Table of Contents
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, 2015
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 $3,838 million based on the last sales
price quoted as of June 30, 2015, the last business day of the registrant’s most recently completed second quarter.
The number of common units outstanding as of January 31, 2016 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 Accounting Fees and Services
PART IV
Exhibits and Financial Statement Schedules
3
3
4
4
5
13
13
14
17
30
30
30
31
32
33
34
53
56
106
106
106
107
111
143
146
149
150
159
2
Table of Contents
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 34 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, 2015, our assets included:
•
•
•
•
5,500 miles of refined product pipelines with 21 associated terminals providing storage capacity of 5.0 million
barrels and two tank farms providing storage capacity of 1.4 million barrels;
2,000 miles of anhydrous ammonia pipelines;
1,200 miles of crude oil pipelines, with 8 associated terminals, providing 4.0 million barrels of associated storage
capacity; and
50 terminal and storage facilities providing 82.9 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.
We strive to increase unitholder value 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 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 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.
3
Table of Contents
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%.
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 a summary of our organizational structure at December 31, 2015.
4
Table of Contents
Detailed financial information about our segments is included in Note 25 of the Notes to Consolidated Financial Statements in
Item 8. “Financial Statements and Supplementary Data.” The following map depicts our assets at December 31, 2015.
SEGMENTS
PIPELINE
Our pipeline operations consist of the transportation of refined petroleum products, crude oil and anhydrous ammonia. As of
December 31, 2015, we owned and operated:
•
•
•
•
refined product pipelines with an aggregate length of 3,140 miles and crude oil pipelines with an aggregate length
of 1,200 miles in Texas, Oklahoma, Kansas, Colorado and New Mexico (collectively, the Central West System);
a 1,920-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.
5
Table of Contents
The following table lists information about our pipeline assets as of December 31, 2015:
Region / Pipeline System
Central West System:
McKee System
Three Rivers System
Other
Central West Refined Products Pipelines
South Texas Crude System
Other
Eagle Ford System
McKee System
Ardmore System
Central West Crude Oil Pipelines
Total Central West System
Central East System:
East Pipeline
North Pipeline
Ammonia Pipeline
Total Central East System
Throughput
For the year ended December 31,
Length
(Miles)
Tank Capacity
2015
2014
(Barrels)
(Barrels/Day)
2,276
373
491
3,140
319
196
515
598
87
1,200
4,340
1,920
440
2,000
4,360
—
—
—
—
2,157,000
—
2,157,000
1,039,000
824,000
4,020,000
4,020,000
4,977,000
1,437,000
—
6,414,000
172,590
74,361
60,410
307,361
179,734
85,495
265,229
144,077
62,326
471,632
778,993
132,005
46,951
35,829
214,785
164,589
78,177
51,698
294,464
155,439
75,226
230,665
140,402
66,690
437,757
732,221
134,816
45,641
35,816
216,273
Total
8,700
10,434,000
993,778
948,494
Description of Pipelines
Central West System. The Central West System covers a total of 4,340 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 3,140 miles (Central West
Refined Products Pipelines) and transport 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 1,200
miles (Central West 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 and
refineries in Corpus Christi, Texas.
Central East System. The Central East System covers a total of 4,360 miles and consists of the East Pipeline, North Pipeline
and Ammonia Pipeline.
The East Pipeline covers 1,920 miles 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 3.6 million
barrels and two tank farms with storage capacity of 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.
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.
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 predominately relate
to the volumes transported on the pipeline through fees included in the pipeline tariff. As a result, these terminals are included
in this segment instead of the storage segment.
6
Table of Contents
The 2,000-mile Ammonia Pipeline originates in the Louisiana delta area, where it connects 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, shippers on our crude oil and refined product pipelines deliver petroleum products to our pipelines for transport to/
from: (i) refineries that connect to our pipelines, (ii) third-party pipelines or terminals and (iii) NuStar Energy terminals for
further delivery to marine vessels or pipelines. We charge our shippers tariff rates based on transportation from the origination
point on the pipeline to the point of delivery.
Our pipelines are subject to federal regulation by one or more of the following governmental agencies: the Federal Energy
Regulatory Commission (the FERC), the Surface Transportation Board (the STB), the Department of Transportation (DOT),
the Environmental Protection Agency (EPA) and Homeland Security. Additionally, the operations and integrity of the pipelines
are subject to the respective state jurisdictions.
The majority of our pipelines are common carrier. Common carrier activities are those for which transportation through our
pipelines is available to any shipper of petroleum products who requests such services and satisfies the conditions and
specifications for transportation. Published tariffs are (i) filed with the FERC for interstate petroleum product shipments, (ii)
filed with the relevant state authority for intrastate petroleum product shipments and (iii) regulated by the STB for our
Ammonia Pipeline.
We use a computerized Supervisory Control and Data Acquisition (SCADA) system to remotely operate pipelines. The SCADA
system allows control center operators to control pumps and valves regulating and directing the transportation of petroleum
products, while monitoring flow rates and pressures to assure system integrity and conform to pipeline schedules.
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 longer distances.
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.
7
Table of Contents
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 adverse 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
CHS Inc., HollyFrontier Corporation (HollyFrontier) and Phillips 66, respectively. 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 are dependent on our customers’ continued access to sufficient 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. Changes in crude oil prices could also affect the exploration and
production of shale plays, which could impact crude oil pipelines serving those regions, such as our Eagle Ford System.
However, many of our crude oil pipelines, including the McKee System, are the primary source of crude oil for our customers’
refineries. Therefore, these “demand-pull” pipelines are less affected by changes 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, 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, 2015. 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, 2015.
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.
Certain of our crude oil pipelines serve areas or refineries impacted by domestic shale oil production in the Eagle Ford,
Permian Basin and Granite Wash regions. Our pipelines also face competition from other crude oil pipelines and truck
transportation in these regions. However, that exposure is mitigated through our long-term contracts and minimum volume
commitments with credit-worthy customers.
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.
8
Table of Contents
Competitors of the Ammonia Pipeline include the other major anhydrous ammonia pipeline, owned by Magellan, 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, 2015, we owned and operated:
•
40 terminal and storage facilities in the United States and one terminal in Nuevo Laredo, Mexico, with total
storage capacity of 51.2 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, Canada with tank capacity of 7.8 million barrels and a transshipment facility;
and
•
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.
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, which 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 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
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. In 2016, we expect to complete
construction of two additional tanks with an aggregate storage capacity of 720,000 barrels.
Point Tupper. We own and operate a 7.8 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 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.
Linden, New Jersey. Our Linden terminal facility has two terminals that provide deep-water terminalling capabilities in the
New York Harbor and primarily stores petroleum products, including gasoline, jet fuel and fuel oils. The two terminals have a
total storage capacity of 4.6 million barrels and can receive and deliver products via ship, barge and pipeline. The terminal
facility includes two docks. On January 2, 2015, we acquired full ownership of one of the terminals located at the Linden
facility that we previously owned 50% through a joint venture.
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.
9
Table of Contents
Corpus Christi North Beach. We own and operate a 2.1 million barrel crude oil storage and terminalling facility located at the
Port of Corpus Christi in Texas. The facility supports our South Texas Crude System and provides our customers with the
flexibility to segregate and deliver crude oil and processed condensate. In addition, this facility has three docks, including one
private dock, and can load crude oil onto ships simultaneously on all three docks at a maximum rate of 65,000 barrels per hour.
The Corpus Christi North Beach terminal has the capacity to move on average between 350,000 and 400,000 barrels per day
and can accommodate Panamax-class vessels (which carry between 350,000 and 500,000 barrels).
Terminal and Storage Facilities
The following table sets forth information about our terminal and storage facilities as of December 31, 2015:
Facility
Colorado Springs, CO
Denver, CO
Albuquerque, NM
Abernathy, TX
Amarillo, TX
Corpus Christi, TX
Corpus Christi, TX (North Beach)
Edinburg, TX
El Paso, TX (b)
Harlingen, TX
Laredo, TX
San Antonio, TX (c)
Southlake, TX
Nuevo Laredo, Mexico
Central West Terminals
Pittsburg, CA
Rosario, NM
Catoosa, OK
Houston, TX
Asphalt Terminals
Jacksonville, FL
St. James, LA
Texas City, TX (c)
Gulf Coast Terminals
Blue Island, IL
Andrews AFB, MD (a)
Baltimore, MD
Piney Point, MD
Linden, NJ (c)
Paulsboro, NJ
Virginia Beach, VA (a)
North East Terminals
10
Tank Capacity
(Barrels)
328,000
110,000
251,000
160,000
269,000
329,000
2,136,000
340,000
419,000
286,000
215,000
375,000
569,000
35,000
5,822,000
398,000
166,000
358,000
86,000
1,008,000
2,593,000
9,190,000
2,964,000
14,747,000
690,000
75,000
818,000
5,402,000
4,649,000
74,000
41,000
11,749,000
Table of Contents
Facility
Los Angeles, CA
Selby, CA
Stockton, CA
Portland, OR
Tacoma, WA
Vancouver, WA (c)
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
St. Eustatius, the Netherlands
Amsterdam, the Netherlands
Point Tupper, Canada
Total Terminals and Storage Facilities
Tank Capacity
(Barrels)
608,000
3,060,000
816,000
1,365,000
391,000
774,000
7,014,000
4,030,000
3,141,000
3,683,000
10,854,000
1,958,000
2,096,000
149,000
719,000
353,000
408,000
5,683,000
14,411,000
3,834,000
7,778,000
82,900,000
(a) Terminal facility also includes pipelines to U.S. government military base locations.
(b) 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.
(c) Location includes two terminal facilities.
During 2015, we divested our refined product terminals with an aggregate storage capacity of 0.7 million barrels and located in
Indianapolis, Indiana; Alamogordo, New Mexico and Placedo, Texas.
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 refinery 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
11
Table of Contents
current prices), demand for storage services will generally increase. As of December 31, 2015, almost all of our tank storage
capacity is under contract.
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, 2015. No other customer accounted for a significant portion of the total revenues of
the storage segment for the year ended December 31, 2015.
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.
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 comply 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 Point 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,which 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 necessitates unloading these ships to storage and subsequent loading onto 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.
12
Table of Contents
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, 2015.
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, 2015, NuStar GP, LLC had 1,251 domestic employees
and certain of our wholly owned subsidiaries had 393 employees performing services for our international operations. We
believe that NuStar GP, LLC and our subsidiaries each have satisfactory relationships with their employees. Please refer to
Note 28 of the Notes to Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary Data” for a
discussion of the employee transfer from NuStar GP, LLC.
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 and require that such pipelines index their rates down to the prescribed ceiling level if the index is
negative. In addition, the FERC retains cost-of-service ratemaking, market-based rates and settlement rates as alternatives to
the indexing approach.
The Ammonia Pipeline is subject to regulation by the STB pursuant to the Interstate Commerce Act applicable to such pipelines
(which differs from the ICA applicable to interstate liquids pipelines). Under that regulation, the Ammonia Pipeline’s rates,
classifications, rules and practices related to the interstate transportation of anhydrous ammonia must be reasonable and, in
13
Table of Contents
providing interstate transportation, the 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,
including 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 and pollution prevention measures, among others. Our
operations are also subject to extensive federal, state and local health and safety laws and regulations, including those relating
to worker and pipeline safety, pipeline integrity and operator qualifications. 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 related 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, risk management planning, hazard communication,
emergency response planning, community right-to-know, occupational health and the handling, storage, use and disposal of
hazardous materials, that are designed to comply with applicable federal, state and local regulations and 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. While we believe that we are in substantial compliance with the health, safety
and environmental regulations applicable to us, 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.
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 2015, our capital expenditures attributable to compliance with
environmental regulations were $11.4 million, and are currently estimated to be approximately $18.0 million for 2016.
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, 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
14
Table of Contents
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.
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 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.
15
Table of Contents
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.
INTEGRITY AND SAFETY
Our pipeline, storage tank and other operations are subject to extensive federal, state and local statutes and regulations
governing mechanical integrity and safety, including those in Title 49 of the United States Code and its implementing
regulations. These statutes and regulations include requirements for safe operation, maintenance, testing and corrosion control,
and qualification programs for 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.
16
Table of Contents
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.
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.
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, the supply and demand of crude oil and refined products,
17
Table of Contents
availability to our customers of attractively priced alternative solutions for storage, transportation or supplies of crude oil and
refined products and overall customer demand.
If we are unable to retain current, and obtain 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 turnarounds or unscheduled maintenance at refineries we serve;
operational problems or catastrophic events at a refinery we serve or our assets;
environmental proceedings or other litigation that compel the cessation of all or a portion of the operations at a
refinery we serve 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 obtain 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.
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 conditions in the financial markets.
As of December 31, 2015, our consolidated debt was $3.2 billion. We also 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. In addition to
any potential direct financial impact of our 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. Any downgrades in our credit ratings in the future could result in increases to the interest rates on
borrowings under our credit facilities and the 7.65% senior notes due 2018, significantly increase our capital costs, reduce our
liquidity 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.
Our accounts receivable securitization program contains various customary affirmative and negative covenants and default,
indemnification and termination provisions. In addition, the related receivables financing agreement pursuant to which we are
initial servicer and performance guarantor provides for acceleration of amounts owed upon the occurrence of certain specified
events.
Our debt service obligations, restrictive covenants 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
18
Table of Contents
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.
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, 2015, we had approximately $3.2 billion of
consolidated debt, of which $1.8 billion was at fixed interest rates and $1.4 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 interest rates on our variable interest rate
debt to increase further. Additionally, at December 31, 2015, we had $600.0 million aggregate notional amount of interest rate
swap arrangements, which increase our exposure to variable interest rates. As a result, our results of operations, cash flows and
financial position could be materially adversely affected by significant increases in interest rates above current levels. In
addition, we historically have funded our strategic capital expenditures and acquisitions from external sources, primarily
borrowings under our revolving credit agreement or funds raised through debt or equity offerings. An increase in interest rates
may negatively impact our ability to access the capital markets at economically attractive rates. Further, the trading price of our
units is sensitive to changes in interest rates and any rise in interest rates could adversely impact the trading price of our units,
which would effectively increase our cost of raising funds through equity offerings.
Low crude oil prices could have an adverse impact on our results of operations, cash flows and ability to make distributions
to our unitholders, as well as our ability to access the capital markets at economically attractive rates.
During 2015 and early 2016, the price of crude oil has continued to decline, reaching lows not seen in 13 years. The sustained
period of low prices has forced most crude oil producers to reduce their capital spending and drilling activity and narrow their
focus to assets in the most cost-advantaged regions. On the other hand, refiners generally have benefitted from lower crude
prices, particularly to the extent that lower feedstock price has been coupled with higher demand for certain refined products in
some regional markets. However, a protracted period of depressed crude oil prices and overall economic downturn could have
a negative impact on our results of operations.
In addition, regardless of insulation from or lack of exposure to commodity prices, continued low crude oil prices seem to be
having a direct, negative impact on the unit price of many master limited partnerships, including our own, and unfavorable
market conditions have increased the cost of financing capital spending through the public debt and equity markets.
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 and
terminals 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 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.
19
Table of Contents
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;
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 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.
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 or other claims related to the operation of our assets and the
services we provide to our customers.
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. We also could face other claims by our
customers if our assets do not operate as expected by our customers or our services otherwise do not meet our customers’
expectations. A successful claim or series of claims against us could result in unforeseen expenditures and a loss of one or more
customers.
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 derivatives could expose us to additional interest rate or 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 26, 2016, at which point the amount of Credit Support will begin to decline until the
obligation is terminated no later than September 28, 2019.
Axeon was scheduled to repay principal amounts under the Axeon Term Loan to reduce the principal amount outstanding to
$175 million by December 31, 2014 and to $150 million by September 30, 2015, with repayment in full no later than
September 28, 2019 and earlier repayment possible, depending on the amount of excess cash flows (if any) generated by
20
Table of Contents
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 principal payments by
December 31, 2014 and September 30, 2015, respectively, increasing the interest rate payable by Axeon until Axeon makes the
payments.
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 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.
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 or otherwise change our capital structure, and we may be unable to integrate acquisitions and expansions
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 us to raise a substantial amount of equity or incur a substantial amount of
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.
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.
21
Table of Contents
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 December 2015, representatives from 195 countries, including the United States, met at the 2015 United
Nations Climate Change Conference and adopted an accord wherein each country committed to take certain steps to reduce
global carbon emissions. While adherence to the accord is voluntary and not currently binding on the United States, if the U.S.
Congress adopts legislation implementing its provisions, this could have an adverse effect on demand for our products and
increase our operating costs. 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.
We operate a global business that exposes us to additional risk.
We operate a global business and a significant portion of our revenues come from our business outside of the United States.
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.
22
Table of Contents
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 15 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 index is measured by the year-over-year change in the Bureau of
Labor’s producer price index for finished goods, plus 2.65%. For the five-year period beginning July 1, 2016, the index is
measured by the year-over-year change in the Bureau of Labor’s producer price index for finished goods, plus 1.23%. We
anticipate that the oil pipeline index for the five-year period beginning July 1, 2016 may be subject to further review by FERC.
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.
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. Circuit), and on May 29, 2007, the D.C. Circuit
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.
Petitions for review of FERC’s rulings on the income tax allowance have been filed with the D.C. Circuit. 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 would ultimately be entitled in a cost-of-service rate
review 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
23
Table of Contents
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.
The Ammonia Pipeline is subject to regulation under the ICA by the STB. Under that regulation the 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, 2015, our power costs
equaled approximately $44.9 million, or 9.5% 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 primarily use
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, and the
possibility that infrastructure facilities could be direct targets of, or indirect casualties of, an act of terror or 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 historically 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.
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.
Our marketing and trading of crude oil and petroleum products expose us to commodity 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. In addition, we may be required to post cash collateral under our
hedging arrangements. We also may 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.
24
Table of Contents
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.
If we fail to maintain an effective system of internal controls, we may not be able to report our financial results accurately
or prevent fraud, which could have a material and adverse impact on our financial condition, results of operations, and
cash flows and our ability to make distributions to our unitholders.
We are required to disclose material changes made in our internal controls over financial reporting on a quarterly basis and we
are required to assess the effectiveness of our controls annually. Effective internal controls are necessary for us to provide
reliable and timely financial reports, to prevent fraud, and to operate successfully as a publicly traded limited partnership. We
may be unable to maintain effective controls over our financial processes and reporting in the future or to comply with our
obligations under Section 404 of the Sarbanes-Oxley Act of 2002. For example, Section 404 requires us, among other things,
annually to review and report on the effectiveness of our internal control over financial reporting. Any failure to maintain
effective internal controls or to improve our internal controls could harm our operating results or cause us to fail to meet our
reporting obligations.
Given the difficulties inherent in the design and operation of internal controls over financial reporting, we can provide no
assurance as to our, or our independent registered public accounting firm’s, future conclusions about the effectiveness of our
internal controls, and we may incur significant costs in our efforts to comply with Section 404. Any failure to maintain effective
internal controls over financial reporting will subject us to regulatory scrutiny and a loss of confidence in our reported financial
information, which could have a material adverse effect on our financial condition, results of operations and cash flows and our
ability to make distributions to our unitholders.
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, 2015, an aggregate 12.9% limited
partner interest in us out of the total possible ownership. 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 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
25
Table of Contents
•
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.
The general partner interest, the control of our general partner and the incentive distribution rights of our general partner
may be transferred to a third party without unitholder consent.
Our general partner may transfer its general partner interest to a third party in a merger or in a sale of all or substantially all of
its assets without the consent of our unitholders. Furthermore, the general partner may transfer its general partnership interest
to a third party without the consent of our unitholders. Any new owner of our general partner would be in a position to replace
the officers of the general partner with its own choices and to control the decisions made by such officers.
Additionally, our general partner may transfer its incentive distribution rights to a third party at any time without the consent of
our unitholders. If our general partner transfers its incentive distribution rights to a third party but retains its general partner
interest, our general partner may not have the same incentive to grow our partnership and increase quarterly distributions to
unitholders over time as it would if it had retained ownership of its incentive distribution rights.
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.
Unitholders may not have limited liability if a court finds that unitholder action constitutes control of our business or that
we have not complied with applicable statutes, which may have an impact on the cash we have available to make
distributions.
Under Delaware law, unitholders could be held liable for our obligations to the same extent as a general partner if a court
determined that actions of a unitholder constituted participation in the “control” of our business.
Under Delaware law, the general partner generally has unlimited liability for the obligations of the partnership, such as its debts
and environmental liabilities, except for those contractual obligations of the partnership that are expressly made without
recourse to the general partner. In addition, Section 17-607 of the Delaware Revised Uniform Limited Partnership Act (the
Delaware Act) provides that, under some circumstances, a limited partner may be liable to us for the amount of a distribution
for a period of three years from the date of the distribution.
Unitholders may have liability to repay distributions.
Under certain circumstances, our unitholders may have to repay amounts wrongfully returned or distributed to them. Under
Section 17-607 of the Delaware Act, we may not make a distribution to our unitholders if the distribution would cause our
liabilities to exceed the fair value of our assets. Liabilities to partners on account of their partnership interests and liabilities that
are nonrecourse to the partnership are not counted for purposes of determining whether a distribution is permitted.
Delaware law provides that, for a period of three years from the date of an impermissible distribution, limited partners who
received the distribution and who knew at the time of the distribution that it violated Delaware law will be liable to us for the
repayment of the distribution amount. Likewise, upon the winding up of our partnership, in the event that (a) we do not
distribute assets in the following order: (1) to creditors in satisfaction of their liabilities; (2) to partners and former partners in
satisfaction of liabilities for distributions owed under our partnership agreement; (3) to partners for the return of their
contributions; and finally (4) to the partners in the proportions in which the partners share in distributions and (b) a limited
partner knows at the time that the distribution violated the Delaware Act, then such limited partner will be liable to repay the
distribution for a period of three years from the impermissible distribution under Section 17-804 of the Delaware Act.
A purchaser of common units becomes a limited partner and is liable for the obligations of the transferring limited partner to
make contributions to us that are known to such purchaser of common units at the time it became a limited partner and for
unknown obligations, if the liabilities could be determined from our partnership agreement.
26
Table of Contents
Unitholders may be required to sell their units to our general partner at an undesirable time or price.
If at any time less than 20% of the outstanding units of any class are held by persons other than the general partner and its
affiliates, the general partner will have the right to acquire all, but not less than all, of those units at a price no less than their
then-current market price. As a consequence, a unitholder may be required to sell his common units at an undesirable time or
price. The general partner may assign this purchase right to any of its affiliates or to us.
The NYSE does not require a publicly traded limited partnership like us to comply with certain of its corporate governance
requirements.
We currently list our common units on the NYSE under the symbol “NS.” Although our general partner has maintained a
majority of independent directors on its board and all members of its board’s audit committee, compensation committee and
nominating/governance & conflicts committee are independent directors, because we are a publicly traded limited partnership,
the NYSE does not require us to have a majority of independent directors on our general partner’s board of directors or to have
a compensation committee or a nominating committee consisting of independent directors. Additionally, any future issuance
of additional common units or other securities, including to affiliates, will not be subject to the NYSE’s shareholder approval
rules that apply to a corporation. Accordingly, the NYSE does not mandate the same protections for our unitholders as are
required for certain corporations that are subject to all of the NYSE corporate governance requirements. See “Director
Independence” under Item 13 of this annual report on Form 10-K for additional information regarding the independence of our
general partner’s directors and the committees of our general partner’s board.
TAX RISKS TO OUR UNITHOLDERS
If we were treated as a corporation for federal or state income tax purposes or we were otherwise subject to a material
amount of entity-level taxation, 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.
