10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 ______________________________________________________________________________________

FORM 10-Q

 ______________________________________________________________________________________

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020

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: 1-32225

  _____________________________________________________________________________________

HOLLY ENERGY PARTNERS, L.P.

(Exact name of registrant as specified in its charter)

 ______________________________________________________________________________________

Delaware	20-0833098
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
2828 N. Harwood, Suite 1300
Dallas
Texas	75201
(Address of principal executive offices)	(Zip code)

(214) 871-3555

(Registrant’s telephone number, including area code)

________________________________________________________________

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to 12(b) of the Securities Exchange Act of 1934:
Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Limited Partner Units	HEP	New York Stock Exchange

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  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).    Yes   ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth” company in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐	Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).    Yes  ☐ No  ☒

The number of the registrant’s outstanding common units at July 31, 2020, was 105,440,201.

Table of Contentsril 19,

HOLLY ENERGY PARTNERS, L.P.

INDEX

	FORWARD-LOOKING STATEMENTS		3
PART I. FINANCIAL INFORMATION			5
	Item 1.	Financial Statements (Unaudited)	5
		Consolidated Balance Sheets	5
		Consolidated Statements of Income	6
		Consolidated Statements of Cash Flows	7
		Consolidated Statements of Equity	8
		Notes to Consolidated Financial Statements	9
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	33
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	47
	Item 4.	Controls and Procedures	47
PART II. OTHER INFORMATION			48
	Item 1.	Legal Proceedings	48
	Item 1A.	Risk Factors	48
	Item 6.	Exhibits	48
		Index to Exhibits	49
		SIGNATURES	50

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Table of Contentsril 19,

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains certain “forward-looking statements” within the meaning of the federal securities laws. All statements, other than statements of historical fact included in this Form 10-Q, including, but not limited to, statements regarding funding of capital expenditures and distributions, distributable cash flow coverage and leverage targets, and statements under “Results of Operations” and “Liquidity and Capital Resources” in Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part I are forward-looking statements. Forward-looking statements use words such as “anticipate,” “project,” “expect,” “plan,” “goal,” “forecast,” “intend,” “should,” “would,” “could,” “believe,” “may,” and similar expressions and statements regarding our plans and objectives for future operations. These statements are based on our beliefs and assumptions and those of our general partner using currently available information and expectations as of the date hereof, are not guarantees of future performance and involve certain risks and uncertainties. Although we and our general partner believe that such expectations reflected in such forward-looking statements are reasonable, neither we nor our general partner can give assurance that our expectations will prove to be correct. All statements concerning our expectations for future results of operations are based on forecasts for our existing operations and do not include the potential impact of any future acquisitions. Our forward-looking statements are subject to a variety of risks, uncertainties and assumptions. If one or more of these risks or uncertainties materialize, or if underlying assumptions prove incorrect, our actual results may vary materially from those anticipated, estimated, projected or expected. Certain factors could cause actual results to differ materially from results anticipated in the forward-looking statements. These factors include, but are not limited to:

• the extraordinary market environment and effects of the COVID-19 pandemic, including the continuation of a material decline in demand for refined petroleum products in markets we serve;

• risks and uncertainties with respect to the actual quantities of petroleum products and crude oil shipped on our pipelines and/or terminalled, stored or throughput in our terminals and refinery processing units;

• the economic viability of HollyFrontier Corporation (“HFC”), our other customers and our joint ventures’ other customers, including any refusal or inability of our or our joint ventures’ customers or counterparties to perform their obligations under their contracts;

• the demand for refined petroleum products in the markets we serve;

• our ability to purchase and integrate future acquired operations;

• our ability to complete previously announced or contemplated acquisitions;

• the availability and cost of additional debt and equity financing;

• the possibility of temporary or permanent reductions in production or shutdowns at refineries utilizing our pipelines, terminal facilities and refinery processing units, due to reasons such as infection in the workforce, in response to reductions in demand or lower gross margins due to economic impact of the COVID-19 pandemic, and any potential asset impairments resulting from such actions;

• the effects of current and future government regulations and policies, including the effects of current and future restrictions on various commercial and economic activities in response to the COVID-19 pandemic;

• delay by government authorities in issuing permits necessary for our business or our capital projects;

• our and our joint venture partners’ ability to complete and maintain operational efficiency in carrying out routine operations and capital construction projects;

• the possibility of terrorist or cyber attacks and the consequences of any such attacks;

• general economic conditions, including uncertainty regarding the timing, pace and extent of an economic recovery in the United States;

• the impact of recent or proposed changes in the tax laws and regulations that affect master limited partnerships; and

• other financial, operational and legal risks and uncertainties detailed from time to time in our Securities and Exchange Commission filings.

Cautionary statements identifying important factors that could cause actual results to differ materially from our expectations are set forth in this Form 10-Q, including, without limitation, the forward-looking statements that are referred to above. You should not put any undue reliance on any forward-looking statements. When considering forward-looking statements, you should keep in mind the known material risk factors and other cautionary statements set forth in our Annual Report on Form 10-K for the year ended December 31, 2019 and in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, and in this Quarterly

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Table of Contentsril 19,

Report on Form 10-Q in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” All forward-looking statements included in this Form 10-Q and all subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. The forward-looking statements speak only as of the date made and, other than as required by law, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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Table of Contentsril 19,

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

HOLLY ENERGY PARTNERS, L.P.

CONSOLIDATED BALANCE SHEETS

(In thousands, except unit data)

	June 30, 2020		December 31, 2019
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents (Cushing Connect VIEs: $10,773 and $6,842, respectively)	$	18,913	$	13,287
Accounts receivable:
Trade (Cushing Connect VIEs: $2,170 and $79, respectively)	14,929		18,731
Affiliates	49,847		49,716
	64,776		68,447
Prepaid and other current assets	7,905		7,629
Total current assets	91,594		89,363
Properties and equipment, net (Cushing Connect VIEs: $25,832 and $2,916, respectively)	1,458,934		1,467,099
Operating lease right-of-use assets, net	3,377		3,255
Net investment in leases	168,153		134,886
Intangible assets, net	94,318		101,322
Goodwill	270,336		270,336
Equity method investments (Cushing Connect VIEs: $39,815 and $37,084, respectively)	123,299		120,071
Other assets	11,772		12,900
Total assets	$	2,221,783	$	2,199,232
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable:
Trade (Cushing Connect VIEs: $6,421 and $2,082, respectively)	$	14,639	$	17,818
Affiliates	7,286		16,737
	21,925		34,555
Accrued interest	10,683		13,206
Deferred revenue	11,002		10,390
Accrued property taxes	5,526		3,799
Current operating lease liabilities	1,213		1,126
Current finance lease liabilities	3,293		3,224
Other current liabilities	2,975		2,305
Total current liabilities	56,617		68,605
Long-term debt	1,486,648		1,462,031
Noncurrent operating lease liabilities	2,530		2,482
Noncurrent finance lease liabilities	70,039		70,475
Other long-term liabilities	13,689		12,808
Deferred revenue	42,692		45,681
Class B unit	51,062		49,392
Equity:
Partners’ equity:
Common unitholders (105,440,201 units issued and outstanding     at June 30, 2020 and December 31, 2019)	380,723		381,103
Noncontrolling interest	117,783		106,655
Total equity	498,506		487,758
Total liabilities and equity	$	2,221,783	$	2,199,232

See accompanying notes.

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Table of Contentsril 19,

HOLLY ENERGY PARTNERS, L.P.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In thousands, except per unit data)

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
Revenues:
Affiliates	$	95,563		$	102,369		$	196,991		$	205,728
Third parties	19,244			28,382			45,670			59,520
	114,807			130,751			242,661			265,248
Operating costs and expenses:
Operations (exclusive of depreciation and amortization)	34,737			40,602			69,718			78,121
Depreciation and amortization	25,034			24,247			49,012			48,071
General and administrative	2,535			1,988			5,237			4,608
	62,306			66,837			123,967			130,800
Operating income	52,501			63,914			118,694			134,448
Other income (expense):
Equity in earnings of equity method investments	2,156			1,783			3,870			3,883
Interest expense	(13,779		)	(19,230		)	(31,546		)	(38,252		)
Interest income	2,813			551			5,031			1,079
Gain on sales-type leases	33,834			—			33,834			—
Loss on early extinguishment of debt	—			—			(25,915		)	—
Gain (loss) on sale of assets and other	468			111			974			(199		)
	25,492			(16,785		)	(13,752		)	(33,489		)
Income before income taxes	77,993			47,129			104,942			100,959
State income tax benefit (expense)	(39		)	30			(76		)	(6		)
Net income	77,954			47,159			104,866			100,953
Allocation of net income attributable to noncontrolling interests	(1,484		)	(1,469		)	(3,535		)	(4,081		)
Net income attributable to the partners	76,470			45,690			101,331			96,872
Limited partners’ per unit interest in earnings—basic and diluted	$	0.73		$	0.43		$	0.96		$	0.92
Weighted average limited partners’ units outstanding	105,440			105,440			105,440			105,440

See accompanying notes.

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Table of Contentsril 19,

HOLLY ENERGY PARTNERS, L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

 

	Six Months Ended June 30,
	2020			2019
Cash flows from operating activities
Net income	$	104,866		$	100,953
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	49,012			48,071
(Gain) loss on sale of assets	(797		)	48
Loss on early extinguishment of debt	25,915			—
Gain on sales-type leases	(33,834		)	—
Amortization of deferred charges	1,641			1,535
Equity-based compensation expense	980			1,246
Equity in earnings of equity method investments, net of distributions	(1,298		)	526
(Increase) decrease in operating assets:
Accounts receivable—trade	3,803			(2,742		)
Accounts receivable—affiliates	(131		)	704
Prepaid and other current assets	216			426
Increase (decrease) in operating liabilities:
Accounts payable—trade	(4,959		)	420
Accounts payable—affiliates	(9,452		)	(6,489		)
Accrued interest	(2,523		)	27
Deferred revenue	(2,378		)	339
Accrued property taxes	1,727			3,658
Other current liabilities	669			—
Other, net	1,137			(3,733		)
Net cash provided by operating activities	134,594			144,989
Cash flows from investing activities
Additions to properties and equipment	(30,740		)	(17,752		)
Investment in Cushing Connect	(2,400		)	—
Proceeds from sale of assets	816			194
Distributions in excess of equity in earnings of equity investments	470			299
Net cash used for investing activities	(31,854		)	(17,259		)
Cash flows from financing activities
Borrowings under credit agreement	168,000			175,000
Repayments of credit agreement borrowings	(138,500		)	(156,500		)
Redemption of senior notes	(522,500		)	—
Proceeds from issuance of debt	500,000			—
Contributions from general partner	435			—
Contributions from noncontrolling interest	13,263			—
Distributions to HEP unitholders	(102,979		)	(136,207		)
Distributions to noncontrolling interest	(4,000		)	(5,250		)
Payments on finance leases	(1,972		)	(503		)
Deferred financing costs	(8,714		)	—
Purchase of units for incentive grants	—			(255		)
Units withheld for tax withholding obligations	(147		)	(119		)
Net cash used by financing activities	(97,114		)	(123,834		)
Cash and cash equivalents
Increase for the period	5,626			3,896
Beginning of period	13,287			3,045
End of period	$	18,913		$	6,941

See accompanying notes.

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Table of Contentsril 19,

HOLLY ENERGY PARTNERS, L.P.

CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

(In thousands)

	Common Units			Noncontrolling Interest			Total Equity
Balance December 31, 2019	$	381,103		$	106,655		$	487,758
Capital contribution - Cushing Connect	—			7,304			7,304
Distributions to HEP unitholders	(68,519		)	—			(68,519		)
Distributions to noncontrolling interest	—			(3,000		)	(3,000		)
Equity-based compensation	506			—			506
Class B unit accretion	(835		)	—			(835		)
Other	208			—			208
Net income	25,696			1,216			26,912
Balance March 31, 2020	338,159			112,175			450,334
Capital Contribution - Cushing Connect	—			5,959			$	5,959
Distributions to HEP unitholders	(34,460		)	—			(34,460		)
Distributions to noncontrolling interest	—			(1,000		)	(1,000		)
Equity-based compensation	474			—			474
Class B unit accretion	(835		)	—			(835		)
Other	80			—			80
Net income	77,305			649			77,954
Balance June 30, 2020	$	380,723		$	117,783		$	498,506

	Common Units			Noncontrolling Interest			Total Equity
Balance December 31, 2018	$	427,435		$	88,126		$	515,561
Distributions to HEP unitholders	(67,975		)	—			(67,975		)
Distributions to noncontrolling interest	—			(3,000		)	(3,000		)
Equity-based compensation	661			—			661
Class B unit accretion	(780		)	—			(780		)
Other	814			—			814
Net income	51,962			1,832			53,794
Balance March 31, 2019	412,117			86,958			499,075
Distributions to HEP unitholders	(68,232		)	—			(68,232		)
Distributions to noncontrolling interest	—			(2,250		)	(2,250		)
Equity-based compensation	585			—			585
Class B unit accretion	(781		)	—			(781		)
Other	(138		)	—			(138		)
Net income	46,471			688			47,159
Balance June 30, 2019	$	390,022		$	85,396		$	475,418

See accompanying notes.

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Table of Contentsril 19,

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1: Description of Business and Presentation of Financial Statements

Holly Energy Partners, L.P. (“HEP”), together with its consolidated subsidiaries, is a publicly held master limited partnership. As of June 30, 2020, HollyFrontier Corporation (“HFC”) and its subsidiaries own a 57% limited partner interest and the non-economic general partner interest in HEP. We commenced operations on July 13, 2004, upon the completion of our initial public offering. In these consolidated financial statements, the words “we,” “our,” “ours” and “us” refer to HEP unless the context otherwise indicates.

On October 31, 2017, we closed on an equity restructuring transaction with HEP Logistics Holdings, L.P. (“HEP Logistics”), a wholly-owned subsidiary of HFC and the general partner of HEP, pursuant to which the incentive distribution rights ("IDRs") held by HEP Logistics were canceled, and HEP Logistics' 2% general partner interest in HEP was converted into a non-economic general partner interest in HEP. In consideration, we issued 37,250,000 of our common units to HEP Logistics. In addition, HEP Logistics agreed to waive $2.5 million of limited partner cash distributions for each of twelve consecutive quarters beginning with the first quarter the units issued as consideration were eligible to receive distributions. This waiver of limited partner cash distributions will expire after the cash distribution for the second quarter of 2020, which will be made during the third quarter of 2020. As a result of this transaction, no distributions were made on the general partner interest after October 31, 2017.

We own and operate petroleum product and crude oil pipelines, terminal, tankage and loading rack facilities and refinery processing units that support refining and marketing operations of HFC and other refineries in the Mid-Continent, Southwest and Northwest regions of the United States. Additionally, we own a 75% interest in UNEV Pipeline, LLC (“UNEV”), a 50% interest in Osage Pipe Line Company, LLC (“Osage”), a 50% interest in Cheyenne Pipeline LLC, and a 50% interest in Cushing Connect Pipeline & Terminal LLC.

On June 1, 2020, HFC announced plans to permanently cease petroleum refining operations at its Cheyenne Refinery and to convert certain assets at that refinery to renewable diesel production. HFC subsequently began winding down petroleum refining operations at its Cheyenne Refinery on August 3, 2020. As of June 30, 2020, our throughput agreement with HFC required minimum annualized payments to us of approximately $17.6 million related to our Cheyenne assets. During the third quarter of 2020, we expect to begin negotiations with HFC related to potential changes to our existing throughput agreement. The net book value of our Cheyenne assets as of June 30, 2020 was approximately $88.5 million, including $28.1 million of long-lived assets and $68.7 million of goodwill. Additionally, our annual goodwill impairment test is scheduled for the third quarter of 2020. Depending upon the outcome of negotiations related to our throughput agreement or other changes in anticipated commercial uses of our Cheyenne assets, such assets could be at risk of impairment in the future and such impairment charges could be material.

We operate in two reportable segments, a Pipelines and Terminals segment and a Refinery Processing Unit segment. Disclosures around these segments are discussed in Note 15.

We generate revenues by charging tariffs for transporting petroleum products and crude oil through our pipelines, by charging fees for terminalling and storing refined products and other hydrocarbons, providing other services at our storage tanks and terminals and by charging fees for processing hydrocarbon feedstocks through our refinery processing units. We do not take ownership of products that we transport, terminal, store or process, and therefore, we are not exposed directly to changes in commodity prices.

The consolidated financial statements included herein have been prepared without audit, pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). The interim financial statements reflect all adjustments, which, in the opinion of management, are necessary for a fair presentation of our results for the interim periods. Such adjustments are considered to be of a normal recurring nature. Although certain notes and other information required by U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted, we believe that the disclosures in these consolidated financial statements are adequate to make the information presented not misleading. These consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2019. Results of operations for interim periods are not necessarily indicative of the results of operations that will be realized for the year ending December 31, 2020.

Principles of Consolidation and Common Control Transactions

The consolidated financial statements include our accounts and those of subsidiaries and joint ventures that we control. All significant intercompany transactions and balances have been eliminated.

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Most of our acquisitions from HFC occurred while we were a consolidated variable interest entity (“VIE”) of HFC. Therefore, as an entity under common control with HFC, we recorded these acquisitions on our balance sheets at HFC's historical basis instead of our purchase price or fair value.

Accounting Pronouncements Adopted During the Periods Presented

Goodwill Impairment Testing

In January 2017, Accounting Standard Update (“ASU”) 2017-04, “Simplifying the Test for Goodwill Impairment,” was issued amending the testing for goodwill impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. Under this standard, goodwill impairment is measured as the excess of the carrying amount of the reporting unit over the related fair value. We adopted this standard effective in the second quarter of 2019, and the adoption of this standard had no effect on our financial condition, results of operations or cash flows.

Leases

In February 2016, ASU No. 2016-02, “Leases” (“ASC 842”) was issued requiring leases to be measured and recognized as a lease liability, with a corresponding right-of-use asset on the balance sheet. We adopted this standard effective January 1, 2019, and we elected to adopt using the modified retrospective transition method, whereby comparative prior period financial information will not be restated and will continue to be reported under the lease accounting standard in effect during those periods. We also elected practical expedients provided by the new standard, including the package of practical expedients and the short-term lease recognition practical expedient, which allow an entity to not recognize on the balance sheet leases with a term of 12 months or less. Upon adoption of this standard, we recognized $78.4 million of lease liabilities and corresponding right-of-use assets on our consolidated balance sheet. Adoption of this standard did not have a material impact on our results of operations or cash flows. See Notes 3 and 4 for additional information on our lease policies.

Credit Losses Measurement

In June 2016, ASU 2016-13, “Measurement of Credit Losses on Financial Instruments,” was issued requiring measurement of all expected credit losses for certain types of financial instruments, including trade receivables, held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. We adopted this standard effective January 1, 2020, and adoption of the standard did not have a material impact on our financial condition, results of operations or cash flows.

Note 2: Investment in Joint Venture

On October 2, 2019, HEP Cushing LLC (“HEP Cushing”), a wholly-owned subsidiary of HEP, and Plains Marketing, L.P. (“PMLP”), a wholly-owned subsidiary of Plains All American Pipeline, L.P. (“Plains”), formed a 50/50 joint venture, Cushing Connect Pipeline & Terminal LLC (the “Cushing Connect Joint Venture”), for (i) the development and construction of a new 160,000 barrel per day common carrier crude oil pipeline (the “Cushing Connect Pipeline”) that will connect the Cushing, Oklahoma crude oil hub to the Tulsa, Oklahoma refining complex owned by a subsidiary of HFC and (ii) the ownership and operation of 1.5 million barrels of crude oil storage in Cushing, Oklahoma (the “ Cushing Connect JV Terminal”). The Cushing Connect JV Terminal was fully in service beginning in April 2020. The Cushing Connect Pipeline is expected to be in service during the first quarter of 2021. Long-term commercial agreements have been entered into to support the Cushing Connect Joint Venture assets.

The Cushing Connect Joint Venture contracted with an affiliate of HEP to manage the construction and operation of the Cushing Connect Pipeline and with an affiliate of Plains to manage the operation of the Cushing Connect JV Terminal. The total Cushing Connect Joint Venture investment will be shared proportionately among the partners, and HEP estimates its share of the cost of the Cushing Connect JV Terminal contributed by Plains and Cushing Connect Pipeline construction costs will be approximately $65 million.

The Cushing Connect Joint Venture legal entities are variable interest entities ("VIEs") as defined under GAAP. A VIE is a legal entity if it has any one of the following characteristics: (i) the entity does not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support; (ii) the at risk equity holders, as a group, lack the characteristics of a controlling financial interest; or (iii) the entity is structured with non-substantive voting rights. The Cushing Connect Joint Venture legal entities do not have sufficient equity at risk to finance their activities without additional financial support. Since HEP is constructing and will operate the Cushing Connect Pipeline, HEP has more ability to direct the activities that most significantly impact the financial performance of the Cushing Connect Joint Venture and Cushing Connect Pipeline legal entities.

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Therefore, HEP consolidates those legal entities. We do not have the ability to direct the activities that most significantly impact the Cushing Connect JV Terminal legal entity, and therefore, we account for our interest in the Cushing Connect JV Terminal legal entity using the equity method of accounting.

Note 3: Revenues

Revenues are generally recognized as products are shipped through our pipelines and terminals, feedstocks are processed through our refinery processing units or other services are rendered. The majority of our contracts with customers meet the definition of a lease since (1) performance of the contracts is dependent on specified property, plant, or equipment and (2) it is remote that one or more parties other than the customer will take more than a minor amount of the output associated with the specified property, plant, or equipment. Prior to the adoption of the new lease standard (see Note 1), we bifurcated the consideration received between lease and service revenue. The new lease standard allows the election of a practical expedient whereby a lessor does not have to separate non-lease (service) components from lease components under certain conditions. The majority of our contracts meet these conditions, and we have made this election for those contracts. Under this practical expedient, we treat the combined components as a single performance obligation in accordance with Accounting Standards Codification (“ASC”) 606, which largely codified ASU 2014-09, if the non-lease (service) component is the dominant component. If the lease component is the dominant component, we treat the combined components as a lease in accordance with ASC 842, which largely codified ASU 2016-02.

Several of our contracts include incentive or reduced tariffs once a certain quarterly volume is met. Revenue from the variable element of these transactions is recognized based on the actual volumes shipped as it relates specifically to rendering the services during the applicable quarter.

The majority of our long-term transportation contracts specify minimum volume requirements, whereby, we bill a customer for a minimum level of shipments in the event a customer ships below their contractual requirements. If there are no future performance obligations, we will recognize these deficiency payments in revenue.

In certain of these throughput agreements, a customer may later utilize such shortfall billings as credit towards future volume shipments in excess of its minimum levels within its respective contractual shortfall make-up period. Such amounts represent an obligation to perform future services, which may be initially deferred and later recognized as revenue based on estimated future shipping levels, including the likelihood of a customer’s ability to utilize such amounts prior to the end of the contractual shortfall make-up period. We recognize the service portion of these deficiency payments in revenue when we do not expect we will be required to satisfy these performance obligations in the future based on the pattern of rights exercised by the customer. During the three and six months ended June 30, 2020, we recognized $5.1 million and $12.6 million of these deficiency payments in revenue, of which none and $0.7 million, respectively, related to deficiency payments billed in prior periods. As of June 30, 2020, deferred revenue reflected in our consolidated balance sheet related to shortfalls billed was $0.5 million.

