Related Party Transactions

Commercial Agreements

The Partnership has various long-term, fee-based commercial agreements with Delek under which we provide crude oil gathering, crude oil and refined products transportation and storage services and marketing and terminalling services to Delek. Each of these agreements include minimum quarterly volume or throughput commitments and have tariffs or fees indexed to inflation, provided that the tariffs or fees will not be decreased below the initial amount. Fees under each agreement are payable to us monthly by Delek or certain third parties to whom Delek has assigned certain of its rights. In most circumstances, if Delek or the applicable third party assignee fails to meet or exceed the minimum volume or throughput commitment during any calendar quarter, Delek, and not any third party assignee, will be required to make a quarterly shortfall payment to us equal to the volume of the shortfall multiplied by the applicable fee. Carry-over of any volumes in excess of such commitment to any subsequent quarter is not permitted. Exceptions to this requirement that Delek make minimum payments under a given agreement can exist if (i) there is an event of force majeure affecting our asset, or (ii) after the first three years of the applicable commercial agreement's term (a) there is an event of force majeure affecting the applicable Delek asset, or (b) if Delek shuts down the applicable refinery upon giving 12 months' notice, which such notice may only be given after the first two years of the applicable commercial agreement's term. In addition, Delek may terminate any of these agreements under certain circumstances.

Under each of these agreements, we are required to maintain the capabilities of our pipelines and terminals such that Delek may throughput and/or store, as the case may be, specified volumes of crude oil and refined products. To the extent that Delek is prevented by our failure to maintain such capacities from throughputting or storing such specified volumes for more than 30 days per year, Delek's minimum throughput commitment will be reduced proportionately and prorated for the portion of the quarter during which the specified throughput capacity was unavailable, and/or the storage fee will be reduced, prorated for the portion of the month during which the specified storage capacity was unavailable. Such reduction would occur even if actual throughput or storage amounts were below the minimum volume commitment levels.

The tariffs, throughput fees and the storage fees under our agreements with Delek are subject to increase or decrease on July 1 of each year, by the amount of any change in the FERC oil pipeline index or, in the case of the east Texas marketing agreement, to the consumer price index; provided, however, that in no event will the fees be adjusted below the amount initially set forth in the applicable agreement.

We believe the terms and conditions under these agreements, as well as our other agreements with Delek described below, are generally no less favorable to either party than those that could have been negotiated with unaffiliated parties with respect to similar services. These commercial agreements with Delek include the following:




Asset/Operation	Initiation Date	Initial/Maximum Term (years) ⁽¹⁾	Service	Minimum Throughput Commitment (bpd)	Fee (/bbl)
Lion Pipeline System and SALA Gathering System:
Crude Oil Pipelines (non-gathered)	November 2012	5 / 15	Crude oil and refined products transportation	46,000 ⁽²⁾	$ 0 .89 ⁽³⁾
Refined Products Pipelines	November 2012			40,000	$	0.105
SALA Gathering System	November 2012		Crude oil gathering	14,000	$ 2.35⁽³⁾
East Texas Crude Logistics System:
Crude Oil Pipelines	November 2012	5 / 15	Crude oil transportation and storage	35,000	$ 0.42⁽⁴⁾
Storage	November 2012			N/A	$261,480/month
East Texas Marketing	November 2012	10 ⁽⁵⁾	Marketing products for Tyler Refinery	50,000	$ .6065/bbl⁽⁵⁾
Memphis Terminal	November 2012	5 / 15	Dedicated terminalling services	10,000	$	0.52
Big Sandy Terminal: ⁽⁶⁾
Refined Products Transportation	November 2012	5 / 15	Refined products transportation, dedicated terminalling services and storage for the Tyler Refinery	5,000	$	0.52
Terminalling	November 2012			5,000	$	0.52
Storage	November 2012			N/A	$52,250/month
Tyler Throughput and Tankage:
Refined Products Throughput	July 2013	8 / 16	Dedicated Terminalling and storage	50,000	$	0.35
Storage	July 2013			N/A	$841,667/month
Tyler Lease and Access	July 2013	50	Real property lease	N/A	$100 annually
Tyler Site Services	July 2013	8 / 16	Shared services	N/A	$200,000 annually
North Little Rock Terminal:
Terminalling	October 2013	8 / 16	Dedicated terminalling and storage services	8,100	$ 0.23 ⁽⁷⁾
Storage	October 2013	8 / 16		N/A	$63,000/month ⁽⁷⁾


⁽¹⁾	Maximum term gives effect to the extension of the commercial agreement pursuant to the terms thereof.