Despite the fact that we are a limited partnership under Delaware law, we will be treated as a corporation for federal income tax
purposes unless we satisfy a “qualifying income” requirement. Based upon our current operations, we believe we satisfy the
qualifying income requirement. Failing to meet the qualifying income requirement or a change in current law could cause us to
be treated as a corporation for federal income tax purposes or otherwise subject us to taxation as an entity.
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%, and would likely pay state and local income tax at varying rates.
Distributions to unitholders would generally be taxed again as corporate dividends (to the extent of our current and
accumulated earnings and profits), and no income, gains, losses, deductions or credits would flow through to unitholders.
Because a tax would be imposed upon us as a corporation, our distributable cash flow would be substantially reduced.
In addition, recently enacted legislation applicable to partnership tax years beginning after 2017 changes the audit procedures
for large partnerships and, in certain circumstances, would permit the IRS to assess and collect taxes (including any applicable
penalties and interest) resulting from partnership-level federal income tax audits directly from us in the year in which the audit
is completed. If we are required to make payments of taxes, penalties and interest resulting from audit adjustments, our cash
available for distribution to our unitholders might be substantially reduced.
Moreover, changes in current state law may subject us to entity-level taxation by individual states. 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 and other forms of taxation. Imposition of any such taxes or an increase in the existing tax
rates would substantially reduce the cash available for distribution to our unitholders. Therefore, if we were treated as a
corporation for federal income tax purposes or otherwise subjected to a material amount of entity-level taxation, there would be
a material reduction in the anticipated cash flow and after-tax return to our unitholders, likely causing a substantial reduction in
the value of our common units.
27
Table of Contents
The tax treatment of publicly traded partnerships or an investment in our units could be subject to potential legislative,
judicial or administrative changes or differing interpretations, possibly applied on a retroactive basis.
The present U.S. federal income tax treatment of publicly traded partnerships, including us, or an investment in our common
units may be modified by administrative, legislative or judicial changes or differing interpretations at any time. From time to
time, members of Congress propose and consider such substantive changes to the existing federal income tax laws that affect
publicly traded partnerships. Further, the U.S. Treasury Department and the IRS issued proposed regulations regarding
qualifying income within the meaning of Section 7704 of the Code (the “Proposed Regulations”). We believe the income that
we treat as qualifying income satisfies the requirements for qualifying income under the Proposed Regulations. However, the
Proposed Regulations could be changed before they are finalized and could take a position that is contrary to our interpretation
of Section 7704 of the Code.
Any modification to the federal income tax laws may be applied retroactively and could make it more difficult or impossible
for us to meet the exception for certain publicly traded partnerships to be treated as partnerships for federal income tax
purposes. We are unable to predict whether any of these changes or other proposals will ultimately be enacted. Any such
changes could negatively impact the value of an investment in our common units.
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
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, recently enacted legislation applicable to partnership tax years beginning after 2017
changes the audit procedures for large partnerships and, in certain circumstances, would permit the IRS to assess and collect
taxes (including any applicable penalties and interest) resulting from partnership-level federal income tax audits directly from
us in the year in which the audit is completed. If we are required to make payments of taxes, penalties and interest resulting
from audit adjustments, our cash available for distribution to our unitholders might be substantially reduced. In addition, 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 their respective
share of our taxable income, whether or not the unitholders receive cash distributions from us. Unitholders may not receive
cash distributions from us equal to their respective share of our taxable income or even equal to the actual tax liability that
results from their 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.
We will be considered to have terminated for federal income tax purposes if there is a sale or exchange of 50% or more of the
total interests in our capital and profits within a twelve-month period. For purposes of determining whether the 50% threshold
has been met, multiple sales of the same interest will be counted only once.
Our termination for federal income tax purposes would, among other things, result in the closing of our taxable year for all
unitholders, which would result in us filing two tax returns for one calendar year and could result in a significant deferral of
depreciation deductions allowable in computing our taxable income. In the case of a unitholder reporting on a taxable year
other than a calendar year, the closing of our taxable year may also result in more than twelve months of our taxable income or
loss being includable in taxable income for the unitholder’s taxable year that includes our termination. Our termination would
not affect our classification as a partnership for federal income tax purposes, but it would result in our being treated as a new
partnership for U.S. federal income tax purposes following the termination. If we were treated as a new partnership, we would
be required to make new tax elections and could be subject to penalties if we were unable to determine that a termination
occurred. The IRS has announced a relief procedure whereby if a publicly traded partnership that has technically terminated
requests, and the IRS grants, special relief, among other things, the partnership may be permitted to provide only a single
Schedule K-1 to unitholders for the two short tax periods included in the year in which the termination occurs.
Tax gain or loss on the disposition of our units could be different than expected.
If a unitholder sells units, the selling unitholder will recognize a gain or loss equal to the difference between the amount
realized and the unitholder’s tax basis in those units. Prior distributions to the selling unitholder in excess of the total net
taxable income the unitholder was allocated for a unit, which decreased the unitholder’s tax basis in that unit, will, in effect,
become taxable income to the selling unitholder if the unit is sold at a price greater than the unitholder’s tax basis in that unit,
28
Table of Contents
even if the price the unitholder receives is less than the unit’s 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 with 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 a unitholder’s sale of units and could have a negative impact on the value of our units or result in audit adjustments
to the 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 the 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 and local tax returns.
We prorate our items of income, gain, loss and deduction between transferors and transferees of our units each month
based upon the ownership of our units on the first day of each month, instead of on the basis of the date a particular unit is
transferred. The IRS may challenge this treatment, which could change the allocation of items of income, gain, loss and
deduction among our unitholders.
We prorate our items of income, gain, loss and deduction between transferors and transferees of our units each month based
upon the ownership of our units on the first day of each month, instead of on the basis of the date a particular unit is transferred.
The U.S. Treasury Department and the IRS recently issued final regulations pursuant to which a publicly traded partnership
may use a similar monthly simplifying convention to allocate tax items among transferor and transferee unitholders, although
such tax items must be prorated on a daily basis. Certain publicly traded partnerships, including us, may, but are not required
to, apply the conventions provided by the final regulations. However, such regulations do not specifically authorize the use of
the proration method we have currently adopted. If the IRS were to challenge our proration method, we may be required to
change the allocation of items of income, gain, loss and deduction among our unitholders.
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,
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.
29
Table of Contents
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 for current taxes and other burdens and easements, and restrictions or other encumbrances, including those related to
environmental liabilities associated with historical operations, 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
proceeding or whether such ultimate outcome may have a material effect on our consolidated financial position. We are
reporting this proceeding to comply with SEC regulations, including those which require us to disclose proceedings arising
under federal, state or local provisions regulating the discharge of materials into the environment or primarily for the purpose of
protecting the environment if a governmental authority is a party to the proceeding and 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, dioxin/furans and other pollutants. Shore and more than 90 other parties have received a
30
Table of Contents
“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 clean-up. 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 if and 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.
31
Table of Contents
PART II
ITEM 5.
MARKET FOR REGISTRANT’S COMMON UNITS, RELATED UNITHOLDER MATTERS AND
ISSUER PURCHASES OF COMMON UNITS
Our common units are listed and traded on the New York Stock Exchange under the symbol “NS.” At the close of business on
February 8, 2016, we had 535 holders of record of our common units. The high and low sales prices (composite transactions)
by quarter for the years ended December 31, 2015 and 2014 were as follows:
Year 2015
4th Quarter
3rd Quarter
2nd Quarter
1st Quarter
Year 2014
4th Quarter
3rd Quarter
2nd Quarter
1st Quarter
Price Range of Common Unit
High
Low
$
$
$
$
$
$
$
$
52.24
60.48
68.10
63.78
66.94
68.33
62.88
55.15
$
$
$
$
$
$
$
$
31.20
42.00
58.81
54.58
50.91
61.02
53.76
47.51
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, 2015 and 2014 were as
follows:
Year 2015
4th Quarter
3rd Quarter
2nd Quarter
1st Quarter
Year 2014
4th Quarter
3rd Quarter
2nd Quarter
1st Quarter
Record Date
Payment Date
Amount
Per Unit
February 8, 2016
February 12, 2016
November 9, 2015
November 13, 2015
August 7, 2015
August 13, 2015
May 8, 2015
May 14, 2015
February 9, 2015
February 13, 2015
November 10, 2014 November 14, 2014
August 6, 2014
August 11, 2014
May 7, 2014
May 12, 2014
$
$
$
$
$
$
$
$
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
Percentage of Distribution
Unitholders
General Partner
98%
90%
75%
2%
10%
25%
32
Table of Contents
Our general partner’s incentive distributions totaled $43.2 million for each of the years ended December 31, 2015 and 2014.
The general partner’s share of our distributions for the years ended December 31, 2015 and 2014 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, 2015 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)
—
—
34.20
34.20
— $
—
30,000
30,000
$
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, 2015, NuStar GP, LLC, the general partner of our general partner, purchased
30,000 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.
Year Ended December 31,
2015
2014
2013 (a)
2012 (a)
2011
(Thousands of Dollars, Except Per Unit Data)
Statement of Income Data:
Revenues (b)
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
$ 2,084,040
390,704
305,946
$ 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
3.29
4.380
2.14
4.380
(2.89)
(2.79)
4.380
4.380
2.74
4.360
Balance Sheet Data:
Property, plant and equipment, net
Total assets
Long-term debt, less current portion
Total partners’ equity
2015
2014
2013
2012
2011
December 31,
(Thousands of Dollars)
$ 3,683,571
5,149,262
3,079,349
1,609,844
$ 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
(a)
(b)
The losses for the years ended December 31, 2013 and 2012 are mainly due to goodwill impairment and other asset
impairment charges.
The decline in revenues is due to reductions in our fuels marketing segment mainly resulting from disposals and lower
commodity prices.
33
Table of Contents
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 this 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, 2015. 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
Acquisitions and Dispositions
Linden Acquisition. On January 2, 2015, we acquired full ownership of ST Linden Terminal, LLC (Linden), which owns a
refined products terminal in Linden, NJ with 4.3 million barrels of storage capacity (the Linden Acquisition). Linden is located
on a 44-acre facility that provides deep-water terminalling capabilities in the New York Harbor and primarily stores petroleum
products, including gasoline, jet fuel and fuel oils. Prior to the Linden Acquisition, Linden operated as a joint venture between
us and Linden Holding Corp., with each party owning 50%.
In connection with the Linden Acquisition, we ceased applying the equity method of accounting and consolidated Linden,
which is included in our storage segment. The consolidated statements of income include the results of operations for Linden
commencing on January 2, 2015. On the acquisition date, we remeasured our existing 50% equity investment in Linden to its
fair value of $128.0 million and we recognized a gain of $56.3 million in “Other income, net” in the consolidated statements of
income for the year ended December 31, 2015. Please refer to Note 4 of the Notes to Consolidated Financial Statements in
Item 8. “Financial Statements and Supplementary Data” for a discussion of the Linden Acquisition.
Discontinued Operations. In 2014, we divested our terminals in Mobile, AL, Wilmington, NC and Dumfries, VA and our 75%
interest in our facility in Mersin, Turkey. We presented the results of operations for those facilities as discontinued operations,
34
Table of Contents
including an impairment loss of $102.5 million for the year ended December 31, 2013. On January 1, 2013, we sold our fuels
refinery in San Antonio, Texas and related assets for approximately $117.0 million (the San Antonio Refinery Sale) and
recognized a gain of $9.3 million.
2014 Asphalt Sale. On February 26, 2014, we sold our remaining 50% ownership interest in NuStar Asphalt LLC to Lindsay
Goldberg LLC, a private investment firm (the 2014 Asphalt Sale). Effective February 27, 2014, NuStar Asphalt LLC changed
its name to Axeon Specialty Products LLC (Axeon). As a result of the 2014 Asphalt Sale, we ceased applying the equity
method of accounting, and we ceased reporting transactions between us and Axeon as related party transactions in our
consolidated financial statements. 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. Please refer to Note 10 of the Notes to Consolidated Financial Statements in Item 8. “Financial Statements and
Supplementary Data” for additional information on the Axeon Term Loan.
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 3,140 miles of refined product pipelines pipelines and 1,200 miles of crude oil pipelines, as well as
approximately 4.0 million barrels of storage capacity, which comprise our Central West System. In addition, we own 2,360
miles of refined product pipelines, consisting of the East and North Pipelines, and a 2,000 mile ammonia pipeline, which
comprise our Central East System. The East and North Pipelines have storage capacity of approximately 6.4 million barrels.
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), with approximately 82.9 million barrels of storage capacity.
Fuels Marketing. 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. 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, 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.
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.
35
Table of Contents
RESULTS OF OPERATIONS
Year Ended December 31, 2015 Compared to Year Ended December 31, 2014
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
Total costs and expenses
Operating income
Equity in earnings of joint ventures
Interest expense, net
Interest income from related party
Other income, net
Income from continuing operations before income tax expense
Income tax expense
Income from continuing operations
Income (loss) from discontinued operations, net of tax
Net income
Net income (loss) per unit applicable to limited partners:
Continuing operations
Discontinued operations
Total
Year Ended December 31,
2015
2014
Change
$ 1,114,153
$ 1,026,446
$
969,887
2,084,040
2,048,672
3,075,118
87,707
(1,078,785)
(991,078)
907,574
473,031
102,521
210,210
1,967,528
472,925
96,056
191,708
1,693,336
2,728,217
(1,059,954)
106
6,465
18,502
(1,034,881)
390,704
—
(131,868)
—
61,822
320,658
14,712
305,946
774
306,720
$
346,901
4,796
(132,281)
1,055
4,499
224,970
10,801
214,169
(3,791)
210,378
3.29
0.01
3.30
$
$
2.14
(0.04)
2.10
$
$
$
$
$
$
43,803
(4,796)
413
(1,055)
57,323
95,688
3,911
91,777
4,565
96,342
1.15
0.05
1.20
—
Weighted-average limited partner units outstanding
77,886,078
77,886,078
36
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
Segment operating income
Fuels Marketing:
Product sales and other revenue
Cost of product sales
Gross margin
Operating expenses
Depreciation and amortization expense
Segment operating income
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
Segment operating income
General and administrative expenses
Other depreciation and amortization expense
Consolidated operating income
37
Year Ended December 31,
2015
2014
Change
522,146
471,632
993,778
508,522
153,222
84,951
270,349
899,606
130,127
494,781
624,908
290,322
116,768
217,818
$
$
$
$
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
$
$
$
$
11,409
33,875
45,284
31,492
(884)
7,260
25,116
11,999
7,076
53,326
60,402
12,768
12,920
34,714
976,216
922,906
53,310
39,803
—
13,507
$ 2,060,017
1,983,339
76,678
51,857
16
24,805
$
$ (1,083,801)
(1,060,433)
(23,368)
(12,054)
(16)
(11,298)
$
(25,606) $
(15,332)
(10,316)
42
$
(26,435) $
(15,811)
(10,592)
(32) $
829
479
276
74
$
$
$
$
$
$
$
$
$ 2,084,040
907,574
473,031
201,719
501,716
102,521
8,491
390,704
$
$ 3,075,118
1,967,528
472,925
181,555
453,110
96,056
10,153
346,901
$
$ (991,078)
(1,059,954)
106
20,164
48,606
6,465
(1,662)
43,803
$
Table of Contents
Annual Highlights
Net income increased $96.3 million for the year ended December 31, 2015, compared to the year ended December 31, 2014,
primarily due to an increase of $48.6 million in segment operating income, resulting mainly from improvements in the pipeline
and storage segments, and a $56.3 million gain associated with the Linden Acquisition.
Pipeline
Revenues increased $31.5 million and throughputs increased 45,284 barrels per day for the year ended December 31, 2015,
compared to the year ended December 31, 2014, primarily due to:
•
•
•
an increase in revenues of $17.0 million and an increase in throughputs of 34,564 barrels per day on our Eagle
Ford System, primarily resulting from completion of expansion projects that increased our overall capacity;
an increase in revenues of $11.9 million and an increase in throughputs of 11,676 barrels per day as a result of
increased production in 2015 and a turnaround during the first quarter of 2014 at the refinery served by our
McKee systems; and
an increase in revenues of $3.6 million, despite throughputs that remained flat, on our Ammonia Pipeline as a
result of increased long-haul deliveries and the annual index adjustment in July 2015.
The increases in pipeline revenues and throughputs were partially offset by a decrease in revenues of $4.4 million and a
decrease in throughputs of 2,811 barrels per day due to turnarounds at refineries served by the East Pipeline and unfavorable
pricing differentials in markets served by the East Pipeline.
Operating expenses decreased $0.9 million, despite an increase in throughputs, for the year ended December 31, 2015,
compared to the year ended December 31, 2014, primarily due to the completion of a capital project to install permanent power
along our South Texas Crude System reducing power and rental costs.
Depreciation and amortization expense increased $7.3 million for the year ended December 31, 2015, compared to the year
ended December 31, 2014, mainly due to the completion of expansion projects.
Storage
Throughput revenues increased $7.1 million and throughputs increased 11,999 barrels per day for the year ended December 31,
2015, compared to the year ended December 31, 2014, primarily due to:
•
•
•
an increase in revenues of $2.5 million and an increase in throughputs of 19,853 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 related expansion projects;
an increase in revenues of $2.3 million and an increase in throughputs of 6,263 barrels per day at our terminals in
Edinburg, Harlingen and Paulsboro, mainly due to increased demand; and
an increase in revenues of $2.0 million and an increase in throughputs of 12,558 barrels per day as a result of a
turnaround during the first quarter of 2014 at the refinery served by our Benicia crude oil refinery tanks.
The increases in storage throughput revenues and throughputs were partially offset by a decrease in revenues of $0.9 million
and a decrease in throughputs of 21,107 barrels per day as a result of a turnaround during the first quarter of 2015 at the
refinery served by our Texas City crude oil refinery tanks.
Storage lease revenues increased $53.3 million for the year ended December 31, 2015, compared to the year ended
December 31, 2014, primarily due to:
•
•
•
•
an increase of $41.5 million as a result of the Linden Acquisition;
an increase of $11.8 million at our domestic terminal facilities, mainly due to storage rate escalations and new
customers at our Texas City, West Coast and Asphalt Terminals;
an increase of $9.9 million at our St. Eustatius terminal facility, mainly due to higher demand for storage and
increased throughput and related handling fees; and
an increase of $5.0 million at our Point Tupper terminal facility, due to new customers and rate escalations, as
well as increased throughput and related handling fees.
The increases in storage lease revenues were partially offset by:
•
•
a decrease of $8.4 million at our Amsterdam terminal facility, primarily due to the effect of foreign exchange
rates; and
a decrease of $3.5 million at our St. James terminal facility, mainly due to reduced volumes delivered to one of
our unit train offloading facilities, partially offset by increased revenues from storage rate escalations.
38
Table of Contents
Operating expenses increased $12.8 million for the year ended December 31, 2015, compared to the year ended December 31,
2014, primarily due to:
•
•
an increase of $12.6 million as a result of the Linden Acquisition; and
an increase of $4.6 million in regulatory and maintenance expenses, mainly at our St. James and St. Eustatius
terminal facilities.
The increases in storage operating expenses were partially offset by a decrease of $3.4 million in contract services, mainly at
our St. James terminal facility due to a reduction in dock and rail labor costs.
Depreciation and amortization expense increased $12.9 million for the year ended December 31, 2015, compared to the year
ended December 31, 2014, mainly due to the assets associated with the Linden Acquisition.
Fuels Marketing
Segment operating income decreased $11.3 million for the year ended December 31, 2015, compared to the year ended
December 31, 2014, primarily due to lower product margins from our bunker fuel operations and refined product sales. The
lower product margins were partially offset by a reduction in operating expenses due to decreased marine vessel costs and
lower bad debt expense in 2015.
Consolidation and Intersegment Eliminations
Revenue and operating expense eliminations primarily 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 $6.5 million for the year ended December 31, 2015, compared to the year ended
December 31, 2014, primarily due to:
•
•
•
a $3.6 million increase in outside legal and other professional fees;
a $3.5 million increase in salaries and wages mainly due to increased headcount and higher employee benefit
costs; and
a $3.1 million increase as a result of 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.
The increases in general and administrative expenses were partially offset by a decrease of $4.5 million in compensation
expense associated with our long-term incentive plans, which fluctuates with our unit price.
Equity in earnings of joint ventures for the year ended December 31, 2014 primarily relates to our equity investment in Linden
prior to the Linden Acquisition.
Interest expense, net decreased $0.4 million for the year ended December 31, 2015, compared to the year ended December 31,
2014, mainly due to increased interest income from the Axeon Term Loan. The decrease in interest expense, net was partially
offset by increased interest costs associated with higher borrowings under our revolving credit agreement.
Other income, net increased by $57.3 million for the year ended December 31, 2015, compared to the year ended December 31,
2014, mainly due to the $56.3 million gain associated with the Linden Acquisition.
Income tax expense increased $3.9 million for the year ended December 31, 2015, compared to the year ended December 31,
2014, mainly due to estimated withholding taxes on our planned repatriation of cash held by foreign subsidiaries in 2016.
Please refer to Note 24 of the Notes to Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary
Data” for a discussion on income taxes.
For the year ended December 31, 2015, we recorded income from discontinued operations of $0.8 million, compared to a loss
from discontinued operations of $3.8 million for the year ended December 31, 2014. Discontinued operations include the
results of operations of certain storage assets that were divested in 2014 and the first quarter of 2015.
39
Table of Contents
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
—
40
Table of Contents
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
$
$
$
$
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) $
$
$
$
$
$ 2,060,017
1,983,339
76,678
51,857
16
24,805
$
$
$ 2,527,698
2,474,612
53,086
53,185
27
(126) $
$
23,716
72,008
95,724
65,501
19,741
8,820
36,940
106,394
18,498
(10,541)
7,957
(2,158)
3,980
(304,453)
310,588
(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
$
41
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 our Eagle Ford System.
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 Eagle
Ford System, 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 our McKee
systems 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
our acquisition of certain assets from TexStar Midstream Services, LP;
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 our Eagle Ford System
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 refinery storage tanks; and
an increase in revenues of $1.7 million and an increase in throughputs of 7,727 barrels per day at our McKee
system terminals 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;
a decrease of $1.6 million at our Point Tupper, Canada terminal facility, mainly due to lower throughput and
related handling fees; and
42
Table of Contents
•
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. For the year ended December 31, 2014, we 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 primarily 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.
43
Table of Contents
TRENDS AND OUTLOOK
Current Market Conditions
During 2015 and early 2016, the price of crude oil has continued to decline, reaching lows not seen in 13 years. The sustained
period of low prices has forced most crude oil producers to reduce their capital spending and drilling activity and narrow their
focus to assets in the most cost-advantaged regions. On the other hand, refiners generally have benefitted from lower crude
prices, particularly to the extent the lower feedstock price has been coupled with higher demand for certain refined products in
some regional markets.
We believe a number of factors serve to minimize our direct exposure to the risks associated with fluctuating commodity prices.
We own assets and offer services in regional markets across the United States and around the world, and we are not dependent
on the regions or markets that have been hardest hit by depressed crude oil prices, the domestic shale play regions: in 2015,
revenue from our Eagle Ford pipeline and storage assets constituted less than 16% of our total pipeline and storage segment
revenue. In our view, the fact that our pipeline segment and our storage segment are approximately equal serves to balance the
impact of market fluctuations. High crude prices have tended to correlate with high pipeline demand, while low prices have
tended to correlate with high storage demand. In addition, many of our commercial contracts are long-term, take-or-pay
arrangements for committed storage or throughput capacity, which mitigates the short-term impact of low crude oil prices on
our results of operations. However, a protracted period of depressed crude oil prices and overall economic downturn could
have a negative impact on our results of operations.