A contract liability exists when an entity is obligated to perform future services for a customer for which the entity has received consideration. Since HEP may be required to perform future services for these deficiency payments received, the deferred revenues on our balance sheets were considered contract liabilities. A contract asset exists when an entity has a right to consideration in exchange for goods or services transferred to a customer. Our consolidated balance sheets included the contract assets and liabilities in the table below:

	June 30, 2020			December 31, 2019
	(In thousands)
Contract assets	$	6,064		$	5,675
Contract liabilities	$	(500	)	$	(650	)

The contract assets and liabilities include both lease and service components. We did not recognize any revenue during the three months ended June 30, 2020, that was previously included in contract liability as of December 31, 2019, and we recognized $0.7 million of revenue during the six months ended June 30, 2020, that was previously included in contract liability as of December 31, 2019. We did not recognize any revenue during the three months ended June 30, 2019, that was previously included in contract liability as of December 31, 2018, and we recognized $0.6 million of revenue during the six months ended June 30, 2019, that was previously included in contract liability as of December 31, 2018. During the three and the six months ended June 30, 2020, we also recognized $0.2 million and $0.4 million, respectively, of revenue included in contract assets at June 30, 2020.

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As of June 30, 2020, we expect to recognize $2.3 billion in revenue related to our unfulfilled performance obligations under the terms of our long-term throughput agreements and leases expiring in 2021 through 2036. These agreements generally provide for changes in the minimum revenue guarantees annually for increases or decreases in the Producer Price Index (“PPI”) or Federal Energy Regulatory Commission (“FERC”) index, with certain contracts having provisions that limit the level of the rate increases or decreases. We expect to recognize revenue for these unfulfilled performance obligations as shown in the table below (amounts shown in table include both service and lease revenues):

Years Ending December 31,	(In millions)
Remainder of 2020	$	185
2021	362
2022	332
2023	295
2024	257
2025	188
Thereafter	650
Total	$	2,269

Payment terms under our contracts with customers are consistent with industry norms and are typically payable within 10 to 30 days of the date of invoice.

Disaggregated revenues were as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
	(In thousands)
Pipelines	$	58,954	$	72,263	$	129,426	$	147,363
Terminals, tanks and loading racks	36,280		39,089		73,778		76,667
Refinery processing units	19,573		19,399		39,457		41,218
	$	114,807	$	130,751	$	242,661	$	265,248

During the three and six months ended June 30, 2020, lease revenues amounted to $86.3 million and $179.5 million, respectively, and service revenues amounted to $28.5 million and $63.2 million, respectively. Both of these revenues were recorded within affiliates and third parties revenues on our consolidated statement of income.

Note 4: Leases

We adopted ASC 842 effective January 1, 2019, and elected to adopt using the modified retrospective transition method and practical expedients, both of which are provided as options by the standard and further defined in Note 1.

Lessee Accounting

At inception, we determine if an arrangement is or contains a lease. Right-of-use assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our payment obligation under the leasing arrangement. Right-of-use assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. We use our estimated incremental borrowing rate (“IBR”) to determine the present value of lease payments as most of our leases do not contain an implicit rate. Our IBR represents the interest rate which we would pay to borrow, on a collateralized basis, an amount equal to the lease payments over a similar term in a similar economic environment. We use the implicit rate when readily determinable.

As a lessee, we lease land, buildings, pipelines, transportation and other equipment to support our operations. These leases can be categorized into operating and finance leases. Operating leases are recorded in operating lease right-of-use assets and current and noncurrent operating lease liabilities on our consolidated balance sheet. Finance leases are included in properties and equipment, current finance lease liabilities and noncurrent finance lease liabilities on our consolidated balance sheet.

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When renewal options are defined in a lease, our lease term includes an option to extend the lease when it is reasonably certain we will exercise that option. Leases with a term of 12 months or less are not recorded on our balance sheet, and lease expense is accounted for on a straight-line basis. In addition, as a lessee, we separate non-lease components that are identifiable and exclude them from the determination of net present value of lease payment obligations.

Our leases have remaining terms of less than 1 year to 25 years, some of which include options to extend the leases for up to 10 years.

Finance Lease Obligations

We have finance lease obligations related to vehicle leases with initial terms of 33 to 48 months. The total cost of assets under finance leases was $6.9 million and $7.0 million as of June 30, 2020 and December 31, 2019, respectively, with accumulated depreciation of $3.4 million and $4.5 million as of June 30, 2020 and December 31, 2019, respectively. We include depreciation of finance leases in depreciation and amortization in our consolidated statements of income.

In addition, we have a finance lease obligation related to a pipeline lease with an initial term of 10 years with one remaining subsequent renewal option for an additional 10 years.

Supplemental balance sheet information related to leases was as follows (in thousands, except for lease term and discount rate):

	June 30, 2020			December 31, 2019
Operating leases:
Operating lease right-of-use assets, net	$	3,377		3,255
Current operating lease liabilities	1,213			1,126
Noncurrent operating lease liabilities	2,530			2,482
Total operating lease liabilities	$	3,743		3,608
Finance leases:
Properties and equipment	$	6,851		6,968
Accumulated amortization	(3,358		)	(4,547	)
Properties and equipment, net	$	3,493		2,421
Current finance lease liabilities	$	3,293		3,224
Noncurrent finance lease liabilities	70,039			70,475
Total finance lease liabilities	$	73,332		73,699
Weighted average remaining lease term (in years)
Operating leases	6.1			6.5
Finance leases	16.3			17.0
Weighted average discount rate
Operating leases	4.8%			5.0%
Finance leases	5.6%			6.0%

Supplemental cash flow and other information related to leases were as follows:

	Six Months Ended June 30,
	2020		2019
	(In thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows on operating leases	$	518	$	3,589
Operating cash flows on finance leases	$	2,157	$	51
Financing cash flows on finance leases	$	1,972	$	503

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Maturities of lease liabilities were as follows:

	June 30, 2020
	Operating			Finance
	(In thousands)
2020	$	491		$	3,865
2021	906			7,411
2022	627			7,285
2023	607			7,332
2024	494			6,856
2025 and thereafter	1,179			80,313
Total lease payments	4,304			113,062
Less: Imputed interest	(561		)	(39,730		)
Total lease obligations	3,743			73,332
Less: Current lease liabilities	(1,213		)	(3,293		)
Noncurrent lease liabilities	$	2,530		$	70,039

The components of lease expense were as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
	(In thousands)
Operating lease costs	$	230	$	1,798	$	503	$	3,568
Finance lease costs
Amortization of assets	273		254		515		498
Interest on lease liabilities	1,040		24		2,077		51
Variable lease cost	46		35		95		71
Total net lease cost	$	1,589	$	2,111	$	3,190	$	4,188

Lessor Accounting

As discussed in Note 3, the majority of our contracts with customers meet the definition of a lease. See Note 3 for further discussion of the impact of adoption of this standard on our activities as a lessor.

Customer contracts that contain leases are generally classified as either operating leases, direct finance leases or sales-type leases. We consider inputs such as the lease term, fair value of the underlying asset and residual value of the underlying assets when assessing the classification.

Substantially all of the assets supporting contracts meeting the definition of a lease have long useful lives, and we believe these assets will continue to have value when the current agreements expire due to our risk management strategy for protecting the residual fair value of the underlying assets by performing ongoing maintenance during the lease term. HFC generally has the option to purchase assets located within HFC refinery boundaries, including refinery tankage, truck racks and refinery processing units, at fair market value when the related agreements expire.

One of our throughput agreements with Delek was renewed during the three months ending June 30, 2020. Certain components of this agreement met the criteria of sales-type leases since the underlying assets are not expected to have an alternative use at the end of the lease term to anyone other than Delek. Under sales-type lease accounting, at the commencement date, the lessor recognizes a net investment in the lease, based on the estimated fair value of the underlying leased assets at contract inception, and derecognizes the underlying assets with the difference recorded as selling profit or loss arising from the lease. Therefore, we recognized a gain on sales-type leases during the three months ending June 30, 2020 composed of the following:

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	(In thousands)
Net investment in leases	$	35,319
Properties and equipment, net	(1,485		)
Gain on sales-type leases	$	33,834

This sales-type lease transaction, including the related gain, was a non-cash transaction.

Lease income recognized was as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
	(In thousands)
Operating lease revenues	$	84,872	$	94,783	$	175,671	$	188,287
Direct financing lease interest income	524		509		1,048		1,019
Gain on sales-type leases	33,834		—		33,834		—
Sales-type lease interest income	2,286		—		3,940		—
Lease revenues relating to variable lease payments not included in measurement of the sales-type lease receivable	1,474		—		3,822		—

For our sales-type leases, we included customer obligations related to minimum volume requirements in guaranteed minimum lease payments. Portions of our minimum guaranteed pipeline tariffs for assets subject to sales-type lease accounting are recorded as interest income with the remaining amounts recorded as a reduction in net investment in leases. We recognized any billings for throughput volumes in excess of minimum volume requirements as variable lease payments, and these variable lease payments were recorded in lease revenues.

Annual minimum undiscounted lease payments under our leases were as follows as of June 30, 2020:

	Operating		Finance		Sales-type
Years Ending December 31,	(In thousands)
Remainder of 2020	$	155,376	$	1,060	$	6,198
2021	306,771		2,128		12,396
2022	304,315		2,145		12,396
2023	273,362		2,162		12,396
2024	235,280		2,179		12,396
2025 and thereafter	739,158		40,787		72,432
Total	$	2,014,262	$	50,461	$	128,214

Net investments in leases recorded on our balance sheet were composed of the following:

	June 30, 2020				December 31, 2019
	Sales-type Leases		Direct Financing Leases		Sales-type Leases		Direct Financing Leases
	(In thousands)				(In thousands)
Lease receivables (1)	$	92,041	$	16,486	$	68,457	$	16,511
Unguaranteed residual assets	63,134		—		52,933		—
Net investment in leases	$	155,175	$	16,486	$	121,390	$	16,511

(1) Current portion of lease receivables included in prepaid and other current assets on the balance sheet.

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Note 5: Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are derived using inputs (assumptions that market participants would use in pricing an asset or liability) including assumptions about risk. GAAP categorizes inputs used in fair value measurements into three broad levels as follows:

• (Level 1) Quoted prices in active markets for identical assets or liabilities.

• (Level 2) Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, similar assets and liabilities in markets that are not active or can be corroborated by observable market data.

• (Level 3) Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes valuation techniques that involve significant unobservable inputs.

Financial Instruments

Our financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable, and debt. The carrying amounts of cash equivalents, accounts receivable and accounts payable approximate fair value due to the short-term maturity of these instruments. Debt consists of outstanding principal under our revolving credit agreement (which approximates fair value as interest rates are reset frequently at current interest rates) and our fixed interest rate senior notes.

The carrying amounts and estimated fair values of our senior notes were as follows:

		June 30, 2020		December 31, 2019
Financial Instrument	Fair Value Input Level	Carrying Value	Fair Value	Carrying Value	Fair Value
		(In thousands)
Liabilities:
6% Senior Notes	Level 2	—	—	496,531	522,045
5% Senior Notes	Level 2	491,648	477,835	—	—

Level 2 Financial Instruments

Our senior notes are measured at fair value using Level 2 inputs. The fair value of the senior notes is based on market values provided by a third-party bank, which were derived using market quotes for similar type debt instruments. See Note 9 for additional information.

Non-Recurring Fair Value Measurements

For gains on sales-type leases recognized during the second quarter of 2020, the estimated fair value of the underlying leased assets at contract inception and the present value of the estimated unguaranteed residual asset at the end of the lease term are used in determining the net investment in leases and related gain on sales-type leases recorded. The asset valuation estimates include Level 3 inputs based on a replacement cost valuation method.

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Note 6: Properties and Equipment 

The carrying amounts of our properties and equipment are as follows:

	June 30, 2020		December 31, 2019
	(In thousands)
Pipelines, terminals and tankage	$	1,610,916	$	1,602,231
Refinery assets	349,030		348,093
Land and right of way	87,076		86,190
Construction in progress	30,892		10,930
Other	9,829		14,110
	2,087,743		2,061,554
Less accumulated depreciation	628,809		594,455
	$	1,458,934	$	1,467,099

We capitalized $24 thousand and $8 thousand during the six months ended June 30, 2020 and 2019, respectively, in interest attributable to construction projects.

Depreciation expense was $41.7 million and $41.3 million for the six months ended June 30, 2020 and 2019, respectively, and includes depreciation of assets acquired under capital leases.

Note 7: Intangible Assets

Intangible assets include transportation agreements and customer relationships that represent a portion of the total purchase price of certain assets acquired from Delek in 2005, from HFC in 2008 prior to HEP becoming a consolidated VIE of HFC, from Plains in 2017, and from other minor acquisitions in 2018.

The carrying amounts of our intangible assets are as follows:

	Useful Life	June 30, 2020		December 31, 2019
		(In thousands)
Delek transportation agreement	30 years	$	59,933	$	59,933
HFC transportation agreement	10-15 years	75,131		75,131
Customer relationships	10 years	69,683		69,683
Other		50		50
		204,797		204,797
Less accumulated amortization		110,479		103,475
		$	94,318	$	101,322

Amortization expense was $7.0 million for both of the six months ended June 30, 2020 and 2019. We estimate amortization expense to be $14.0 million for each of the next two years, $9.9 million in 2023, and $9.1 million in 2024 and 2025.

We have additional transportation agreements with HFC resulting from historical transactions consisting of pipeline, terminal and tankage assets contributed to us or acquired from HFC. These transactions occurred while we were a consolidated variable interest entity of HFC; therefore, our basis in these agreements is zero and does not reflect a step-up in basis to fair value.

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Note 8: Employees, Retirement and Incentive Plans

Direct support for our operations is provided by Holly Logistic Services, L.L.C. (“HLS”), an HFC subsidiary, which utilizes personnel employed by HFC who are dedicated to performing services for us. Their costs, including salaries, bonuses, payroll taxes, benefits and other direct costs, are charged to us monthly in accordance with an omnibus agreement that we have with HFC (the “Omnibus Agreement”). These employees participate in the retirement and benefit plans of HFC. Our share of retirement and benefit plan costs was $1.6 million and $1.7 million for the three months ended June 30, 2020 and 2019, respectively, and $3.7 million for the six months ended June 30, 2020 and 2019.

Under HLS’s secondment agreement with HFC (the “Secondment Agreement”), certain employees of HFC are seconded to HLS to provide operational and maintenance services for certain of our processing, refining, pipeline and tankage assets, and HLS reimburses HFC for its prorated portion of the wages, benefits, and other costs related to these employees.

We have a Long-Term Incentive Plan for employees and non-employee directors who perform services for us. The Long-Term Incentive Plan consists of four components: restricted or phantom units, performance units, unit options and unit appreciation rights. Our accounting policy for the recognition of compensation expense for awards with pro-rata vesting (a significant proportion of our awards) is to expense the costs ratably over the vesting periods.

As of June 30, 2020, we had two types of incentive-based awards outstanding, which are described below. The compensation cost charged against income was $0.5 million and $0.6 million for the three months ended June 30, 2020 and 2019, respectively, and $1.0 million and $1.2 million for the six months ended June 30, 2020 and 2019. We currently purchase units in the open market instead of issuing new units for settlement of all unit awards under our Long-Term Incentive Plan. As of June 30, 2020, 2,500,000 units were authorized to be granted under our Long-Term Incentive Plan, of which 1,119,542 have not yet been granted, assuming no forfeitures of the unvested units and full achievement of goals for the unvested performance units.

Restricted and Phantom Units

Under our Long-Term Incentive Plan, we grant restricted units to non-employee directors and phantom units to selected employees who perform services for us, with most awards vesting over a period of one to three years. Although full ownership of the units does not transfer to the recipients until the units vest, the recipients have distribution rights on these units from the date of grant, and the recipients of the restricted units have voting rights on the restricted units from the date of grant.

The fair value of each restricted or phantom unit award is measured at the market price as of the date of grant and is amortized on a straight-line basis over the requisite service period for each separately vesting portion of the award.

A summary of restricted and phantom unit activity and changes during the six months ended June 30, 2020, is presented below:

Restricted and Phantom Units	Units		Weighted Average Grant-Date Fair Value
Outstanding at January 1, 2020 (nonvested)	145,205		$	26.22
Vesting and transfer of full ownership to recipients	(4,397	)	30.29
Forfeited	(5,890	)	25.33
Outstanding at June 30, 2020 (nonvested)	134,918		$	26.13

The grant date fair values of phantom units that were vested and transferred to recipients during the six months ended June 30, 2020 were $0.1 million. No restricted or phantom units were vested and transferred to recipients during the six months ended June 30, 2019. As of June 30, 2020, there was $1.4 million of total unrecognized compensation expense related to unvested restricted and phantom unit grants, which is expected to be recognized over a weighted-average period of 1.2 years.

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Performance Units

Under our Long-Term Incentive Plan, we grant performance units to selected officers who perform services for us. Performance units granted are payable in common units at the end of a three-year performance period based upon meeting certain criteria over the performance period. Under the terms of our performance unit grants, some awards are subject to the growth in our distributable cash flow per common unit over the performance period while other awards are subject to "financial performance" and "market performance." Financial performance is based on meeting certain earnings before interest, taxes, depreciation and amortization ("EBITDA") targets, while market performance is based on the relative standing of total unitholder return achieved by HEP compared to peer group companies. The number of units ultimately issued under these awards can range from 50% to 150% or 0% to 200%. As of June 30, 2020, estimated unit payouts for outstanding nonvested performance unit awards ranged between 100% and 150% of the target number of performance units granted.

We did not grant any performance units during the six months ended June 30, 2020. Although common units are not transferred to the recipients until the performance units vest, the recipients have distribution rights with respect to the target number of performance units subject to the award from the date of grant at the same rate as distributions paid on our common units.

A summary of performance unit activity and changes for the six months ended June 30, 2020, is presented below:

Performance Units	Units
Outstanding at January 1, 2020 (nonvested)	53,445
Vesting and transfer of common units to recipients	(11,634	)
Outstanding at June 30, 2020 (nonvested)	41,811

The grant date fair value of performance units vested and transferred to recipients during the six months ended June 30, 2020 and 2019 was $0.4 million and $0.3 million, respectively. Based on the weighted-average fair value of performance units outstanding at June 30, 2020, of $1.2 million, there was $0.4 million of total unrecognized compensation expense related to nonvested performance units, which is expected to be recognized over a weighted-average period of 1.6 years.

During the six months ended June 30, 2020, we did not purchase any of our common units in the open market for the issuance and settlement of unit awards under our Long-Term Incentive Plan.

Note 9: Debt

Credit Agreement

We have a $1.4 billion senior secured revolving credit facility (the “Credit Agreement”) expiring in July 2022. The Credit Agreement is available to fund capital expenditures, investments, acquisitions, distribution payments and working capital and for general partnership purposes. The Credit Agreement is also available to fund letters of credit up to a $50 million sub-limit, and it contains an accordion feature giving us the ability to increase the size of the facility by up to $300 million with additional lender commitments.

Our obligations under the Credit Agreement are collateralized by substantially all of our assets, and indebtedness under the Credit Agreement is guaranteed by our material, wholly-owned subsidiaries.  The Credit Agreement requires us to maintain compliance with certain financial covenants consisting of total leverage, senior secured leverage, and interest coverage.  It also limits or restricts our ability to engage in certain activities.  If, at any time prior to the expiration of the Credit Agreement, HEP obtains two investment grade credit ratings, the Credit Agreement will become unsecured and many of the covenants, limitations, and restrictions will be eliminated.

We may prepay all loans at any time without penalty, except for tranche breakage costs.  If an event of default exists under the Credit Agreement, the lenders will be able to accelerate the maturity of all loans outstanding and exercise other rights and remedies.  We were in compliance with the covenants as of June 30, 2020.

Senior Notes

As of December 31, 2019, we had $500 million aggregate principal amount of 6% senior unsecured notes due in 2024 (the "6% Senior Notes") outstanding. The 6% Senior Notes were unsecured and imposed certain restrictive covenants, including limitations on our ability to incur additional indebtedness, make investments, sell assets, incur certain liens, pay distributions, enter into transactions with affiliates and enter into mergers.

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On February 4, 2020, we closed a private placement of $500 million in aggregate principal amount of 5% senior unsecured notes due in 2028 (the "5% Senior Notes"). On February 5, 2020, we redeemed the existing $500 million 6% Senior Notes at a redemption cost of $522.5 million, at which time we recognized a $25.9 million early extinguishment loss consisting of a $22.5 million debt redemption premium and unamortized financing costs of $3.4 million. We funded the $522.5 million redemption with net proceeds from the issuance of our 5% Senior Notes and borrowings under our Credit Agreement.

The 5% Senior Notes are unsecured and impose certain restrictive covenants, including limitations on our ability to incur additional indebtedness, make investments, sell assets, incur certain liens, pay distributions, enter into transactions with affiliates, and enter into mergers. We were in compliance with the restrictive covenants for the 5% Senior Notes as of June 30, 2020. At any time when the 5% Senior Notes are rated investment grade by either Moody’s or Standard & Poor’s and no default or event of default exists, we will not be subject to many of the foregoing covenants. Additionally, we have certain redemption rights at varying premiums over face value under the 5% Senior Notes.

Indebtedness under the 5% Senior Notes is guaranteed by all of our existing wholly-owned subsidiaries (other than Holly Energy Finance Corp. and certain immaterial subsidiaries).

Long-term Debt

The carrying amounts of our long-term debt was as follows:

	June 30, 2020			December 31, 2019
	(In thousands)
Credit Agreement
Amount outstanding	995,000			$	965,500
6% Senior Notes
Principal	—			500,000
Unamortized premium and debt issuance costs	—			(3,469		)
	—			496,531
5% Senior Notes
Principal	500,000			—
Unamortized premium and debt issuance costs	(8,352		)	—
	491,648			—
Total long-term debt	$	1,486,648		$	1,462,031

Note 10: Related Party Transactions

We serve HFC’s refineries under long-term pipeline, terminal and tankage throughput agreements, and refinery processing unit tolling agreements expiring from 2021 to 2036, and revenues from these agreements accounted for 83% and 81% of our total revenues for the three months and six months ended June 30, 2020, respectively. Under these agreements, HFC agrees to transport, store and process throughput volumes of refined product, crude oil and feedstocks on our pipelines, terminals, tankage, loading rack facilities and refinery processing units that result in minimum annual payments to us. These minimum annual payments or revenues are subject to annual rate adjustments on July 1st each year generally based on increases or decreases in PPI or the FERC index. As of July 1, 2020, these agreements with HFC require minimum annualized payments to us of $351.1 million.

If HFC fails to meet its minimum volume commitments under the agreements in any quarter, it will be required to pay us the amount of any shortfall in cash by the last day of the month following the end of the quarter. Under certain of these agreements, a shortfall payment may be applied as a credit in the following four quarters after its minimum obligations are met.

Under certain provisions of the Omnibus Agreement, we pay HFC an annual administrative fee (currently $2.6 million) for the provision by HFC or its affiliates of various general and administrative services to us. This fee does not include the salaries of personnel employed by HFC who perform services for us on behalf of HLS or the cost of their employee benefits, which are charged to us separately by HFC. Also, we reimburse HFC and its affiliates for direct expenses they incur on our behalf.

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Related party transactions with HFC are as follows:

• Revenues received from HFC were $95.6 million and $102.4 million for the three months ended June 30, 2020 and 2019, respectively, and $197.0 million and $205.7 million for the six months ended June 30, 2020 and 2019, respectively.

• HFC charged us general and administrative services under the Omnibus Agreement of $0.7 million and $0.6 million for the three months ended June 30, 2020 and 2019, and $1.3 million for the six months ended June 30, 2020 and 2019.

