restricted units granted is based upon the expected fair value of a single restricted unit at the time of grant.
The Compensation Committee reviews and approves grants for the NEOs. The CEO develops individual grant recommendations
based upon the methodology described above, but both the CEO and the Compensation Committee may make adjustments to the
recommended grants based upon an assessment of an individual’s performance and contributions to NuStar Energy. Grants to the
CEO are decided solely by the Compensation Committee following the methodology described above, and the Compensation
Committee may make discretionary adjustments to the calculated level of long-term incentives based upon its independent
evaluation of the CEO’s performance and contributions.
Restricted Units
Restricted units comprise approximately 65% of each executive’s total NuStar Energy long-term incentive target. The
Compensation Committee presently expects to grant restricted units annually. The executives’ long-term incentive targets include
approximately 70% NuStar Energy restricted units and 30% NuStar GP Holdings restricted units (in both cases, calculated from
an assumed unit value based on the average closing price for the first 10 business days of the month prior to the Compensation
Committee meeting at which the awards are to be approved). The restricted units all vest over five years in equal increments on
the anniversary of the grant date. Restricted units of NuStar GP Holdings were introduced into the compensation program in 2008
to reflect the fact that the performance of NuStar GP Holdings is directly tied to the performance of NuStar Energy, since NuStar
GP Holdings’ sole asset is its interest in NuStar Energy. The annual grants of NuStar GP Holdings restricted units, as well as the
annual grants of the NuStar Energy restricted units, were approved in a joint meeting of the Compensation Committee and the
compensation committee of NuStar GP Holdings’ Board of Directors.
In 2014, the Compensation Committee and management made a determination that the grants for employees, including
management, and non-employee directors would be made as soon as administratively practicable and no earlier than the third
business day following our third quarter earnings release. Due to the time required to award and implement the grants, the 2014
annual grants were not effective until December 19, 2014.
Name
Barron
Shoaf
Brown
Perry (1)
Thompson (1)
Restricted Units Granted in 2014
NuStar Energy
7,155
3,610
3,885
2,000
2,150
NuStar GP Holdings
4,805
2,425
2,610
1,275
1,275
(1) The grants of NuStar Energy restricted units in 2014 include 100 units and 250 units granted to Ms. Perry and Ms.
Thompson, respectively, on January 1, 2014 as special recognition for their 2013 performance prior to their promotions.
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Performance Units
Performance units comprise approximately 35% of each of our NEOs’ total NuStar Energy long-term incentive targets and
typically have been granted in January of each year. Performance units are earned only upon NuStar Energy’s achievement of an
objective performance measure for the performance period. The Compensation Committee believes this type of incentive award
strengthens the tie between each NEO’s pay and our financial performance.
For performance unit awards granted prior to 2014, the objective performance measure is tied to NuStar Energy’s total unitholder
return (TUR), as compared with the Historical Compensation Comparative Group. NuStar Energy’s TUR is the total return to
unitholders, based upon the growth in the unit price, as well as cash distributions to unitholders, during the year. Each award is
subject to vesting in three annual increments, based upon our TUR during rolling three-year periods that end on December 31 of
each year following the date of grant. At the end of each performance period, our TUR is compared to the Historical
Compensation Comparative Group and ranked by quartile. Executives then earn 0%, 50%, 100% or 150% of that portion of the
initial grant amount that is eligible for vesting, depending upon whether our TUR is in the last, 3rd, 2nd or 1st quartile,
respectively, and they earn 200% if we rank highest in the group. Amounts not earned in a given performance period can be
carried forward for one additional performance period and up to 100% of the carried amount can still be earned, depending upon
the quartile achieved for that subsequent period.
For 2014, the Compensation Committee delayed consideration of the annual performance unit awards until completion of BDO’s
comprehensive review of our NEOs’ Total Direct Compensation. After consultation with BDO and management regarding the
appropriate performance metric to use for the performance unit awards, the Compensation Committee adopted a different
performance metric for the 2014 performance unit awards. As described above, in the MLP investment community, distribution
coverage is widely regarded as a significant determinant of unit price. BDO’s review reflected the fact that cash flow metrics are
the most common measures that MLPs use to determine the vesting of performance unit awards. The Compensation Committee
believes that distribution coverage appropriately aligns our management’s interest with our unitholders’ interest in increasing
distributions in a prudent manner over time.
In July, the Compensation Committee determined that the target performance measure for the 2014 performance unit awards is
NuStar Energy achieving a distribution coverage ratio, after taking into account the aggregate expense of the performance units
(DCR), of 1:1 for 2014. The target metric for performance unit vesting with respect to 2015 and each year thereafter will be the
DCR determined by the Compensation Committee in the first quarter of the year, based on the approved budget for that year. The
Compensation Committee also may designate one or more DCRs that are above the targeted DCR as goals that will be used to
determine vesting greater than 100% (up to 200%) of an officer’s performance units available for vesting in that year. Each award
is subject to vesting in three annual increments, based upon our DCR during the one-year periods that end on December 31 of
each year following the date of grant. Notwithstanding anything above, the Committee has full discretion to increase the vesting
determination for any officer (up to the 200% cap).
The number of performance units granted in July 2014 was determined by multiplying annual base salary rate by the long-term
incentive target percentage, and then multiplying that product by 35%. That product is then divided by the assumed value of an
individual unit, which is the product of (x) the average unit price for the period of December 15 through December 31 (using the
daily closing prices) and (y) a factor that reflects the present value of the award and a risk that the award might be forfeited.
Name
Barron
Shoaf
Brown
Perry
Thompson
Performance Unit Grants in 2014
8,000
4,284
4,614
2,142
2,142
On January 29, 2015, the Compensation Committee met and discussed NuStar Energy’s performance for the performance period
ended December 31, 2014, and determined that NuStar Energy’s TUR was in the third quartile of its peer group for that three-year
performance period. As a result, the performance units granted in 2011, 2012 and 2013 that were available to vest for the
performance period ending on December 31, 2014 vested at 50%, in accordance with the award terms. On January 29, 2015, the
Compensation Committee also determined that NuStar Energy achieved a DCR of 1:1 for 2014 and, in accordance with the award
terms, the performance units available to vest for the 2014 awards vested at 100%.
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Perquisites and Other Benefits
Perquisites
We provide only minimal perquisites to our executive officers. Mr. Barron, Mr. Shoaf and Ms. Brown received federal income tax
preparation services in 2014. Executives also are eligible to receive personal liability insurance. For more information on
perquisites, see the Summary Compensation Table and its footnotes.
Other Benefits
We provide other benefits, including medical, life, dental and disability insurance in line with competitive market conditions. Our
NEOs are eligible for the same benefit plans provided to our other employees, including our pension plans, 401(k) thrift plan (the
Thrift Plan), and insurance and supplemental plans chosen and paid for by employees who desire additional coverage. Executive
officers and other employees whose compensation exceeds certain limits are eligible to participate in non-qualified excess benefit
programs whereby those individuals can choose to make larger contributions than allowed under the qualified plan rules and
receive correspondingly higher benefits. These plans are described below under “Post-Employment Benefits.”
Post-Employment Benefits
Pension Plans
For a discussion of our pension plans, as well as the Excess Pension Plan, please see the narrative description accompanying the
Pension Benefits table below in this Item 11.
Nonqualified Deferred Compensation Plan (Excess Thrift Plan)
The Excess Thrift Plan provides unfunded benefits to those employees of NuStar GP, LLC whose annual additions under the
Thrift Plan are subject to the limitations on such annual additions as provided under §415 of the Internal Revenue Code of 1986,
as amended (the Code), and/or who are constrained from making maximum contributions under the Thrift Plan by §401(a)(17) of
the Code, which limits the amount of an employee’s annual compensation which may be taken into account under that plan. The
Excess Thrift Plan is comprised of two separate components, consisting of (1) an “excess benefit plan” as defined under §3(36) of
The Employee Retirement Income Security Act of 1974, as amended (ERISA), and (2) a plan that is maintained primarily for the
purpose of providing deferred compensation for a select group of management or highly compensated employees. Each
component of the Excess Thrift Plan consists of a separate plan for purposes of Title I of ERISA. To the extent a participant’s
annual total compensation exceeds the compensation limits for the calendar year under §401(a)(17) of the Code ($260,000 for
2014), the participant’s Excess Thrift Plan account is credited with that number of hypothetical NuStar Energy units that could
have been purchased with the difference between:
• The total company matching contributions that would have been credited to the participant’s account under the Thrift
Plan had the participant’s contributions not been reduced pursuant to §401; and
• The actual company matching contributions credited to such participant’s account.
Mr. Barron, Mr. Shoaf and Ms. Brown participated in the Excess Thrift Plan in 2014.
Change of Control Severance Arrangements
We entered into change of control severance agreements with each of the NEOs in, or prior to, 2007. These agreements are
intended to assure the continued availability of these executives in the event of certain transactions culminating in a “change of
control” as defined in the agreements. The change of control severance agreements have three-year terms, which terms are
automatically extended for one year upon each anniversary unless a notice not to extend is given by us. If a “change of
control” (as defined in the agreements) occurs during the term of an agreement, then the agreement becomes operative for a fixed
three-year period. The agreements provide generally that the executive’s terms and conditions of employment (including position,
location, compensation and benefits) will not be adversely changed during the three-year period after a change of control of us.
Particular payments under the agreements are triggered commensurate with the occurrence of any of the following:
(1) termination of employment by the company other than for “cause” (as defined in the agreements) or disability; (2) termination
by the executive for “good reason” (as defined in the agreements); (3) termination by the executive other than for “good reason;”
and (4) termination of employment because of death or disability. These triggers were designed to ensure the continued
availability of the executives following a change of control, and to compensate the executives at appropriate levels if their
employment is unfairly or prematurely terminated during the applicable term following a change of control. For more information
regarding payments that may be made under our change of control severance arrangements, see our disclosures below under the
caption “Potential Payments upon Termination or Change of Control.”
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Employment Agreements
None of the NEOs have employment agreements, other than the change of control severance agreements described above. As a
result, in the event of a termination, retirement, death or disability that does not follow a change of control, an NEO will only
receive the compensation or benefits to which he or she would be entitled under the terms of, as applicable, the defined
contribution, defined benefit, medical or long-term incentive plans.
Impact of Accounting and Tax Treatments
Accounting Treatment
NuStar Energy’s financial statements include the expense for awards of NuStar Energy unit options, restricted units and
performance units to NuStar GP, LLC employees and directors and the expense for awards of NuStar GP Holdings unit options
and restricted units to NuStar GP, LLC employees, as we are obligated to pay for all costs of NuStar GP, LLC’s employees
working on our behalf in accordance with the Services Agreement described below in Item 13. Under the Services Agreement,
1% of NuStar GP, LLC’s domestic unit compensation expense is charged back to NuStar GP Holdings.
NuStar GP, LLC accounts for awards of NuStar Energy common unit options, restricted units and performance units to NuStar
GP, LLC’s employees and directors at fair value as a derivative, whereby a liability for the award is recorded at inception.
Subsequent changes in the fair value of the award are included in the determination of net income. NuStar GP, LLC determines
the fair value of unit options using the Black-Scholes model at each reporting date. The fair value of restricted units and
performance units equals the market price of NuStar Energy common units at each reporting date. However, performance units
are earned only upon NuStar Energy’s achievement of an objective performance measure. NuStar GP, LLC records compensation
expense each reporting period such that the cumulative compensation expense recorded equals the current fair value of the
percentage of the award that has vested. NuStar GP, LLC records compensation expense related to unit options until such options
are exercised, and records compensation expense for restricted units until the date of vesting.
NuStar GP Holdings accounts for awards of NuStar GP Holdings restricted units and unit options awarded to its directors, as well
as the employees and directors of NuStar GP, LLC, at fair value. NuStar GP Holdings uses the market price at the grant date as
the fair value of restricted units. NuStar GP Holdings estimates the fair value of unit options at the grant date using the Black-
Scholes model. For both restricted units and unit options, NuStar GP Holdings recognizes the resulting compensation expense
ratably over the vesting period.
Under these long-term incentive plans, certain awards provide that the grantee’s award vests immediately upon retirement.
Compensation expense is recognized immediately if these awards are granted to retirement-eligible employees, as defined in each
award. In addition, if, during a vesting period of a grant, the grantee will become retirement-eligible, then compensation expense
associated with the grant is recognized from the grant date through the grantee’s retirement eligibility date.
Tax Treatment
Under Section 162(m) of the Code, publicly held corporations may not take a tax deduction for compensation in excess of $1
million paid to the CEO or the other four most highly compensated executive officers unless that compensation meets the Code’s
definition of “performance-based” compensation. Section 162(m) allows a deduction for compensation to a specified executive
that exceeds $1 million only if it is paid (1) solely upon attainment of one or more performance goals, (2) pursuant to a qualifying
performance-based compensation plan adopted by the Compensation Committee and (3) the material terms, including the
performance goals, of such plan are approved by the unitholders before payment of the compensation. The Compensation
Committee considers deductibility under Section 162(m) with respect to compensation arrangements for executive officers.
Although Section 162(m) does not now apply to master limited partnerships, if a similar limitation were to be applied to NuStar
Energy, the Compensation Committee believes that it would be in the company’s best interest for the Compensation Committee to
retain its flexibility and discretion to make compensation awards to foster achievement of performance goals established by the
Compensation Committee (which may include performance goals defined in the Code) and other corporate goals the
Compensation Committee deems important to NuStar Energy’s success, such as encouraging employee retention, rewarding
achievement of non-quantifiable goals and achieving progress with specific projects. The Compensation Committee believes that
unit options and performance unit grants qualify as performance-based compensation and, therefore, would not be subject to any
deductibility limitations under an applicable section similar to Section 162(m). Grants of restricted units and other equity-based
awards that are not subject to specific quantitative performance measures will likely not qualify as “performance-based”
compensation and, in such event, would be subject to such deduction restrictions.
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Compensation-Related Policies
Unit Ownership Guidelines
Our Board, the Compensation Committee and management recognize that ownership of NuStar Energy units is an effective
means by which to align the interests of NuStar GP, LLC directors and executives with those of NuStar Energy’s unitholders. We
have long emphasized and reinforced the importance of unit ownership among our executives and directors.
During 2006, the Compensation Committee worked with its independent compensation consultant to formalize unit ownership
and retention guidelines for NuStar GP, LLC directors and officers to ensure continuation of our successful track record in
aligning the interests of NuStar GP, LLC directors and officers with those of NuStar Energy’s unitholders through ownership of
NuStar Energy units. The guidelines were approved by the Compensation Committee in January 2006. In view of the public
offerings of units of NuStar GP Holdings in 2006, the guidelines were amended to include ownership of either NuStar GP
Holdings units or NuStar Energy units.
Non-Employee Director Unit Ownership Guidelines
Non-employee directors are expected to acquire and hold during their service as a Board member NuStar Energy units and/or
NuStar GP Holdings units with an aggregate value of at least $50,000. Directors have five years from their initial election to the
Board to meet the target unit ownership guidelines, and they are expected to continuously own sufficient units to meet the
guidelines, once attained.