Regardless of insulation from or the lack of exposure to commodity prices, continued low crude oil prices seem to be having a
direct, negative impact on the unit price of many master limited partnerships, including our own. Unfavorable market
conditions have increased the cost of financing capital spending through the public debt and equity markets, and, as a result, we
have reduced our overall capital spending budget for 2016 and have prioritized our capital projects to minimize the need to
access the public capital markets.
Pipeline Segment
We expect our pipeline segment to benefit from higher forecasted volumes on our refined product pipelines. However, we
expect these increases to be more than offset by reduced throughput volumes on our Eagle Ford crude pipelines due to lower
domestic shale production, resulting in lower earnings in the first quarter and full-year 2016 as compared to the comparable
periods of 2015.
Storage Segment
We expect storage segment earnings for the first quarter 2016 to be slightly higher than the first quarter 2015 mainly due to
favorable storage contract renewals at several of our terminal facilities. However, we expect that the reduced throughput on our
Eagle Ford crude pipelines, as referred to and with regard to our Pipeline Segment, will also result in lower throughputs in the
first quarter at our Corpus Christi North Beach terminal.
We expect the full-year earnings for 2016 to benefit from favorable storage contract renewals and higher forecasted throughput
volumes at several of our terminal facilities. However, we expect these increases to be more than offset by lower throughputs at
our Corpus Christi North Beach terminal and overall lower revenue from some of our foreign terminal facilities, resulting in
lower earnings in the full-year 2016 as compared to 2015.
Fuels Marketing Segment
We expect first quarter 2016 results for our fuels marketing segment to be lower than the first quarter 2015 and full-year 2016
results in this segment to be comparable or higher than 2015. 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 and the capital markets, changes to refinery maintenance schedules and unplanned refinery downtime, supply
of and demand for crude oil, refined products and anhydrous ammonia, demand for our transportation and storage services and
changes in laws or regulations affecting our assets.
44
Table of Contents
LIQUIDITY AND CAPITAL RESOURCES
Overview
Primary Cash Requirements. Our primary cash requirements are for distributions to our partners, capital expenditures, debt
service 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, our objective is to fund our total annual 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 that objective, we utilize other sources of cash flow, which in the past have primarily 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. We have typically funded 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 when our cash flow from operations is less than our distribution and reliability capital requirements, we may
maintain our distribution level because we can use other sources of Available Cash, as provided in our partnership agreement,
including borrowings under our revolving credit agreement and 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 our distribution.
For the years ended December 31, 2015, 2014 and 2013, our cash flow from operations exceeded our distributions to our
partners and our reliability capital expenditures. For 2016, we currently expect to continue to produce cash from operations in
excess of our distribution and reliability capital expenditures.
As described above, we and many other master limited partnerships have experienced significant declines in our unit prices,
and current market conditions have increased the cost of financing capital spending through public debt and equity offerings.
As a result, we have prioritized our capital budget for 2016 to minimize our need to access the public debt and equity markets
in 2016, and we intend to first utilize other sources of funding, including cash on hand and borrowings under our revolver, for
our strategic capital spending, before availing ourselves of cost-prohibitive public debt or equity financing. Our current 2016
strategic capital program includes projects that we can reduce in scope or forego entirely, depending on our evaluation of
changing market conditions and our analysis of each project’s relative expected returns, strategic importance and overall capital
requirements.
Cash Flows for the Years Ended December 31, 2015, 2014 and 2013
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 increase (decrease) in cash and cash equivalents
Year Ended December 31,
2015
2014
2013
(Thousands of Dollars)
$
$
524,937
(452,029)
(29,229)
(12,729)
30,950
$
$
$
518,523
(340,231)
(188,185)
(2,938)
(12,831) $
485,219
(310,961)
(149,350)
(7,767)
17,141
Net cash provided by operating activities remained relatively flat for the year ended December 31, 2015 compared to the year
ended December 31, 2014, despite higher net income in 2015. Net income for the year ended December 31, 2015 includes the
$56.3 million non-cash gain associated with the Linden Acquisition. In addition, changes in working capital provided cash flow
of $50.6 million for the year ended December 31, 2015 compared to $82.4 million for the year ended December 31, 2014.
Please refer to the Working Capital Requirements section below for a discussion of the changes in working capital.
For the year ended December 31, 2015, the majority of 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 $40.0 million of
45
Table of Contents
reliability capital expenditures. The proceeds from debt borrowings, net of repayments, combined a portion of net cash
provided by operating activities, were used to fund our strategic capital expenditures, including the Linden Acquisition.
For the year ended December 31, 2014, the majority of 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 our strategic capital expenditures primarily related
to our pipeline and storage segments and advances to Axeon under the NuStar JV Facility.
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.
Revolving Credit Agreement
NuStar Logistics is a party to a $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.
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 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, 2015, our consolidated debt coverage ratio was 4.5x, and we had $587.3 million available
for borrowing.
Letters of credit issued under our Revolving Credit Agreement totaled $30.1 million as of December 31, 2015. 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 13 of the Notes to Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary
Data” for a discussion of our debt agreements.
Other Sources of Liquidity
Other sources of liquidity consist of the following:
•
•
•
$365.4 million in revenue bonds pursuant to the Gulf Opportunity Zone Act of 2005 (the Gulf Opportunity Zone
Revenue Bonds), with $54.8 million remaining in trust as of December 31, 2015, supported by $370.2 million letters
of credit issued by individual banks that do no restrict the amount we can borrow under our Revolving Credit
Agreement;
a $125.0 million receivables financing agreement between NuStar Energy, NuStar Finance LLC and third-party
lenders (the Receivables Financing Agreement), with the amount available for borrowing based on the availability of
eligible receivables and other customary factors and conditions; and
two short-term line of credit agreements with an aggregate uncommitted borrowing capacity of up to $105.0 million
with $84.0 million outstanding as of December 31, 2015.
Please refer to Note 13 of the Notes to Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary
Data” for a more detailed discussion of these debt agreements.
LOC Agreement
NuStar Logistics is a party to a $100.0 million uncommitted letter of credit agreement, which provides for standby letters of
credit or guarantees with a term of up to one year (LOC Agreement). Any letters of credit issued under the LOC Agreement do
not reduce availability under our Revolving Credit Agreement. As of December 31, 2015, letters of credit issued under the LOC
Agreement totaled $14.7 million. The interest rate and maturity vary and are determined at the time of borrowing.
46
Table of Contents
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.
Shelf Registration Statement
On June 2, 2015, the Securities and Exchange Commission declared our shelf registration statement on Form S-3 effective,
which permits us to offer and sell NuStar Energy common units having an aggregate purchase price of up to $500.0 million (the
Shelf Registration Statement).
On September 30, 2015, in connection with the Shelf Registration Statement, we entered into an Equity Distribution Agreement
(the Equity Distribution Agreement) with various banks (each a Manager, and collectively, the Managers). Under the Equity
Distribution Agreement, we may from time to time sell NuStar Energy common units representing limited partner interests
having an aggregate offering price of up to $500.0 million, using the Managers as our sales agents. Sales of common units will
be made by means of ordinary brokers’ transactions on the New York Stock Exchange at market prices, in block transactions or
as otherwise agreed by us and the Managers. Under the terms of the Equity Distribution Agreement, we may also sell common
units to any Manager as principal for its own account at a price to be agreed upon at the time of sale. As of December 31, 2015,
we have not sold any NuStar Energy common units under the Equity Distribution Agreement.
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 the existing operating capacity of existing
assets or extend their useful lives, as well as those required to maintain equipment reliability and safety; and
strategic capital expenditures, such as those to expand or upgrade the operating capacity, increase efficiency or
increase the earnings potential of existing assets, whether through construction or acquisition, as well as certain
capital expenditures related to support functions.
The following table summarizes our capital expenditures, and the amount we expect to spend for 2016:
For the year ended December 31:
2013
2014
2015 (c)
Reliability Capital
Expenditures (a)
Strategic Capital
Expenditures (b)
(Thousands of Dollars)
Total
$
$
$
41,319
28,635
40,002
$
$
$
302,001
328,330
430,870
$
$
$
343,320
356,965
470,872
Expected for the year ended December 31, 2016
$ 35,000 - 45,000
$ 360,000 - 380,000
$ 395,000 - 425,000
(a) Reliability capital primarily relates to maintenance upgrade projects at our terminals.
(b) For each of 2013, 2014 and 2015, strategic capital expenditures primarily related to projects associated with the Eagle Ford Shale
region in South Texas. In 2015, strategic capital also included $142.5 million for the Linden Acquisition. In 2014 and 2015,
strategic capital also included the reactivation and conversion of our 200-mile pipeline between Mont Belvieu and Corpus Christi,
Texas. In 2013, strategic capital also included projects at our St. James, Louisiana terminal.
(c) In 2015, our completed Eagle Ford Shale region capital projects included the expansion of our South Texas Crude System, which
increased throughput capacity of the system, construction of additional storage at our Corpus Christi North Beach and Oakville
terminals and projects that connected our South Texas Crude System to two major refineries in the Corpus Christi area.
For 2016, we continue to evaluate our capital budget and make changes as economic conditions warrant, and our actual capital
expenditures for 2016 may increase or decrease from the budgeted amounts. We believe cash on hand, combined with other
47
Table of Contents
sources of liquidity previously described, will be sufficient to fund our capital expenditures in 2016, and our internal growth
projects can be accelerated or scaled back depending on the condition of the capital markets.
Working Capital Requirements
Working capital requirements, particularly in our fuels marketing segment, may vary with the seasonality of demand and the
volatility of commodity prices for the products we market. This seasonality in demand and the volatility of commodity prices
affect our accounts receivable and accounts payable balances, which vary depending on timing of payments.
Inventories decreased $16.8 million during the year ended December 31, 2015, mainly due to the continued decline in crude oil
prices. In addition, inventory volumes decreased in 2015 primarily due to decreased bunker fuel operations activity. During the
year ended December 31, 2015, accounts receivable decreased $67.3 million and accounts payable decreased $32.2 million
primarily due to decreased bunker fuel operations and crude oil trading activity.
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 to further reduce the volume of our inventory carried in our
bunker fuel operations and 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 during 2013 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 that were 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 the two scheduled principal payments, increasing
the interest rate payable by Axeon until Axeon makes the payments. 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, which must be repaid in full no later than 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. During the year ended December 31, 2015, the weighted average interest rate
was 5.2%.
We also are obligated to provide credit support, such as guarantees, letters of credit and cash collateral, as applicable, of up to
$150.0 million to Axeon, until February 26, 2016, at which point the amount of credit support will decrease by $25.0 million.
Our obligation will continue to decrease until the obligation is terminated no later than September 28, 2019. As of
December 31, 2015, we provided guarantees for Axeon with an aggregate maximum potential exposure of $71.9 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, 2015, we have also provided $36.2 million in letters of credit on behalf of Axeon. In the event
that 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.”
48
Table of Contents
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,
2015
2014
2013
(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
$
$
7,844
43,220
51,064
341,140
392,204
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, 2015 (a)
September 30, 2015
June 30, 2015
March 31, 2015
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 8, 2016
February 12, 2016
98,051 November 9, 2015 November 13, 2015
98,051
98,051
August 7, 2015
August 13, 2015
May 8, 2015
May 14, 2015
(a) The distribution was announced on January 29, 2016.
Debt Obligations
As of December 31, 2015, we were a party to the following debt agreements:
•
•
•
•
the Revolving Credit Agreement due October 29, 2019, with a balance of $882.7 million as of December 31,
2015;
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
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;
$105.0 million line of credit agreements with $84.0 million outstanding as of December 31, 2015; and
• Receivables Financing Agreement due June 15, 2018, with $53.5 million of borrowings outstanding as of
December 31, 2015.
Management believes that we are in compliance with the ratios and covenants contained under our debt instruments. A default
under certain of our debt agreements would be considered an event of default under other of our debt instruments. Please refer
to Note 13 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 7.65% senior notes due 2018 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
49
Table of Contents
credit support for certain contracts, although as of December 31, 2015, we have not been required to provide any additional
credit support under those contracts due to credit ratings.
Interest Rate Swaps
We are a party to forward-starting interest rate swap agreements for the purpose of hedging interest rate risk. During the year
ended December 31, 2015, we entered into forward-starting interest rate agreements with an aggregate notional amount of
$600.0 million related to forecasted probable debt issuances in 2018 and 2020. Please refer to Note 2 and Note 17 of the Notes
to Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary Data” for a more detailed discussion
on our interest rate swaps.
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, 2015:
Payments Due by Period
2016
2017
2018
2019
2020
Thereafter
Total
(Thousands of Dollars)
Long-term debt maturities
$
— $
— $ 403,500
$ 882,664
$ 450,000
$ 1,317,940
$ 3,054,104
Interest payments
Operating leases
Purchase obligations
138,212
31,969
6,920
138,212
27,919
3,673
127,131
25,175
2,286
109,890
18,522
1,441
94,669
6,991
9
971,751
65,258
1,579,865
175,834
—
14,329
The interest payments calculated for our variable-rate debt are based on the outstanding borrowings and the interest rates and
payment dates as of December 31, 2015. The interest payments on our fixed-rate debt are based on the stated interest rates, the
outstanding balances as of December 31, 2015 and interest payment dates.
Our operating leases consist primarily of leases for tugs and barges utilized at our St. Eustatius facility 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.
Environmental, Health and Safety
We 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 and pollution prevention measures, among others. Our operations are
also subject to extensive federal, state and local health and safety laws and regulations, including those relating to worker and
pipeline safety, pipeline integrity and operator qualifications. 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 in the future.
The balance of and changes in our accruals for environmental matters as of and for the years ended December 31, 2015 and
2014 are included in Note 14 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 15 of the Notes to Consolidated Financial Statements in Item 8. “Financial
Statements and Supplemental Data.”
RELATED PARTY TRANSACTIONS
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 currently provide services to both NuStar Energy
and NuStar GP Holdings and we reimburse NuStar GP, LLC for all costs related to its employees, other than costs associated
with NuStar GP Holdings. Please refer to Note 18 of the Notes to Consolidated Financial Statements in Item 8. “Financial
Statements and Supplementary Data” for a more detailed discussion of our related party transactions.
50
Table of Contents
On March 1, 2016, NuStar GP, LLC intends to transfer and assign to NuStar Services Company LLC, a wholly owned
subsidiary of NuStar Energy, all of NuStar GP, LLC’s employees and related benefit plans. Following the transfer of
employees, we will pay employee costs directly and sponsor the following related benefit plans, among others:
• The NuStar Thrift Plan (the Thrift Plan), a qualified employee profit-sharing plan;
• The NuStar Pension Plan, a qualified non-contributory defined benefit pension plan;
• The NuStar Excess Thrift Plan, a benefit plan to those employees whose compensation and/or annual contributions
under the Thrift Plan are subject to the limitations applicable to qualified retirement plans;
• The NuStar Excess Pension Plan, a benefit plan to a select group of management or other highly compensated
employees; and
• The NuStar GP, LLC Retiree Welfare Benefits Plan, a medical benefits plan for certain retired employees.
We do not expect this transfer of employees and related benefit plans to materially change our expenses since we currently
reimburse NuStar GP, LLC for all employee costs attributable to us. Our consolidated balance sheet will reflect employee-
related obligations to external parties instead of related party payables to NuStar GP, LLC.
On January 28, 2016, at a special meeting of unitholders, NuStar Energy’s unitholders approved the Fifth Amended and
Restated 2000 Long-Term Incentive Plan (the Amended Plan), which, among other items, provided that NuStar Energy could
use newly issued units from NuStar Energy to satisfy unit awards. The unitholder vote approving the Amended Plan on
January 28, 2016, coupled with the subsequent transfer of the employees of NuStar GP, LLC into NuStar Services Company
LLC, will result in the classification of substantially all of our currently outstanding and subsequently issued awards as equity
awards. At the time of the transfer of employees, NuStar Services Company LLC will assume obligations associated therewith,
including all outstanding awards, and we intend to satisfy substantively all of the vestings of such awards with newly issued
units of NuStar Energy.
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
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 recognize an impairment of goodwill if the carrying value of goodwill exceeds its estimated fair 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
51
Table of Contents
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, 2015 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 interest rate risk and commodity price 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
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.
52
Table of Contents
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. In addition, we utilize forward-starting interest rate swap agreements to lock in the rate on the interest payments
related to forecasted debt issuances. Borrowings under our variable rate debt expose us to increases in interest rates.
During the year ended December 31, 2015, we entered into forward-starting interest rate swap agreements, with a notional
amount of $600.0 million. Please refer to Note 2 and Note 17 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, 2015
Expected Maturity Dates
2016
2017
2018
2019
2020
There-
after
Total
Fair
Value
(Thousands of Dollars, Except Interest Rates)
$ — $ — $350,000
$
— $450,000
$952,500
$1,752,500
$1,626,785
—
—
8.2%
—
4.8%
6.6%
6.4%
$ — $ — $ 53,500
$882,664
$
— $365,440
$1,301,604
$1,302,653
—
—
1.2%
2.1%
—
0.1%
1.5%
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%
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
The following table presents information regarding our forward-starting interest rate swap agreements:
Notional Amount
December 31, 2015
(Thousands of Dollars)
Period of Hedge
Weighted-Average Fixed Rate
December 31, 2015
Fair Value
2.6% $
2.8%
2.7% $
(Thousands of Dollars)
140
1,163
1,303
$
$
350,000
250,000
600,000
04/2018 - 04/2028
09/2020 - 09/2030
53
Table of Contents
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
on our various types of derivatives.
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, as approved by our board of directors.
The commodity contracts disclosed below represent only those contracts exposed to commodity price risk at the end of the
period. Please refer to Note 17 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.
Contract
Volumes
(Thousands
of Barrels)
December 31, 2015
Weighted Average
Pay Price
Receive Price
Fair Value of
Current
Asset (Liability)
(Thousands of
Dollars)
Fair Value Hedges:
Futures – long:
(crude oil and refined products)
38
$
37.85
N/A $
Futures – short:
(crude oil and refined products)
59
N/A $
39.07
$
1
68
Swaps – long:
(refined products)
Swaps – short:
(refined products)
Economic Hedges and Other Derivatives:
Futures – long:
129
$
23.83
N/A $
(18)
784
N/A $
26.28
$
1,864
(crude oil and refined products)
87
$
44.81
N/A $
(48)
Futures – short:
(crude oil and refined products)
196
N/A $
43.54
$
149
Swaps – long:
(refined products)
Swaps – short:
(refined products)
Forward purchase contracts:
(crude oil)
Forward sales contracts:
(crude oil)
1,532
$
28.19
N/A $
(8,529)
1,435
N/A $
33.01
$
14,931
248
$
36.99
N/A $
193
248
N/A $
36.82
$
(235)
Total fair value of open positions exposed to
commodity price risk
$
8,376
54
Table of Contents
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
55
Table of Contents
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, 2015. 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, 2015, 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, 2015 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.
56
Table of Contents
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, 2015 and 2014, 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, 2015. 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, 2015 and 2014, and the results of their operations and their
cash flows for each of the years in the three-year period ended December 31, 2015, 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, 2015, 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 25, 2016 expressed an unqualified opinion on the effectiveness
of the Partnership’s internal control over financial reporting.
/s/ KPMG LLP
San Antonio, Texas
February 25, 2016
57
Table of Contents
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, 2015, 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, 2015, 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, 2015 and 2014, 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, 2015, and our report dated February 25, 2016 expressed an unqualified opinion on
those consolidated financial statements.
/s/ KPMG LLP
San Antonio, Texas
February 25, 2016
58
Table of Contents
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 $8,473 and $7,808
as of December 31, 2015 and 2014, 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 venture
Deferred income tax asset
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 15)
Partners’ equity:
Limited partners (77,886,078 common units outstanding
as of December 31, 2015 and 2014)
General partner
Accumulated other comprehensive loss
Total partners’ equity
Total liabilities and partners’ equity
December 31,
2015
2014
$
118,862
$
87,912
145,064
—
38,749
31,176
—
333,851
5,209,160
(1,525,589)
3,683,571
112,011
696,637
—
2,858
320,334
5,149,262
125,147
14,799
84,000
34,286
55,194
12,810
5,977
332,213
3,079,349
32,080
24,810
70,966
$
$
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
1,661,900
36,738
(88,794)
1,609,844
5,149,262
$
1,744,810
39,312
(67,912)
1,716,210
4,918,796
$
$
$
See Notes to Consolidated Financial Statements.
59
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
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
Income (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 22)
Year Ended December 31,
2015
2014
2013
$ 1,114,153
969,887
2,084,040
$ 1,026,446
2,048,672
3,075,118
$
938,138
2,525,594
3,463,732
907,574
1,967,528
2,453,997
337,466
135,565
473,031
35,752
66,769
102,521
210,210
—
1,693,336
390,704
—
(131,868)
—
61,822
320,658
14,712
305,946
774
306,720
—
306,720
3.29
0.01
3.30
$
$
$
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)
(2.89)
(1.11)
(4.00)
$
$
$
Weighted-average limited partner units outstanding
77,886,078
77,886,078
77,886,078
See Notes to Consolidated Financial Statements.
60
Table of Contents
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 unrealized gain on cash flow hedges
Net loss reclassified into income on cash flow hedges
Total other comprehensive loss
Comprehensive income (loss)
Less comprehensive loss attributable to noncontrolling interest
Comprehensive income (loss) attributable to NuStar Energy L.P.
Year Ended December 31,
2015
2014
$
306,720
$
210,378
$
2013
(284,671)
(31,987)
1,303
9,802
(20,882)
285,838
—
$
285,838
$
(15,614)
—
10,663
(4,951)
(19,364)
7,213
7,570
(4,581)
205,427
(828)
206,255
$
(289,252)
(10,953)
(278,299)
See Notes to Consolidated Financial Statements.
61
Table of Contents
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 on sale or disposition of assets
Gain associated with the Linden Acquisition
Asset and goodwill impairment loss
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 23)
Other, net
Net cash provided by operating activities
Cash Flows from Investing Activities:
Capital expenditures
Change in accounts payable related to capital expenditures
Acquisitions
Increase in other long-term assets
Proceeds from sale or disposition of assets
Proceeds from insurance recoveries
Increase in note receivable from Axeon
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
Distributions to unitholders and general partner
Payments for termination of interest rate swaps
(Decrease) increase in cash book overdrafts
Other, net
Net cash used in 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
Year Ended December 31,
2015
2014
2013
$
306,720
$
210,378
$
(284,671)
210,210
8,840
(1,617)
(56,277)
—
2,058
—
2,500
50,559
1,944
524,937
(324,808)
(3,156)
(142,500)
(3,564)
17,132
4,867
—
—
(452,029)
860,131
823,500
—
(500,410)
(816,500)
(392,204)
—
(2,954)
(792)
(29,229)
(12,729)
30,950
87,912
191,708
184,363
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)
—
12,851
(5,781)
(188,185)
(2,938)
(12,831)
100,743
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)
1,738,451
—
686,863
(2,150,743)
—
(392,204)
(33,697)
2,851
(871)
(149,350)
(7,767)
17,141
83,602
$
118,862
$
87,912
$
100,743
See Notes to Consolidated Financial Statements.
