10-K 1 nsh201510-k.htm 10-K 10-K
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 1-32940
NUSTAR GP HOLDINGS, LLC
(Exact name of registrant as specified in its charter)
Delaware
 
85-0470977
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
19003 IH-10 West
 
78257
San Antonio, Texas
 
(Zip Code)
(Address of principal executive offices)
 
 
Registrant’s telephone number, including area code (210) 918-2000
Securities registered pursuant to Section 12(b) of the Act: Units representing limited liability company membership 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 (Check one):
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 units held by non-affiliates was approximately $1,313 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 units outstanding as of January 31, 2016 was 42,930,549.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the proxy statement for the registrant’s 2016 annual meeting of unitholders, expected to be filed within 120 days after the end of the fiscal year covered by this Form 10-K, are incorporated by reference into PART III herein.


TABLE OF CONTENTS
 
Items 1., 1A. and 2.
 
 
 
 
 
 
 
 
 
 
Item 1B.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
Item X.
 
Item 5.
 
 
 
Item 6.
 
 
 
Item 7.
 
 
 
Item 7A.
 
 
 
Item 8.
 
 
 
Item 9.
 
 
 
Item 9A.
 
 
 
Item 9B.
 
Item 10.
 
 
 
Item 11.
 
 
 
Item 12.
 
 
 
Item 13.
 
 
 
Item 14.
 
 
 
Item 15.
 
 
 
 


2

PART I
Unless otherwise indicated, the terms “NuStar GP Holdings,” “we,” “our” and “us” are used in this report to refer to NuStar GP Holdings, LLC, 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 29 of this report under the heading: “CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION.”

ITEMS 1., 1A. and 2. BUSINESS, RISK FACTORS AND PROPERTIES

OVERVIEW

NuStar GP Holdings, LLC (NuStar GP Holdings), a Delaware limited liability company, was formed in June 2000. Our units are traded on the New York Stock Exchange (NYSE) under the symbol “NSH.” Our principal executive offices are located at 19003 IH-10 West, San Antonio, Texas 78257 and our telephone number is (210) 918-2000.

Our only cash generating assets are our ownership interests in NuStar Energy L.P. (NuStar Energy), a publicly traded Delaware limited partnership (NYSE: NS). NuStar Energy is engaged in the transportation of petroleum products and anhydrous ammonia, the terminalling and storage of petroleum products and the marketing of petroleum products. NuStar Energy has terminal and storage facilities in the United States, Canada, Mexico, the Netherlands, including St. Eustatius in the Caribbean, and the United Kingdom. As of December 31, 2015, our aggregate ownership interests in NuStar Energy consisted of the following:
•
the 2% general partner interest;
•
100% of the incentive distribution rights issued by NuStar Energy, which entitle us to receive increasing percentages of the cash distributed by NuStar Energy, currently at the maximum percentage of 23%; and
•
10,252,660 common units of NuStar Energy representing a 12.9% limited partner interest.

We strive to increase unitholder value by actively supporting NuStar Energy in executing its business strategy, which includes continued growth through expansion projects and strategic acquisitions. We may facilitate NuStar Energy’s growth through the use of our capital resources, which could involve capital contributions, loans or other forms of financial support.

NuStar Energy’s partnership agreement requires that it distribute all “Available Cash” to its partners each quarter, defined in its 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 NuStar Energy’s board of directors. Similarly, we are required by our limited liability company agreement to distribute all of our available cash at the end of each quarter, less reserves established by our board of directors. However, unlike NuStar Energy, we do not have a general partner or incentive distribution rights. Therefore, all of our distributions are made on our units, which are our only class of securities outstanding.

Our internet website address is http://www.nustargpholdings.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 “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 GP Holdings, LLC, 19003 IH-10 West, San Antonio, Texas 78257 or corporatesecretary@nustarenergy.com.


3

RECENT DEVELOPMENTS

On January 2, 2015, NuStar Energy 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 NuStar Energy and Linden Holding Corp, with each party owning 50%.

ORGANIZATIONAL STRUCTURE

The following chart depicts a summary of our organizational structure and relationship with NuStar Energy as of December 31, 2015:


4

EMPLOYEES

Our wholly owned subsidiary, NuStar GP, LLC, provides administrative services to us. Employees of NuStar GP, LLC also provide services to NuStar Energy pursuant to the GP Services Agreement (defined in Note 5 of the Notes to Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary Data”). As of December 31, 2015, NuStar GP, LLC had 1,251 employees. We believe that NuStar GP, LLC has a satisfactory relationship with its employees. Please refer to Note 18 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.

ENVIRONMENTAL AND SAFETY REGULATION

Our only cash generating assets are our indirect ownership interests in NuStar Energy. We have no independent operations.

PROPERTIES

Our only cash generating assets are our indirect ownership interests in NuStar Energy. We have no independent operations.

RISK FACTORS

RISKS INHERENT IN AN INVESTMENT IN US

Our only cash generating assets are our ownership interests in NuStar Energy. Our cash flows and ability to make distributions at current levels are, therefore, completely dependent upon the ability of NuStar Energy to make cash distributions at current levels to its partners, including us. If NuStar Energy does not make cash distributions at its current levels or reduces the level of cash distributions to its partners, we may not have sufficient cash to pay distributions at our current levels.
Our operating cash flows currently are completely dependent upon NuStar Energy making cash distributions at current levels to its partners, including us. The amount of cash that NuStar Energy can distribute to its partners each quarter principally depends upon the amount of cash it generates from its operations, which will fluctuate from quarter to quarter based on, among other things:
•
throughput volumes transported in its pipelines;
•
lease renewals or throughput volumes in its terminals and storage facilities;
•
tariff rates and fees it charges and the returns it realizes for its services;
•
the results of its 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;
•
its operating costs;
•
weather conditions;
•
domestic and foreign governmental regulations and taxes; and
•
prevailing economic conditions.

In addition, the amount of cash that NuStar Energy will have available for distribution will depend on other factors, including:
•
its debt service requirements and restrictions on distributions contained in its current or future debt agreements;
•
the sources of cash used to fund its acquisitions;
•
its capital expenditures;
•
fluctuations in its working capital needs;
•
its issuances of debt and equity securities; and
•
adjustments in cash reserves made by NuStar Energy’s general partner, in its discretion.

Because of these factors, NuStar Energy may not have sufficient available cash each quarter to continue paying distributions at its current level or at all. Furthermore, cash distributions to NuStar Energy unitholders depend primarily upon cash flows, and not solely on profitability, which is affected by non-cash items. Therefore, NuStar Energy may make cash distributions during periods when it records net losses and may not make cash distributions during periods when it records net income.

In the future, we may not have sufficient cash to pay distributions at our current quarterly distribution level or to increase distributions.
Because our only source of operating cash flows consists of cash distributions from NuStar Energy, the amount of distributions we are able to make to our unitholders may fluctuate based on the level of distributions NuStar Energy makes to its unitholders,

5

including us. We cannot assure you that NuStar Energy will continue to make quarterly distributions at its current level of $1.095 per unit, or any other amount, or increase its quarterly distributions in the future. In addition, while we would expect to increase or decrease distributions to our unitholders if NuStar Energy increases or decreases distributions to us, the timing and amount of such changes in distributions, if any, will not necessarily be comparable to the timing and amount of any changes in distributions made by NuStar Energy to us. Our ability to distribute cash received from NuStar Energy to our unitholders is limited by a number of factors, including:
•
interest expense and principal payments on any indebtedness we may incur;
•
restrictions on distributions contained in any future debt agreements;
•
our general and administrative expenses, including expenses we incur as a public company;
•
expenses of our subsidiaries, including tax liabilities of our corporate subsidiaries;
•
reserves necessary for us to make the necessary capital contributions to maintain our 2% general partner interest in NuStar Energy, as required by the partnership agreement of NuStar Energy upon the issuance of additional partnership securities by NuStar Energy; and
•
reserves our board of directors believes prudent for us to maintain for the proper conduct of our business or to provide for future distributions.

We cannot guarantee that in the future we will be able to pay distributions or that any distributions NuStar Energy pays to us will allow us to pay distributions at or above our current quarterly distribution of $0.545 per unit. The actual amount of cash that is available for distribution to our unitholders will depend on numerous factors, many of which are beyond our control or the control of NuStar Energy. Therefore, a reduction in the amount of cash distributed by NuStar Energy per unit or on the incentive distribution rights, or an increase in our expenses, may result in our not being able to pay our current quarterly distribution of $0.545 per unit.

NuStar Energy’s unitholders, excluding the owner of NuStar Energy’s general partner, have the right to remove NuStar Energy’s general partner by a simple majority vote, which would cause us to divest our general partner interest and incentive distribution rights in NuStar Energy in exchange for cash or common units of NuStar Energy and cause us to lose our ability to manage NuStar Energy.
We currently manage NuStar Energy through Riverwalk Logistics, L.P., NuStar Energy’s general partner and our indirect, wholly owned subsidiary. NuStar Energy’s partnership agreement, however, gives unitholders of NuStar Energy the right to remove the general partner of NuStar Energy upon the affirmative vote of holders of a majority of outstanding NuStar Energy common units, excluding the common units owned by us. As of December 31, 2015, we owned 10,252,660 common units representing limited partner interests in NuStar Energy, and the public unitholders owned the remaining 67,633,418 outstanding common units representing limited partner interests. If Riverwalk Logistics, L.P. were removed as the general partner of NuStar Energy, it would receive cash or common units in exchange for its 2% general partner interest and its incentive distribution rights and would lose its ability to manage NuStar Energy. While the common units or cash that Riverwalk Logistics, L.P. would receive are intended under the terms of NuStar Energy’s partnership agreement to fully compensate it in the event it is removed as general partner, these common units or the investments made with the cash over time may not provide us with as much distributable cash, or be as valuable, as the 2% general partner interest and incentive distribution rights had we retained them.

NuStar Energy’s general partner, with our consent, may limit or modify the incentive distributions we are entitled to receive in order to facilitate the growth strategy of NuStar Energy. Our board of directors can give this consent without a vote of our unitholders.
We indirectly own NuStar Energy’s general partner, which owns the incentive distribution rights in NuStar Energy that entitle us to receive increasing percentages, up to a maximum of 23%, of any cash distributed by NuStar Energy as it exceeds a distribution of $0.60 per NuStar Energy common unit in any quarter. A substantial portion of the cash flows we receive from NuStar Energy are provided by these incentive distributions. Our limited liability company agreement provides that our board of directors may consent to the elimination, reduction or modification of the incentive distribution rights without our unitholders’ approval if our board determines that the elimination, reduction or modification will not adversely affect our unitholders in any material respect.

Restrictions in our credit facility limit our ability to make distributions to our unitholders. Our credit facility matures in June 2016.
Our credit facility contains covenants limiting our ability to incur indebtedness, grant liens, engage in transactions with affiliates and make distributions to our unitholders. The credit facility also contains covenants requiring NuStar Energy to maintain certain financial ratios. Our and NuStar Energy’s ability to comply with any restrictions and covenants may be affected by events beyond our control, including prevailing economic, financial and industry conditions. If we or NuStar Energy are unable to comply with these restrictions and covenants, a significant portion of any indebtedness under our credit

6

facility may become immediately due and payable, and our lenders’ commitment to make loans to us under our credit facility may terminate. We might not have, or be able to obtain, sufficient funds to make these accelerated payments.

Our payment of principal and interest on any future indebtedness will reduce our cash available for distribution on our units. Our credit facility limits our ability to pay distributions to our unitholders during an event of default or if an event of default would result from the distribution.

In addition, this and any future levels of indebtedness may:
•
adversely affect our ability to obtain additional financing for future operations or capital needs;
•
limit our ability to pursue acquisitions and other business opportunities; or
•
make our results of operations more susceptible to adverse economic or operating conditions.

Our revolving credit facility matures in June 2016. It is possible that our lenders may not agree to renew our credit facility or may only agree to renew it on substantially less favorable terms. If our credit facility is renewed on substantially less favorable terms, or if our credit facility is not renewed and we must enter into alternative financing arrangements, various limitations in these financing agreements may reduce our ability to incur additional indebtedness, to engage in some transactions or to capitalize on business opportunities. In the event we are unable to obtain adequate financing and NuStar Energy issues additional units, we may not be able to make contributions to NuStar Energy necessary to maintain our 2% general partner interest.

Our ability to sell our ownership interests in NuStar Energy may be limited by securities laws restrictions and liquidity constraints.
All of the units of NuStar Energy that we own are unregistered, restricted securities, within the meaning of Rule 144 under the Securities Act of 1933. Unless we exercise our registration rights with respect to these units, we are limited to selling into the market in any three-month period an amount of NuStar Energy common units that does not exceed the greater of 1% of the total number of common units outstanding or the average weekly reported trading volume of the common units for the four calendar weeks prior to the sale. We face contractual limitations on our ability to sell our 2% general partner interest and incentive distribution rights, and the market for such interests is illiquid.

The market price of our units could be adversely affected by sales of substantial amounts of our units into public markets, including sales by our existing unitholders.
Sales by us or any of our existing unitholders, including William E. Greehey, Chairman of the Boards of Directors of NuStar GP Holdings and NuStar GP, LLC, of a substantial number of our units in the public markets, or the perception that such sales might occur, could have a material adverse effect on the price of our units or could impair our ability to obtain capital through an offering of equity securities. As of December 31, 2015, Mr. Greehey beneficially owned 20.1% of our outstanding units.

Distributions on our incentive distribution rights in NuStar Energy are more uncertain than distributions on the common units we hold.
Our indirect ownership of the incentive distribution rights in NuStar Energy entitles us to receive our pro rata share of specified percentages of total cash distributions made by NuStar Energy with respect to any particular quarter only in the event that NuStar Energy distributes more than $0.60 per unit for such quarter. As a result, the holders of NuStar Energy’s common units have a priority over the holders of NuStar Energy’s incentive distribution rights to the extent of cash distributions by NuStar Energy up to and including $0.60 per unit for any quarter.

Our incentive distribution rights entitle us to receive increasing percentages, up to 23%, of all cash distributed by NuStar Energy. Because the incentive distribution rights currently participate at the maximum 23% target cash distribution level in all distributions made by NuStar Energy at or above the current distribution level, future growth in distributions we receive from NuStar Energy will not result from an increase in the target cash distribution level associated with the incentive distribution rights.

Furthermore, a decrease in the amount of distributions by NuStar Energy to less than $0.66 per unit per quarter would reduce our percentage of the incremental cash distributions above $0.60 per unit per quarter from 23% to 8%. As a result, any such reduction in quarterly cash distributions from NuStar Energy would have the effect of disproportionately reducing the amount of all distributions that we receive from NuStar Energy based on our ownership interest in the incentive distribution rights in NuStar Energy as compared to cash distributions we receive from NuStar Energy on our 2% general partner interest in NuStar Energy and our NuStar Energy common units.


7

If NuStar Energy’s general partner is not fully reimbursed or indemnified for obligations and liabilities it incurs in managing the business and affairs of NuStar Energy, it may not be able to satisfy its obligations and its cash flows will be reduced.
The general partner of NuStar Energy and its affiliates may make expenditures on behalf of NuStar Energy for which they will seek reimbursement from NuStar Energy. In addition, under Delaware law, the general partner, in its capacity as the general partner of NuStar Energy, has unlimited liability for the obligations of NuStar Energy, such as its debts and environmental liabilities, except for those contractual obligations of NuStar Energy that are expressly made without recourse to the general partner. To the extent Riverwalk Logistics, L.P. incurs obligations on behalf of NuStar Energy, it is entitled to be reimbursed or indemnified by NuStar Energy. If NuStar Energy does not reimburse or indemnify its general partner, Riverwalk Logistics, L.P. may be unable to satisfy these liabilities or obligations, which would reduce its cash flows. In turn, Riverwalk Logistics, L.P. would have less cash to distribute to us.

If distributions on our units are not paid with respect to any fiscal quarter, our unitholders will not be entitled to receive such payments in the future.
Our distributions to our unitholders are not cumulative. Consequently, if distributions on our units are not paid with respect to any fiscal quarter at the current distribution rate, our unitholders will not be entitled to receive such payments in the future.

Our cash distribution policy limits our growth because we do not retain earnings to reinvest in any acquisitions or growth capital expenditures, and NuStar Energy’s distribution policy may limit NuStar Energy’s growth.
Because we distribute all of our available cash, our growth may not be as fast as businesses that reinvest their available cash to expand ongoing operations. In fact, our growth currently is completely dependent upon NuStar Energy’s ability to increase its quarterly distributions because our only cash-generating assets are indirect ownership interests in NuStar Energy. If we issue additional units or incur debt to fund acquisitions and growth capital expenditures, the payment of distributions on those additional units or interest on that debt could increase the risk that we will be unable to maintain or increase our current per unit distribution level.

Consistent with the terms of its partnership agreement, NuStar Energy distributes to its partners its available cash each quarter. In determining the amount of cash available for distribution, NuStar Energy sets aside cash reserves, which it uses to fund its growth capital expenditures. Additionally, it historically has relied upon external financing sources, including commercial borrowings and other debt and equity issuances, to fund its acquisition capital expenditures. Accordingly, to the extent NuStar Energy does not have sufficient cash reserves or is unable to finance growth externally, its cash distribution policy will significantly impair its ability to grow. In addition, to the extent NuStar Energy issues additional units in connection with any acquisitions or growth capital expenditures, the payment of distributions on those additional units may increase the risk that NuStar Energy will be unable to maintain or increase its per unit distribution level, which in turn may impact the available cash that we have to distribute to our unitholders. The incurrence of additional debt to finance its growth strategy would result in increased interest expense to NuStar Energy, which in turn may impact the available cash that we have to distribute to our unitholders.

If in the future we cease to manage NuStar Energy, we may be deemed to be an investment company under the Investment Company Act of 1940, which would cause us either to have to register as an investment company, obtain exemptive relief from the SEC, or modify our organizational structure or our contract rights.
If we cease to manage NuStar Energy as a consequence of Riverwalk Logistics, L.P.’s removal or withdrawal as NuStar Energy’s general partner or otherwise, and are deemed to be an investment company under the Investment Company Act of 1940 because of our ownership of NuStar Energy partnership interests, we would either have to register as an investment company under the Investment Company Act, obtain exemptive relief from the SEC, or modify our organizational structure or our contract rights to fall outside the definition of an investment company. Registering as an investment company could, among other things, materially limit our ability to engage in transactions with affiliates, including the sale and purchase of certain securities or other property to or from our affiliates, restrict our ability to borrow funds or engage in other transactions involving leverage.

An increase in interest rates may cause the market price of our units to decline.
As interest rates rise, the ability of investors to obtain higher risk-adjusted rates of return by purchasing government-backed debt securities may cause a corresponding decline in demand for riskier investments generally, including yield-based equity investments, such as limited liability company membership interests. Reduced demand for our units resulting from investors seeking other more favorable investment opportunities may cause the trading price of our units to decline.

We may issue an unlimited number of additional securities without the consent of our unitholders, which will dilute each unitholder’s ownership interest in us and may increase the risk that we will be unable to maintain or increase our per unit distribution level.

8

At any time we may issue an unlimited number of additional securities without the approval of our unitholders on terms and conditions determined by our board of directors. The issuance by us of additional units or other equity securities of equal or senior rank will have the following effects:
•
our unitholders’ proportionate ownership interest in us will decrease;
•
the amount of cash available for distribution on each unit may decrease;
•
the relative voting strength of each previously outstanding unit may be diminished;
•
the ratio of taxable income to distributions may increase; and
•
the market price of the units may decline.

NuStar Energy may issue additional NuStar Energy units, which may increase the risk that NuStar Energy will not have sufficient available cash to maintain or increase its per unit cash distribution level and that we will have to make a capital contribution to NuStar Energy.
NuStar Energy may issue additional NuStar Energy units, including units that rank senior to the NuStar Energy common units and the incentive distribution rights as to quarterly cash distributions, on the terms and conditions established by its general partner. Additionally, we are required to make additional capital contributions to NuStar Energy upon NuStar Energy’s issuance of additional units in order to maintain our 2% general partner interest in NuStar Energy. Furthermore, to the extent NuStar Energy issues units that are senior to the NuStar Energy common units and the incentive distribution rights, their issuance will render more uncertain the payment of distributions on the common units and the incentive distribution rights. Neither the common units nor the incentive distribution rights are entitled to any arrearages from prior quarters. The payment of distributions on any additional NuStar Energy units may increase the risk that NuStar Energy will be unable to maintain or increase its per unit cash distribution level and the requirement that we make capital contributions to NuStar Energy to maintain our 2% general partner interest may impact the available cash that we have to distribute to our unitholders.

Anti-takeover provisions in our limited liability company agreement may make an acquisition of us complicated and the removal and replacement of our directors and executive officers difficult.
Our limited liability company agreement contains provisions that may delay or prevent a change in control. These provisions may also make it difficult for unitholders to remove and replace our board of directors and executive officers.

Section 203. Our limited liability company agreement effectively adopts Section 203 of the Delaware General Corporation Law (DGCL). Section 203 of the DGCL, as it applies to us, prevents an interested unitholder, defined as a person who owns 15% or more of our outstanding units, from engaging in business combinations with us for three years following the time such person becomes an interested unitholder. Section 203 broadly defines “business combination” to encompass a wide variety of transactions with or caused by an interested unitholder, including mergers, asset sales and other transactions in which the interested unitholder receives a benefit on other than a pro rata basis with other unitholders. This provision of our limited liability company agreement could have an anti-takeover effect with respect to transactions not approved in advance by our board of directors, including discouraging takeover attempts that might result in a premium over the market price for our units.