Officer Unit Ownership Guidelines
Unit ownership guidelines for officers of NuStar GP, LLC are as follows:
Officer
Value of NuStar Energy Units and/or
NuStar GP Holdings Units Owned
Chief Executive Officer, President or any Executive Vice
Presidents
Senior Vice Presidents
Vice Presidents
3.0x Base Salary
2.0x Base Salary
1.0x Base Salary
Our officers are expected to meet the applicable guideline within five years of their initial appointment and continuously own
sufficient units to meet the guideline, once attained.
Prohibition on Insider Trading and Speculation on NuStar Energy or NuStar GP Holdings Units
We have established policies prohibiting our officers, directors and employees from purchasing or selling either NuStar Energy or
NuStar GP Holdings securities while in possession of material, nonpublic information or otherwise using such information for
their personal benefit or in any manner that would violate applicable laws and regulations. Our directors, officers and certain
other employees are prohibited from trading in either NuStar Energy or NuStar GP Holdings securities for the period beginning
on the last business day of each calendar quarter through the first business day following our disclosure of our quarterly or annual
financial results. In addition, our policies prohibit our officers, directors and employees from speculating in either NuStar Energy
or NuStar GP Holdings units, which includes short selling (profiting if the market price of our units decreases), buying or selling
publicly traded options (including writing covered calls), hedging or any other type of derivative arrangement that has a similar
economic effect. Our directors, officers and certain other employees are also required to receive consent from the CEO (or, in the
case of the CEO, from the Chair of the applicable company’s Audit Committee) before they enter into margin loans or other
financing arrangements that may lead to the ownership or other rights to their NuStar Energy or NuStar GP Holdings securities
being transferred to a third party.
EVALUATION OF COMPENSATION RISK
The Compensation Committee has focused on aligning our compensation policies with the long-term interests of NuStar Energy
and avoiding short-term rewards for management decisions that could pose long-term risks to NuStar Energy. As described above
in “Compensation Discussion and Analysis,” NuStar Energy’s compensation programs are structured so that a considerable
amount of our management’s compensation is tied to NuStar Energy’s long-term fiscal health. The only short-term incentive
available to NuStar Energy employees and executives is the all-employee performance bonus. All bonuses, including executive
bonuses, are determined with reference to well-defined performance metrics selected by the Compensation Committee and
applicable to all employees. Historically, our long-term incentives have taken the form of performance units, restricted units and
unit options that typically vest over three- and five-year periods, which we believe serves to align our employees’ interests with
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the long-term goals of NuStar Energy. No business group or unit is compensated differently than any other, regardless of
profitability. There also is a maximum number of performance units that may be earned, based on the performance of NuStar
Energy relative to a performance metric selected by the Compensation Committee. As such, we believe that our compensation
policies encourage employees to operate our business in a fundamentally sound manner and do not create incentives to take risks
that are reasonably likely to have a material adverse effect on NuStar Energy.
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
The following pages of this Item 11 provide information required by the SEC regarding compensation paid to or earned by our
NEOs and the members of our Board for the periods indicated. We have used captions and headings in the tables provided below
in accordance with the SEC regulations requiring these disclosures. The footnotes to these tables provide important information to
explain the values presented in the tables, and are an important part of our disclosures.
SUMMARY COMPENSATION TABLE
The following table provides a summary of compensation paid for the years ended December 31, 2014, December 31, 2013 and
December 31, 2012 to NuStar GP, LLC’s CEO, CFO and to its three other most highly compensated executive officers serving
during 2014. Mr. Shoaf, Ms. Perry and Ms. Thompson were not executive officers prior to 2014 and, accordingly, their
compensation is reported only with respect to 2014. For each NEO, the table shows amounts earned for services rendered to
NuStar GP, LLC in all capacities in which the NEO served during the periods presented for that NEO.
Year
2014
2013
2012
2014
2014
2013
2012
2014
Salary
($)
460,000
327,160
304,875
324,800
349,785
345,983
329,265
250,000
Bonus
($)(1)
683,100
125,000
—
321,552
346,287
110,000
—
226,875
Unit
Awards
($)(2)
1,086,708
530,915
503,574
564,231
607,456
546,876
547,821
294,772
Non-Equity
Incentive
Plan
Compensation
($)
Option
Awards
($)
Change in Pension
Value
and Nonqualified
Deferred
Compensation
Earnings
($)(3)
All Other
Compensation
($)(4)
Total
($)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
147,448
2,328
134,758
142,990
136,213
48,510
127,380
51,525
29,815
2,407,071
21,818
1,007,221
19,483
962,690
21,703
1,375,276
23,202
1,462,943
24,302
1,075,671
22,400
1,026,866
8,865
832,037
2014
250,000
226,875
302,421
—
—
68,726
16,466
864,488
Name and Principal
Position
Bradley C. Barron
President and CEO
Thomas R. Shoaf
Executive Vice
President and CFO
Mary Rose Brown
Executive Vice
President and Chief
Administrative Officer
Amy L. Perry
Senior Vice President,
General Counsel-
Corporate and
Commercial Law &
Corporate Secretary
Karen M. Thompson
Senior Vice President
and General Counsel-
Litigation, Regulatory
& Environmental
(1) Bonus amounts for 2014 were paid in February 2015 with respect to 2014 performance. Bonus amounts for 2013 were
paid in February 2014 with respect to 2013 performance. The NEOs were not awarded bonuses for 2012. Bonuses were
determined taking into consideration NuStar Energy’s performance in the applicable year, the individual executive’s
targets and the executive’s performance, as described above under “Compensation Discussion and Analysis-Annual
Incentive Bonus.” For an explanation of the amount of salary and bonus in proportion to total compensation, see
“Compensation Discussion and Analysis-Relative Size of Primary Elements of Compensation.”
(2) The amounts reported represent the grant date fair value of grants of NuStar Energy restricted units, NuStar Energy
performance units and NuStar GP Holdings restricted units. Please see “Compensation Discussion and Analysis-Impact
of Accounting and Tax Treatments-Accounting Treatment” above in this Item 11 and the footnotes to the Grants of Plan-
Based Awards During the Year Ended December 31, 2014 table below in this Item 11 for information regarding the
assumptions made in the valuation.
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(3) The following table identifies the separate amounts attributable to (A) the aggregate change in the actuarial present value
of the NEOs’ accumulated benefit under NuStar GP, LLC’s defined benefit and actuarial pension plans, including
supplemental plans (but excluding tax-qualified defined contribution plans and nonqualified defined contribution plans),
and (B) above-market or preferential earnings on compensation that is deferred on a basis that is not tax-qualified.
Name
Barron
Shoaf
Brown
Perry
Thompson
Year
2014
2013
2012
2014
2014
2013
2012
2014
2014
(A) ($)
(B) ($)
TOTAL ($)
147,448
2,328
134,758
142,990
136,213
48,510
127,380
51,525
68,726
—
—
—
—
—
—
—
—
—
147,448
2,328
134,758
142,990
136,213
48,510
127,380
51,525
68,726
(4) The amounts reported in this column for 2014 consist of the following for each officer:
Company
Contribution
to Thrift
Plan ($)
15,600
15,600
13,887
7,500
14,433
Company
Contribution
to Excess
Thrift Plan ($)
12,000
3,888
7,100
—
—
Tax
Preparation
($)
Personal
Liability
Insurance
($)
850
850
850
—
—
1,365
1,365
1,365
1,365
—
Name
Barron
Shoaf
Brown
Perry
Thompson
Executive
Health
—
Exams ($)(a) TOTAL ($)
29,815
21,703
23,202
8,865
16,466
—
2,033
—
—
(a) The amount reported is the difference between the value of executive health exams made available to NuStar Energy
officers and the value of NuStar Energy’s all-employee wellness assessments.
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GRANTS OF PLAN-BASED AWARDS
DURING THE YEAR ENDED DECEMBER 31, 2014
The following table provides information regarding the grants of plan-based awards to the NEOs during 2014.
Estimated Future Payouts Under
Equity
Incentive Plan Awards
Date of
Approval of
Compensation
Committee
Threshold
(#)
Target
(#)
Maximum
(#)
All Other
Unit
Awards:
Number
of
Units (#)
All Other
Option
Awards:
Number of
Securities
Underlying
Options (#)
Exercise or
Base Price
of Option
Awards
($/Unit)
Grant Date
Fair Value of
Unit and
Unit Option
Awards ($)
Name
Grant Date
Barron
Shoaf
Brown
Perry
Thompson
7/23/2014 (1)
(2)
12/19/2014
12/19/2014
7/23/2014
12/19/2014
12/19/2014
7/23/2014
12/19/2014
12/19/2014
1/1/2014
7/23/2014
12/19/2014
12/19/2014
1/1/2014
7/23/2014
12/19/2014
12/19/2014
(3)
(1)
(2)
(3)
(1)
(2)
(3)
(4)
(1)
(2)
(3)
(4)
(1)
(2)
(3)
7/23/2014
10/29/2014
10/29/2014
7/23/2014
10/29/2014
10/29/2014
7/23/2014
10/29/2014
10/29/2014
(4)
7/23/2014
10/29/2014
10/29/2014
(4)
7/23/2014
10/29/2014
10/29/2014
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
8,000
16,000
—
—
—
—
4,284
8,568
—
—
—
—
4,614
9,228
—
—
—
—
—
—
2,142
4,284
—
—
—
—
—
—
2,142
4,284
—
—
—
—
—
7,155
4,805
—
3,610
2,425
—
3,885
2,610
100
—
1,900
1,275
250
—
1,900
1,275
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
514,160
408,121
164,427
275,333
205,914
82,984
296,542
221,600
89,314
5,099
137,666
108,376
43,631
12,748
137,666
108,376
43,631
(5)
(6)
(7)
(5)
(6)
(7)
(5)
(6)
(7)
(8)
(5)
(6)
(7)
(8)
(5)
(6)
(7)
(1) Performance units were awarded by the Compensation Committee on July 23, 2014 pursuant to the 2000 LTIP. Each
award is subject to vesting in three annual increments, based upon our DCR during the one-year performance periods
that end on December 31 of each year following the date of grant. For the 2014 performance unit awards, the target
performance measure is NuStar Energy achieving a DCR of 1:1 for 2014. The target metric for performance unit vesting
with respect to 2015 and each year thereafter will be the DCR determined by the Compensation Committee in the first
quarter of the year, based on the approved budget for that year. The Compensation Committee also may designate one or
more DCRs that are above the targeted DCR as goals that will be used to determine vesting greater than 100% (up to
200%) of an officer’s performance units available for vesting in that year. Notwithstanding anything above, the
Compensation Committee has full discretion to increase the vesting determination for any officer (up to the 200% cap).
For the performance period ended December 31, 2014, we achieved a DCR of 1:1 and the performance units available to
vest for the 2014 awards vested at 100%.
(2) Restricted units of NuStar Energy were approved by the Compensation Committee at a joint meeting with the
Compensation Committee of NuStar GP Holdings on October 29, 2014, and the grant date for these NuStar Energy
restricted units was set at that time for the date that was as soon as administratively practicable after the meeting and no
earlier than the third business day following our third quarter earnings release. The NuStar Energy restricted units were
awarded pursuant to the 2000 LTIP and vest 1/5 annually over five years beginning on the first anniversary of the grant
date. All grantees receiving NuStar Energy restricted units are entitled to receive an amount equal to the product of (a)
the number of restricted units granted to the grantee that remain outstanding and unvested as of the record date for such
quarter and (b) the quarterly distribution declared by the Board for such quarter, provided that such amounts are subject
to the same restrictions as the restricted units.
(3) Restricted units of NuStar GP Holdings were approved by the Compensation Committee of NuStar GP Holdings at a
joint meeting with the Compensation Committee of NuStar GP, LLC on October 29, 2014, and the grant date for these
NuStar GP Holdings restricted units was set at that time for the date that was as soon as administratively practicable after
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the meeting and no earlier than the third business day following NuStar GP Holdings’ third quarter earnings release. The
NuStar GP Holdings restricted units were awarded pursuant to the NuStar GP Holdings Long-Term Incentive Plan, as
amended and restated as of April 1, 2007, and vest 1/5 annually over five years beginning on the first anniversary of the
grant date. All grantees receiving NuStar GP Holdings restricted units are entitled to receive an amount equal to the
product of (a) the number of restricted units granted to the grantee that remain outstanding and unvested as of the record
date for such quarter and (b) the quarterly distribution declared by the NuStar GP Holdings Board for such quarter,
provided that such amounts are subject to the same restrictions as the restricted units.
(4) On January 1, 2014, Ms. Perry and Ms. Thompson received grants of NuStar Energy units pursuant to the 2000 LTIP as
special recognition for their 2013 performance prior to their promotions. Due to the nature of the special awards, the
units were 100% vested on the date of grant. The CEO awarded each grant prior to Ms. Perry and Ms. Thompson
becoming executive officers, pursuant to delegated authority to him by the Compensation Committee, and the grants
were not separately approved by the Compensation Committee.
(5) The grant date fair value for performance units was determined by multiplying the number of performance units that
were granted by the NYSE closing unit price of our units on the date of grant, $64.27. See “Compensation Discussion
and Analysis-Impact of Accounting and Tax Treatments-Accounting Treatment” above in this Item 11 for information
regarding the assumptions made in valuation.
(6) The grant date fair value for restricted units was determined by multiplying the number of restricted units that were
granted by the NYSE closing unit price of our units on the date of grant, $57.04. See “Compensation Discussion and
Analysis-Impact of Accounting and Tax Treatments-Accounting Treatment” above in this Item 11 for information
regarding the assumptions made in valuation.
(7) The grant date fair value for restricted units was determined by multiplying the number of NuStar GP Holdings restricted
units that were granted by the NYSE closing unit price of NuStar GP Holdings units on the date of grant, $34.22. See
“Compensation Discussion and Analysis-Impact of Accounting and Tax Treatments-Accounting Treatment” above in this
Item 11 for information regarding the assumptions made in valuation.
(8) The grant date for these restricted units was not a trading day on the NYSE. Accordingly, the grant date fair value was
determined by multiplying the number of restricted units that were granted by the NYSE closing unit price of our units
on the last business day before the date of grant, $50.99. See “Compensation Discussion and Analysis-Impact of
Accounting and Tax Treatments-Accounting Treatment” above in this Item 11 for information regarding the assumptions
made in valuation.
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OUTSTANDING EQUITY AWARDS
AT DECEMBER 31, 2014
The following table provides information regarding our NEOs’ unexercised unit options, unvested restricted units and unvested
performance units as of December 31, 2014. The value of NuStar Energy restricted units and performance units reported below is
equal to the number of restricted units or performance units, as applicable, multiplied by $57.75, the NuStar Energy closing price
on the NYSE on December 31, 2014. The value of the NuStar GP Holdings restricted units reported below is equal to the number
of restricted units multiplied by $34.42, the NuStar GP Holdings closing price on the NYSE on December 31, 2014.