62
Table of Contents
Balance as of
January 1, 2013
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
Net income
Other comprehensive
loss
Cash distributions
to partners
Balance as of
December 31, 2015
—
—
—
—
—
—
—
NUSTAR ENERGY L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF PARTNERS’ EQUITY
Years Ended December 31, 2015, 2014 and 2013
(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
77,886,078
$ 2,573,263
$
57,986
$
(310,652)
36,882
(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
258,230
39,312
48,490
(67,912)
—
1,716,210
306,720
—
—
(20,882)
(20,882)
(341,140)
(51,064)
—
(392,204)
— 1,716,210
—
—
—
306,720
(20,882)
(392,204)
77,886,078
$ 1,661,900
$
36,738
$
(88,794) $ 1,609,844
$
— $ 1,609,844
See Notes to Consolidated Financial Statements.
63
Table of Contents
NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2015, 2014 and 2013
1. ORGANIZATION AND OPERATIONS
Organization
NuStar Energy L.P. (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,” “NS,” “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 or
NSH) (NYSE: NSH) owns our general partner, Riverwalk Logistics, L.P., and owns a 14.9% total interest in us as of
December 31, 2015.
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 3,140 miles of refined product pipelines and 1,200 miles of crude oil pipelines, as well as approximately 4.0
million barrels of storage capacity, which comprise our Central West System. In addition, we own 2,360 miles of refined
product pipelines, consisting of the East and North Pipelines, and a 2,000 mile ammonia pipeline, which comprise our Central
East System. The East and North Pipelines have storage capacity of approximately 6.4 million barrels. 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, with approximately 82.9 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. 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.
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.
64
Table of Contents
NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
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. 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. When property or equipment is retired, sold or otherwise disposed of, the
difference between the carrying value and the net proceeds is recognized in “Other income, net” in the consolidated statements
of income in the year of disposition.
We capitalize overhead costs and interest costs incurred on funds used to construct property, plant and equipment while the
asset is under construction. The overhead costs and capitalized interest are recorded as part of the asset to which it relates and is
amortized over the asset’s estimated useful life as a component of depreciation expense.
Goodwill
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, 2015 and 2014,
and we determined that no impairment charges occurred. See Note 11 for a discussion of the goodwill impairment recognized in
2013.
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 that would be 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.
Investment in Joint Ventures
We account for investment in the joint ventures using the equity method of accounting. We reported 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). On January 2, 2015, we acquired full ownership of ST Linden Terminal, LLC (Linden), which
owns a refined products terminal in Linden, NJ with 4.3 million barrels of storage capacity (the Linden Acquisition). See Note 4
for additional information on the Linden Acquisition. On February 26, 2014, we sold our remaining 50% ownership interest in
Axeon Specialty Products LLC. See Note 5 for additional discussion.
65
Table of Contents
NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Impairment of Long-Lived Assets
We review long-lived assets, including property, plant and equipment, 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, 2015 are
recoverable. See Note 5 for a discussion of impairments of long-lived assets recognized in 2013.
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.
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, 2015 and 2014.
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 2011 through 2014, 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 $0.6 million and $0.8 million as of December 31, 2015 and 2014, 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.
66
Table of Contents
NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
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.
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.
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.
67
Table of Contents
NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
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. 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.”
Under the terms of our forward-starting interest rate swap agreements, we pay a fixed rate and receive a variable rate. We
entered into the forward-starting 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. We
account for the forward-starting interest rate swaps as Cash Flow Hedges, and we recognize the fair value of each interest rate
swap in the consolidated balance sheets. We record the effective portion of mark-to-market adjustments as a component of
AOCI, and any hedge ineffectiveness is 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. See Note 17 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 and its affiliates 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
68
Table of Contents
NUSTAR ENERGY L.P. AND SUBSIDIARIES
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, net” in the consolidated statements of income.
3. NEW ACCOUNTING PRONOUNCEMENTS
Financial Instruments
In January 2016, the Financial Accounting Standards Board (FASB) issued new guidance that addresses certain aspects of
recognition, measurement, presentation and disclosure of financial instruments. The changes are effective for annual and
interim periods beginning after December 15, 2017, and amendments should be applied by means of a cumulative-effect
adjustment to the balance sheet as of the beginning of the fiscal year of adoption. We will adopt these provisions January 1,
2018, and we do not expect the guidance to have a material impact on our financial position, results of operations or
disclosures.
Deferred Taxes
In November 2015, the FASB issued amended guidance that requires deferred tax assets and liabilities to be classified as
noncurrent on the balance sheet. The changes are effective for annual and interim periods beginning after December 15, 2016,
using either a prospective or retrospective transition method, and early adoption is permitted. Accordingly, we adopted these
provisions during 2015 on a prospective basis, and they did not have a material impact on our financial position, results of
operations or disclosures. Prior periods were not retrospectively adjusted.
Business Combinations
In September 2015, the FASB issued amended guidance for business combinations that eliminates the requirement to restate
prior period financial statements for measurement period adjustments. The new guidance requires that the cumulative impact of
a measurement period adjustment be recognized in the reporting period in which the adjustment is identified. The changes are
effective for annual and interim periods beginning after December 15, 2015. Accordingly, we adopted the amended guidance on
January 1, 2016, and it will not impact our financial position, results of operations or disclosures.
Inventory
In July 2015, the FASB issued amended guidance that requires inventory to be measured at the lower of cost or net realizable
value. The changes are effective for annual and interim periods beginning after December 15, 2016, and must be applied
prospectively after the date of adoption. We will adopt these provisions January 1, 2017, and we do not expect the amended
guidance to have a material impact on our financial position, results of operations or disclosures.
Debt Issuance Costs
In April 2015, the FASB issued amended guidance for the presentation of debt issuance costs. Under the amended guidance,
debt issuance costs will be presented on the balance sheet as a deduction from the carrying value of the associated debt liability.
In August 2015, the FASB issued amended guidance that would allow debt issuance costs related to line-of-credit agreements to
continue to be presented as an asset on the balance sheet. The changes are effective for annual and interim periods beginning
after December 15, 2015, and retrospective application is required. Accordingly, we adopted the amended guidance on
January 1, 2016 and it will not have a material impact on our financial position, results of operations or disclosures.
Consolidation
In February 2015, the 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
69
Table of Contents
NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
effective for public companies for annual and interim reporting periods beginning after December 15, 2015, using one of two
retrospective transition methods. Accordingly, we adopted the guidance on January 1, 2016, and it will not impact our financial
position, results of operations or disclosures.
Revenue Recognition
In May 2014, the FASB and the International Accounting Standards Board jointly issued a comprehensive new revenue
recognition standard. In August 2015, the FASB deferred the effective date by one year. The standard is now effective for public
entities for annual and interim periods beginning after December 15, 2017, using one of two retrospective transition methods.
Early adoption is permitted, but not before the original effective date. 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.
4. ACQUISITIONS
Linden Acquisition. On January 2, 2015, we acquired full ownership of Linden, which owns a refined products terminal in
Linden, NJ with 4.3 million barrels of storage capacity. Linden is located on a 44-acre facility that provides deep-water
terminalling capabilities in the New York Harbor and primarily stores petroleum products, including gasoline, jet fuel and fuel
oils. Prior to the Linden Acquisition, Linden operated as a joint venture between us and Linden Holding Corp., with each party
owning 50%.
In connection with the Linden Acquisition, we ceased applying the equity method of accounting and consolidated Linden,
which is included in our storage segment. The consolidated statements of income include the results of operations for Linden
commencing on January 2, 2015. On the acquisition date, we remeasured our existing 50% equity investment in Linden to its
fair value of $128.0 million and we recognized a gain of $56.3 million in “Other income, net” in the consolidated statements of
income for the year ended December 31, 2015. We estimated the fair value using a market approach and an income approach.
The market approach estimates the enterprise value based on an earnings multiple. The income approach calculates fair value
by discounting the estimated net cash flows. We funded the acquisition with borrowings under our revolving credit agreement.
The acquisition complements our existing storage operations, and having sole ownership of Linden strengthens our presence in
the New York Harbor and the East Coast market.
We accounted for the Linden Acquisition using the acquisition method. The purchase price has been allocated based on the
estimated fair values of the individual assets acquired and liabilities assumed at the date of the acquisition.
The final purchase price allocation was as follows (in thousands of dollars):
Cash paid for the Linden Acquisition
Fair value of liabilities assumed
Consideration
Acquisition date fair value of previously held equity interest
Total
Current assets (a)
Property, plant and equipment
Goodwill
Intangible assets (b)
Other long-term assets
Purchase price allocation
$
$
$
$
142,500
22,865
165,365
128,000
293,365
9,513
134,484
79,208
70,050
110
293,365
(a) Current assets include a receivable of $7.8 million related to a pre-acquisition insurance claim, for which proceeds
were received in 2015.
(b) Intangible assets primarily consist of customer contracts and relationships and are being amortized over 10 years.
70
Table of Contents
5. DISPOSITIONS
NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Discontinued Operations
Terminal Dispositions. In January 2015, we sold our terminal in Alamogordo, NM with storage capacity of 0.1 million barrels
for proceeds of $1.1 million. We classified the associated property, plant and equipment as “Assets held for sale” on the
consolidated balance sheet as of December 31, 2014. In 2014, we divested our terminals in Mobile AL, Wilmington, NC and
Dumfries, VA and our 75% interest in our facility in Mersin, Turkey (the Turkey Sale). We recognized a gain of $3.7 million on
the Turkey Sale for the year ended December 31, 2014. We presented the results of operations for those facilities as
discontinued operations.
We allocated interest expense of $0.8 million and $1.4 million for the years ended December 31, 2014 and 2013, respectively,
to discontinued operations based on the ratio of net assets discontinued to consolidated net assets.
In connection with the decision to dispose of these terminal facilities, 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 for the year
ended December 31, 2013. We recorded the impairment loss in “Loss from discontinued operations, net of tax” on the
consolidated statement of income. The impairment loss consisted of the following (in thousands of dollars):
Property, plant and equipment, net
Intangible assets, net (customer relationships)
Goodwill
Asset impairment loss
$
$
68,213
6,856
27,460
102,529
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) and recognized a gain of $9.3
million on the sale for the year ended December 31, 2013. We presented the results of operations for the San Antonio Refinery
and related assets as discontinued operations.
The following table summarizes the results from discontinued operations:
Revenues
Income (loss) before income tax expense
Year Ended December 31,
2015
2014
2013
(Thousands of Dollars)
$
$
208
774
$
$
4,265
$
(3,791) $
7,758
(106,033)
2014 Asphalt Sale
On February 26, 2014, we sold our remaining 50% ownership interest in NuStar Asphalt LLC to Lindsay Goldberg LLC, a
private investment firm (the 2014 Asphalt Sale). Effective February 27, 2014, NuStar Asphalt LLC changed its name to Axeon
Specialty Products LLC (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 through February 25, 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. We ceased reporting transactions between us and Axeon as related party transactions in
our consolidated financial statements on February 26, 2014. See Note 10 for additional information on the Axeon Term Loan.
71
Table of Contents
NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
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, net
Accounts charged against the allowance
Foreign currency translation
Balance as of end of year
7. INVENTORIES
Inventories consisted of the following:
Year Ended December 31,
2015
2014
2013
(Thousands of Dollars)
$
$
7,808
965
(300)
—
8,473
$
$
1,224
7,649
(1,065)
—
7,808
$
$
808
1,039
(625)
2
1,224
December 31,
2015
2014
Crude oil and refined petroleum products
Materials and supplies
Total
$
$
$
(Thousands of Dollars)
30,154
8,595
38,749
$
46,733
8,980
55,713
We purchase crude oil and refined petroleum products for resale. Our refined petroleum 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.
8. OTHER CURRENT ASSETS
Other current assets consisted of the following:
December 31,
2015
2014
$
(Thousands of Dollars)
16,331
11,402
3,443
31,176
$
16,140
16,362
3,442
35,944
Prepaid expenses
Derivative assets
Other
Other current assets
$
$
72
Table of Contents
NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
9. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, at cost, consisted of the following:
Estimated Useful
Lives
December 31,
2015
2014
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
(Years)
-
-
-
-
-
-
40
40
40
40
5
15
20
20
$
$
$
(Thousands of Dollars)
140,292
186,848
137,269
4,399,378
194,055
151,318
5,209,160
(1,525,589)
3,683,571
120,351
160,283
134,857
3,963,134
160,008
276,763
4,815,396
(1,354,664)
3,460,732
$
Capitalized interest costs added to property, plant and equipment totaled $5.5 million, $5.7 million and $4.5 million for the
years ended December 31, 2015, 2014 and 2013, respectively. Depreciation and amortization expense for property, plant and
equipment totaled $192.3 million, $177.3 million and $168.8 million for the years ended December 31, 2015, 2014 and 2013,
respectively, which includes depreciation expense included in “Income (loss) from discontinued operations, net of tax” on the
consolidated statements of income (loss).
10. INTANGIBLE ASSETS AND OTHER LONG-TERM ASSETS
Intangible Assets
Intangible assets are recorded at cost and are amortized on a straight-line basis over 10 to 47 years. Intangible assets consisted
of the following:
December 31, 2015
December 31, 2014
Cost
Accumulated
Amortization
Cost
Accumulated
Amortization
Customer relationships
Other
Total
$
$
196,616
2,359
198,975
$
$
(Thousands of Dollars)
(86,370) $
(594)
(86,964) $
126,566
2,359
128,925
$
$
(69,711)
(544)
(70,255)
All of our intangible assets are subject to amortization. Amortization expense for intangible assets was $16.7 million, $12.6
million and $13.8 million for the years ended December 31, 2015, 2014 and 2013, respectively. The estimated aggregate
amortization expense is $13.8 million for the each of the years 2016 through 2020.
Other Long-Term Assets, Net
Other long-term assets, net consisted of the following:
December 31,
2015
2014
Axeon Term Loan
Amount remaining in trust for the Gulf Opportunity Zone revenue bonds (Note 13)
Ammonia pipeline linefill and tank heel inventory
Deferred financing costs
Other
Other long-term assets, net
$
$
73
$
(Thousands of Dollars)
170,352
54,822
35,178
29,939
30,043
320,334
$
169,235
72,240
35,686
32,957
4,048
314,166
Table of Contents
NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
As of December 31, 2015, the carrying amount of the Axeon Term Loan is $170.4 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 $1.7
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. We recognize interest income associated with
the Axeon Term Loan ratably over the term of the loan in “Interest income, net” on the consolidated statements of income.
We provide credit support, such as guarantees, letters of credit and cash collateral, as applicable, of up to $150.0 million to
Axeon, until February 26, 2016, at which point the amount of credit support will decrease by $25.0 million. Our obligation will
continue to decrease until the obligation is terminated no later than September 28, 2019. In the event that we are obligated to
perform under any of these guarantees or letters of credit, that amount paid by us will be treated as additional borrowings under
the Axeon Term Loan. As a result, we adjust the carrying value of the Axeon Term Loan by the same amount as the liability for
the fair value of the guarantees outstanding. As of December 31, 2015, we have provided $36.2 million in letters of credit on
behalf of Axeon. Please refer to Note 16 for a discussion of the guarantees.
We review the financial information of Axeon monthly for possible credit loss indicators. Any repayments of the Axeon Term
Loan, including those that were scheduled in 2014 and 2015, are subject to Axeon meeting certain restrictive requirements
contained in its third-party asset-based revolving credit facility. In 2015 and 2014, Axeon failed to make two scheduled
principal payments, increasing the interest rate payable by Axeon until Axeon makes the payments. 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 no later than September 28,
2019.
11. GOODWILL
Changes in the carrying amount of goodwill by segment were as follows:
Pipeline
Storage
Fuels
Marketing
Total
(Thousands of Dollars)
Balances as of January 1, 2014 and December 31, 2014:
Goodwill
Accumulated impairment losses
Net goodwill
$
306,207
$
—
306,207
$
612,012
(331,913)
280,099
$
53,255
(22,132)
31,123
971,474
(354,045)
617,429
Activity for the year ended December 31, 2015:
Linden Acquisition final purchase price allocation
—
79,208
—
79,208
Balances as of December 31, 2015:
Goodwill
Accumulated impairment losses
Net goodwill
306,207
—
$
306,207
$
691,220
(331,913)
359,307
$
53,255
(22,132)
31,123
$
1,050,682
(354,045)
696,637
2013 Goodwill Impairment
In 2013, 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
74
Table of Contents
NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
resulting from those factors, a customer at our St. Eustatius terminal vacated a significant portion of its storage in the fourth
quarter of 2013.
12. ACCRUED LIABILITIES
Accrued liabilities consisted of the following:
Derivative liabilities
Employee wages and benefit costs
Unearned income
Other
Accrued liabilities
13. DEBT
Long-term debt consisted of the following:
December 31,
2015
2014
(Thousands of Dollars)
$
$
121
31,143
14,290
9,640
55,194
$
$
4,623
32,349
10,884
13,169
61,025
$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
Receivables Financing Agreement
Net fair value adjustments and unamortized discounts
Total long-term debt
The long-term debt repayments are due as follows (in thousands):
2016 - 2017
2018
2019
2020
Thereafter
Total repayments
Net fair value adjustments and unamortized discounts
Total long-term debt
December 31,
Maturity
2015
2014
(Thousands of Dollars)
2019
2022
2021
2020
2018
2043
2038 thru 2041
2018
N/A
$
882,664
$
250,000
300,000
450,000
350,000
402,500
365,440
53,500
25,245
601,496
250,000
300,000
450,000
350,000
402,500
365,440
—
30,016
$
3,079,349
$
2,749,452
$
$
—
403,500
882,664
450,000
1,317,940
3,054,104
25,245
3,079,349
Interest payments totaled $138.9 million, $135.0 million and $118.3 million for the years ended December 31, 2015, 2014 and
2013, respectively.
Revolving Credit Agreement
NuStar Logistics is party to a $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
75
Table of Contents
NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
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.
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, 2015, our weighted-average interest rate was
2.1%. During the year ended December 31, 2015, the weighted-average interest rate related to borrowings under the Revolving
Credit Agreement was 2.0%.
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 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, 2015, our consolidated debt coverage ratio was 4.5x, and we had $587.3 million available
for borrowing.
Letters of credit issued under our Revolving Credit Agreement totaled $30.1 million as of December 31, 2015. 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. 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, 2015. 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 Logistics’ ability to incur additional 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.
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 that interest payments
are 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
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
76
Table of Contents
NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
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, 2015 and 2014, the amount received from the trustee totaled $17.5 million and $11.9 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 by various individual banks 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.
Obligations under the letters of credit issued are guaranteed by NuStar Energy and NuPOP. 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, 2015:
Date Issued
Maturity Date
Amount
Outstanding
Amount of
Letter of
Credit
Amount
Received from
Trustee
Amount
Remaining in
Trust
Average Annual
Interest Rate
June 1, 2038
$
55,440
$
56,169
$
55,440
$
(Thousands of Dollars)
June 26, 2008
July 15, 2010
October 7, 2010
July 1, 2040
October 1, 2040
December 29, 2010
December 1, 2040
August 29, 2011
August 1, 2041
100,000
50,000
85,000
75,000
101,315
50,658
86,118
75,986
100,000
43,441
37,528
75,000
—
—
6,806
48,016
—
0.1%
0.1%
0.1%
0.1%
0.1%
Total
$
365,440
$
370,246
$
311,409
$
54,822
Receivables Financing Agreement
NuStar Energy and NuStar Finance LLC (NuStar Finance), a special purpose entity and wholly owned subsidiary of NuStar
Logistics, are parties to a $125.0 million receivables financing agreement with third-party lenders (the Receivables Financing
Agreement) and agreements with certain of NuStar Energy’s wholly owned subsidiaries (collectively with the Receivables
Financing Agreement, the Securitization Program). Under the Securitization Program, certain of NuStar Energy’s wholly
owned subsidiaries, NuStar Logistics, NuPOP, NuStar Energy Services, Inc. and NuStar Supply & Trading LLC (collectively,
the Originators), sell their accounts receivable to NuStar Finance on an ongoing basis, and NuStar Finance provides the newly
acquired accounts receivable as collateral for its revolving borrowings under the Receivables Financing Agreement. NuStar
Energy provides a performance guarantee in connection with the Securitization Program. The maximum amount available for
borrowing by NuStar Finance under the Receivables Financing Agreement is $125.0 million, with an option for NuStar Finance
to request an increase of up to $75.0 million from the lenders (for aggregate total borrowings not to exceed $200.0 million).
The amount available for borrowing is based on the availability of eligible receivables and other customary factors and
conditions. The Securitization Program contains various customary affirmative and negative covenants and default,
indemnification and termination provisions, and the Receivables Financing Agreement provides for acceleration of amounts
owed upon the occurrence of certain specified events.
Borrowings by NuStar Finance under the Receivables Financing Agreement bear interest at either the applicable commercial
paper rate or the applicable bank rate, each as defined under the Receivables Financing Agreement. The Securitization Program
has an initial termination date of June 15, 2018, with the option to renew for additional 364-day periods thereafter. As of
December 31, 2015, $97.9 million of our accounts receivable are included in the Securitization Program. The weighted average
interest rate related to outstanding borrowings under the Securitization Program during the year ended December 31, 2015 was
1.1%.
NuStar Finance’s sole business consists of purchasing such receivables and providing them as collateral under the
Securitization Program. NuStar Finance is a separate legal entity and the assets of NuStar Finance, including these accounts
receivable, are not available to satisfy the claims of creditors of NuStar Energy, the Originators or their affiliates.
Short-Term Lines of Credit
NuStar Logistics is party to two short-term line of credit agreements with an aggregate uncommitted borrowing capacity of up
to $105.0 million, which 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 borrowing. We had $84.0 million outstanding
under these lines of credit as of December 31, 2015. Obligations under these short-term line of credit agreements are
77
Table of Contents
NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
guaranteed by NuStar Energy. As of December 31, 2015 and 2014, the weighted-average interest rates related to outstanding
borrowings under our short-term lines of credit were 1.9% and 1.8%, respectively.
14. 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 and pollution prevention measures, among others. Our
operations are also subject to extensive federal, state and local health and safety laws and regulations, including those relating
to worker and pipeline safety, pipeline integrity and operator qualifications. 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 related 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: the Federal
Energy Regulatory Commission (the FERC), the Surface Transportation Board (the STB), the Department of Transportation
(DOT), the Environmental Protection Agency (EPA) and Homeland Security. 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, risk management planning, hazard communication,
emergency response planning, community right-to-know, occupational health and the handling, storage, use and disposal of
hazardous materials, that are designed to comply with applicable federal, state and local regulations and 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.
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
Foreign currency translation
Balance as of the end of year
Year Ended December 31,
2015
2014
(Thousands of Dollars)
$
$
6,598
$
3,685
(2,574)
(42)
7,667
$
6,233
3,292
(2,878)
(49)
6,598
Accruals for environmental matters are included in the consolidated balance sheets as follows:
Accrued liabilities
Other long-term liabilities
Accruals for environmental matters
78
December 31,
2015
2014
(Thousands of Dollars)
$
$
4,350
3,317
7,667
$
$
3,518
3,080
6,598
Table of Contents
NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
15. COMMITMENTS AND CONTINGENCIES
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, 2015, we have accrued $4.8 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,
2015 are as follows:
2016
2017
2018
2019
2020
There-
after
Total
Payments Due by Period
(Thousands of Dollars)
Operating leases
Purchase obligations
$
31,969
$
27,919
$
25,175
$
18,522
$
6,991
$
65,258
$
175,834
6,920
3,673
2,286
1,441
9
—
14,329
Rental expense for all operating leases totaled $39.7 million, $46.1 million and $52.9 million for the years ended December 31,
2015, 2014 and 2013, respectively. 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, with original terms ranging from 10 to 100 years.
