8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported):
August 11, 2010 (August 9, 2010)

HOLLY ENERGY PARTNERS, L.P.

(Exact name of registrant as specified in its charter)

Delaware	001-32225	20-0833098
(State of Incorporation)	(Commission File Number)	(I.R.S. Employer Identification Number)

100 Crescent Court, Suite 1600, Dallas, Texas 75201-6915
(Address of Principal Executive Offices)

(214) 871-3555
(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01 Entry Into a Material Definitive Agreement.

     On August 9, 2010, HEP Tulsa LLC (“HEP Tulsa”), a subsidiary of Holly Energy Partners, L.P. (the “Partnership”) entered into a term sheet (the “Term Sheet”) with Holly Refining & Marketing - Tulsa LLC (“Holly Tulsa”), a subsidiary of Holly Corporation (“Holly”), the entity that controls the Partnership’s general partner, regarding the construction of facilities by HEP Tulsa at Holly Tulsa’s refinery site in Tulsa, Oklahoma (the “Tulsa Refinery”), which will include facilities and pipelines to interconnect the Western and Eastern complexes of the Tulsa Refinery. The construction projects are anticipated to begin in August of 2010 and to be completed by the end of 2010 for an estimated combined construction cost not to exceed $35 million without further approval by the Board of Directors and the Conflicts Committee of the Partnership. The Term Sheet is not binding, and its terms are subject to the negotiation of definitive agreements by the parties and approval by the Conflicts Committee of the Partnership, except for the parties’ binding agreement that, in the event that definitive documents are not mutually agreed upon by December 31, 2010, Holly Tulsa will complete the projects and reimburse HEP Tulsa for all costs it incurred in connection with the completion of the projects, and HEP Tulsa will convey any interest it has in such projects to Holly Tulsa.

     The description of the term sheet is qualified by reference to the copy of the term sheet filed as Exhibit 10.1 to this report, which is incorporated herein by reference in its entirety.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

ExhibitNo.		Description
	10.1	Term Sheet dated August 9, 2010

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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 hereunto duly authorized.

HOLLY ENERGY PARTNERS, L.P.
By:	HEP Logistics Holdings, L.P., its General Partner
	By:	Holly Logistic Services, L.L.C., its General Partner
		By:	/s/ Bruce R. Shaw
			Bruce R. Shaw
			Senior Vice President and
			Chief Financial Officer

Date:     August 11, 2010

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EXHIBIT INDEX

ExhibitNo.		Description
	10.1	Term Sheet dated August 9, 2010

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EX-10.1

Exhibit 10.1

TULSA REFINERY INTERCONNECTS TERM SHEET

This Term Sheet is intended to document discussions between Holly Refining & Marketing-Tulsa, LLC (“Holly Tulsa”) and HEP Tulsa LLC (“HEP Tulsa”) regarding the construction of facilities by HEP Tulsa at Holly Tulsa’s refinery in Tulsa, Oklahoma (the “Tulsa Refinery”), including facilities and pipelines to interconnect the Western and Eastern complexes of the Tulsa Refinery, as more particularly described below. The following terms and conditions are for discussion purposes only and nothing in this document shall be considered binding upon either party hereto, other than the provisions in the section entitled “Reimbursement,” which shall be fully binding on both parties hereto.

Inter-Plant (Offsite) Pipelines Project:
Project Description:	Construction of the following off-site pipelines:      ·     8 inch hydrogen pipeline, capacity 10mm SCFD      ·     12 inch sweet fuel gas, 32mm SCFD      ·     10 inch sour fuel gas, 22mm SCFD      ·     12 inch gas oil diesel fuel 45 MMBPD      ·     12 inch spare bore for future line
Estimated Costs/AFE’s Approved:	$11,140,000
Project Timing:	Construction to begin during or about August 2010 with completion estimated by the end of 2010
Intra-Plant (Onsite) Facilities Project:	These pipelines and related facilities are needed to connect the new Inter-Plant Pipelines to the respective processing facilities and storage tanks to allow the two refinery complexes to operate as one connected facility.
Phase I:
Project Description:	Construction of the following facilities:      ·     8 inch hydrogen to unit      ·     16 inch sweet fuel gas to unit      ·     12 inch gas oil/diesel fuel to tanks      ·     8 inch and 10 inch east plant gasoline blending components
Estimated Costs:	$16,802,136
Project Timing:	Construction to begin during or about August 2010 with completion estimated by the end of 2010

Other Terms/Arrangements:
Throughput Economics	The parties would negotiate throughput commitments (probably through an amendment to the existing First Amended and Restated Pipelines, Tankage and Loading Rack Throughput Agreement (Tulsa East)) to provide HEP Tulsa with an internal rate of return on invested capital similar to that negotiated with other assets recently acquired from Holly Tulsa and its affiliates, which would be subject to further approval by the HEP Board and Conflicts Committee. Throughput fees and minimum volume commitments would be negotiated for:      ·     8 inch hydrogen movements/capacities      ·     12 inch sweet fuel gas movements/capacities      ·     10 inch sour fuel gas movements/capacities      ·     12 inch gas oil/diesel fuel movements/capacities
Other Related Contractual Arrangements	Holly Tulsa Operating Agreement - The parties would negotiate an operating agreement to provide for Holly Tulsa to maintain and operate the Intra-Plant Pipelines.   Lease and Access Agreement — The parties would negotiate a typical lease and access agreement to provide HEP Tulsa and its affiliates a ground lease and access to the land underlying the facilities constructed. This could involve the amendment of the existing Lease and Access Agreement for the Tulsa Refinery.   Site Services — The parties would negotiate a typical site services agreement for Holly Tulsa to provide services to the facilities constructed. This could involve the amendment of the existing Site Services Agreement for the Tulsa Refinery.
Approved Amounts	The HEP Board and Conflicts Committee have approved the expenditure of up to $35.0 million (for all costs, including construction and capitalized interest costs) by HEP in connection with projects discussed herein. Expenditures in excess of that amount or material additional related projects are subject to subsequent approval.
Reimbursement	If the parties are unable to mutually agree upon definitive documents regarding this transaction by December 31, 2010, Holly Tulsa will complete the project and reimburse HEP for any costs (including construction and capitalized interest costs) it incurred in connection with the projects described herein, and HEP will convey any interest it has in such projects to Holly Tulsa.

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Acknowledged and Agreed this 9th day of August 2010.

HOLLY REFINING & MARKETING — TULSA LLC

By: Holly Refining & Marketing Company, its sole member

By:	/s/ David L. Lamp
	David L. Lamp President

HEP TULSA LLC

By:	/s/ David G. Blair
	David G. Blair
	Senior Vice President