• We reimbursed HFC for costs of employees supporting our operations of $13.2 million for the three months ended June 30, 2020 and 2019, and $27.3 million and $26.8 million for the six months ended June 30, 2020 and 2019.

• HFC reimbursed us $0.9 million and $3.6 million for the three months ended June 30, 2020 and 2019, respectively, for expense and capital projects, and $4.0 million and $5.8 million for the six months ended June 30, 2020 and 2019.

• We distributed $18.4 million and $37.5 million in the three months ended June 30, 2020 and 2019, respectively, and $56.0 million and $74.8 million for the six months ended June 30, 2020 and 2019, respectively, to HFC as regular distributions on its common units.

• Accounts receivable from HFC were $49.8 million and $49.7 million at June 30, 2020, and December 31, 2019, respectively.

• Accounts payable to HFC were $7.3 million and $16.7 million at June 30, 2020, and December 31, 2019, respectively.

• Deferred revenue in the consolidated balance sheets at June 30, 2020 and December 31, 2019, included $0.3 million and $0.5 million, respectively, relating to certain shortfall billings to HFC.

• We received direct financing lease payments from HFC for use of our Artesia and Tulsa railyards of $0.5 million for the three months ended June 30, 2020 and 2019, respectively, and $1.0 million for both the six months ended June 30, 2020 and 2019 .

• We received sales-type lease payments of $2.4 million from HFC that were not included in revenues for the three months ended June 30, 2020 and no payments for the same period in 2019, respectively, and $4.8 million for the six months ended June 30, 2020 and no payments for the same period in 2019.

• On October 31, 2017, we closed on an equity restructuring transaction with HEP Logistics, a wholly-owned subsidiary of HFC and the general partner of HEP, pursuant to which the incentive distribution rights held by HEP Logistics were canceled, and HEP Logistics' 2% general partner interest in HEP was converted into a non-economic general partner interest in HEP. In consideration, we issued 37,250,000 of our common units to HEP Logistics. In addition, HEP Logistics agreed to waive $2.5 million of limited partner cash distributions for each of twelve consecutive quarters beginning with the first quarter the units issued as consideration were eligible to receive distributions. This waiver of limited partner cash distributions will expire after the cash distribution for the second quarter of 2020, which will be made during the third quarter of 2020.

Note 11: Partners’ Equity, Income Allocations and Cash Distributions

As of June 30, 2020, HFC held 59,630,030 of our common units, constituting a 57% limited partner interest in us, and held the non-economic general partner interest.

Continuous Offering Program

We have a continuous offering program under which we may issue and sell common units from time to time, representing limited partner interests, up to an aggregate gross sales amount of $200 million. As of June 30, 2020, HEP has issued 2,413,153 units under this program, providing $82.3 million in gross proceeds.

Allocations of Net Income

Net income attributable to HEP is allocated to the partners based on their weighted-average ownership percentage during the period.

- 21 -

Cash Distributions

On July 23, 2020, we announced our cash distribution for the second quarter of 2020 of $0.35 per unit. The distribution is payable on all common units and will be paid August 13, 2020, to all unitholders of record on August 3, 2020. However, HEP Logistics waived $2.5 million in limited partner cash distributions due to them as discussed in Note 1.

Our regular quarterly cash distribution to the limited partners will be $34.5 million for the three months ended June 30, 2020 and was $68.5 million for the three months ended June 30, 2019. For the six months ended June 30, 2020, the regular quarterly distribution to the limited partners will be $68.9 million and was $136.7 million for the six months ended June 30, 2019. Our distributions are declared subsequent to quarter end; therefore, these amounts do not reflect distributions paid during the respective period.

Note 12: Net Income Per Limited Partner Unit

Basic net income per unit applicable to the limited partners is calculated as net income attributable to the partners divided by the weighted average limited partners’ units outstanding. Diluted net income per unit assumes, when dilutive, the issuance of the net incremental units from restricted units, phantom units and performance units.To the extent net income attributable to the partners exceeds or is less than cash distributions, this difference is allocated to the partners based on their weighted-average ownership percentage during the period, after consideration of any priority allocations of earnings. Our dilutive securities are immaterial for all periods presented.

Net income per limited partner unit is computed as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
	(In thousands, except per unit data)
Net income attributable to the partners	$	76,470	$	45,690	$	101,331	$	96,872
Weighted average limited partners' units outstanding	105,440		105,440		105,440		105,440
Limited partners' per unit interest in earnings - basic and diluted	$	0.73	$	0.43	$	0.96	$	0.92

Note 13: Environmental

We expensed $0.5 million and $0.7 million for the three and six months ended June 30, 2020, for environmental remediation obligations, and we expensed $0.1 million for the three and six months ended June 30, 2019. The accrued environmental liability, net of expected recoveries from indemnifying parties, reflected in our consolidated balance sheets was $5.7 million and $5.5 million at June 30, 2020 and December 31, 2019, respectively, of which $3.5 million was classified as other long-term liabilities for both periods. These accruals include remediation and monitoring costs expected to be incurred over an extended period of time.

Under the Omnibus Agreement and certain transportation agreements and purchase agreements with HFC, HFC has agreed to indemnify us, subject to certain monetary and time limitations, for environmental noncompliance and remediation liabilities associated with certain assets transferred to us from HFC and occurring or existing prior to the date of such transfers. Our consolidated balance sheets included additional accrued environmental liabilities of $0.4 million and $0.5 million for HFC indemnified liabilities for the periods ending June 30, 2020 and December 31, 2019, respectively, and other assets included equal and offsetting balances representing amounts due from HFC related to indemnifications for environmental remediation liabilities.

Note 14: Contingencies

We are a party to various legal and regulatory proceedings, none of which we believe will have a material adverse impact on our financial condition, results of operations or cash flows.

- 22 -

Note 15: Segment Information

Although financial information is reviewed by our chief operating decision makers from a variety of perspectives, they view the business in two reportable operating segments: pipelines and terminals, and refinery processing units. These operating segments adhere to the accounting polices used for our consolidated financial statements.

Pipelines and terminals have been aggregated as one reportable segment as both pipeline and terminals (1) have similar economic characteristics, (2) similarly provide logistics services of transportation and storage of petroleum products, (3) similarly support the petroleum refining business, including distribution of its products, (4) have principally the same customers and (5) are subject to similar regulatory requirements.

We evaluate the performance of each segment based on its respective operating income. Certain general and administrative expenses and interest and financing costs are excluded from segment operating income as they are not directly attributable to a specific reportable segment. Identifiable assets are those used by the segment, whereas other assets are principally equity method investments, cash, deposits and other assets that are not associated with a specific reportable reportable segment.

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
	(In thousands)
Revenues:
Pipelines and terminals - affiliate	$	75,990		$	82,970		$	157,534		$	164,510
Pipelines and terminals - third-party	19,244			28,382			45,670			59,520
Refinery processing units - affiliate	19,573			19,399			39,457			41,218
Total segment revenues	$	114,807		$	130,751		$	242,661		$	265,248
Segment operating income:
Pipelines and terminals	$	45,630		$	57,936		$	104,533		$	121,168
Refinery processing units	9,406			7,966			19,398			17,888
Total segment operating income	55,036			65,902			123,931			139,056
Unallocated general and administrative expenses	(2,535		)	(1,988		)	(5,237		)	(4,608		)
Interest and financing costs, net	(10,966		)	(18,679		)	(26,515		)	(37,173		)
Loss on early extinguishment of debt	—			—			(25,915		)	—
Equity in earnings of equity method investments	2,156			1,783			3,870			3,883
Gain on sales-type leases	33,834			—			33,834			—
Gain (loss) on sale of assets and other	468			111			974			(199		)
Income before income taxes	$	77,993		$	47,129		$	104,942		$	100,959
Capital Expenditures:
Pipelines and terminals	$	11,798		$	7,034		$	30,416		$	17,752
Refinery processing units	—			—			324			—
Total capital expenditures	$	11,798		$	7,034		$	30,740		$	17,752

	June 30, 2020		December 31, 2019
	(In thousands)
Identifiable assets:
Pipelines and terminals (1)	$	1,765,038	$	1,749,843
Refinery processing units	307,900		305,897
Other	148,845		143,492
Total identifiable assets	$	2,221,783	$	2,199,232

(1) Includes goodwill of $270.3 million as of June 30, 2020 and December 31, 2019.

- 23 -

Note 16: Supplemental Guarantor/Non-Guarantor Financial Information

Obligations of HEP (“Parent”) under the 5% Senior Notes have been jointly and severally guaranteed by each of its direct and indirect 100% owned subsidiaries (“Guarantor Subsidiaries”). These guarantees are full and unconditional, subject to certain customary release provisions. These circumstances include (i) when a Guarantor Subsidiary is sold or sells all or substantially all of its assets, (ii) when a Guarantor Subsidiary is declared “unrestricted” for covenant purposes, (iii) when a Guarantor Subsidiary’s guarantee of other indebtedness is terminated or released and (iv) when the requirements for legal defeasance or covenant defeasance or to discharge the senior notes have been satisfied.

The following financial information presents condensed consolidating balance sheets, statements of comprehensive income, and statements of cash flows of the Parent, the Guarantor Subsidiaries and the Non-Guarantor Subsidiaries. The information has been presented as if the Parent accounted for its ownership in the Guarantor Subsidiaries, and the Guarantor Restricted Subsidiaries accounted for the ownership of the Non-Guarantor Non-Restricted Subsidiaries, using the equity method of accounting.

- 24 -

Condensed Consolidating Balance Sheet

June 30, 2020		Parent		Guarantor Restricted Subsidiaries			Non-Guarantor Non-Restricted Subsidiaries		Eliminations			Consolidated
		(In thousands)
ASSETS
Current assets:
Cash and cash equivalents		$	3,927	$	(766	)	$	15,752	$	—		$	18,913
Accounts receivable		—		58,197			7,840		(1,261		)	64,776
Prepaid and other current assets		337		6,992			576					7,905
Total current assets		4,264		64,423			24,168		(1,261		)	91,594
Properties and equipment, net		—		1,110,139			348,795		—			1,458,934
Operating lease right-of-use assets	0	—		3,185			192		—			3,377
Net investment in leases		—		168,153					—			168,153
Investment in subsidiaries		1,868,595		282,348			—		(2,150,943		)	—
Intangible assets, net		—		94,318			—		—			94,318
Goodwill		—		270,336			—		—			270,336
Equity method investments		—		83,484			39,815		—			123,299
Other assets		5,497		6,275			—		—			11,772
Total assets		$	1,878,356	$	2,082,661		$	412,970	$	(2,152,204	)	$	2,221,783
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable		$	—	$	14,343		$	8,843	$	(1,261	)	$	21,925
Accrued interest		10,683		—			—		—			10,683
Deferred revenue		—		10,502			500		—			11,002
Accrued property taxes		—		2,732			2,794		—			5,526
Current operating lease liabilities		—		1,145			68		—			1,213
Current finance lease liabilities		—		3,293			—		—			3,293
Other current liabilities		42		2,819			114		—			2,975
Total current liabilities		10,725		34,834			12,319		(1,261		)	56,617
Long-term debt		1,486,648		—			—		—			1,486,648
Noncurrent operating lease liabilities		—		2,530			—		—			2,530
Noncurrent finance lease liabilities		—		70,039			—		—			70,039
Other long-term liabilities		260		12,909			520		—			13,689
Deferred revenue		—		42,692			—		—			42,692
Class B unit		—		51,062			—		—			51,062
Equity - partners		380,723		1,868,595			282,348		(2,150,943		)	380,723
Equity - noncontrolling interest		—		—			117,783		—			117,783
Total liabilities and equity		$	1,878,356	$	2,082,661		$	412,970	$	(2,152,204	)	$	2,221,783

- 25 -

Condensed Consolidating Balance Sheet

December 31, 2019	Parent		Guarantor Restricted Subsidiaries			Non-Guarantor Non-Restricted Subsidiaries		Eliminations			Consolidated
	(In thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	4,790	$	(709	)	$	9,206	$	—		$	13,287
Accounts receivable	—		60,229			8,549		(331		)	68,447
Prepaid and other current assets	282		6,710			637		—			7,629
Total current assets	5,072		66,230			18,392		(331		)	89,363
Properties and equipment, net	—		1,133,534			333,565		—			1,467,099
Operating lease right-of-use assets	—		3,243			12		—			3,255
Net investment in leases	—		134,886			—		—			134,886
Investment in subsidiaries	1,844,812		275,279			—		(2,120,091		)	—
Intangible assets, net	—		101,322			—		—			101,322
Goodwill	—		270,336			—		—			270,336
Equity method investments	—		82,987			37,084		—			120,071
Other assets	6,722		6,178			—		—			12,900
Total assets	$	1,856,606	$	2,073,995		$	389,053	$	(2,120,422	)	$	2,199,232
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	—	$	29,895		$	4,991	$	(331	)	$	34,555
Accrued interest	13,206		—			—		—			13,206
Deferred revenue	—		9,740			650		—			10,390
Accrued property taxes	—		2,737			1,062		—			3,799
Current operating lease liabilities	—		1,114			12		—			1,126
Current finance lease liabilities	—		3,224			—		—			3,224
Other current liabilities	6		2,293			6		—			2,305
Total current liabilities	13,212		49,003			6,721		(331		)	68,605
Long-term debt	1,462,031		—			—		—			1,462,031
Noncurrent operating lease liabilities	—		2,482			—		—			2,482
Noncurrent finance lease liabilities	—		70,475			—		—			70,475
Other long-term liabilities	260		12,150			398		—			12,808
Deferred revenue	—		45,681			—		—			45,681
Class B unit	—		49,392			—		—			49,392
Equity - partners	381,103		1,844,812			275,279		(2,120,091		)	381,103
Equity - noncontrolling interest	—		—			106,655		—			106,655
Total liabilities and equity	$	1,856,606	$	2,073,995		$	389,053	$	(2,120,422	)	$	2,199,232

- 26 -

Condensed Consolidating Statement of Comprehensive Income

Three Months Ended June 30, 2020	Parent			Guarantor Restricted Subsidiaries			Non-Guarantor Non-restricted Subsidiaries			Eliminations			Consolidated
	(In thousands)
Revenues:
Affiliates	$	—		$	89,417		$	6,146		$	—		$	95,563
Third parties	—			15,887			3,357			—			19,244
	—			105,304			9,503			—			114,807
Operating costs and expenses:
Operations (exclusive of depreciation and amortization)	—			30,980			3,757			—			34,737
Depreciation and amortization	—			20,739			4,295			—			25,034
General and administrative	780			1,755			—			—			2,535
	780			53,474			8,052			—			62,306
Operating income (loss)	(780		)	51,830			1,451			—			52,501
Other income (expense):
Equity in earnings of subsidiaries	89,893			1,510			—			(91,403		)	—
Equity in earnings of equity method investments	—			1,449			707			—			2,156
Interest expense	(12,740		)	(1,039		)	—			—			(13,779		)
Interest income	26			2,787			—			—			2,813
Gain on sales-type lease	—			33,834			—			—			33,834
Gain on sale of assets and other	71			396			1			—			468
	77,250			38,937			708			(91,403		)	25,492
Income before income taxes	76,470			90,767			2,159			(91,403		)	77,993
State income tax expense	—			(39		)	—			—			(39		)
Net income	76,470			90,728			2,159			(91,403		)	77,954
Allocation of net income attributable to noncontrolling interests	—			(835		)	(649		)	—			(1,484		)
Net income attributable to the partners	$	76,470		$	89,893		$	1,510		$	(91,403	)	$	76,470

- 27 -

Condensed Consolidating Statement of Comprehensive Income

Three Months Ended June 30, 2019	Parent			Guarantor Restricted Subsidiaries			Non-Guarantor Non-Restricted Subsidiaries			Eliminations			Consolidated
	(In thousands)
Revenues:
Affiliates	$	—		$	96,221		$	6,148		$	—		$	102,369
Third parties	—			23,700			4,682			—			28,382
	—			119,921			10,830			—			130,751
Operating costs and expenses:
Operations (exclusive of depreciation and amortization)	—			36,701			3,901			—			40,602
Depreciation and amortization				20,027			4,220			—			24,247
General and administrative	745			1,243			—			—			1,988
	745			57,971			8,121			—			66,837
Operating income (loss)	(745		)	61,950			2,709			—			63,914
Other income (expense):
Equity in earnings of subsidiaries	65,431			2,063			—			(67,494		)	—
Equity in earnings of equity method investments	—			1,783			—			—			1,783
Interest expense	(18,996		)	(234		)	—			—			(19,230		)
Interest income	—			551			—			—			551
Gain (loss) on sale of assets and other	—			69			42			—			111
	46,435			4,232			42			(67,494		)	(16,785		)
Income before income taxes	45,690			66,182			2,751			(67,494		)	47,129
State income tax benefit	—			30			—			—			30
Net income	45,690			66,212			2,751			(67,494		)	47,159
Allocation of net income attributable to noncontrolling interests	—			(781		)	(688		)	—			(1,469		)
Net income attributable to the partners	$	45,690		$	65,431		$	2,063		$	(67,494	)	$	45,690

- 28 -

Condensed Consolidating Statement of Comprehensive Income

Six Months Ended June 30, 2020	Parent			Guarantor Restricted Subsidiaries			Non-Guarantor Non-restricted Subsidiaries				Eliminations				Consolidated
	(In thousands)
Revenues:
Affiliates	$	—		$	184,172		$	12,819			$	—			$	196,991
Third parties	—			35,042			10,628				—				45,670
	—			219,214			23,447				—				242,661
Operating costs and expenses:
Operations (exclusive of depreciation and amortization)	—			62,111			7,607				—				69,718
Depreciation and amortization	—			40,492			8,520				—				49,012
General and administrative	1,879			3,358			—				—				5,237
	1,879			105,961			16,127				—				123,967
Operating income (loss)	(1,879		)	113,253			7,320				—			—	118,694
Other income (expense):
Equity in earnings of subsidiaries	158,428			5,805			—				(164,233		)		—
Equity in earnings of equity method investments	—			3,537			333			—	—				3,870
Interest expense	(29,470		)	(2,076		)	—				—				(31,546		)
Interest income	26			5,005			—				—				5,031
Loss on early extinguishment of debt	(25,915		)	—			—				—				(25,915		)
Gain on sales-type lease	—			33,834			—				—				33,834
Gain on sale of assets and other	141			816			17			—	—				974
	103,210			46,921			350				(164,233		)		(13,752		)
Income before income taxes	101,331			160,174			7,670				(164,233		)		104,942
State income tax expense	—			(76		)	—				—				(76		)
Net income	101,331			160,098			7,670				(164,233		)		104,866
Allocation of net income attributable to noncontrolling interests	—			(1,670		)	(1,865		)		—				(3,535		)
Net income attributable to the partners	$	101,331		$	158,428		$	5,805			$	(164,233	)		$	101,331

- 29 -

Condensed Consolidating Statement of Comprehensive Income

Six Months Ended June 30, 2019	Parent			Guarantor Restricted Subsidiaries			Non-Guarantor Non-restricted Subsidiaries				Eliminations			Consolidated
	(In thousands)
Revenues:
Affiliates	$	—		$	193,614		$	12,114			$	—		$	205,728
Third parties	—			45,765			13,755				—			59,520
	—			239,379			25,869				—			265,248
Operating costs and expenses:
Operations (exclusive of depreciation and amortization)	—			70,778			7,343				—			78,121
Depreciation and amortization				39,563			8,508				—			48,071
General and administrative	1,821			2,787			—				—			4,608
	1,821			113,128			15,851				—			130,800
Operating income (loss)	(1,821		)	126,251			10,018				—			134,448
Other income (expense):
Equity in earnings of subsidiaries	136,730			7,559			—				(144,289		)	—
Equity in earnings of equity method investments	—			3,883			—			—	—			3,883
Interest expense	(38,037		)	(215		)	—				—			(38,252		)
Interest income	—			1,079			—			—	—			1,079
Gain on sale of assets and other	—			(260		)	61				—			(199		)
	98,693			12,046			61				(144,289		)	(33,489		)
Income before income taxes	96,872			138,297			10,079				(144,289		)	100,959
State income tax expense	—			(6		)	—				—			(6		)
Net income	96,872			138,291			10,079				(144,289		)	100,953
Allocation of net income attributable to noncontrolling interests	—			(1,561		)	(2,520		)		—			(4,081		)
Net income attributable to the partners	$	96,872		$	136,730		$	7,559			$	(144,289	)	$	96,872

- 30 -

Condensed Consolidating Statement of Cash Flows

Six Months Ended June 30, 2020	Parent			Guarantor Restricted Subsidiaries			Non-Guarantor Non-Restricted Subsidiaries			Eliminations			Consolidated
	(In thousands)
Cash flows from operating activities	$	(31,103	)	$	151,331		$	20,277		$	(5,911	)	$	134,594
Cash flows from investing activities
Additions to properties and equipment	—			(8,883		)	(21,857		)	—			(30,740		)
Investment in Cushing Connect	—			(13,263		)	(2,400		)	13,263			(2,400		)
Proceeds from sale of assets	—			816			—			—			816
Distributions in excess of equity in earnings of equity investments	—			6,559			—			(6,089		)	470
	—			(14,771		)	(24,257		)	7,174			(31,854		)
Cash flows from financing activities
Net borrowings under credit agreement	29,500			—			—			—			29,500
Net intercompany financing activities	134,645			(134,645		)	—			—			—
Redemption of senior notes	(522,500		)	—			—			—			(522,500		)
Proceeds from issuance of senior notes	500,000			—			—			—			500,000
Contribution from general partner	435			—			13,263			(13,263		)	435
Contribution from noncontrolling interest	—			—			13,263			—			13,263
Distributions to HEP unitholders	(102,979		)	—			—			—			(102,979		)
Distributions to noncontrolling interests	—			—			(16,000		)	12,000			(4,000		)
Units withheld for tax withholding obligations	(147		)	—			—			—			(147		)
Deferred financing costs	(8,714		)	—			—			—			(8,714		)
Payments on finance leases	—			(1,972		)	—			—			(1,972		)
	30,240			(136,617		)	10,526			(1,263		)	(97,114		)
Cash and cash equivalents
Increase (decrease) for the period	(863		)	(57		)	6,546			—			5,626
Beginning of period	4,790			(709		)	9,206			—			13,287
End of period	$	3,927		$	(766	)	$	15,752		$	—		$	18,913

- 31 -

Condensed Consolidating Statement of Cash Flows

Six Months Ended June 30, 2019	Parent			Guarantor Restricted Subsidiaries			Non-Guarantor Non-Restricted Subsidiaries			Eliminations			Consolidated
	(In thousands)
Cash flows from operating activities	$	(37,005	)	$	165,882		$	23,671		$	(7,559	)	$	144,989
Cash flows from investing activities
Additions to properties and equipment	—			(17,274		)	(478		)	—			(17,752		)
Distributions from UNEV in excess of earnings	—			8,191			—			(8,191		)	—
Proceeds from sale of assets	—			194			—			—			194
Distributions in excess of equity in earnings of equity investments	—			299			—			—			299
	—			(8,590		)	(478		)	(8,191		)	(17,259		)
Cash flows from financing activities
Net borrowings under credit agreement	18,500			—			—			—			18,500
Net intercompany financing activities	155,225			(155,225		)	—			—			—
Distributions to HEP unitholders	(136,207		)	—			—			—			(136,207		)
Distributions to noncontrolling interests	—			—			(21,000		)	15,750			(5,250		)
Units withheld for tax withholding obligations	(119		)	—			—			—			(119		)
Purchase units for incentive grants	(255		)				—			—			(255		)
Payments on finance leases	(139		)	(364		)	—			—			(503		)
	37,005			(155,589		)	(21,000		)	15,750			(123,834		)
Cash and cash equivalents
Increase for the period	—			1,703			2,193			—			3,896
Beginning of period	2			—			3,043			—			3,045
End of period	$	2		$	1,703		$	5,236		$	—		$	6,941

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Item 2, including but not limited to the sections under “Results of Operations” and “Liquidity and Capital Resources,” contains forward-looking statements. See “Forward-Looking Statements” at the beginning of Part I of this Quarterly Report on Form 10-Q. In this document, the words “we,” “our,” “ours” and “us” refer to Holly Energy Partners, L.P. (“HEP”) and its consolidated subsidiaries or to HEP or an individual subsidiary and not to any other person.