79
Table of Contents
NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
16. 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 for 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
Other long-term assets, net:
Interest rate swaps
Total
Liabilities:
Accrued liabilities:
Product imbalances
Commodity derivatives
Other long-term liabilities:
Guarantee liability
Interest rate swaps
Total
Assets:
Other current assets:
Product imbalances
Commodity derivatives
Total
Liabilities:
Accrued liabilities:
Product imbalances
Commodity derivatives
Other long-term liabilities:
Guarantee liability
Total
December 31, 2015
Level 1
Level 2
Level 3
Total
(Thousands of Dollars)
179
$
11,325
— $
77
—
2,755
— $
—
—
11,504
$
2,832
$
— $
(419) $
—
—
—
(419) $
— $
(120)
—
(1,452)
(1,572) $
— $
—
(1,697)
—
(1,697) $
179
11,402
2,755
14,336
(419)
(120)
(1,697)
(1,452)
(3,688)
December 31, 2014
Level 1
Level 2
Level 3
Total
(Thousands of Dollars)
117
11,009
11,126
$
$
— $
5,353
5,353
$
(1,388) $
—
— $
(4,623)
— $
—
— $
— $
—
—
(1,388) $
—
(4,623) $
(580)
(580) $
117
16,362
16,479
(1,388)
(4,623)
(580)
(6,591)
$
$
$
$
$
$
$
$
Product Imbalances. We value our assets and liabilities related to product imbalances using quoted market prices in active
markets as of the reporting date. Therefore, we include these product imbalances in Level 1 of the fair value hierarchy.
80
Table of Contents
NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Interest Rate Swaps. We estimate the fair value of our forward-starting interest rate swaps using discounted cash flows, which
use observable inputs such as time to maturity and market interest rates. Therefore, we include these interest rate swaps in
Level 2 of the fair value hierarchy.
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 17 for a discussion of our derivative instruments.
Guarantees. As of December 31, 2015 and 2014, we recorded a liability of $1.7 million and $0.6 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, 2015 and 2014, totaling $71.9
million and $25.3 million, respectively, plus two guarantees that do not specify a maximum amount. We provide guarantees for
commodity purchases, lease obligations and certain utilities for Axeon. A majority of these guarantees have no expiration date.
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.
The following table summarizes the activity in our Level 3 liabilities:
Beginning balance
Adjustment to guarantee liability
Ending balance
Year Ended
December 31, 2015
(Thousands of Dollars)
$
$
580
1,117
1,697
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 the Axeon Term Loan and long-term debt,
approximate their carrying amounts.
The estimated fair values and carrying amounts of the long-term debt and the Axeon Term Loan were as follows:
Long-term debt
Axeon Term Loan
December 31, 2015
December 31, 2014
Fair Value
Carrying Amount
Fair Value
Carrying Amount
(Thousands of Dollars)
$
$
2,929,438
172,123
$
$
3,079,349
170,352
$
$
2,764,242
164,386
$
$
2,749,452
169,235
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 Axeon Term Loan 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. The carrying value
of the Axeon Term Loan is included in “Other long-term assets, net” on the consolidated balance sheets.
81
Table of Contents
NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
17. DERIVATIVES AND RISK MANAGEMENT ACTIVITIES
We utilize various derivative instruments to manage our exposure to interest rate risk and commodity price 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 are a party to certain interest rate swap agreements to manage our exposure to changes in interest rates. During the year
ended December 31, 2015, we entered into forward-starting interest rate swap agreements with an aggregate notional amount of
$600.0 million. Under the terms of the swaps, we pay a fixed rate and receive 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 2018 and
2020. We record the effective portion of mark-to-market adjustments as a component of “Accumulated other comprehensive
income” (AOCI), and the amount in AOCI will be recognized in “Interest expense, net” as the forecasted interest payments
occur or if the interest payments are probable not to occur.
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.
As of December 31, 2015, the remaining fair value amount associated with unwound fixed-to-floating interest rate swap
agreements totaled $26.3 million gain and is included in “Long-term debt” on the consolidated balance sheets. The remaining
fair value amount associated with unwound forward-starting interest rate swap agreements totaled $29.3 million loss as of
December 31, 2015 and is included in AOCI on the consolidated balance sheets. These amounts are amortized ratably over the
remaining life of the related debt instrument into “Interest expense, net” on the consolidated statements of income.
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 refined 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.
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 8.0 million barrels and 4.7 million barrels as of December 31, 2015 and
2014, respectively.
82
Table of Contents
NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The fair values of our derivative instruments included in our consolidated balance sheets were as follows:
Derivatives Designated as
Hedging Instruments:
Commodity contracts
Interest rate swaps
Interest rate swaps
Total
Derivatives Not Designated
as Hedging Instruments:
Commodity contracts
Commodity contracts
Total
Asset Derivatives
Liability Derivatives
December 31,
Balance Sheet Location
2015
2014
2015
2014
(Thousands of Dollars)
Other current assets
$
1,937
$
5,609
$
Other long-term assets, net
Other long-term liabilities
2,755
—
4,692
—
—
5,609
(23) $
—
(1,452)
(1,475)
—
—
—
—
Other current assets
Accrued liabilities
34,016
117
34,133
38,704
13,081
51,785
(24,528)
(237)
(24,765)
(27,951)
(17,704)
(45,655)
Total Derivatives
$
38,825
$
57,394
$ (26,240) $
(45,655)
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,
2015
2014
(Thousands of Dollars)
$
$
11,402
$
(120) $
16,362
(4,623)
The earnings impact of our commodity contracts, for which gains and/or losses are recognized in "Cost of product sales" on the
consolidated income statements, was as follows:
Derivatives Designated as Fair Value Hedging Instruments:
Gain (loss) recognized in income on derivative
Gain (loss) recognized in income on hedged item
Gain (loss) recognized in income for ineffective portion
Derivatives Not Designated as Hedging Instruments:
Year Ended December 31,
2015
2014
2013
(Thousands of Dollars)
$
$
21,589
(18,047)
3,542
$
21,951
(21,587)
364
3,964
(6,327)
(2,363)
Gain (loss) recognized in income on derivative
$
2,208
$
18,407
$
(5,323)
83
Table of Contents
NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The earnings impact of our interest rate swaps was as follows:
Year Ended December 31,
2015
2014
2013
(Thousands of Dollars)
Derivatives Designated as Cash Flow Hedging Instruments:
Gain (loss) recognized in other comprehensive income on derivative
(effective portion)
Gain (loss) reclassified from AOCI into interest expense, net
(effective portion) (a)
$
1,303
$
— $
7,213
(9,802)
(10,663)
(7,570)
(a) As of December 31, 2015, we expect to reclassify a loss of $8.3 million to "Interest expense, net" within the next
twelve months associated with unwound forward-starting interest rate swaps.
18. RELATED PARTY TRANSACTIONS
We had a payable to related party of $14.8 million and $15.1 million as of December 31, 2015 and 2014, respectively, mainly
representing payroll, employee benefit plan expenses and unit-based compensation. We also had a long-term payable to related
party as of December 31, 2015 and 2014 of $32.1 million and $33.5 million, respectively, representing long-term employee
benefits. 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,
2015
2014
2013
(Thousands of Dollars)
$
$
$
$
$
$
135,565
66,769
— $
$
$
— $
— $
$
2
929
125,736
66,910
1,055
528
1,680
$
$
$
$
$
$
14,897
122,677
58,602
6,113
3,720
6,051
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 renews automatically every two years unless terminated by either party.
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.
Please refer to Note 28 for a discussion of the employee transfer from NuStar GP, LLC.
84
Table of Contents
NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
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. We were a party to 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.
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.
Services Agreement. 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.
19. 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 has no participants following final payouts 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
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, 2015, 2014 and 2013, our costs for these plans totaled
$2.6 million, $2.7 million and $2.5 million, respectively.
85
Table of Contents
NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Long-Term Incentive Plans
As of December 31, 2015, NuStar GP, LLC sponsored 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, 2015, NS common units that remained available to be awarded totaled
1,260,634 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, 2015, a total of 1,492,327 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 number of awards granted under the above-noted plans were as follows:
2000 LTIP:
Performance awards
Restricted units (b)
Vesting
2015
2014
2013
Year Ended December 31,
(a)
1/5 per year
29,633
250,563
28,841
208,714
38,786
269,182
Restricted units (grants to non-employee directors of NuStar
GP, LLC)
1/3 per year
7,553
7,009
8,904
2006 LTIP:
Restricted units
1/5 per year
26,240
16,895
18,620
Restricted units (grants to non-employee directors of NuStar
GP Holdings) (c)
1/3 per year
12,814
8,911
13,183
(a)
(b)
(c)
Performance awards vest 1/3 per year if certain performance measures are met, as defined in the award terms.
The 2000 LTIP restricted unit grants include 2,835, 2,844 and 3,882 restricted unit awards granted to certain
international employees for the years ended December 31, 2015, 2014 and 2013 respectively, that vest 1/3
per year, as defined in the award terms.
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
Year Ended December 31,
2015
2014
2013
(Thousands of Dollars)
$
$
13,215
6,397
$
$
11,385
10,934
$
$
27,741
7,369
Please refer to Note 28 for a discussion of the employee transfer from NuStar GP, LLC.
86
Table of Contents
NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
20. OTHER INCOME
Other income consisted of the following:
Gain associated with Linden Acquisition
Foreign exchange gains
Gain from sale or disposition of assets
Other, net
Other income, net
21. PARTNERS’ EQUITY
Year Ended December 31,
2015
2014
2013
(Thousands of Dollars)
56,277
$
— $
3,891
1,617
37
2,057
642
1,800
61,822
$
4,499
$
—
7,707
(524)
158
7,341
$
$
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, 2013
$
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
Balance as of December 31, 2014
Other comprehensive (loss) income before reclassifications
Net loss reclassified into interest expense, net
Other comprehensive (loss) income
Foreign
Currency
Translation
Cash Flow
Hedges
Total
(Thousands of Dollars)
$
(64,519) $
7,213
7,570
14,783
(49,736)
—
10,663
10,663
(39,073)
1,303
9,802
11,105
5,654
(19,312)
—
(19,312)
(13,658)
(15,181)
—
(15,181)
(28,839)
(31,987)
—
(31,987)
(58,865)
(12,099)
7,570
(4,529)
(63,394)
(15,181)
10,663
(4,518)
(67,912)
(30,684)
9,802
(20,882)
Balance as of December 31, 2015
$
(60,826) $
(27,968) $
(88,794)
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.
87
Table of Contents
NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The following table details the calculation of net income applicable to the general partner:
Year Ended December 31,
2015
2014
2013
(Thousands of Dollars)
Net income (loss) attributable to NuStar Energy L.P.
$
306,720
$
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
43,220
263,500
43,220
167,553
2%
2%
(273,770)
43,220
(316,990)
2%
incentive distribution
General partner incentive distribution
Net income applicable to general partner
5,270
43,220
48,490
$
3,352
43,220
46,572
$
(6,338)
43,220
36,882
$
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 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,
2015
2014
2013
(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
$
$
7,844
43,220
51,064
341,140
392,204
4.380
$
$
$
88
Table of Contents
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, 2015 (a)
September 30, 2015
June 30, 2015
March 31, 2015
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 8, 2016
February 12, 2016
98,051 November 9, 2015 November 13, 2015
98,051
98,051
August 7, 2015
August 13, 2015
May 8, 2015
May 14, 2015
(a) The distribution was announced on January 29, 2016.
22. 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,
2015
2014
2013
(Thousands of Dollars, Except Per Unit Data)
306,720
$
210,773
$
51,064
51,064
341,140
(85,484) $
341,140
(181,431) $
(273,770)
51,064
341,140
(665,974)
51,064
(1,710)
49,354
341,140
(83,774)
257,366
$
$
$
$
51,064
(3,630)
47,434
341,140
(177,801)
163,339
$
$
$
$
51,064
(13,318)
37,746
341,140
(652,656)
(311,516)
77,886,078
77,886,078
77,886,078
3.30
$
2.10
$
(4.00)
$
$
$
$
$
$
$
89
Table of Contents
NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
23. STATEMENTS OF CASH FLOWS
Changes in current assets and current liabilities were as follows:
Decrease (increase) in current assets:
Accounts receivable
Receivable from related parties
Inventories
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
Year Ended December 31,
2015
2014
2013
(Thousands of Dollars)
$
67,257
$
72,298
$
107,209
—
16,776
4,414
(32,152)
(872)
941
(7,834)
(1,522)
3,551
50,918
82,075
3,785
(153,671)
837
303
22,980
4,341
(1,448)
82,418
58,692
31,975
26,139
(96,330)
6,922
9,370
(32,452)
(87)
1,338
$
112,776
Changes in current assets and current liabilities
$
50,559
$
The above changes in current assets and current liabilities differ from changes between amounts reflected in the applicable
consolidated balance sheets due to:
•
•
•
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 financing activities for the years ended December 31, 2015 and 2013 mainly consist of changes in the fair values of
our interest rate swap agreements.
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
$
$
133,388
9,971
$
$
129,377
6,699
$
$
113,805
11,386
Year Ended December 31,
2015
2014
2013
(Thousands of Dollars)
90
Table of Contents
24. 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
Foreign withholding tax
Total current
Deferred:
U.S.
Foreign
Foreign withholding tax
Total deferred
Year Ended December 31,
2015
2014
2013
(Thousands of Dollars)
$
$
908
9,820
1,926
12,654
(182) $
7,516
—
7,334
1,022
(1,464)
2,500
2,058
1,889
1,578
—
3,467
3,098
9,273
—
12,371
1,687
(1,305)
—
382
Total income tax expense
$
14,712
$
10,801
$
12,753
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
Foreign withholding tax
Total deferred income tax liabilities
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
91
December 31,
2015
2014
(Thousands of Dollars)
$
33,043
894
2,698
1,758
38,393
(13,151)
25,242
(44,880)
(2,314)
(47,194)
35,698
664
1,261
1,827
39,450
(14,532)
24,918
(47,797)
—
(47,797)
(21,952) $
(22,879)
$
2,858
(24,810)
(21,952) $
4,429
(27,308)
(22,879)
$
$
$
$
Table of Contents
NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
As of December 31, 2015, our U.S. and foreign corporate operations have net operating loss carryforwards for tax purposes
totaling approximately $83.3 million and $13.1 million, respectively, which are subject to various limitations on use and expire
in years 2021 through 2024 for U.S. losses and in years 2016 and 2018 for foreign losses.
As of December 31, 2015 and 2014, we recorded a valuation allowance of $13.2 million and $14.5 million, respectively, related
to our deferred tax assets. We estimate the amount of valuation allowance based upon our expectations of taxable income in the
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
2015, the valuation allowance decreased $1.1 million for the U.S. net operating loss and decreased $0.2 million for the foreign
net operating loss, 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, 2015 is dependent upon our ability to generate
future taxable income in the United States. We believe it is more likely than not that the net deferred income tax assets as of
December 31, 2015 will be realized, based on expected future taxable income.
Repatriation
Previously all undistributed earnings of our foreign subsidiaries were indefinitely reinvested. In the fourth quarter of 2015,
management determined that we would begin to repatriate a portion of undistributed foreign earnings in order to provide
greater flexibility to meet cash flow needs. As a result, we recognized a current tax liability of $1.9 million and a deferred tax
liability of $2.5 million related to foreign withholding taxes on approximately $90.0 million of undistributed foreign earnings.
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. The 2005 Tax Agreement provides for annual minimum profit tax of approximately $0.6 million,
beginning as of January 1, 2005.
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 appealed this decision. In 2015, the tax court held that NuStar was obligated to
pay the property tax. In February 2016, the civil appellate court also ruled against NuStar, deferring to the decision of the tax
court. We are evaluating whether to file a further appeal.
25. 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 resulted from storage agreements with our joint ventures.
92
Table of Contents
NUSTAR ENERGY L.P. AND SUBSIDIARIES
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
Total operating income (loss)
Revenues by geographic area are shown in the table below.
United States
Netherlands
Other
Consolidated revenues
Year Ended December 31,
2015
2014
2013
(Thousands of Dollars)
$
508,522
$
477,030
$
411,529
599,302
25,606
—
624,908
537,142
26,435
929
564,506
518,253
32,044
6,252
556,549
976,216
2,060,017
2,519,053
—
—
976,216
(25,606)
2,084,040
$
2,060,017
(26,435)
3,075,118
$
8,645
2,527,698
(32,044)
3,463,732
84,951
$
77,691
$
116,768
—
201,719
8,491
103,848
16
181,555
10,153
210,210
$
191,708
$
270,349
$
245,233
$
217,818
13,507
42
501,716
102,521
8,491
183,104
24,805
(32)
453,110
96,056
10,153
68,871
99,868
27
168,766
10,155
178,921
208,293
(127,484)
(126)
1,437
82,120
91,086
10,155
(19,121)
$
390,704
$
346,901
$
$
$
$
$
Year Ended December 31,
2015
2014
2013
(Thousands of Dollars)
$
$
1,599,088
$
2,276,609
$
2,340,694
386,282
98,670
705,207
93,302
1,027,260
95,778
2,084,040
$
3,075,118
$
3,463,732
93
Table of Contents
NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
For the years ended December 31, 2015, 2014 and 2013, Valero Energy Corporation accounted for approximately 16%, or
$331.7 million, 9%, or $282.9 million, and 15%, or $534.2 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,
2015
2014
(Thousands of Dollars)
$
$
3,049,334
$
2,809,462
449,406
184,831
451,564
199,706
3,683,571
$
3,460,732
December 31,
2015
2014
(Thousands of Dollars)
$
2,051,866
$
1,962,821
2,438,621
156,866
4,647,353
501,909
2,241,573
227,642
4,432,036
486,760
$
5,149,262
$
4,918,796
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,
2015
2014
2013
(Thousands of Dollars)
175,657
$
244,713
$
285,258
—
9,957
470,872
$
108,457
—
3,795
356,965
$
$
$
165,096
170,637
69
7,518
343,320
94
Table of Contents
NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
26. 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, 2015
(Thousands of Dollars)
NuStar
Energy
NuStar
Logistics
NuPOP
Non-Guarantor
Subsidiaries
Eliminations
Consolidated
Assets
Cash and cash equivalents
Receivables, net
Inventories
Other current assets
Intercompany receivable
Total current assets
Property, plant and equipment, net
Intangible assets, net
Goodwill
Investment in wholly owned
subsidiaries
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
$
$
4
885
419
—
1,776
—
140
11,026
— 1,610,370
1,623,595
— 1,915,370
48,961
—
149,453
—
1,025
$
— $
—
3,648
497
—
4,145
570,415
—
170,652
117,973
144,645
33,325
19,513
$
— $
—
—
—
— (1,610,370)
(1,610,370)
118,862
145,064
38,749
31,176
—
333,851
— 3,683,571
112,011
—
696,637
—
315,456
1,197,786
63,050
376,532
2,205,904
—
933
$ 2,207,862
48,547
—
279,063
$ 4,064,989
1,031,162
—
26,329
$ 1,802,703
915,115
4,037
14,009
$ 2,885,985
(4,200,728)
(1,179)
—
—
2,858
320,334
$(5,812,277) $ 5,149,262
$
$
12
—
—
723
126
—
508,363
509,224
52,650
84,000
34,271
32,816
6,452
1,362
—
211,551
— 3,025,849
26,638
—
1,143
—
37,209
—
762,599
1,698,638
$
11,193
—
—
5,753
3,325
9
858,018
878,298
—
—
36
9,294
915,075
$
76,091
—
15
15,902
2,907
4,606
243,989
343,510
53,500
5,442
24,810
24,463
2,434,260
$
— $
—
—
—
—
—
(1,610,370)
(1,610,370)
139,946
84,000
34,286
55,194
12,810
5,977
—
332,213
— 3,079,349
32,080
—
(1,179)
24,810
70,966
—
(4,200,728)
1,609,844
$ 2,207,862
$ 4,064,989
$ 1,802,703
$ 2,885,985
$(5,812,277) $ 5,149,262
95
Table of Contents
NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
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
1,498,120
923
— 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
96
Table of Contents
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
Interest (expense) income, net
Other income, net
Income from continuing
operations before income
tax (benefit) expense
Income tax (benefit) expense
Income from continuing
operations
Income from discontinued
operations, net of tax
Net income
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, 2015
(Thousands of Dollars)
NuStar
Energy
NuStar
Logistics
NuPOP
Non-Guarantor
Subsidiaries
$
— $
547,959
$
215,469
$ 1,322,675
$
1,717
(1,717)
293,708
254,251
308,437
—
—
(7,257)
(137,847)
1,179
140,081
75,388
120,768
1,611
5
1,259,935
62,740
197,760
4,368
60,638
Eliminations
Consolidated
(2,063) $ 2,084,040
(2,105)
1,693,336
42
390,704
(619,708)
—
—
—
(131,868)
61,822
306,720
—
110,326
(392)
197,772
23
325,506
15,081
(619,666)
—
320,658
14,712
306,720
110,718
197,749
310,425
(619,666)
305,946
—
—
—
774
—
774
$
306,720
$
110,718
$
197,749
$
311,199
$ (619,666) $
306,720
Condensed Consolidating Statements of Income (Loss)
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
97
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)
98
Table of Contents
NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Condensed Consolidating Statements of Comprehensive Income
For the Year Ended December 31, 2015
(Thousands of Dollars)
Net income
$
306,720
$
110,718
$
197,749
$
311,199
NuStar
Energy
NuStar
Logistics
NuPOP
Non-Guarantor
Subsidiaries
Eliminations
$ (619,666) $
Consolidated
Other comprehensive income:
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)
—
—
—
—
—
1,303
9,802
11,105
—
—
—
—
(31,987)
—
—
(31,987)
—
—
—
—
306,720
(31,987)
1,303
9,802
(20,882)
Comprehensive income
$
306,720
$
121,823
$
197,749
$
279,212
$ (619,666) $
285,838
Condensed Consolidating Statements of Comprehensive Income (Loss)
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
99
Table of Contents
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
—
—
—
(10,953)
—
(10,953)
Comprehensive (loss) income
attributable to NuStar Energy L.P.