Option Awards
Unit Awards
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)
Option
Exercise
Price ($)
Option
Expiration
Date
Number of
Units
That Have
Not
Vested (#)
Market
Value of
Units That
Have Not
Vested ($)
Equity
Incentive
Plan
Awards:
Number of
Unearned
Units
or Other
Rights
That Have
Not
Vested (#)
Equity
Incentive
Plan
Awards:
Market or
Payout Value
of
Unearned
Units or
Other Rights
That
Have Not
Vested ($)
—
—
—
2,825(1)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
57.51
10/27/2015
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
15,378(2)
10,357(3)
—
—
8,711(4)
5,913(5)
—
12,504(6)
8,400(7)
—
5,576(8)
1,275(9)
—
5,456(10)
1,275(11)
—
14,428(12)
833,217
888,080
356,488
—
—
—
—
—
8,505(13)
503,060
203,525
—
—
—
—
—
491,164
—
—
—
11,581(14)
668,803
722,106
289,128
—
—
—
—
—
2,142(15)
123,701
322,014
43,886
—
—
—
—
—
2,142(16)
123,701
315,084
43,886
—
—
—
—
Name
Barron
Shoaf
Brown
Perry
Thompson
(1) Mr. Shoaf’s options granted on October 27, 2005 vested in 1/5 increments over five years, beginning on the first
anniversary of the date of grant. In 2012, the Compensation Committee extended the expiration date for these options
from 2012 to 2015.
(2) Mr. Barron’s restricted NuStar Energy units consist of: 491 restricted units granted December 30, 2010; 1,256 restricted
units granted December 16, 2011; 606 restricted units granted January 26, 2012; 2,070 restricted units granted December
19, 2012; 3,800 restricted units granted December 16, 2013; and 7,155 restricted units granted December 19, 2014. The
restricted units granted January 26, 2012 vest in 1/3 increments over three years, beginning on the first anniversary of the
date of grant. All of Mr. Barron’s other restricted units vest in 1/5 increments over five years, beginning on the first
anniversary of the date of grant.
(3) Mr. Barron’s restricted NuStar GP Holdings units consist of: 410 restricted units granted December 30, 2010; 956
restricted units granted December 16, 2011; 1,434 restricted units granted December 19, 2012; 2,752 restricted units
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granted December 16, 2013; and 4,805 restricted units granted December 19, 2014. All of Mr. Barron’s NuStar GP
Holdings restricted units vest in 1/5 increments over five years, beginning on the first anniversary of the date of grant.
(4) Mr. Shoaf’s restricted NuStar Energy units consist of: 235 restricted units granted December 30, 2010; 618 restricted
units granted December 16, 2011; 296 restricted units granted January 26, 2012; 1,404 restricted units granted December
19, 2012; 2,548 restricted units granted December 16, 2013; and 3,610 restricted units granted December 19, 2014. The
restricted units granted January 26, 2012 vest in 1/3 increments over three years, beginning on the first anniversary of the
date of grant. All of Mr. Shoaf’s other restricted units vest in 1/5 increments over five years, beginning on the first
anniversary of the date of grant.
(5) Mr. Shoaf’s restricted NuStar GP Holdings units consist of: 200 restricted units granted December 30, 2010; 472
restricted units granted December 16, 2011; 972 restricted units granted December 19, 2012; 1,844 restricted units
granted December 16, 2013; and 2,425 restricted units granted December 19, 2014. All of Mr. Shoaf’s NuStar GP
Holdings restricted units vest in 1/5 increments over five years, beginning on the first anniversary of the date of grant.
(6) Ms. Brown’s restricted NuStar Energy units consist of: 550 restricted units granted December 30, 2010; 1,356 restricted
units granted December 16, 2011; 675 restricted units granted January 26, 2012; 2,238 restricted units granted December
19, 2012; 3,800 restricted units granted December 16, 2013; and 3,885 restricted units granted December 19, 2014. The
restricted units granted January 26, 2012 vest in 1/3 increments over three years, beginning on the first anniversary of the
date of grant. All of Ms. Brown’s other restricted units vest in 1/5 increments over five years, beginning on the first
anniversary of the date of grant.
(7) Ms. Brown’s restricted NuStar GP Holdings units consist of: 458 restricted units granted December 30, 2010; 1,032
restricted units granted December 16, 2011; 1,548 restricted units granted December 19, 2012; 2,752 restricted units
granted December 16, 2013; and 2,610 restricted units granted December 19, 2014. All of Ms. Brown’s NuStar GP
Holdings restricted units vest in 1/5 increments over five years, beginning on the first anniversary of the date of grant.
(8) Ms. Perry’s restricted NuStar Energy units consist of: 270 restricted units granted December 30, 2010; 570 restricted
units granted December 16, 2011; 1,116 restricted units granted December 19, 2012; 1,720 restricted units granted
December 16, 2013; and 1,900 restricted units granted December 19, 2014. All of Ms. Perry’s restricted units vest in 1/5
increments over five years, beginning on the first anniversary of the date of grant.
(9) Ms. Perry’s restricted NuStar GP Holdings units consist of 1,275 restricted units granted December 19, 2014. Ms. Perry’s
NuStar GP Holdings restricted units vest in 1/5 increments over five years, beginning on the first anniversary of the date
of grant.
(10) Ms. Thompson’s restricted NuStar Energy units consist of: 270 restricted units granted December 30, 2010; 570
restricted units granted December 16, 2011; 996 restricted units granted December 19, 2012; 1,720 restricted units
granted December 16, 2013; and 1,900 restricted units granted December 19, 2014. All of Ms. Thompson’s restricted
units vest in 1/5 increments over five years, beginning on the first anniversary of the date of grant.
(11) Ms. Thompson’s restricted NuStar GP Holdings units consist of 1,275 restricted units granted December 19, 2014.
Ms. Thompson’s NuStar GP Holdings restricted units vest in 1/5 increments over five years, beginning on the first
anniversary of the date of grant.
(12) Mr. Barron’s unvested NuStar Energy performance units consist of: 525 units granted January 28, 2011; 1,970 units
granted April 24, 2012; 3,933 units granted January 30, 2013; and 8,000 units granted July 23, 2014.
The performance units awarded in 2011, 2012 and 2013 are eligible to vest in three annual increments and are payable in
NuStar Energy’s units. Upon vesting, the performance units are converted into a number of NuStar Energy units based
on NuStar Energy’s TUR during rolling three-year periods that end of December 31 of each year following the date of
grant. At the end of each performance period, NuStar Energy’s TUR is compared to the peer group and ranked by
quartile. Holders of the performance units then earn 0%, 50%, 100% or 150% of that portion of the initial grant that is
eligible for vesting, depending upon whether NuStar Energy’s TUR is in the last, third, second or first quartile,
respectively. Holders earn 200% if NuStar Energy is the highest ranking entity in the peer group. For the periods ended
December 31, 2011, December 31, 2012 and December 31, 2013, NuStar’s TUR was in the last quartile of its peer
group, which resulted in no vesting for participants. For the performance period ended December 31, 2014, NuStar’s
TUR was in the third quartile of its peer group, which resulted in 50% vesting of the units eligible to vest under the 2011,
2012 and 2013 performance unit awards.
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The performance units awarded in 2014 are eligible to vest in three annual increments and are payable in NuStar
Energy’s units. Upon vesting, the performance units are converted into a number of NuStar Energy units based upon
NuStar Energy’s DCR during the one-year performance periods that end on December 31 of each year following the date
of grant. For the 2014 performance unit awards, the target performance measure is NuStar Energy achieving a DCR of
1:1 for 2014. The target metric for performance unit vesting with respect to 2015 and each year thereafter will be the
DCR determined by the Compensation Committee in the first quarter of the year, based on the approved budget for that
year. The Compensation Committee also may designate one or more DCRs that are above the targeted DCR as goals
that will be used to determine vesting greater than 100% (up to 200%) of an officer’s performance units available for
vesting in that year. Notwithstanding anything above, the Compensation Committee has full discretion to increase the
vesting determination for any officer (up to the 200% cap). For the performance period ended December 31, 2014,
NuStar Energy achieved a DCR of 1:1 and the performance units available to vest under the 2014 awards vested at
100%.
(13) Mr. Shoaf’s unvested NuStar Energy performance units consist of: 251 units granted January 28, 2011; 970 units granted
April 24, 2012; 3,000 units granted January 30, 2013; and 4,284 units granted July 23, 2014. The performance units vest
in accordance with the description in Footnote (12) above.
(14) Ms. Brown’s unvested NuStar Energy performance units consist of: 589 units granted January 28, 2011; 2,130 units
granted April 24, 2012; 4,248 units granted January 30, 2013; and 4,614 units granted July 23, 2014. The performance
units vest in accordance with the description in Footnote (12) above.
(15) Ms. Perry’s unvested NuStar Energy performance units consist of 2,142 units granted July 23, 2014. The performance
units vest in accordance with the description in Footnote (12) above.
(16) Ms. Thompson’s unvested NuStar Energy performance units consist of 2,142 units granted July 23, 2014. The
performance units vest in accordance with the description in Footnote (12) above.
OPTION EXERCISES AND UNITS VESTED
DURING THE YEAR ENDED DECEMBER 31, 2014
The following table provides information regarding option exercises by our NEOs, and the vesting of restricted units and
performance units held by our NEOs, during 2014.
Option Awards
Unit Awards
Name
Number of Units
Acquired on Exercise (#)
Value Realized on
Exercise ($)(4)
Number of Units
Acquired on Vesting (#)
Value Realized on
Vesting ($)(10)
Barron
Shoaf
Brown
Perry
Thompson
36,975(1)
25,700(2)
35,000(3)
—
—
485,889
122,846
470,750
—
—
6,241(5)
3,576(6)
6,698(7)
1,749(8)
1,859(9)
286,938
164,490
308,071
96,101
103,097
(1) Mr. Barron exercised 1,975 NuStar Energy unit options and 35,000 NuStar GP Holdings unit options on July 28, 2014.
(2) Mr. Shoaf exercised 25,700 NuStar GP Holdings unit options on November 14, 2014.
(3) Ms. Brown exercised 35,000 NuStar GP Holdings unit options on July 28, 2014.
(4) For exercises of NuStar Energy unit options, the value realized on exercise was calculated by multiplying the number of
NuStar Energy units to which the option exercise related by the difference between the price of NuStar Energy units on
the NYSE at the time of exercise and the option exercise price. For exercises of NuStar GP Holdings unit options, the
value realized on exercise was calculated by multiplying the number of NuStar GP Holdings units to which the option
exercise related by the difference between the price of NuStar GP Holdings units on the NYSE at the time of exercise
and the option exercise price.
(5) Mr. Barron's NuStar Energy units vested in 2014 as follows: 606 units on January 26, 2014; 423 units on December 14,
2014; 1,578 units on December 16, 2014; 690 units on December 19, 2014; and 491 units on December 30, 2014. Mr.
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Barron's NuStar GP Holdings units vested in 2014 as follows: 399 units on December 14, 2014; 1,166 units on
December 16, 2014; 478 units on December 19, 2014; and 410 units on December 30, 2014.
(6) Mr. Shoaf’s NuStar Energy units vested in 2014 as follows: 295 on January 26, 2014; 211 units on December 14, 2014;
946 units on December 16, 2014; 468 units on December 19, 2014; and 235 units on December 30, 2014. Mr. Shoaf’s
NuStar GP Holdings units vested in 2014 as follows: 200 units on December 14, 2014; 697 units on December 16, 2014;
324 units on December 19, 2014; and 200 units on December 30, 2014.
(7) Ms. Brown’s NuStar Energy units vested in 2014 as follows: 675 on January 26, 2014; 474 units on December 14, 2014;
1,628 units on December 16, 2014; 746 units on December 19, 2014; and 550 units on December 30, 2014. Ms.
Brown’s NuStar GP Holdings units vested in 2014 as follows: 447 units on December 14, 2014; 1,204 units on
December 16, 2014; 516 units on December 19, 2014; and 458 units on December 30, 2014.
(8) Ms. Perry’s NuStar Energy units vested in 2014 as follows: 100 on January 1, 2014; 292 units on December 14, 2014;
715 units on December 16, 2014; 372 units on December 19, 2014; and 270 units on December 30, 2014.
(9) Ms. Thompson’s NuStar Energy units vested in 2014 as follows: 250 on January 1, 2014; 292 units on November 6,
2014; 715 units on December 16, 2014; 332 units on December 19, 2014; and 270 units on December 30, 2014.
(10) The value realized on vesting of NuStar Energy restricted units was calculated by multiplying the closing price of NuStar
Energy units on the NYSE on the date of vesting by the number of NuStar Energy units vested. The value realized on
vesting of NuStar GP Holdings restricted units was calculated by multiplying the closing price of NuStar GP Holdings
units on the NYSE on the date of vesting by the number of NuStar GP Holdings units vested. The closing prices on the
applicable dates are as follows:
2014 Restricted Unit Vesting
Date
NuStar Energy Closing Price ($)
December 31 , 2013 (for January 1, 2014 vesting)
January 26, 2014
November 6, 2014
December 14, 2014
December 16, 2014
December 19, 2014
December 30, 2014
December 14, 2014
December 16, 2014
December 19, 2014
December 30, 2014
50.99
48.23
60.10
54.52
53.82
57.04
56.97
Date
NuStar GP Holdings Closing Price ($)
32.45
33.45
34.22
34.35
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POST-EMPLOYMENT COMPENSATION
PENSION BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 2014
The following table provides information regarding the accumulated benefits of our NEOs under NuStar GP, LLC’s pension plans
during the year ended December 31, 2014.
Name
Plan Name
Number of Years
Credited Service
Present Value of
Accumulated
Benefit ($)(1)
Payments During Last
Fiscal Year ($)
Barron
Shoaf
Brown
Perry
NuStar GP, LLC Pension Plan
NuStar GP, LLC Excess
Pension Plan
NuStar GP, LLC Pension Plan
NuStar GP, LLC Excess
Pension Plan
NuStar GP, LLC Pension Plan
NuStar GP, LLC Excess
Pension Plan
NuStar GP, LLC Pension Plan
NuStar GP, LLC Excess
Pension Plan
Thompson
NuStar GP, LLC Pension Plan
NuStar GP, LLC Excess
Pension Plan
(2)
(2)
(2)
(2)
(2)
(2)
(2)
(2)
(2)
(2)
244,268
281,669
332,824
289,425
324,725
266,334
132,853
21,825
206,059
24,511
—
—
—
—
—
—
—
—
—
—
(1) The present values stated in the table above were calculated using the same interest rate and mortality table we use for
our financial reporting. The present values as of December 31, 2014 were determined using a 4.22% discount rate and
the plans’ earliest unreduced retirement age (i.e., age 62). The present values reflect post-retirement mortality rates based
on the RP2014 generational mortality table projected using scale MP2014. No decrements were included for pre-
retirement termination, mortality or disability. Where applicable, lump sums were determined based on a 3.72% interest
rate and the mortality table prescribed by the IRS in Rev. Ruling 2007-67 and updated by IRS Notices 2008-85 and
2013-49 for distributions in the years 2009-2015.
(2) As of December 31, 2013, the final average pay formula used in the Pension Plan and the Excess Pension Plan, which
was based on years of service and compensation during service, was frozen. Benefits for service after December 31,
2013 accrue under a cash balance formula described below. The number of years of credited service under the final
average pay formula and the cash balance formula for each of our NEOs under the Pension Plan and the Excess Pension
Plan are set forth below.