OVERVIEW

HEP is a Delaware limited partnership. Through our subsidiaries and joint ventures, we own and/or operate petroleum product and crude oil pipelines, terminal, tankage and loading rack facilities and refinery processing units that support the refining and marketing operations of HollyFrontier Corporation (“HFC”) and other refineries in the Mid-Continent, Southwest and Northwest regions of the United States. HEP, through its subsidiaries and joint ventures, owns and/or operates petroleum product and crude pipelines, tankage and terminals in Texas, New Mexico, Washington, Idaho, Oklahoma, Utah, Nevada, Wyoming and Kansas as well as refinery processing units in Utah and Kansas. HFC owned 57% of our outstanding common units and the non-economic general partnership interest, as of June 30, 2020.

We generate revenues by charging tariffs for transporting petroleum products and crude oil through our pipelines, by charging fees for terminalling and storing refined products and other hydrocarbons, providing other services at our storage tanks and terminals and charging a tolling fee per barrel or thousand standard cubic feet of feedstock throughput in our refinery processing units. We do not take ownership of products that we transport, terminal, store or process, and therefore, we are not directly exposed to changes in commodity prices.

We believe the long-term growth of global refined product demand and U.S. crude production should support high utilization rates for the refineries we serve, which in turn should support volumes in our product pipelines, crude gathering systems and terminals.

Impact of COVID-19 on Our Business

Our business depends in large part on the demand for the various petroleum products we transport, terminal and store in the markets we serve. The impact of the COVID-19 pandemic on the global macroeconomy has created unprecedented destruction of demand, as well as lack of forward visibility, for refined products and crude oil transportation, and for the terminalling and storage services that we provide. Over the course of the second quarter, demand for transportation fuels stabilized, and we saw incremental improvement in our volumes late in the quarter. We expect our customers will continue to adjust refinery production levels commensurate with market demand and ultimately expect demand to return to pre-COVID-19 levels. HFC, our largest customer, has announced that for the third quarter of 2020 it expects to run between 340,000 and 370,000 barrels per day of crude oil based on expected market demand for transportation fuels.

In response to the COVID-19 pandemic, and with the health and safety of our employees as a top priority, we took several actions, including limiting onsite staff at all of our facilities to essential operational personnel only, implementing a work from home policy for certain employees and restricting travel unless approved by senior leadership. We will continue to monitor COVID-19 developments and the dynamic environment to properly address these policies going forward.

In light of current circumstances and our expectations for the future, HEP reduced its quarterly distribution to $0.35 per unit beginning with the distribution for the first quarter of 2020, representative of a new distribution strategy focused on funding all capital expenditures and distributions within cash flow, improving distributable cash flow coverage to 1.3x or greater and reducing leverage to 3.0-3.5x.

On March 27, 2020, the United States government passed the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), an approximately $2 trillion stimulus package that includes various provisions intended to provide relief to individuals and businesses in the form of tax changes, loans and grants, among others. At this time, we have not sought relief in the form of loans or grants from the CARES Act; however, we have benefited from certain tax deferrals in the CARES Act and may benefit from other tax provisions if we meet the requirements to do so.

The extent to which HEP’s future results are affected by COVID-19 will depend on various factors and consequences beyond our control, such as the duration and scope of the pandemic, additional actions by businesses and governments in response to the pandemic and the speed and effectiveness of responses to combat the virus. However, we have long-term customer contracts with minimum volume commitments, which have expiration dates from 2021 to 2036. These minimum volume commitments accounted for approximately 70% of our total revenues in 2019. We are currently not aware of any reasons that would prevent such customers

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from making the minimum payments required under the contracts or potentially making payments in excess of the minimum payments. In addition to these payments, we also expect to collect payments for services provided to uncommitted shippers. There have been no material changes to customer payment terms due to the COVID-19 pandemic.

The COVID-19 pandemic, and the volatile regional and global economic conditions stemming from it, could also exacerbate the risk factors identified in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, and in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020. The COVID-19 pandemic may also materially adversely affect our results in a manner that is either not currently known or that we do not currently consider to be a significant risk to our business.

Investment in Joint Venture

On October 2, 2019, HEP Cushing (“HEP Cushing”), a wholly-owned subsidiary of HEP, and Plains Marketing, L.P. (“PMLP”), a wholly-owned subsidiary of Plains All American Pipeline, L.P. (“Plains”), formed a 50/50 joint venture, Cushing Connect Pipeline & Terminal LLC (the “Cushing Connect Joint Venture”), for (i) the development and construction of a new 160,000 barrel per day common carrier crude oil pipeline (the “Cushing Connect Pipeline”) that will connect the Cushing, Oklahoma crude oil hub to the Tulsa, Oklahoma refining complex owned by a subsidiary of HFC and (ii) the ownership and operation of 1.5 million barrels of crude oil storage in Cushing, Oklahoma (the “Cushing Connect JV Terminal”). The Cushing Connect JV Terminal went into service during the second quarter of 2020, and the Cushing Connect Pipeline is expected to be in service during the first quarter of 2021. Long-term commercial agreements have been entered into to support the Cushing Connect Joint Venture assets.

The Cushing Connect Joint Venture will contract with an affiliate of HEP to manage the construction and operation of the Cushing Connect Pipeline and with an affiliate of Plains to manage the operation of the Cushing Connect JV Terminal. The total Cushing Connect Joint Venture investment will be shared proportionately among the partners, and HEP estimates its share of the cost of the Cushing Connect JV Terminal contributed by Plains and Cushing Connect Pipeline construction costs will be approximately $65 million.

Agreements with HFC

We serve HFC’s refineries under long-term pipeline, terminal, tankage and refinery processing unit throughput agreements expiring from 2021 to 2036. Under these agreements, HFC agrees to transport, store and process throughput volumes of refined product, crude oil and feedstocks on our pipelines, terminal, tankage, and loading rack facilities and refinery processing units that result in minimum annual payments to us. These minimum annual payments or revenues are subject to annual rate adjustments on July 1st each year, based on the Producer Price Index (“PPI”) or Federal Energy Regulatory Commission index. As of July 1, 2020, these agreements with HFC require minimum annualized payments to us of $351.1 million.

If HFC fails to meet its minimum volume commitments under the agreements in any quarter, it will be required to pay us the amount of any shortfall in cash by the last day of the month following the end of the quarter. Under certain of the agreements, a shortfall payment may be applied as a credit in the following four quarters after minimum obligations are met.

A significant reduction in revenues under these agreements could have a material adverse effect on our results of operations.

On June 1, 2020, HFC announced plans to permanently cease petroleum refining operations at its Cheyenne Refinery and to convert certain assets at that refinery to renewable diesel production. HFC subsequently began winding down petroleum refining operations at its Cheyenne Refinery on August 3, 2020. As of June 30, 2020, our throughput agreement with HFC required minimum annualized payments to us of approximately $17.6 million related to our Cheyenne assets. During the third quarter of 2020, we expect to begin negotiations with HFC related to potential changes to our existing throughput agreement. The net book value of our Cheyenne related net assets as of June 30, 2020 was approximately $88.5 million, including $28.1 million of long-lived assets and $68.7 million of goodwill. Additionally, our annual goodwill impairment test is scheduled for the third quarter of 2020. Depending upon the outcome of negotiations related to our throughput agreement or other changes in anticipated commercial uses of our Cheyenne assets, such assets could be at risk of impairment in the future and such impairment charges could be material.

Under certain provisions of an omnibus agreement we have with HFC (the “Omnibus Agreement”), we pay HFC an annual administrative fee, currently $2.6 million, for the provision by HFC or its affiliates of various general and administrative services to us. This fee does not include the salaries of personnel employed by HFC who perform services for us on behalf of Holly Logistic Services, L.L.C. (“HLS”), or the cost of their employee benefits, which are separately charged to us by HFC. We also reimburse HFC and its affiliates for direct expenses they incur on our behalf.

Under HLS’s Secondment Agreement with HFC, certain employees of HFC are seconded to HLS to provide operational and maintenance services for certain of our processing, refining, pipeline and tankage assets, and HLS reimburses HFC for its prorated portion of the wages, benefits, and other costs of these employees for our benefit.

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We have a long-term strategic relationship with HFC that has historically facilitated our growth. Our future growth plans include organic projects around our existing assets and select investments or acquisitions that enhance our service platform while creating accretion for our unitholders. While in the near term, any acquisitions would be subject to economic conditions discussed in “Overview - Impact of COVID-19 on Our Business” above, we also expect over the longer term to continue to work with HFC on logistic asset acquisitions in conjunction with HFC’s refinery acquisition strategies.

Furthermore, we plan to continue to pursue third-party logistic asset acquisitions that are accretive to our unitholders and increase the diversity of our revenues.

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RESULTS OF OPERATIONS (Unaudited)

Income, Distributable Cash Flow, Volumes and Balance Sheet Data

The following tables present income, distributable cash flow and volume information for the three and the six months ended June 30, 2020 and 2019.

	Three Months Ended June 30,						Change from
	2020			2019			2019
	(In thousands, except per unit data)
Revenues:
Pipelines:
Affiliates—refined product pipelines	$	16,302		$	20,759		$	(4,457	)
Affiliates—intermediate pipelines	7,475			7,297			178
Affiliates—crude pipelines	19,311			20,651			(1,340		)
	43,088			48,707			(5,619		)
Third parties—refined product pipelines	8,750			11,778			(3,028		)
Third parties—crude pipelines	7,116			11,778			(4,662		)
	58,954			72,263			(13,309		)
Terminals, tanks and loading racks:
Affiliates	32,902			34,263			(1,361		)
Third parties	3,378			4,826			(1,448		)
	36,280			39,089			(2,809		)
Affiliates—refinery processing units	19,573			19,399			174
Total revenues	114,807			130,751			(15,944		)
Operating costs and expenses:
Operations (exclusive of depreciation and amortization)	34,737			40,602			(5,865		)
Depreciation and amortization	25,034			24,247			787
General and administrative	2,535			1,988			547
	62,306			66,837			(4,531		)
Operating income	52,501			63,914			(11,413		)
Other income (expense):
Equity in earnings of equity method investments	2,156			1,783			373
Interest expense, including amortization	(13,779		)	(19,230		)	5,451
Interest income	2,813			551			2,262
Gain on sales-type leases	33,834			—			33,834
Gain on sale of assets and other	468			111			357
	25,492			(16,785		)	42,277
Income before income taxes	77,993			47,129			30,864
State income tax benefit (expense)	(39		)	30			(69		)
Net income	77,954			47,159			30,795
Allocation of net income attributable to noncontrolling interests	(1,484		)	(1,469		)	(15		)
Net income attributable to the partners	76,470			45,690			30,780
Limited partners’ earnings per unit—basic and diluted	$	0.73		$	0.43		$	0.30
Weighted average limited partners’ units outstanding	105,440			105,440			—
EBITDA (1)	$	112,509		$	88,586		$	23,923
Adjusted EBITDA (1)	$	80,168		$	88,586		$	(8,418	)
Distributable cash flow (2)	$	65,456		$	67,486		$	(2,030	)
Volumes (bpd)
Pipelines:
Affiliates—refined product pipelines	100,524			130,802			(30,278		)
Affiliates—intermediate pipelines	128,464			141,345			(12,881		)
Affiliates—crude pipelines	252,570			370,351			(117,781		)
	481,558			642,498			(160,940		)
Third parties—refined product pipelines	57,876			66,963			(9,087		)
Third parties—crude pipelines	85,851			140,555			(54,704		)
	625,285			850,016			(224,731		)
Terminals and loading racks:
Affiliates	372,093			431,509			(59,416		)
Third parties	45,876			59,343			(13,467		)
	417,969			490,852			(72,883		)
Affiliates—refinery processing units	49,891			77,728			(27,837		)
Total for pipelines and terminal and refinery processing unit assets (bpd)	1,093,145			1,418,596			(325,451		)

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	Six Months Ended June 30,						Change from
	2020			2019			2019
	(In thousands, except per unit data)
Revenues:
Pipelines:
Affiliates—refined product pipelines	$	36,385		$	41,491		$	(5,106	)
Affiliates—intermediate pipelines	14,949			14,578			371
Affiliates—crude pipelines	39,704			41,772			(2,068		)
	91,038			97,841			(6,803		)
Third parties—refined product pipelines	23,548			27,382			(3,834		)
Third parties—crude pipelines	14,840			22,140			(7,300		)
	129,426			147,363			(17,937		)
Terminals, tanks and loading racks:
Affiliates	66,496			66,669			(173		)
Third parties	7,282			9,998			(2,716		)
	73,778			76,667			(2,889		)
Affiliates—refinery processing units	39,457			41,218			(1,761		)
Total revenues	242,661			265,248			(22,587		)
Operating costs and expenses:
Operations (exclusive of depreciation and amortization)	69,718			78,121			(8,403		)
Depreciation and amortization	49,012			48,071			941
General and administrative	5,237			4,608			629
	123,967			130,800			(6,833		)
Operating income	118,694			134,448			(15,754		)
Other income (expense):
Equity in earnings of equity method investments	3,870			3,883			(13		)
Interest expense, including amortization	(31,546		)	(38,252		)	6,706
Interest income	5,031			1,079			3,952
Loss on early extinguishment of debt	(25,915		)	—			(25,915		)
Gain on sales-type leases	33,834			—			33,834
Gain (loss) on sale of assets and other	974			(199		)	1,173
	(13,752		)	(33,489		)	19,737
Income before income taxes	104,942			100,959			3,983
State income tax expense	(76		)	(6		)	(70		)
Net income	104,866			100,953			3,913
Allocation of net income attributable to noncontrolling interests	(3,535		)	(4,081		)	546
Net income attributable to the partners	101,331			96,872			4,459
Limited partners’ earnings per unit—basic and diluted	$	0.96		$	0.92		$	0.04
Weighted average limited partners’ units outstanding	105,440			105,440			—
EBITDA (1)	$	176,934		$	182,122		$	(5,188	)
Adjusted EBITDA (1)	$	171,276		$	182,122		$	(10,846	)
Distributable cash flow (2)	$	136,164		$	138,085		$	(1,921	)
Volumes (bpd)
Pipelines:
Affiliates—refined product pipelines	115,245			130,805			(15,560		)
Affiliates—intermediate pipelines	135,288			136,116			(828		)
Affiliates—crude pipelines	278,801			385,490			(106,689		)
	529,334			652,411			(123,077		)
Third parties—refined product pipelines	53,756			73,975			(20,219		)
Third parties—crude pipelines	89,027			133,565			(44,538		)
	672,117			859,951			(187,834		)
Terminals and loading racks:
Affiliates	400,911			402,909			(1,998		)
Third parties	45,910			64,028			(18,118		)
	446,821			466,937			(20,116		)
Affiliates—refinery processing units	59,843			71,816			(11,973		)
Total for pipelines and terminal and refinery processing unit assets (bpd)	1,178,781			1,398,704			(219,923		)

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(1) Earnings before interest, taxes, depreciation and amortization (“EBITDA”) is calculated as net income attributable to the partners plus (i) interest expense, net of interest income, (ii) state income tax expense and (iii) depreciation and amortization. Adjusted EBITDA is calculated as EBITDA plus (i) loss on early extinguishment of debt and (ii) pipeline tariffs not included in revenues due to impacts from lease accounting for certain pipeline tariffs minus (iii) gain on sales-type leases and (iv) pipeline lease payments not included in operating costs and expenses. Portions of our minimum guaranteed pipeline tariffs for assets subject to sales-type lease accounting are recorded as interest income with the remaining amounts recorded as a reduction in net investment in leases. These pipeline tariffs were previously recorded as revenues prior to the renewal of the throughput agreements, which triggered sales-type lease accounting. Similarly, certain pipeline lease payments were previously recorded as operating costs and expenses, but the underlying lease was reclassified from an operating lease to a financing lease, and these payments are now recoded as interest expense and reductions in the lease liability. EBITDA and Adjusted EBITDA are not calculations based upon generally accepted accounting principles ("GAAP"). However, the amounts included in the EBITDA and Adjusted EBITDA calculations are derived from amounts included in our consolidated financial statements. EBITDA and Adjusted EBITDA should not be considered as alternatives to net income attributable to Holly Energy Partners or operating income, as indications of our operating performance or as alternatives to operating cash flow as a measure of liquidity. EBITDA and Adjusted EBITDA are not necessarily comparable to similarly titled measures of other companies. EBITDA and Adjusted EBITDA are presented here because they are widely used financial indicators used by investors and analysts to measure performance. EBITDA and Adjusted EBITDA are also used by our management for internal analysis and as a basis for compliance with financial covenants. Set forth below are our calculations of EBITDA and Adjusted EBITDA.

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
	(In thousands)
Net income attributable to the partners	$	76,470		$	45,690		$	101,331		$	96,872
Add (subtract):
Interest expense	13,779			19,230			31,546			38,252
Interest income	(2,813		)	(551		)	(5,031		)	(1,079		)
State income tax (benefit) expense	39			(30		)	76			6
Depreciation and amortization	25,034			24,247			49,012			48,071
EBITDA	$	112,509		$	88,586		$	176,934		$	182,122
Loss on early extinguishment of debt	—			—			25,915			—
Gain on sales-type leases	(33,834		)	—			(33,834		)	—
Pipeline tariffs not included in revenues	3,099			—			5,474			—
Lease payments not included in operating costs	(1,606		)	—			(3,213		)	—
Adjusted EBITDA	$	80,168		$	88,586		$	171,276		$	182,122

(2) Distributable cash flow is not a calculation based upon GAAP. However, the amounts included in the calculation are derived from amounts presented in our consolidated financial statements, with the general exceptions of maintenance capital expenditures. Distributable cash flow should not be considered in isolation or as an alternative to net income or operating income as an indication of our operating performance or as an alternative to operating cash flow as a measure of liquidity. Distributable cash flow is not necessarily comparable to similarly titled measures of other companies. Distributable cash flow is presented here because it is a widely accepted financial indicator used by investors to compare partnership performance. It is also used by management for internal analysis and for our performance units. We believe that this measure provides investors an enhanced perspective of the operating performance of our assets and the cash our business is generating. Set forth below is our calculation of distributable cash flow.

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	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
	(In thousands)
Net income attributable to the partners	$	76,470		$	45,690		$	101,331		$	96,872
Add (subtract):
Depreciation and amortization	25,034			24,247			49,012			48,071
Amortization of discount and deferred debt issuance costs	842			769			1,641			1,535
Loss on early extinguishment of debt	—			—			25,915			—
Revenue recognized greater than customer billings	(44		)	(297		)	(501		)	(3,331		)
Maintenance capital expenditures (3)	(1,140		)	(625		)	(3,627		)	(1,360		)
Increase (decrease) in environmental liability	157			(277		)	158			(555		)
Decrease in reimbursable deferred revenue	(3,005		)	(2,061		)	(5,805		)	(3,640		)
Gain on sales-type leases	(33,834		)	—			(33,834		)	—
Other	976			40			1,874			493
Distributable cash flow	$	65,456		$	67,486		$	136,164		$	138,085

(3) Maintenance capital expenditures are capital expenditures made to replace partially or fully depreciated assets in order to maintain the existing operating capacity of our assets and to extend their useful lives. Maintenance capital expenditures include expenditures required to maintain equipment reliability, tankage and pipeline integrity, safety and to address environmental regulations.

	June 30, 2020		December 31, 2019
	(In thousands)
Balance Sheet Data
Cash and cash equivalents	$	18,913	$	13,287
Working capital	$	34,977	$	20,758
Total assets	$	2,221,783	$	2,199,232
Long-term debt	$	1,486,648	$	1,462,031
Partners’ equity	$	380,723	$	381,103

Results of Operations—Three Months Ended June 30, 2020 Compared with Three Months Ended June 30, 2019

Summary

Net income attributable to the partners for the second quarter was $76.5 million ($0.73 per basic and diluted limited partner unit) compared to $45.7 million ($0.43 per basic and diluted limited partner unit) for the second quarter of 2019. The increase in earnings was primarily due to the recognition of a non-cash gain on sales-type leases resulting from the renewal of a third-party throughput agreement during the second quarter of 2020. A portion of the new throughput agreement met the definition of a sales-type lease, which resulted in a non-cash gain of $33.8 million million upon the initial recognition of the sales-type lease during the second quarter. Excluding this gain, net income attributable to HEP for the quarter was $42.6 million ($0.40 per basic and diluted limited partner unit), a decrease of $3.1 million compared to the same period of 2019. The decrease in earnings was mainly due to lower volumes due to demand destruction caused by the COVID-19 pandemic substantially offset by lower operating expenses and lower interest expense.

Revenues

Revenues for the second quarter were $114.8 million, a decrease of $15.9 million compared to the second quarter of 2019. The decrease was mainly attributable to a 26% reduction in overall crude and product pipeline volumes predominantly in our Southwest and Rockies regions.

Revenues from our refined product pipelines were $25.1 million, a decrease of $7.5 million compared to the second quarter of 2019. Shipments averaged 158.4 thousand barrels per day (“mbpd”) compared to 197.8 mbpd for the second quarter of 2019. The volume and revenue decreases were mainly due to lower volumes on pipelines servicing HFC's Navajo refinery, Delek's Big

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Spring refinery and our UNEV pipeline as well as the recording of certain pipeline tariffs as interest income as the related throughput contract renewals were determined to be sales-type leases.

Revenues from our intermediate pipelines were $7.5 million, an increase of $0.2 million compared to the second quarter of 2019. Shipments averaged 128.5 mbpd for the second quarter of 2020 compared to 141.3 mbpd for the second quarter of 2019. The decrease in volumes was mainly due to lower throughputs on our intermediate pipelines servicing HFC's Navajo refinery while revenue remained relatively constant mainly due to contractual minimum volume guarantees.

Revenues from our crude pipelines were $26.4 million, a decrease of $6.0 million compared to the second quarter of 2019, and shipments averaged 338.4 mbpd compared to 510.9 mbpd for the second quarter of 2019. The decreases were mainly attributable to decreased volumes on our crude pipeline systems in New Mexico and Texas and on our crude pipeline systems in Wyoming and Utah.

Revenues from terminal, tankage and loading rack fees were $36.3 million, a decrease of $2.8 million compared to the second quarter of 2019. Refined products and crude oil terminalled in the facilities averaged 418.0 mbpd compared to 490.9 mbpd for the second quarter of 2019. The volume and revenue decreases were mainly due to demand destruction associated with COVID-19 across most of our facilities. Revenue did not decrease in proportion to the decrease in volumes mainly due to contractual minimum volume guarantees.

Revenues from refinery processing units were $19.6 million, an increase of $0.2 million compared to the second quarter of 2019, and throughputs averaged 49.9 mbpd compared to 77.7 mbpd for the second quarter of 2019. The decrease in volumes was mainly due to reduced throughput for both our Woods Cross and El Dorado processing units while revenue remained relatively constant mainly due to contractual minimum volume guarantees.