$ (273,770) $
21,375
$ (281,320) $
(629,071) $
884,487
$ (278,299)
100
Table of Contents
NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Condensed Consolidating Statements of Cash Flows
For the Year Ended December 31, 2015
(Thousands of Dollars)
Net cash provided by operating
activities
Cash flows from investing activities:
Capital expenditures
Change in accounts payable
related to capital expenditures
Acquisitions
Increase in other long-term assets
Proceeds from sale or disposition
of assets
Proceeds from insurance recoveries
Net cash used in investing activities
Cash flows from financing activities:
Debt borrowings
Debt repayments
Distributions to unitholders and
general partner
Net intercompany activity
Other, net
NuStar
Energy
NuStar
Logistics
NuPOP
Non-Guarantor
Subsidiaries
Eliminations
Consolidated
$ 389,967
$
237,780
$
119,928
$
365,588
$ (588,326) $
524,937
(201,388)
(39,533)
(83,887)
—
—
—
—
—
—
—
(4,950)
—
—
10,320
—
(196,018)
33
—
—
22
—
(39,478)
—
—
—
—
—
—
—
(324,808)
(3,156)
(142,500)
(3,564)
17,132
4,867
(452,029)
— 1,683,631
— (1,316,910)
588,326
—
—
588,326
(392,204)
—
(3,746)
(29,229)
—
—
—
(12,729)
30,950
87,912
1,761
(142,500)
(3,564)
6,790
4,867
(216,533)
94,500
(41,000)
(196,122)
37,427
(141)
(105,336)
(12,729)
30,990
86,983
—
—
—
— 1,589,131
— (1,275,910)
—
—
(392,204)
2,199
—
(196,102)
(155,278)
(3,605)
(41,764)
(196,102)
115,652
—
(80,450)
$
— $
117,973
$
— $
118,862
Net cash used in financing activities
(390,005)
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
—
(38)
923
$
885
$
—
(2)
6
4
101
Table of Contents
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
Axeon
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 activity
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
—
—
83,387
(1,166)
—
35,620
—
(13,340)
(120,687)
8,259
13,340
—
(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
102
Table of Contents
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
Axeon
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 activity
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)
—
—
(3,880)
(47)
(33,697)
302
(128,277)
2,027
—
—
—
—
183,700
—
—
—
686,863
(39)
392,243
(392,204)
—
(530)
(51,543)
—
—
228
—
—
(33,697)
—
—
1,980
(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
103
Table of Contents
NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
27. QUARTERLY FINANCIAL DATA (UNAUDITED)
The following table summarizes quarterly financial data for the years ended December 31, 2015 and 2014:
2015:
Revenues
Operating income
Income from continuing operations
Income from discontinued
operations, net of tax
Net income
Net income per unit applicable to limited
partners:
Continuing operations
Discontinued operations
Total
Cash distributions per unit applicable to limited
partners
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
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Total
(Thousands of Dollars, Except Per Unit Data)
$
$
$
554,944
99,281
127,125
$
$
$
570,611
92,405
54,325
$
$
$
493,566
100,994
65,016
$
$
$
464,919
$ 2,084,040
98,024
59,480
$
$
390,704
305,946
774
—
—
—
774
$
127,899
$
54,325
$
65,016
$
59,480
$
306,720
$
$
$
$
$
$
$
$
$
$
1.46
0.01
1.47
$
$
0.54
—
0.54
$
$
0.68
—
0.68
$
$
0.61
—
0.61
$
$
3.29
0.01
3.30
1.095
$
1.095
$
1.095
$
1.095
$
4.380
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
104
Table of Contents
NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
28. SUBSEQUENT EVENT
On March 1, 2016, NuStar GP, LLC intends to transfer and assign to NuStar Services Company LLC, a wholly owned
subsidiary of NuStar Energy, all of NuStar GP, LLC’s employees and related benefit plans. Following the transfer of employees,
we will pay employee costs directly and sponsor the following related benefit plans, among others:
• The NuStar Thrift Plan (the Thrift Plan), a qualified employee profit-sharing plan;
• The NuStar Pension Plan, a qualified non-contributory defined benefit pension plan;
• The NuStar Excess Thrift Plan, a benefit plan to those employees whose compensation and/or annual contributions
under the Thrift Plan are subject to the limitations applicable to qualified retirement plans;
• The NuStar Excess Pension Plan, a benefit plan to a select group of management or other highly compensated
employees; and
• The NuStar GP, LLC Retiree Welfare Benefits Plan, a medical benefits plan for certain retired employees.
We do not expect this transfer of employees and related benefit plans to materially change our expenses since we currently
reimburse NuStar GP, LLC for all employee costs attributable to us. Our consolidated balance sheet will reflect employee-
related obligations to external parties instead of related party payables to NuStar GP, LLC.
On January 28, 2016, at a special meeting of unitholders, NuStar Energy’s unitholders approved the Fifth Amended and
Restated 2000 Long-Term Incentive Plan (the Amended Plan), which, among other items, provided that NuStar Energy could
use newly issued units from NuStar Energy to satisfy unit awards. The unitholder vote approving the Amended Plan on
January 28, 2016, coupled with the subsequent transfer of the employees of NuStar GP, LLC into NuStar Services Company
LLC, will result in the classification of substantially all of our currently outstanding and subsequently issued awards as equity
awards. At the time of the transfer of employees, NuStar Services Company LLC will assume obligations associated therewith,
including all outstanding awards, and we intend to satisfy substantively all of the vestings of such awards with newly issued
units of NuStar Energy.
105
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, 2015.
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 Form 10-K, 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.
106
Table of Contents
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 19, 2016.
Name
William E. Greehey
Bradley C. Barron
J. Dan Bates
Dan J. Hill
Robert J. Munch
W. Grady Rosier
Mary Rose Brown
Thomas R. Shoaf
Jorge A. del Alamo
Amy L. Perry
Karen M. Thompson
Age
79
50
71
75
64
67
59
57
46
47
48
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. Munch. 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.
107
Table of Contents
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 the 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. Munch became a director of NuStar GP, LLC in January 2016. He served as General Manager and Head of Corporate &
Investment Banking of Mizuho Bank, Ltd. from 2006 to 2013 and as Deputy General Manager, Origination, of Mizuho Bank,
Ltd. from 2005 to 2006. Prior to his service with Mizuho Bank Ltd., Mr. Munch also served in several senior management
positions with Canadian Imperial Bank of Commerce and CIBC World Markets from 1980 to 2001 and Fidelity Union
Bancorporation (now Wells Fargo) from 1973 to 1980.
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 joining 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 for 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.
108
Table of Contents
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 Managing 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. We believe that our directors, executive officers and greater than
10% unitholders have filed all Section 16(a) reports by the applicable deadlines with respect to the year ended December 31,
2015, other than one late Form 5 with respect to a gift of units made by Mr. Greehey during December 2015.
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 we file 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. Munch and Mr. Rosier. The Board has determined that Mr. Bates is an “audit committee
financial expert” (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 2015. 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, 2015,
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 Auditing Standard No. 16,
“Communications with Audit Committees,” issued by the PCAOB. 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.
109
Table of Contents
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, 2015.
Members of the Audit Committee:
J. Dan Bates (Chairman)
Dan J. Hill
Robert J. Munch
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.
110
Table of Contents
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, a copy of which is available on NuStar Energy’s website at www.nustarenergy.com. The
members of the Compensation Committee are Mr. Hill (Chairman), Mr. Bates, Mr. Munch 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 2015.
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
Robert J. Munch
W. Grady Rosier
COMPENSATION DISCUSSION AND ANALYSIS
Executive Compensation Philosophy
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 growth for our unitholders.
Compensation for our NEOs primarily consists of base salary, an annual incentive bonus and long-term, equity-
based incentives. Our NEOs participate in the same group benefit programs available to our salaried employees in
the United States. In addition, as discussed in the section titled “Post-Employment Benefits” below in this
Compensation Discussion and Analysis, our NEOs may participate in certain non-qualified, retirement-related
programs. Our NEOs 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 predominant
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.
111
Table of Contents
Our NEOs for the year ended December 31, 2015 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 (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 independent directors who are not participants in our executive
compensation programs. Policies adopted by the Compensation Committee are implemented by our Human
Resources department.
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 our
NEOs, the Compensation Committee:
•
•
•
•
•
establishes and approves target compensation levels for each NEO;
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 our NEOs.
In making determinations about total compensation for our NEOs, 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 NEO’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 relative to his or her 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 has been 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 Compensation 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 historically 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 (MLPs) 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. Prior to
2014, our peer group was composed of MLPs and independent, regional refining companies against which we felt
that we competed for executive talent at the time (the Pre-2014 Compensation Comparative Group). During 2014,
after we sold our refining assets and our remaining 50% interest in the asphalt business, the Compensation
Committee, in consultation with management and BDO, reevaluated our peer group in view of those changes and
removed the independent refining companies from our peer group. Since July 2014, our peer group (the Current
Compensation Comparative Group) has been composed entirely of MLPs against which we believe we compete for
executive talent. The competitive data regarding the companies in the Pre-2014 Compensation Comparative Group
112
Table of Contents
and the Current Compensation Comparative Group is derived from their respective publicly filed annual proxy
statements or Annual Reports on Form 10-K.
PRE-2014 COMPENSATION COMPARATIVE GROUP
The companies included in the Pre-2014 Compensation Comparative Group are listed below.
Company
1. Boardwalk Pipeline Partners, LP
2. Buckeye Partners L.P.
3. EnLink Midstream Partners, LP
4. Enbridge Energy Partners, L.P.
5. Energy Transfer Partners, L.P.
6. Enterprise Products 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
EEP
ETP
EPD
KMP
MMP
MWE
OKS
PAA
RGP
SXL
HFC
WNR
CURRENT COMPENSATION COMPARATIVE GROUP
Since the Compensation Committee approved the Current Compensation Comparative Group in July 2014, several
of the companies on the list have been, or are in the process of, merging or consolidating. The table below lists the
companies in the Current Compensation Comparative Group after giving effect to all such transactions that have
closed prior to February 19, 2016, with the relevant transactions described in the footnotes following the table.
Company (1)
1. Arc Logistics Partners LP
2. Boardwalk Pipeline Partners, LP
3. Buckeye Partners, L.P.
4. Enable Midstream Partners, LP
5. Enbridge Energy Partners, L.P.
6. Energy Transfer Partners, L.P. (2)
7. EnLink Midstream Partners, LP
8. Enterprise Products Partners L.P.
9. Genesis Energy, L.P.
10. Holly Energy Partners, L.P.
11. Magellan Midstream Partners, L.P.
12. MPLX LP
13. Phillips 66 Partners LP
14. Plains All American Pipeline, L.P.
15. Sunoco Logistics Partners L.P.
16. Tesoro Logistics LP
17. Valero Energy Partners LP
18. Western Refining Logistics, LP
113
Ticker
ARCX
BWP
BPL
ENBL
EEP
ETP
ENLK
EPD
GEL
HEP
MMP
MPLX
PSXP
PAA
SXL
TLLP
VLP
WNRL
Table of Contents
(1) The following companies have been removed from the Current Compensation Comparative Group originally
established in July 2014 as a result of the transactions described in this footnote: Access Midstream Partners,
L.P. merged with Williams Partners L.P. in February 2015; Atlas Pipeline Partners, L.P. was acquired by Targa
Resources Partners LP in February 2015; Kinder Morgan Energy Partners, L.P. was acquired by Kinder
Morgan, Inc. in November 2014; MarkWest Energy Partners, L.P. was acquired by MPLX LP in December
2015; Regency Energy Partners LP was acquired by Energy Transfer Partners, L.P. in April 2015; and Targa
Resources Partners LP was acquired by Targa Resources Corp. in February 2016.
(2) Energy Transfer Equity, L.P. (ETE) owns the general partner of, 100% of the incentive distribution rights in, and
certain common and other units in Energy Transfer Partners, L.P. ETE is working to obtain Federal Trade
Commission approval to acquire The Williams Companies, Inc., the general partner of Williams Partners L.P.
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 specific executive positions reported in certain Towers Watson Executive Compensation
surveys. We refer to the competitive survey data, together with the Pre-2014 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 of the NEOs. Recommendations regarding
NEO compensation, other than the CEO’s, 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 NuStar Energy.
The recommendations are then reviewed by the Compensation Committee, which may accept the recommendations
or may make adjustments to the recommended compensation based on the Compensation Committee’s 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 the Compensation Committee’s
independent evaluation of the CEO’s contributions to NuStar Energy’s performance.
Each July, the Compensation Committee reviews each NEO’s 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 NEOs from an internal
equity perspective and review of reports on the compensation history of each NEO. Based on these reviews and
evaluations, the Compensation Committee establishes annual salary rates for each NEO 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 NEOs for the current year and targets for annual incentive bonus
and long-term incentive grants
Consider grants of restricted units to employees and NEOs 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 2015 long-term incentive grants is discussed below under
“Performance Units” and “Restricted Units.”
114
Table of Contents
Elements of Executive Compensation
Our executive compensation programs, including for our NEOs, 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 individual’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
NEOs on improving NuStar Energy’s distributable cash flow (DCF), a non-GAAP measure of financial
performance, which is widely regarded among the MLP investment community as a significant determinant of an
MLP’s operating performance. The calculation of DCF is discussed more fully in the section below titled “Annual
Incentive Bonus-Company Performance Objectives.” Our long-term equity incentive awards are designed to directly
tie an NEO’s financial reward opportunities with the rewards to unitholders 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 NEO’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 our 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 compensation, the Compensation Committee considers the aggregate amount of compensation payable to
each NEO 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 NEOs 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 NEO’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 NEO’s incentive
compensation to NuStar Energy’s performance more closely aligns the NEO’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.
115
Table of Contents
The following table summarizes the relative size of base salary and incentive compensation targets for 2015 for each
of our NEOs:
Name
Barron
Shoaf
Brown
Perry
Thompson
Target Percentage of Total Direct Compensation
Annual
Incentive Bonus (%)
25
19
19
22
22
Long-Term
Incentives (%)
50
48
48
39
39
Base Salary (%)
25
32
32
39
39
TOTAL (%) (1)
100
100
100
100
100
(1) The sum of 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 NEO’s ability to lead, communicate and successfully adhere 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.
The Compensation Committee uses its evaluation of individual performance to supplement the objective
compensation criteria and adjust an NEO’s recommended compensation. For example, although an individual’s
indicated bonus may be calculated to be $100,000 based on NuStar Energy’s performance, the individual’s
performance evaluation might result in a reduction or increase in that amount.
Base Salaries
The base salaries for our NEOs are reviewed annually by the Compensation Committee based on recommendations
of our CEO, with input from BDO and our Human Resources department. 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 NEO’s 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.
Effective January 1, 2014, 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
to reflect their respective promotions and increased responsibilities. In July 2014, BDO performed a comprehensive
review of our NEOs’ Total Direct Compensation. Effective July 1, 2014, 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 to remain competitive with the
Compensation Comparative Data.
116
Table of Contents
For 2015, the Committee considered, among other factors, the Consumer Price Index, the average base salary
increase anticipated by nationwide compensation surveys, the increases required by NuStar Energy’s union contracts
and the anticipated increases by other local companies. Effective July 1, 2015, after consideration and 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 to remain competitive,
as presented in the table below:
Name
Annualized Base Salary at
December 31, 2015 ($)
July 1, 2015 Increase to Prior
Annualized Salary ($)
Barron
Shoaf
Brown
Perry
Thompson
Annual Incentive Bonus
540,000
339,500
365,700
267,800
267,800
50,000
9,900
10,700
7,800
7,800
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’s performance.
In July 2014, following BDO’s comprehensive review of our NEOs’ Total Direct Compensation and 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%. In July 2015, after consultation with BDO and the Chairman, the
Compensation Committee raised the annual incentive bonus target for Mr. Barron from 90% to 100%. The
Compensation Committee did not make any changes to the annual incentive bonus targets for the other NEOs during
2015.
The following table shows each NEO’s annual bonus target for the fiscal year ended December 31, 2015.
Name
Barron
Shoaf
Brown
Perry
Thompson
Annual Incentive Bonus Target
(% of Eligible Earnings)
100
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 NEO paid $200,000 with 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, as well as 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.
117
Table of Contents
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 NEO’s 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 2015, 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 operating performance. As such, the Compensation Committee
believes the measure appropriately aligns our management’s interest with our unitholders’ interest in 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, unrealized gains and losses arising from certain derivative contracts
and other non-cash items, including non-cash gains or losses. We further adjust our earnings by subtracting our
aggregate annual reliability capital expenditures, adding the aggregate annual amount of cash distributions received
from equity investments in joint ventures and adding certain cash receipts not included in net income.
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 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 2015, 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 1.01 times. After achieving a 100% bonus, incremental DCF earned would be
shared between the bonus pool and NuStar Energy until employees achieve a 200% bonus.
Determination of Awards
For the 2015 annual incentive bonus determination, the Compensation Committee reviewed NuStar Energy’s DCF
against the established target of attaining a coverage ratio of 1.01 times and considered the performance of each
NEO to determine the amount of incentive award earned. Based on this review, the Compensation Committee set the
bonus award for our NEOs at 155%. Actual bonuses awarded are shown in the following table:
Name
Barron
Shoaf
Brown
Perry
Thompson
Long-Term Incentive Awards
Bonuses Paid For 2015 ($)
800,000
311,000
335,000
225,000
225,000
We provide unit-based, long-term incentive compensation for employees, including our NEOs, and for our non-
employee directors through our 2000 Long-Term Incentive Plan (as amended and restated from time to time, the
2000 LTIP). 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. On
January 28, 2016, at a special meeting of unitholders, NuStar Energy’s unitholders approved the Fifth Amended and
Restated 2000 LTIP (the Amended Plan). The Amended Plan differs from the Fourth Amended and Restated 2000
Long-Term Incentive Plan in that, among other things, the Amended Plan:
118
Table of Contents
•
•
•
permits common units available for issuance under the Amended Plan to be newly issued in addition to
outstanding common units acquired from an affiliate;
has been updated to delete certain obsolete provisions;
has been updated to reflect certain technical changes in tax laws and for accounting; and
• will not terminate until ten years from the new effective date.
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.
Effective January 1, 2014, 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 to reflect their
respective promotions and increased responsibilities. After BDO’s comprehensive review of our NEOs’ Total Direct
Compensation in July 2014 and with the recommendations of 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 in July 2014. The
Compensation Committee did not make any changes to the long-term incentive targets for our NEOs during 2015.
The following table shows each NEO’s long-term incentive target for 2015 (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
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
(including our NEOs). 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 each NEO 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 each NEO 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 long-term incentive 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 NEO’s total NuStar Energy long-term incentive target. The
Compensation Committee presently expects to grant restricted units on an annual basis. The NEOs’ long-term
incentive targets include approximately 70% NuStar Energy restricted units to be granted by the Compensation
Committee under the 2000 LTIP and 30% NuStar GP Holdings restricted units to be granted by NuStar GP
Holdings’ compensation committee under its long-term incentive plan (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 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, and distribution equivalents are paid in cash quarterly for all unvested NuStar
119
Table of Contents
Energy and NuStar GP Holdings restricted units. 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 2015, the Compensation Committee and management made a determination that the grants for employees,
including the NEOs, and for the 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 2015 annual grants were not effective until November 16, 2015. The following table
sets forth the restricted units granted to each of our NEOs in 2015.
Name
Barron
Shoaf
Brown
Perry
Thompson
Performance Units
Restricted Units Granted in 2015
NuStar Energy
10,000
4,650
5,005
2,445
2,445
NuStar GP Holdings
7,300
3,430
3,695
1,805
1,805
Performance units comprise approximately 35% of each of our NEOs’ total NuStar Energy long-term incentive
targets and typically have been granted in the first quarter 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 was tied to NuStar Energy’s
total unitholder return (TUR) as compared with the Pre-2014 Compensation Comparative Group. NuStar Energy’s
TUR was defined as 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 was 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 was compared to the Pre-2014 Compensation Comparative Group
and ranked by quartile. Our NEOs then earned 0%, 50%, 100% or 150% of that portion of the initial grant amount
that was eligible for vesting, depending upon whether our TUR was in the last, third, second or first quartile,
respectively, and they earned 200% if we ranked highest in the group. Amounts not earned in a given performance
period could be carried forward for one additional performance period and up to 100% of the carried amount could
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 operating performance. 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 NEOs’ interest with our unitholders’ interest in
increasing distributions in a prudent manner over time.
In July 2014, the Compensation Committee determined that the target performance measure for the 2014
performance unit awards would be NuStar Energy achieving a distribution coverage ratio, after taking into account
the aggregate expense of the performance units (DCR), of 1:1 for 2014 and that the target metric for performance
unit vesting with respect to 2015 and each year thereafter would 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 retained the ability to designate one or more DCRs above the targeted DCR as goals to be used to determine
vesting greater than 100% (up to 200%) of performance units available for vesting in that year. Each 2014
performance unit award is subject to vesting in three annual increments, based upon our DCR during the one-year
120
Table of Contents
periods that end on December 31 of each year following the date of grant. Notwithstanding anything above, the
Compensation Committee retained full discretion to increase the vesting determination for any individual (up to the
200% cap).
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%.
For 2015, performance units were awarded by the Compensation Committee on January 29, 2015 pursuant to the
2000 LTIP, with each 2015 performance unit award 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.
The target metric for performance unit vesting with respect to 2015 was NuStar Energy achieving a DCR of 1.01:1,
with all units eligible for vesting as follows based on the DCR for 2015:
Level
DCR
% Performance Units Earned
Below Threshold
Threshold
Target
Exceeds Target
Maximum
Below 1.00 : 1
1.00 : 1
1.01 : 1
1.05 : 1
1.10 : 1
0%
90%
100%
150%
200%
Eligible units would not vest and would be forfeited if the DCR for 2015 was less than 1.00:1. If the DCR were to
fall between the benchmarks described above, the percentage vesting would be determined through straight-line
interpolation. The Compensation Committee retained the full discretion to vest up to 200% of performance units
available for vesting, regardless of the DCR that NuStar Energy attained for the year.
The number of performance units granted in 2015 was determined by multiplying the annual base salary rate by the
long-term incentive target percentage, and then multiplying that product by 35%. That product was then divided by
the assumed value of an individual unit, which was 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 reflecting the risk that the award
might be forfeited. The following table sets forth the performance units granted to our NEOs in 2015.
Name
Barron
Shoaf
Brown
Perry
Thompson
Performance Unit Grants in 2015
8,000
3,939
4,242
2,070
2,070
On January 28, 2016, the Compensation Committee met and discussed NuStar Energy’s performance for the
performance period ended December 31, 2015, and determined that NuStar Energy’s TUR was in the second
quartile of its peer group for that three-year performance period. As a result, the performance units granted in 2012
and 2013 that were available to vest for the performance period ending on December 31, 2015 vested at 100%, in
accordance with the award terms. On January 28, 2016, the Compensation Committee also determined that NuStar
Energy achieved a DCR of 1.11:1 for 2015 and, in accordance with the award terms, the performance units available
to vest for the 2014 awards and 2015 awards vested at 200%.
Perquisites and Other Benefits
Perquisites
We provide only minimal perquisites to our NEOs. Mr. Barron, Mr. Shoaf, Ms. Brown and Ms. Perry each received
federal income tax preparation services and each of our NEOs received personal liability insurance in 2015. For
more information on perquisites, see the Summary Compensation Table and its footnotes.
121
Table of Contents
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. Our NEOs 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 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 ($265,000 for 2015), 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 2015.
Change of Control Severance Arrangements
We entered into change of control severance agreements with each of our 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 and are automatically extended for one year upon each anniversary unless we give notice not to
extend. 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 NEO’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.
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), death or
disability; (2) termination by the NEO for “good reason” (as defined in the agreements); (3) termination by the NEO
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 these executives following a change of control, and to compensate
them 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.”
122
Table of Contents
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 is not related to 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.
Historically, NuStar GP, LLC has accounted 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 and 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 under its
long-term incentive plan to its directors, as well as the employees 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.
However, as described in Item 13, under the Services Agreement, NuStar Energy historically has been obligated to
pay for all costs of NuStar GP, LLC’s employees working on NuStar Energy’s behalf (including unit-based
compensation) and NuStar GP Holdings was charged 1.0% of NuStar GP, LLC’s domestic unit compensation
expense under the Services Agreement.
As described in Item 13 below, on March 1, 2016, NuStar GP, LLC intends to transfer and assign to NuStar Services
Company LLC (NuStar Services), a wholly owned subsidiary of NuStar Energy, employment of all of NuStar GP,
LLC’s employees. Our executive officers will continue to serve as officers of NuStar GP Holdings, NuStar GP,
LLC, and also will serve as officers of NuStar Services and other NuStar Energy subsidiaries. In connection with
the transfer and assignment, we intend to amend and restate the Services Agreement such that, beginning March 1,
2016, NuStar GP Holdings and NuStar Energy will receive all management and administrative services from NuStar
Services. NuStar Energy will reimburse NuStar Services for all services provided to NuStar Energy, including
payroll and benefit costs, as well as NuStar Energy unit-based compensation costs. NuStar GP Holdings will pay
NuStar Services an administrative services fee, subject to certain adjustments, but it will no longer pay 1.0% of
NuStar GP, LLC’s domestic bonus and unit compensation expenses. Instead, NuStar GP Holdings will retain the
expense associated with any NuStar GP Holdings common unit awards or other compensation that it provides to its
officers. By approving the Amended Plan on January 28, 2016 to permit new issuances of NuStar Energy common
units and then transferring the employees of NuStar GP, LLC into the NuStar Energy consolidated affiliate group,
substantially all of our currently outstanding and subsequently issued awards will be classified as equity awards,
which would reduce the volatility in the expense related to our awards. In addition, we believe that these changes
will put our structure, approach to long-term incentives and accounting more in-line with those of our peer MLPs.