⁽²⁾	Excludes volumes gathered on the SALA Gathering System


⁽³⁾	Volumes gathered on the SALA Gathering System will not be subject to an additional fee for transportation on our Lion Pipeline System to the El Dorado Refinery


⁽⁴⁾	For any volumes in excess of 50,000 bpd, the throughput fee will be $0.638/bbl.


⁽⁵⁾	Following the primary term, the marketing agreement automatically renews for successive one-year terms unless either party provides notice of non-renewal 10 months prior to the expiration of the then-current term. An additional fee of 50% of the margin on products sold is also paid pursuant to the agreement. The fee shall not be less than $175,000 nor greater than $500,000 per quarter.

⁽⁶⁾

On July 19, 2013, we acquired the Hopewell Pipeline in order to effectively connect it with the Big Sandy Pipeline and thereby return the Big Sandy Terminal to operation. In connection with the acquisition, on July 25, 2013, we and Delek entered into the Amended and Restated Services Agreement (Big Sandy Terminal and Pipeline), which amended and restated the terminalling services agreement for the Big Sandy Terminal originally entered into in connection with the Offering. Even though the Big Sandy Terminal was not operational for a majority of the year ended December 31, 2013, as the pipeline required maintenance in order to return it to service, Delek paid to us the minimum terminal and storage fees for the Big Sandy Terminal pursuant to the agreement above. The terminal was available for use by Delek, beginning in the fourth quarter 2013.


⁽⁷⁾	Pursuant to the agreement, capital projects are to be completed in two phases in order to support and enhance blending activities at the terminal. Upon completion of phase II capital projects, the minimum throughput fees will decrease and storage fees will increase.

El Dorado Refinery Crude Oil and Refined Products Supply and Offtake Arrangement

Pursuant to an arrangement with Delek and Lion Oil, to which we are not a party, J. Aron & Company ("J. Aron") acquires and holds title to substantially all crude oil and refined products transported on our Lion Pipeline System and SALA Gathering System. J. Aron is therefore considered the shipper for the liquid it owns on the Lion Pipeline System and the SALA Gathering System. J. Aron also has title to the refined products stored at our Memphis and North Little Rock terminals. Under (i) our pipelines and storage agreement with Lion Oil relating to the Lion Pipeline System and the SALA Gathering System, (ii) our terminalling agreements with Lion Oil relating to the Memphis and North Little Rock terminals and (iii) our throughput and tankage agreement relating to the El Dorado Terminal and Tank Assets, Lion Oil has assigned to J. Aron certain of its rights under these agreements, including the right to have J. Aron's crude oil and intermediate and refined products stored in or transported on or through these systems, Memphis and North Little Rock terminals and the El Dorado Terminal and Tank Assets, with Lion Oil acting as J. Aron's agent for scheduling purposes. Accordingly, even though this is effectively a financing arrangement for Delek whereby J. Aron sells the product back to Delek, J. Aron is technically our primary customer under each of these agreements. J. Aron will retain these storage and transportation rights for the term of its arrangement with Delek and Lion Oil, which currently runs through April 30, 2017, and J. Aron will pay us for the transportation, throughput and storage services we provide to it. The rights assigned to J. Aron will not alter Lion Oil's obligations to meet certain throughput minimum volumes under our agreements with respect to the transportation, throughputting and storage of crude oil and refined products through our facilities, but J. Aron's throughput will be credited toward Lion Oil's minimum throughout commitments. Accordingly, Lion Oil will be responsible for making any shortfall payments incurred under the pipelines and storage agreement or the terminalling agreement which may result from minimum throughputs or volumes not being met.