Name
Plan Name
Number of Years
Credited Service - Final Average
Pay Formula (Frozen as of
December 31, 2013)
Number of Years
Credited Service - Cash
Balance Formula
Barron
Shoaf
Brown
Perry
Thompson
NuStar GP, LLC Pension Plan
NuStar GP, LLC Excess Pension Plan
NuStar GP, LLC Pension Plan
NuStar GP, LLC Excess Pension Plan
NuStar GP, LLC Pension Plan
NuStar GP, LLC Excess Pension Plan
NuStar GP, LLC Pension Plan
NuStar GP, LLC Excess Pension Plan
NuStar GP, LLC Pension Plan
NuStar GP, LLC Excess Pension Plan
136
7.5
13.0
7.5
28.5
6.7
6.7
7.5
7.5
6.7
11.7
14.0
14.0
29.5
29.5
17.3
17.3
12.0
12.0
12.7
12.7
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We maintain a noncontributory defined benefit pension plan in which most of our employees are eligible to participate and under
which contributions by individual participants are neither required nor permitted. We also maintain a noncontributory, non-
qualified excess pension plan, which provides supplemental pension benefits to certain highly compensated employees. The
excess pension plan provides eligible employees with additional retirement savings opportunities that cannot be achieved with
tax-qualified plans due to the Code’s limits on (1) annual compensation that can be taken into account under qualified plans or
(2) annual benefits that can be provided under qualified plans.
NuStar GP, LLC Pension Plan
The Pension Plan is a qualified, non-contributory defined benefit pension plan that became effective as of July 1, 2006. The
Pension Plan covers substantially all of NuStar GP, LLC’s employees and generally provides retirement income calculated under
a cash balance formula (CBF), which is based on age, years of service and interest credits. Employees become fully vested in
their CBF benefits upon attaining three years of service. Prior to January 1, 2014, eligible employees were covered under either
the CBF or a defined benefit final average pay formula (FAP) based on years of service and compensation during their period of
service, and employees became fully vested in their benefits upon attaining five years of service. The Pension Plan was amended
to freeze the FAP benefit at December 31, 2013 and, on or after January 1, 2014, all employees are covered under the CBF.
NuStar GP, LLC Excess Pension Plan
The Excess Pension Plan, which became effective July 1, 2006, provides benefits to eligible employees of NuStar GP, LLC whose
pension benefits under the Pension Plan and the Valero Energy Pension Plan, where applicable, are subject to limitations under
the Code. The Excess Pension Plan is an excess benefit plan as contemplated under ERISA for those benefits provided in excess
of Section 415 of the Code. Benefits provided as a result of other statutory limitations are limited to a select group of management
or highly compensated employees. The Excess Pension Plan is not intended to constitute either a qualified plan under the Code or
a funded plan subject to ERISA. For employees of NuStar GP, LLC who were eligible to receive a benefit under the Valero
Energy Excess Pension Plan (the Predecessor Excess Pension Plan) as of July 1, 2006, the Excess Pension Plan assumed the
liabilities of the Predecessor Excess Pension Plan and will provide a single, nonqualified defined benefit to eligible employees for
their pre-July 1, 2006 benefit accruals under the Predecessor Excess Pension Plan and their post-July 1, 2006 benefit accruals
under this Excess Pension Plan.
An eligible employee’s monthly pension under the Excess Pension Plan will be equal to:
•
•
1.6% of the employee’s average monthly compensation multiplied by the employee’s years of service for service
through December 31, 2013 plus the employee’s CBF benefits for service after December 31, 2013, less
the employee’s Pension Plan benefit.
All of our NEOs participated in the Excess Pension Plan during 2014.
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NONQUALIFIED DEFERRED COMPENSATION
FOR THE YEAR ENDED DECEMBER 31, 2014
The following table provides information regarding contributions by NuStar GP, LLC and each of our NEOs under our non-
qualified defined contribution plan during the year ended December 31, 2014. The table also presents each NEOs withdrawals,
earnings and year-end balances in such plan. Please see the description of our Excess Thrift Plan above in “Compensation
Discussion and Analysis-Post-Employment Benefits.”
Name
Barron
Shoaf
Brown
Perry
Thompson
Executive
Contributions
in 2014 ($)(1)
Registrant
Contributions in
2014 ($)(2)
Aggregate
Earnings in
2014 ($)(3)
Aggregate
Withdrawals/
Distributions ($)
—
—
—
—
—
12,000
3,888
7,100
—
—
5,977
30
8,293
—
—
Aggregate
Balance at
December 31,
2014 ($)(4)
46,415
1,823
52,190
—
—
—
—
—
—
—
(1) The NEOs made no contributions during 2014.
(2) Amounts reported represent our contributions to our Excess Thrift Plan. All of the amounts included in this column are
included within the amounts reported as “All Other Compensation” for 2014 in the Summary Compensation Table.
(3) Amounts include the earnings (excluding dividends, if any), if any, of the NEO’s respective account in our Excess Thrift
Plan.
(4) Amounts include the aggregate balance at year end, if any, of the NEO’s respective account in our Excess Thrift Plan.
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POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL
SEC regulations require us to disclose potential payments to an NEO in connection with his or her termination or a change of
control of NuStar Energy, other than those amounts disclosed under the headings “Pension Benefits For The Year Ended
December 31, 2014” and “Nonqualified Deferred Compensation For The Year Ended December 31, 2014” above in this Item 11
or amounts pursuant to arrangements that do not discriminate in favor of executive officers and are generally available to salaried
employees. The following narrative and table provide the required disclosures.
None of our NEOs have employment agreements, other than the change of control severance agreements described below. As a
result, in the event of a termination, retirement, death or disability that does not follow a change of control, an NEO will only
receive the compensation or benefits to which he or she would already be entitled under the terms of, as applicable, the defined
contribution, defined benefit, medical or long-term incentive plans. Therefore, these scenarios are not presented in the table
below.
Each of our NEOs has entered into a change of control severance agreement with NuStar Energy and NuStar GP, LLC. These
agreements seek to assure the continued availability of these executives in the event of a “change of control” (described below) of
NuStar Energy. When determining the amounts and benefits payable under the agreements, the Compensation Committee sought
to secure compensation that is competitive in our market in order to recruit and retain executive officer talent. Consideration was
given to the principal economic terms found in written employment and change of control agreements of other publicly traded
companies.
When a change of control occurs, the agreement becomes operative for a fixed three-year period. The agreements provide
generally that the executive’s terms of employment will not be adversely changed during the three-year period after a change of
control. In addition, outstanding unit options held by the executive will automatically vest, restrictions applicable to outstanding
restricted units held by the executive will lapse and all unvested performance units held by the executive will fully vest and
become payable at 200% of target. Certain of the executives also are entitled to receive a payment in an amount sufficient to make
the executive whole for any excise tax on excess parachute payments imposed under Section 4999 of the Code, as set forth in the
table below. Each agreement subjects the executive to obligations of confidentiality, both during the term and after termination,
for secret and confidential information relating to NuStar Energy, NuStar GP, LLC and their affiliates (as defined in the
agreement) that the executive acquired during his or her employment.
For purposes of these agreements, a “change of control” means any of the following (subject to additional particulars as stated in
the agreements):
•
•
the acquisition by an individual, entity or group of beneficial ownership of 40% of NuStar GP Holdings’ voting
interests;
the failure of NuStar GP Holdings to control NuStar GP, LLC, NuStar Energy’s general partner, Riverwalk
Logistics, L.P., or all of the general partner interests of NuStar Energy;
• Riverwalk Logistics, L.P. ceases to be NuStar Energy’s general partner or Riverwalk Logistics, L.P. is no longer
•
•
•
•
•
•
controlled by either NuStar GP, LLC or one of its affiliates;
the acquisition of more than 50% of all voting interests of NuStar Energy then outstanding;
certain consolidations or mergers of NuStar GP Holdings;
certain consolidations or mergers of NuStar Energy;
sale of all or substantially all of the assets of NuStar GP Holdings to anyone other than its affiliates;
sale of all or substantially all of the assets of NuStar Energy to anyone other than its affiliates; or
change in the composition of the NuStar GP Holdings board of directors so that fewer than a majority of those
directors are “incumbent directors” as defined in the agreement.
In the agreements, “cause” is defined to mean, generally, the willful and continued failure of the executive to perform
substantially the executive’s duties, or the willful engaging by the executive in illegal or gross misconduct that is materially and
demonstrably injurious to NuStar Energy, NuStar GP, LLC or an affiliate. “Good reason” is defined to mean, generally:
•
•
•
a diminution in the executive’s position, authority, duties and responsibilities;
failure of the successor of NuStar Energy to assume and perform under the agreement; and
relocation of the executive or increased travel requirements.
Except as otherwise noted, the values in the table below assume that a change of control occurred on December 31, 2014 and that
the NEO’s employment terminated on that date.
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Under the change of control severance agreements, if an executive officer’s employment is terminated for “cause” following a
change of control, the officer will not receive any additional benefits or compensation as a result of the termination and will only
receive accrued salary or vacation pay that remained unpaid through the date of termination, if any. Therefore, there is no
presentation of termination for “cause” in the table below.
Termination of
Employment by the
Company Other Than for
“Cause,” Death
or Disability, or by
the Executive for “Good
Reason” ($)(2)
Executive Benefits and
Payments
Termination of
Employment because of
Death or Disability ($)(3)
Termination by the
Executive Other Than
for “Good Reason” ($)(4)
Continued
Employment
Following Change
of Control ($)(5)
Salary (1)
Barron
Shoaf
Brown
Perry
Thompson
Bonus (1)
Barron
Shoaf
Brown
Perry
Thompson
Pension and Excess Pension
Benefits
Barron
Shoaf
Brown
Perry
Thompson
Contributions under Defined
Contribution Plans
Barron
Shoaf
Brown
Perry
Thompson
Health and Welfare Plan
Benefits (6)
Barron
Shoaf
Brown
Perry
Thompson
—
—
—
—
—
683,100
321,552
346,287
226,875
226,875
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
980,000
659,200
710,000
390,000
390,000
1,366,200
643,104
692,574
340,313
340,313
131,682
129,392
151,434
38,103
43,006
55,200
38,976
41,974
11,250
21,650
27,479
37,510
23,564
18,040
28,132
—
—
—
—
—
683,100
321,552
346,287
226,875
226,875
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
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Executive Benefits and
Payments
Accelerated Vesting of Unit
Options
Barron
Shoaf
Brown
Perry
Thompson
Accelerated Vesting of
Restricted Units (7)
Barron
Shoaf
Brown
Perry
Thompson
Accelerated Vesting of
Performance Units (8)
Barron
Shoaf
Brown
Perry
Thompson
280G Tax Gross-Up (9)
Barron
Shoaf
Brown
Perry
Thompson
Totals
Barron
Shoaf
Brown
Perry
Thompson
Termination of
Employment by the
Company Other Than for
“Cause,” Death
or Disability, or by
the Executive for “Good
Reason” ($)(2)
Termination of
Employment because of
Death or Disability ($)(3)
Termination by the
Executive Other Than
for “Good Reason” ($)(4)
Continued
Employment
Following Change
of Control ($)(5)
—
—
—
—
—
1,244,567
706,586
1,011,234
365,900
358,970
1,666,434
982,328
1,337,606
247,401
247,401
2,146,296
1,235,956
1,369,537
—
—
7,617,858
4,433,052
5,337,923
1,411,007
1,429,472
—
—
—
—
—
1,244,567
706,586
1,011,234
365,900
358,970
1,666,434
982,328
1,337,606
247,401
247,401
—
—
—
—
—
3,594,101
2,010,466
2,695,127
840,176
833,246
—
—
—
—
—
1,244,567
706,586
1,011,234
365,900
358,970
1,666,434
982,328
1,337,606
247,401
247,401
—
—
—
—
—
3,594,101
2,010,466
2,695,127
840,176
833,246
—
—
—
—
—
1,244,567
706,586
1,011,234
365,900
358,970
1,666,434
982,328
1,337,606
247,401
247,401
—
—
—
—
—
2,911,001
1,688,914
2,348,840
613,301
606,371
(1) Per SEC regulations, for purposes of this analysis we assumed each executive’s compensation at the time of each
triggering event to be as stated below. The listed salary is the executive’s actual annualized rate of pay as of
December 31, 2014. The listed bonus amount represents the highest bonus earned by the executive in any of the fiscal
years 2012, 2013 and 2014 (the three years prior to the assumed change of control):
Name
Annual Salary ($)
Bonus ($)
Barron
Shoaf
Brown
Perry
Thompson
683,100
321,552
346,287
226,875
226,875
490,000
329,600
355,000
260,000
260,000
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(2) The change of control severance agreements provide that if the company terminates the executive officer’s employment
(other than for “cause,” death or “disability,” as defined in the agreement) or if the executive officer terminates his or her
employment for “good reason,” as defined in the agreement, the executive is generally entitled to receive the following:
(A) a lump sum cash payment equal to the sum of:
(i) accrued and unpaid compensation through the date of termination, including a pro-rata annual bonus (for this
table, we assumed that the executive officers’ bonuses for the year of termination were paid at year end);
(ii) two times the sum of the executive officer’s (1.5 times for Ms. Perry and Ms. Thompson) annual base salary plus
the executive officer’s highest annual bonus from the past three years;
(iii) the amount of the excess of the actuarial present value of the pension benefits (qualified and nonqualified) the
executive would have received for an additional two years (1.5 years for Ms. Perry and Ms. Thompson) of service
over the actuarial present value of the executive officer’s actual pension benefits; and
(iv) the equivalent of two years (1.5 years for Ms. Perry and Ms. Thompson) of employer contributions under NuStar
GP, LLC’s tax-qualified and supplemental defined contribution plans;
(B) continued welfare benefits for two years (1.5 years for Ms. Perry and Ms. Thompson); and
(C) vesting of all outstanding equity incentive awards on the date of the change of control, as described above.
(3) If the executive’s employment is terminated by reason of his death or disability, then his or her estate or beneficiaries
will be entitled to receive a lump sum cash payment equal to any accrued and unpaid salary and vacation pay plus a
bonus equal to the highest bonus earned by the executive in the prior three years (prorated to the date of termination). In
this example, the termination of employment was deemed to occur on the last day of the year. Therefore, a full year’s
bonus is shown in the table. In addition, in the case of disability, the executive would be entitled to any disability and
related benefits at least as favorable as those provided by NuStar GP, LLC under its plans and programs during the 120-
days prior to the executive’s termination of employment. In addition, all outstanding equity incentive awards will
automatically vest on the date of the change of control, as described above.
(4) If the executive voluntarily terminates his employment other than for “good reason,” then he or she will be entitled to a
lump sum cash payment equal to any accrued and unpaid salary and vacation pay plus a bonus equal to the highest bonus
earned by the executive in the prior three years (prorated to the date of termination). In this example, the termination of
employment was deemed to occur on the last day of the year. Therefore, a full year’s bonus is shown in the table. In
addition, all outstanding equity incentive awards will automatically vest on the date of the change of control, as
described above.