Limited Voting Rights. Our limited liability company agreement provides that if any person or group other than our affiliates acquires beneficial ownership of 20% or more of any class of units, that person or group loses voting rights on all of its units. This loss of voting rights does not apply to any person or group that acquires all of its units from our affiliates or any transferees of that person or group approved by our board of directors or to any person or group who acquires the units with the prior approval of our board of directors.

Staggered Board. In addition, our limited liability company agreement divides our board of directors into two classes serving staggered two-year terms and permits the board to be divided into three classes serving staggered three-year terms upon the election of a fifth director to our board. This provision, when coupled with the provision of our limited liability company agreement authorizing only the board of directors to fill vacant or newly created directorships or increase the size of the board of directors and the provision providing that directors may only be removed at a meeting of unitholders and cannot be done by written consent, may deter a unitholder from gaining control of our board of directors by removing incumbent directors or increasing the number of directorships and simultaneously filling the vacancies or newly created directorships with its own nominees.

Preferred Unit Purchase Rights. On July 19, 2006, we entered into a rights agreement, as amended by the first amendment effective February 28, 2008, the second amendment effective October 23, 2012 and the third amendment effective November 2, 2015, under which our board of directors declared a distribution of one preferred unit purchase right for each of our outstanding units. The rights become exercisable under specified circumstances, including any person or group (an “acquiring person”) becoming the beneficial owner of 15% or more of our outstanding units, subject to specified exceptions. If events specified in the rights agreement occur, each holder of rights, other than an acquiring person, can exercise their rights. When a holder exercises a right, the holder will be entitled to receive units valued at some multiple of the exercise price of the right. In some

9

cases, the holder will receive cash, property or other securities instead of units. We may redeem the rights prior to a person or group becoming an acquiring person.

These provisions may delay or prevent a third party from acquiring us and any such delay or prevention could cause the market price of our units to decline.

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 18-607 of the Delaware Limited Liability Company Act (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 members on account of their membership interests and liabilities that are nonrecourse to the limited liability company 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, members 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 limited liability company, in the event that (a) we do not distribute assets in the following order: (1) to creditors in satisfaction of their liabilities; (2) to members and former members in satisfaction of liabilities for distributions owed under our limited liability company agreement; (3) to members for the return of their contributions; and finally (4) to the members in the proportions in which the members share in distributions and (b) a member knows at the time that the distribution violated the Delaware Act, then such member will be liable to repay the distribution for a period of three years (subject to certain exceptions) from the impermissible distribution under Section 18-804 of the Delaware Act.

A purchaser of common units will be liable for the obligations of the transferor to make contributions to us that are known to such purchaser at the time it became a member and for unknown obligations, if the liabilities could be determined from our limited liability company agreement.

NuStar Energy’s unitholders may not have limited liability if a court finds that limited partner actions constitute control of NuStar Energy’s business and may, therefore, become liable for certain of NuStar Energy’s obligations, which may have an impact on the cash we have available to make distributions.
Under Delaware law, unitholders could be held liable for NuStar Energy’s obligations to the same extent as a general partner if a court determined that actions of a unitholder constituted participation in the “control” of NuStar Energy’s 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 provides that, under some circumstances, a limited partner may be liable to NuStar Energy for the amount of a distribution for a period of three years from the date of the distribution.

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 liability company. 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.


10

RISKS RELATED TO CONFLICTS OF INTEREST

Although we manage NuStar Energy through our indirect ownership of its general partner, NuStar Energy’s general partner owes fiduciary duties to NuStar Energy and NuStar Energy’s unitholders, which may conflict with our interests.
Conflicts of interest exist and may arise in the future as a result of the relationships between us and our affiliates, including NuStar Energy’s general partner, on the one hand, and NuStar Energy and its limited partners, on the other hand. The directors and officers of NuStar GP, LLC have fiduciary duties to manage NuStar Energy’s business in a manner beneficial to us, its owner. At the same time, NuStar GP, LLC has a fiduciary duty to manage NuStar Energy in a manner beneficial to NuStar Energy and its unitholders. The board of directors of NuStar GP, LLC or its conflicts committee will resolve any such conflict and have broad latitude to consider the interests of all parties to the conflict. Our independent directors will not be the same as the independent directors who serve on the conflicts committee of NuStar GP, LLC. The resolution of these conflicts may not always be in our best interest or that of our unitholders.

For example, conflicts of interest may arise in the following situations:
•
the allocation of shared overhead expenses to NuStar Energy and us;
•
the determination and timing of the amount of cash to be distributed to NuStar Energy’s partners and the amount of cash to be reserved for the future conduct of NuStar Energy’s business;
•
any proposal by NuStar GP, LLC to eliminate, reduce or modify the incentive distribution rights;
•
the decision whether NuStar Energy should make acquisitions, and on what terms;
•
the determination of whether NuStar Energy should use cash on hand, borrow or issue equity to raise cash to finance acquisitions or expansion capital projects, repay indebtedness, meet working capital needs, pay distributions to NuStar Energy’s partners or otherwise; and
•
any decision we make in the future to engage in business activities independent of, or in competition with, NuStar Energy.

Our limited liability company agreement limits and modifies our directors’ fiduciary duties and the fiduciary duties of our officers and directors may conflict with those of the general partner of NuStar Energy’s general partner’s officers and directors.
Our limited liability company agreement contains provisions that modify and limit our directors’ fiduciary duties to our unitholders. For example, our limited liability company agreement provides that:
•
our directors will not have any liability to us or our unitholders for decisions made in good faith, meaning they believed the decision was in our best interests; and
•
our board of directors will not be liable for monetary damages to us or our unitholders for any acts or omissions unless there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining that the board of directors acted in bad faith or engaged in fraud or willful misconduct or, in the case of a criminal matter, acted with knowledge that such conduct was unlawful.

Our directors and officers have fiduciary duties to manage our business in a manner beneficial to us and our unitholders. Simultaneously, two of our directors and all of our officers are also directors and officers of NuStar GP, LLC, the general partner of NuStar Energy’s general partner, and have fiduciary duties to manage the business of NuStar Energy in a manner beneficial to NuStar Energy and its unitholders. For instance, William E. Greehey is our Chairman of the Board as well as the Chairman of the Board of NuStar GP, LLC. Consequently, these directors and officers may encounter situations in which their fiduciary obligations to NuStar Energy, on the one hand, and us, on the other hand, are in conflict. The resolution of these conflicts may not always be in our best interest or that of our unitholders. For example, we share certain executive officers and administrative personnel with NuStar GP, LLC to operate both our business and NuStar Energy’s business. Our executive officers, who are also the executive officers of NuStar GP, LLC, will allocate, in their reasonable and sole discretion, their time spent on our behalf and on behalf of NuStar Energy. These allocations may not be the result of arms-length negotiations between NuStar GP, LLC and us and, therefore, the allocations may not exactly match the actual time and overhead spent.

RISKS RELATED TO NUSTAR ENERGY’S BUSINESS

NuStar Energy’s inability to develop and execute growth projects and acquire new assets could limit its ability to maintain and grow quarterly distributions to its unitholders, including us.
NuStar Energy’s ability to maintain and grow its distributions to unitholders, including us, depends on the growth of NuStar Energy’s existing businesses and strategic acquisitions.  If NuStar Energy is unable to implement business development opportunities and finance such activities on economically acceptable terms, its future growth will be limited, which could adversely impact its results of operations and cash flows and, accordingly, result in reduced distributions to unitholders, including us, over time.

11

Failure to complete capital projects as planned could adversely affect NuStar Energy’s 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 NuStar Energy’s existing facilities) could adversely affect NuStar Energy’s ability to achieve forecasted operating results. Although NuStar Energy evaluates and monitors each capital spending project and tries to anticipate difficulties that may arise, such delays or cost increases may arise as a result of factors that are beyond its 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 NuStar Energy’s 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.

NuStar Energy’s forecasted operating results are also based upon its projections of future market fundamentals that are not within its control, including changes in general economic conditions, the supply and demand of crude oil and refined products, availability to its customers of attractively priced alternative solutions for storage, transportation or supplies of crude oil and refined products and overall customer demand.

If NuStar Energy is 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 NuStar Energy’s leased assets suffers a material decrease, NuStar Energy’s revenue and cash flows could be reduced to levels that could adversely affect its ability to make quarterly distributions to its unitholders, including us.
NuStar Energy’s revenue and cash flows are generated primarily from its customers’ payments of fees under throughput contracts and lease agreements. Failure of NuStar Energy to renew or enter into new contracts or its leasing customers’ material reduction of their utilization under 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 NuStar Energy’s pipelines and terminals;
•
scheduled turnarounds or unscheduled maintenance at refineries NuStar Energy serves;
•
operational problems or catastrophic events at a refinery NuStar Energy serves or NuStar Energy’s assets;
•
environmental proceedings or other litigation that compel the cessation of all or a portion of the operations at a refinery NuStar Energy serves or NuStar Energy’s assets;
•
a decision by NuStar Energy’s current customers to redirect refined products transported in NuStar Energy’s pipelines to markets not served by NuStar Energy’s pipelines or to transport crude oil or refined products by means other than NuStar Energy’s pipelines;
•
increasingly stringent environmental regulations; or
•
a decision by NuStar Energy’s current customers to sell one or more of the refineries NuStar Energy serves to a purchaser that elects not to use NuStar Energy’s 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 NuStar Energy’s ability to obtain and retain customers or reduce utilization of its leased assets, which could reduce NuStar Energy’s revenues and cash flows, thereby reducing its ability to make its quarterly distributions to unitholders, including us.
NuStar Energy’s 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 NuStar Energy does. Certain of its 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 NuStar Energy’s customers may be reluctant to renew or enter into long-term contracts or contracts that provide for minimum throughput amounts in the future. NuStar Energy’s inability to renew or replace 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 NuStar Energy’s revenue, cash flows and ability to make quarterly distributions to its unitholders, including us.

NuStar Energy’s future financial and operating flexibility may be adversely affected by its significant leverage, downgrades of its credit ratings, restrictions in its debt agreements or conditions in the financial markets.
As of December 31, 2015, NuStar Energy’s consolidated debt was $3.2 billion. NuStar Energy also may be required to post cash collateral under certain of its hedging arrangements, which it expects to fund with borrowings under its revolving credit

12

agreement. In addition to any potential direct financial impact of NuStar Energy’s debt, it is possible that any material increase to NuStar Energy’s debt or other negative financial factors may be viewed negatively by credit rating agencies, which could result in ratings downgrades and increased costs for NuStar Energy to access the capital markets. Any downgrades in NuStar Energy’s credit ratings in the future could result in increases to the interest rates on borrowings under NuStar Energy’s credit facilities and its 7.65% senior notes due 2018, significantly increase NuStar Energy’s capital costs, reduce its liquidity and adversely affect its ability to raise capital in the future.

NuStar Energy’s 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 NuStar Energy 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.

NuStar Energy’s 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 NuStar Energy is initial servicer and performance guarantor provides for acceleration of amounts owed upon the occurrence of certain specified events.

NuStar Energy’s debt service obligations, restrictive covenants and maturities resulting from its leverage may adversely affect NuStar Energy’s ability to finance future operations, pursue acquisitions, fund its capital needs and pay cash distributions at current levels to its unitholders, including us. In addition, this leverage may make NuStar Energy’s results of operations more susceptible to adverse economic or operating conditions. For example, during an event of default under certain of NuStar Energy’s debt agreements, NuStar Energy would be prohibited from making cash distributions to its unitholders, including us. If NuStar Energy’s lenders file for bankruptcy or experience severe financial hardship, they may not honor their pro rata share of NuStar Energy’s borrowing requests under the revolving credit agreement, which may significantly reduce its available borrowing capacity and, as a result, materially adversely affect NuStar Energy’s financial condition and ability to pay distributions at current levels to its unitholders, including us. Additionally, NuStar Energy may not be able to access the capital markets in the future at economically attractive terms, which may adversely affect its future financial and operating flexibility and its ability to pay cash distributions at current levels.

Increases in interest rates could adversely affect NuStar Energy’s business and the trading price of NuStar Energy’s units.
NuStar Energy has significant exposure to increases in interest rates. As of December 31, 2015, NuStar Energy 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 NuStar Energy’s existing indebtedness caused interest rates under its revolving credit agreement and its senior notes due 2018 to increase effective January 2013, and future downgrades may cause interest rates on NuStar Energy’s variable interest rate debt to increase further. Additionally, at December 31, 2015, NuStar Energy had $600.0 million aggregate notional amount of interest rate swap arrangements, which increase its exposure to variable interest rates. As a result, NuStar Energy’s results of operations, cash flows and financial position could be materially adversely affected by significant increases in interest rates above current levels. In addition, NuStar Energy historically has funded its strategic capital expenditures and acquisitions from external sources, primarily borrowings under its revolving credit agreement or funds raised through debt or equity offerings. An increase in interest rates may negatively impact NuStar Energy’s ability to access the capital markets at economically attractive rates. Further, the trading price of NuStar Energy’s common units is sensitive to changes in interest rates and any rise in interest rates could adversely impact the trading price of NuStar Energy’s units, which would effectively increase NuStar Energy’s cost of raising funds through equity offerings.

Low crude oil prices could have an adverse impact on NuStar Energy’s results of operations, cash flows and ability to make distributions to its unitholders, including us, as well as NuStar Energy’s 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 NuStar Energy’s results of operations.


13

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 NuStar Energy’s, 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 NuStar Energy’s results of operations and ability to make distributions to its unitholders at current levels, including us.
NuStar Energy’s business is dependent upon the demand for and supply of the crude oil and refined products transported by its pipelines and stored in its terminals. Any sustained decrease in demand for refined products in the markets served by NuStar Energy’s pipelines and terminals could result in a significant reduction in throughputs in its pipelines and storage in its terminals, which would reduce NuStar Energy’s cash flows and its ability to make distributions at current levels to its partners, including us. 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 NuStar Energy’s control, and increases in the price of crude oil may result in a lower demand for refined products that NuStar Energy transports, stores and markets, including fuel oil;
•
a decrease in corn acres planted, which may reduce demand for anhydrous ammonia; and
•
the increased use of alternative fuel sources, such as battery-powered engines.

Similarly, any sustained decrease in the supply of crude oil and refined products could result in a significant reduction in throughputs in NuStar Energy’s pipelines and storage in its terminals, which would reduce its cash flows and its ability to make distributions at current levels to its partners, including us. Factors that could lead to a decrease in supply to NuStar Energy’s 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 NuStar Energy’s 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.

NuStar Energy’s operations are subject to operational hazards and unforeseen interruptions, and NuStar Energy does not insure against all potential losses. Therefore, NuStar Energy could be seriously harmed by unexpected liabilities.
NuStar Energy’s 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 its control. These events might result in a loss of equipment or life, injury or extensive property damage, as well as an interruption in NuStar Energy’s operations. In the event any of NuStar Energy’s facilities are forced to shut down for a significant period of time, it may have a material adverse effect on NuStar Energy’s earnings, its other results of operations and its financial condition as a whole.

NuStar Energy may not be able to maintain or obtain insurance of the type and amount it desires at reasonable rates. As a result of market conditions, premiums and deductibles for certain of NuStar Energy’s 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, NuStar Energy’s insurance carriers require broad exclusions for losses due to terrorist acts. If NuStar Energy were to incur a significant liability for which it is not fully insured, such a liability could have a material adverse effect on NuStar Energy’s financial position and its ability to make distributions at current levels to its unitholders, including us, and to meet its debt service requirements.

NuStar Energy could be subject to damages based on claims brought against it by its customers or lose customers as a result of the failure of its products to meet certain quality specifications or other claims related to the operation of its assets and the services it provides to its customers.
Certain of NuStar Energy’s 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. NuStar Energy also could face other

14

claims by its customers if its assets do not operate as expected by its customers or its services otherwise do not meet its customers’ expectations. A successful claim or series of claims against NuStar Energy could result in unforeseen expenditures and a loss of one or more customers.

NuStar Energy is exposed to counterparty credit risk. Nonpayment and nonperformance by NuStar Energy’s customers, vendors or derivative counterparties could reduce its revenues, increase its expenses and otherwise have a negative impact on its ability to conduct its business, its operating results, cash flows and ability to make distributions to its unitholders, including us.
NuStar Energy is subject to risks of loss resulting from nonpayment or nonperformance by its customers to whom it extends credit. In addition, nonperformance by vendors who have committed to provide NuStar Energy with critical products or services could raise its costs or interfere with its ability to successfully conduct its business. Furthermore, nonpayment by the counterparties to any of NuStar Energy’s outstanding derivatives could expose NuStar Energy to additional interest rate or commodity price risk. Weak economic conditions and widespread financial stress could reduce the liquidity of its customers, vendors or counterparties, making it more difficult for them to meet their obligations to NuStar Energy. Any substantial increase in the nonpayment and nonperformance by NuStar Energy’s customers, vendors or counterparties could have a material adverse effect on its results of operations, cash flows and ability to make distributions at current levels to its unitholders, including us.

Axeon’s failure to repay the Axeon Term Loan and any liability NuStar Energy incurs as a result of the financing arrangements and guarantees of Axeon required by that loan could have a material and adverse impact on NuStar Energy’s financial condition, results of operations and cash flows and could adversely affect its ability to make quarterly distributions to its unitholders, including us.
In connection with NuStar Energy’s sale of NuStar Asphalt LLC (now known as Axeon), NuStar Logistics, an operating subsidiary of NuStar Energy, agreed to convert the revolving credit facility with Axeon into a $190 million term loan (the Axeon Term Loan). NuStar Energy 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 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, NuStar Energy 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, NuStar Energy 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 NuStar Energy’s financial condition, results of operations, cash flows and ability to pay distributions to its unitholders, including us, at current levels.

A failure in NuStar Energy’s computer systems or a cyber-attack on NuStar Energy or third parties with whom NuStar Energy has a relationship may adversely affect NuStar Energy’s operations and reputation.
NuStar Energy relies on the use of technology to conduct its business. NuStar Energy’s business is dependent upon its operational and financial computer systems to process the data necessary to conduct almost all aspects of its business, including operating its pipelines and storage facilities, recording and reporting commercial and financial transactions and receiving and making payments. NuStar Energy’s systems and networks, as well as those of its 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 NuStar Energy’s operations, damage its facilities or those of third parties and harm NuStar Energy’s and, in turn, our reputation. Any failure or disruption of NuStar Energy’s systems could have an adverse effect on its revenues and increase its operating and capital costs, which could reduce the amount of cash otherwise available for distributions to unitholders, including us. NuStar Energy also may be required to incur additional costs to modify or enhance its systems in order to try to prevent or remediate any such attacks.


15

Potential future acquisitions and expansions, if any, may increase substantially the level of NuStar Energy’s indebtedness and contingent liabilities or otherwise change its capital structure, and NuStar Energy may be unable to integrate acquisitions and expansions effectively into its existing operations.
From time to time, NuStar Energy evaluates and acquires assets and businesses that it believes complement or diversify its existing assets and businesses. Acquisitions may require NuStar Energy to raise a substantial amount of equity or incur a substantial amount of indebtedness. If NuStar Energy consummates any future material acquisitions, its 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 NuStar Energy 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 NuStar Energy’s management and other personnel to devote significant amounts of time to integrating the acquired businesses with NuStar Energy’s 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 NuStar Energy does not successfully integrate any past or future acquisitions, or if there is any significant delay in achieving such integration, NuStar Energy’s business and financial condition could be adversely affected.

Moreover, part of NuStar Energy’s business strategy includes acquiring additional assets that complement NuStar Energy’s existing asset base and distribution capabilities or provide entry into new markets. NuStar Energy may not be able to identify suitable acquisitions, or it may not be able to purchase or finance any acquisitions on terms that it finds acceptable. Additionally, NuStar Energy competes against other companies for acquisitions, and NuStar Energy may not be successful in the acquisition of any assets or businesses appropriate for its growth strategy.

NuStar Energy does not own all of the land on which its pipelines and facilities have been constructed, and NuStar Energy is therefore subject to the possibility of increased costs or the inability to retain necessary land use.
NuStar Energy obtains the rights to construct and operate its 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 NuStar Energy’s facilities are located on leased premises. Its loss of these rights, through its inability to renew right-of-way contracts or leases or otherwise, could adversely affect its operations and cash flows available for distribution to unitholders, including us.

In addition, the construction of additions to NuStar Energy’s existing assets may require it to obtain new rights-of-way or property rights prior to construction. NuStar Energy may be unable to obtain such rights-of-way or other property rights to connect new supplies to its existing pipelines, storage terminals or other facilities or to capitalize on other attractive expansion opportunities. Additionally, it may become more expensive for NuStar Energy 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 NuStar Energy’s operations and cash flows available for distribution to unitholders, including us.

NuStar Energy may have liabilities from its assets that pre-exist NuStar Energy’s acquisition of those assets, but that may not be covered by indemnification rights NuStar Energy may have against the sellers of the assets.
In some cases, NuStar Energy may have indemnified the previous owners and operators of acquired assets. Some of NuStar Energy’s 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 from the seller is not available, it could adversely affect NuStar Energy’s financial position and results of operations.