Other Agreements with Delek

In addition to the the commercial agreements described above, the Partnership has entered into the following agreements with Delek:

Omnibus Agreement

The Partnership entered into an omnibus agreement with Delek, our general partner, our subsidiary, Delek Logistics Operating, LLC ("OpCo"), Delek, Lion Oil, and certain of the Partnership’s and Delek’s other subsidiaries upon the completion of the Offering on November 7, 2012. We refer to this omnibus agreement, as subsequently amended, as the “Omnibus Agreement.”

On July 26, 2013, in connection with the acquisition from Delek of the refined products terminal and 96 storage tanks and ancillary assets adjacent to the Tyler Refinery from Delek, the Partnership entered into an amendment and restatement of the Omnibus Agreement (the “First Omnibus Amendment”). The First Omnibus Amendment, included the following, among other things: (i) certain modifications in the reimbursement by Delek and certain of its subsidiaries under the Omnibus Agreement for certain operating expenses and capital expenditures incurred by the Partnership or its subsidiaries, (ii) certain modifications of the indemnification provisions under the Omnibus Agreement in favor of the Partnership with respect to certain environmental matters, and (iii) the increase of the annual administrative fee payable by us to Delek under the Omnibus Agreement for corporate general and administrative services.

The annual administrative fee payable by the Partnership to Delek for corporate general and administrative services that Delek and its affiliates provide under the First Omnibus Amendment, increased from $2.7 million to $3.0 million, which is prorated and payable monthly. We paid Delek approximately $3.7 million pursuant to the Omnibus Agreement, which includes $2.8 million related to general and administrative services and $0.9 million related to insurance coverage during the year ended December 31, 2013. Delek paid us approximately $0.9 million pursuant to the Omnibus Agreement during the year ended December 31, 2013 as indemnification relative to the Paline Pipeline System.

Under the Omnibus Agreement, Delek has agreed to reimburse us for certain expenses that we incur for inspections, maintenance and repairs to any storage tanks we acquired in the Tyler Acquisition to cause such storage tanks to comply with applicable regulatory and/or industry standards. Delek is also required to reimburse us for certain expenses that we incur for inspections, maintenance and repairs to any of the storage tanks contributed to us by Delek (subject to a deductible of $0.5 million per year) that are necessary to comply with the DOT pipeline integrity rules and certain American Petroleum Institute storage tank standards for a period of five years. Furthermore, under the Omnibus Agreement, Delek was required to reimburse us for all non-discretionary maintenance capital expenditures with respect to the Tyler Terminal and Tank Assets in excess of $0.4 million for the period from July 26, 2013 through September 30, 2013. Delek was also required to reimburse us for non-discretionary maintenance capital expenditures with respect to all assets transferred from Delek to the Partnership in excess of $1.4 million for the period from September 30, 2013 through December 31, 2013.

For additional information regarding the Omnibus Agreement, see “Note 20—Subsequent Events—El Dorado Terminal and Tankage Acquisition”

Operation and Management Services Agreement

Our general partner operates our business on our behalf and is entitled under our partnership agreement to be reimbursed for the cost of providing those services. We and our general partner entered into an operation and management services agreement with Delek, pursuant to which our general partner uses employees of Delek to provide operation and management services with respect to our pipelines, storage and terminalling facilities and related assets, including operating and maintaining flow and pressure control, maintaining and repairing our pipelines, storage and terminalling facilities and related assets, conducting routine operational activities, and managing transportation and logistics, contract administration, crude oil and refined product measurement, database mapping, rights-of-way, materials, engineering support and such other services as our general partner and Delek may mutually agree upon from time to time. We and/or our general partner reimbursed Delek for such services under the operation and management services agreement. We and our subsidiaries paid Delek approximately $5.9 million pursuant to this agreement during the year ended December 31, 2013.

On July 26, 2013, in connection with the Tyler Acquisition, the Partnership, our general partner and Delek Logistics Services Company terminated the operation and management services agreement. We continued to reimburse our general partner for the services it provides to us under our partnership agreement. We reimbursed our general partner $6.5 million pursuant to the partnership agreement during the year ended December 31, 2013.