(5) The change of control agreements provide for a three-year term of employment following a change of control. The
agreements generally provide that the executive will continue to enjoy compensation and benefits on terms at least as
favorable as in effect prior to the change of control. In addition, all outstanding equity incentive awards will
automatically vest on the date of the change of control, as described above.
(6) The executive is entitled to coverage under the welfare benefit plans (e.g., health, dental, etc.) for two years (1.5 years
for Ms. Perry and Ms. Thompson) following the date of termination.
(7) The amounts stated in the table represent the gross value of previously unvested restricted units, derived by multiplying
(x) the number of units whose restrictions lapsed because of the change of control, times (y) (as applicable) $57.75 (the
closing price of NuStar Energy’s units on the NYSE on December 31, 2014) or $34.42 (the closing price of NuStar GP
Holdings’ units on the NYSE on December 31, 2014).
(8) The amounts stated in the table represent the product of (x) the number of performance units whose vesting was
accelerated because of the change of control, times (y) 200%, times (z) $57.75 (the closing price of NuStar Energy’s
units on the NYSE on December 31, 2014).
(9) If any payment or benefit to Mr. Barron, Mr. Shoaf or Ms. Brown is determined to be subject to an excise tax under
Section 4999 of the Code, the impacted executive is entitled to receive an additional payment to adjust for the
incremental tax cost of the payment or benefit. However, if it is determined that the executive is entitled to receive an
additional payment to adjust for the incremental tax cost but the value of all payments to the executive does not exceed
100% of 2.99 times the executive’s “base amount” (as defined by Section 280G(b)(3) of the Code) (the Safe Harbor
Amount), the additional payment will not be made and the amount payable to the executive will be reduced so that the
aggregate value of all payments equals the Safe Harbor Amount.
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DIRECTOR COMPENSATION
FOR THE YEAR ENDED DECEMBER 31, 2014
The following table provides a summary of compensation paid for the year ended December 31, 2014 to the Board. The table
shows amounts earned by such persons for services rendered to NuStar GP, LLC in all capacities in which they served.
Name
William E. Greehey
Bradley C. Barron
J. Dan Bates
Dan J. Hill
Rodman D. Patton
W. Grady Rosier
Fees Earned or
Paid in Cash
($)(1)
Unit Awards
($)(3)
Option
Awards
($)(3)
118,083
(2)
84,583
91,333
106,333
76,333
99,991
(2)
74,951
74,951
74,951
74,951
—
(2)
—
—
—
—
Change in Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($)
Non-Equity
Incentive Plan
Compensation
($)
All Other
Compensation
($)
—
(2)
—
—
—
—
n/a
(2)
n/a
n/a
n/a
n/a
—
(2)
—
—
—
—
TOTAL
($)
218,074
(2)
159,534
166,284
181,284
151,284
(1) The amounts disclosed in this column exclude reimbursement for expenses for commercial transportation to and from
Board meetings and lodging while attending meetings.
(2) Mr. Barron was not compensated for his service as a director of NuStar GP, LLC. His compensation for his services as
President and CEO are included above in the Summary Compensation Table.
(3) The amounts reported represent the grant date fair value for the December 19, 2014 grant of restricted NuStar Energy
units to our non-employee directors for the fiscal year ended December 31, 2014 (1,753 restricted units for Mr. Greehey,
as Chairman, and 1,314 restricted units for each of the other non-employee directors) based on the closing price of
NuStar Energy’s units on the NYSE on December 19, 2014 ($57.04). Please see “Compensation Discussion and
Analysis-Impact of Accounting and Tax Treatments-Accounting Treatment” above in this Item 11 for information
regarding the assumptions made in the valuation.
As of December 31, 2014, each director holds the following aggregate number of NuStar Energy restricted unit and option
awards:
Name
Greehey
Barron
Bates
Hill
Patton
Rosier
Aggregate # of Restricted Units
Aggregate # of Unit Options
3,711
*
2,757
2,757
2,757
3,180
—
*
—
—
—
—
* Mr. Barron’s aggregate holdings are disclosed above in the Outstanding Equity Awards at December 31, 2014 table in this
Item 11.
The compensation structure for our non-employee directors consists of the following components: (1) an annual cash retainer; (2)
an annual restricted unit grant; (3) an additional cash payment for each meeting attended in-person and telephonically; (4) an
additional annual cash retainer for each committee chair; (5) an additional annual retainer for the Chairman of the Board, which
includes both cash and restricted units; and (6) an additional annual cash retainer for the lead director. Directors who are
employees of NuStar GP, LLC receive no compensation (other than reimbursement of expenses) for serving as directors.
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During 2014, BDO conducted a comprehensive review of the compensation for our non-employee directors. Based on that
review, in July 2014, the Compensation Committee recommended and the Board approved revisions to the compensation for our
non-employee directors beginning in August 2014, as described below.
Non-Employee Director Compensation Component
Prior to August 2014
Beginning in August 2014
Annual Cash Retainer ($)
Annual Restricted Unit Grant ($ value of restricted units)
Per Meeting Fees (in-person attendance) ($)
Per Meeting Fees (telephonic attendance) ($)
Annual Audit and Compensation Committee Chair Retainers ($)
Annual Nominating, Governance and Conflicts Committee Chair Retainer ($)
Annual Chairman of the Board Retainer ($25,000 of value in restricted units/$50,000 cash)
Annual Lead Director Retainer ($)
55,000
70,000
1,250
500
10,000
10,000
75,000
n/a
60,000
75,000
1,500
500
15,000
10,000
75,000
15,000
As described above, NuStar GP, LLC supplements the cash compensation paid to non-employee directors with an annual grant of
restricted NuStar Energy units that vests in equal annual installments over a three-year period. We believe this annual grant of
restricted units increases the non-employee directors’ identification with the interests of NuStar Energy’s unitholders through
ownership of NuStar Energy units. Upon a non-employee director’s initial election to the Board, the director will receive a grant
of restricted units equal to the pro-rated amount of the annual grant of restricted units from the time of his or her election through
the next annual grant of restricted units.
In the event of a “change of control” as defined in the 2000 LTIP, all unvested restricted units and unit options previously granted
immediately become vested or exercisable. Each plan also contains anti-dilution provisions providing for an adjustment in the
number of restricted units or unit options, respectively, that have been granted to prevent dilution of benefits in the event any
change in the capital structure of NuStar Energy affects the NuStar Energy units.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
There are no compensation committee interlocks. The members of our Compensation Committee are Mr. Hill (Chairman),
Mr. Bates, Mr. Patton and Mr. Rosier. None of the members of our Compensation Committee have served as an officer or
employee of NuStar GP, LLC. Furthermore, except for compensation arrangements disclosed in this Annual Report on Form 10-
K, NuStar Energy has not participated in any contracts, loans, fees, awards or financial interests, direct or indirect, with any
Compensation Committee member. In addition, none of NuStar Energy’s management or Board members are aware of any
means, directly or indirectly, by which a Compensation Committee member could receive a material benefit from NuStar Energy.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
UNITHOLDER MATTERS
SECURITY OWNERSHIP OF MANAGEMENT AND DIRECTORS
The following table sets forth ownership of NuStar Energy L.P. units and NuStar GP Holdings, LLC units on December 31,
2014 by the directors and executive officers of NuStar GP, LLC as of February 25, 2015. Unless otherwise indicated in the
notes to the table, each of the named persons and members of the group has sole voting and investment power with respect to
the units shown.
Name of
Beneficial Owner (1)
William E. Greehey
Bradley C. Barron
J. Dan Bates
Dan J. Hill
Rodman D. Patton
W. Grady Rosier
Mary Rose Brown
Thomas R. Shoaf
Jorge A. del Alamo
Amy L. Perry (7)
Karen M. Thompson
NuStar
Energy Units
Beneficially
Owned (2)
2,671,366
28,977
22,400
19,992
27,447
18,113
44,603
17,228
10,750
6,327
11,322
All directors and executive officers
as a group (11 people)
2,878,525
NuStar
Energy
Units under
Exercisable
Options (3)
Percentage of
Outstanding
NuStar Energy
Units (4)
NuStar GP Holdings
Units Beneficially
Owned (5)
Percentage of
Outstanding
NuStar GP
Holdings
Units(6)
—
—
—
—
—
—
—
2,825
—
—
—
2,825
3.43%
8,213,774
19.14%
*
*
*
*
*
*
*
*
*
*
29,299
2,000
11,000
15,000
—
49,233
13,773
1,225
1,275
1,275
*
*
*
*
*
*
*
*
*
*
3.70%
8,337,854
19.43%
* Indicates that the percentage of beneficial ownership does not exceed 1% of the class.
(1) The business address for all beneficial owners listed above is 19003 IH-10 West, San Antonio, Texas 78257.
(2) This column includes restricted units issued under the long-term incentive plans of NuStar GP, LLC. Restricted units
granted under NuStar GP, LLC’s long-term incentive plans are rights to receive NuStar Energy units upon vest and, as
such, may not be disposed of or voted until vested. The column does not include units that could be acquired under
options, which information is set forth in the next column.
(3) This column discloses units that may be acquired within 60 days of December 31, 2014 through the exercise of unit
options.
(4) As of December 31, 2014, 77,886,078 NuStar Energy units were issued and outstanding. There are no classes of
equity securities of NuStar Energy outstanding other than the units. The calculation for “Percentage of Outstanding
NuStar Energy Units” includes units listed under the captions “NuStar Energy Units Beneficially Owned” and “NuStar
Energy Units under Exercisable Options.”
(5) This column includes restricted units issued under the long-term incentive plan of NuStar GP Holdings. Restricted
units granted under NuStar GP Holdings’ long-term incentive plan are rights to receive NuStar GP Holdings units
upon vest and, as such, may not be disposed of or voted until vested.
(6) As of December 31, 2014, 42,913,277 NuStar GP Holdings units were issued and outstanding. There are no classes of
equity securities of NuStar GP Holdings outstanding other than the units.
(7) Ms. Perry was divorced in September 2012 and, as a part of the settlement, Ms. Perry agreed to give her ex-spouse a
portion of any NuStar Energy units she would receive in the future upon vesting of restricted units that were granted to
her prior to September 2012 (in 2007 through 2011) and remained outstanding at the time of the divorce.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Except as otherwise indicated, the following table sets forth certain information as of December 31, 2014 with respect to each
entity known to us to be the beneficial owner of more than 5% of NuStar Energy’s outstanding units.
Name and Address of Beneficial Owner
Units
Percentage of Units (4)
NuStar GP Holdings (1)
Oppenheimer Funds, Inc. (2)
ALPS Advisors, Inc. (3)
10,248,179
7,771,109
4,155,451
13.2%
10.0%
5.3%
(1) NuStar GP Holdings owns the units through its wholly owned subsidiaries, NuStar GP, LLC and Riverwalk Holdings,
LLC. NuStar GP Holdings controls voting and investment power of the units through these wholly owned subsidiaries.
NuStar GP Holdings’ business address is 19003 IH-10 West, San Antonio, Texas 78257.
(2) As reported on a Schedule 13G filed on January 30, 2015, Oppenheimer Funds, Inc. (OFI) is an investment adviser
that may be deemed to beneficially own, and has shared voting and dispositive power with respect to, 7,771,109 units.
The 7,771,109 units that OFI may be deemed to beneficially own include 6,208,932 units that Oppenheimer SteelPath
MLP Income Fund (OSP), an investment company, may be deemed to beneficially own. OSP has shared voting and
dispositive power with respect to the 6,208,932 units. OFI disclaims beneficial ownership of the units pursuant to
Rule 13d-4 of the Securities Exchange Act of 1934. OPI’s business address is Two World Financial Center, 225
Liberty Street, New York, New York 10281. OSP’s business address is 6803 S. Tucson Way, Centennial, Colorado
80112.
(3) As reported on a Schedule 13G filed on February 17, 2015, ALPS Advisors, Inc. (AAI) is an investment adviser that
may be deemed to beneficially own, and has shared voting and dispositive power with respect to, 4,155,451 units. The
4,155,451 units that AAI may be deemed to beneficially own include 4,143,307 units that Alerian MLP ETF (Alerian)
may be deemed to beneficially own. Alerian has shared voting and dispositive power with respect to the 4,143,307
units. AAI disclaims beneficial ownership of the units pursuant to Rule 13d-4 of the Securities Exchange Act of 1934.
The business address of AAI and Alerian is 1290 Broadway, Suite 1100, Denver, Colorado 80203.
(4) Assumes 77,886,078 units outstanding.
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EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth information about NuStar GP, LLC’s equity compensation plans as of December 31, 2014, which
are described in further detail in Note 20 of the Notes to Consolidated Financial Statements in Item 8. “Financial Statements
and Supplementary Data.”
Plan categories
Equity Compensation Plans
approved by security holders (1)
Equity Compensation Plans not
approved by security holders (2)
Number of securities to
be issued upon exercise of
outstanding unit options,
warrants and rights (3)
Weighted-average
exercise price of
outstanding unit
options, warrants
and rights ($) (4)
Number of securities
remaining for
future issuance
under equity
compensation plans
669,906
63,584
57.44
57.51
1,441,988
—
(1) The information in this row relates to NuStar GP, LLC’s Fourth Amended and Restated 2000 Long-Term Incentive
Plan.
(2) The information in this row relates to NuStar GP, LLC’s 2003 Employee Unit Incentive Plan, which terminated on
June 16, 2013, and NuStar GP, LLC’s 2002 Unit Option Plan, which terminated on March 22, 2012.
(3) Grants under NuStar GP, LLC’s long-term incentive plans do not dilute the interests of NuStar Energy unitholders.
Upon the vesting of a restricted unit or performance unit or the exercise of a unit option granted under NuStar GP,
LLC’s plan, NuStar GP, LLC purchases NuStar Energy units on the open market to satisfy that vesting or exercise. No
new NuStar Energy units are issued to satisfy the vesting of restricted units or performance units or the exercises of
unit options.
(4) The information in this column includes only the exercise price for unit options. No value is included in this column
for restricted units or performance units because they do not have an exercise price.
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
TRANSACTIONS WITH MANAGEMENT AND OTHERS
In January 2007, our Board adopted a written related person transaction policy that codifies our prior practice. For purposes of
the policy, a related person transaction is one that is not available to all employees generally or involves $10,000 or more when
aggregated with similar transactions. The policy requires that any related person transaction between NuStar Energy or NuStar
GP, LLC and: (1) any vice president, Section 16 officer or director; (2) any 5% or greater unitholder of NuStar Energy, its
controlled affiliates or NuStar GP Holdings; (3) any immediate family member of any officer or director; or (4) any entity
controlled by any of (1), (2) or (3) (or in which any of (1), (2) or (3) owns more than 5%) must be approved by the disinterested
members of the Board. In addition, the policy requires that the officers and directors have an affirmative obligation to inform
our Corporate Secretary of his or her immediate family members, as well as any entities in which he or she controls or owns
more than 5%.
Please see “Potential Payments upon Termination or Change of Control” in Item 11 for a discussion of NuStar Energy’s change
of control severance agreements with the NEOs.