Operations Expense

Operations (exclusive of depreciation and amortization) expense was $34.7 million for the three months ended June 30, 2020, a decrease of $5.9 million compared to the second quarter of 2019. The decrease was mainly due to lower rental expenses, maintenance costs and variable costs such as electricity and chemicals associated with lower volumes for the three months ended June 30, 2020.

Depreciation and Amortization

Depreciation and amortization for the three months ended June 30, 2020 increased by $0.8 million compared to the three months ended June 30, 2019. The increase was mainly due to the acceleration of depreciation on certain of our Cheyenne tanks.

General and Administrative

General and administrative costs for the three months ended June 30, 2020 increased by $0.5 million compared to the three months ended June 30, 2019, mainly due to higher legal expenses for the three months ended June 30, 2020.

Equity in Earnings of Equity Method Investments

	Three Months Ended June 30,
Equity Method Investment	2020		2019
	(in thousands)
Osage Pipe Line Company, LLC	$	366	$	746
Cheyenne Pipeline LLC	1,085		1,037
Cushing Terminal	705		—
Total	$	2,156	$	1,783

Equity in earnings of Osage Pipe Line Company, LLC decreased for the three months ended June 30, 2020, mainly due to lower throughput volumes.

Interest Expense

Interest expense for the three months ended June 30, 2020, totaled $13.8 million, a decrease of $5.5 million compared to the three months ended June 30, 2019. The decrease was mainly due to market interest rate decreases under our senior secured revolving credit facility and refinancing our $500 million 6% Senior Notes with $500 million 5% Senior Notes. Our aggregate effective interest rates were 3.4% and 5.3% for the three months ended June 30, 2020 and 2019, respectively.

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State Income Tax

We recorded a state income tax expense of $39,000 and a state income tax benefit of $30,000 for the three months ended June 30, 2020 and 2019, respectively. All tax expense is solely attributable to the Texas margin tax.

Results of Operations—Six Months Ended June 30, 2020 Compared with Six Months Ended June 30, 2019

Summary

Net income attributable to the partners for the six months ended June 30, 2020 was $101.3 million ($0.96 per basic and diluted limited partner unit) compared to $96.9 million ($0.92 per basic and diluted limited partner unit) for the second quarter of 2019. The six months ended June 30, 2020 included a non-cash gain on sales-type leases of $33.8 million discussed above as well as a charge of $25.9 million related to the early redemption of our previously outstanding $500 million aggregate principal amount of 6% senior notes, due in 2024. Excluding the gain on sales-type leases and the loss on early extinguishment of debt, net income attributable to the partners for the six months ended June 30, 2020 was $93.4 million ($0.89 per basic and diluted limited partner unit), a decrease of $3.5 million compared to the same period of 2019. The decrease in earnings was mainly due to lower volumes due to demand destruction caused by the COVID-19 pandemic substantially offset by lower operating expenses and lower interest expense.

Revenues

Revenues for the six months ended June 30, 2020, were $242.7 million, a decrease of $22.6 million compared to the six months ended June 30, 2019. The decrease was mainly attributable to a 22% reduction in overall crude and product pipeline volumes predominantly in our Southwest and Rockies regions.

Revenues from our refined product pipelines were $59.9 million, a decrease of $8.9 million compared to the six months ended June 30, 2019. Shipments averaged 169.0 mbpd compared to 204.8 mbpd for the six months ended June 30, 2019. The volume and revenue decreases were mainly due to lower volumes on pipelines servicing HFC's Navajo refinery, Delek's Big Spring refinery and our UNEV pipeline as well as the recording of certain pipeline tariffs as interest income as the related throughput contract renewals were determined to be sales-type leases.

Revenues from our intermediate pipelines were $14.9 million, an increase of $0.4 million compared to the six months ended June 30, 2019. Shipments averaged 135.3 mbpd compared to 136.1 mbpd for the six months ended June 30, 2019.

Revenues from our crude pipelines were $54.5 million, a decrease of $9.4 million compared to the six months ended June 30, 2019. Shipments averaged 367.8 mbpd compared to 519.1 mbpd for the six months ended June 30, 2019. The decreases were mainly attributable to decreased volumes on our crude pipeline systems in New Mexico and Texas and on our crude pipeline systems in Wyoming and Utah.

Revenues from terminal, tankage and loading rack fees were $73.8 million, a decrease of $2.9 million compared to the six months ended June 30, 2019. Refined products and crude oil terminalled in the facilities averaged 446.8 mbpd compared to 466.9 mbpd for the six months ended June 30, 2019. The volume and revenue decreases were mainly due to demand destruction associated with the COVID-19 pandemic across most of our facilities.

Revenues from refinery processing units were $39.5 million, a decrease of $1.8 million compared to the six months ended June 30, 2019. Throughputs averaged 59.8 mbpd compared to 71.8 mbpd for the six months ended June 30, 2019. The decrease in volumes was mainly due to reduced throughput for both our Woods Cross and El Dorado processing units. Revenues were higher in the six months ended June 30, 2019 due to an adjustment in revenue recognition recorded during that period.

Operations Expense

Operations expense (exclusive of depreciations and amortization) for the six months ended June 30, 2020, decreased by $8.4 million compared to the six months ended June 30, 2019. The decrease was mainly due to lower rental expenses, maintenance costs and variable costs such as electricity and chemicals associated with lower volumes.

Depreciation and Amortization

Depreciation and amortization for the six months ended June 30, 2020, increased by $0.9 million compared to the six months ended June 30, 2019. The increase was mainly due to the acceleration of depreciation on certain of our Cheyenne tanks.

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General and Administrative

General and administrative costs for the six months ended June 30, 2020, increased by $0.6 million compared to the six months ended June 30, 2019 mainly due to higher legal expenses incurred in the six months ended June 30, 2020.

Equity in Earnings of Equity Method Investments

	Six Months Ended June 30,
Equity Method Investment	2020		2019
	(in thousands)
Osage Pipe Line Company, LLC	1,380		1,251
Cheyenne Pipeline LLC	2,160		2,632
Cushing Terminal	330		—
Total	$	3,870	$	3,883

Equity in earnings of Cheyenne Pipeline LLC decreased for the six months ended June 30, 2020, mainly due to lower throughput volumes.

Interest Expense

Interest expense for the six months ended June 30, 2020, totaled $31.5 million, a decrease of $6.7 million compared to the six months ended June 30, 2019. The decrease was mainly due to market interest rate decreases under our senior secured revolving credit facility and refinancing our $500 million 6% Senior Notes with $500 million 5% Senior Notes. Our aggregate effective interest rates were 4.0% and 5.3% for the six months ended June 30, 2020 and 2019, respectively.

State Income Tax

We recorded a state income tax expense of $76,000 and $6,000 for the six months ended June 30, 2020 and 2019, respectively. All tax expense is solely attributable to the Texas margin tax.

LIQUIDITY AND CAPITAL RESOURCES

Overview

We have a $1.4 billion senior secured revolving credit facility (the “Credit Agreement”) expiring in July 2022. The Credit Agreement is available to fund capital expenditures, investments, acquisitions, distribution payments and working capital and for general partnership purposes. The Credit Agreement is also available to fund letters of credit up to a $50 million sub-limit, and it contains an accordion feature giving us the ability to increase the size of the facility by up to $300 million with additional lender commitments.

During the six months ended June 30, 2020, we received advances totaling $168.0 million and repaid $138.5 million, resulting in a net increase of $29.5 million under the Credit Agreement and an outstanding balance of $995.0 million at June 30, 2020. As of June 30, 2020, we have no letters of credit outstanding under the Credit Agreement and the available capacity under the Credit Agreement was $405.0 million. Amounts repaid under the Credit Agreement may be reborrowed from time to time.

On February 4, 2020, we closed a private placement of $500 million in aggregate principal amount of 5% senior unsecured notes due in 2028 (the "5% Senior Notes"). On February 5, 2020, we redeemed the existing $500 million 6% Senior Notes at a redemption cost of $522.5 million, at which time we recognized a $25.9 million early extinguishment loss consisting of a $22.5 million debt redemption premium and unamortized financing costs of $3.4 million. We funded the $522.5 million redemption with proceeds from the issuance of our 5% Senior Notes and borrowings under our Credit Agreement.

We have a continuous offering program under which we may issue and sell common units from time to time, representing limited partner interests, up to an aggregate gross sales amount of $200 million. We did not issue any units under this program during the three months ended June 30, 2020. As of June 30, 2020, HEP has issued 2,413,153 units under this program, providing $82.3 million in gross proceeds.

Under our registration statement filed with the Securities and Exchange Commission (“SEC”) using a “shelf” registration process, we currently have the authority to raise up to $2.0 billion by offering securities, through one or more prospectus supplements that would describe, among other things, the specific amounts, prices and terms of any securities offered and how the proceeds would be used. Any proceeds from the sale of securities would be used for general business purposes, which may include, among other

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things, funding acquisitions of assets or businesses, working capital, capital expenditures, investments in subsidiaries, the retirement of existing debt and/or the repurchase of common units or other securities.

We believe our current cash balances, future internally generated funds and funds available under the Credit Agreement will provide sufficient resources to meet our working capital liquidity, capital expenditure and quarterly distribution needs for the foreseeable future.

In May 2020, we paid a regular cash distribution of $0.35 on all units in an aggregate amount of $34.5 million after deducting HEP Logistics' waiver of $2.5 million of limited partner cash distributions.

Cash and cash equivalents increased by $5.6 million during the six months ended June 30, 2020. The cash flows provided by operating activities of $134.6 million were more than the cash flows used for financing activities of $97.1 million and investing activities of $31.9 million. Working capital increased by $14.2 million to $35.0 million at June 30, 2020, from $20.8 million at December 31, 2019.

Cash Flows—Operating Activities

Cash flows from operating activities decreased by $10.4 million from $145.0 million for the six months ended June 30, 2019, to $134.6 million for the six months ended June 30, 2020. The decrease was mainly due to lower cash receipts from customers and higher payments for operating expenses, partially offset by lower payment for interest expenses during the six months ended June 30, 2020, as compared to the six months ended June 30, 2019.

Cash Flows—Investing Activities

Cash flows used for investing activities were $31.9 million for the six months ended June 30, 2020, compared to $17.3 million for the six months ended June 30, 2019, an increase of $14.6 million. During the six months ended June 30, 2020 and 2019, we invested $30.7 million and $17.8 million in additions to properties and equipment, respectively. During the six months ended June 30, 2020, we invested $2.4 million in our equity method investment in Cushing Connect JV Terminal. We received $0.5 million in excess of equity in earnings during the six months ended June 30, 2020 and $0.3 million during the six months ended June 30, 2019.

Cash Flows—Financing Activities

Cash flows used for financing activities were $97.1 million for the six months ended June 30, 2020, compared to $123.8 million for the six months ended June 30, 2019, a decrease of $26.7 million. During the six months ended June 30, 2020, we received $168.0 million and repaid $138.5 million in advances under the Credit Agreement. Additionally, we paid $103.0 million in regular quarterly cash distributions to our limited partners and $4.0 million to our noncontrolling interest. We received $13.3 million in contributions from noncontrolling interest during the six months ended June 30, 2020. We also received net proceeds of $491.3 million for issuance of our 5% Senior Notes and paid $522.5 million to retire our 6% Senior Notes. During the six months ended June 30, 2019, we received $175.0 million and repaid $156.5 million in advances under the Credit Agreement. We paid $136.2 million in regular quarterly cash distributions to our limited partners, and distributed $5.3 million to our noncontrolling interest.

Capital Requirements

Our pipeline and terminalling operations are capital intensive, requiring investments to maintain, expand, upgrade or enhance existing operations and to meet environmental and operational regulations. Our capital requirements have consisted of, and are expected to continue to consist of, maintenance capital expenditures and expansion capital expenditures. “Maintenance capital expenditures” represent capital expenditures to replace partially or fully depreciated assets to maintain the operating capacity of existing assets. Maintenance capital expenditures include expenditures required to maintain equipment reliability, tankage and pipeline integrity, safety and to address environmental regulations. “Expansion capital expenditures” represent capital expenditures to expand the operating capacity of existing or new assets, whether through construction or acquisition. Expansion capital expenditures include expenditures to acquire assets, to grow our business and to expand existing facilities, such as projects that increase throughput capacity on our pipelines and in our terminals. Repair and maintenance expenses associated with existing assets that are minor in nature and do not extend the useful life of existing assets are charged to operating expenses as incurred.

Each year the board of directors of HLS, our ultimate general partner, approves our annual capital budget, which specifies capital projects that our management is authorized to undertake. Additionally, at times when conditions warrant or as new opportunities arise, additional projects may be approved. The funds allocated for a particular capital project may be expended over a period in excess of a year, depending on the time required to complete the project. Therefore, our planned capital expenditures for a given year consist of expenditures approved for capital projects included in the current year’s capital budget as well as, in certain cases, expenditures approved for capital projects in capital budgets for prior years. The 2020 capital budget as well as our current forecast are comprised of approximately $8 million to $12 million for maintenance capital expenditures, $4 million to $6 million for refinery unit turnarounds and $45 million to $50 million for expansion capital expenditures and our share of Cushing Connect Joint Venture

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investments. We expect the majority of the 2020 expansion capital budget to be invested in our share of Cushing Connect Joint Venture investments. In addition to our capital budget, we may spend funds periodically to perform capital upgrades or additions to our assets where a customer reimburses us for such costs. The upgrades or additions would generally benefit the customer over the remaining life of the related service agreements.

We expect that our currently planned sustaining and maintenance capital expenditures, as well as expenditures for acquisitions and capital development projects, will be funded with cash generated by operations.

Under the terms of the transaction to acquire HFC’s 75% interest in UNEV, we issued to HFC a Class B unit comprising a noncontrolling equity interest in a wholly-owned subsidiary subject to redemption to the extent that HFC is entitled to a 50% interest in our share of annual UNEV earnings before interest, income taxes, depreciation, and amortization above $30 million beginning July 1, 2015, and ending in June 2032, subject to certain limitations. However, to the extent earnings thresholds are not achieved, no redemption payments are required. No redemption payments have been required to date.

Credit Agreement

Our $1.4 billion Credit Agreement expires in July 2022. The Credit Agreement is available to fund capital expenditures, investments, acquisitions, distribution payments and working capital and for general partnership purposes. The Credit Agreement is also available to fund letters of credit up to a $50 million sub-limit, and it contains an accordion feature giving us the ability to increase the size of the facility by up to $300 million with additional lender commitments.

Our obligations under the Credit Agreement are collateralized by substantially all of our assets, and indebtedness under the Credit Agreement is guaranteed by our material, wholly-owned subsidiaries.  The Credit Agreement requires us to maintain compliance with certain financial covenants consisting of total leverage, senior secured leverage, and interest coverage.  It also limits or restricts our ability to engage in certain activities.  If, at any time prior to the expiration of the Credit Agreement, HEP obtains two investment grade credit ratings, the Credit Agreement will become unsecured and many of the covenants, limitations, and restrictions will be eliminated.

We may prepay all loans at any time without penalty, except for tranche breakage costs.  If an event of default exists under the Credit Agreement, the lenders will be able to accelerate the maturity of all loans outstanding and exercise other rights and remedies.  We were in compliance with all covenants as of June 30, 2020.

Senior Notes

As of December 31, 2019, we had $500 million in aggregate principal amount of 6% Senior Notes due in 2024 (the “ 6% Senior Notes”).

On February 4, 2020, we closed a private placement of $500 million in aggregate principal amount of 5% senior unsecured notes due in 2028 (the "5% Senior Notes"). On February 5, 2020, we redeemed the existing $500 million 6% Senior Notes at a redemption cost of $522.5 million, at which time we recognized a $25.9 million early extinguishment loss consisting of a $22.5 million debt redemption premium and unamortized financing costs of $3.4 million. We funded the $522.5 million redemption with proceeds from the issuance of our 5% Senior Notes and borrowings under our Credit Agreement.

The 5% Senior Notes are unsecured and impose certain restrictive covenants, including limitations on our ability to incur additional indebtedness, make investments, sell assets, incur certain liens, pay distributions, enter into transactions with affiliates, and enter into mergers. We were in compliance with the restrictive covenants for the 5% Senior Notes as of June 30, 2020. At any time when the 5% Senior Notes are rated investment grade by either Moody’s or Standard & Poor’s and no default or event of default exists, we will not be subject to many of the foregoing covenants. Additionally, we have certain redemption rights at varying premiums over face value under the 5% Senior Notes.

Indebtedness under the 5% Senior Notes is guaranteed by all of our existing wholly-owned subsidiaries (other than Holly Energy Finance Corp. and certain immaterial subsidiaries).

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Long-term Debt

The carrying amounts of our long-term debt are as follows:

	June 30, 2020			December 31, 2019
	(In thousands)
Credit Agreement	995,000			$	965,500
6% Senior Notes
Principal	—			500,000
Unamortized debt issuance costs	—			(3,469		)
	—			496,531
5% Senior Notes
Principal	500,000			—
Unamortized debt issuance costs	(8,352		)	—
	491,648			—
Total long-term debt	$	1,486,648		$	1,462,031

Contractual Obligations

There were no significant changes to our long-term contractual obligations during this period.

Impact of Inflation

Inflation in the United States has been relatively moderate in recent years and did not have a material impact on our results of operations for the six months ended June 30, 2020 and 2019. PPI has increased an average of 0.6% annually over the past five calendar years, including increases of 0.8% and 3.1% in 2019 and 2018, respectively.

The substantial majority of our revenues are generated under long-term contracts that provide for increases or decreases in our rates and minimum revenue guarantees annually for increases or decreases in the PPI. Certain of these contracts have provisions that limit the level of annual PPI percentage rate increases or decreases. A significant and prolonged period of high inflation or a significant and prolonged period of negative inflation could adversely affect our cash flows and results of operations if costs increase at a rate greater than the fees we charge our shippers.

Environmental Matters

Our operation of pipelines, terminals, and associated facilities in connection with the transportation and storage of refined products and crude oil is subject to stringent and complex federal, state, and local laws and regulations governing the discharge of materials into the environment, or otherwise relating to the protection of the environment. As with the industry generally, compliance with existing and anticipated laws and regulations increases our overall cost of business, including our capital costs to construct, maintain, and upgrade equipment and facilities. While these laws and regulations affect our maintenance capital expenditures and net income, we believe that they do not affect our competitive position given that the operations of our competitors are similarly affected. However, these laws and regulations, and the interpretation or enforcement thereof, are subject to frequent change by regulatory authorities, and we are unable to predict the ongoing cost to us of complying with these laws and regulations or the future impact of these laws and regulations on our operations. Violation of environmental laws, regulations, and permits can result in the imposition of significant administrative, civil and criminal penalties, injunctions, and construction bans or delays. A major discharge of hydrocarbons or hazardous substances into the environment could, to the extent the event is not insured, subject us to substantial expense, including both the cost to comply with applicable laws and regulations and claims made by employees, neighboring landowners and other third parties for personal injury and property damage.

Under the Omnibus Agreement and certain transportation agreements and purchase agreements with HFC, HFC has agreed to indemnify us, subject to certain monetary and time limitations, for environmental noncompliance and remediation liabilities associated with certain assets transferred to us from HFC and occurring or existing prior to the date of such transfers.

We have an environmental agreement with Delek with respect to pre-closing environmental costs and liabilities relating to the pipelines and terminals acquired from Delek in 2005, under which Delek will indemnify us subject to certain monetary and time limitations.

There are environmental remediation projects in progress that relate to certain assets acquired from HFC. Certain of these projects were underway prior to our purchase and represent liabilities retained by HFC. At June 30, 2020, we had an accrual of $5.7 million

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that related to environmental clean-up projects for which we have assumed liability or for which the indemnity provided for by HFC has expired or will expire. The remaining projects, including assessment and monitoring activities, are covered under the HFC environmental indemnification discussed above and represent liabilities of HFC.

CRITICAL ACCOUNTING POLICIES

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities as of the date of the financial statements. Actual results may differ from these estimates under different assumptions or conditions. Our significant accounting policies are described in “Item 7. Management’s Discussion and Analysis of Financial Condition and Operations—Critical Accounting Policies” in our Annual Report on Form 10-K for the year ended December 31, 2019. Certain critical accounting policies that materially affect the amounts recorded in our consolidated financial statements include revenue recognition, assessing the possible impairment of certain long-lived assets and goodwill, and assessing contingent liabilities for probable losses. There have been no changes to these policies in 2020. We consider these policies to be the most critical to understanding the judgments that are involved and the uncertainties that could impact our results of operations, financial condition and cash flows.

Accounting Pronouncements Adopted During the Periods Presented

Goodwill Impairment Testing

In January 2017, Accounting Standard Update (“ASU”) 2017-04, “Simplifying the Test for Goodwill Impairment,” was issued amending the testing for goodwill impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. Under this standard, goodwill impairment is measured as the excess of the carrying amount of the reporting unit over the related fair value. We adopted this standard effective in the second quarter of 2019, and the adoption of this standard had no effect on our financial condition, results of operations or cash flows.

Leases

In February 2016, ASU No. 2016-02, “Leases” (“ASC 842”) was issued requiring leases to be measured and recognized as a lease liability, with a corresponding right-of-use asset on the balance sheet. We adopted this standard effective January 1, 2019, and we elected to adopt using the modified retrospective transition method, whereby comparative prior period financial information will not be restated and will continue to be reported under the lease accounting standard in effect during those periods. We also elected practical expedients provided by the new standard, including the package of practical expedients and the short-term lease recognition practical expedient, which allows an entity to not recognize on the balance sheet leases with a term of 12 months or less. Upon adoption of this standard, we recognized $78.4 million of lease liabilities and corresponding right-of-use assets on our consolidated balance sheet. Adoption of the standard did not have a material impact on our results of operations or cash flows. See Notes 3 and 4 of Notes to the Consolidated Financial Statements for additional information on our lease policies.

Credit Losses Measurement

In June 2016, ASU 2016-13, “Measurement of Credit Losses on Financial Instruments,” was issued requiring measurement of all expected credit losses for certain types of financial instruments, including trade receivables, held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. This standard was effective January 1, 2020. Adoption of the standard did not have a material impact on our financial condition, results of operations or cash flows.

RISK MANAGEMENT

The market risk inherent in our debt positions is the potential change arising from increases or decreases in interest rates as discussed below.

At June 30, 2020, we had an outstanding principal balance of $500 million on our 5% Senior Notes. A change in interest rates generally would affect the fair value of the 5% Senior Notes, but not our earnings or cash flows. At June 30, 2020, the fair value of our 5% Senior Notes was $477.8 million. We estimate a hypothetical 10% change in the yield-to-maturity applicable to the 5% Senior Notes at June 30, 2020 would result in a change of approximately $17 million in the fair value of the underlying 5% Senior Notes.

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For the variable rate Credit Agreement, changes in interest rates would affect cash flows, but not the fair value. At June 30, 2020, borrowings outstanding under the Credit Agreement were $995.0 million. A hypothetical 10% change in interest rates applicable to the Credit Agreement would not materially affect our cash flows.

Our operations are subject to normal hazards of operations, including fire, explosion and weather-related perils. We maintain various insurance coverages, including business interruption insurance, subject to certain deductibles. We are not fully insured against certain risks because such risks are not fully insurable, coverage is unavailable, or premium costs, in our judgment, do not justify such expenditures.

We have a risk management oversight committee that is made up of members from our senior management. This committee monitors our risk environment and provides direction for activities to mitigate, to an acceptable level, identified risks that may adversely affect the achievement of our goals.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Market risk is the risk of loss arising from adverse changes in market rates and prices. See “Risk Management” under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a discussion of market risk exposures that we have with respect to our long-term debt, which disclosure should be read in conjunction with the quantitative and qualitative disclosures about market risk contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

Since we do not own products shipped on our pipelines or terminalled at our terminal facilities, we do not have direct market risks associated with commodity prices.