Under the long-term incentive plans, certain awards provided that the grantee’s award vests immediately upon
retirement. Compensation expense was recognized immediately if these awards were granted to retirement-eligible
employees, as defined in each award. In addition, if during a vesting period of a grant the grantee would become
retirement-eligible, then compensation expense associated with the grant was recognized from the grant date
through the grantee’s retirement eligibility date.
123
Table of Contents
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 MLPs, 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 likely would not qualify as “performance-based”
compensation and, in such event, would be subject to such deduction restrictions.
Compensation-Related Policies
Unit Ownership Guidelines
We believe that ownership of NuStar Energy units aligns 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 initially 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 subsequently were amended to include ownership of either NuStar GP Holdings units or NuStar
Energy units.
During 2015, at the request of the Board and its committees, management undertook a review of the unit ownership
and retention guidelines. Management discussed the results of its review with BDO, which agreed with
management’s conclusions. The Compensation Committee and the Nominating/Governance and Conflicts
Committee of NuStar GP, LLC’s Board, as well as the board of directors of NuStar GP Holdings, have approved the
updated unit ownership and retention guidelines described below.
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 two times their annual cash retainer.
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.
124
Table of Contents
Officer Unit Ownership Guidelines
Unit ownership guidelines for the officers set forth below are as follows:
Officer
CEO/President
EVP serving on CEO’s officer committee
SVP serving on CEO’s officer committee
VP serving on CEO’s officer committee
Value of NuStar Energy Units and/or
NuStar GP Holdings Units Owned
4.0x base salary
3.0x base salary
2.0x base salary
1.0x base salary
The officers subject to the unit ownership and retention guidelines are expected to meet the applicable guidelines
within five years of becoming subject to the guidelines and continuously own sufficient units to meet the guidelines,
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, such as by 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 also are required to obtain 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 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.
125
Table of Contents
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, 2015, December
31, 2014 and December 31, 2013 to NuStar GP, LLC’s CEO, CFO and to its three other most highly compensated
executive officers serving during 2015. Mr. Shoaf, Ms. Perry and Ms. Thompson were not executive officers prior to
2014 and, accordingly, their compensation is reported only with respect to 2015 and 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.
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
Year
2015
2014
2013
2015
2014
2015
2014
2013
2015
2014
2015
2014
Salary
($)
515,000
Bonus
($)(1)
800,000
Unit
Awards
($)(2)
1,077,860
460,000
683,100
1,086,708
327,160
334,550
125,000
311,000
324,800
321,552
360,350
349,785
345,983
263,900
250,000
335,000
346,287
110,000
225,000
226,875
530,915
515,023
564,231
554,552
607,456
546,876
270,770
294,772
263,900
225,000
270,770
250,000
226,875
302,421
Non-Equity
Incentive
Plan
Compensation
($)
Option
Awards
($)
Change in Pension
Value
and Nonqualified
Deferred
Compensation
Earnings
($)(3)
All Other
Compensation
($)(4)
Total
($)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
47,061
147,448
2,328
47,692
142,990
173,968
136,213
48,510
18,483
51,525
35,677
2,475,598
29,815
2,407,071
21,818
1,007,221
21,729
1,229,994
21,703
1,375,276
23,836
1,447,706
23,202
1,462,943
24,302
1,075,671
17,074
8,865
795,227
832,037
16,350
68,726
19,525
795,545
16,466
864,488
(1) Bonus amounts for 2015 were paid in February 2016 with respect to 2015 performance. 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. Bonuses were determined taking into consideration
NuStar Energy’s performance in the applicable year, the individual NEO’s targets and the NEO’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 the “Long-Term Incentive
Awards” section and the “Impact of Accounting and Tax Treatments-Accounting Treatment” section of
“Compensation Discussion and Analysis” above in this Item 11 and the footnotes to the Grants of Plan-
Based Awards During the Year Ended December 31, 2015 table below in this Item 11 for information
regarding the vesting schedules and the assumptions made in the valuation.
126
Table of Contents
(3) The following table identifies the separate amounts attributable to (A) the aggregate change in the actuarial
present value of each NEO’s 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
2015
2014
2013
2015
2014
2015
2014
2013
2015
2014
2015
2014
(A) ($)
(B) ($)
TOTAL ($)
47,061
147,448
2,328
47,692
142,990
173,968
136,213
48,510
18,483
51,525
16,350
68,726
—
—
—
—
—
—
—
—
—
—
—
—
47,061
147,448
2,328
47,692
142,990
173,968
136,213
48,510
18,483
51,525
16,350
68,726
(4) The amounts reported in this column for 2015 consist of the following for each NEO:
Company
Contribution
to Thrift
Plan ($)
15,900
15,900
14,307
14,859
15,834
Company
Contribution
to Excess
Thrift Plan ($)
15,000
3,614
7,314
—
—
Tax
Preparation
($)
Personal
Liability
Insurance
($)
850
850
850
850
—
1,365
1,365
1,365
1,365
1,365
Name
Barron
Shoaf
Brown
Perry
Thompson
Executive
Health
2,562
Exams ($)(a) TOTAL ($)
35,677
21,729
23,836
17,074
19,525
2,326
—
—
—
(a) The amount reported is the difference between the value of the respective NEO’s health exams and the
value of NuStar Energy’s all-employee wellness assessments.
127
Table of Contents
GRANTS OF PLAN-BASED AWARDS
DURING THE YEAR ENDED DECEMBER 31, 2015
The following table provides information regarding grants of plan-based awards to the NEOs during 2015.
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
($/Unit)
Grant Date
Fair Value of
Unit and
Unit Option
Awards ($)
1/29/2015
10/29/2015
10/29/2015
1/29/2015
10/29/2015
10/29/2015
1/29/2015
10/29/2015
10/29/2015
1/29/2015
10/29/2015
10/29/2015
1/29/2015
10/29/2015
10/29/2015
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
8,000
16,000
—
—
—
—
3,939
7,878
—
—
—
—
4,242
8,484
—
—
—
—
2,070
4,140
—
—
—
—
2,070
4,140
—
—
—
—
—
10,000
7,300
—
4,650
3,430
—
5,005
3,695
—
2,445
1,805
—
2,445
1,805
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
473,920
430,200
173,740
233,346
200,043
81,634
251,296
215,315
87,941
122,627
105,184
42,959
122,627
105,184
42,959
(4)
(5)
(6)
(4)
(5)
(6)
(4)
(5)
(6)
(4)
(5)
(6)
(4)
(5)
(6)
Name
Grant Date
Barron
Shoaf
Brown
Perry
Thompson
1/29/2015 (1)
(2)
11/16/2015
11/16/2015
1/29/2015
11/16/2015
11/16/2015
1/29/2015
11/16/2015
11/16/2015
1/29/2015
11/16/2015
11/16/2015
1/29/2015
11/16/2015
11/16/2015
(3)
(1)
(2)
(3)
(1)
(2)
(3)
(1)
(2)
(3)
(1)
(2)
(3)
(1) Performance units were awarded by the Compensation Committee on January 29, 2015 pursuant to the
2000 LTIP, with each award 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. The target
metric for performance unit vesting with respect to 2015 is NuStar Energy achieving a DCR of 1.01:1, with
all units eligible for vesting as follows based on the DCR for 2015:
Level
DCR
% Performance Units Earned
Below Threshold
Threshold
Target
Exceeds Target
Maximum
Below 1.00 : 1
1.00 : 1
1.01 : 1
1.05 : 1
1.10 : 1
0%
90%
100%
150%
200%
Eligible units would not vest and would be forfeited if the DCR for 2015 was less than 1.00:1. If the DCR
were to fall between the benchmarks described above, the percentage vesting would be determined through
straight-line interpolation. The Compensation Committee retained the full discretion to vest up to 200% of
performance units available for vesting, regardless of the DCR that NuStar Energy attained for the year.
For the performance period ended December 31, 2015, we achieved a DCR of 1.11:1 and the performance
units available to vest for the 2015 awards vested at 200%.
128
Table of Contents
(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, 2015, 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.
(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, 2015,
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 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.
(4) 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, $59.24. 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. See
footnote (1) above for the vesting schedule and the actual performance level attained for 2015 for the
performance unit awards.
(5) The grant date fair value for restricted units was determined by multiplying the number of NuStar Energy
restricted units that were granted by the NYSE closing unit price of our units on the date of grant, $43.02.
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 and see
footnote (2) above for the vesting schedule.
(6) 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, $23.80. 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 and see footnote (3) above for the vesting schedule.
129
Table of Contents
OUTSTANDING EQUITY AWARDS
AT DECEMBER 31, 2015
The following table provides information regarding our NEOs’ unvested restricted units and the target amount of our
NEOs’ unvested performance units as of December 31, 2015. The value of NuStar Energy restricted units or
performance units reported below is equal to the number of restricted units or performance units reflected in the
table, as applicable, multiplied by $40.10, the NuStar Energy closing price on the NYSE on December 31, 2015.
The value of the NuStar GP Holdings restricted units reported below is equal to the number of restricted units
reflected in the table multiplied by $21.15, the NuStar GP Holdings closing price on the NYSE on
December 31, 2015. The footnotes to the table describe the vesting schedules for the unvested restricted units and
the unvested performance units reflected in the table. None of our NEOs had outstanding unit options as of
December 31, 2015.
Option Awards
Unit Awards
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)
Option
Exercise
Price ($)
Option
Expiration
Date
Number of
Units
That Have
Not
Vested (#)
Market
Value of
Units That
Have Not
Vested ($)
Equity
Incentive
Plan
Awards:
Number of
Unearned
Units
or Other
Rights
That Have
Not
Vested (#)
Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Units or
Other Rights
That
Have Not
Vested ($)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
20,582(1)
14,642(2)
—
10,694(3)
7,637(4)
—
13,133(5)
9,395(6)
—
6,284(7)
2,825(8)
—
6,204(9)
2,825(10)
—
15,791(11)
633,219
825,338
309,678
—
428,829
161,523
—
—
8,537(12)
—
—
—
—
342,334
—
—
—
9,974(13)
399,957
526,633
198,704
—
—
—
—
—
3,498(14)
140,270
251,988
59,749
—
—
—
—
—
3,498(15)
140,270
248,780
59,749
—
—
—
—
Name
Barron
Shoaf
Brown
Perry
Thompson
(1) Mr. Barron’s restricted NuStar Energy units consist of: 628 restricted units granted December 16, 2011;
1,380 restricted units granted December 19, 2012; 2,850 restricted units granted December 16, 2013; 5,724
restricted units granted December 19, 2014; and 10,000 restricted units granted November 16, 2015. All of
Mr. Barron’s NuStar Energy restricted units vest in 1/5 increments over five years, beginning on the first
anniversary of the date of grant.
(2) Mr. Barron’s restricted NuStar GP Holdings units consist of: 478 restricted units granted December 16,
2011; 956 restricted units granted December 19, 2012; 2,064 restricted units granted December 16, 2013;
3,844 restricted units granted December 19, 2014; and 7,300 restricted units granted November 16, 2015.
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.
130
Table of Contents
(3) Mr. Shoaf’s restricted NuStar Energy units consist of: 309 restricted units granted December 16, 2011; 936
restricted units granted December 19, 2012; 1,911 restricted units granted December 16, 2013; 2,888
restricted units granted December 19, 2014; and 4,650 restricted units granted November 16, 2015. All of
Mr. Shoaf’s NuStar Energy 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 GP Holdings units consist of: 236 restricted units granted December 16,
2011; 648 restricted units granted December 19, 2012; 1,383 restricted units granted December 16, 2013;
1,940 restricted units granted December 19, 2014; and 3,430 restricted units granted November 16, 2015.
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.
(5) Ms. Brown’s restricted NuStar Energy units consist of: 678 restricted units granted December 16, 2011;
1,492 restricted units granted December 19, 2012; 2,850 restricted units granted December 16, 2013; 3,108
restricted units granted December 19, 2014; and 5,005 restricted units granted November 16, 2015. All of
Ms. Brown’s NuStar Energy 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 GP Holdings units consist of: 516 restricted units granted December 16,
2011; 1,032 restricted units granted December 19, 2012; 2,064 restricted units granted December 16, 2013;
2,088 restricted units granted December 19, 2014; and 3,695 restricted units granted November 16, 2015.
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.
(7) Ms. Perry’s restricted NuStar Energy units consist of: 285 restricted units granted December 16, 2011; 744
restricted units granted December 19, 2012; 1,290 restricted units granted December 16, 2013; 1,520
restricted units granted December 19, 2014; and 2,445 restricted units granted November 16, 2015. All of
Ms. Perry’s NuStar Energy 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 GP Holdings units consist of: 1,020 restricted units granted December 19,
2014; and 1,805 restricted units granted November 16, 2015. 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.
(9) Ms. Thompson’s restricted NuStar Energy units consist of: 285 restricted units granted December 16, 2011;
664 restricted units granted December 19, 2012; 1,290 restricted units granted December 16, 2013; 1,520
restricted units granted December 19, 2014; and 2,445 restricted units granted November 16, 2015. All of
Ms. Thompson’s NuStar Energy 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 GP Holdings units consist of: 1,020 restricted units granted December
19, 2014; and 1,805 restricted units granted November 16, 2015. 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.
(11) Mr. Barron’s unvested NuStar Energy performance units consist of: 492 units granted April 24, 2012; 1,966
units granted January 30, 2013; 5,333 units granted July 23, 2014; and 8,000 units granted January 29,
2015.
The performance units awarded in 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 on
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. On January 28, 2016, the Compensation
Committee determined that, for the performance period ended December 31, 2015, NuStar Energy’s TUR
was in the second quartile of its peer group, which resulted in 100% vesting on January 28, 2016 of the
units eligible to vest under the 2012 and 2013 performance unit awards.
131
Table of Contents
The performance units awarded in 2014 and 2015 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. The target metric for performance unit vesting
with respect to 2015 is NuStar Energy achieving a DCR of 1.01:1. All units awarded in 2014 and 2015 and
eligible for vesting vest as follows based on the DCR for 2015:
Level
Below Threshold
Threshold
Target
Exceeds Target
Maximum
DCR
Below 1.00 : 1
1.00 : 1
1.01 : 1
1.05 : 1
1.10 : 1
% Performance Units Earned
0%
90%
100%
150%
200%
On January 28, 2016, the Compensation Committee determined that, for the performance period ended
December 31, 2015, NuStar Energy achieved a DCR of 1.11:1 and the performance units available to vest
for the 2014 and 2015 awards vested at 200% on January 28, 2016.
(12) Mr. Shoaf’s unvested NuStar Energy performance units consist of: 242 units granted April 24, 2012; 1,500
units granted January 30, 2013; 2,856 units granted July 23, 2014; and 3,939 units granted January 29,
2015. The performance units vest in accordance with the description in Footnote (11) above.
(13) Ms. Brown’s unvested NuStar Energy performance units consist of: 532 units granted April 24, 2012; 2,124
units granted January 30, 2013; 3,076 units granted July 23, 2014; and 4,242 units granted January 29,
2015. The performance units vest in accordance with the description in Footnote (11) above.
(14) Ms. Perry’s unvested NuStar Energy performance units consist of: 1,428 units granted July 23, 2014; and
2,070 units granted January 29, 2015. The performance units vest in accordance with the description in
Footnote (11) above.
(15) Ms. Thompson’s unvested NuStar Energy performance units consist of: 1,428 units granted July 23, 2014;
and 2,070 units granted January 29, 2015. The performance units vest in accordance with the description in
Footnote (11) above.
OPTION EXERCISES AND UNITS VESTED
DURING THE YEAR ENDED DECEMBER 31, 2015
The following table provides information regarding the vesting of restricted units and performance units held by our
NEOs during 2015. None of our NEOs exercised option awards during 2015 and none of our NEOs currently have
outstanding option awards.
Option Awards(1)
Unit Awards
Name
Number of Units
Acquired on Exercise (#)
Value Realized on
Exercise ($)
Number of Units
Acquired on Vesting (#)
Value Realized on
Vesting ($)(6)
Barron
Shoaf
Brown
Perry
Thompson
—
—
—
—
—
—
—
—
—
—
13,039(1)
7,413(2)
11,391(3)
2,706(4)
2,666(5)
544,416
309,928
473,288
107,239
105,874
(1) Mr. Barron's restricted NuStar Energy units vested in 2015 as follows: 606 units on January 26, 2015;
1,578 units on December 16, 2015; 2,121 units on December 19, 2015; and 491 units on December 30,
2015. Mr. Barron's restricted NuStar GP Holdings units vested in 2015 as follows: 1,166 units on
December 16, 2015; 1,439 units on December 19, 2015; and 410 units on December 30, 2015. On January
29, 2015, 5,228 of Mr. Barron’s NuStar Energy performance units vested.
132
Table of Contents
(2) Mr. Shoaf’s restricted NuStar Energy units vested in 2015 as follows: 296 units on January 26, 2015; 946
units on December 16, 2015; 1,190 units on December 19, 2015; and 235 units on December 30, 2015. Mr.
Shoaf’s restricted NuStar GP Holdings units vested in 2015 as follows: 697 units on December 16, 2015;
809 units on December 19, 2015; and 200 units on December 30, 2015. On January 29, 2015, 3,040 of Mr.
Shoaf’s NuStar Energy performance units vested.
(3) Ms. Brown’s restricted NuStar Energy units vested in 2015 as follows: 675 units on January 26, 2015;
1,628 units on December 16, 2015; 1,523 units on December 19, 2015; and 550 units on December 30,
2015. Ms. Brown’s restricted NuStar GP Holdings units vested in 2015 as follows: 1,204 units on
December 16, 2015; 1,038 units on December 19, 2015; and 458 units on December 30, 2015. On January
29, 2015, 4,315 of Ms. Brown’s NuStar Energy performance units vested.
(4) Ms. Perry’s restricted NuStar Energy units vested in 2015 as follows: 715 units on December 16, 2015; 752
units on December 19, 2015; and 270 units on December 30, 2015. Ms. Perry’s restricted NuStar GP
Holdings units vested in 2015 as follows: 255 units on December 19, 2015. On January 29, 2015, 714 of
Ms. Perry’s NuStar Energy performance units vested.
(5) Ms. Thompson’s restricted NuStar Energy units vested in 2015 as follows: 715 units on December 16,
2015; 712 units on December 19, 2015; and 270 units on December 30, 2015. Ms. Thompson’s restricted
NuStar GP Holdings units vested in 2015 as follows: 255 units on December 19, 2015. On January 29,
2015, 714 of Ms. Thompson’s NuStar Energy performance units vested.
(6) The value realized on vesting of NuStar Energy restricted units and performance 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:
Closing Prices for 2015 Vestings
Date
NuStar Energy Closing Price ($)
January 26, 2015
January 29, 2015
December 16, 2015
December 19, 2015
December 30, 2015
December 16, 2015
December 19, 2015
December 30, 2015
60.71
59.24
35.07
34.12
37.55
Date
NuStar GP Holdings Closing Price ($)
17.95
15.96
19.21
133
Table of Contents
POST-EMPLOYMENT COMPENSATION
PENSION BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 2015
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, 2015.
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)
248,381
324,617
350,182
319,758
345,670
419,356
139,906
33,256
210,544
36,376
—
—
—
—
—
—
—
—
—
—
(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, 2015 were determined using a
4.61% discount rate and the plans’ earliest unreduced retirement age (i.e., age 62). The present values
reflect post-retirement mortality rates based on the RP2006 generational mortality table projected using
scale MP2015. No decrements were included for pre-retirement termination, mortality or disability. Where
applicable, lump sums were determined based on a 4.11% 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
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
134
7.5
13.0
7.5
28.5
6.7
6.7
7.5
7.5
6.7
11.7
15.0
15.0
30.5
30.5
18.3
18.3
13.0
13.0
13.7
13.7
Table of Contents
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 the maximum amount allowable under 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 the 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 2015.
135
Table of Contents
NONQUALIFIED DEFERRED COMPENSATION
FOR THE YEAR ENDED DECEMBER 31, 2015
The following table provides information regarding contributions by NuStar GP, LLC and each of our NEOs under
our non-qualified defined contribution plan, the Excess Thrift Plan, during the year ended December 31, 2015. The
table also presents each NEO’s 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 2015 ($)(1)
Registrant
Contributions in
2015 ($)(2)
Aggregate
Earnings (Loss) in
2015 ($)(3)
Aggregate
Withdrawals/
Distributions ($)
—
—
—
—
—
15,000
3,614
7,314
—
—
(19,023)
(1,352)
(19,501)
—
—
Aggregate
Balance at
December 31,
2015 ($)(4)
47,765
6,553
44,966
—
—
—
—
—
—
—
(1) The NEOs made no contributions during 2015.
(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 2015 in the Summary
Compensation Table.
(3) Amounts include the earnings (excluding dividends, if any) and losses, if any, of each NEO’s respective
account in our Excess Thrift Plan.
(4) Amounts include the aggregate balance at year end, if any, of each NEO’s respective account in our Excess
Thrift Plan and include registrant contributions that were previously reported as compensation to each of
the NEOs in the “All Other Compensation” column in the Summary Compensation Table for 2015 and
previous years.
136
Table of Contents
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, 2015” and “Nonqualified Deferred Compensation For The Year Ended December 31,
2015” 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 occur in connection
with 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 NEO’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 NEO will automatically vest, restrictions
applicable to outstanding restricted units held by the NEO will lapse and all unvested performance units held by the
NEO will fully vest and become payable at 200% of target. Certain of the NEOs also are entitled to receive a
payment in an amount sufficient to make the NEO 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 NEO 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 NEO 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
a 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 agreements.
In the agreements, “cause” is defined to mean, generally, the willful and continued failure of the NEO to perform
substantially his or her duties, or the willful engaging by the NEO 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 NEO’s position, authority, duties and responsibilities;
failure of the successor of NuStar Energy to assume and perform under the agreement; and
relocation of the NEO or increased travel requirements.
137
Table of Contents
Except as otherwise noted, the values in the table below assume that a change of control occurred on December 31,
2015 and that the NEO’s employment terminated on that date.