On December 10, 2007, NuStar Logistics, L.P., our wholly owned subsidiary, entered into a non-exclusive Aircraft Time
Sharing Agreement (the Time Share Agreement) with William E. Greehey, Chairman of our Board. The Time Share Agreement
provides that NuStar Logistics, L.P. will sublease the aircraft to Mr. Greehey on an “as needed and as available” basis, and will
provide a fully qualified flight crew for all Mr. Greehey’s flights. Mr. Greehey will pay NuStar Logistics, L.P. an amount equal
to the maximum amount of expense reimbursement permitted in accordance with Section 91.501(d) of the Aeronautics
Regulations of the Federal Aviation Administration and the Department of Transportation, which expenses include and are
limited to: fuel oil, lubricants and other additives; travel expenses of the crew, including food, lodging and ground
transportation; hangar and tie down costs away from the aircraft’s base of operation; insurance obtained for the specific flight;
landing fees, airport taxes and similar assessments; customs, foreign permit and similar fees directly related to the flight; in-
flight food and beverages; passenger ground transportation; flight planning and weather contract services; and an additional
charge equal to 100% of the costs of the fuel oil, lubricants and other additives. The Time Share Agreement had an initial term
of two years, and automatically renews for one-year terms until terminated by either party. The Time Share Agreement was
approved by the disinterested members of the Board on December 5, 2007. The Time Share Agreement was amended, as of
September 4, 2009, to reflect the addition of another aircraft.
On April 24, 2008, the independent directors of NuStar GP, LLC approved the adoption of a Services Agreement, effective
January 1, 2008, between NuStar GP, LLC and NuStar Energy (the Services Agreement). The Services Agreement provides that
NuStar GP, LLC will furnish all services necessary for the conduct of the business of NuStar Energy, and NuStar Energy will
reimburse NuStar GP, LLC for all payroll and related benefit costs, including pension and unit-based compensation costs, other
than the expenses allocated to NuStar GP Holdings (the Holdco Services Expense). The Holdco Services Expense is equal to
$1.1 million (as adjusted), plus 1.0% of NuStar GP, LLC’s domestic employee bonus and unit compensation expense for the
applicable fiscal year. For fiscal year 2014, the Holdco Services Expense was equal to $1.7 million. The Holdco Services
Expense is subject to adjustment (a) by an annual amount equal to NuStar GP, LLC’s annual merit increase percentage for the
most recently completed contract year and (b) for changed levels of services due to expansion of operations through, among
other things, expansion of operations, acquisitions or the construction of new businesses or assets. On December 31, 2014, the
Services Agreement automatically renewed for a two-year term and will continue to renew automatically for two-year terms
unless terminated by either party on six months’ written notice.
John D. Greehey, a NuStar employee, is the son of Mr. Greehey. As such, he is deemed to be a “related person” under Item 404
(a) of the SEC’s Regulation S-K. Mr. J. Greehey is a Vice President of a subsidiary of NuStar Energy L.P. In 2014, Mr. J.
Greehey did not attend any Board or Committee meetings. The aggregate value of compensation paid by NuStar to Mr. J.
Greehey in 2014 was less than $500,000. There were no material differences between the compensation paid to Mr. J. Greehey
and the compensation paid to any other employees who hold analogous positions.
Garrett Brown, a NuStar employee, is the son of Mary Rose Brown, Executive Vice President and Chief Administrative Officer.
As such, he is deemed to be a “related person” under Item 404(a) of the SEC’s Regulation S-K. Mr. Brown works in the
Corporate Communications department at NuStar, as a Government Relations Coordinator. In 2014, Mr. Brown did not attend
any Board or Committee meetings. The aggregate value of compensation paid by NuStar to Mr. Brown in 2014 was less than
$500,000. There were no material differences between the compensation paid to Mr. Brown and the compensation paid to any
other employees who hold analogous positions.
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Due to its ownership of NuStar GP, LLC and Riverwalk Holdings, LLC, as of December 31, 2014, NuStar GP Holdings
indirectly owned:
RIGHTS OF NUSTAR GP HOLDINGS
•
•
•
the 2% general partner interest in NuStar Energy, through its indirect 100% ownership interest in Riverwalk
Logistics, L.P.;
100% of the incentive distribution rights issued by us, which entitle NuStar GP Holdings to receive increasing
percentages of the cash we distribute, currently at the maximum percentage of 23%; and
10,248,179 NuStar Energy L.P. units representing 13.2% of the issued and outstanding NuStar Energy common
units.
Certain of our officers also are officers of NuStar GP Holdings. Our Chairman, Mr. Greehey, also is the Chairman of Board
and, as of December 31, 2014, owned 19.1% of NuStar GP Holdings. NuStar GP Holdings appoints NuStar GP, LLC’s
directors. NuStar GP, LLC’s board is responsible for overseeing NuStar GP, LLC’s role as the owner of the general partner of
NuStar Energy. NuStar GP Holdings must also approve matters that have or would have reasonably expected to have a material
effect on NuStar GP Holdings’ interests as one of our major unitholders.
NuStar Energy’s partnership agreement requires that NuStar GP, LLC maintain a Conflicts Committee, composed entirely of
independent directors, to review and resolve certain potential conflicts of interest between Riverwalk Logistics, L.P. and its
affiliates, on one hand, and NuStar Energy, on the other hand.
DIRECTOR INDEPENDENCE
Our business is managed under the direction of the Board of NuStar GP, LLC, the general partner of Riverwalk Logistics, L.P.,
the general partner of NuStar Energy. The Board conducts its business through meetings of the Board and its committees. The
Board has standing Audit, Compensation and Nominating/Governance & Conflicts Committees. Each committee has a written
charter. During 2014, the Board held six meetings, the Audit Committee held eight meetings, the Compensation Committee
held four meetings and the Nominating/Governance & Conflicts Committee held one meeting. No member of the Board
attended less than 75% of the meetings of the Board and committees of which he was a member.
Independent Directors
The Board has one member of management, Mr. Barron, President and CEO, and five non-management directors. As a limited
partnership, NuStar Energy is not required to have a majority of independent directors. However, the Board has determined that
four of five of its non-management directors meet the independence requirements of the NYSE listing standards as set forth in
the NYSE Listed Company Manual. The independent directors are: Mr. Bates, Mr. Hill, Mr. Patton and Mr. Rosier.
Mr. Greehey, Chairman of the Board, also serves as the Chairman of the NuStar GP Holdings board of directors and, as of
December 31, 2014, owned 19.1% of NuStar GP Holdings. Mr. Greehey is not an independent director under the NYSE’s
listing standards.
Mr. Barron has been President and CEO of NuStar GP, LLC since January 2014. Mr. Barron also serves as President and CEO
of NuStar GP Holdings. As a member of management, Mr. Barron is not an independent director under the NYSE’s listing
standards.
The Audit, Compensation and Nominating/Governance & Conflicts Committees of the Board are each composed entirely of
directors who meet the independence requirements of the NYSE listing standards. Each member of the Audit Committee also
meets the additional independence standards for Audit Committee members set forth in the regulations of the SEC. For further
information about the committees, see also Item 10 and Item 11 above.
Independence Determinations
Under the NYSE’s listing standards, no director qualifies as independent unless the Board affirmatively determines that the
director has no material relationship with NuStar Energy. Based upon information requested from and provided by each
director concerning their background, employment and affiliations, including commercial, industrial, banking, consulting,
legal, accounting, charitable and familial relationships, the Board has determined that, other than being a director of NuStar GP,
LLC, a unitholder of NuStar Energy and/or a unitholder of NuStar GP Holdings, each of the independent directors named
above has either no relationship with NuStar Energy, either directly or as a partner, equityholder or officer of an organization
that has a relationship with NuStar Energy, or has only immaterial relationships with NuStar Energy, and is therefore
independent under the NYSE’s listing standards.
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As provided for under the NYSE listing standards, the Board has adopted categorical standards or guidelines to assist the Board
in making its independence determinations with respect to each director. Under the NYSE listing standards, immaterial
relationships that fall within the guidelines are not required to be disclosed in this Annual Report on Form 10-K.
A relationship falls within the guidelines adopted by the Board if it:
•
•
•
is not a relationship that would preclude a determination of independence under Section 303A.02(b) of the NYSE Listed
Company Manual;
consists of charitable contributions by NuStar Energy to an organization where a director is an executive officer and does
not exceed the greater of $1 million or 2% of the organization’s gross revenue in any of the last three years;
consists of charitable contributions by NuStar Energy to any organization with which a director, or any member of a
director’s immediate family, is affiliated as an officer, director or trustee pursuant to a matching gift program of NuStar
Energy and made on terms applicable to employees and directors, or is in amounts that do not exceed $250,000 per year;
and
•
is not required to be disclosed in this Annual Report on Form 10-K.
Our Corporate Governance Guidelines contain the director qualification standards, including the guidelines listed above, and
are available on NuStar Energy’s internet website at www.nustarenergy.com (in the “Investor Relations” section) or are
available in print upon request to NuStar GP, LLC’s Corporate Secretary at the address indicated on the cover page of this
Annual Report on Form 10-K or corporatesecretary@nustarenergy.com.
Presiding Director/Meetings of Non-Management Directors
The Board has designated Mr. Hill to serve as the Presiding Director for meetings of the non-management Board members
outside the presence of management.
Communications with the Board, Non-Management Directors or Presiding Director
Unitholders and other interested parties may communicate with the Board, the non-management directors or the Presiding
Director by sending a written communication in an envelope addressed to “Board of Directors,” “Non-Management Directors,”
or “Presiding Director” in care of NuStar GP, LLC’s Corporate Secretary at the address indicated on the cover page of this
Annual Report on Form 10-K or corporatesecretary@nustarenergy.com.
Availability of Governance Documents
NuStar Energy has posted its Corporate Governance Guidelines, Code of Business Conduct and Ethics, Code of Ethics of
Senior Financial Officers and the Charters of the Audit Committee, Compensation Committee and Nominating/Governance &
Conflicts Committee on NuStar Energy’s internet website at www.nustarenergy.com (in the “Investor Relations” section).
NuStar Energy’s governance documents are available in print to any unitholder of record who makes a written request to
NuStar Energy. Requests must be directed to NuStar GP, LLC’s Corporate Secretary at the address indicated on the cover page
of this Annual Report on Form 10-K or corporatesecretary@nustarenergy.com.
150
Table of Contents
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
KPMG FEES
The aggregate fees for professional services rendered to us by KPMG for the years ended December 31, 2014 and 2013 were:
Category of Service
Audit fees (1)
Audit-related fees (2)
Tax fees (3)
All other fees
Total
2014
2,433,000
—
8,000
—
2,441,000
$
2013
$2,433,000
186,000
22,612
—
2,641,612
$
$
(1) Audit fees for 2014 and 2013 were for professional services rendered by KPMG in connection with the audits of our
annual financial statements for the years ended December 31, 2014 and 2013, respectively, included in our Annual
Reports on Form 10-K, reviews of our interim financial statements included in our Quarterly Reports on Form 10-Q,
the audit of the effectiveness of our internal control over financial reporting as of December 31, 2014 and 2013,
respectively, and related services that that are normally provided by the principal auditor (e.g., comfort letters and
assistance with review of documents filed with the SEC).
(2) Audit-related fees for 2013 were for assurance and related services rendered by KPMG that are reasonably related to
the performance of the audit or review of our financial statements and are not reported under “Audit fees.”
(3) Tax fees for 2014 and 2013 were for professional services rendered by KPMG for tax compliance, tax advice and tax
planning.
AUDIT COMMITTEE PRE-APPROVAL POLICY
The Audit Committee has adopted a pre-approval policy to address the approval of services rendered to us by our independent
auditors, which is filed herewith as Exhibit 99.01.
None of the services (described above) for 2014 or 2013 provided by KPMG were approved by the Audit Committee pursuant
to the pre-approval waiver contained in paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
151
Table of Contents
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
PART IV
(a)
(1) Financial Statements. The following consolidated financial statements of NuStar Energy L.P. and its subsidiaries are
included in Part II, Item 8 of this Form 10-K:
Management’s Report on Internal Control over Financial Reporting
Reports of independent registered public accounting firm (KPMG LLP)
Consolidated Balance Sheets as of December 31, 2014 and 2013
Consolidated Statements of Income for the Years Ended December 31, 2014, 2013 and 2012
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2014, 2013 and 2012
Consolidated Statements of Cash Flows for the Years Ended December 31, 2014, 2013 and 2012
Consolidated Statements of Partners’ Equity for the Years Ended December 31, 2014, 2013 and 2012
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules and Other Financial Information. No financial statement schedules are submitted
because either they are inapplicable or because the required information is included in the consolidated financial
statements or notes thereto.
(3) Exhibits
Filed as part of this Form 10-K are the following:
Exhibit
Number
Description
Incorporated by Reference
to the Following Document
3.01
3.02
3.03
3.04
3.05
3.06
3.07
3.08
3.09
3.10
3.11
Amended and Restated Certificate of Limited
Partnership of Shamrock Logistics, L.P., effective
January 1, 2002
NuStar Energy L.P.’s Annual Report on Form 10-K
for year ended December 31, 2001 (File No.
001-16417), Exhibit 3.3
Amendment to Certificate of Limited Partnership
of Valero L.P., dated March 21, 2007 and effective
April 1, 2007
NuStar Energy L.P.’s Current Report on Form 8-K,
filed March 27, 2007 (File No. 001-16417), Exhibit
3.01
Third Amended and Restated Agreement of
Limited Partnership of Valero L.P., dated as of
March 18, 2003
NuStar Energy L.P.’s Quarterly Report on Form 10-
Q for the quarter ended March 31, 2003 (File No.
001-16417), Exhibit 3.1
Amendment No. 1 to Third Amended and Restated
Agreement of Limited Partnership of Valero L.P.,
dated as of March 11, 2004
NuStar Energy L.P.’s Annual Report on Form 10-K
for year ended December 31, 2003 (File No.
001-16417), Exhibit 4.3
Amendment No. 2 to Third Amended and Restated
Agreement of Limited Partnership of Valero L.P.,
dated as of July 1, 2005
NuStar Energy L.P.’s Quarterly Report on Form 10-
Q for the quarter ended June 30, 2005 (File No.
001-16417), Exhibit 4.01
Amendment No. 3 to Third Amended and Restated
Agreement of Limited Partnership of NuStar
Energy L.P., dated as of April 10, 2008
NuStar Energy L.P.’s Current Report on Form 8-K
filed April 15, 2008 (File No. 001-16417), Exhibit
3.1
Amended and Restated Certificate of Limited
Partnership of Shamrock Logistics Operations,
L.P., dated as of January 7, 2002 and effective
January 8, 2002
NuStar Energy L.P.’s Annual Report on Form 10-K
for year ended December 31, 2001 (File No.
001-16417), Exhibit 3.8
Certificate of Amendment to Certificate of Limited
Partnership of Valero Logistics Operations, L.P.,
dated March 21, 2007 and effective April 1, 2007
NuStar Energy L.P.’s Quarterly Report on Form 10-
Q for the quarter ended March 31, 2007 (File No.