Climate change legislation and other regulatory initiatives may decrease demand for the products NuStar Energy stores, transports and sells and increase NuStar Energy’s 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 NuStar Energy’s products and increase its operating costs. In addition, several states and local governmental bodies, either individually or

16

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 NuStar Energy conducts business, could result in changes to the demand for the products NuStar Energy stores, transports and sells, and could increase the costs of NuStar Energy’s operations, including costs to operate and maintain its facilities, install new emission controls on its facilities, acquire allowances to authorize its greenhouse gas emissions, pay any taxes related to its greenhouse gas emissions or administer and manage a greenhouse gas emissions program. Even though NuStar Energy attempts to mitigate such lost revenues or increased costs through the contracts it signs with its customers, NuStar Energy may be unable to recover those revenues or mitigate the increased costs, and any such recovery may depend on events beyond its control, including the outcome of future rate proceedings before the Federal Energy Regulatory Commission (the FERC), the Surface Transportation Board (STB) or other regulators and the provisions of any final legislation or regulations. Reductions in NuStar Energy’s revenues or increases in its expenses as a result of climate control or other initiatives could have adverse effects on NuStar Energy’s business, financial position, results of operations and prospects.

NuStar Energy operates a global business that exposes it to additional risks.
NuStar Energy operates a global business and a significant portion of its revenues come from its business outside of the United States. Its 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. NuStar Energy has 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 its operations or financial results.

NuStar Energy’s operations are subject to federal, state and local laws and regulations, in the U.S. and in the foreign countries in which it operates, relating to environmental protection and operational safety that could require NuStar Energy to make substantial expenditures.
NuStar Energy’s 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. NuStar Energy owns or leases 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 NuStar Energy’s control.

If NuStar Energy 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 its financial position and its ability to make distributions at current levels to its unitholders, including us, and its ability to meet its debt service requirements.

NuStar Energy’s 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 NuStar Energy’s 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 Interstate Commerce Act, FERC or shippers may challenge NuStar Energy’s 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.

NuStar Energy uses various FERC-authorized rate change methodologies for its interstate pipelines, including indexing, cost-of-service rates, market-based rates and settlement rates. Typically, NuStar Energy adjusts its 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

17

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%. NuStar Energy anticipates that the oil pipeline index for the five-year period beginning July 1, 2016 may be subject to further review by FERC. Some of NuStar Energy’s newer projects that involved an open season include negotiated indexation rate caps. These methodologies could result in changes in NuStar Energy’s revenue that do not fully reflect changes in costs it incurs to operate and maintain its pipelines. For example, NuStar Energy’s 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, NuStar Energy is 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 NuStar Energy’s 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 NuStar Energy’s ability to make distributions at current levels to its unitholders, including us, and to meet its debt service requirements. Additionally, competition constrains NuStar Energy’s rates in various markets. As a result, NuStar Energy may from time to time be forced to reduce some of its rates to remain competitive.

Changes to FERC rate-making principles could have an adverse impact on NuStar Energy’s ability to recover the full cost of operating its pipeline facilities and its ability to make distributions at current levels to its unitholders, including us.
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 NuStar Energy 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 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 NuStar Energy’s ability to include a full income tax allowance in cost of service.

The rates that NuStar Energy may charge on its interstate ammonia pipeline are subject to regulation by the STB.
NuStar Energy’s ammonia pipeline is subject to regulation under the Interstate Commerce Act by the STB. Under that regulation NuStar Energy’s ammonia pipeline’s rates, classifications, rules and practices related to the interstate transportation of anhydrous ammonia must be reasonable and, in providing interstate transportation, NuStar Energy’s 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 NuStar Energy’s operating expenses and its ability to make distributions at current levels to its unitholders, including us.
Power costs constitute a significant portion of NuStar Energy’s operating expenses. For the year ended December 31, 2015, NuStar Energy’s power costs equaled approximately $44.9 million, or 9.5% of NuStar Energy’s operating expenses for the year. NuStar Energy uses mainly electric power at its pipeline pump stations and terminals, and such electric power is furnished by various utility companies that primarily use natural gas to generate electricity. Accordingly, NuStar Energy’s power costs typically fluctuate with natural gas prices. Increases in natural gas prices may cause NuStar Energy’s power costs to increase further. If natural gas prices increase, NuStar Energy’s cash flows may be adversely affected, which could adversely affect NuStar Energy’s ability to make distributions at current levels to its unitholders, including us.


18

Terrorist attacks and the threat of terrorist attacks have resulted in increased costs to NuStar Energy’s business. Continued hostilities in the Middle East or other sustained military campaigns may adversely impact NuStar Energy’s results of operations.
Increased security measures taken by NuStar Energy as a precaution against possible terrorist attacks have resulted in increased costs to its business. Uncertainty surrounding continued hostilities in the Middle East or other sustained military campaigns may affect NuStar Energy’s 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 NuStar Energy’s ability to raise capital.

NuStar Energy’s purchase and sale of crude oil and petroleum products may expose NuStar Energy to trading losses and hedging losses, and non-compliance with NuStar Energy’s related risk management policies could result in significant financial losses.
NuStar Energy’s marketing and trading of crude oil and petroleum products expose NuStar Energy to commodity price volatility risk for the purchase and sale of crude oil and petroleum products, including distillates and fuel oil. NuStar Energy attempts to mitigate this volatility risk through hedging, but it is still exposed to basis risk. In addition, NuStar Energy may be required to post cash collateral under its hedging arrangements. NuStar Energy 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, NuStar Energy’s marketing and trading activities, including any hedging activities, may cause volatility in NuStar Energy’s earnings. In addition, NuStar Energy will be exposed to credit risk in the event of non-performance by counterparties.

NuStar Energy’s risk management policies may not eliminate all price risk since open trading positions will expose it to price volatility. Further, there is a risk that NuStar Energy’s risk management policies will not be complied with. Although NuStar Energy has designed procedures to anticipate and detect non-compliance, there are no assurances these steps will detect and prevent all violations of NuStar Energy’s 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 NuStar Energy’s marketing and trading business may expose NuStar Energy to volatility in earnings and financial losses, which may adversely affect its financial condition and ability to make its quarterly distributions to its unitholders, including us.

Hedging transactions may limit NuStar Energy’s 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 NuStar Energy’s potential gains if petroleum product prices were to rise substantially over the price established by the hedge. In addition, such transactions may expose NuStar Energy to the risk of financial loss in certain circumstances, including instances in which:
•
the counterparties to NuStar Energy’s 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 NuStar Energy engages in hedging transactions that are effective economically, these transactions may not be considered effective for accounting purposes. Accordingly, NuStar Energy’s 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 NuStar Energy to engage in a hedging transaction that completely mitigates its exposure to commodity prices. NuStar Energy’s financial statements may reflect a gain or loss arising from an exposure to commodity prices for which NuStar Energy is unable to enter into an effective hedge.

TAX RISKS TO OUR UNITHOLDERS

If we or NuStar Energy were treated as a corporation for federal or state income tax purposes or we or NuStar Energy were otherwise subject to a material amount of entity-level taxation, then our cash available for distribution to our 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.

The value of our investment in NuStar Energy depends largely on NuStar Energy being treated as a partnership for federal income tax purposes.


19

Despite the fact that we are a limited liability company and NuStar Energy is a limited partnership under Delaware law, we would each be treated as a corporation for federal income tax purposes unless each of us satisfies a “qualifying income” requirement. Based upon our current operations, we believe we and NuStar Energy each satisfy the qualifying income requirement. Failing to meet the qualifying income requirement or a change in current law could cause us or NuStar Energy to be treated as a corporation for federal income tax purposes or otherwise subject us or NuStar Energy 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. If NuStar Energy were treated as a corporation for federal income tax purposes, it would pay federal income tax on its taxable income at the corporate tax rate. Distributions to us would generally be taxed again as corporate distributions, and no income, gains, losses, deductions or credits would flow through to us. Because a tax would be imposed upon us or NuStar Energy as a corporation, our distributable cash flow would be substantially reduced.

In addition, recently enacted legislation applicable to tax years beginning after 2017 changes the audit procedures for entities treated as large partnerships for federal income tax purposes and, in certain circumstances, would permit the IRS to assess and collect taxes (including any applicable penalties and interest) resulting from entity-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 or NuStar Energy to entity-level taxation by individual states. Because of widespread state budget deficits and other reasons, several states are evaluating ways to subject entities treated as 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 unitholders. Therefore, if we or NuStar Energy 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.

The tax treatment of publicly traded entities treated as partnerships for federal income tax purposes, or an investment in our or NuStar Energy 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 entities treated as partnerships for federal income tax purposes, including us or NuStar Energy, or an investment in our or NuStar Energy’s 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 such entities. 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 or NuStar Energy to meet the exception for certain publicly traded entities 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 or NuStar Energy take may adversely impact the market for our or NuStar Energy’s 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 or NuStar Energy 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 or NuStar Energy take. A court may not agree with all of the positions we or NuStar Energy take. Any contest with the IRS may materially and adversely impact the market for our or NuStar Energy’s units and the prices at which they trade. In addition, the costs of any contest between NuStar Energy and the IRS will result in a reduction in cash available for distribution to NuStar Energy unitholders and thus will be borne indirectly by us, as a unitholder and as the owner of the general partner of NuStar Energy, and by the other unitholders of NuStar Energy. Moreover, recently enacted legislation applicable to tax years beginning after 2017 changes the audit procedures for entities treated as large partnerships for federal income tax purposes and, in certain circumstances, would permit the IRS to assess and collect taxes (including any applicable penalties and interest) resulting from entity-level federal income tax audits directly from us in the year in which the audit is completed. If we or NuStar Energy are required to make payments of taxes, penalties and interest resulting from audit adjustments, our cash

20

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.

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 our termination 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 entity treated as a partnership for federal income tax purposes that has technically terminated requests, and the IRS grants, special relief, among other things, the entity 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, even if the price the unitholder receives is less than the units’ 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 or NuStar Energy 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

21

penalties for failure to comply with those requirements. We or NuStar Energy 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 entity treated as a partnership for federal income tax purposes 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 entities treated as partnerships for federal income tax purposes, 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.

NuStar Energy has adopted certain valuation methodologies that may result in a shift of income, gain, loss and deduction between us and the public unitholders of NuStar Energy. The IRS may challenge this treatment, which could adversely affect the value of NuStar Energy’s common units and our common units.
When we or NuStar Energy issue additional units or engage in certain other transactions, NuStar Energy determines the fair market value of its assets and allocates any unrealized gains or losses attributable to such assets to the capital accounts of NuStar Energy’s public unitholders and us. NuStar Energy’s methodology may be viewed as understating the value of NuStar Energy’s assets. In that case, there may be a shift of income, gain, loss and deduction between certain NuStar Energy public unitholders and us, which may be unfavorable to such NuStar Energy unitholders. Moreover, under our current valuation methods, subsequent purchasers of our common units may have a greater portion of their Internal Revenue Code Section 743(b) adjustment allocated to NuStar Energy’s intangible assets and a lesser portion allocated to NuStar Energy’s tangible assets. The IRS may challenge NuStar Energy’s valuation methods, our methods, or NuStar Energy’s allocation of the Section 743(b) adjustment attributable to NuStar Energy’s tangible and intangible assets, and allocations of income, gain, loss and deduction between us and certain of NuStar Energy’s public 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 or the NuStar Energy unitholders. It also could affect the amount of gain on the sale of common units by our unitholders or NuStar Energy’s unitholders and could have a negative impact on the value of our common units or those of NuStar Energy or result in audit adjustments to our or NuStar Energy’s unitholders’ tax returns without the benefit of additional deductions.

We expect that our ratio of taxable income to cash distributions will be higher than the ratio applicable to holders of common units in NuStar Energy.
We expect that our ratio of taxable income to cash distributions will be higher than the ratio applicable to holders of common units in NuStar Energy. Other holders of common units in NuStar Energy will receive remedial allocations of deductions from NuStar Energy. Any remedial allocations of deductions to us from NuStar Energy will be very limited. In addition, our ownership of NuStar Energy incentive distribution rights will cause more taxable income to be allocated to us from NuStar Energy. If NuStar Energy is successful in increasing its distributions over time, our income allocations from our NuStar Energy incentive distribution rights will increase, and, therefore, our ratio of taxable income to cash distributions will increase.

Items of our income, gain, loss and deduction will be allocated among our unitholders to account for the difference between the fair market value and tax basis of our assets at the time of an offering.
Specified items of income, gain, loss and deduction will be allocated to us from NuStar Energy and among our unitholders to account for the difference between the fair market value and tax basis of NuStar Energy’s assets and our assets at the time the assets were contributed to NuStar Energy (or its predecessors) or at any other offering. The effect of these allocations will be to allocate to us from NuStar Energy and to our unitholders, gains attributable to our share of the difference between the fair market value and the tax basis of NuStar Energy’s assets at these times (including gain attributable to our ownership of the incentive distribution rights). The effect of these allocations to a unitholder purchasing units will be essentially the same as if the tax basis of our and NuStar Energy’s assets were equal to their fair market values at the time of the purchase, with the result that a unitholder purchasing units will not bear the federal income tax burden associated with any existing difference between the fair market value and tax basis of our or NuStar Energy’s assets. The federal income tax burden associated with the difference between the fair market value and the tax basis of our assets immediately prior to purchasing units will be borne by our existing unitholders as of that time.

22


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 an interest in an entity treated as a partnership for federal income tax purposes, 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 for tax purposes 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.

ITEM 1B. UNRESOLVED STAFF COMMENTS
None.

ITEM 3. LEGAL PROCEEDINGS

We are not currently a party to any material legal proceedings. 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 indemnify us against liabilities arising from future legal proceedings as a result of our ordinary business activity.

NuStar Energy is named as a defendant in litigation and is a party to other claims and legal proceedings relating to NuStar Energy’s 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 NuStar Energy’s results of operations, financial position or liquidity. NuStar Energy is insured against various business risks to the extent its management believes is prudent; however, NuStar Energy cannot be assured that the nature and amount of such insurance will be adequate, in every case, to protect it against liabilities arising from future legal proceedings as a result of its ordinary business activity.

ENVIRONMENTAL AND SAFETY COMPLIANCE MATTERS

With respect to the environmental proceeding listed below, if it was decided against NuStar Energy, we believe that it would not have a material effect on its 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 NuStar Energy’s 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, NuStar Energy’s 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 the Shore 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 “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. NuStar Energy has 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, Shore 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.


23

ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.


24

ITEM X. EXECUTIVE OFFICERS OF THE REGISTRANT
 
Set forth below is certain information concerning our executive officers, effective as of February 20, 2016.

Name
 
Age  
 
Position Held with NuStar GP Holdings, LLC
Bradley C. Barron
 
50
 
President, Chief Executive Officer and Director
Mary Rose Brown
 
59
 
Executive Vice President and Chief Administrative Officer
Thomas R. Shoaf
 
57
 
Executive Vice President and Chief Financial Officer
Jorge A. del Alamo
 
46
 
Senior Vice President and Controller
Amy L. Perry
 
47
 
Senior Vice President, General Counsel-Corporate & Commercial Law and Corporate Secretary
Karen M. Thompson
 
48
 
Senior Vice President, General Counsel-Litigation, Regulatory & Environmental

Mr. Barron became Chief Executive Officer, President and a Director of NuStar GP Holdings and NuStar GP, LLC in January 2014. He served as Executive Vice President and General Counsel of NuStar GP Holdings and NuStar GP, LLC from February 2012 until his promotion in January 2014. From April 2007 to February 2012, he served as a Senior Vice President and General Counsel of NuStar GP Holdings and NuStar GP, LLC. Mr. Barron also served as Secretary of NuStar GP Holdings and NuStar GP, LLC from April 2007 to February 2009. He served as Vice President, General Counsel and Secretary of NuStar GP Holdings from March 2006 until April 2007 and as Vice President, General Counsel and Secretary of NuStar GP, LLC from January 2006 until April 2007. He has been with NuStar GP, LLC since July 2003 and, prior to that, was with Valero Energy Corporation (Valero Energy) from January 2001 until July 2003.

Ms. Brown became Executive Vice President and Chief Administrative Officer of NuStar GP Holdings and NuStar GP, LLC in April 2013. She served as Executive Vice President - Administration of NuStar GP Holdings and NuStar GP, LLC 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 Holdings and NuStar GP, LLC in January 2014. He served as Senior Vice President and Controller of NuStar GP Holdings and NuStar GP, LLC from February 2012 until his promotion in January 2014. Mr. Shoaf served as Vice President and Controller of NuStar GP Holdings from March 2006 to February 2012 and Vice President and Controller of NuStar GP, LLC from July 2005 to 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 Holdings and NuStar GP, LLC in July 2014. Prior thereto, he served as Vice President and Controller of NuStar GP Holdings and NuStar GP, LLC 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 Holdings and NuStar GP, LLC in January 2014. She served as Corporate Secretary of NuStar GP Holdings and Vice President, Assistant General Counsel and Corporate Secretary of NuStar GP, LLC from February 2010 until her promotion in January 2014. From March 2006 to February 2010 she served as Assistant Secretary of NuStar GP Holdings and, from June 2005 to February 2010, Assistant General Counsel and Assistant Secretary of NuStar GP, LLC. Prior to her service at NuStar GP, LLC, Ms. Perry served as Counsel to Valero Energy.

Ms. Thompson became Senior Vice President, General Counsel-Litigation, Regulatory & Environmental of NuStar GP Holdings and NuStar GP, LLC 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.


25

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 “NSH.” At the close of business on February 8, 2016, we had 12 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:
 
 
Price Range of
Common Unit
 
High
 
Low
Year 2015
 
 
 
4th Quarter
$
31.55

 
$
15.06

3rd Quarter
$
38.40

 
$
24.46

2nd Quarter
$
39.94

 
$
34.03

1st Quarter
$
39.53

 
$
30.77

Year 2014
 
 
 
4th Quarter
$
44.07

 
$
30.77

3rd Quarter
$
45.52

 
$
38.37

2nd Quarter
$
39.50

 
$
32.96

1st Quarter
$
34.05

 
$
26.57


We are required by our limited liability company agreement to distribute all of our available cash at the end of each quarter, less reserves established by our board of directors. All of our distributions are made on our common units, which are our only class of security outstanding. 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:
 
 
Record Date
 
Payment Date
 
Amount
Per Unit
Year 2015
 
 
 
 
 
4th Quarter
February 8, 2016
 
February 16, 2016
 
$
0.545

3rd Quarter
November 9, 2015
 
November 17, 2015
 
$
0.545

2nd Quarter
August 7, 2015
 
August 17, 2015
 
$
0.545

1st Quarter
May 8, 2015
 
May 18, 2015
 
$
0.545

 
 
 
 
 
 
Year 2014
 
 
 
 
 
4th Quarter
February 9, 2015
 
February 17, 2015
 
$
0.545

3rd Quarter
November 10, 2014
 
November 19, 2014
 
$
0.545

2nd Quarter
August 6, 2014
 
August 14, 2014
 
$
0.545

1st Quarter
May 7, 2014
 
May 15, 2014
 
$
0.545



26

The following Performance Graph is not “soliciting material,” is not deemed filed with the SEC and is not to be incorporated by reference into any of NuStar GP Holdings, LLC’s filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, as amended, respectively. The stock or unit price performance included in this graph is not necessarily indicative of future stock or unit price performance.

The following graph compares the cumulative 5-year total return provided to holders of NuStar GP Holdings, LLC’s common units relative to the cumulative total returns of the NYSE Composite index and the Alerian MLP index. An investment of $100 (with reinvestment of all dividends) is assumed to have been made in our common units and in each of the indexes on December 31, 2010 and its relative performance is tracked through December 31, 2015.

 
12/10
 
12/11
 
12/12
 
12/13
 
12/14
 
12/15
NuStar GP Holdings, LLC
100.00
 
96.76
 
86.09
 
94.60
 
123.17
 
80.87
NYSE Composite
100.00
 
96.16
 
111.53
 
140.85
 
150.35
 
144.21
Alerian MLP
100.00
 
111.08
 
120.99
 
164.01
 
182.07
 
127.31

27

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
 
2012
 
2011
 
(Thousands of Dollars, Except Per Unit Data)
Statement of Comprehensive Income (Loss) Data:
 
 
 
 
 
 
 
 
 
Equity in earnings (loss) of NuStar Energy L.P.
$
79,673

 
$
65,380

 
$
(6,741
)
 
$
(4,578
)
 
$
65,783

Net income (loss)
72,208

 
61,427

 
(11,034
)
 
2,128

 
69,636

Basic and diluted net income (loss) per unit
1.68

 
1.44

 
(0.26
)
 
0.05

 
1.64

Cash distributions per unit
2.18

 
2.18

 
2.18

 
2.11

 
1.98

Other Financial Data:
 
 
 
 
 
 
 
 
 
Distributions received from NuStar Energy L.P.
$
96,030

 
$
96,012

 
$
96,134

 
$
92,628

 
$
86,106

 
 
 
 
 
 
 
 
 
 
 
December 31,
 
2015
 
2014
 
2013
 
2012
 
2011
 
(Thousands of Dollars)
Balance Sheet Data:
 
 
 
 
 
 
 
 
 
Total assets
$
360,490

 
$
385,150

 
$
412,382

 
$
517,716

 
$
589,027

Total short-term debt
26,000

 
26,000

 
26,000

 
20,000

 
16,500

Members’ equity
287,070

 
310,836

 
349,986

 
412,822

 
506,883

 

28

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 GP Holdings, LLC (NuStar GP Holdings) is a Delaware limited liability company. Our units are traded on the New York Stock Exchange (NYSE) under the symbol “NSH.” Unless otherwise indicated, the terms “NuStar GP Holdings,” “we,” “our” and “us” are used in this report to refer to NuStar GP Holdings, LLC, to one or more of our consolidated subsidiaries or to all of them taken as a whole. 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

Our only cash generating assets are our ownership interests in NuStar Energy L.P. (NuStar Energy), a publicly traded Delaware limited partnership (NYSE: NS). As of December 31, 2015, our aggregate ownership interests in NuStar Energy consisted of the following:
•
the 2% general partner interest;
•
100% of the incentive distribution rights issued by NuStar Energy, which entitle us to receive increasing percentages of the cash distributed by NuStar Energy, currently at the maximum percentage of 23%; and
•
10,252,660 common units of NuStar Energy representing a 12.9% limited partner interest.