Item 4. Controls and Procedures

(a) Evaluation of disclosure controls and procedures

Our principal executive officer and principal financial officer have evaluated, as required by Rule 13a-15(b) under the Securities Exchange Act of 1934 (the “Exchange Act”), our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this quarterly report on Form 10-Q. Our disclosure controls and procedures are designed to provide reasonable assurance that the information we are required to disclose in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Based upon the evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were effective as of June 30, 2020, at a reasonable level of assurance.

(b) Changes in internal control over financial reporting

During the three months ended June 30, 2020, there have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during our last fiscal quarter that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

In the ordinary course of business, we may become party to legal, regulatory or administrative proceedings or governmental investigations, including environmental and other matters. Damages or penalties may be sought from us in some matters and certain matters may require years to resolve.  While the outcome and impact of these proceedings and investigations on us cannot be predicted with certainty, based on advice of counsel and information currently available to us, management believes that the resolution of these proceedings and investigations, through settlement or adverse judgment, will not, either individually or in the aggregate, have a materially adverse effect on our financial condition, results of operations or cash flows.

Item 1A. Risk Factors

There have been no material changes in our risk factors as previously disclosed in Part 1, “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and in Part II, “Item 1A Risk Factors” of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020. In addition to the other information set forth in this quarterly report, you should consider carefully the information discussed in our 2019 Form 10-K and our first quarter 2020 Form 10-Q, which could materially affect our business, financial condition or future results. The risks described in our 2019 Form 10-K and our first quarter 2020 Form 10-Q are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially and adversely affect our business, financial condition or future results.

Item 6. Exhibits

The Exhibit Index on page 49 of this Quarterly Report on Form 10-Q lists the exhibits that are filed or furnished, as applicable, as part of this Quarterly Report on Form 10-Q.

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Exhibit Index

Exhibit Number	Description
3.1	Second Amended and Restated Agreement of Limited Partnership of Holly Energy Partners, L.P. (incorporated by reference to Exhibit 3.1 to Registrant’s Current Report on Form 8-K filed on November 1, 2017, File No. 1-32225).
3.2	First Amended and Restated Agreement of Limited Partnership of Holly Energy Partners - Operating Company, L.P. (incorporated by reference to Exhibit 3.2 of Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2004, File No. 1-32225).
3.3	First Amended and Restated Agreement of Limited Partnership of HEP Logistics Holdings, L.P. (incorporated by reference to Exhibit 3.4 of Registrant’s Quarterly Report on Form 10-Q for its quarterly period ended June 30, 2004, File No. 1-32225).
3.4	First Amended and Restated Limited Liability Company Agreement of Holly Logistic Services, L.L.C. (incorporated by reference to Exhibit 3.5 of Registrant’s Quarterly Report on Form 10-Q for its quarterly period ended June 30, 2004, File No. 1-32225).
3.5	Amendment No. 1 to the First Amended and Restated Limited Liability Company Agreement of Holly Logistic Services, L.L.C., dated April 27, 2011 (incorporated by reference to Exhibit 3.1 of Registrant’s Form 8-K Current Report filed on May 3, 2011, File No. 1-32225).
3.6	First Amended and Restated Limited Liability Company Agreement of HEP Logistics GP, L.L.C. (incorporated by reference to Exhibit 3.6 of Registrant’s Quarterly Report on Form 10-Q for its quarterly period ended June 30, 2004, File No. 1-32225).
10.1*	Second Amendment to Third Amended and Restated Crude Pipelines and Tankage Agreement dated as of May 26, 2020, by and among HollyFrontier Navajo Refining LLC, HollyFrontier Woods Cross Refining LLC, HollyFrontier Refining & Marketing LLC, Holly Energy Partners - Operating, L.P., HEP Pipeline, L.L.C. and HEP Woods Cross, L.L.C.
10.2*	First Amendment to Fifth Amended and Restated Master Lease and Access Agreement dated as of August 4, 2020, effective as of January 23, 2020, by and among certain subsidiaries of Holly Energy Partners, L.P. and certain subsidiaries of HollyFrontier Corporation.
31.1*	Certification of Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**	Certification of Chief Executive Officer under Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**	Certification of Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002.
101++	The following financial information from Holly Energy Partners, L.P.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020 formatted in iXBRL (Inline Extensible Business Reporting Language): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Cash Flows, (v) Consolidated Statement of Partners’ Equity, and (vi) Notes to Consolidated Financial Statements. The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.
104	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).

*	Filed herewith.
**	Furnished herewith.
++	Filed electronically herewith.

- 49 -

Table of Contentsril 19,

HOLLY ENERGY PARTNERS, L.P.

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	HOLLY ENERGY PARTNERS, L.P.
	(Registrant)
		By: HEP LOGISTICS HOLDINGS, L.P. its General Partner
		By: HOLLY LOGISTIC SERVICES, L.L.C. its General Partner
Date: August 6, 2020		/s/    John Harrison
		John Harrison
		Senior Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer)
Date: August 6, 2020		/s/    Kenneth P. Norwood
		Kenneth P. Norwood
		Vice President and Controller (Principal Accounting Officer)

- 50 -

EX-10.1

Exhibit 10.1

SECOND AMENDMENT

TO THIRD AMENDED AND RESTATED

CRUDE PIPELINES AND TANKAGE AGREEMENT

This Second Amendment to Third Amended and Restated Crude Pipelines and Tankage Agreement (this “Amendment”) is entered into on May 26, 2020, to be effective as of May 26, 2020 (the “Second Amendment Effective Date”) by and among:

1.HollyFrontier Navajo Refining LLC, a Delaware limited liability company (“Navajo Refining”),

2.HollyFrontier Woods Cross Refining LLC, a Delaware limited liability company (“Holly Refining – Woods Cross”),

3.HollyFrontier Refining & Marketing LLC, a Delaware limited liability company (“HFRM”, together with Navajo Refining and Holly Refining – Woods Cross, the “HollyFrontier Entities”),

4.Holly Energy Partners - Operating, L.P., a Delaware limited partnership (the “Operating Partnership”),

5.HEP Pipeline, L.L.C., a Delaware limited liability company (“HEP Pipeline”), and

6.HEP Woods Cross, L.L.C., a Delaware limited liability company (“HEP Woods Cross”, together with the Operating Partnership and HEP Pipeline, the “Partnership Entities”).

Each of the HollyFrontier Entities and the Partnership Entities are individually referred to herein as a “Party” and collectively as the “Parties.”

WHEREAS, the Parties desire to amend certain provisions of the Third Amended and Restated Crude Pipelines and Tankage Agreement, effective as of March 12, 2015, (as amended to date, the “Agreement”) by and among the HollyFrontier Entities and the Partnership Entities as set forth herein; and

WHEREAS, HEP Pipeline has constructed and installed the system upgrades and HFRM has agreed to reimburse HEP Pipeline for the cost of such upgrades all as provided herein;

NOW, THEREFORE, in consideration of the covenants and obligations contained herein, the Parties hereby agree as follows:

ARTICLE 1AMENDMENTS

1.1Amendment to Section 2.Section 2 of the Agreement is hereby amended by adding subsection (w) as follows:

“(w)    Hobbs System Expansion.

1

(i)    Effective as of the Hobbs Expansion Commencement Date, the HollyFrontier Entities shall pay to the Partnership Entities a pump-over fee of $0.22 per barrel for all barrels received at the Hobbs Station terminal in Hobbs, New Mexico from Plains Pipeline, L.P. (the “Hobbs Pump-Over Fee”). The Hobbs Pump-Over Fee shall (A) remain in effect until the Partnership Entities have received aggregate Hobbs Pump-Over Fees in respect of the Hobbs System Expansion equal to $600,000, and (B) be in addition to the Minimum Trunk Pipeline Revenue Commitment.

(ii)    From the Hobbs Expansion Commencement Date until the last day of the month following the month in which the Partnership Entities have received the full amount to which they are entitled with respect to the Hobbs System Expansion, the Partnership Entities shall provide the HollyFrontier Entities with written notice of their calculation of the Hobbs Pump-Over Fee by no later than 30 days following the end of each calendar month. The notice will include an aggregate balance of the Hobbs Pump-Over Fees paid by the HollyFrontier Entities since the Hobbs Expansion Commencement Date.

(iii)    If the HollyFrontier Entities disagree with the Partnership Entities’ calculations in respect of the Hobbs Pump-Over Fee, then HollyFrontier Entities will notify the Partnership Entities and a senior officer of HollyFrontier and a senior officer of the Partnership will negotiate in good faith to resolve any differences with respect to such calculations. If such differences are not resolved within 30 days following the Partnership Entities’ delivery to the HollyFrontier Entities of the Hobbs Pump-Over Fee calculations, the HollyFrontier Entities and the Partnership Entities shall submit any and all matters which remain in dispute to arbitration in accordance with Section 12(e).”

1.2Amendment to Section 6. Section 6 of the Agreement is hereby amended by adding the following to the end thereof:

“If the amount contemplated in Section 2(w)(i) has not been paid to the Partnership Entities at the time this Agreement is terminated in accordance with its terms, then, notwithstanding anything in this Agreement to the contrary, any amounts then owing in respect of Section 2(w)(i) shall be paid to the Partnership Entities not later than the third business day following such termination.”

1.3Amendment to Annex A.

(i)    Annex A to the Agreement is hereby amended to add the following definition in the proper alphabetical sequence:

“Hobbs Expansion Commencement Date” means June 1, 2020.

“Hobbs System Expansion” means the following construction in 2020: (A) connection facilities at the Hobbs Station terminal in New Mexico allowing for additional third party crude deliveries to such terminal and (B) additional pumps and pumping capacity to the Hobbs to Lovington 8-inch pipeline enabling an additional 10,000 barrels per day of Crude Oil to be transported between the Hobbs Station terminal in Hobbs, New Mexico and the Lovington Refinery.

(ii)    Annex A to the Agreement is hereby amended to add the following definitions to the defined term table in proper alphabetical sequence:

2

Term	Section
“Hobbs Pump-Over Fee”	Section 2(w)(i)

ARTICLE 2

MISCELLANEOUS

2.1Counterparts. This Amendment may be executed in counterparts each of which shall be deemed an original. An executed counterpart of this Amendment transmitted by facsimile shall be equally as effective as a manually executed counterpart.

2.2Successors and Assigns. Section 12(b) of the Agreement is hereby incorporated by reference into this Section 2.2, mutatis mutandis.

2.3Entire Agreement. The Agreement, as amended by this Amendment, contains the entire agreement between the Parties as to the subject matter of the Agreement and, except as provided for in this Amendment, the terms and provisions of the Agreement shall remain in full force and effect as originally written.

[Remainder of page intentionally left blank. Signature pages follow.]

IN WITNESS WHEREOF, the undersigned Parties have executed this Amendment as of the date first written above to be effective as of the Second Amendment Effective Date.

PARTNERSHIP ENTITIES:

HOLLY ENERGY PARTNERS - OPERATING, L.P.

HEP WOODS CROSS, L.L.C.

HEP PIPELINE, L.L.C.

By:     /s/ Richard L. Voliva III    

Name: Richard L. Voliva III

Title:     President

HOLLYFRONTIER ENTITIES:

HOLLYFRONTIER NAVAJO REFINING LLC

HOLLYFRONTIER WOODS CROSS REFINING LLC

By:     /s/ Thomas G. Creery    

Name: Thomas G. Creery

Title:     Senior Vice President, Commercial

HOLLYFRONTIER REFINING & MARKETING LLC

By:     /s/ Thomas G. Creery    

Thomas G. Creery

President

3

EX-10.2

FIRST AMENDMENT TO

FIFTH AMENDED AND RESTATED MASTER

LEASE AND ACCESS AGREEMENT

This First Amendment to Fifth Amended and Restated Master Lease and Access Agreement (this “Amendment”) is entered into as of August 4, 2020 to be effective 12:01 a.m. Central Time (the “Effective Time”) on January 23, 2020 (the “Effective Date”) by and between the Parties whose signatures are set forth below.

WHEREAS, on October 29, 2018, the Parties entered into that certain Fifth Amended and Restated Master Lease and Access Agreement (the “Agreement”). Capitalized terms used but not otherwise defined in this Amendment have the meanings ascribed to such terms in the Agreement.

WHEREAS, the Parties now desire to amend certain provisions of the Agreement as set forth herein.

NOW, THEREFORE, in consideration of the premises and the covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, as of the Effective Date, the Parties hereby amend the Agreement as follows:

1.Incorporation of Recitals. The recitals for this Amendment are fully incorporated herein by the reference thereto with the same force and effect as though recited herein.

2.Amendments. Exhibit E attached to the Agreement is hereby deleted and replaced in its entirety with Exhibit E attached to this Amendment. In addition, Exhibits E-8 and F-8 attached to this Amendment are hereby added to the Agreement.

3.     Counterparts. This Amendment may be executed in counterparts each of which shall be deemed an original. An executed counterpart of this Amendment transmitted by email shall be equally as effective as a manually executed counterpart.

4.    Successors and Assigns. This Amendment shall inure for the benefit of and shall be binding on each of the Parties and their respective successors and/or assigns.

5.    Entire Agreement. This Amendment contains the entire agreement between the Parties as to the subject matter hereof and, except as provided for in this Amendment, the terms and provisions of the Agreement shall remain in full force and effect.

[Remainder of Page Intentionally Left Blank]

IN WITNESS WHEREOF, the Parties have executed this First Amendment to Fifth Amended and Restated Master Lease and Access Agreement to be effective as of the Effective Date.

Related Refinery Owners:

HOLLYFRONTIER EL DORADO REFINING LLC

HOLLYFRONTIER CHEYENNE REFINING LLC

HOLLYFRONTIER TULSA REFINING LLC

HOLLYFRONTIER WOODS CROSS REFINING LLC

HOLLYFRONTIER NAVAJO REFINING LLC

By: /s/ Thomas G. Creery            

Name: Thomas G. Creery

Title: Senior Vice President, Commercial

Relevant Asset Owners:

EL DORADO LOGISTICS LLC

EL DORADO OPERATING LLC

CHEYENNE LOGISTICS LLC

HEP TULSA LLC

WOODS CROSS OPERATING LLC

HEP WOODS CROSS, L.L.C.

HEP PIPELINE, L.L.C.

By: /s/ Richard L. Voliva III            

Name: Richard L. Voliva III

Title: President

Exhibit E

to

Fifth Amended and Restated Master Lease and Access Agreement

Applicable Term and Applicable Assets

Location	Applicable Term	Applicable Assets
El Dorado Refinery Complex
For El Dorado Logistics	Commencement Date: November 1, 2011 End Date: November 1, 2061 (midnight)	See Exhibit E-1
For El Dorado Operating	Commencement Date: November 1, 2015 End Date: November 1, 2065 (midnight)	See Exhibit E-8
Cheyenne Refinery Complex
For Cheyenne Logistics	Commencement Date: November 1, 2011 End Date: November 1, 2061 (midnight)	See Exhibit E-2
Tulsa Refinery Complex
Group 1 Assets and Group 2 Assets	Commencement Date: March 31, 2010 End Date: March 31, 2060 (midnight)	See Exhibit E-3
Tulsa West Tankage Assets and Receiving Pipelines	Commencement Date: March 31, 2016 End Date: March 31, 2066 (midnight)	See Exhibit E-3
Woods Cross Refinery Complex
For HEP Woods Cross	Commencement Date: February 29, 2008 End Date: February 28, 2058 (midnight)	Applicable Assets at Woods Cross Refinery Complex (excluding the Woods Cross Pipeline Pad) See Exhibit E-4
	Commencement Date: September 10, 2010 End Date: February 28, 2058 (midnight)	Woods Cross Pipeline Pad See Exhibit E-5
For Woods Cross Operating	Commencement Date: October 1, 2016 End Date: October 1, 2066 (midnight)	See Exhibit E-9
Navajo Refinery Complex
	Commencement Date: February 29, 2008 End Date: February 28, 2058 (midnight)	Applicable Assets at Navajo Refinery Complex (excluding the Truck Rack, the Artesia Blending Station and the Artesia Pump and Receiving Stations) See Exhibit E-6
	Commencement Date: September 10, 2010 End Date: February 28, 2058 (midnight)	Artesia Pump and Receiving Stations See Exhibit E-7
	Commencement Date: January 23, 2020 End Date: February 28, 2058 (midnight)	LACT Units #6007102, #6007103, and the easternmost LACT Unit located in Lane 3 on the land described on Exhibit F-8 and all related equipment See Exhibit E-8

Exhibit E-8

to

Fifth Amended and Restated Master Lease and Access Agreement

Applicable Assets: Navajo Refinery Complex

LACT Units #6007102, #6007102, and the easternmost LACT Unit located in Lane 3 on the land described on Exhibit F-8 and all related equipment

1. LACT Units #6007102, #6007103, and the easternmost LACT Unit located in Lane 3 on the land described on Exhibit F-8 and all related equipment

Exhibit F-8

to

Fifth Amended and Restated Master Lease and Access Agreement

Legal Description for Navajo Refinery Complex (LACT Units #6007102, 6007103, and the easternmost LACT Unit located in Lane 3 and related equipment)

Page 1

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Michael C. Jennings, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Holly Energy Partners, L.P;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

c. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 6, 2020	/s/ Michael C. Jennings
	Michael C. Jennings
	Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, John Harrison, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Holly Energy Partners, L.P;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

c. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 6, 2020	/s/ John Harrison
	John Harrison
	Senior Vice President, Chief Financial Officer  and Treasurer

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE

OFFICER OF HOLLY ENERGY PARTNERS, L.P.

PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the accompanying report on Form 10-Q for the quarterly period ended June 30, 2020 and filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael C. Jennings, Chief Executive Officer of Holly Logistic Services, L.L.C., the general partner of HEP Logistics Holdings, L.P., the general partner of Holly Energy Partners, L.P (the “Company”), hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 6, 2020	/s/ Michael C. Jennings
	Michael C. Jennings
	Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL

OFFICER OF HOLLY ENERGY PARTNERS, L.P.

PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the accompanying report on Form 10-Q for the quarterly period ended June 30, 2020 and filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John Harrison, Senior Vice President, Chief Financial Officer and Treasurer of Holly Logistic Services, L.L.C., the general partner of HEP Logistics Holdings, L.P., the general partner of Holly Energy Partners, L.P (the “Company”), hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 6, 2020	/s/ John Harrison
	John Harrison
	Senior Vice President, Chief Financial Officer  and Treasurer

XML

Document Entity Information - shares	6 Months Ended
	Jun. 30, 2020	Jul. 31, 2020
Document Information [Line Items]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Jun. 30, 2020
Document Transition Report	false
Entity File Number	1-32225
Entity Registrant Name	HOLLY ENERGY PARTNERS LP
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	20-0833098
Entity Address, Address Line One	2828 N. Harwood, Suite 1300
Entity Address, City or Town	Dallas
Entity Address, State or Province	TX
Entity Address, Postal Zip Code	75201
City Area Code	214
Local Phone Number	871-3555
Title of 12(b) Security	Common Limited Partner Units
Trading Symbol	HEP
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		105,440,201
Entity Central Index Key	0001283140
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q2
Amendment Flag	false

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Current assets:
Cash and cash equivalents (Cushing Connect VIEs: $10,773 and $6,842, respectively)	$ 18,913	$ 13,287
Accounts receivable:
Trade	14,929	18,731
Affiliates	49,847	49,716
Total accounts receivable	64,776	68,447
Prepaid and other current assets	7,905	7,629
Total current assets	91,594	89,363
Properties and equipment, net (Cushing Connect VIEs: $25,832 and $2,916, respectively)	1,458,934	1,467,099
Operating lease right-of-use assets	3,377	3,255
Net Investment in Lease, Noncurrent	168,153	134,886
Intangible assets, net	94,318	101,322
Goodwill	270,336	270,336
Equity method investments (Cushing Connect VIEs: $39,815 and $37,084, respectively)	123,299	120,071
Other assets	11,772	12,900
Total assets	2,221,783	2,199,232
Accounts payable:
Trade (Cushing Connect VIEs: $6,421 and $2,082, respectively)	14,639	17,818
Affiliates	7,286	16,737
Total accounts payable	21,925	34,555
Accrued interest	10,683	13,206
Deferred revenue	11,002	10,390
Accrued property taxes	5,526	3,799
Current maturities of operating leases	1,213	1,126
Current maturities of finance leases	3,293	3,224
Other current liabilities	2,975	2,305
Total current liabilities	56,617	68,605
Long-term debt	1,486,648	1,462,031
Noncurrent operating lease liabilities	2,530	2,482
Noncurrent finance lease liabilities	70,039	70,475
Other long-term liabilities	13,689	12,808
Deferred revenue	42,692	45,681
Class B unit	51,062	49,392
Partners’ equity:
Common unitholders (105,440,201 units issued and outstanding at March 31, 2020 and December 31, 2019)	380,723	381,103
Noncontrolling interest	117,783	106,655
Total Equity	498,506	487,758
Total liabilities and equity	2,221,783	2,199,232
Total partners’ equity	$ 380,723	$ 381,103

XML

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Condensed Balance Sheet Statements, Captions [Line Items]
Cash and cash equivalents (Cushing Connect VIEs: $10,773 and $6,842, respectively)	$ 18,913	$ 13,287
Properties and equipment, net (Cushing Connect VIEs: $25,832 and $2,916, respectively)	1,458,934	1,467,099
Equity method investments (Cushing Connect VIEs: $39,815 and $37,084, respectively)	123,299	120,071
Accounts Payable, Trade, Current	14,639	17,818
Other current liabilities	$ 2,975	$ 2,305
Partners' Equity:
Common units issued (in shares)	105,440,201	105,440,201
Common units outstanding (in shares)	105,440,201	105,440,201
Variable Interest Entity, Primary Beneficiary [Member]
Condensed Balance Sheet Statements, Captions [Line Items]
Cash and cash equivalents (Cushing Connect VIEs: $10,773 and $6,842, respectively)	$ 10,773	$ 6,842
Properties and equipment, net (Cushing Connect VIEs: $25,832 and $2,916, respectively)	25,832	2,916
Equity method investments (Cushing Connect VIEs: $39,815 and $37,084, respectively)	39,815	37,084
Accounts Payable, Trade, Current	$ 6,421	$ 2,082

XML

Consolidated Statements of Income - USD ($) shares in Thousands, $ in Thousands		3 Months Ended				6 Months Ended
	Feb. 05, 2020	Jun. 30, 2020	Mar. 31, 2020	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2020	Jun. 30, 2019
Revenues:
Revenues		$ 114,807		$ 130,751		$ 242,661	$ 265,248
Operating costs and expenses:
Operations (exclusive of depreciation and amortization)		34,737		40,602		69,718	78,121
Depreciation and amortization		25,034		24,247		49,012	48,071
General and administrative		2,535		1,988		5,237	4,608
Total operating costs and expenses		62,306		66,837		123,967	130,800
Operating income		52,501		63,914		118,694	134,448
Other income (expense):
Equity in earnings of equity method investments		2,156		1,783		3,870	3,883
Interest expense		(13,779)		(19,230)		(31,546)	(38,252)
Interest income		2,813		551		5,031	1,079
Gain on Sales-type Leases		33,834		0		33,834	0
Gain (Loss) on Extinguishment of Debt	$ 25,900	0		0		(25,915)	0
Gain (loss) on sale of assets and other		468		111		974	(199)
Total other income (expense)		25,492		(16,785)		(13,752)	(33,489)
Income before income taxes		77,993		47,129		104,942	100,959
State income tax benefit (expense)		(39)		30		(76)	(6)
Net Income		77,954	$ 26,912	47,159	$ 53,794	104,866	100,953
Allocation of net income attributable to noncontrolling interests		(1,484)		(1,469)		(3,535)	(4,081)
Net income attributable to the partners		$ 76,470		$ 45,690		$ 101,331	$ 96,872
Limited partners’ per unit interest in earnings—basic and diluted (in dollars per share)		$ 0.73		$ 0.43		$ 0.96	$ 0.92
Weighted average limited partners’ units outstanding (in shares)		105,440		105,440		105,440	105,440
Affiliates
Revenues:
Revenues		$ 95,563		$ 102,369		$ 196,991	$ 205,728
Third parties
Revenues:
Revenues		$ 19,244		$ 28,382		$ 45,670	$ 59,520