001-16417), Exhibit 3.03
Certificate of Amendment to Certificate of Limited
Partnership of NuStar Logistics, L.P., dated and
effective as of March 18, 2014
*
Second Amended and Restated Agreement of
Limited Partnership of Shamrock Logistics
Operations, L.P., dated as of April 16, 2001
NuStar Energy L.P.’s Annual Report on Form 10-K
for year ended December 31, 2001 (File No.
001-16417), Exhibit 3.9
First Amendment to Second Amended and Restated
Agreement of Limited Partnership of Shamrock
Logistics Operations, L.P., effective as of April 16,
2001
NuStar Energy L.P.’s Quarterly Report on Form 10-
Q for the quarter ended June 30, 2001 (File No.
001-16417), Exhibit 4.1
152
Table of Contents
3.12
3.13
3.14
3.15
3.16
3.17
3.18
3.19
3.20
4.01
4.02
4.03
4.04
Second Amendment to Second Amended and
Restated Agreement of Limited Partnership of
Shamrock Logistics Operations, L.P., dated as of
January 7, 2002
Certificate of Limited Partnership of Riverwalk
Logistics, L.P., dated as of June 5, 2000
NuStar Energy L.P.’s Annual Report on Form 10-K
for year ended December 31, 2001 (File No.
001-16417), Exhibit 3.10
NuStar Energy L.P.’s Registration Statement on
Form S-1 filed August 14, 2000 (File No.
333-43668), Exhibit 3.7
First Amended and Restated Limited Partnership
Agreement of Riverwalk Logistics, L.P., dated as of
April 16, 2001
NuStar Energy L.P.’s Annual Report on Form 10-K
for year ended December 31, 2001 (File No.
001-16417), Exhibit 3.16
Certificate of Formation of Shamrock Logistics GP,
LLC, dated as of December 7, 1999
NuStar Energy L.P.’s Registration Statement on
Form S-1 filed August 14, 2000 (File No.
333-43668), Exhibit 3.9
Certificate of Amendment to Certificate of
Formation of Shamrock Logistics GP, LLC, dated
as of December 31, 2001
NuStar Energy L.P.’s Annual Report on Form 10-K
for year ended December 31, 2001 (File No.
001-16417), Exhibit 3.14
Certificate of Amendment to Certificate of
Formation of Valero GP, LLC, dated March 21,
2007 and effective April 1, 2007
NuStar Energy L.P.’s Quarterly Report on Form 10-
Q for the quarter ended March 31, 2007 (File No.
001-16417), Exhibit 3.02
First Amended and Restated Limited Liability
Company Agreement of Shamrock Logistics GP,
LLC, dated as of June 5, 2000
NuStar Energy L.P.’s Amendment No. 5 to
Registration Statement on Form S-1 filed March
29, 2001 (File No. 333-43668), Exhibit 3.10
First Amendment to First Amended and Restated
Limited Liability Company Agreement of
Shamrock Logistics GP, LLC, effective as of
December 31, 2001
NuStar Energy L.P.’s Annual Report on Form 10-K
for year ended December 31, 2001 (File No.
001-16417), Exhibit 3.15
Second Amendment to First Amended and Restated
Limited Liability Company Agreement of Valero
GP, LLC, effective as of June 1, 2006
*
Indenture, dated as of July 15, 2002, among Valero
Logistics Operations, L.P., as Issuer, Valero L.P., as
Guarantor, and The Bank of New York, as Trustee,
relating to Senior Debt Securities
First Supplemental Indenture, dated as of July 15,
2002, to Indenture dated as of July 15, 2002, in
each case among Valero Logistics Operations, L.P.,
as Issuer, Valero L.P., as Guarantor, and The Bank
of New York, as Trustee, relating to 6 7/8% Senior
Notes due 2012
Second Supplemental Indenture, dated as of
March 18, 2003, to Indenture dated as of
July 15, 2002, as amended and supplemented by a
First Supplemental Indenture thereto dated as of
July 15, 2002, in each case among Valero Logistics
Operations, L.P., as Issuer, Valero L.P., as
Guarantor, and The Bank of New York, as Trustee
(including, form of global note representing
$250,000,000 6.05% Senior Notes due 2013)
Third Supplemental Indenture, dated as of July 1,
2005, to Indenture dated as of July 15, 2002, as
amended and supplemented, among Valero
Logistics Operations, L.P., Valero L.P., Kaneb Pipe
Line Operating Partnership, L.P., and The Bank of
New York Trust Company, N.A.
NuStar Energy L.P.’s Current Report on Form 8-K
filed July 15, 2002 (File No. 001-16417),
Exhibit 4.1
NuStar Energy L.P.’s Current Report on Form 8-K
filed July 15, 2002 (File No. 001-16417), Exhibit
4.2
NuStar Energy L.P.’s Quarterly Report on Form 10-
Q for the quarter ended March 31, 2003 (File No.
001-16417), Exhibit 4.1
NuStar Energy L.P.’s Quarterly Report on Form 10-
Q for the quarter ended June 30, 2005 (File No.
001-16417), Exhibit 4.02
153
Table of Contents
4.05
4.06
4.07
4.08
4.09
4.10
4.11
10.01
Instrument of Resignation, Appointment and
Acceptance, dated March 31, 2008, among NuStar
Logistics, L.P., NuStar Energy L.P., Kaneb Pipeline
Operating Partnership, L.P., The Bank of New York
Trust Company N.A., and Wells Fargo Bank,
National Association
Fourth Supplemental Indenture, dated as of April 4,
2008, to Indenture dated as of July 15, 2002,
among NuStar Logistics L.P., as Issuer, NuStar
Energy L.P., as Guarantor, NuStar Pipeline
Operating Partnership L.P., as Affiliate Guarantor,
and Wells Fargo Bank, National Association, as
Successor Trustee
Fifth Supplemental Indenture, dated as of August
12, 2010, to Indenture dated as of July 15, 2002,
among NuStar Logistics, L.P., as Issuer, NuStar
Energy L.P., as Guarantor, NuStar Pipeline
Operating Partnership L.P., as Affiliate Guarantor
and Wells Fargo Bank, National Association, as
Successor Trustee
Sixth Supplemental Indenture, dated as of February
2, 2012, to Indenture dated as of July 15, 2002,
among NuStar Logistics, L.P., as Issuer, NuStar
Energy L.P., as Guarantor, NuStar Pipeline
Operating Partnership L.P., as Affiliate Guarantor
and Wells Fargo Bank, National Association, as
Successor Trustee
Seventh Supplemental Indenture, dated as of
August 19, 2013, among NuStar Logistics, L.P., as
Issuer, NuStar Energy L.P., as Guarantor, NuStar
Pipeline Operating Partnership L.P., as Affiliate
Guarantor, and Wells Fargo Bank, National
Association, as Successor Trustee
Indenture, dated as of January 22, 2013, among
NuStar Logistics, L.P., as Issuer, NuStar Energy
L.P., as Guarantor, and Wells Fargo Bank, National
Association, as Trustee, relating to Subordinated
Debt Securities
First Supplemental Indenture, dated as of January
22, 2013, among NuStar Logistics, L.P., as Issuer,
NuStar Energy L.P., as Parent Guarantor, NuStar
Pipeline Operating Partnership L.P., as Affiliate
Guarantor, and Wells Fargo Bank, National
Association, as Trustee
5-Year Revolving Credit Agreement, dated as of
May 2, 2012, among NuStar Logistics, L.P., NuStar
Energy L.P., the Lenders party thereto and
JPMorgan Chase Bank, N.A., as Administrative
Agent, Suntrust Bank, Mizuho Corporate Bank,
Ltd., as Co-Syndication Agents, and Wells Fargo
Bank, National Association, Barclays Bank PLC, as
Co-Documentation Agents, and J.P. Morgan
Securities Inc., Suntrust Robinson Humphrey, Inc.,
Mizuho Corporate Bank, Ltd., Wells Fargo
Securities, LLC and Barclays Bank PLC as Joint
Bookrunners and Joint Lead Arrangers
NuStar Energy L.P.’s Annual Report on Form 10-K
for year ended December 31, 2008 (File No.
001-16417), Exhibit 4.05
NuStar Energy L.P.’s Current Report on Form 8-K
filed April 4, 2008 (File No. 001-16417),
Exhibit 4.2
NuStar Energy L.P.’s Current Report on Form 8-K
filed August 16, 2010 (File No. 001-16417),
Exhibit 4.3
NuStar Energy L.P.’s Current Report on Form 8-K
filed February 7, 2012 (File No. 001-16417),
Exhibit 4.3
NuStar Energy L.P.’s Current Report on Form 8-K
filed August 23, 2013 (File No. 001-16417),
Exhibit 4.3
NuStar Energy L.P.’s Current Report on Form 8-K
filed January 22, 2013 (File No. 001-16417),
Exhibit 4.1
NuStar Energy L.P.’s Current Report on Form 8-K
filed January 22, 2013 (File No. 001-16417),
Exhibit 4.2
NuStar Energy L.P.’s Current Report on Form 8-K
filed May 8, 2012 (File No. 001-16417), Exhibit
10.01
10.02
First Amendment to 5-Year Revolving Credit
Agreement, dated as of June 29, 2012, among
NuStar Logistics, L.P., NuStar Energy L.P.,
JPMorgan Chase Bank, N.A., as Administrative
Agent, and the Lenders party thereto
NuStar Energy L.P.’s Current Report on Form 8-K
filed July 6, 2012 (File No. 001-16417), Exhibit
10.01
154
Table of Contents
10.03
10.04
10.05
10.06
10.07
10.08
10.09
10.10
10.11
10.12
NuStar Energy L.P.’s Annual Report on Form 10-K
for year ended December 31, 2012 (File No.
001-16417), Exhibit 10.03
NuStar Energy L.P.’s Annual Report on Form 10-K
for year ended December 31, 2012 (File No.
001-16417), Exhibit 10.04
NuStar Energy L.P.’s Annual Report on Form 10-K
for year ended December 31, 2013 (File No.
001-16417), Exhibit 10.05
NuStar Energy L.P.’s Current Report on Form 8-K
filed October 31, 2014 (File No. 001-16417),
Exhibit 10.1
Second Amendment to 5-Year Revolving Credit
Agreement, dated as of November 30, 2012, among
NuStar Logistics, L.P., NuStar Energy L.P.,
JPMorgan Chase Bank, N.A., as Administrative
Agent, and the Lenders party thereto
Third Amendment to 5-Year Revolving Credit
Agreement, dated as of January 11, 2013, among
NuStar Logistics, L.P., NuStar Energy L.P.,
JPMorgan Chase Bank, N.A., as Administrative
Agent, and the Lenders party thereto
Fourth Amendment to 5-Year Revolving Credit
Agreement, dated as of December 4, 2013, among
NuStar Logistics, L.P., NuStar Energy L.P.,
JPMorgan Chase Bank, N.A., as Administrative
Agent, and the Lenders Party thereto
Amended and Restated 5-Year Revolving Credit
Agreement, dated as of October 29, 2014, among
NuStar Logistics, L.P., NuStar Energy L.P., the
Lenders party thereto and JPMorgan Chase Bank,
N.A., as Administrative Agent, SunTrust Bank and
Mizuho Bank, Ltd., as Co-Syndication Agents,
Wells Fargo Bank, National Association and PNC
Bank, National Association, as Co-Documentation
Agents, and J.P. Morgan Securities LLC, SunTrust
Robinson Humphrey, Inc., Mizuho Bank, Ltd.,
Wells Fargo Securities, LLC and PNC Capital
Markets LLC, as Joint Bookrunners and Joint Lead
Arrangers
Lease Agreement Between Parish of St. James,
State of Louisiana and NuStar Logistics, L.P. dated
as of July 1, 2010
NuStar Energy L.P.’s Current Report on Form 8-K
filed July 21, 2010 (File No. 001-16417), Exhibit
10.01
NuStar Energy L.P.’s Current Report on Form 8-K
filed June 12, 2012 (File No. 001-16417), Exhibit
10.01
NuStar Energy L.P.’s Current Report on Form 8-K
filed July 6, 2012 (File No. 001-16417), Exhibit
10.02
*
*
*
Letter of Credit Agreement dated June 5, 2012
among NuStar Logistics, L.P., NuStar Energy L.P.,
the Lenders party thereto and Mizuho Corporate
Bank, Ltd., as Issuing Bank and Administrative
Agent
First Amendment to Letter of Credit Agreement,
dated as of June 29, 2012, among NuStar Logistics,
L.P., NuStar Energy L.P., the Lenders party thereto
and Mizuho Corporate Bank, Ltd., as Issuing Bank
and Administrative Agent
Second Amendment to Letter of Credit Agreement,
dated as of January 17, 2013, among NuStar
Logistics, L.P., NuStar Energy L.P., the Lenders
party thereto and Mizuho Corporate Bank, Ltd., as
Issuing Bank and Administrative Agent
Third Amendment to Letter of Credit Agreement,
dated as of March 8, 2013, among NuStar
Logistics, L.P., NuStar Energy L.P., the Lenders
party thereto and Mizuho Corporate Bank, Ltd., as
Issuing Bank and Administrative Agent
Fourth Amendment to Letter of Credit Agreement,
dated as of April 19, 2013, among NuStar
Logistics, L.P., NuStar Energy L.P., the Lenders
party thereto and Mizuho Corporate Bank, Ltd., as
Issuing Bank and Administrative Agent
155
Table of Contents
10.13
10.14
10.15
10.16
10.17
10.18
10.19
10.20
+10.21
+10.22
+10.23
+10.24
+10.25
+10.26
Fifth Amendment to Letter of Credit Agreement,
dated as of April 23, 2014, among NuStar
Logistics, L.P., NuStar Energy L.P., the Lenders
party thereto and Mizuho Bank, Ltd., as Issuing
Bank and Administrative Agent
Sixth Amendment to Letter of Credit Agreement,
dated as of November 3, 2014, among NuStar
Logistics, L.P., NuStar Energy L.P., the Lenders
party thereto and Mizuho Bank, Ltd., as Issuing
Bank and Administrative Agent
*
NuStar Energy L.P.’s Current Report on Form 8-K
filed November 6, 2014 (File No. 001-16417),
Exhibit 10.1
Lease Agreement between Parish of St. James,
State of Louisiana and NuStar Logistics, L.P. dated
as of December 1, 2010
NuStar Energy L.P.’s Current Report on Form 8-K
filed December 30, 2010 (File No. 001-16417),
Exhibit 10.01
Letter of Credit Agreement dated as of September
3, 2014 among NuStar Logistics, L.P., NuStar
Energy L.P., the Lenders party thereto and The
Bank of Tokyo-Mitsubishi UFJ, Ltd., as Issuing
Bank and Administrative Agent
Amendment No. 1 to Letter of Credit Agreement
and Subsidiary Guaranty Agreement dated as of
November 3, 2014 among NuStar Logistics, L.P.,
NuStar Energy L.P., the Lenders party thereto and
The Bank of Tokyo-Mitsubishi UFJ, Ltd., as
Issuing Bank and Administrative Agent
NuStar Energy L.P.’s Current Report on Form 8-K
filed September 9, 2014 (File No. 001-16417),
Exhibit 10.01
NuStar Energy L.P.’s Current Report on Form 8-K
filed November 6, 2014 (File No. 001-16417),
Exhibit 10.3
Lease Agreement between Parish of St. James,
State of Louisiana and NuStar Logistics, L.P. dated
as of August 1, 2011
NuStar Energy L.P.’s Current Report on Form 8-K
filed August 10, 2011 (File No. 001-16417),
Exhibit 10.01
Letter of Credit Agreement dated as of June 5, 2013
among NuStar Logistics, L.P., NuStar Energy L.P.,
the Lenders party thereto and The Bank of Nova
Scotia, as Issuing Bank and Administrative Agent
Amendment No. 1 to Letter of Credit Agreement
and Subsidiary Guaranty Agreement dated as of
November 3, 2014 among NuStar Logistics, L.P.,
NuStar Energy L.P., the Lenders party thereto and
The Bank of Nova Scotia, as Issuing Bank and
Administrative Agent
NuStar Energy L.P.’s Current Report on Form 8-K
filed June 11, 2013 (File No. 001-16417), Exhibit
10.01
NuStar Energy L.P.’s Current Report on Form 8-K
filed November 6, 2014 (File No. 001-16417),
Exhibit 10.2
NuStar GP, LLC Amended and Restated 2003
Employee Unit Incentive Plan, amended and
restated as of April 1, 2007
NuStar Energy L.P.’s Quarterly Report on Form 10-
Q for the quarter ended June 30, 2007 (File No.