Other Agreements

Paline Pipeline System Capacity Reservation. In 2011, prior to our purchase of the Paline Pipeline, a major integrated oil company contracted with the prior owner of the Paline Pipeline System to reverse the pipeline to primarily run southbound. In exchange, the oil company agreed to pay for use of 100% of such southbound capacity for a fee of $450,000 and $529,250 per month in 2012 and 2013, respectively. The agreement will thereafter be subject to annual escalation based on the change in the producer price index for finished goods during any renewal periods. The monthly fees payable to us under our agreement with this customer will increase proportionately to the extent throughput volumes are above 30,000 bpd. To the extent we are unable to provide our customer with 30,000 barrels of throughput capacity during a given month, the monthly fee may be reduced accordingly. The agreement extends through December 31, 2014 and will renew automatically each year unless terminated by either party at least six months prior to the year end.

Pursuant to the terms of the usage contract, this customer was required to make only payments of $229,000 per month for this capacity until the final segment of the reversal of the Paline Pipeline System was completed, and we entered into a connection agreement with an affiliate of the customer to connect our system with such affiliate's tanks. We completed our work on the fourth segment of the reversal in October 2012. However, a connection agreement was not fully executed until April 2013. Even though our customer had not yet completed the work on its tanks, because we completed our necessary work, we believe we were owed the full payment under the contract beginning in November 2012. Our customer paid only $229,000 per month in 2012 and during the first quarter 2013. Pursuant to the Omnibus Agreement, Delek is required to indemnify us during the period from November 1, 2012 through December 31, 2013 for any lost service fees attributable to the failure of our customer to pay 100% of the full monthly fee. Therefore, Delek indemnified us for lost service fees related to the Paline Pipeline System in 2012 and during the first quarter 2013. Beginning in the second quarter of 2013 and for the rest of 2013, each month we received the entire monthly amount payable to us of $529,250.

Predecessors' Transactions

Related-party transactions of the Predecessors were settled through division equity. Revenues from affiliates consist of revenues from gathering, pipeline transportation, storage, wholesale marketing and products terminalling services to Delek and its affiliates based on regulated tariff rates or contractually based fees.

Costs related specifically to us have been identified and included in the accompanying consolidated statements of income and comprehensive income. Prior to the Offering and the Tyler Acquisition, we were not allocated certain corporate costs. These costs were primarily allocated based on a percentage of salaries expense and property, plant and equipment costs. In the opinion of management, the methods for allocating these costs are reasonable. It is not practicable to estimate the costs that would have been incurred by us if we had been operated on a stand-alone basis.

Summary of Transactions

A summary of revenue and expense transactions with Delek, including expenses directly charged and allocated to our Predecessors, are as follows (in thousands):



	Year Ended December 31,
	2013		2012		2011
			Predecessors		Predecessors
Revenues	$	77,272	$	43,216	$	34,266
Operating and maintenance expenses⁽¹⁾	$	14,718	$	3,394	$	3,291
General and administrative expenses⁽²⁾	$	3,341	$	4,944	$	3,125

⁽¹⁾

Operating and maintenance expenses include costs allocated to the Tyler Predecessor for operating support provided to the Tyler Predecessor by Delek Refining, including certain labor related costs, property and liability insurance costs and certain other operating expenses. The costs that were allocated to us were $1.4 million for the year ended December 31, 2013, and $2.7 million, for each of the years ended December 31, 2012 and 2011.

⁽²⁾

General and administrative expenses include costs allocated to the Tyler Predecessor for general and administrative support provided to the Tyler Predecessor by Delek Refining, including services such as corporate management, risk management, accounting and human resources. The costs that were allocated to us were $0.5 million, $0.8 million and $0.7 million for the years ended December 31, 2013, 2012 and 2011, respectively.

Quarterly Cash Distribution

In accordance with our partnership agreement, our common, subordinated and general partner unitholders are entitled to receive quarterly distributions of available cash. On January 23, 2014, we declared a quarterly cash distribution of $0.415 per unit based on the results of the fourth quarter of 2013, which was paid on February 13, 2014.