XML

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019
Cash flows from operating activities
Net income	$ 104,866	$ 100,953
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	49,012	48,071
(Gain) loss on sale of assets	797	48
Gain (Loss) on Extinguishment of Debt	(25,915)	0
Gain on Sales-type Leases	33,834	0
Amortization of deferred charges	1,641	1,535
Equity-based compensation expense	980	1,246
Equity in earnings of equity method investments, net of distributions	(1,298)	(526)
(Increase) decrease in operating assets:
Accounts receivable – trade	3,803	(2,742)
Accounts receivable – affiliates	131	704
Prepaid and other current assets	(216)	426
Increase (decrease) in operating liabilities:
Accounts payable – trade	4,959	420
Accounts payable – affiliates	(9,452)	(6,489)
Accrued interest	2,523	27
Deferred revenue	(2,378)	(339)
Accrued property taxes	1,727	3,658
Other current liabilities	669	0
Other, net	1,137	3,733
Net cash provided by operating activities	134,594	144,989
Cash flows from investing activities
Additions to properties and equipment	(30,740)	(17,752)
Payments to Acquire Interest in Joint Venture	(2,400)	0
Proceeds from sale of assets	816	194
Distributions in excess of equity in earnings of equity investments	470	299
Net cash used for investing activities	31,854	17,259
Cash flows from financing activities
Borrowings under credit agreement	168,000	175,000
Repayments of credit agreement borrowings	(138,500)	(156,500)
Early Repayment of Senior Debt	(522,500)	0
Proceeds from Issuance of Senior Long-term Debt	500,000	0
Contributions from general partner	435	0
Contribution from Joint Venture Partner	13,263	0
Distributions to HEP unitholders	(102,979)	(136,207)
Distributions to noncontrolling interests	(4,000)	(5,250)
Payments on finance leases	(1,972)	(503)
Payments of Debt Issuance Costs	(8,714)	0
Payments for Repurchase of Other Equity	0	(255)
Units withheld for tax withholding obligations	(147)	(119)
Net cash used by financing activities	(97,114)	(123,834)
Cash and cash equivalents
Increase (decrease) for the period	5,626	3,896
Beginning of period	13,287	3,045
End of period	$ 18,913	$ 6,941

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Consolidated Statement of Equity - USD ($) $ in Thousands	Total	Common Units	Noncontrolling Interest
Balance, Beginning of Period at Dec. 31, 2018	$ 515,561	$ 427,435	$ 88,126
Increase (Decrease) in Partners' Equity [Roll Forward]
Distributions to HEP unitholders	(67,975)	(67,975)
Distributions to noncontrolling interest	(3,000)		(3,000)
Amortization of restricted and performance units	661	661
Class B unit accretion	(780)	(780)
Other	814	814
Net income	53,794	51,962	1,832
Balance, End of Period at Mar. 31, 2019	499,075	412,117	86,958
Balance, Beginning of Period at Dec. 31, 2018	515,561	427,435	88,126
Increase (Decrease) in Partners' Equity [Roll Forward]
Net income	100,953
Balance, End of Period at Jun. 30, 2019	475,418	390,022	85,396
Balance, Beginning of Period at Mar. 31, 2019	499,075	412,117	86,958
Increase (Decrease) in Partners' Equity [Roll Forward]
Distributions to HEP unitholders	(68,232)	(68,232)
Distributions to noncontrolling interest	(2,250)		(2,250)
Amortization of restricted and performance units	585	585
Class B unit accretion	(781)	(781)
Other	(138)	(138)
Net income	47,159	46,471	688
Balance, End of Period at Jun. 30, 2019	475,418	390,022	85,396
Balance, Beginning of Period at Dec. 31, 2019	487,758	381,103	106,655
Increase (Decrease) in Partners' Equity [Roll Forward]
Capital Contribution from Joint Venture Partner	7,304		7,304
Distributions to HEP unitholders	(68,519)	(68,519)
Distributions to noncontrolling interest	(3,000)		(3,000)
Amortization of restricted and performance units	506	506
Class B unit accretion	(835)	(835)
Other	208	208
Net income	26,912	25,696	1,216
Balance, End of Period at Mar. 31, 2020	450,334	338,159	112,175
Balance, Beginning of Period at Dec. 31, 2019	487,758	381,103	106,655
Increase (Decrease) in Partners' Equity [Roll Forward]
Net income	104,866
Balance, End of Period at Jun. 30, 2020	498,506	380,723	117,783
Balance, Beginning of Period at Mar. 31, 2020	450,334	338,159	112,175
Increase (Decrease) in Partners' Equity [Roll Forward]
Capital Contribution from Joint Venture Partner	5,959		5,959
Distributions to HEP unitholders	(34,460)	(34,460)
Distributions to noncontrolling interest	(1,000)		(1,000)
Amortization of restricted and performance units	474	474
Class B unit accretion	(835)	(835)
Other	80	80
Net income	77,954	77,305	649
Balance, End of Period at Jun. 30, 2020	$ 498,506	$ 380,723	$ 117,783

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Description of Business and Presentation of Financial Statements

6 Months Ended

Jun. 30, 2020

Accounting Policies [Abstract]

Description of Business and Presentation of Financial Statements

Description of Business and Presentation of Financial Statements

Holly Energy Partners, L.P. (“HEP”), together with its consolidated subsidiaries, is a publicly held master limited partnership. As of June 30, 2020, HollyFrontier Corporation (“HFC”) and its subsidiaries own a 57% limited partner interest and the non-economic general partner interest in HEP. We commenced operations on July 13, 2004, upon the completion of our initial public offering. In these consolidated financial statements, the words “we,” “our,” “ours” and “us” refer to HEP unless the context otherwise indicates.

On October 31, 2017, we closed on an equity restructuring transaction with HEP Logistics Holdings, L.P. (“HEP Logistics”), a wholly-owned subsidiary of HFC and the general partner of HEP, pursuant to which the incentive distribution rights ("IDRs") held by HEP Logistics were canceled, and HEP Logistics' 2% general partner interest in HEP was converted into a non-economic general partner interest in HEP. In consideration, we issued 37,250,000 of our common units to HEP Logistics. In addition, HEP Logistics agreed to waive $2.5 million of limited partner cash distributions for each of twelve consecutive quarters beginning with the first quarter the units issued as consideration were eligible to receive distributions. This waiver of limited partner cash distributions will expire after the cash distribution for the second quarter of 2020, which will be made during the third quarter of 2020. As a result of this transaction, no distributions were made on the general partner interest after October 31, 2017.

We own and operate petroleum product and crude oil pipelines, terminal, tankage and loading rack facilities and refinery processing units that support refining and marketing operations of HFC and other refineries in the Mid-Continent, Southwest and Northwest regions of the United States. Additionally, we own a 75% interest in UNEV Pipeline, LLC (“UNEV”), a 50% interest in Osage Pipe Line Company, LLC (“Osage”), a 50% interest in Cheyenne Pipeline LLC, and a 50% interest in Cushing Connect Pipeline & Terminal LLC.

On June 1, 2020, HFC announced plans to permanently cease petroleum refining operations at its Cheyenne Refinery and to convert certain assets at that refinery to renewable diesel production. HFC subsequently began winding down petroleum refining operations at its Cheyenne Refinery on August 3, 2020. As of June 30, 2020, our throughput agreement with HFC required minimum annualized payments to us of approximately $17.6 million related to our Cheyenne assets. During the third quarter of 2020, we expect to begin negotiations with HFC related to potential changes to our existing throughput agreement. The net book value of our Cheyenne assets as of June 30, 2020 was approximately $88.5 million, including $28.1 million of long-lived assets and $68.7 million of goodwill. Additionally, our annual goodwill impairment test is scheduled for the third quarter of 2020. Depending upon the outcome of negotiations related to our throughput agreement or other changes in anticipated commercial uses of our Cheyenne assets, such assets could be at risk of impairment in the future and such impairment charges could be material.

We operate in two reportable segments, a Pipelines and Terminals segment and a Refinery Processing Unit segment. Disclosures around these segments are discussed in Note 15.

We generate revenues by charging tariffs for transporting petroleum products and crude oil through our pipelines, by charging fees for terminalling and storing refined products and other hydrocarbons, providing other services at our storage tanks and terminals and by charging fees for processing hydrocarbon feedstocks through our refinery processing units. We do not take ownership of products that we transport, terminal, store or process, and therefore, we are not exposed directly to changes in commodity prices.

The consolidated financial statements included herein have been prepared without audit, pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). The interim financial statements reflect all adjustments, which, in the opinion of management, are necessary for a fair presentation of our results for the interim periods. Such adjustments are considered to be of a normal recurring nature. Although certain notes and other information required by U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted, we believe that the disclosures in these consolidated financial statements are adequate to make the information presented not misleading. These consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2019. Results of operations for interim periods are not necessarily indicative of the results of operations that will be realized for the year ending December 31, 2020.

Principles of Consolidation and Common Control Transactions

The consolidated financial statements include our accounts and those of subsidiaries and joint ventures that we control. All significant intercompany transactions and balances have been eliminated.

Most of our acquisitions from HFC occurred while we were a consolidated variable interest entity (“VIE”) of HFC. Therefore, as an entity under common control with HFC, we recorded these acquisitions on our balance sheets at HFC's historical basis instead of our purchase price or fair value.

Accounting Pronouncements Adopted During the Periods Presented

Goodwill Impairment Testing

In January 2017, Accounting Standard Update (“ASU”) 2017-04, “Simplifying the Test for Goodwill Impairment,” was issued amending the testing for goodwill impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. Under this standard, goodwill impairment is measured as the excess of the carrying amount of the reporting unit over the related fair value. We adopted this standard effective in the second quarter of 2019, and the adoption of this standard had no effect on our financial condition, results of operations or cash flows.

Leases

In February 2016, ASU No. 2016-02, “Leases” (“ASC 842”) was issued requiring leases to be measured and recognized as a lease liability, with a corresponding right-of-use asset on the balance sheet. We adopted this standard effective January 1, 2019, and we elected to adopt using the modified retrospective transition method, whereby comparative prior period financial information will not be restated and will continue to be reported under the lease accounting standard in effect during those periods. We also elected practical expedients provided by the new standard, including the package of practical expedients and the short-term lease recognition practical expedient, which allow an entity to not recognize on the balance sheet leases with a term of 12 months or less. Upon adoption of this standard, we recognized $78.4 million of lease liabilities and corresponding right-of-use assets on our consolidated balance sheet. Adoption of this standard did not have a material impact on our results of operations or cash flows. See Notes 3 and 4 for additional information on our lease policies.

Credit Losses Measurement

In June 2016, ASU 2016-13, “Measurement of Credit Losses on Financial Instruments,” was issued requiring measurement of all expected credit losses for certain types of financial instruments, including trade receivables, held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. We adopted this standard effective January 1, 2020, and adoption of the standard did not have a material impact on our financial condition, results of operations or cash flows.

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Investment in Joint Venture (Notes)

6 Months Ended

Jun. 30, 2020

Business Combinations [Abstract]

Business Combination Disclosure [Text Block]

Investment in Joint Venture

On October 2, 2019, HEP Cushing LLC (“HEP Cushing”), a wholly-owned subsidiary of HEP, and Plains Marketing, L.P. (“PMLP”), a wholly-owned subsidiary of Plains All American Pipeline, L.P. (“Plains”), formed a 50/50 joint venture, Cushing Connect Pipeline & Terminal LLC (the “Cushing Connect Joint Venture”), for (i) the development and construction of a new 160,000 barrel per day common carrier crude oil pipeline (the “Cushing Connect Pipeline”) that will connect the Cushing, Oklahoma crude oil hub to the Tulsa, Oklahoma refining complex owned by a subsidiary of HFC and (ii) the ownership and operation of 1.5 million barrels of crude oil storage in Cushing, Oklahoma (the “ Cushing Connect JV Terminal”). The Cushing Connect JV Terminal was fully in service beginning in April 2020. The Cushing Connect Pipeline is expected to be in service during the first quarter of 2021. Long-term commercial agreements have been entered into to support the Cushing Connect Joint Venture assets.

The Cushing Connect Joint Venture contracted with an affiliate of HEP to manage the construction and operation of the Cushing Connect Pipeline and with an affiliate of Plains to manage the operation of the Cushing Connect JV Terminal. The total Cushing Connect Joint Venture investment will be shared proportionately among the partners, and HEP estimates its share of the cost of the Cushing Connect JV Terminal contributed by Plains and Cushing Connect Pipeline construction costs will be approximately $65 million.

The Cushing Connect Joint Venture legal entities are variable interest entities ("VIEs") as defined under GAAP. A VIE is a legal entity if it has any one of the following characteristics: (i) the entity does not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support; (ii) the at risk equity holders, as a group, lack the characteristics of a controlling financial interest; or (iii) the entity is structured with non-substantive voting rights. The Cushing Connect Joint Venture legal entities do not have sufficient equity at risk to finance their activities without additional financial support. Since HEP is constructing and will operate the Cushing Connect Pipeline, HEP has more ability to direct the activities that most significantly impact the financial performance of the Cushing Connect Joint Venture and Cushing Connect Pipeline legal entities.

Therefore, HEP consolidates those legal entities. We do not have the ability to direct the activities that most significantly impact the Cushing Connect JV Terminal legal entity, and therefore, we account for our interest in the Cushing Connect JV Terminal legal entity using the equity method of accounting.

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Revenues

6 Months Ended

Jun. 30, 2020

Revenue from Contract with Customer [Abstract]

Revenues

Revenues

Revenues are generally recognized as products are shipped through our pipelines and terminals, feedstocks are processed through our refinery processing units or other services are rendered. The majority of our contracts with customers meet the definition of a lease since (1) performance of the contracts is dependent on specified property, plant, or equipment and (2) it is remote that one or more parties other than the customer will take more than a minor amount of the output associated with the specified property, plant, or equipment. Prior to the adoption of the new lease standard (see Note 1), we bifurcated the consideration received between lease and service revenue. The new lease standard allows the election of a practical expedient whereby a lessor does not have to separate non-lease (service) components from lease components under certain conditions. The majority of our contracts meet these conditions, and we have made this election for those contracts. Under this practical expedient, we treat the combined components as a single performance obligation in accordance with Accounting Standards Codification (“ASC”) 606, which largely codified ASU 2014-09, if the non-lease (service) component is the dominant component. If the lease component is the dominant component, we treat the combined components as a lease in accordance with ASC 842, which largely codified ASU 2016-02.

Several of our contracts include incentive or reduced tariffs once a certain quarterly volume is met. Revenue from the variable element of these transactions is recognized based on the actual volumes shipped as it relates specifically to rendering the services during the applicable quarter.

The majority of our long-term transportation contracts specify minimum volume requirements, whereby, we bill a customer for a minimum level of shipments in the event a customer ships below their contractual requirements. If there are no future performance obligations, we will recognize these deficiency payments in revenue.

In certain of these throughput agreements, a customer may later utilize such shortfall billings as credit towards future volume shipments in excess of its minimum levels within its respective contractual shortfall make-up period. Such amounts represent an obligation to perform future services, which may be initially deferred and later recognized as revenue based on estimated future shipping levels, including the likelihood of a customer’s ability to utilize such amounts prior to the end of the contractual shortfall make-up period. We recognize the service portion of these deficiency payments in revenue when we do not expect we will be required to satisfy these performance obligations in the future based on the pattern of rights exercised by the customer. During the three and six months ended June 30, 2020, we recognized $5.1 million and $12.6 million of these deficiency payments in revenue, of which none and $0.7 million, respectively, related to deficiency payments billed in prior periods. As of June 30, 2020, deferred revenue reflected in our consolidated balance sheet related to shortfalls billed was $0.5 million.

A contract liability exists when an entity is obligated to perform future services for a customer for which the entity has received consideration. Since HEP may be required to perform future services for these deficiency payments received, the deferred revenues on our balance sheets were considered contract liabilities. A contract asset exists when an entity has a right to consideration in exchange for goods or services transferred to a customer. Our consolidated balance sheets included the contract assets and liabilities in the table below:

	June 30, 2020			December 31, 2019
	(In thousands)
Contract assets	$	6,064		$	5,675
Contract liabilities	$	(500	)	$	(650	)

The contract assets and liabilities include both lease and service components. We did not recognize any revenue during the three months ended June 30, 2020, that was previously included in contract liability as of December 31, 2019, and we recognized $0.7 million of revenue during the six months ended June 30, 2020, that was previously included in contract liability as of December 31, 2019. We did not recognize any revenue during the three months ended June 30, 2019, that was previously included in contract liability as of December 31, 2018, and we recognized $0.6 million of revenue during the six months ended June 30, 2019, that was previously included in contract liability as of December 31, 2018. During the three and the six months ended June 30, 2020, we also recognized $0.2 million and $0.4 million, respectively, of revenue included in contract assets at June 30, 2020.

As of June 30, 2020, we expect to recognize $2.3 billion in revenue related to our unfulfilled performance obligations under the terms of our long-term throughput agreements and leases expiring in 2021 through 2036. These agreements generally provide for changes in the minimum revenue guarantees annually for increases or decreases in the Producer Price Index (“PPI”) or Federal Energy Regulatory Commission (“FERC”) index, with certain contracts having provisions that limit the level of the rate increases or decreases. We expect to recognize revenue for these unfulfilled performance obligations as shown in the table below (amounts shown in table include both service and lease revenues):

Years Ending December 31,	(In millions)
Remainder of 2020	$	185
2021	362
2022	332
2023	295
2024	257
2025	188
Thereafter	650
Total	$	2,269

Payment terms under our contracts with customers are consistent with industry norms and are typically payable within 10 to 30 days of the date of invoice.

Disaggregated revenues were as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
	(In thousands)
Pipelines	$	58,954	$	72,263	$	129,426	$	147,363
Terminals, tanks and loading racks	36,280		39,089		73,778		76,667
Refinery processing units	19,573		19,399		39,457		41,218
	$	114,807	$	130,751	$	242,661	$	265,248

During the three and six months ended June 30, 2020, lease revenues amounted to $86.3 million and $179.5 million, respectively, and service revenues amounted to $28.5 million and $63.2 million, respectively. Both of these revenues were recorded within affiliates and third parties revenues on our consolidated statement of income.

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Leases

6 Months Ended

Jun. 30, 2020

Leases [Abstract]

Leases

Leases

We adopted ASC 842 effective January 1, 2019, and elected to adopt using the modified retrospective transition method and practical expedients, both of which are provided as options by the standard and further defined in Note 1.

Lessee Accounting

At inception, we determine if an arrangement is or contains a lease. Right-of-use assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our payment obligation under the leasing arrangement. Right-of-use assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. We use our estimated incremental borrowing rate (“IBR”) to determine the present value of lease payments as most of our leases do not contain an implicit rate. Our IBR represents the interest rate which we would pay to borrow, on a collateralized basis, an amount equal to the lease payments over a similar term in a similar economic environment. We use the implicit rate when readily determinable.

As a lessee, we lease land, buildings, pipelines, transportation and other equipment to support our operations. These leases can be categorized into operating and finance leases. Operating leases are recorded in operating lease right-of-use assets and current and noncurrent operating lease liabilities on our consolidated balance sheet. Finance leases are included in properties and equipment, current finance lease liabilities and noncurrent finance lease liabilities on our consolidated balance sheet.

When renewal options are defined in a lease, our lease term includes an option to extend the lease when it is reasonably certain we will exercise that option. Leases with a term of 12 months or less are not recorded on our balance sheet, and lease expense is accounted for on a straight-line basis. In addition, as a lessee, we separate non-lease components that are identifiable and exclude them from the determination of net present value of lease payment obligations.

Our leases have remaining terms of less than 1 year to 25 years, some of which include options to extend the leases for up to 10 years.

Finance Lease Obligations

We have finance lease obligations related to vehicle leases with initial terms of 33 to 48 months. The total cost of assets under finance leases was $6.9 million and $7.0 million as of June 30, 2020 and December 31, 2019, respectively, with accumulated depreciation of $3.4 million and $4.5 million as of June 30, 2020 and December 31, 2019, respectively. We include depreciation of finance leases in depreciation and amortization in our consolidated statements of income.

In addition, we have a finance lease obligation related to a pipeline lease with an initial term of 10 years with one remaining subsequent renewal option for an additional 10 years.

Supplemental balance sheet information related to leases was as follows (in thousands, except for lease term and discount rate):

	June 30, 2020			December 31, 2019
Operating leases:
Operating lease right-of-use assets, net	$	3,377		3,255
Current operating lease liabilities	1,213			1,126
Noncurrent operating lease liabilities	2,530			2,482
Total operating lease liabilities	$	3,743		3,608
Finance leases:
Properties and equipment	$	6,851		6,968
Accumulated amortization	(3,358		)	(4,547	)
Properties and equipment, net	$	3,493		2,421
Current finance lease liabilities	$	3,293		3,224
Noncurrent finance lease liabilities	70,039			70,475
Total finance lease liabilities	$	73,332		73,699
Weighted average remaining lease term (in years)
Operating leases	6.1			6.5
Finance leases	16.3			17.0
Weighted average discount rate
Operating leases	4.8%			5.0%
Finance leases	5.6%			6.0%

Supplemental cash flow and other information related to leases were as follows:

	Six Months Ended June 30,
	2020		2019
	(In thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows on operating leases	$	518	$	3,589
Operating cash flows on finance leases	$	2,157	$	51
Financing cash flows on finance leases	$	1,972	$	503

Maturities of lease liabilities were as follows:

	June 30, 2020
	Operating			Finance
	(In thousands)
2020	$	491		$	3,865
2021	906			7,411
2022	627			7,285
2023	607			7,332
2024	494			6,856
2025 and thereafter	1,179			80,313
Total lease payments	4,304			113,062
Less: Imputed interest	(561		)	(39,730		)
Total lease obligations	3,743			73,332
Less: Current lease liabilities	(1,213		)	(3,293		)
Noncurrent lease liabilities	$	2,530		$	70,039

The components of lease expense were as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
	(In thousands)
Operating lease costs	$	230	$	1,798	$	503	$	3,568
Finance lease costs
Amortization of assets	273		254		515		498
Interest on lease liabilities	1,040		24		2,077		51
Variable lease cost	46		35		95		71
Total net lease cost	$	1,589	$	2,111	$	3,190	$	4,188

Lessor Accounting

As discussed in Note 3, the majority of our contracts with customers meet the definition of a lease. See Note 3 for further discussion of the impact of adoption of this standard on our activities as a lessor.

Customer contracts that contain leases are generally classified as either operating leases, direct finance leases or sales-type leases. We consider inputs such as the lease term, fair value of the underlying asset and residual value of the underlying assets when assessing the classification.