We account for our ownership interest in NuStar Energy using the equity method. Therefore, our financial results reflect a portion of NuStar Energy’s net income based on our ownership interest. We have no separate operating activities apart from those conducted by NuStar Energy and therefore generate no revenues from operations.

NuStar Energy is engaged in the transportation of petroleum products and anhydrous ammonia, the terminalling and storage of petroleum products and the marketing of petroleum products. NuStar Energy has terminal and storage facilities in the United States, Canada, Mexico, the Netherlands, including St. Eustatius in the Caribbean, and the United Kingdom.

NuStar Energy’s partnership agreement requires that it distribute all “Available Cash” to its partners each quarter, and this term is defined in its 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 NuStar Energy’s board of directors. Similarly, we are

29

required by our limited liability company agreement to distribute all of our available cash at the end of each quarter, less reserves established by our board of directors.

On January 2, 2015, NuStar Energy acquired full ownership of a refined products terminal in Linden, NJ, for $142.5 million (the Linden Acquisition). Prior to the acquisition, the terminal operated as a joint venture between NuStar Energy and Linden Holding Corp, with each party owning 50%.

On February 26, 2014, NuStar Energy sold its remaining 50% ownership interest in NuStar Asphalt LLC (the 2014 Asphalt Sale) to Lindsay Goldberg LLC, a private investment firm. Effective February 27, 2014, NuStar Asphalt LLC changed its name to Axeon Specialty Products LLC (Axeon).

On January 1, 2013, NuStar Energy sold its fuels refinery in San Antonio, Texas and related assets for approximately $117.0 million (the San Antonio Refinery Sale).


30

RESULTS OF OPERATIONS
As discussed above, we account for our investment in NuStar Energy using the equity method. As a result, our equity in earnings of NuStar Energy, our only source of income, directly fluctuates with the amount of NuStar Energy’s distributions and results of operations. NuStar Energy’s distributions determine the amount of our incentive distribution earnings, while NuStar Energy’s results of operations determine the amounts of earnings attributable to our general partner and limited partner interests.
Year Ended December 31, 2015 Compared to Year Ended December 31, 2014
Financial Highlights
(Thousands of Dollars, Except Unit and Per Unit Data)
 
 
Year Ended December 31,
 
 
 
2015
 
2014
 
Change
Equity in earnings of NuStar Energy
$
79,673

 
$
65,380

 
$
14,293

General and administrative expenses
(3,338
)
 
(3,396
)
 
58

Other expense, net
(2,333
)
 
(1,458
)
 
(875
)
Interest expense, net
(893
)
 
(885
)
 
(8
)
Income before income tax (expense) benefit
73,109

 
59,641

 
13,468

Income tax (expense) benefit
(901
)
 
1,786

 
(2,687
)
Net income
$
72,208

 
$
61,427

 
$
10,781

Basic and diluted net income per unit
$
1.68

 
$
1.44

 
$
0.24


The following table summarizes NuStar Energy’s statement of income data:
 
Year Ended December 31,
 
 
 
2015
 
2014
 
Change
 
(Thousands of Dollars, Except Per Unit Data)
Revenues
$
2,084,040

 
$
3,075,118

 
$
(991,078
)
Cost of product sales
907,574

 
1,967,528

 
(1,059,954
)
Operating expenses
473,031

 
472,925

 
106

Depreciation and amortization expense
201,719

 
181,555

 
20,164

Segment operating income
501,716

 
453,110

 
48,606

General and administrative expenses
102,521

 
96,056

 
6,465

Other depreciation and amortization expense
8,491

 
10,153

 
(1,662
)
Operating income
$
390,704

 
$
346,901

 
$
43,803

 
 
 
 
 
 
Income from continuing operations
$
305,946

 
$
214,169

 
$
91,777

Income (loss) from discontinued operations, net of tax
774

 
(3,791
)
 
4,565

Net income
$
306,720

 
$
210,378

 
$
96,342

 
 
 
 
 
 
Net income per unit applicable to limited partners
$
3.30

 
$
2.10

 
$
1.20

 
 
 
 
 
 
Cash distributions per unit applicable to limited partners
$
4.380

 
$
4.380

 
$
—





31

NuStar Energy’s 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 NuStar Energy’s segment operating income, resulting mainly from improvements in its pipeline and storage segments, and a $56.3 million gain associated with NuStar Energy’s Linden Acquisition.

Equity in earnings of NuStar Energy
The following table summarizes our equity in earnings of NuStar Energy: 
 
Year Ended December 31,
 
 
 
2015
 
2014
 
Change
 
(Thousands of Dollars)
NuStar GP Holdings’ Equity in Earnings of NuStar Energy:
 
 
 
 
 
General partner interest
$
5,270

 
$
3,352

 
$
1,918

General partner incentive distribution
43,220

 
43,220

 
—

General partner’s interest in earnings and incentive
distributions of NuStar Energy
48,490

 
46,572

 
1,918

Limited partner interest in earnings of NuStar Energy
34,067

 
21,692

 
12,375

Amortization of step-up in basis related to
NuStar Energy’s assets and liabilities
(2,884
)
 
(2,884
)
 
—

Equity in earnings of NuStar Energy
$
79,673

 
$
65,380

 
$
14,293


Our equity in earnings related to our general and limited partner interests in NuStar Energy increased $14.3 million for the year ended December 31, 2015, compared to the year ended December 31, 2014, due to an increase in NuStar Energy’s net income.






32

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
Equity in earnings (loss) of NuStar Energy
$
65,380

 
$
(6,741
)
 
$
72,121

General and administrative expenses
(3,396
)
 
(3,105
)
 
(291
)
Other (expense) income, net
(1,458
)
 
382

 
(1,840
)
Interest expense, net
(885
)
 
(778
)
 
(107
)
Income (loss) before income tax benefit (expense)
59,641

 
(10,242
)
 
69,883

Income tax benefit (expense)
1,786

 
(792
)
 
2,578

Net income (loss)
$
61,427

 
$
(11,034
)
 
$
72,461

Basic and diluted net income (loss) per unit
$
1.44

 
$
(0.26
)
 
$
1.70


The following table summarizes NuStar Energy’s statement of income (loss) data:
 
Year Ended December 31,
 
 
 
2014
 
2013
 
Change
 
(Thousands of Dollars, Except Per Unit Data)
Revenues
$
3,075,118

 
$
3,463,732

 
$
(388,614
)
Cost of product sales
1,967,528

 
2,453,997

 
(486,469
)
Operating expenses
472,925

 
454,396

 
18,529

Depreciation and amortization expense
181,555

 
168,766

 
12,789

Goodwill impairment loss
—

 
304,453

 
(304,453
)
Segment operating income
453,110

 
82,120

 
370,990

General and administrative expenses
96,056

 
91,086

 
4,970

Other depreciation and amortization expense
10,153

 
10,155

 
(2
)
Operating income (loss)
$
346,901

 
$
(19,121
)
 
$
366,022

 
 
 
 
 
 
Income (loss) from continuing operations
$
214,169

 
$
(185,509
)
 
$
399,678

Loss from discontinued operations, net of tax
(3,791
)
 
(99,162
)
 
95,371

Net income (loss)
$
210,378

 
$
(284,671
)
 
$
495,049

 
 
 
 
 
 
Net income (loss) per unit applicable to limited partners
$
2.10

 
$
(4.00
)
 
$
6.10

 
 
 
 
 
 
Cash distributions per unit applicable to limited partners
$
4.380

 
$
4.380

 
$
—


NuStar Energy’s 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 NuStar Energy’s storage segment in 2013, which included a goodwill impairment charge of $304.5 million. NuStar Energy’s 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 their Eagle Ford System. NuStar Energy’s 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 their bunker fuel operations. Additionally, NuStar Energy 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 NuStar Energy’s investment in Axeon in 2013.

33


NuStar Energy’s 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, NuStar Energy 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.

Equity in earnings (loss) of NuStar Energy
The following table summarizes our equity in earnings (loss) of NuStar Energy:
 
 
Year Ended December 31,
 
 
 
2014
 
2013
 
Change
 
(Thousands of Dollars)
NuStar GP Holdings’ Equity in Earnings (Loss) of NuStar Energy:
 
 
 
 
 
General partner interest
$
3,352

 
$
(6,338
)
 
$
9,690

General partner incentive distribution
43,220

 
43,220

 
—

General partner’s interest in earnings and incentive
distributions of NuStar Energy
46,572

 
36,882

 
9,690

Limited partner interest in earnings (loss) of NuStar Energy
21,692

 
(40,739
)
 
62,431

Amortization of step-up in basis related to
NuStar Energy’s assets and liabilities
(2,884
)
 
(2,884
)
 
—

Equity in earnings (loss) of NuStar Energy
$
65,380

 
$
(6,741
)
 
$
72,121


For the year ended December 31, 2014, NuStar Energy reported net income per unit applicable to limited partners of $2.10, compared to a net loss of $4.00 per unit for the year ended December 31, 2013. As our results are based on NuStar Energy’s results, we reported equity in earnings for the year ended December 31, 2014, compared to equity in loss for the year ended December 31, 2013 related to our general and limited partner interests in NuStar Energy.




34

TRENDS AND OUTLOOK
We expect our equity in earnings of NuStar Energy to increase or decrease consistent with NuStar Energy’s earnings.

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.

NuStar Energy believes a number of factors serve to minimize its direct exposure to the risks associated with fluctuating commodity prices. NuStar Energy owns assets and offer services in regional markets across the United States and around the world, and NuStar Energy is 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 its Eagle Ford pipeline and storage assets constituted less than 16% of its total pipeline and storage segment revenue. In NuStar Energy’s view, the fact that its pipeline segment and its 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 its 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 its results of operations. However, a protracted period of depressed crude oil prices and overall economic downturn could have a negative impact on its 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 NuStar Energy’s. Unfavorable market conditions have increased the cost of financing capital spending through the public debt and equity markets, and, as a result, NuStar Energy has reduced its overall capital spending budget for 2016 and has prioritized its capital projects to minimize the need to access the public capital markets.

NuStar Energy’s Pipeline Segment
NuStar Energy expects its pipeline segment to benefit from higher forecasted volumes on its refined product pipelines. However, NuStar Energy expects these increases to be more than offset by reduced throughput volumes on its 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.

NuStar Energy’s Storage Segment
NuStar Energy expects 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 its terminal facilities. However, NuStar Energy expects that the reduced throughput on its Eagle Ford crude pipelines, as referred to with regard to its Pipeline Segment, will also result in lower throughputs in the first quarter at its Corpus Christi North Beach terminal.

NuStar Energy expects the full-year earnings for 2016 to benefit from favorable storage contract renewals and higher forecasted throughput volumes at several of its terminal facilities. However, NuStar Energy expects these increases to be more than offset by lower throughputs at its Corpus Christi North Beach terminal and overall lower revenue from some of its foreign terminal facilities, resulting in lower earnings in the full-year 2016 as compared to 2015.

NuStar Energy’s Fuels Marketing Segment
NuStar Energy expects first quarter 2016 results for its 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 NuStar Energy’s forecast.

NuStar Energy’s outlook for the partnership, both overall and for any of its segments, may change, as NuStar Energy bases its expectations on its continuing evaluation of a number of factors, many of which are outside its 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 its transportation and storage services and changes in laws or regulations affecting its assets.





35

LIQUIDITY AND CAPITAL RESOURCES
General
Our cash flows consist of distributions from NuStar Energy on our partnership interests, including the incentive distribution rights that we own. Due to our ownership of NuStar Energy’s incentive distribution rights, our portion of NuStar Energy’s total distributions may exceed our ownership interest in NuStar Energy. Our primary cash requirements are for distributions to members, capital contributions to maintain our 2% general partner interest in NuStar Energy in the event that NuStar Energy issues additional units, debt service requirements, if any, benefit plan funding and general and administrative expenses. In addition, because NuStar GP, LLC, a wholly owned subsidiary of NuStar GP Holdings, elected to be treated as a taxable entity in August 2006, we may be required to pay income taxes, which may exceed the amount of tax expense recorded in the consolidated financial statements. We expect to fund our cash requirements primarily with the quarterly cash distributions we receive from NuStar Energy and borrowings under our revolving credit facility, if necessary. Additionally, NuStar Energy reimburses us for all costs incurred on its behalf, which are primarily employee-related costs.

Cash Distributions from NuStar Energy
NuStar Energy distributes all of its available cash within 45 days following the end of each quarter based on the partnership interests outstanding as of a record date that is set after the end of each quarter. The following table reflects the cash distributions earned for the periods shown with respect to our ownership interests in NuStar Energy and our incentive distribution rights:
 
Year Ended December 31,
 
2015
 
2014
 
2013
 
(Thousands of Dollars, Except Per Unit Data)
Cash distributions per unit applicable to limited partners
$
4.380

 
$
4.380

 
$
4.380

Total cash distributions by NuStar Energy to all partners
$
392,204

 
$
392,204

 
$
392,204

Cash distributions we received from NuStar Energy:
 
 
 
 
 
General partner interest
$
7,844

 
$
7,844

 
$
7,844

General partner incentive distribution
43,220

 
43,220

 
43,220

Limited partner interest – common units
45,073

 
44,974

 
44,975

Total cash distributions to us
$
96,137

 
$
96,038

 
$
96,039

Distributions to us as a percentage of total cash distributions
24.5
%
 
24.5
%
 
24.5
%

Cash Flows for the Years Ended December 31, 2015, 2014 and 2013
Cash distributions received from NuStar Energy were $96.0 million for the year ended December 31, 2015, which we used primarily to fund distributions to our unitholders totaling $93.6 million.

Cash distributions received from NuStar Energy were $96.0 million for the year ended December 31, 2014, which we used primarily to fund distributions to our unitholders totaling $93.1 million. We also received $7.2 million in proceeds from the exercise of unit options in 2014.

Cash distributions received from NuStar Energy were $96.1 million for the year ended December 31, 2013, which we used primarily to fund distributions to our unitholders totaling $92.9 million. We borrowed $26.0 million from our revolving credit facility during 2013, mainly to repay $18.5 million on our previous revolving credit facility and to repay $7.5 million to NuStar Energy for employee benefits and related costs.

Credit Facility
Borrowings under our revolving credit facility are used to fund capital contributions to NuStar Energy to maintain our 2% general partner interest when NuStar Energy issues additional common units and to meet other liquidity and capital resource requirements. Our revolving credit facility dated June 28, 2013, as most recently amended on June 17, 2015, will mature on June 27, 2016 and has a borrowing capacity of up to $50.0 million, of which, up to $10.0 million may be available for letters of credit. Our obligations under our revolving credit facility are guaranteed by Riverwalk Holdings, LLC (Riverwalk), a wholly owned subsidiary. Riverwalk pledged 1,792,918 NuStar Energy units that it owns to secure its guarantee.

As of December 31, 2015, we had outstanding borrowings of $26.0 million and availability of $24.0 million for borrowings under our revolving credit facility. Interest on our revolving credit facility is based upon, at our option, either an alternative base rate or a LIBOR-based rate. As of December 31, 2015, the interest rate was 2.4%. Our management believes that we are in compliance with the covenants of the revolving credit facility as of December 31, 2015. We are in discussions with the

36

lenders to renew or replace our revolving credit facility. Please refer to Note 10 of the Notes to Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary Data” for a detailed discussion on our revolving credit facility.

Cash Distributions to Unitholders
Our limited liability company agreement requires that, within 50 days after the end of each quarter, we distribute all of our available cash to the holders of record of our units on the applicable record date. Available cash is defined as all cash on hand at the end of any calendar quarter, less the amount of cash reserves necessary or appropriate, as determined in good faith by our board of directors, to fund debt we may incur, if any, general and administrative expenses, future distributions and other miscellaneous uses of cash. The following table shows our cash distributions applicable to the period in which the distributions were earned:
 
Year Ended December 31,
 
2015
 
2014
 
2013
 
(Thousands of Dollars, Except Per Unit Data)
Cash distributions per unit
$
2.18

 
$
2.18

 
$
2.18

Total cash distributions
$
93,561

 
$
93,252

 
$
92,938


Pension and Other Postretirement Benefit Funded Status
During 2015, we contributed $8.3 million to NuStar GP LLC’s pension and postretirement benefit plans. Approximately $8.4 million is expected to be contributed to these pension and postretirement benefit plans in 2016, which principally represents contributions either required by regulations or laws or, with respect to unfunded plans, necessary to fund current benefits. We have not disclosed pension and postretirement funding beyond 2016 as the funding can vary from year to year based upon changes in the fair value of the plan assets and actuarial assumptions. Funding for these plans will be provided by NuStar Energy.

Contingencies
We are not currently a party to any material legal proceedings and have not recorded any accruals for loss contingencies. NuStar Energy is a party to claims and legal proceedings arising in the ordinary course of its business, which it believes are not material to its financial position or results of operations. However, 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 NuStar Energy’s results of operations and ability to pay distributions, which would impact our results of operations and ability to pay distributions.

RELATED PARTY TRANSACTIONS
Agreements with NuStar Energy
Pursuant to a services agreement between NuStar GP, LLC and NuStar Energy, NuStar Energy has reimbursed NuStar GP, LLC for furnishing administrative and certain operating services necessary to conduct the business of NuStar Energy. Please refer to Note 5 of the Notes to Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary Data” for a more detailed discussion of agreements with NuStar Energy.

Employee Benefit Plans and Unit-Based Compensation
As of December 31, 2015, we sponsored the following employee 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.

As of December 31, 2015, we had the following long-term incentive plans:

•
The Fourth Amended and Restated 2000 Long-Term Incentive Plan, under which NuStar GP, LLC may award up to 3,250,000 NuStar Energy (NS) common units;
•
The 2006 Long-Term Incentive Plan, under which NuStar GP Holdings may award up to 2,000,000 NuStar GP Holdings (NSH) units.


37

Please refer to Notes 14 and 15 of the Notes to Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary Data” for a more detailed discussion of Employee Benefit Plans and Unit-Based Compensation.

NuStar Energy has reimbursed NuStar GP, LLC for expenses incurred related to employee benefit plans at cost, and for long-term incentive plan compensation expenses resulting from NS and NSH awards to employees and directors of NuStar GP, LLC. Expenses resulting from NuStar GP Holdings awards to our non-employee directors are included in “General and administrative expenses” on our consolidated statements of comprehensive income. Our current liabilities related to the long-term incentive plans and employee benefits are included in “Accrued compensation expense” and our noncurrent liabilities for employee benefits are included in “Long-term liabilities” on our consolidated balance sheets.

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 its employees and related benefit plans. Following the transfer of employees, NuStar Energy will pay employee costs directly and sponsor the employee benefit plans described above. We do not expect this transfer of employees and related benefit plans to materially change our results of operations since NuStar Energy currently reimburses us for nearly all of NuStar GP, LLC’s employee costs. However, our consolidated balance sheet will no longer reflect employee-related payables or the corresponding receivables from NuStar Energy.

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. At the time of the transfer of employees, NuStar Services Company LLC will assume obligations associated therewith, including all outstanding awards, and NuStar Energy intends 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 Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary Data,” which summarizes our significant accounting policies.

Investment in NuStar Energy
We evaluate our investment in NuStar Energy for impairment if and when there is evidence that we may not be able to recover the carrying amount of our investment or that NuStar Energy is unable to sustain an earnings capacity that justifies the carrying amount. A loss in the value of our investment that is other than a temporary decline is recognized currently in earnings based on the difference between the estimated current fair value of the investment and our carrying amount. In order to determine fair value, our management must make certain estimates and assumptions regarding NuStar Energy’s operations, including, among other things, an assessment of market conditions, projected cash flows, interest rates and growth rates that could significantly impact the fair value of our investment. Due to the significant subjectivity of the assumptions used to determine fair value, changes in market conditions and/or changes in assumptions could result in significant impairment charges in the future, thus affecting our earnings. We believe that the carrying amount of our investment in NuStar Energy as of December 31, 2015 is recoverable.