Under the change of control severance agreements, if an NEO’s employment is terminated for “cause” following a
change of control, the NEO 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 and any
other benefits which the NEO would already be entitled to receive, 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 ($)(5)
Salary (1)
Barron
Shoaf
Brown
Perry
Thompson
Bonus (1)
Barron
Shoaf
Brown
Perry
Thompson
Pension and Excess Pension
Benefits
Barron
Shoaf
Brown
Perry
Thompson
Contributions under Defined
Contribution Plans
Barron
Shoaf
Brown
Perry
Thompson
Health and Welfare Plan
Benefits (6)
Barron
Shoaf
Brown
Perry
Thompson
—
—
—
—
—
800,000
321,552
346,287
226,875
226,875
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
800,000
321,552
346,287
226,875
226,875
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,080,000
679,000
731,400
401,700
401,700
1,600,000
643,104
692,574
340,313
340,313
221,429
177,017
200,966
51,365
60,076
61,800
39,028
43,242
22,289
23,751
27,479
37,510
19,758
15,965
28,132
138
Table of Contents
Executive Benefits and
Payments
Accelerated Vesting of Unit
Options
Barron
Shoaf
Brown
Perry
Thompson
Accelerated Vesting of
Restricted Units (7)
Barron
Shoaf
Brown
Perry
Thompson
Accelerated Vesting of
Performance Units (8)
Barron
Shoaf
Brown
Perry
Thompson
280G Tax Gross-Up (9)
Barron
Shoaf
Brown
Perry
Thompson
Totals
Barron
Shoaf
Brown
Perry
Thompson
Termination of
Employment by the
Company Other Than for
“Cause,” Death
or Disability, or by
the Executive for “Good
Reason” ($)(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 ($)(5)
—
—
—
—
—
1,135,016
590,352
725,337
311,737
308,529
1,266,438
684,668
799,914
280,540
280,540
2,058,757
1,059,042
—
—
—
7,450,919
3,909,721
3,213,191
1,423,909
1,443,041
—
—
—
—
—
1,135,016
590,352
725,337
311,737
308,529
1,266,438
684,668
799,914
280,540
280,540
—
—
—
—
—
3,201,454
1,596,572
1,871,538
819,152
815,944
—
—
—
—
—
1,135,016
590,352
725,337
311,737
308,529
1,266,438
684,668
799,914
280,540
280,540
—
—
—
—
—
3,201,454
1,596,572
1,871,538
819,152
815,944
—
—
—
—
—
1,135,016
590,352
725,337
311,737
308,529
1,266,438
684,668
799,914
280,540
280,540
—
—
—
—
—
2,401,454
1,275,020
1,525,251
592,277
589,069
(1) Per SEC regulations, for purposes of this analysis we assumed each NEO’s compensation at the time of
each triggering event to be as stated below. The listed salary is the NEO’s actual annualized rate of pay as
of December 31, 2015. The listed bonus amount represents the highest bonus earned by the executive in
any of the fiscal years 2013, 2014 and 2015 (the three years prior to the assumed change of control):
Name
Annual Salary ($)
Bonus ($)
Barron
Shoaf
Brown
Perry
Thompson
540,000
339,500
365,700
267,800
267,800
800,000
321,552
346,287
226,875
226,875
(2) The change of control severance agreements provide that if the company terminates the NEO’s
employment (other than for “cause,” death or “disability,” as defined in the agreements) or if the NEO
terminates his or her employment for “good reason,” as defined in the agreements, the NEO is generally
entitled to receive the following:
139
Table of Contents
(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 NEOs’ bonuses for the year of termination were paid at year
end);
(ii) two times the sum of the NEO’s (1.5 times for Ms. Perry and Ms. Thompson) annual base salary
plus the NEO’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 NEO 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 NEO’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 NEO’s employment is terminated by reason of his or her 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 NEO 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 NEO 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 NEO’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 NEO voluntarily terminates his or her 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 NEO 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 NEO 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 NEO 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) $40.10 (the closing price of NuStar Energy’s units on the NYSE on December 31, 2015)
or $21.15 (the closing price of NuStar GP Holdings’ units on the NYSE on December 31, 2015).
(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) $40.10 (the closing price of
NuStar Energy’s units on the NYSE on December 31, 2015).
(9) If any payment or benefit to Mr. Barron, Mr. Shoaf or Ms. Brown is determined to be subject to an excise
tax under Section 4999 of the Code, the impacted NEO is entitled to receive an additional payment to
adjust for the incremental tax cost of the payment or benefit. However, if it is determined that the NEO is
entitled to receive an additional payment to adjust for the incremental tax cost but the value of all payments
to the NEO does not exceed 100% of 2.99 times the NEO’s “base amount” (as defined by Section 280G(b)
(3) of the Code) (the Safe Harbor Amount), the additional payment will not be made and the amount
payable to the NEO will be reduced so that the aggregate value of all payments equals the Safe Harbor
Amount.
140
Table of Contents
DIRECTOR COMPENSATION
FOR THE YEAR ENDED DECEMBER 31, 2015
The following table provides a summary of compensation paid for the year ended December 31, 2015 to the
directors who served on the Board during 2015. The table shows amounts earned by such persons for services
rendered to NuStar GP, LLC in all capacities in which they served during 2015. Rodman D. Patton retired as a
member of the Board on April 22, 2015 and the table below reflects the compensation for his service on the Board
prior to his retirement. Robert J. Munch was appointed as a member of the Board on January 26, 2016.
Accordingly, because Mr. Munch did not serve as a director during 2015, there is no compensation reflected for him
in the table below.
Fees Earned or
Paid in Cash
($)(1)
Unit Awards
($)(3)
Option
Awards
($)(3)
Non-Equity
Incentive Plan
Compensation
($)
135,000
(2)
100,500
115,500
33,500
95,500
99,978
(2)
74,984
74,984
136,915
74,984
—
(2)
—
—
—
—
—
(2)
—
—
—
—
Name
William E. Greehey
Bradley C. Barron
J. Dan Bates
Dan J. Hill
Rodman D. Patton
W. Grady Rosier
Change in Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($)
All Other
Compensation
($)
n/a
(2)
n/a
n/a
n/a
n/a
—
(2)
—
—
—
—
TOTAL
($)
234,978
(2)
175,484
190,484
170,415
170,484
(1) The amounts disclosed in this column exclude reimbursement for expenses for 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 for Messrs. Greehey, Bates, Hill and Rosier represent the grant date fair value for the
November 16, 2015 grant of restricted NuStar Energy units to them as non-employee directors for the fiscal
year ended December 31, 2015 (2,324 restricted units for Mr. Greehey, as Chairman, and 1,743 restricted
units for each of Messrs. Bates, Hill and Rosier) based on the closing price of NuStar Energy’s units on the
NYSE on November 16, 2015 ($43.02). Mr. Patton retired from the Board during 2015. Accordingly, Mr.
Patton did not receive a restricted unit grant in 2015. The amount reported for Mr. Patton represents the
incremental value associated with the acceleration of 2,053 of Mr. Patton’s outstanding restricted units in
connection with his retirement, based on the closing price of NuStar Energy’s units on the NYSE on May 1,
2015 ($66.69). Please see “Compensation Discussion and Analysis-Impact of Accounting and Tax
Treatments-Accounting Treatment” above in this Item 11 for information regarding the assumptions made
in the valuation.
As of December 31, 2015, each director listed in the table above held the following aggregate number of NuStar
Energy restricted unit and option awards:
Name
Greehey
Barron
Bates
Hill
Patton
Rosier
Aggregate # of Restricted Units
Aggregate # of Unit Options
4,127
*
3,086
3,086
**
3,552
—
*
—
—
—
—
* Mr. Barron’s aggregate holdings are disclosed above in the Outstanding Equity Awards at December 31, 2015 table in this
Item 11.
** Mr. Patton’s outstanding restricted units vested upon his retirement from the Board during 2015 as described in Footnote
(3) above.
141
Table of Contents
Directors who are employees of NuStar GP, LLC receive no compensation (other than reimbursement of expenses)
for serving as directors. The compensation structure for our non-employee directors consists of the following
components: (1) an annual cash retainer; (2) an annual restricted unit grant; (3) an additional cash payment for each
meeting attended in-person and telephonically; (4) an additional annual cash retainer for each committee chair; (5)
an additional annual retainer for the Chairman of the Board, which includes both cash and restricted units; and (6)
an additional annual cash retainer for the lead director, each as set forth in the table below.
Non-Employee Director Compensation Component
Amount
Annual Cash Retainer ($)
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 value in restricted units/$50,000 cash)
Annual Lead Director Retainer ($)
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.
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 current members of our Compensation Committee are
Mr. Hill (Chairman), Mr. Bates, Mr. Munch and Mr. Rosier. Prior to his retirement from our Board in April 2015,
Mr. Patton served as a member of our Compensation Committee. 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 or awards, nor does it have 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.
142
Table of Contents
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 information as of February 19, 2016 regarding NuStar Energy units and NuStar GP Holdings
units beneficially owned (or deemed beneficially owned) by the directors, executive officers and all directors and executive
officers of NuStar GP, LLC as a group. 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)
NuStar
Energy Units
Beneficially
Owned (2)
Percentage of
Outstanding
NuStar Energy
Units (3)
NuStar GP Holdings
Units Beneficially
Owned (4)
Percentage of
Outstanding
NuStar GP
Holdings
Units(5)
William E. Greehey (6)
Bradley C. Barron
J. Dan Bates (7)
Dan J. Hill (8)
Robert J. Munch
W. Grady Rosier (9)
Mary Rose Brown
Thomas R. Shoaf
Jorge A. del Alamo
Amy L. Perry (10)
Karen M. Thompson
2,951,190
3.79%
8,728,715
20.33%
56,519
31,143
23,185
2,469
24,856
62,024
27,125
14,703
9,335
16,348
*
*
*
*
*
*
*
*
*
*
39,332
2,000
27,000
—
20,000
52,418
16,562
2,880
2,973
2,984
*
*
*
*
*
*
*
*
*
*
All directors and executive officers as a group
(11 people)
3,218,897
4.13%
8,894,864
20.72%
* 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 vesting and,
as such, may not be disposed of or voted until vested.
(3) As of February 19, 2016, 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.
(4) 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 vesting and, as such, may not be disposed of or voted until vested.
(5) As of February 19, 2016, 42,930,549 NuStar GP Holdings units were issued and outstanding. There are no classes of
equity securities of NuStar GP Holdings outstanding other than the units.
(6) The number of NuStar GP Holdings units shown for Mr. Greehey includes 159,500 units owned indirectly by Mr.
Greehey through a limited liability company.
(7) The number of NuStar Energy units shown for Mr. Bates includes 7,667 units owned indirectly by Mr. Bates through a
trust.
(8) The number of NuStar Energy units shown for Mr. Hill includes 600 units owned indirectly by Mr. Hill through his
spouse. Pursuant to Rule 13d-4 of the Securities Exchange Act of 1934, Mr. Hill disclaims beneficial ownership of
2,000 of the NuStar GP Holdings units reflected in the table above, which were purchased by a trust.
(9) The number of NuStar Energy units shown for Mr. Rosier includes 19,000 units owned indirectly by Mr. Rosier
through a trust.
143
Table of Contents
(10) When Ms. Perry was divorced in September 2012, 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 and remained outstanding at the time of the divorce.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information as of December 31, 2015 regarding each entity known to us to be the beneficial
owner of more than 5% of NuStar Energy’s outstanding units, and is based solely upon reports filed by such entities with the
SEC.
Name and Address of Beneficial Owner
Units
Percentage of Units (4)
NuStar GP Holdings (1)
Oppenheimer Funds, Inc. (2)
ALPS Advisors, Inc. (3)
10,252,660
6,180,686
5,022,317
13.16%
7.94%
6.45%
(1) As of December 31, 2015, NuStar GP Holdings owns these NuStar Energy units through its wholly owned
subsidiaries, NuStar GP, LLC and Riverwalk Holdings, LLC. NuStar GP Holdings controls voting and investment
power over 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/A filed on February 4, 2016, OppenheimerFunds, Inc. (OFI) is an investment adviser
that may be deemed to beneficially own, and has shared voting and dispositive power with respect to, 6,180,686 units.
The 6,180,686 units that OFI may be deemed to beneficially own include 4,940,776 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 4,940,776 units. OFI disclaims beneficial ownership of the units pursuant to Rule
13d-4 of the Securities Exchange Act of 1934. OFI’s business address is 2 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/A filed on February 3, 2016, 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, 5,022,317 units. The
5,022,317 units that AAI may be deemed to beneficially own include 5,000,185 units that Alerian MLP ETF (Alerian),
an investment company, may be deemed to beneficially own. Alerian has shared voting and dispositive power with
respect to the 5,000,185 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) As of December 31, 2015, there were 77,886,078 NuStar Energy units issued and outstanding.
144
Table of Contents
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth information about NuStar GP, LLC’s equity compensation plans as of December 31, 2015, which
are described in further detail in Note 19 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
706,491
5,475
—
—
1,260,634
—
(1) The information in this row relates to NuStar GP, LLC’s 2000 LTIP. See the “Compensation Discussion and Analysis”
section of Item 11. “Executive Compensation” above for further details regarding the 2000 LTIP.
(2) The information in this row relates to NuStar GP, LLC’s 2003 Employee Unit Incentive Plan, which terminated on
June 16, 2013.
(3) Historically, grants under NuStar GP, LLC’s long-term incentive plans have not diluted the interests of NuStar Energy
unitholders because, 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 has purchased NuStar Energy units on the open market to satisfy that
vesting or exercise and no new NuStar Energy units were issued to satisfy these vestings. On January 28, 2016,
NuStar Energy’s unitholders approved the amendment and restatement of the 2000 LTIP, which provides the ability to
issue new NuStar Energy units to satisfy the vesting or exercise of awards under the plan. See the “Compensation
Discussion and Analysis” section of Item 11. “Executive Compensation.”
(4) No value is included in this column because there were no unit options outstanding as of December 31, 2015 and
because restricted units and performance units do not have an exercise price.
145
Table of Contents
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 unitholder owning greater than 5% 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 a 5% or greater ownership interest) 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 and provide updates to our Corporate Secretary regarding his or her immediate family
members, as well as any entities in which he or she controls or owns 5% or more.
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 of 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). Pursuant to the Services Agreement,
NuStar GP, LLC historically has furnished all services necessary for the conduct of the business of NuStar Energy, and NuStar
Energy has reimbursed 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 expenses allocated to NuStar GP Holdings
under the Services Agreement equaled 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, subject to adjustment (1) by an annual amount equal to NuStar
GP, LLC’s annual merit increase percentage for the most recently completed contract year and (2) 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. For fiscal year 2015, the expenses allocated to NuStar GP Holdings were $1.5 million. On March
1, 2016, NuStar GP, LLC intends to transfer and assign to NuStar Services, a wholly owned subsidiary of NuStar Energy,
employment of all of NuStar GP, LLC’s employees. Our executive officers will continue to serve as officers of NuStar GP
Holdings and NuStar GP, LLC, and also will serve as officers of NuStar Services and other NuStar Energy subsidiaries. In
connection with the transfer and assignment, we intend to amend and restate the Services Agreement (the Amended and
Restated Services Agreement) such that, beginning March 1, 2016, NuStar GP Holdings and NuStar Energy will receive all
management and administrative services from NuStar Services. NuStar Energy will reimburse NuStar Services for all services
provided to NuStar Energy, including payroll and benefit costs, as well as NuStar Energy unit-based compensation costs.
NuStar GP Holdings will pay NuStar Services an administrative services fee of $1.0 million per year, subject to adjustment (1)
by an annual amount equal to NuStar Services’ annual merit increase percentage for the most recently completed fiscal year
and (2) for changed levels of services due to expansion of operations through acquisitions, construction of new businesses or
assets or otherwise. Beginning March 1, 2016, NuStar GP Holdings will no longer pay 1.0% of NuStar GP, LLC’s domestic
bonus and unit compensation expenses. Instead, NuStar GP Holdings will retain the expense associated with any NuStar GP
Holdings common unit awards or other compensation that it provides to its officers.
146
Table of Contents
John D. Greehey, a NuStar GP, LLC 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 certain subsidiaries of NuStar Energy. In 2015,
Mr. J. Greehey did not attend any Board or Committee meetings. The aggregate value of compensation paid by NuStar GP,
LLC to Mr. J. Greehey in 2015 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 GP, LLC 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, as a Public Affairs Specialist. In 2015, Mr. Brown did not
attend any Board or Committee meetings. The aggregate value of compensation paid by NuStar GP, LLC to Mr. Brown in 2015
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.
RIGHTS OF NUSTAR GP HOLDINGS
Due to its ownership of NuStar GP, LLC and Riverwalk Holdings, LLC, as of December 31, 2015, NuStar GP Holdings
indirectly owned:
•
•
•
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
10,252,660 NuStar Energy 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, 2015, beneficially owned 20.1% 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 the one hand, and NuStar Energy, on the other.
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 2015, the Board held five meetings, the Audit Committee held eight meetings, the Compensation Committee
held four meetings and the Nominating/Governance & Conflicts Committee held three meetings. No member of the Board
attended less than 75% of the meetings of the Board and committees during the period in which he was a member during 2015.
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 current non-management directors meet the independence requirements of the NYSE listing standards as set
forth in the NYSE Listed Company Manual. The current independent directors are: Mr. Bates, Mr. Hill, Mr. Munch and Mr.
Rosier. As disclosed in Item 11 above, Mr. Patton served as a director until his retirement from the Board in April 2015, and
the Board previously determined that Mr. Patton also met such independence requirements during his term as a director.
Mr. Greehey, Chairman of the Board, also serves as the Chairman of the NuStar GP Holdings board of directors and, as of
December 31, 2015, beneficially owned 20.1% of the common units 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.
147
Table of Contents
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 annually 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.
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 generally, 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 website at www.nustarenergy.com (in the “Investors” 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 website at www.nustarenergy.com (in the “Investors” 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.
148
Table of Contents
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
KPMG FEES
The aggregate fees for professional services rendered to us by KPMG for the years ended December 31, 2015 and 2014 were:
Category of Service
Audit fees (1)
Audit-related fees (2)
Tax fees (3)
All other fees
Total
2015
2,770,868
3,243
—
—
2,774,111
$
$
2014
2,433,000
—
8,000
—
2,441,000
$
$
(1) Audit fees for 2015 and 2014 were for professional services rendered by KPMG in connection with the audits of our
annual financial statements for the years ended December 31, 2015 and 2014, 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, 2015 and 2014,
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 2015 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 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 2015 or 2014 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.
149
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, 2015 and 2014
Consolidated Statements of Income for the Years Ended December 31, 2015, 2014 and 2013
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2015, 2014 and 2013
Consolidated Statements of Cash Flows for the Years Ended December 31, 2015, 2014 and 2013
Consolidated Statements of Partners’ Equity for the Years Ended December 31, 2015, 2014 and 2013
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
NuStar Energy L.P.’s Annual Report on Form 10-K
for year ended December 31, 2014 (File No.
001-16417), Exhibit 3.09
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
150
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
NuStar Energy L.P.’s Annual Report on Form 10-K
for year ended December 31, 2014 (File No.
001-16417), Exhibit 3.20
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
151
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
152
Table of Contents
10.03
10.04
10.05
10.06
10.07
10.08
10.09
10.10
10.11
10.12
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
First Amendment to Amended and Restated 5-Year
Revolving Credit Agreement, dated as of March 19,
2015, 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 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
NuStar Energy L.P.’s Quarterly Report on Form 10-
Q for the quarter ended June 30, 2015 (File No.
001-16417), Exhibit 10.01
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
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
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
NuStar Energy L.P.’s Annual Report on Form 10-K
for year ended December 31, 2014 (File No.
001-16417), Exhibit 10.10
NuStar Energy L.P.’s Annual Report on Form 10-K
for year ended December 31, 2014 (File No.
001-16417), Exhibit 10.11
153
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
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
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
Seventh Amendment to Letter of Credit Agreement,
dated as of April 30, 2015, 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 Annual Report on Form 10-K
for year ended December 31, 2014 (File No.
001-16417), Exhibit 10.12
NuStar Energy L.P.’s Annual Report on Form 10-K
for year ended December 31, 2014 (File No.
001-16417), Exhibit 10.13
NuStar Energy L.P.’s Current Report on Form 8-K
filed November 6, 2014 (File No. 001-16417),
Exhibit 10.1
NuStar Energy L.P.’s Quarterly Report on Form 10-
Q for the quarter ended June 30, 2015 (File No.
001-16417), Exhibit 10.02
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
Amendment No. 2 to Letter of Credit Agreement
and Subsidiary Guaranty Agreement dated as of
August 19, 2015 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
NuStar Energy L.P.’s Quarterly Report on Form 10-
Q for the quarter ended September 30, 2015 (File
No. 001-16417), Exhibit 10.01
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
Purchase and Sale Agreement, dated as of June 15,
2015, among NuStar Energy Services, Inc., NuStar
Logistics, L.P., NuStar Pipeline Operating
Partnership L.P. and NuStar Supply & Trading
LLC, as Originators, NuStar Energy L.P., as
Servicer, and NuStar Finance LLC, as Buyer
154
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 Energy L.P.'s Current Report on Form 8-K
filed June 19, 2015 (File No. 001-16417), Exhibit
10.1
Table of Contents
10.25
10.26
+10.27
+10.28
+10.29
+10.30
+10.31
+10.32
+10.33
+10.34
+10.35
+10.36
+10.37
+10.38
Receivables Financing Agreement, dated as of June
15, 2015, by and among NuStar Finance LLC, as
Borrower, the persons from time to time party
thereto as Lenders and Group Agents, PNC Bank,
National Association, as Administrative Agent, and
NuStar Energy L.P., as initial Servicer
NuStar Energy L.P.'s Current Report on Form 8-K
filed June 19, 2015 (File No. 001-16417), Exhibit
10.2
Omnibus Amendment, dated as of January 15,
2016, which is the First Amendment to the
Purchase and Sale Agreement referenced above and
the First Amendment to the Receivables Financing
Agreement referenced above among the respective
parties thereto
*
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
NuStar GP, LLC Fifth Amended and Restated 2000
Long-Term Incentive Plan, amended and restated as
of January 28, 2016
NuStar Energy L.P.’s Proxy Statement on Schedule
14A filed December 17, 2015 (File No.
001-16417), Appendix A
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
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 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)
NuStar Energy L.P.’s Annual Report on Form 10-K
for year ended December 31, 2009 (File No.
001-16417), Exhibit 10.11
+10.39
Form of Waiver Related to Certain Performance
Units (for 2010 and 2011 awards)
NuStar Energy L.P.’s Current Report on Form 8-K
filed January 31, 2012 (File No. 001-16417),
Exhibit 10.3
155
Table of Contents
+10.40
+10.41
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
+10.42
NuStar Energy L.P. Annual Bonus 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 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 Excess Pension Plan, amended and restated
effective as of January 1, 2014
*
NuStar Excess Thrift Plan, amended and restated
effective as of January 1, 2008
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
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
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
156
+10.43
+10.44
+10.45
+10.46
10.47
10.48
10.49
10.50
10.51
10.52
10.53
Table of Contents
10.54
10.55
10.56
10.57
12.01
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 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
31.02
32.01
32.02
99.01
99.02
99.03
List of subsidiaries of NuStar Energy L.P.
Consent of KPMG LLP dated February 25, 2016
(NuStar Energy L.P.)
Consent of KPMG LLP dated February 25, 2016
(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
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
XBRL Taxonomy Extension Calculation Linkbase
Document
XBRL Taxonomy Extension Definition Linkbase
Document
157
*
*
*
*
*
*
**
**
*
*
*
*
*
*
*
Table of Contents
101.LAB
101.PRE
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.
158
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 25, 2016
/s/ Thomas R. Shoaf
Thomas R. Shoaf
Executive Vice President and Chief Financial Officer
February 25, 2016
/s/ Jorge A. del Alamo
Jorge A. del Alamo
Senior Vice President and Controller
February 25, 2016
159
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/ Robert J. Munch
Robert J. Munch
/s/ W. Grady Rosier
W. Grady Rosier
Chairman of the Board
February 25, 2016
President, Chief Executive
Officer and Director
(Principal Executive Officer)
Executive Vice President
and Chief Financial Officer
(Principal Financial Officer)
February 25, 2016
February 25, 2016
Senior Vice President and Controller
(Principal Accounting Officer)
February 25, 2016
Director
February 25, 2016
Director
February 25, 2016
Director
February 25, 2016
Director
February 25, 2016
160