001-16417), Exhibit 10.03
Form of Unit Option Agreement under the NuStar
GP, LLC Amended and Restated 2003 Employee
Unit Incentive Plan, as amended
NuStar Energy L.P.’s Annual Report on Form 10-K
for year ended December 31, 2006 (File No.
001-16417), Exhibit 10.11
NuStar GP, LLC Amended and Restated 2002 Unit
Option Plan, amended and restated as of April 1,
2007
NuStar Energy L.P.’s Quarterly Report on Form 10-
Q for the quarter ended June 30, 2007 (File No.
001-16417), Exhibit 10.02
NuStar GP, LLC Third Amended and Restated
2000 Long-Term Incentive Plan, amended and
restated as of May 1, 2011
NuStar Energy L.P.’s Current Report on Form 8-K
filed May 10, 2011 (File No. 001-16417), Exhibit
10.01
NuStar GP, LLC Fourth Amended and Restated
2000 Long-Term Incentive Plan, amended and
restated as of January 1, 2014
NuStar Energy L.P.’s Annual Report on Form 10-K
for year ended December 31, 2013 (File No.
001-16417), Exhibit 10.10
Form of Restricted Unit Award Agreement under
the NuStar GP, LLC Second Amended and Restated
2000 Long-Term Incentive Plan (substantially the
same for 2008 and 2009 awards)
NuStar Energy L.P.’s Current Report on Form 8-K
filed November 10, 2008 (File No. 001-16417),
Exhibit 10.03
156
Table of Contents
+10.27
+10.28
+10.29
+10.30
+10.31
+10.32
+10.33
+10.34
+10.35
+10.36
+10.38
+10.39
+10.40
10.41
Form of Unit Option Award Agreement under the
NuStar GP, LLC Second Amended and Restated
2000 Long-Term Incentive Plan
NuStar Energy L.P.’s Current Report on Form 8-K
filed November 3, 2006 (File No. 001-16417),
Exhibit 10.02
Form of 2010 Restricted Unit Award Agreement
under the NuStar GP, LLC Second Amended and
Restated 2000 Long-Term Incentive Plan
NuStar Energy L.P.’s Current Report on Form 8-K
filed January 5, 2011(File No. 001-16417), Exhibit
10.03
Form of 2011 and 2012 Restricted Unit Award
Agreement under the NuStar GP, LLC Third
Amended and Restated 2000 Long-Term Incentive
Plan
NuStar Energy L.P.’s Current Report on Form 8-K
filed January 31, 2012 (File No. 001-16417),
Exhibit 10.2
Form of 2013 Restricted Unit Award Agreement
under the NuStar GP, LLC Third Amended and
Restated 2000 Long-Term Incentive Plan
NuStar Energy L.P.’s Annual Report on Form 10-K
for year ended December 31, 2013 (File No.
001-16417), Exhibit 10.15
Form of Amended and Restated Performance Unit
Agreement under the NuStar GP, LLC Second
Amended and Restated 2000 Long-Term Incentive
Plan (for 2006, 2007, 2008 and 2009 awards)
Omnibus Amendment to Form of Amended and
Restated Performance Unit Agreements under the
NuStar GP, LLC Second Amended and Restated
2000 Long-Term Incentive Plan (for 2006, 2007,
2008 and 2009 awards)
Form of Performance Unit Agreement under the
NuStar GP, LLC Second Amended and Restated
2000 Long-Term Incentive Plan (substantially the
same for 2010, 2011, 2012 and 2013 awards with
appropriate adjustments based on award dates)
Form of Waiver Related to Certain Performance
Units (for 2009, 2010 and 2011 awards)
Form of Non-employee Director Restricted Unit
Agreement under the NuStar GP, LLC Second
Amended and Restated 2000 Long-Term Incentive
Plan (substantially the same for 2010, 2011 and
2012 awards)
Form of 2013 Non-employee Director Restricted
Unit Agreement under the NuStar GP, LLC Third
Amended and Restated 2000 Long-Term Incentive
Plan
Form of Change of Control Severance Agreement
with executive officers of NuStar GP, LLC
(substantially the same for all executive officers,
except for payment multiple)
NuStar Excess Pension Plan, amended and restated
effective as of January 1, 2008
NuStar Excess Thrift Plan, amended and restated
effective as of January 1, 2008
NuStar Energy L.P.’s Current Report on Form 8-K
filed December 8, 2009 (File No. 001-16417),
Exhibit 10.02
NuStar Energy L.P.’s Current Report on Form 8-K
filed February 2, 2010 (File No. 001-16417),
Exhibit 10.03
NuStar Energy L.P.’s Annual Report on Form 10-K
for year ended December 31, 2009 (File No.
001-16417), Exhibit 10.11
NuStar Energy L.P.’s Current Report on Form 8-K
filed January 31, 2012 (File No. 001-16417),
Exhibit 10.3
NuStar Energy L.P.’s Current Report on Form 8-K
filed January 5, 2011(File No. 001-16417), Exhibit
10.02
NuStar Energy L.P.’s Annual Report on Form 10-K
for year ended December 31, 2013 (File No.
001-16417), Exhibit 10.21
NuStar Energy L.P.’s Annual Report on Form 10-K
for year ended December 31, 2006 (File No.
001-16417), Exhibit 10.18
NuStar Energy L.P.’s Quarterly Report on Form 10-
Q for the quarter ended September 30, 2006 (File
No. 001-16417), Exhibit 10.06
NuStar Energy L.P.’s Annual Report on Form 10-K
for year ended December 31, 2008 (File No.
001-16417), Exhibit 10.29
NuStar Energy L.P.’s Annual Report on Form 10-K
for year ended December 31, 2008 (File No.
001-16417), Exhibit 10.30
Non-Compete Agreement, dated July 19, 2006,
between Valero GP Holdings, LLC, Valero L.P.,
Riverwalk Logistics, L.P. and Valero GP, LLC
NuStar Energy L.P.’s Quarterly Report on Form 10-
Q for quarter ended September 30, 2006 (File No.
001-16417), Exhibit 10.03
157
+10.37
NuStar Energy L.P. Annual Bonus Plan
Table of Contents
10.42
10.43
10.44
10.45
10.46
10.47
10.48
10.49
10.50
10.51
12.01
Services Agreement, effective as of January 1,
2008, between NuStar GP, LLC and NuStar Energy
L.P.
NuStar Energy L.P.’s Quarterly Report on Form 10-
Q for quarter ended March 31, 2008 (File No.
001-16417), Exhibit 10.01
Amended and Restated Aircraft Time Sharing
Agreement, dated as of September 4, 2009,
between NuStar Logistics, L.P. and William E.
Greehey
Crude Oil Sales Agreement between NuStar
Marketing LLC and PDVSA-Petróleo S.A., an
affiliate of Petróleos de Venezuela S.A., the
national oil company of the Bolivarian Republic of
Venezuela, dated effective as of March 1, 2008
Amendment to Crude Oil Sales Agreement between
PDVSA-Petróleo S.A., NuStar Logistics, L.P. and
NuStar Marketing LLC, effective as of October 1,
2012
Purchase and Sale Agreement by and among
NuStar Energy L.P., NuStar Logistics, L.P., NuStar
Asphalt Refining, LLC, NuStar Marketing LLC,
NuStar GP, LLC, NuStar Asphalt LLC and Asphalt
Acquisition LLC dated as of July 3, 2012
Letter Agreement by and among Asphalt
Acquisition LLC, NuStar Energy L.P., NuStar
Logistics, L.P., NuStar Asphalt Refining, LLC,
NuStar Marketing LLC, NuStar GP, LLC and
NuStar Asphalt LLC dated August 2, 2012
Amendment No. 1 to Purchase and Sale Agreement
dated as of September 28, 2012 by and among
NuStar Energy L.P., NuStar Logistics, L.P., NuStar
Asphalt Refining, LLC, NuStar Marketing LLC,
NuStar GP, LLC, NuStar Asphalt LLC and Asphalt
Acquisition LLC
NuStar Energy L.P.’s Annual Report on Form 10-K
for year ended December 31, 2009 (File No.
001-16417), Exhibit 10.24
NuStar Energy L.P.’s Current Report on Form 8-K
filed March 25, 2008 (File No. 001-16417), Exhibit
10.1
NuStar Energy L.P.’s Quarterly Report on Form 10-
Q for quarter ended June 30, 2013 (File No.
001-16417), Exhibit 10.01
NuStar Energy L.P.’s Current Report on Form 8-K
filed July 6, 2012 (File No. 001-16417), Exhibit
10.01
NuStar Energy L.P.’s Quarterly Report on Form 10-
Q for quarter ended September 30, 2012 (File No.
001-16417), Exhibit 10.02
NuStar Energy L.P.’s Quarterly Report on Form 10-
Q for quarter ended September 30, 2012 (File No.
001-16417), Exhibit 10.03
Amended and Restated Transaction Agreement by
and between LG Asphalt L.P. and NuStar Logistics,
L.P. dated as of December 20, 2013
NuStar Energy L.P.’s Annual Report on Form 10-K
for year ended December 31, 2013 (File No.
001-16417), Exhibit 10.47
Amendment No. 1 to Amended and Restated
Transaction Agreement dated as of January 29,
2014
NuStar Energy L.P.’s Annual Report on Form 10-K
for year ended December 31, 2013 (File No.
001-16417), Exhibit 10.48
Amendment No. 2 to Amended and Restated
Transaction Agreement dated as of February 26,
2014
NuStar Energy L.P.’s Annual Report on Form 10-K
for year ended December 31, 2013 (File No.
001-16417), Exhibit 10.49
Statement of Computation of Ratio of Earnings to
Fixed Charges
*
14.01
Code of Ethics for Senior Financial Officers
NuStar Energy L.P.’s Annual Report on Form 10-K
for year ended December 31, 2003 (File No.
001-16417), Exhibit 14.1
21.01
23.01
23.02
24.01
31.01
List of subsidiaries of NuStar Energy L.P.
Consent of KPMG LLP dated February 26, 2015
(NuStar Energy L.P.)
Consent of KPMG LLP dated February 26, 2015
(NuStar Asphalt LLC)
Powers of Attorney (included in signature page of
this Form 10-K)
Rule 13a-14(a) Certification (under Section 302 of
the Sarbanes-Oxley Act of 2002) of principal
executive officer
*
*
*
*
*
158
Table of Contents
31.02
32.01
32.02
99.01
99.02
99.03
Rule 13a-14(a) Certification (under Section 302 of
the Sarbanes-Oxley Act of 2002) of principal
financial officer
Section 1350 Certification (under Section 906 of
the Sarbanes-Oxley Act of 2002) of principal
executive officer
Section 1350 Certification (under Section 906 of
the Sarbanes-Oxley Act of 2002) of principal
financial officer
Audit Committee Pre-Approval Policy
Consolidated Financial Statements of NuStar
Asphalt LLC for December 31, 2013 and 2012
Unaudited Consolidated Financial Statements of
NuStar Asphalt LLC as of February 25, 2014 and
for the period from January 1, 2014 to February 25,
2014
101.INS
XBRL Instance Document
101.SCH
XBRL Taxonomy Extension Schema Document
101.CAL
101.DEF
101.LAB
101.PRE
XBRL Taxonomy Extension Calculation Linkbase
Document
XBRL Taxonomy Extension Definition Linkbase
Document
XBRL Taxonomy Extension Label Linkbase
Document
XBRL Taxonomy Extension Presentation Linkbase
Document
*
**
**
*
*
*
*
*
*
*
*
*
*
**
+
Filed herewith.
Furnished herewith.
Identifies management contracts or compensatory plans or arrangements required to be filed as an exhibit hereto
pursuant to Item 15(c) of Form 10-K.
Copies of exhibits filed as a part of this Form 10-K may be obtained by unitholders of record at a charge of $0.15 per page,
minimum $5.00 each request. Direct inquiries to Corporate Secretary, NuStar Energy L.P., 19003 IH-10 West, San Antonio,
Texas 78257.
159
Table of Contents
Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
NUSTAR ENERGY L.P.
(Registrant)
By:
By:
By:
By:
Riverwalk Logistics, L.P., its general partner
By: NuStar GP, LLC, its general partner
/s/ Bradley C. Barron
Bradley C. Barron
President and Chief Executive Officer
February 26, 2015
/s/ Thomas R. Shoaf
Thomas R. Shoaf
Executive Vice President and Chief Financial Officer
February 26, 2015
/s/ Jorge A. del Alamo
Jorge A. del Alamo
Senior Vice President and Controller
February 26, 2015
160
Table of Contents
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints
Bradley C. Barron, Thomas R. Shoaf and Amy L. Perry, or any of them, each with power to act without the other, his true and
lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all subsequent amendments and supplements to this Annual Report on Form 10-K, and to
file the same, or cause to be filed the same, with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto each said attorney-in-fact and agent full power to do and perform each and
every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might
or could do in person, hereby qualifying and confirming all that said attorney-in-fact and agent or his substitute or substitutes
may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ William E. Greehey
William E. Greehey
/s/ Bradley C. Barron
Bradley C. Barron
/s/ Thomas R. Shoaf
Thomas R. Shoaf
/s/ Jorge A. del Alamo
Jorge A. del Alamo
/s/ J. Dan Bates
J. Dan Bates
/s/ Dan J. Hill
Dan J. Hill
/s/ Rodman D. Patton
Rodman D. Patton
/s/ W. Grady Rosier
W. Grady Rosier
Chairman of the Board
February 26, 2015
President, Chief Executive
Officer and Director
(Principal Executive Officer)
Executive Vice President
and Chief Financial Officer
(Principal Financial Officer)
February 26, 2015
February 26, 2015
Senior Vice President and Controller
(Principal Accounting Officer)
February 26, 2015
Director
February 26, 2015
Director
February 26, 2015
Director
February 26, 2015
Director
February 26, 2015
161