Unit-Based Compensation
We account for awards of NS unit options, performance awards and restricted units to employees and directors of NuStar GP, LLC at fair value, whereby a liability for the award is initially recorded and subsequent changes in the fair value are included in the determination of net income. The fair value of NS unit options is determined using the Black-Scholes model at each reporting date. The fair value of NS restricted units and performance awards equals the market price of NS common units at each reporting date. However, NS performance awards are earned only upon NuStar Energy’s achievement of an objective performance measure. We record compensation expense each reporting period such that the cumulative compensation expense equals the portion of the award’s current fair value that has vested. We record compensation expense related to NS unit options until such options are exercised, and we record compensation expense for NS restricted units and performance awards until the date of vesting.

We account for awards of NSH restricted units and unit options granted to employees of NuStar GP, LLC and our directors based on the fair value of the awards at the grant date. 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 units equals the market price of NSH common units at

38

the grant date. Compensation expense for NSH restricted units and unit options is recognized ratably over the vesting period based on the initial fair value determination.

We make certain assumptions to determine the fair value of NS and NSH unit options related to the expected life of the option, volatility of the related units, expected distribution yield and risk-free interest rate. Changes in these assumptions impact the amount of expense associated with the award and the amount of our liability.

Pension and Other Postretirement Benefit Obligations
We have significant pension and postretirement benefit liabilities and costs that are developed from actuarial valuations. Inherent in these valuations are key assumptions including discount rates, expected long-term rate of returns on plan assets, future compensation increases and health care cost trend rates. Changes in these assumptions are primarily influenced by factors outside our control. For example, the discount rate assumption is based on a hypothetical yield curve represented by a series of annualized individual discount rates. Each bond issue underlying the hypothetical yield curve required an average rating of double-A, when averaging all available ratings by Moody’s Investor Service Inc., Standard & Poor’s Ratings Services and Fitch, Inc. The resulting discount rates were 4.61% and 4.75% for pension and other postretirement benefit plans, respectively, as of December 31, 2015. The expected return on plan assets for the pension and other postretirement benefit plans is based on the weighted averages of the expected long-term rates of return for each asset class of investments held in our plans as determined using historical data and the assumption that capital markets are informationally efficient.

These assumptions can have an effect on the amounts reported in our consolidated financial statements. For example, a 0.25% decrease in the discount rate or expected return on plan assets or a 0.25% increase in the rate of compensation increase would have the following effects (in thousands):
 
 
Pension 
Benefits
 
Other
Postretirement
Benefits
Increase in benefit obligation as of December 31, 2015 from:
 
 
 
Discount rate decrease
$
5,500

 
$
400

Compensation rate increase
1,500

 
n/a

Increase in net periodic benefit cost for the year ending
December 31, 2016 resulting from:
 
 
 
Discount rate decrease
$
500

 
$
—

Expected long-term rate of returns on plan assets decrease
200

 
n/a

Compensation rate increase
400

 
n/a


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 detailed discussion of new accounting pronouncements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

None.


39

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 GP Holdings, LLC’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 42.


40

Report of Independent Registered Public Accounting Firm
The Board of Directors and Members
of NuStar GP Holdings, LLC:
We have audited the accompanying consolidated balance sheets of NuStar GP Holdings, LLC and subsidiaries (the Company) as of December 31, 2015 and 2014, and the related consolidated statements of comprehensive income, members’ 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 Company’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 GP Holdings, LLC 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 GP Holdings, LLC 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 Company’s internal control over financial reporting.
/s/    KPMG LLP
San Antonio, Texas
February 25, 2016


41

Report of Independent Registered Public Accounting Firm
The Board of Directors and Members
of NuStar GP Holdings, LLC:
We have audited NuStar GP Holdings, LLC and subsidiaries’ (the Company’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 Company’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 Company’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 GP Holdings, LLC 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 GP Holdings, LLC and subsidiaries as of December 31, 2015 and 2014, and the related consolidated statements of comprehensive income, members’ 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




42

NUSTAR GP HOLDINGS, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars)
 
 
December 31,
 
2015
 
2014
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
34

 
$
2,840

Receivable from related parties
14,799

 
15,704

Income tax receivable
1,212

 
1,211

Other receivables
69

 
91

Deferred income tax assets, net
—


724

Other current assets
344

 
491

Total current assets
16,458

 
21,061

Investment in NuStar Energy L.P.
306,694

 
326,982

Long-term receivable from related party
32,080

 
33,537

Deferred income tax assets, net
5,258

 
3,570

Total assets
$
360,490

 
$
385,150

Liabilities and Members’ Equity
 
 
 
Current liabilities:
 
 
 
Short-term debt
$
26,000

 
$
26,000

Accounts payable
636

 
620

Accrued compensation expense
8,990

 
9,944

Accrued liabilities
340

 
437

Deferred income tax liabilities, net
2,660

 
—

Taxes other than income tax
1,935

 
1,751

Total current liabilities
40,561

 
38,752

Long-term liabilities
32,859

 
35,562

Commitments and contingencies (Note 11)

 

Members’ equity
295,734

 
316,611

Accumulated other comprehensive loss
(8,664
)
 
(5,775
)
Total members’ equity
287,070

 
310,836

Total liabilities and members’ equity
$
360,490

 
$
385,150

See Notes to Consolidated Financial Statements.


43

NUSTAR GP HOLDINGS, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Thousands of Dollars, Except Unit and Per Unit Data)
 
 
Year Ended December 31,
 
2015
 
2014
 
2013
Equity in earnings (loss) of NuStar Energy L.P.
$
79,673

 
$
65,380

 
$
(6,741
)
General and administrative expenses
(3,338
)
 
(3,396
)
 
(3,105
)
Other (expense) income, net
(2,333
)
 
(1,458
)
 
382

Interest expense, net
(893
)
 
(885
)
 
(778
)
Income (loss) before income tax (expense) benefit
73,109

 
59,641

 
(10,242
)
Income tax (expense) benefit
(901
)
 
1,786

 
(792
)
Net income (loss)
72,208

 
61,427

 
(11,034
)
Other comprehensive (loss) income:
 
 
 
 
 
Share of NuStar Energy L.P.’s other comprehensive loss
(3,107
)
 
(665
)
 
(674
)
Pension and other postretirement benefit plan adjustments:
 
 
 
 
 
Net unrecognized gain (loss) arising during the year, net of income tax (expense) benefit of ($744), $6,298 and ($23,552)
1,312

 
(11,136
)
 
39,596

Net (gain) loss reclassified into income
(1,094
)
 
(2,915
)
 
2,041

Pension and other postretirement benefit plan adjustments
218

 
(14,051
)
 
41,637

Total other comprehensive (loss) income
(2,889
)
 
(14,716
)
 
40,963

Comprehensive income
$
69,319

 
$
46,711

 
$
29,929

Basic and diluted net income (loss) per unit
$
1.68

 
$
1.44

 
$
(0.26
)
Weighted-average number of basic units outstanding
42,914,297

 
42,719,217

 
42,619,722

Weighted-average number of diluted units outstanding
42,914,297

 
42,742,202

 
42,619,722

See Notes to Consolidated Financial Statements.


44

NUSTAR GP HOLDINGS, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
 
 
Year Ended December 31,
 
2015
 
2014
 
2013
Cash Flows from Operating Activities:
 
 
 
 
 
Net income (loss)
$
72,208

 
$
61,427

 
$
(11,034
)
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
 
 
 
 
 
Equity in (earnings) loss of NuStar Energy L.P.
(79,673
)
 
(65,380
)
 
6,741

Distributions of equity in earnings from NuStar Energy L.P.
79,673

 
65,380

 
—

Loss (gain) on sale of NuStar Energy L.P. limited partner units in
connection with unit-based compensation
2,333

 
1,458

 
(382
)
Expense (benefit) for deferred income tax
952

 
(621
)
 
424

Changes in current assets and liabilities (Note 9)
296

 
(2,270
)
 
(4,000
)
Decrease (increase) in long-term receivable from related party
363

 
(1,527
)
 
(22,984
)
(Decrease) increase in long-term liabilities
(647
)
 
36

 
16,452

Other, net
394

 
290

 
209

Net cash provided by (used in) operating activities
75,899

 
58,793

 
(14,574
)
Cash Flows from Investing Activities:
 
 
 
 
 
Distributions in excess of equity in earnings from NuStar Energy L.P.
16,357

 
30,632

 
96,134

Investment in NuStar Energy L.P.
(7,444
)
 
(19,340
)
 
(3,913
)
Proceeds from sale of NuStar Energy L.P. units in connection with
unit-based compensation
5,935

 
17,059

 
8,271

Net cash provided by investing activities
14,848

 
28,351

 
100,492

Cash Flows from Financing Activities:
 
 
 
 
 
Proceeds from short-term debt borrowings
—

 
26,000

 
26,000

Repayment of short-term debt
—

 
(26,000
)
 
(20,000
)
Distributions to unitholders
(93,567
)
 
(93,098
)
 
(92,912
)
Proceeds from the exercise of unit options
—

 
7,206

 
—

Other, net
14

 
(15
)
 
—

Net cash used in financing activities
(93,553
)
 
(85,907
)
 
(86,912
)
Net (decrease) increase in cash and cash equivalents
(2,806
)
 
1,237

 
(994
)
Cash and cash equivalents as of the beginning of the period
2,840

 
1,603

 
2,597

Cash and cash equivalents as of the end of the period
$
34

 
$
2,840

 
$
1,603

See Notes to Consolidated Financial Statements.

45

NUSTAR GP HOLDINGS, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF MEMBERS’ EQUITY
(Thousands of Dollars, Except Unit Data)
 
 
Units
 
Members’
Equity
 
Accumulated
Other
Comprehensive
(Loss) Income
 
Total
Balance as of January 1, 2013
42,600,191

 
$
444,844

 
$
(32,022
)
 
$
412,822

Net loss
—

 
(11,034
)
 
—

 
(11,034
)
Other comprehensive income
—

 
—

 
40,963

 
40,963

Distributions to unitholders
—

 
(92,912
)
 
—

 
(92,912
)
Unit-based compensation
56,090

 
147

 
—

 
147

Balance as of December 31, 2013
42,656,281

 
341,045

 
8,941

 
349,986

Net income
—

 
61,427

 
—

 
61,427

Other comprehensive loss
—

 
—

 
(14,716
)
 
(14,716
)
Distributions to unitholders
—

 
(93,098
)
 
—

 
(93,098
)
Unit-based compensation
256,996

 
7,251

 
—

 
7,251

Other
—

 
(14
)
 
—

 
(14
)
Balance as of December 31, 2014
42,913,277

 
316,611

 
(5,775
)
 
310,836

Net income
—

 
72,208

 
—

 
72,208

Other comprehensive loss
—

 
—

 
(2,889
)
 
(2,889
)
Distributions to unitholders
—

 
(93,567
)
 
—

 
(93,567
)
Unit-based compensation
17,272

 
468

 
—

 
468

Other
—

 
14

 
—

 
14

Balance as of December 31, 2015
42,930,549

 
$
295,734

 
$
(8,664
)
 
$
287,070

See Notes to Consolidated Financial Statements.


46

NUSTAR GP HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2015, 2014 and 2013

1. ORGANIZATION

NuStar GP Holdings, LLC (NuStar GP Holdings) (NYSE: NSH), a publicly held Delaware limited liability company, was formed in June 2000. Unless otherwise indicated, the terms “NuStar GP Holdings,” “we,” “our” and “us” are used in this report to refer to NuStar GP Holdings, to one or more of our consolidated subsidiaries or to all of them taken as a whole.

Our unitholders have no liability under our limited liability company agreement, or for any of our debts, obligations or liabilities, in their capacity as a unitholder.

We have no operations or sources of income or cash flows other than our investment in NuStar Energy L.P. (NuStar Energy or NS) (NYSE: NS). On December 31, 2015, we owned approximately 14.9% of NuStar Energy, consisting of the following:
•
the 2% general partner interest;
•
100% of the incentive distribution rights issued by NuStar Energy, which entitle us to receive increasing percentages of the cash distributed by NuStar Energy, currently at the maximum percentage of 23%; and
•
10,252,660 common units of NuStar Energy representing a 12.9% limited partner interest.

NuStar Energy is a publicly held Delaware limited partnership engaged in the transportation of petroleum products and anhydrous ammonia, the terminalling and storage of petroleum products and the marketing of petroleum products. NuStar Energy has terminal and storage facilities in the United States, Canada, Mexico, the Netherlands, including St. Eustatius in the Caribbean, and the United Kingdom.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Consolidation
The accompanying consolidated financial statements include the accounts of NuStar GP Holdings and subsidiaries in which it has a controlling interest. Intercompany balances and transactions have been eliminated in consolidation.

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.
 
Investment in NuStar Energy
We account for our 14.9% investment in NuStar Energy using the equity method, even though our ownership did not exceed 20% as of December 31, 2015. As the general partner, we exercise significant influence over NuStar Energy. We evaluate our investment in NuStar Energy for impairment when there is evidence that we may not be able to recover the carrying amount of our investment or that the investee is unable to sustain an earnings capacity that justifies the carrying amount. We recognize a loss in the value of our investment that is other than a temporary decline currently in earnings based on the difference between the estimated current fair value of the investment and our carrying amount. We believe that the carrying amount of our investment in NuStar Energy as of December 31, 2015 is recoverable.

Accounting for Sales of Units by NuStar Energy
We account for issuances of common units by NuStar Energy as if we had sold a proportionate share of our investment, such that we record any gain or loss in earnings.


47
NUSTAR GP HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)


Income Taxes
We are a limited liability company taxed as a 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 unitholders. 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.

On August 14, 2006, NuStar GP, LLC, our wholly owned subsidiary, elected to be treated as a corporation for federal income tax purposes under Treasury Regulation §301.7701-3(a). We account for income taxes under 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.

Income tax expense includes federal and state income and withholding taxes currently payable and deferred federal and state income taxes resulting from temporary differences between financial statement and tax bases of assets and liabilities when such differences exist. We, or certain of our subsidiaries, file income tax returns in the U.S. federal jurisdiction and various state jurisdictions. For U.S. federal and state purposes, tax years subject to examination are 2011 through 2014, according to standard statute of limitations.

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.

Unit-Based Compensation
We account for awards of NS unit options, performance awards and restricted units to employees and directors of NuStar GP, LLC and its affiliates at fair value, whereby a liability for the award is initially recorded and subsequent changes in the fair value are included in the determination of net income. The fair value of NS unit options is determined using the Black-Scholes model at each reporting date. The fair value of NS restricted units and performance awards equals 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. We record compensation expense each reporting period such that the cumulative compensation expense equals the portion of the award’s current fair value that has vested. We record compensation expense related to NS unit options until such options are exercised, and we record compensation expense for NS restricted units and performance awards until the date of vesting.

We account for awards of NSH restricted units and unit options granted to employees of NuStar GP, LLC and our directors based on the fair value of the awards at the grant date. 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 units equals the market price of NSH common units at the grant date. Compensation expense for NSH restricted units and unit options is recognized ratably over the vesting period based on the initial fair value determination.

The liability for awards of NS unit options, performance awards and restricted units is included in “Accrued compensation expense” on our consolidated balance sheets. NuStar Energy reimburses us for the expenses resulting from NS awards and NSH awards to employees providing services to NuStar Energy. Expenses resulting from NSH awards to our non-employee directors are included in “General and administrative expenses” on our consolidated statements of comprehensive income.

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.

Pension and Other Postretirement Benefits
We recognize the overfunded or underfunded status of our defined benefit pension or postretirement plans as an asset or a liability as of the balance sheet dates. We record changes in the funded status of our plans as a component of comprehensive income (loss) in the year the changes occur.

48
NUSTAR GP HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)


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. We will adopt these provisions on a prospective basis on January 1, 2017, and we do not expect the 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 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. INVESTMENT IN NUSTAR ENERGY

NuStar Energy’s Acquisitions and Dispositions
On January 2, 2015, NuStar Energy acquired full ownership of a refined products terminal in Linden, NJ for $142.5 million (the Linden Acquisition). Prior to the Linden Acquisition, the terminal operated as a joint venture between NuStar Energy and Linden Holding Corp, with each party owning 50%.

On February 26, 2014, NuStar Energy sold its remaining 50% ownership interest in NuStar Asphalt LLC (the 2014 Asphalt Sale) to Lindsay Goldberg LLC, a private investment firm. Effective February 27, 2014, NuStar Asphalt LLC changed its name to Axeon Specialty Products LLC (Axeon).

On January 1, 2013, NuStar Energy sold its fuels refinery in San Antonio, Texas (the San Antonio Refinery) and related assets for approximately $117.0 million (the San Antonio Refinery Sale).





49
NUSTAR GP HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)


Summary Financial Information
Condensed consolidated financial information reported by NuStar Energy is presented below:
 
December 31,
 
2015
 
2014
 
(Thousands of Dollars)
Balance Sheet Information:
 
 
 
Current assets
$
333,851

 
$
389,147

Property, plant and equipment, net
3,683,571

 
3,460,732

Goodwill
696,637

 
617,429

Other non-current assets
435,203

 
451,488

Total assets
$
5,149,262

 
$
4,918,796

Current liabilities
$
332,213

 
$
365,192

Long-term debt
3,079,349

 
2,749,452

Other non-current liabilities
127,856

 
87,942

Total liabilities
3,539,418

 
3,202,586

NuStar Energy partners’ equity
1,609,844

 
1,716,210

Total liabilities and partners’ equity
$
5,149,262

 
$
4,918,796

 
 
Year Ended December 31,
 
2015
 
2014
 
2013
 
(Thousands of Dollars)
Statement of Income Information:
 
 
 
 
 
Revenues
$
2,084,040

 
$
3,075,118

 
$
3,463,732

Operating income
$
390,704

 
$
346,901

 
$
(19,121
)
 
 
 
 
 
 
Income from continuing operations
$
305,946

 
$
214,169

 
$
(185,509
)
 Income (loss) from discontinued operations, net of tax
774

 
(3,791
)
 
(99,162
)
Net income
$
306,720

 
$
210,378

 
$
(284,671
)

Other
Our investment in NuStar Energy reconciles to NuStar Energy’s total partners’ equity as follows:
 
December 31,
 
2015
 
2014
 
(Thousands of Dollars)
NuStar Energy’s partners’ equity
$
1,609,844

 
$
1,716,210

NuStar GP Holdings’ ownership interest in NuStar Energy
14.9
%
 
14.9
%
NuStar GP Holdings’ share of NuStar Energy’s partners’ equity
239,867

 
255,715

Step-up in basis related to NuStar Energy’s assets and liabilities,
including equity method goodwill, and other
66,827

 
71,267

Investment in NuStar Energy
$
306,694

 
$
326,982

 
Valero Energy Corporation (Valero Energy) acquired us in connection with its December 31, 2001 acquisition of Ultramar Diamond Shamrock Corporation (2001 Acquisition). The step-up in basis related to NuStar Energy’s assets and liabilities, including equity method goodwill, reflected in the table above relates to purchase accounting adjustments resulting from the 2001 Acquisition. The amount represents the unamortized excess of the fair value over carrying amount applicable to Valero Energy’s proportionate 73.6% interest in NuStar Energy’s identifiable assets and liabilities as of December 31, 2001, of which $81.8 million is being amortized as a reduction to equity in earnings of NuStar Energy over approximately 28 years. This

50
NUSTAR GP HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)


amount also includes the portion of goodwill resulting from the 2001 Acquisition that was attributed to our investment in NuStar Energy. Since 26.4% of the equity interest in NuStar Energy was owned by public unitholders as of the date of the 2001 Acquisition, a significant portion of the total ownership interest in NuStar Energy was deemed to be held by the public according to GAAP, thereby preventing the adjustment of the reported financial statements of NuStar Energy.

The following table summarizes our equity in earnings (loss) of NuStar Energy:
 
Year Ended December 31,
 
2015
 
2014
 
2013
 
(Thousands of Dollars)
NuStar GP Holdings’ Equity in Earnings (Loss) of NuStar Energy:
 
 
 
 
 
General partner interest
$
5,270

 
$
3,352

 
$
(6,338
)
General partner incentive distribution
43,220

 
43,220

 
43,220

General partner’s interest in earnings and
incentive distributions of NuStar Energy
48,490

 
46,572

 
36,882

Limited partner interest in earnings (loss) of NuStar Energy
34,067

 
21,692

 
(40,739
)
Amortization of step-up in basis related to
NuStar Energy’s assets and liabilities
(2,884
)
 
(2,884
)
 
(2,884
)
Equity in earnings (loss) of NuStar Energy
$
79,673

 
$
65,380

 
$
(6,741
)

5. RELATED PARTY TRANSACTIONS

General
We manage NuStar Energy through our ownership of NuStar GP, LLC and Riverwalk Holdings, LLC, which own Riverwalk Logistics L.P., the general partner of NuStar Energy. Our officers are also officers of NuStar GP, LLC. The chairman of our board of directors, William E. Greehey, is also the chairman of the board of directors of NuStar GP, LLC. The board of directors of NuStar GP, LLC is responsible for overseeing NuStar GP, LLC’s role as the general partner of the general partner of NuStar Energy, and we, as the sole owner of NuStar GP, LLC, must also approve matters that have or would reasonably be expected to have a material effect on our interests as the sole owner of NuStar GP, LLC.

