Investments in Non-Controlled Entities

We account for interests in affiliates that we do not control using the equity method of accounting. Under this method, an investment is recorded at our acquisition cost or capital contributions, as adjusted by contractual terms, plus equity in earnings or losses since acquisition or formation, plus interest capitalized, less distributions received and amortization of interest capitalized and excess net investment. Excess net investment is the amount by which our investment in a non-controlled entity exceeded our proportionate share of the book value of the net assets of that investment. We amortize excess net investment over the weighted-average depreciable asset lives of the equity investee. Our unamortized excess net investment was $61.3 million and $59.7 million at December 31, 2016 and 2017, respectively. The amount of unamortized excess investment is primarily related to our investment in BridgeTex Pipeline Company, LLC. We evaluate equity method investments for impairment whenever events or circumstances indicate that there is an other-than-temporary loss in value of the investment. In the event that we determine that the loss in value of an investment is other-than-temporary, we would record a charge to earnings to adjust the carrying value to fair value. We recognized no equity investment impairments during 2015, 2016 and 2017.

Our investments in non-controlled entities at December 31, 2017 were comprised of:



Entity		Ownership Interest
BridgeTex Pipeline Company, LLC (“BridgeTex”)		50%
Double Eagle Pipeline LLC (“Double Eagle”)		50%
HoustonLink Pipeline Company, LLC (“HoustonLink”)		50%
MVP Terminalling, LLC (“MVP”)		50%
Powder Springs Logistics, LLC (“Powder Springs”)		50%
Saddlehorn Pipeline Company, LLC (“Saddlehorn”)		40%
Seabrook Logistics, LLC (“Seabrook”)		50%
Texas Frontera, LLC (“Texas Frontera”)		50%

MVP was formed in September 2017 to construct and develop a refined products marine storage facility along the Houston Ship Channel in Pasadena, Texas. We own a 50% equity interest in MVP, with an affiliate of Valero Energy Corporation (“Valero”) owning the other 50% interest. We serve as construction manager and will serve as operator of the MVP facility. The initial phase of this facility is expected to be operational in early 2019, with the next phase of the project being completed in 2020. Upon formation of MVP, we contributed $97.6 million of property, plant and equipment (“PP&E”) to this entity. Concurrently, Valero contributed cash of $48.8 million, which was distributed to us as reimbursement for Valero’s portion of the PP&E we contributed. The $48.8 million is reflected as distributions in excess of earnings of non-controlled entities on our consolidated statements of cash flows.

We receive fees for management services from BridgeTex, HoustonLink, MVP, Powder Springs, Saddlehorn, Texas Frontera and the pipeline activities of Seabrook, as well as reimbursement or payment to us for certain direct operational payroll and other overhead costs. The management fees we have received are reported as affiliate management fee revenue on our consolidated statements of income. Cost reimbursements we receive from these entities in connection with our operating services are included as reductions to costs and expenses on our consolidated statements of income and totaled $1.3 million, $4.2 million and $3.6 million, respectively, for the years ended December 31, 2015, 2016 and 2017.

We recorded the following revenue from certain of these non-controlled entities in our consolidated statements of income (in millions):



	Year Ended December 31,
	2015		2016		2017
Transportation and terminals revenue:
BridgeTex, capacity lease	$	34.6	$	35.5	$	36.1
Double Eagle, throughput revenue	$	3.4	$	3.3	$	4.7
Saddlehorn, storage revenue	$	—	$	0.7	$	2.1

Our consolidated balance sheets reflected the following balances related to our investments in non-controlled entities (in millions):



	December 31, 2016						December 31, 2017
	Trade Accounts Receivable		Other Accounts Receivable		Other Accounts Payable		Trade Accounts Receivable		Other Accounts Receivable		Other Accounts Payable
Double Eagle	$	0.3	$	—	$	—	$	0.5	$	—	$	—
HoustonLink	$	—	$	—	$	—	$	—	$	—	$	0.1
MVP	$	—	$	—	$	—	$	—	$	0.4	$	—
Powder Springs	$	—	$	—	$	—	$	—	$	0.9	$	—
Saddlehorn	$	—	$	0.1	$	—	$	—	$	0.1	$	—
Seabrook	$	—	$	—	$	—	$	—	$	0.2	$	—

In addition to the transactions noted above, we incurred charges of $14.5 million for transportation of crude oil at published spot tariff rates on the BridgeTex pipeline for the year ended December 31, 2017. We recorded these charges as cost of product sales in our consolidated statements of income. We also purchased inventory from BridgeTex valued at $6.7 million during 2017.

In January 2017, we entered into an agreement to guarantee our 50% pro rata share, up to $50.0 million, of obligations under Powder Springs’ credit facility. As of December 31, 2017, we had recognized a $0.8 million other current liability and a corresponding increase in our investment in non-controlled entities on our consolidated balance sheets to reflect the fair value of this guarantee.

In February 2016, we transferred a 50% membership interest in Osage Pipe Line Company, LLC (“Osage”) to an affiliate of HollyFrontier Corporation. In conjunction with this transaction, we entered into several commercial agreements with affiliates of HollyFrontier Corporation, which we recorded at that time as a $43.7 million intangible asset and an $8.3 million other receivable on our consolidated balance sheets. The intangible asset will be amortized over the 20-year life of the contracts received. We recognized a $28.1 million non-cash gain in 2016 in relation to this transaction.

The financial results from MVP and Texas Frontera are included in our marine storage segment, the financial results from BridgeTex, Double Eagle, HoustonLink, Osage, Saddlehorn and Seabrook are included in our crude oil segment and the financial results from Powder Springs are included in our refined products segment, each as earnings of non-controlled entities.

A summary of our investments in non-controlled entities (representing only our proportionate interests) follows (in thousands):




Investments at December 31, 2016	$	931,255
Additional investment⁽¹⁾	232,404
Earnings of non-controlled entities:
Proportionate share of earnings	123,373
Amortization of excess investment and capitalized interest	(2,379		)
Earnings of non-controlled entities	120,994
Less:
Distributions of earnings from investments in non-controlled entities	123,660
Distributions in excess of earnings of non-controlled entities⁽²⁾	78,482
Investments at December 31, 2017	$	1,082,511

(1) Includes our $97.6 million contribution of PP&E to MVP.

(2) Includes the $48.8 million distribution to us from MVP as reimbursement for the PP&E we contributed, as well as an additional distribution of $6.2 million from BridgeTex that is not related to the ongoing operations of non-controlled entities.

Summarized financial information of our non-controlled entities (representing 100% of the interests in these entities) follows (in thousands):



	December 31,
	2016		2017
Current assets	$	208,901	$	229,342
Noncurrent assets	1,714,920		2,057,892
Total assets	$	1,923,821	$	2,287,234
Current liabilities	$	111,164	$	122,198
Noncurrent liabilities	27,022		74,533
Total liabilities	$	138,186	$	196,731
Equity	$	1,785,635	$	2,090,503



	Year Ended December 31,
	2015		2016		2017
Revenue	$	246,841	$	279,180	$	419,214
Net income	$	138,457	$	164,684	$	256,423