We had a receivable from related parties of $14.8 million and $15.7 million, as of December 31, 2015 and 2014, respectively, mainly relating to payroll, employee benefit plans and unit-based compensation for our employees providing services to NuStar Energy and NuStar Energy’s joint ventures. We also had a long-term receivable from related party of $32.1 million and $33.5 million as of December 31, 2015 and 2014, respectively, related to amounts payable for retiree medical benefits and other post-employment benefits. The following table summarizes information pertaining to related party transactions reimbursed primarily by NuStar Energy:
 
Year Ended December 31,
 
2015
 
2014
 
2013
 
(Thousands of Dollars)
Expenses for payroll, employee benefit plans and unit-based compensation
$
201,852

 
$
197,745

 
$
190,643

Other expenses
$
484

 
$
482

 
$
434


NuStar Energy
GP Services Agreement. NuStar Energy and NuStar GP, LLC, our wholly owned subsidiary, 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 Holdco Administrative Services Expense is based on $1.1 million, plus 1.0% of NuStar GP, LLC’s domestic bonus and unit-based compensation expense, subject to certain other adjustments. The GP Services Agreement renews automatically every two years unless terminated by either party. For the years ended December 31, 2015, 2014 and 2013, the Holdco Administrative Services Expense totaled $1.5 million, $1.7 million and $1.4 million, respectively.


51
NUSTAR GP HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)


Non-Compete Agreement. On July 19, 2006, in connection with our initial public offering, we entered into a non-compete agreement with NuStar Energy (the Non-Compete Agreement). Under the Non-Compete Agreement, we 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. NuStar Energy has 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. With respect to any other business opportunities, neither we nor NuStar Energy are prohibited from engaging in any business, even if we and NuStar Energy would have a conflict of interest with respect to such other business opportunity. The Non-Compete Agreement remains in effect for so long as we or any of our affiliates own 20% or more of NuStar GP, LLC or Riverwalk Logistics, L.P.
Please refer to Note 18 for a discussion of the employee transfer from NuStar GP, LLC.

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.

Axeon Services Agreement. NuStar GP, LLC and Axeon were a party to a services agreement, which provided that NuStar GP, LLC 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. The aggregate amount charged under the Axeon Services Agreement was $3.1 million and $7.9 million for the years ended December 31, 2014 and 2013, respectively.

6. DISTRIBUTIONS FROM NUSTAR ENERGY

NuStar Energy’s partnership agreement, as amended, determines the amount and priority of cash distributions that NuStar Energy’s common unitholders and general partner may receive. We, as NuStar Energy’s general partner, are entitled to incentive distributions if the amount NuStar Energy distributes with respect to any quarter exceeds $0.60 per unit, with the maximum percentage of 23% of the amount of any quarterly distribution in excess of $0.66 per unit. We also receive a 2% distribution with respect to our general partner interest. The following table reflects the allocation of NuStar Energy’s cash distributions earned for the periods indicated among its general and limited partners:
 
Year Ended December 31,
 
2015
 
2014
 
2013
 
(Thousands of Dollars, Except Per Unit Data)
General partner interest
$
7,844

 
$
7,844

 
$
7,844

General partner incentive distribution
43,220

 
43,220

 
43,220

Total general partner distribution
51,064

 
51,064

 
51,064

Limited partner distribution
45,073

 
44,974

 
44,975

Total distributions to NuStar GP Holdings
96,137

 
96,038

 
96,039

Public unitholders’ distributions
296,067

 
296,166

 
296,165

Total cash distributions
$
392,204

 
$
392,204

 
$
392,204

Cash distributions per unit applicable to limited partners
$
4.380

 
$
4.380

 
$
4.380


The following table summarizes information related to NuStar Energy’s quarterly cash distributions:
Quarter Ended
 
Cash Distributions Per Unit
 
Total Cash Distributions
 
Record Date
 
Payment Date
 
 
 
 
(Thousands of Dollars)
 
 
 
 
December 31, 2015 (a)
 
$
1.095

 
$
98,051

 
February 8, 2016
 
February 12, 2016
September 30, 2015
 
$
1.095

 
$
98,051

 
November 9, 2015
 
November 13, 2015
June 30, 2015
 
$
1.095

 
$
98,051

 
August 7, 2015
 
August 13, 2015
March 31, 2015
 
$
1.095

 
$
98,051

 
May 8, 2015
 
May 14, 2015
(a)
The distribution was announced on January 29, 2016.
 

52
NUSTAR GP HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)


7. ACCRUED COMPENSATION EXPENSE AND LONG-TERM LIABILITIES

Accrued compensation expense and long-term liabilities consisted of the following:
 
Accrued Compensation Expense
 
Long-term Liabilities
 
December 31,
 
December 31,
 
2015
 
2014
 
2015
 
2014
 
(Thousands of Dollars)
NuStar Energy restricted units and performance awards
$
3,794

 
$
5,369

 
$
—

 
$
—

Pension liabilities (Note 14)
71

 
60

 
21,425

 
23,423

Other postretirement benefit plan liabilities (Note 14)
304

 
304

 
9,738

 
10,180

Other employee-related liabilities
4,821

 
4,211

 
1,696

 
1,959

Total
$
8,990

 
$
9,944

 
$
32,859

 
$
35,562


8. FAIR VALUE MEASUREMENTS

We segregate the inputs used in measuring fair value into three levels: Level 1, defined as observable inputs such as quoted prices for identical assets or liabilities in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable, such as quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in markets that are not active; and Level 3, defined as unobservable inputs in which little or no market data exists.

The following liabilities are measured at fair value on a recurring basis and are reported in “Accrued compensation expense” on the consolidated balance sheets:
 
Level 1
 
Level 2
 
Level 3
 
Total
 
(Thousands of Dollars)
December 31, 2015:
 
 
 
 
 
 
 
NuStar Energy restricted units and performance awards
$
3,794

 
$
—

 
$
—

 
$
3,794

 
 
 
 
 
 
 
 
December 31, 2014:
 
 
 
 
 
 
 
NuStar Energy restricted units and performance awards
$
5,369

 
$
—

 
$
—

 
$
5,369

 
Fair Value of Financial Instruments
We recognize cash equivalents, receivables, payables and short-term debt in our consolidated balance sheets at their carrying amount. The fair values of these financial instruments approximate their carrying amounts. The fair value measurement of our short-term debt would fall in Level 2 of the fair value hierarchy.


53
NUSTAR GP HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)


9. STATEMENTS OF CASH FLOWS

Changes in current assets and current liabilities were as follows:
 
Year Ended December 31,
 
2015
 
2014
 
2013
 
(Thousands of Dollars)
Decrease (increase) in current assets:
 
 
 
 
 
Receivable from related parties
$
1,134

 
$
105

 
$
338

Income tax receivable
(1
)
 
(13
)
 
1,252

Other receivables
22

 
(14
)
 
70

Other current assets
(8
)
 
(407
)
 
(187
)
Increase (decrease) in current liabilities:
 
 
 
 
 
Accounts payable
16

 
296

 
(678
)
Accrued compensation expense
(954
)
 
(2,374
)
 
(4,743
)
Accrued liabilities
(97
)
 
(99
)
 
107

Taxes other than income tax
184

 
236

 
(159
)
Changes in current assets and current liabilities
$
296

 
$
(2,270
)
 
$
(4,000
)

Cash flows related to interest and income tax were as follows:
 
Year Ended December 31,
 
2015
 
2014
 
2013
 
(Thousands of Dollars)
Cash paid for interest
$
736

 
$
684

 
$
561

Cash refunded for income tax, net
$
(50
)
 
$
(1,149
)
 
$
(885
)

Non-cash investing and financing activities for the years ended December 31, 2015, 2014 and 2013 mainly consisted of:
•
Adjustments to our investment in NuStar Energy and accumulated other comprehensive loss through recognition of our proportionate share of NuStar Energy’s accumulated other comprehensive loss; and
•
Pension funding adjustments recognized in accumulated other comprehensive loss.

10. CREDIT FACILITY

Our revolving credit facility dated June 28, 2013, as most recently amended on June 17, 2015, will mature on June 27, 2016 and has a borrowing capacity of up to $50.0 million, of which, up to $10.0 million may be available for letters of credit. Our obligations under our revolving credit facility are guaranteed by Riverwalk Holdings, LLC (Riverwalk), a wholly owned subsidiary. Riverwalk pledged 1,792,918 NuStar Energy units that it owns to secure its guarantee. Borrowings under our revolving credit facility are used to fund capital contributions to NuStar Energy to maintain our 2% general partner interest when NuStar Energy issues additional common units and to meet other liquidity and capital resource requirements.

As of December 31, 2015, we had outstanding borrowings of $26.0 million and availability of $24.0 million for borrowings under our revolving credit facility. Interest on our revolving credit facility is based upon, at our option, either an alternative base rate or a LIBOR-based rate. The weighted-average interest rate related to borrowings under our revolving credit facility as of December 31, 2015 and 2014 was 2.4% and 2.2%, respectively.

The revolving credit facility contains customary restrictive covenants, such as limitations on indebtedness, liens, dispositions of material property, mergers, asset transfers and certain investing activities. In addition, the revolving credit facility requires NuStar Energy to maintain, as of the end of each rolling period of four consecutive fiscal quarters, a consolidated debt coverage ratio not to exceed 5.00-to-1.00. As of December 31, 2015, NuStar Energy’s consolidated debt coverage ratio was 4.5x. We are also required to receive cash distributions of at least $16.0 million in respect of our ownership interests in NuStar Energy each fiscal quarter. Our management believes that we are in compliance with the covenants of our revolving credit facility as of December 31, 2015.

54
NUSTAR GP HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)


11. COMMITMENTS AND CONTINGENCIES

Contingencies
We are not currently a party to any material legal proceedings and have not recorded any accruals for loss contingencies. NuStar Energy is a party to claims and legal proceedings arising in the ordinary course of its business, which it believes are not material to its financial position or results of operations. However, 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 NuStar Energy’s results of operations and ability to pay distributions, which would impact our results of operations and ability to pay distributions.

Commitments
As of December 31, 2015, we had no future minimum payments applicable to non-cancellable operating leases and purchase obligations.

12. NET INCOME (LOSS) PER UNIT

We treat restricted units granted under our long-term incentive plan as participating securities in computing net income (loss) per unit pursuant to the two-class method. The computation of diluted net loss for the year ended December 31, 2013 excludes 289,100 outstanding options to purchase NuStar GP Holdings units, as the exercise price exceeded the average market price and their effect would have been anti-dilutive. There were no outstanding options to purchase NuStar GP Holdings units for the year ended December 31, 2015. Unit amounts used in the computation of basic and diluted net income (loss) per unit were as follows:
 
Year Ended December 31,
 
2015
 
2014
 
2013
Basic units outstanding:
 
 
 
 
 
Weighted-average number of basic units outstanding
42,914,297

 
42,719,217

 
42,619,722

Diluted units outstanding:
 
 
 
 
 
Weighted-average number of basic units outstanding
42,914,297

 
42,719,217

 
42,619,722

Effect of dilutive securities
—

 
22,985

 
—

Weighted-average number of diluted units outstanding
42,914,297

 
42,742,202

 
42,619,722



55
NUSTAR GP HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)


13. MEMBERS’ EQUITY

Accumulated Other Comprehensive Loss
The following table presents changes in accumulated other comprehensive loss by component:
 
Share of
NuStar
Energy’s Other
Comprehensive
Loss
 
Pension and
Other
Postretirement
Benefit Plan
Adjustments
 
Total
 
(Thousands of Dollars)
Balance as of January 1, 2013
$
(8,743
)
 
$
(23,279
)
 
$
(32,022
)
Other comprehensive (loss) income before reclassification adjustments
(674
)
 
39,596

 
38,922

Amounts reclassified to general and administrative expenses (a)
—

 
2,041

 
2,041

Other comprehensive (loss) income
(674
)
 
41,637

 
40,963

Balance as of December 31, 2013
(9,417
)
 
18,358

 
8,941

Other comprehensive loss before reclassification adjustments
(665
)
 
(11,136
)
 
(11,801
)
Amounts reclassified to general and administrative expenses (a)
—

 
(2,915
)
 
(2,915
)
Other comprehensive loss
(665
)
 
(14,051
)
 
(14,716
)
Balance as of December 31, 2014
(10,082
)
 
4,307

 
(5,775
)
Other comprehensive (loss) income before reclassification adjustments
(3,107
)
 
1,312

 
(1,795
)
Amounts reclassified to general and administrative expenses (a)
—

 
(1,094
)
 
(1,094
)
Other comprehensive (loss) income
(3,107
)
 
218

 
(2,889
)
Balance as of December 31, 2015
$
(13,189
)
 
$
4,525

 
$
(8,664
)
(a)
These amounts are components of net periodic pension cost (income), and NuStar Energy reimburses us for these employee costs. See Note 14 for further details.

Cash Distributions
Our limited liability company agreement requires that, within 50 days after the end of each quarter, we distribute all of our available cash to the holders of record of our units on the applicable record date. Available cash is defined as all cash on hand at the end of any calendar quarter, less the amount of cash reserves necessary or appropriate, as determined in good faith by our board of directors. The following table summarizes our cash distributions applicable to the period in which the distributions were earned:
 
Year Ended December 31,
 
2015
 
2014
 
2013
 
(Thousands of Dollars, Except Per Unit Data)
Cash distributions per unit
$
2.18

 
$
2.18

 
$
2.18

Total cash distributions
$
93,561

 
$
93,252

 
$
92,938


The following table summarizes information related to our quarterly cash distributions:
Quarter Ended
 
Cash Distributions Per Unit
 
Total Cash Distributions
 
Record Date
 
Payment Date
 
 
 
 
(Thousands of Dollars)
 
 
 
 
December 31, 2015 (a)
 
$
0.545

 
$
23,397

 
February 8, 2016
 
February 16, 2016
September 30, 2015
 
$
0.545

 
$
23,388

 
November 9, 2015
 
November 17, 2015
June 30, 2015
 
$
0.545

 
$
23,388

 
August 7, 2015
 
August 17, 2015
March 31, 2015
 
$
0.545

 
$
23,388

 
May 8, 2015
 
May 18, 2015
(a)
The distribution was announced on January 29, 2016.


56
NUSTAR GP HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)


Rights Agreement
On July 19, 2006, we entered into a rights agreement, as amended (the Rights Agreement), under which one preferred unit purchase right (a Right) is attached to each of our outstanding units. The Rights become exercisable under specified circumstances, including if any person or group (an acquiring person) becomes the beneficial owner of 15% or more of our outstanding units, subject to specified exceptions. Each Right entitles the registered holder to purchase from us one one-hundredth of a unit of junior participating preferred units, series I (Preferred Units) at an exercise price of $100, subject to adjustment under specified circumstances. If events specified in the Rights Agreement occur, each holder of Rights other than the acquiring person can exercise their Rights. When a holder exercises a Right, the holder will be entitled to receive units valued at a multiple of the exercise price of the Right specified in the Rights Agreement. In some cases, the holder will receive cash, property or other securities instead of units. We may redeem the Rights for $0.001 per Right at any time prior to the tenth day after a person or group becomes an acquiring person.

The Rights will expire on June 30, 2016, unless extended or earlier redeemed or exchanged, and are protected by customary anti-dilution provisions. Preferred Units purchasable upon exercise of the Rights will not be redeemable. Each Preferred Unit will be entitled to share in our distributions of available cash pro rata with the units. In the event of liquidation, the holders of the Preferred Units will be entitled to a minimum preferential liquidation payment of $100 per unit. Each Preferred Unit will have 100 votes, voting together with the units. Finally, in the event of any merger, consolidation or other transaction in which units are exchanged, each Preferred Unit will be entitled to receive 100 times the amount received per unit.

14. EMPLOYEE BENEFIT PLANS

Thrift Plans
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 eligible 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. Our matching contributions to the Thrift Plan for the years ended December 31, 2015, 2014 and 2013 totaled $6.3 million, $5.9 million and $5.9 million, respectively.

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.

Pension and Other Postretirement Benefits
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 determined 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.

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, we provide partial reimbursement for eligible third-party health care premiums.

The Pension Plan, Excess Pension Plan and the supplemental executive retirement plan (the SERP), which has no participants following final payouts in 2014, are collectively referred to as the Pension Plans in the tables and discussion below. We use December 31 as the measurement date for our pension and other postretirement plans.



57
NUSTAR GP HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)


The changes in the benefit obligation, the changes in fair value of plan assets, the funded status and the amounts recognized in our consolidated balance sheet for our Pension Plans and other postretirement benefit plans as of and for the years ended December 31, 2015 and 2014 were as follows:
 
Pension Plans
 
Other Postretirement
Benefit Plans
 
2015
 
2014
 
2015
 
2014
 
(Thousands of Dollars)
Change in benefit obligation:
 
 
 
 
 
 
 
Benefit obligation, January 1
$
106,848

 
$
87,632

 
$
10,484

 
$
7,154

Service cost
7,676

 
8,049

 
470

 
374

Interest cost
4,389

 
4,225

 
448

 
373

Benefits paid
(4,338
)
 
(9,296
)
 
(507
)
 
(341
)
Participants contributions
—

 
—

 
203

 
206

Actuarial (gain) loss
(5,373
)
 
16,238

 
(1,056
)
 
2,718

Benefit obligation, December 31
$
109,202

 
$
106,848

 
$
10,042

 
$
10,484

Change in plan assets:
 
 
 
 
 
 
 
Plan assets at fair value, January 1
$
83,365

 
$
75,573

 
$
—

 
$
—

Actual return on plan assets
645

 
6,135

 
—

 
—

Company contributions
8,034

 
10,953

 
304

 
135

Benefits paid
(4,338
)
 
(9,296
)
 
(507
)
 
(341
)
Participants contributions
—

 
—

 
203

 
206

Plan assets at fair value, December 31
$
87,706

 
$
83,365

 
$
—

 
$
—

Reconciliation of funded status:
 
 
 
 
 
 
 
Fair value of plan assets at December 31
$
87,706

 
$
83,365

 
$
—

 
$
—

Less: Benefit obligation at December 31
109,202

 
106,848

 
10,042

 
10,484

Funded status at December 31
$
(21,496
)
 
$
(23,483
)
 
$
(10,042
)
 
$
(10,484
)
Amounts recognized in the consolidated balance sheets:
 
 
 
 
 
 
 
Accrued compensation expense
$
(71
)
 
$
(60
)
 
$
(304
)
 
$
(304
)
Long-term liabilities
(21,425
)
 
(23,423
)
 
(9,738
)
 
(10,180
)
Net pension liability
$
(21,496
)
 
$
(23,483
)
 
$
(10,042
)
 
$
(10,484
)
 
The accumulated benefit obligation is the present value of benefits earned to date, assuming no future salary increases. The aggregate accumulated benefit obligation for our Pension Plans as of December 31, 2015 and 2014 was $108.2 million and $106.2 million, respectively. As of December 31, 2015 and 2014, the aggregate accumulated benefit obligation for the Pension Plans exceeded plan assets.


58
NUSTAR GP HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)


NuStar Energy reimbursed all costs incurred by us related to these employee benefit plans at cost. The components of net periodic benefit cost (income) related to our Pension Plans and other postretirement benefit plans, which are reimbursed to us by NuStar Energy, were as follows:
 
Pension Plans
 
Other Postretirement
Benefit Plans
 
Year Ended December 31,
 
Year Ended December 31,
 
2015
 
2014
 
2013
 
2015
 
2014
 
2013
 
(Thousands of Dollars)
Service cost
$
7,676

 
$
8,049

 
$
16,321

 
$
470

 
$
374

 
$
1,171

Interest cost
4,389

 
4,225

 
5,036

 
448

 
373

 
940

Expected return on plan assets
(5,018
)
 
(4,574
)
 
(4,535
)
 
—

 
—

 
—

Amortization of prior service credit
(2,063
)
 
(2,063
)
 
(41
)
 
(1,145
)
 
(1,145
)
 
(198
)
Amortization of net loss
1,845

 
179

 
2,071

 
269

 
114

 
209

Other (a)
—

 
(39
)
 
847

 
—

 
—

 
—

Net periodic benefit cost (income)
$
6,829

 
$
5,777

 
$
19,699

 
$
42

 
$
(284
)
 
$
2,122

(a)
In 2013, other includes charges for the Pensions Plans related to an Excess Pension settlement, disposition charges and a curtailment gain associated with SERP retirement benefits.

Adjustments recognized in other comprehensive (loss) income related to our Pension Plans and other postretirement benefit plans were as follows:
 
Pension Plans
 
Other Postretirement
Benefit Plans
 
Year Ended December 31,
 
Year Ended December 31,
 
2015
 
2014
 
2013
 
2015
 
2014
 
2013
 
(Thousands of Dollars)
Net unrecognized gain (loss)
arising during the year:
 
 
 
 
 
 
 
 
 
 
 
Net actuarial gain (loss) (a)
$
1,000

 
$
(14,716
)
 
$
24,122

 
$
1,056

 
$
(2,718
)
 
$
2,690

Prior service credit
—

 
—

 
24,514

 
—

 
—

 
11,822

Net (gain) loss reclassified into income:
 
 
 
 
 
 
 
 
 
 
 
Amortization of prior service credit
(2,063
)
 
(2,063
)
 
(41
)
 
(1,145
)
 
(1,145
)
 
(198
)
Amortization of net loss
1,845

 
179

 
2,071

 
269

 
114

 
209

Net (gain) loss reclassified into income
(218
)
 
(1,884
)
 
2,030

 
(876
)
 
(1,031
)
 
11

 
 
 
 
 
 
 
 
 
 
 
 
Income tax (expense) benefit
(362
)
 
5,314

 
(18,053
)
 
(382
)
 
984

 
(5,499
)
Total changes in other
comprehensive income (loss)
$
420

 
$
(11,286
)
 
$
32,613

 
$
(202
)
 
$
(2,765
)
 
$
9,024

(a) Net actuarial gain (loss) for the Pension Plans includes an Excess Pension settlement for the year ended December 31, 2013.


59
NUSTAR GP HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)


The amounts recorded as a component of accumulated other comprehensive loss related to our Pension Plans and other postretirement benefit plans were as follows:
 
Pension Plans
 
Other Postretirement
Benefit Plans
 
December 31,
 
December 31,
 
2015
 
2014
 
2015
 
2014
 
(Thousands of Dollars)
Unrecognized actuarial loss (a)
$
(21,975
)
 
$
(24,820
)
 
$
(3,568
)
 
$
(4,893
)
Prior service credit (a)
20,727

 
22,790

 
11,754

 
12,899

Deferred tax asset (liability)
1,313

 
1,675

 
(3,726
)
 
(3,344
)
Accumulated other comprehensive income (loss),
net of tax
$
65

 
$
(355
)
 
$
4,460

 
$
4,662

(a)
Represents the balance of accumulated other comprehensive income (loss) that has not been recognized as a component of net periodic benefit cost (income).

The following pre-tax amounts in accumulated other comprehensive loss as of December 31, 2015 are expected to be recognized as components of net periodic benefit cost (income) in 2016:
 
Pension Plans
 
Other
Postretirement
Benefit Plans
 
(Thousands of Dollars)
Actuarial loss
$
1,091

 
$
181

Prior service credit
$
(2,063
)
 
$
(1,145
)

Investment Policies and Strategies
The investment policies and strategies for the assets of our qualified Pension Plan incorporate a well-diversified approach that is expected to earn long-term returns from capital appreciation and a growing stream of current income. This approach recognizes that assets are exposed to risk, and the market value of the Pension Plan’s assets may fluctuate from year to year. Risk tolerance is determined based on NuStar Energy’s financial ability to withstand risk within the investment program and the willingness to accept return volatility. In line with the investment return objective and risk parameters, the Pension Plan’s mix of assets includes a diversified portfolio of equity and fixed-income instruments. The aggregate asset allocation is reviewed on an annual basis. As of December 31, 2015, the target allocations for plan assets are 65% equity securities and 35% fixed income investments.

The overall expected long-term rate of return on plan assets for the Pension Plan is estimated using various models of asset returns. Model assumptions are derived using historical data with the assumption that capital markets are informationally efficient. Three models are used to derive the long-term expected returns for each asset class. Since each method has distinct advantages and disadvantages and differing results, an equal weighted average of the methods’ results is used.

Fair Value of Plan Assets
We disclose the fair value for each major class of plan assets in the Pension Plan into three levels: Level 1, defined as observable inputs such as quoted prices for identical assets or liabilities in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable, such as quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in markets that are not active; and Level 3, defined as unobservable inputs in which little or no market data exists.

60
NUSTAR GP HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)


The major classes of plan assets measured at fair value for the Pension Plan, were as follows:
 
December 31, 2015
 
Level 1
 
Level 2
 
Level 3
 
Total
 
(Thousands of Dollars)
Asset class:
 
 
 
 
 
 
 
Cash equivalent securities
$
739

 
$
—

 
$
—

 
$
739

Equity securities:
 
 
 
 
 
 
 
U.S. large cap equity fund (a)
—

 
52,086

 
—

 
52,086

International stock index fund (b)
8,522

 
—

 
—

 
8,522

Fixed income securities:
 
 
 
 
 
 
 
Bond market index fund (c)
26,359

 
—

 
—

 
26,359

Total
$
35,620

 
$
52,086

 
$
—

 
$
87,706

 
 
December 31, 2014
 
Level 1
 
Level 2
 
Level 3
 
Total
 
(Thousands of Dollars)
Asset class:
 
 
 
 
 
 
 
Cash equivalent securities
$
1,225

 
$
—

 
$
—

 
$
1,225

Equity securities:
 
 
 
 
 
 
 
U.S. large cap equity fund (a)
—

 
50,009

 
—

 
50,009

International stock index fund (b)
8,092

 
—

 
—

 
8,092

Fixed income securities:
 
 
 
 
 
 
 
Bond market index fund (c)
24,039

 
—

 
—

 
24,039

Total
$
33,356

 
$
50,009

 
$
—

 
$
83,365

(a)
This fund is a low-cost equity index fund not actively managed that tracks the S&P 500. Fair values were estimated using pricing models, quoted prices of securities with similar characteristics or discounted cash flows.
(b)
This fund tracks the performance of the Total International Composite Index.
(c)
This fund tracks the performance of the Barclays Capital U.S. Aggregate Bond Index.

Contributions to the Pension Plans
For the year ended December 31, 2015, we contributed $8.0 million and $0.3 million to the Pension Plans and other postretirement benefit plans, respectively. During 2016, approximately $8.1 million and $0.3 million is expected to be contributed to the Pension Plans and other postretirement benefit plans, respectively, which principally represents contributions either required by regulations or laws, or with respect to unfunded plans, necessary to fund current benefits. Funding for these plans will be provided by NuStar Energy.

Estimated Future Benefit Payments
The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid for the years ending December 31:
 
Pension Plans
 
Other
Postretirement
Benefit Plans
 
(Thousands of Dollars)
2016
$
6,131

 
$
304

2017
$
6,767

 
$
323

2018
$
7,265

 
$
327

2019
$
8,202

 
$
357

2020
$
8,586

 
$
404

Years 2021-2025
$
51,786

 
$
2,629


61
NUSTAR GP HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)


Assumptions
The weighted-average assumptions used to determine the benefit obligations were as follows:
 
Pension Plans
 
Other
Postretirement
Benefit Plans
 
December 31,
 
December 31,
 
2015
 
2014
 
2015
 
2014
Discount rate
4.61
%
 
4.22
%
 
4.75
%
 
4.34
%
Rate of compensation increase
3.51
%
 
3.51
%
 
n/a  

 
n/a  


The weighted-average assumptions used to determine the net periodic benefit cost (income) were as follows:
 
Pension Plans
 
Other Postretirement
Benefit Plans
 
Year Ended December 31,
 
Year Ended December 31,
 
2015
 
2014
 
2013
 
2015
 
2014
 
2013
Discount rate
4.22
%
 
5.04
%
 
4.48
%
 
4.34
%
 
5.28
%
 
4.51
%
Expected long-term rate of
return on plan assets
6.50
%
 
6.75
%
 
6.75
%
 
n/a  

 
n/a  

 
n/a  

Rate of compensation increase
3.51
%
 
3.51
%
 
3.69
%
 
n/a  

 
n/a  

 
n/a  


The assumed health care cost trend rates were as follows:
 
December 31,
 
2015
 
2014
Health care cost trend rate assumed for next year
6.81
%
 
7.46
%
Rate to which the cost trend rate was assumed to decrease to (the ultimate trend rate)
5.00
%
 
5.00
%
Year that the rate reached the ultimate trend rate
2026

 
2022


Assumed health care cost trend rates have a significant effect on the amounts reported for health care plans. We sponsor a contributory postretirement health care plan for employees that retired prior to April 1, 2014. The plan has an annual limitation (a cap) on the increase of the employer’s share of the cost of covered benefits. The cap on the increase in employer’s cost is 2.5% per year. The assumed increase in total health care cost exceeds the 2.5% indexed cap, so increasing or decreasing the health care cost trend rate by 1% does not materially change our obligation or expense for the postretirement health care plan.
Please refer to Note 18 for a discussion of the employee transfer from NuStar GP, LLC.

15. UNIT-BASED COMPENSATION

As of December 31, 2015, we sponsored the following long-term incentive plans:
•
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 our employees, consultants and directors who perform services for us or our affiliates. 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.


62
NUSTAR GP HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)


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. We purchased NS common units as needed to satisfy awards granted under the 2000 LTIP and the UIP.

The number of awards granted under the above-noted plans were as follows:
 
 
 
 
Year Ended December 31,
 
 
Vesting
 
2015
 
2014
 
2013
2000 LTIP:
 
 
 
 
 
 
 
 
Performance awards
 
(a)
 
29,633

 
28,841

 
38,786

Restricted units (b)
 
1/5 per year
 
250,563

 
208,714

 
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)
Performance awards vest 1/3 per year if certain performance measures are met, as defined in the award agreements.
(b)
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 agreements.
(c)
Expenses resulting from our awards to non-employee directors are not reimbursed by NuStar Energy and are included in “General and administrative expenses” on our consolidated statements of comprehensive income.

As of December 31, 2015 and 2014, we had accrued $3.8 million and $5.4 million, respectively, for the outstanding awards of NS performance awards and restricted units in “Accrued compensation expense” on our consolidated balance sheets.

The following table summarizes information pertaining to long-term incentive plan compensation expenses:
 
Year Ended December 31,
 
2015
 
2014
 
2013
 
(Thousands of Dollars)
Long-term incentive plan compensation expense
charged to NuStar Energy
$
6,397

 
$
10,934

 
$
7,369

Expenses resulting from NuStar GP Holdings awards
to non-employee directors
$
239

 
$
129

 
$
19


Unit Options
Under the terms of the 2006 LTIP, the exercise price of options granted is not less than the fair market value of our common units on the date of grant. Options become exercisable pursuant to the individual written agreements between the participants and us, usually in five equal annual installments beginning at the date of grant, with unexercised options expiring seven to ten years from the date of grant.

The fair value of each NSH unit option grant was estimated using the Black-Scholes option-pricing model on the grant date. The expected life of NSH unit options granted is the period of time from the grant date to the date of expected exercise or other expected settlement. Expected volatility for NSH unit options is based on closing prices of NSH common units for periods corresponding to the life of options granted. Expected distribution yield is based on annualized distributions at the grant date for NSH unit options. The risk-free interest rate used is the implied yield currently available from the U.S. Treasury zero-coupon issues with a remaining term equal to the expected life of the options at the grant date for NSH unit options.

On November 16, 2007, we granted 324,100 NSH unit options at $31.55, which was our only grant of options under the 2006 LTIP. These options expired seven years after the grant date and vested in annual one-third increments beginning on November 16, 2010. There were no NSH unit options outstanding and exercisable as of December 31, 2015 and 2014. The number of NSH unit options exercised during the years ended December 31, 2014 and 2013 was 289,100 and 11,666, respectively. The total intrinsic value of the unit options exercised during the years ended December 31, 2014 and 2013 was $2.8 million and $0.1 million, respectively.

63
NUSTAR GP HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)


Restricted Units
The following table summarizes information related to outstanding NSH restricted units awarded under the 2006 LTIP:
 
Restricted
Unit Grants
to Employees
 
Restricted
Unit Grants
to Non-
Employee
Directors
 
Total
 
Weighted-
Average
Grant-Date
Fair Value
Per Unit
Balance as of January 1, 2015
39,090

 
20,425

 
59,515

 
$
31.13

Granted
26,240

 
12,814

 
39,054

 
$
23.80

Vested
(11,403
)
 
(10,086
)
 
(21,489
)
 
$
30.80

Balance as of December 31, 2015
53,927

 
23,153

 
77,080

 
$
27.51


The weighted-average grant-date fair value of NSH restricted units granted during the years ended December 31, 2015, 2014 and 2013 was $23.80, $34.22 and $27.87 per unit, respectively. The total fair value of NSH restricted units that vested during the years ended December 31, 2015, 2014 and 2013 was $0.4 million, $0.7 million and $1.5 million, respectively.
Please refer to Note 18 for a discussion of the employee transfer from NuStar GP, LLC.

16. INCOME TAXES

Components of income tax (expense) benefit were as follows: 
 
Year Ended December 31,
 
2015
 
2014
 
2013
 
(Thousands of Dollars)
Current:
 
 
 
 
 
U.S. federal
$
—

 
$
1,123

 
$
—

U.S. state
51

 
42

 
(368
)
Total current
51

 
1,165

 
(368
)
Deferred:
 
 
 
 
 
U.S. federal
(940
)
 
415

 
(599
)
U.S. state
(12
)
 
206

 
175

Total deferred
(952
)
 
621

 
(424
)
Total income tax (expense) benefit
$
(901
)
 
$
1,786

 
$
(792
)

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 based on our status as a limited liability company.


64
NUSTAR GP HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)


The tax effects of significant temporary differences representing deferred income tax assets and liabilities were as follows:
 
December 31,
 
2015
 
2014
 
(Thousands of Dollars)
Deferred income tax assets:
 
 
 
Unit/option compensation
$
2,115

 
$
2,708

Pension
7,561

 
5,459

Capital loss
1,290

 
590

Other state
14

 
39

Net operating loss
4,346

 
4,419

Foreign tax credits
69

 
66

Total deferred income tax assets
15,395

 
13,281

Less: Valuation allowance
(1,359
)
 
—

Net deferred income tax assets
14,036

 
13,281

 
 
 
 
Deferred income tax liabilities:
 
 
 
Investment in Riverwalk Logistics, L.P. and NuStar Energy
(249
)
 
(216
)
Other employee benefits
(11,189
)
 
(8,771
)
Deferred income tax liabilities
(11,438
)
 
(8,987
)
 
 
 
 
Total net deferred income tax assets
$
2,598

 
$
4,294

 
 
 
 
Reported on the consolidated balance sheets as:
 
 
 
Deferred income tax assets, net (current)
$
—

 
$
724

Deferred income tax assets, net (long-term)
5,258

 
3,570

Deferred income tax liabilities, net (current)
(2,660
)
 
—

Total net deferred income tax assets
$
2,598

 
$
4,294


As of December 31, 2015, our U.S. corporate operations have net operating loss carryforwards and capital loss carryforwards for tax purposes totaling approximately $12.4 million and $3.7 million, respectively, which are subject to a twenty-year and a five-year carryforward limitation, respectively, and are set to expire in 2031 and 2017, respectively.

As of December 31, 2015, we recorded a valuation allowance of $1.4 million related to our deferred tax assets. We estimate the amount of valuation allowance based upon our expectations of taxable income and the period over which we can utilize those future deductions. The valuation allowance reflects uncertainties related to our ability to utilize certain capital loss carryforwards before they expire.  

The realization of 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 deferred income tax assets as of December 31, 2015 will be realized, based upon expected future taxable income and potential tax planning strategies.


65
NUSTAR GP HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)


17. QUARTERLY FINANCIAL DATA (UNAUDITED)

The following table summarizes quarterly financial data for the years ended December 31, 2015 and 2014:
 
First
Quarter
 
Second
Quarter
 
Third
Quarter
 
Fourth
Quarter
 
Total
 
(Thousands of Dollars, Except Per Unit Data)
2015:
 
Net income
$
26,805

 
$
15,527

 
$
16,917

 
$
12,959

 
$
72,208

Basic and diluted net income per unit
0.62

 
0.37

 
0.39

 
0.30

 
1.68

Cash distributions per unit applicable to limited
partners
0.545

 
0.545

 
0.545

 
0.545

 
2.180

2014:
 
 
 
 
 
 
 
 
 
Net income
$
13,646

 
$
15,768

 
$
17,639

 
$
14,374

 
$
61,427

Basic and diluted net income per unit
0.32

 
0.37

 
0.41

 
0.34

 
1.44

Cash distributions per unit applicable to limited
partners
0.545

 
0.545

 
0.545

 
0.545

 
2.180


18. 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 its employees and related benefit plans. Following the transfer of employees, NuStar Energy will pay employee costs directly and sponsor the following related employee 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 results of operations since NuStar Energy currently reimburses us for nearly all of NuStar GP, LLC’s employee costs. However, our consolidated balance sheet will no longer reflect employee-related payables or the corresponding receivables from NuStar Energy.

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. At the time of the transfer of employees, NuStar Services Company LLC will assume obligations associated therewith, including all outstanding awards, and NuStar Energy intends to satisfy substantively all of the vestings of such awards with newly issued units of Nustar Energy.


66

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.

ITEM 9A. CONTROLS AND PROCEDURES
DISCLOSURE CONTROLS AND PROCEDURES
Our management has evaluated, with the participation of our principal executive officer and principal financial officer, 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 GP Holdings, LLC’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 GP Holdings, LLC’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.


67

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Information required to be disclosed under this Item 10 appears under the following headings in our Proxy Statement for the 2016 annual meeting of unitholders and is hereby incorporated by reference: “Information Regarding the Board of Directors;” “Proposal No. 1 Election of Directors;” “Section 16(a) Beneficial Ownership Reporting Compliance;” and “Miscellaneous.”

Information regarding executive officers is included in Part I of this Form 10-K as permitted by General Instruction G(3).

ITEM 11. EXECUTIVE COMPENSATION

Information required to be disclosed under this Item 11 appears under the following headings in our Proxy Statement for the 2016 annual meeting of unitholders and is hereby incorporated by reference: “Compensation Discussion and Analysis;” “Executive Compensation;” “Compensation of Directors;” “Risk Oversight;” “Information Regarding the Board of Directors;” and “Compensation Committee Report.”

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED UNITHOLDER MATTERS

Information required to be disclosed under this Item 12 appears under the following headings in our Proxy Statement for the 2016 annual meeting of unitholders and is hereby incorporated by reference: “Beneficial Ownership of NuStar Securities;” and “Equity Compensation Plan Information.”

ITEM  13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Information required to be disclosed under this Item 13 appears under the following headings in our Proxy Statement for the 2016 annual meeting of unitholders and is hereby incorporated by reference: “Certain Relationships and Related Party Transactions;” and “Information Regarding the Board of Directors.”

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

Information required to be disclosed under this Item 14 appears under the following headings in our Proxy Statement for the 2016 annual meeting of unitholders and is hereby incorporated by reference: “KPMG Fees;” and “Audit Committee Pre-Approval Policy.”



68

PART IV
 
ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

 
(a)
(1
)
 
Financial Statements. The following consolidated financial statements of NuStar GP Holdings, LLC and its subsidiaries are included in Part II, Item 8 of this Form 10-K:
 
 
 
NUSTAR GP HOLDINGS, LLC:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(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

 
Certificate of Formation of UDS Logistics, LLC, dated June 5, 2000
 
NuStar GP Holdings, LLC’s Amendment No. 2 to Registration Statement on Form S-1 filed June 15, 2006 (File No. 333-132917), Exhibit 3.01
 
 
 
 
 
3.02

 
Certificate of Amendment of Certificate of Formation of UDS Logistics, LLC, dated January 19, 2006
 
NuStar GP Holdings, LLC’s Amendment No. 2 to Registration Statement on Form S-1 filed June 15, 2006 (File No. 333-132917), Exhibit 3.03
 
 
 
 
 
3.03

 
Amendment to Certificate of Formation of Valero GP Holdings, LLC, dated March 21, 2007 and effective April 1, 2007
 
NuStar GP Holdings, LLC’s Current Report on Form 8-K, filed March 27, 2007 (File No. 001-32940), Exhibit 3.01
 
 
 
 
 
3.04

 
Second Amended and Restated Limited Liability Company Agreement of Valero GP Holdings, LLC
 
NuStar GP Holdings, LLC’s Current Report on Form 8-K, filed July 25, 2006 (File No. 001-32940), Exhibit 3.01
 
 
 
 
 
4.01

 
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
 
 
 
 
 
4.02

 
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
 
 
 
 
 
4.03

 
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
 
 
 
 
 
4.04

 
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
 
 
 
 
 
4.05

 
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
 
 
 
 
 

69

4.06

 
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
 
 
 
 
 
4.07

 
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
 
 
 
 
 
4.08

 
Certificate of Amendment to Certificate of Limited Partnership of Valero Logistics Operations, L.P., dated March 21, 2007 and effective April 1, 2007
 
NuStar GP Holdings, LLC’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2007 (File No. 001-32940), Exhibit 3.04
 
 
 
 
 
4.09

 
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
 
 
 
 
 
4.10

 
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
 
 
 
 
 
4.11

 
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
 
 
 
 
 
4.12

 
Second Amendment to Second Amended and Restated Agreement of Limited Partnership of Shamrock Logistics Operations, L.P., dated as of January 7, 2002
 
NuStar Energy L.P.’s Annual Report on Form 10-K for year ended December 31, 2001 (File No. 001-16417), Exhibit 3.10
 
 
 
 
 
4.13

 
Certificate of Limited Partnership of Riverwalk Logistics, L.P., dated as of June 5, 2000
 
NuStar Energy L.P.’s Registration Statement on Form S-1 filed August 14, 2000 (File No. 333-43668), Exhibit 3.7
 
 
 
 
 
4.14

 
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
 
 
 
 
 
4.15

 
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
 
 
 
 
 
4.16

 
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
 
 
 
 
 
4.17

 
Certificate of Amendment to Certificate of Formation of Valero GP, LLC, dated March 21, 2007 and effective April 1, 2007
 
NuStar GP Holdings, LLC’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2007 (File No. 001-32940), Exhibit 3.03
 
 
 
 
 
4.18

 
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
 
 
 
 
 
4.19

 
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
 
 
 
 
 
4.20

 
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
 
 
 
 
 
4.21

 
Form of certificate evidencing units representing interests in Valero GP Holdings, LLC
 
NuStar GP Holdings, LLC’s Amendment to the Registration Statement on Form 8-A/A filed September 6, 2006 (File No. 001-32940), Exhibit 4.01
 
 
 
 
 
4.22

 
Rights Agreement between Valero GP Holdings, LLC and Computershare Investor Services, LLC, dated as of July 19, 2006
 
NuStar GP Holdings, LLC’s Current Report on Form 8-K filed July 25, 2006 (File No. 001-32940), Exhibit 4.01

70

 
 
 
 
 
4.23

 
Amendment No. 1, effective as of February 28, 2008, to Rights Agreement between NuStar GP Holdings, LLC (f/k/a Valero GP Holdings, LLC) and Computershare Investor Services, LLC
 
NuStar GP Holdings, LLC’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2008 (File No. 001-32940), Exhibit 4.01
 
 
 
 
 
4.24

 
Amendment No. 2, effective as of October 23, 2012, to Rights Agreement of NuStar GP Holdings, LLC
 
NuStar GP Holdings, LLC’s Current Report on Form 8-K filed October 29, 2012 (File No. 001-32940), Exhibit 4.03
 
 
 
 
 
4.25

 
Amendment No. 3, effective as of November 2, 2015, to Rights Agreement of NuStar GP Holdings, LLC
 
NuStar GP Holdings, LLC’s Current Report on Form 8-K filed November 4, 2015 (File No. 001-32940), Exhibit 4.01
 
 
 
 
 
10.01

 
364-Day Revolving Credit Agreement dated as of June 28, 2013, among NuStar GP Holdings, LLC, as Borrower, the lenders party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, and SunTrust Bank, as Syndication Agent
 
NuStar GP Holdings, LLC’s Current Report on Form 8-K filed July 3, 2013 (File No. 001-32940), Exhibit 10.1
 
 
 
 
 
10.02

 
First Amendment to 364-Day Revolving Credit Agreement dated as of June 17, 2014, among NuStar GP Holdings, LLC, Riverwalk Holdings, LLC, JPMorgan Chase Bank, N.A., as Administrative Agent, and the lenders party thereto
 
NuStar GP Holdings, LLC’s Current Report on Form 8-K filed June 23, 2014 (File No. 001-32940), Exhibit 10.01
 
 
 
 
 
10.03

 
Second Amendment to Revolving Credit Agreement, dated as of June 17, 2015, among NuStar GP Holdings, LLC, Riverwalk Holdings, LLC, JPMorgan Chase Bank, N.A., as Administrative Agent, and the lenders party thereto
 
NuStar GP Holdings, LLC’s Current Report on Form 8-K filed June 19, 2015 (File No. 001-32940), Exhibit 10.01
 
 
 
 
 
10.04

 
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
 
NuStar Energy L.P.’s Current Report on Form 8-K filed July 15, 2002 (File No. 001-16417), Exhibit 4.1
 
 
 
 
 
10.05

 
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
 
NuStar Energy L.P.’s Current Report on Form 8-K filed July 15, 2002 (File No. 001-16417), Exhibit 4.2
 
 
 
 
 
10.06

 
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)
 
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
 
 
 
 
 
10.07

 
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 Quarterly Report on Form 10-Q for the quarter ended June 30, 2005 (File No. 001-16417), Exhibit 4.02
 
 
 
 
 
10.08

 
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
 
NuStar GP Holdings, LLC’s Annual Report on Form 10-K for year ended December 31, 2008 (File No. 001-32940), Exhibit 4.23
 
 
 
 
 

71

10.09

 
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
 
NuStar Energy L.P.’s Current Report on Form 8-K filed April 4, 2008 (File No. 001-16417), Exhibit 4.2
 
 
 
 
 
10.10

 
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
 
NuStar Energy L.P.’s Current Report on Form 8-K filed August 16, 2010 (File No. 001-16417), Exhibit 4.3
 
 
 
 
 
10.11

 
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
 
NuStar Energy L.P.’s Current Report on Form 8-K filed February 7, 2012 (File No. 001-16417), Exhibit 4.3
 
 
 
 
 
10.12

 
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
 
NuStar Energy L.P.’s Current Report on Form 8-K filed August 23, 2013 (File No. 001-16417), Exhibit 4.3
 
 
 
 
 
10.13

 
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
 
NuStar Energy L.P.’s Current Report on Form 8-K filed January 22, 2013 (File No. 001-16417), Exhibit 4.1
 
 
 
 
 
10.14

 
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
 
NuStar Energy L.P.’s Current Report on Form 8-K filed January 22, 2013 (File No. 001-16417), Exhibit 4.2
 
 
 
 
 
10.15

 
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 Current Report on Form 8-K filed May 8, 2012 (File No. 001-16417), Exhibit 10.01
 
 
 
 
 
10.16

 
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
 
 
 
 
 
10.17

 
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
 
NuStar Energy L.P.’s Annual Report on Form 10-K for year ended December 31, 2012 (File No. 001-16417), Exhibit 10.03
 
 
 
 
 

72

10.18

 
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
 
NuStar Energy L.P.’s Annual Report on Form 10-K for year ended December 31, 2012 (File No. 001-16417), Exhibit 10.04
 
 
 
 
 
10.19

 
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
 
NuStar Energy L.P.’s Annual Report on Form 10-K for year ended December 31, 2013 (File No. 001-16417), Exhibit 10.05
 
 
 
 
 
10.20

 
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
 
NuStar Energy L.P.’s Current Report on Form 8-K filed October 31, 2014 (File No. 001-16417), Exhibit 10.1
 
 
 
 
 
10.21

 
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 Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 (File No. 001-16417), Exhibit 10.01
 
 
 
 
 
10.22

 
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
 
 
 
 
 
10.23

 
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
 
NuStar Energy L.P.’s Current Report on Form 8-K filed June 12, 2012 (File No. 001-16417), Exhibit 10.01
 
 
 
 
 
10.24

 
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
 
NuStar Energy L.P.’s Current Report on Form 8-K filed July 6, 2012 (File No. 001-16417), Exhibit 10.02
 
 
 
 
 
10.25

 
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
 
NuStar Energy L.P.’s Annual Report on Form 10-K for year ended December 31, 2014 (File No. 001-16417), Exhibit 10.10
 
 
 
 
 
10.26

 
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 Annual Report on Form 10-K for year ended December 31, 2014 (File No. 001-16417), Exhibit 10.11
 
 
 
 
 
10.27

 
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
 
NuStar Energy L.P.’s Annual Report on Form 10-K for year ended December 31, 2014 (File No. 001-16417), Exhibit 10.12
 
 
 
 
 

73

10.28

 
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
 
NuStar Energy L.P.’s Annual Report on Form 10-K for year ended December 31, 2014 (File No. 001-16417), Exhibit 10.13
 
 
 
 
 
10.29

 
Sixth Amendment to Letter of Credit Agreement, dated as of November 3, 2014, among NuStar Logistics, L.P., NuStar Energy L.P., the Lenders party thereto and Mizuho Bank, Ltd., as Issuing Bank and Administrative Agent
 
NuStar Energy L.P.’s Current Report on Form 8-K filed November 6, 2014 (File No. 001-16417), Exhibit 10.1
 
 
 
 
 
10.30

 
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 Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 (File No. 001-16417), Exhibit 10.02

 
 
 
 
 
10.31

 
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
 
 
 
 
 
10.32

 
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
 
NuStar Energy L.P.’s Current Report on Form 8-K filed September 9, 2014 (File No. 001-16417), Exhibit 10.01
 
 
 
 
 
10.33

 
Amendment No. 1 to Letter of Credit Agreement and Subsidiary Guaranty Agreement dated as of November 3, 2014 among NuStar Logistics, L.P., NuStar Energy L.P., the Lenders party thereto and The Bank of Tokyo-Mitsubishi UFJ, Ltd., as Issuing Bank and Administrative Agent
 
NuStar Energy L.P.’s Current Report on Form 8-K filed November 6, 2014 (File No. 001-16417), Exhibit 10.3
 
 
 
 
 
10.34

 
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 Quarterly Report on Form 10-Q for the quarter ended September 30, 2015 (File No. 001-16417), Exhibit 10.01
 
 
 
 
 
10.35

 
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
 
 
 
 
 
10.36

 
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
 
NuStar Energy L.P.’s Current Report on Form 8-K filed June 11, 2013 (File No. 001-16417), Exhibit 10.01
 
 
 
 
 
10.37

 
Amendment No. 1 to Letter of Credit Agreement and Subsidiary Guaranty Agreement dated as of November 3, 2014 among NuStar Logistics, L.P., NuStar Energy L.P., the Lenders party thereto and The Bank of Nova Scotia, as Issuing Bank and Administrative Agent
 
NuStar Energy L.P.’s Current Report on Form 8-K filed November 6, 2014 (File No. 001-16417), Exhibit 10.2
 
 
 
 
 
10.38

 
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
 
NuStar Energy L.P.'s Current Report on Form 8-K filed June 19, 2015 (File No. 001-16417), Exhibit 10.1
 
 
 
 
 
10.39

 
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

74

 
 
 
 
 
10.40

 
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 Energy L.P’s Annual Report on Form 10-K for year ended December 31, 2015 (File No. 001-16417), Exhibit 10.26
 
 
 
 
 
+10.41

 
NuStar GP Holdings, LLC Long-Term Incentive Plan, amended and restated as of April 1, 2007
 
NuStar GP Holdings, LLC’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007 (File No. 001-32940), Exhibit 10.04
 
 
 
 
 
+10.42

 
Form of Restricted Unit Award Agreement under the NuStar GP Holdings, LLC Long-Term Incentive Plan (substantially the same for 2008 and 2009 awards)
 
NuStar GP Holdings, LLC’s Current Report on Form 8-K filed November 10, 2008 (File No. 001-32940), Exhibit 10.03
 
 
 
 
 
+10.43

 
Form of Restricted Unit Award Agreement under the NuStar GP Holdings, LLC Amended and Restated Long-Term Incentive Plan (substantially the same for 2010, 2011 and 2012 awards)
 
NuStar GP Holdings, LLC’s Current Report on Form 8-K filed January 5, 2011 (File No. 001-32940), Exhibit 10.03
 
 
 
 
 
+10.44

 
Form of 2013 Restricted Unit Award Agreement under the NuStar GP Holdings, LLC Amended and Restated Long-Term Incentive Plan
 
NuStar GP Holdings, LLC’s Annual Report on Form 10-K for year ended December 31, 2013 (File No. 001-32940), Exhibit 10.30
 
 
 
 
 
+10.45

 
Form of Unit Option Award Agreement under the NuStar GP Holdings, LLC Amended and Restated Long-Term Incentive Plan
 
NuStar GP Holdings, LLC’s Current Report on Form 8-K filed October 29, 2007 (File No. 001-32940), Exhibit 10.03
 
 
 
 
 
+10.46

 
Form of Non-employee Director Award Agreement under the NuStar GP Holdings, LLC Long-Term Incentive Plan, as amended (substantially the same for 2008 and 2009 awards)
 
NuStar GP Holdings, LLC’s Current Report on Form 8-K filed November 10, 2008 (File No. 001-32940), Exhibit 10.02
 
 
 
 
 
+10.47

 
Form of Non-employee Director Restricted Unit Agreement under the NuStar GP Holdings, LLC Amended and Restated Long-Term Incentive Plan (substantially the same for 2010, 2011 and 2012 awards with appropriate adjustments based on award dates)
 
NuStar GP Holdings, LLC’s Current Report on Form 8-K filed January 5, 2011 (File No. 001-32940), Exhibit 10.02
 
 
 
 
 
+10.48

 
Form of 2013 Non-employee Director Restricted Unit Agreement under the NuStar GP Holdings, LLC Amended and Restated Long-Term Incentive Plan
 
NuStar GP Holdings, LLC’s Annual Report on Form 10-K for year ended December 31, 2013 (File No. 001-32940), Exhibit 10.27
 
 
 
 
 
+10.49

 
NuStar GP, LLC Amended and Restated 2003 Employee Unit Incentive Plan, amended and restated as of April 1, 2007
 
NuStar GP Holdings, LLC’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007 (File No. 001-32940), Exhibit 10.03
 
 
 
 
 
+10.50

 
Form of Unit Option Agreement under the NuStar GP, LLC Amended and Restated 2003 Employee Unit Incentive Plan, as amended
 
NuStar GP Holdings, LLC’s Annual Report on Form 10-K for year ended December 31, 2006 (File No. 001-32940), Exhibit 10.58
 
 
 
 
 
+10.51

 
NuStar GP, LLC Amended and Restated 2002 Unit Option Plan, amended and restated as of April 1, 2007
 
NuStar GP Holdings, LLC’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007 (File No. 001-32940), Exhibit 10.02
 
 
 
 
 
+10.52

 
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
 
 
 
 
 
+10.53

 
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
 
 
 
 
 
+10.54

 
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
 
 
 
 
 

75

+10.55

 
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
 
 
 
 
 
+10.56

 
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
 
 
 
 
 
+10.57

 
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
 
 
 
 
 
+10.58

 
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
 
 
 
 
 
+10.59

 
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
 
 
 
 
 
+10.60

 
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 GP Holdings, LLC’s Annual Report on Form 10-K for year ended December 31, 2009 (File No. 001-32940), Exhibit 10.12
 
 
 
 
 
+10.61

 
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
 
 
 
 
 
+10.62

 
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)
 
NuStar Energy L.P.’s Current Report on Form 8-K filed January 5, 2011 (File No. 001-16417), Exhibit 10.02
 
 
 
 
 
+10.63

 
Form of 2013 Non-employee Director Restricted Unit 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 10.21
 
 
 
 
 
+10.64

 
NuStar Energy L.P. Annual Bonus Plan
 
NuStar GP Holdings, LLC’s Annual Report on Form 10-K for year ended December 31, 2006 (File No. 001-32940), Exhibit 10.57
 
 
 
 
 
+10.65

 
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 Energy L.P.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2006 (File No. 001-16417), Exhibit 10.06
 
 
 
 
 
+10.66

 
NuStar Excess Pension Plan, amended and restated effective as of January 1, 2008
 
NuStar GP Holdings, LLC’s Annual Report on Form 10-K for year ended December 31, 2008 (File No. 001-32940), Exhibit 10.15
 
 
 
 
 
+10.67

 
NuStar Excess Pension Plan, amended and restated effective as of January 1, 2014
 
NuStar Energy L.P.’s Annual Report on Form 10-K for year ended December 31, 2015 (File No. 001-16417), Exhibit 10.45
 
 
 
 
 
+10.68

 
NuStar Excess Thrift Plan, amended and restated effective as of January 1, 2008
 
NuStar GP Holdings, LLC’s Annual Report on Form 10-K for year ended December 31, 2008 (File No. 001-32940), Exhibit 10.16
 
 
 
 
 
10.69

 
Amended and Restated Omnibus Agreement among Valero Energy Corporation, Valero GP, LLC, Riverwalk Logistics, L.P., Valero L.P. and Valero Logistics Operations, L.P., dated March 31, 2006
 
NuStar GP Holdings, LLC’s Registration Statement on Form S-1 filed March 31, 2006 (File No. 333-132917), Exhibit 10.14
 
 
 
 
 

76

10.70

 
Non-Compete Agreement, dated July 19, 2006, between Valero GP Holdings, LLC, Valero L.P., Riverwalk Logistics, L.P. and Valero GP, LLC
 
NuStar GP Holdings, LLC’s Current Report on Form 8-K filed July 25, 2006 (File No. 001-32940), Exhibit 10.03
 
 
 
 
 
10.71

 
Services Agreement, effective as of January 1, 2008, between NuStar GP, LLC and NuStar Energy L.P.
 
NuStar GP Holdings, LLC’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2008 (File No. 001-32940), Exhibit 10.01
 
 
 
 
 
10.72

 
Amended and Restated Aircraft Time Sharing Agreement, dated as of September 4, 2009, between NuStar Logistics, L.P. and William E. Greehey
 
NuStar Energy L.P.’s Annual Report on Form 10-K for year ended December 31, 2009 (File No. 001-16417), Exhibit 10.24
 
 
 
 
 
10.73

 
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
 
NuStar Energy L.P.’s Current Report on Form 8-K filed March 25, 2008 (File No. 001-16417), Exhibit 10.1
 
 
 
 
 
10.74

 
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
 
NuStar Energy L.P.’s Quarterly Report on Form 10-Q for quarter ended June 30, 2013 (File No. 001-16417), Exhibit 10.01
 
 
 
 
 
10.75

 
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
 
NuStar Energy L.P.’s Current Report on Form 8-K filed July 6, 2012 (File No. 001-16417), Exhibit 10.01
 
 
 
 
 
10.76

 
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 Quarterly Report on Form 10-Q for quarter ended September 30, 2012 (File No. 001-16417), Exhibit 10.02
 
 
 
 
 
10.77

 
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
 
 
 
 
 
10.78

 
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
 
 
 
 
 
10.79

 
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
 
 
 
 
 
10.80

 
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
 
 
 
 
 
14.01

 
Code of Ethics for Senior Financial Officers
 
NuStar GP Holdings, LLC’s Annual Report on Form 10-K for year ended December 31, 2006 (File No. 001-32940), Exhibit 14.1
 
 
 
 
 
21.01

 
List of Subsidiaries of NuStar GP Holdings, LLC
 
*
 
 
 
 
 
23.01

 
Consent of KPMG LLP dated February 25, 2016 (NuStar GP Holdings, LLC)
 
*
23.02

 
Consent of KPMG LLP dated February 25, 2016 (NuStar Energy L.P.)
 
*
 
 
 
 
 
24.01

 
Powers of Attorney (included in signature page of this Form 10-K)
 
*
 
 
 
 
 
31.01

 
Rule 13a-14(a) Certification (under Section 302 of the Sarbanes-Oxley Act of 2002) of principal executive officer
 
*
 
 
 
 
 

77

31.02

 
Rule 13a-14(a) Certification (under Section 302 of the Sarbanes-Oxley Act of 2002) of principal financial officer
 
*
 
 
 
 
 
32.01

 
Section 1350 Certification (under Section 906 of the Sarbanes-Oxley Act of 2002) of principal executive officer
 
**
 
 
 
 
 
32.02

 
Section 1350 Certification (under Section 906 of the Sarbanes-Oxley Act of 2002) of principal financial officer
 
**
 
 
 
 
 
99.01

 
Audit Committee Pre-Approval Policy
 
*
 
 
 
 
 
99.02

 
Consolidated Financial Statements of NuStar Energy L.P. for December 31, 2015 and 2014
 
*
 
 
 
 
 
101.INS

 
XBRL Instance Document
 
*
 
 
 
 
 
101.SCH

 
XBRL Taxonomy Extension Schema Document
 
*
 
 
 
 
 
101.CAL

 
XBRL Taxonomy Extension Calculation Linkbase Document
 
*
 
 
 
 
 
101.DEF

 
XBRL Taxonomy Extension Definition Linkbase Document
 
*
 
 
 
 
 
101.LAB

 
XBRL Taxonomy Extension Label Linkbase Document
 
*
 
 
 
 
 
101.PRE

 
XBRL Taxonomy Extension Presentation Linkbase Document
 
*


+
Identifies management contracts or compensatory plans or arrangements required to be filed as an exhibit hereto.
 
 
*
Filed herewith.
 
 
**
Furnished herewith.
An electronic copy of this Form 10-K is available on our internet website, free of charge, at http://www.nustargpholdings.com (select the “Investors” link, then the “SEC Filings” link). A paper copy of the Form 10-K also is available without charge to unitholders upon written request at the address below. 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 GP Holdings, LLC, 19003 IH-10 West, San Antonio, Texas 78257 or corporatesecretary@nustarenergy.com.

78

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
NuStar GP Holdings, LLC
(Registrant)
 
 
By:
/s/ Bradley C. Barron     
 
 
 
Bradley C. Barron
 
 
President and Chief Executive Officer
 
February 25, 2016
 
 
By:
/s/ Thomas R. Shoaf
 
 
 
Thomas R. Shoaf
 
Executive Vice President and Chief Financial Officer
 
February 25, 2016
 
 
By:
/s/ Jorge A. del Alamo
 
 
 
Jorge A. del Alamo
 
Senior Vice President and Controller
 
February 25, 2016


79

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 or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her 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 or she might or could do in person, hereby qualifying and confirming all that said attorney-in-fact and agent or his or her 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
  
Chairman of the Board
 
February 25, 2016
William E. Greehey
 
 
 
 
 
 
 
 
 
/s/ Bradley C. Barron
  
President, Chief Executive
 
February 25, 2016
Bradley C. Barron
 
Officer and Director
(Principal Executive Officer)
 
 
 
 
 
 
 
/s/ Thomas R. Shoaf
  
Executive Vice President and
 
February 25, 2016
Thomas R. Shoaf
 
Chief Financial Officer
(Principal Financial Officer)
 
 
 
 
 
 
 
/s/ Jorge A. del Alamo
  
Senior Vice President and Controller
 
February 25, 2016
Jorge A. del Alamo
 
(Principal Accounting Officer)
 
 
 
 
 
 
 
/s/ William B. Burnett
  
Director
 
February 25, 2016
William B. Burnett
 
 
 
 
 
 
 
 
 
/s/ James F. Clingman
  
Director
 
February 25, 2016
James F. Clingman
 
 
 
 
 
 
 
 
 
/s/ Jelynne LeBlanc-Burley
  
Director
 
February 25, 2016
Jelynne LeBlanc-Burley
 
 
 
 



80