Substantially all of the assets supporting contracts meeting the definition of a lease have long useful lives, and we believe these assets will continue to have value when the current agreements expire due to our risk management strategy for protecting the residual fair value of the underlying assets by performing ongoing maintenance during the lease term. HFC generally has the option to purchase assets located within HFC refinery boundaries, including refinery tankage, truck racks and refinery processing units, at fair market value when the related agreements expire.

One of our throughput agreements with Delek was renewed during the three months ending June 30, 2020. Certain components of this agreement met the criteria of sales-type leases since the underlying assets are not expected to have an alternative use at the end of the lease term to anyone other than Delek. Under sales-type lease accounting, at the commencement date, the lessor recognizes a net investment in the lease, based on the estimated fair value of the underlying leased assets at contract inception, and derecognizes the underlying assets with the difference recorded as selling profit or loss arising from the lease. Therefore, we recognized a gain on sales-type leases during the three months ending June 30, 2020 composed of the following:

	(In thousands)
Net investment in leases	$	35,319
Properties and equipment, net	(1,485		)
Gain on sales-type leases	$	33,834

This sales-type lease transaction, including the related gain, was a non-cash transaction.

Lease income recognized was as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
	(In thousands)
Operating lease revenues	$	84,872	$	94,783	$	175,671	$	188,287
Direct financing lease interest income	524		509		1,048		1,019
Gain on sales-type leases	33,834		—		33,834		—
Sales-type lease interest income	2,286		—		3,940		—
Lease revenues relating to variable lease payments not included in measurement of the sales-type lease receivable	1,474		—		3,822		—

For our sales-type leases, we included customer obligations related to minimum volume requirements in guaranteed minimum lease payments. Portions of our minimum guaranteed pipeline tariffs for assets subject to sales-type lease accounting are recorded as interest income with the remaining amounts recorded as a reduction in net investment in leases. We recognized any billings for throughput volumes in excess of minimum volume requirements as variable lease payments, and these variable lease payments were recorded in lease revenues.

Annual minimum undiscounted lease payments under our leases were as follows as of June 30, 2020:

	Operating		Finance		Sales-type
Years Ending December 31,	(In thousands)
Remainder of 2020	$	155,376	$	1,060	$	6,198
2021	306,771		2,128		12,396
2022	304,315		2,145		12,396
2023	273,362		2,162		12,396
2024	235,280		2,179		12,396
2025 and thereafter	739,158		40,787		72,432
Total	$	2,014,262	$	50,461	$	128,214

Net investments in leases recorded on our balance sheet were composed of the following:

	June 30, 2020				December 31, 2019
	Sales-type Leases		Direct Financing Leases		Sales-type Leases		Direct Financing Leases
	(In thousands)				(In thousands)
Lease receivables (1)	$	92,041	$	16,486	$	68,457	$	16,511
Unguaranteed residual assets	63,134		—		52,933		—
Net investment in leases	$	155,175	$	16,486	$	121,390	$	16,511

(1)

Current portion of lease receivables included in prepaid and other current assets on the balance sheet.

Leases

Leases

We adopted ASC 842 effective January 1, 2019, and elected to adopt using the modified retrospective transition method and practical expedients, both of which are provided as options by the standard and further defined in Note 1.

Lessee Accounting

At inception, we determine if an arrangement is or contains a lease. Right-of-use assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our payment obligation under the leasing arrangement. Right-of-use assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. We use our estimated incremental borrowing rate (“IBR”) to determine the present value of lease payments as most of our leases do not contain an implicit rate. Our IBR represents the interest rate which we would pay to borrow, on a collateralized basis, an amount equal to the lease payments over a similar term in a similar economic environment. We use the implicit rate when readily determinable.

As a lessee, we lease land, buildings, pipelines, transportation and other equipment to support our operations. These leases can be categorized into operating and finance leases. Operating leases are recorded in operating lease right-of-use assets and current and noncurrent operating lease liabilities on our consolidated balance sheet. Finance leases are included in properties and equipment, current finance lease liabilities and noncurrent finance lease liabilities on our consolidated balance sheet.

When renewal options are defined in a lease, our lease term includes an option to extend the lease when it is reasonably certain we will exercise that option. Leases with a term of 12 months or less are not recorded on our balance sheet, and lease expense is accounted for on a straight-line basis. In addition, as a lessee, we separate non-lease components that are identifiable and exclude them from the determination of net present value of lease payment obligations.

Our leases have remaining terms of less than 1 year to 25 years, some of which include options to extend the leases for up to 10 years.

Finance Lease Obligations

We have finance lease obligations related to vehicle leases with initial terms of 33 to 48 months. The total cost of assets under finance leases was $6.9 million and $7.0 million as of June 30, 2020 and December 31, 2019, respectively, with accumulated depreciation of $3.4 million and $4.5 million as of June 30, 2020 and December 31, 2019, respectively. We include depreciation of finance leases in depreciation and amortization in our consolidated statements of income.

In addition, we have a finance lease obligation related to a pipeline lease with an initial term of 10 years with one remaining subsequent renewal option for an additional 10 years.

Supplemental balance sheet information related to leases was as follows (in thousands, except for lease term and discount rate):

	June 30, 2020			December 31, 2019
Operating leases:
Operating lease right-of-use assets, net	$	3,377		3,255
Current operating lease liabilities	1,213			1,126
Noncurrent operating lease liabilities	2,530			2,482
Total operating lease liabilities	$	3,743		3,608
Finance leases:
Properties and equipment	$	6,851		6,968
Accumulated amortization	(3,358		)	(4,547	)
Properties and equipment, net	$	3,493		2,421
Current finance lease liabilities	$	3,293		3,224
Noncurrent finance lease liabilities	70,039			70,475
Total finance lease liabilities	$	73,332		73,699
Weighted average remaining lease term (in years)
Operating leases	6.1			6.5
Finance leases	16.3			17.0
Weighted average discount rate
Operating leases	4.8%			5.0%
Finance leases	5.6%			6.0%

Supplemental cash flow and other information related to leases were as follows:

	Six Months Ended June 30,
	2020		2019
	(In thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows on operating leases	$	518	$	3,589
Operating cash flows on finance leases	$	2,157	$	51
Financing cash flows on finance leases	$	1,972	$	503

Maturities of lease liabilities were as follows:

	June 30, 2020
	Operating			Finance
	(In thousands)
2020	$	491		$	3,865
2021	906			7,411
2022	627			7,285
2023	607			7,332
2024	494			6,856
2025 and thereafter	1,179			80,313
Total lease payments	4,304			113,062
Less: Imputed interest	(561		)	(39,730		)
Total lease obligations	3,743			73,332
Less: Current lease liabilities	(1,213		)	(3,293		)
Noncurrent lease liabilities	$	2,530		$	70,039

The components of lease expense were as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
	(In thousands)
Operating lease costs	$	230	$	1,798	$	503	$	3,568
Finance lease costs
Amortization of assets	273		254		515		498
Interest on lease liabilities	1,040		24		2,077		51
Variable lease cost	46		35		95		71
Total net lease cost	$	1,589	$	2,111	$	3,190	$	4,188

Lessor Accounting

As discussed in Note 3, the majority of our contracts with customers meet the definition of a lease. See Note 3 for further discussion of the impact of adoption of this standard on our activities as a lessor.

Customer contracts that contain leases are generally classified as either operating leases, direct finance leases or sales-type leases. We consider inputs such as the lease term, fair value of the underlying asset and residual value of the underlying assets when assessing the classification.

Substantially all of the assets supporting contracts meeting the definition of a lease have long useful lives, and we believe these assets will continue to have value when the current agreements expire due to our risk management strategy for protecting the residual fair value of the underlying assets by performing ongoing maintenance during the lease term. HFC generally has the option to purchase assets located within HFC refinery boundaries, including refinery tankage, truck racks and refinery processing units, at fair market value when the related agreements expire.

One of our throughput agreements with Delek was renewed during the three months ending June 30, 2020. Certain components of this agreement met the criteria of sales-type leases since the underlying assets are not expected to have an alternative use at the end of the lease term to anyone other than Delek. Under sales-type lease accounting, at the commencement date, the lessor recognizes a net investment in the lease, based on the estimated fair value of the underlying leased assets at contract inception, and derecognizes the underlying assets with the difference recorded as selling profit or loss arising from the lease. Therefore, we recognized a gain on sales-type leases during the three months ending June 30, 2020 composed of the following:

	(In thousands)
Net investment in leases	$	35,319
Properties and equipment, net	(1,485		)
Gain on sales-type leases	$	33,834

This sales-type lease transaction, including the related gain, was a non-cash transaction.

Lease income recognized was as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
	(In thousands)
Operating lease revenues	$	84,872	$	94,783	$	175,671	$	188,287
Direct financing lease interest income	524		509		1,048		1,019
Gain on sales-type leases	33,834		—		33,834		—
Sales-type lease interest income	2,286		—		3,940		—
Lease revenues relating to variable lease payments not included in measurement of the sales-type lease receivable	1,474		—		3,822		—

For our sales-type leases, we included customer obligations related to minimum volume requirements in guaranteed minimum lease payments. Portions of our minimum guaranteed pipeline tariffs for assets subject to sales-type lease accounting are recorded as interest income with the remaining amounts recorded as a reduction in net investment in leases. We recognized any billings for throughput volumes in excess of minimum volume requirements as variable lease payments, and these variable lease payments were recorded in lease revenues.

Annual minimum undiscounted lease payments under our leases were as follows as of June 30, 2020:

	Operating		Finance		Sales-type
Years Ending December 31,	(In thousands)
Remainder of 2020	$	155,376	$	1,060	$	6,198
2021	306,771		2,128		12,396
2022	304,315		2,145		12,396
2023	273,362		2,162		12,396
2024	235,280		2,179		12,396
2025 and thereafter	739,158		40,787		72,432
Total	$	2,014,262	$	50,461	$	128,214

Net investments in leases recorded on our balance sheet were composed of the following:

	June 30, 2020				December 31, 2019
	Sales-type Leases		Direct Financing Leases		Sales-type Leases		Direct Financing Leases
	(In thousands)				(In thousands)
Lease receivables (1)	$	92,041	$	16,486	$	68,457	$	16,511
Unguaranteed residual assets	63,134		—		52,933		—
Net investment in leases	$	155,175	$	16,486	$	121,390	$	16,511

(1)

Current portion of lease receivables included in prepaid and other current assets on the balance sheet.

Leases

Leases

We adopted ASC 842 effective January 1, 2019, and elected to adopt using the modified retrospective transition method and practical expedients, both of which are provided as options by the standard and further defined in Note 1.

Lessee Accounting

At inception, we determine if an arrangement is or contains a lease. Right-of-use assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our payment obligation under the leasing arrangement. Right-of-use assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. We use our estimated incremental borrowing rate (“IBR”) to determine the present value of lease payments as most of our leases do not contain an implicit rate. Our IBR represents the interest rate which we would pay to borrow, on a collateralized basis, an amount equal to the lease payments over a similar term in a similar economic environment. We use the implicit rate when readily determinable.

As a lessee, we lease land, buildings, pipelines, transportation and other equipment to support our operations. These leases can be categorized into operating and finance leases. Operating leases are recorded in operating lease right-of-use assets and current and noncurrent operating lease liabilities on our consolidated balance sheet. Finance leases are included in properties and equipment, current finance lease liabilities and noncurrent finance lease liabilities on our consolidated balance sheet.

When renewal options are defined in a lease, our lease term includes an option to extend the lease when it is reasonably certain we will exercise that option. Leases with a term of 12 months or less are not recorded on our balance sheet, and lease expense is accounted for on a straight-line basis. In addition, as a lessee, we separate non-lease components that are identifiable and exclude them from the determination of net present value of lease payment obligations.

Our leases have remaining terms of less than 1 year to 25 years, some of which include options to extend the leases for up to 10 years.

Finance Lease Obligations

We have finance lease obligations related to vehicle leases with initial terms of 33 to 48 months. The total cost of assets under finance leases was $6.9 million and $7.0 million as of June 30, 2020 and December 31, 2019, respectively, with accumulated depreciation of $3.4 million and $4.5 million as of June 30, 2020 and December 31, 2019, respectively. We include depreciation of finance leases in depreciation and amortization in our consolidated statements of income.

In addition, we have a finance lease obligation related to a pipeline lease with an initial term of 10 years with one remaining subsequent renewal option for an additional 10 years.

Supplemental balance sheet information related to leases was as follows (in thousands, except for lease term and discount rate):

	June 30, 2020			December 31, 2019
Operating leases:
Operating lease right-of-use assets, net	$	3,377		3,255
Current operating lease liabilities	1,213			1,126
Noncurrent operating lease liabilities	2,530			2,482
Total operating lease liabilities	$	3,743		3,608
Finance leases:
Properties and equipment	$	6,851		6,968
Accumulated amortization	(3,358		)	(4,547	)
Properties and equipment, net	$	3,493		2,421
Current finance lease liabilities	$	3,293		3,224
Noncurrent finance lease liabilities	70,039			70,475
Total finance lease liabilities	$	73,332		73,699
Weighted average remaining lease term (in years)
Operating leases	6.1			6.5
Finance leases	16.3			17.0
Weighted average discount rate
Operating leases	4.8%			5.0%
Finance leases	5.6%			6.0%

Supplemental cash flow and other information related to leases were as follows:

	Six Months Ended June 30,
	2020		2019
	(In thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows on operating leases	$	518	$	3,589
Operating cash flows on finance leases	$	2,157	$	51
Financing cash flows on finance leases	$	1,972	$	503

Maturities of lease liabilities were as follows:

	June 30, 2020
	Operating			Finance
	(In thousands)
2020	$	491		$	3,865
2021	906			7,411
2022	627			7,285
2023	607			7,332
2024	494			6,856
2025 and thereafter	1,179			80,313
Total lease payments	4,304			113,062
Less: Imputed interest	(561		)	(39,730		)
Total lease obligations	3,743			73,332
Less: Current lease liabilities	(1,213		)	(3,293		)
Noncurrent lease liabilities	$	2,530		$	70,039

The components of lease expense were as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
	(In thousands)
Operating lease costs	$	230	$	1,798	$	503	$	3,568
Finance lease costs
Amortization of assets	273		254		515		498
Interest on lease liabilities	1,040		24		2,077		51
Variable lease cost	46		35		95		71
Total net lease cost	$	1,589	$	2,111	$	3,190	$	4,188

Lessor Accounting

As discussed in Note 3, the majority of our contracts with customers meet the definition of a lease. See Note 3 for further discussion of the impact of adoption of this standard on our activities as a lessor.

Customer contracts that contain leases are generally classified as either operating leases, direct finance leases or sales-type leases. We consider inputs such as the lease term, fair value of the underlying asset and residual value of the underlying assets when assessing the classification.

Substantially all of the assets supporting contracts meeting the definition of a lease have long useful lives, and we believe these assets will continue to have value when the current agreements expire due to our risk management strategy for protecting the residual fair value of the underlying assets by performing ongoing maintenance during the lease term. HFC generally has the option to purchase assets located within HFC refinery boundaries, including refinery tankage, truck racks and refinery processing units, at fair market value when the related agreements expire.

One of our throughput agreements with Delek was renewed during the three months ending June 30, 2020. Certain components of this agreement met the criteria of sales-type leases since the underlying assets are not expected to have an alternative use at the end of the lease term to anyone other than Delek. Under sales-type lease accounting, at the commencement date, the lessor recognizes a net investment in the lease, based on the estimated fair value of the underlying leased assets at contract inception, and derecognizes the underlying assets with the difference recorded as selling profit or loss arising from the lease. Therefore, we recognized a gain on sales-type leases during the three months ending June 30, 2020 composed of the following:

	(In thousands)
Net investment in leases	$	35,319
Properties and equipment, net	(1,485		)
Gain on sales-type leases	$	33,834

This sales-type lease transaction, including the related gain, was a non-cash transaction.

Lease income recognized was as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
	(In thousands)
Operating lease revenues	$	84,872	$	94,783	$	175,671	$	188,287
Direct financing lease interest income	524		509		1,048		1,019
Gain on sales-type leases	33,834		—		33,834		—
Sales-type lease interest income	2,286		—		3,940		—
Lease revenues relating to variable lease payments not included in measurement of the sales-type lease receivable	1,474		—		3,822		—

For our sales-type leases, we included customer obligations related to minimum volume requirements in guaranteed minimum lease payments. Portions of our minimum guaranteed pipeline tariffs for assets subject to sales-type lease accounting are recorded as interest income with the remaining amounts recorded as a reduction in net investment in leases. We recognized any billings for throughput volumes in excess of minimum volume requirements as variable lease payments, and these variable lease payments were recorded in lease revenues.

Annual minimum undiscounted lease payments under our leases were as follows as of June 30, 2020:

	Operating		Finance		Sales-type
Years Ending December 31,	(In thousands)
Remainder of 2020	$	155,376	$	1,060	$	6,198
2021	306,771		2,128		12,396
2022	304,315		2,145		12,396
2023	273,362		2,162		12,396
2024	235,280		2,179		12,396
2025 and thereafter	739,158		40,787		72,432
Total	$	2,014,262	$	50,461	$	128,214

Net investments in leases recorded on our balance sheet were composed of the following:

	June 30, 2020				December 31, 2019
	Sales-type Leases		Direct Financing Leases		Sales-type Leases		Direct Financing Leases
	(In thousands)				(In thousands)
Lease receivables (1)	$	92,041	$	16,486	$	68,457	$	16,511
Unguaranteed residual assets	63,134		—		52,933		—
Net investment in leases	$	155,175	$	16,486	$	121,390	$	16,511

(1)

Current portion of lease receivables included in prepaid and other current assets on the balance sheet.

Leases

Leases

We adopted ASC 842 effective January 1, 2019, and elected to adopt using the modified retrospective transition method and practical expedients, both of which are provided as options by the standard and further defined in Note 1.

Lessee Accounting

At inception, we determine if an arrangement is or contains a lease. Right-of-use assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our payment obligation under the leasing arrangement. Right-of-use assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. We use our estimated incremental borrowing rate (“IBR”) to determine the present value of lease payments as most of our leases do not contain an implicit rate. Our IBR represents the interest rate which we would pay to borrow, on a collateralized basis, an amount equal to the lease payments over a similar term in a similar economic environment. We use the implicit rate when readily determinable.

As a lessee, we lease land, buildings, pipelines, transportation and other equipment to support our operations. These leases can be categorized into operating and finance leases. Operating leases are recorded in operating lease right-of-use assets and current and noncurrent operating lease liabilities on our consolidated balance sheet. Finance leases are included in properties and equipment, current finance lease liabilities and noncurrent finance lease liabilities on our consolidated balance sheet.

When renewal options are defined in a lease, our lease term includes an option to extend the lease when it is reasonably certain we will exercise that option. Leases with a term of 12 months or less are not recorded on our balance sheet, and lease expense is accounted for on a straight-line basis. In addition, as a lessee, we separate non-lease components that are identifiable and exclude them from the determination of net present value of lease payment obligations.

Our leases have remaining terms of less than 1 year to 25 years, some of which include options to extend the leases for up to 10 years.

Finance Lease Obligations

We have finance lease obligations related to vehicle leases with initial terms of 33 to 48 months. The total cost of assets under finance leases was $6.9 million and $7.0 million as of June 30, 2020 and December 31, 2019, respectively, with accumulated depreciation of $3.4 million and $4.5 million as of June 30, 2020 and December 31, 2019, respectively. We include depreciation of finance leases in depreciation and amortization in our consolidated statements of income.

In addition, we have a finance lease obligation related to a pipeline lease with an initial term of 10 years with one remaining subsequent renewal option for an additional 10 years.

Supplemental balance sheet information related to leases was as follows (in thousands, except for lease term and discount rate):

	June 30, 2020			December 31, 2019
Operating leases:
Operating lease right-of-use assets, net	$	3,377		3,255
Current operating lease liabilities	1,213			1,126
Noncurrent operating lease liabilities	2,530			2,482
Total operating lease liabilities	$	3,743		3,608
Finance leases:
Properties and equipment	$	6,851		6,968
Accumulated amortization	(3,358		)	(4,547	)
Properties and equipment, net	$	3,493		2,421
Current finance lease liabilities	$	3,293		3,224
Noncurrent finance lease liabilities	70,039			70,475
Total finance lease liabilities	$	73,332		73,699
Weighted average remaining lease term (in years)
Operating leases	6.1			6.5
Finance leases	16.3			17.0
Weighted average discount rate
Operating leases	4.8%			5.0%
Finance leases	5.6%			6.0%

Supplemental cash flow and other information related to leases were as follows:

	Six Months Ended June 30,
	2020		2019
	(In thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows on operating leases	$	518	$	3,589
Operating cash flows on finance leases	$	2,157	$	51
Financing cash flows on finance leases	$	1,972	$	503

Maturities of lease liabilities were as follows:

	June 30, 2020
	Operating			Finance
	(In thousands)
2020	$	491		$	3,865
2021	906			7,411
2022	627			7,285
2023	607			7,332
2024	494			6,856
2025 and thereafter	1,179			80,313
Total lease payments	4,304			113,062
Less: Imputed interest	(561		)	(39,730		)
Total lease obligations	3,743			73,332
Less: Current lease liabilities	(1,213		)	(3,293		)
Noncurrent lease liabilities	$	2,530		$	70,039

The components of lease expense were as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
	(In thousands)
Operating lease costs	$	230	$	1,798	$	503	$	3,568
Finance lease costs
Amortization of assets	273		254		515		498
Interest on lease liabilities	1,040		24		2,077		51
Variable lease cost	46		35		95		71
Total net lease cost	$	1,589	$	2,111	$	3,190	$	4,188

Lessor Accounting

As discussed in Note 3, the majority of our contracts with customers meet the definition of a lease. See Note 3 for further discussion of the impact of adoption of this standard on our activities as a lessor.

Customer contracts that contain leases are generally classified as either operating leases, direct finance leases or sales-type leases. We consider inputs such as the lease term, fair value of the underlying asset and residual value of the underlying assets when assessing the classification.

Substantially all of the assets supporting contracts meeting the definition of a lease have long useful lives, and we believe these assets will continue to have value when the current agreements expire due to our risk management strategy for protecting the residual fair value of the underlying assets by performing ongoing maintenance during the lease term. HFC generally has the option to purchase assets located within HFC refinery boundaries, including refinery tankage, truck racks and refinery processing units, at fair market value when the related agreements expire.

One of our throughput agreements with Delek was renewed during the three months ending June 30, 2020. Certain components of this agreement met the criteria of sales-type leases since the underlying assets are not expected to have an alternative use at the end of the lease term to anyone other than Delek. Under sales-type lease accounting, at the commencement date, the lessor recognizes a net investment in the lease, based on the estimated fair value of the underlying leased assets at contract inception, and derecognizes the underlying assets with the difference recorded as selling profit or loss arising from the lease. Therefore, we recognized a gain on sales-type leases during the three months ending June 30, 2020 composed of the following:

	(In thousands)
Net investment in leases	$	35,319
Properties and equipment, net	(1,485		)
Gain on sales-type leases	$	33,834

This sales-type lease transaction, including the related gain, was a non-cash transaction.

Lease income recognized was as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
	(In thousands)
Operating lease revenues	$	84,872	$	94,783	$	175,671	$	188,287
Direct financing lease interest income	524		509		1,048		1,019
Gain on sales-type leases	33,834		—		33,834		—
Sales-type lease interest income	2,286		—		3,940		—
Lease revenues relating to variable lease payments not included in measurement of the sales-type lease receivable	1,474		—		3,822		—

For our sales-type leases, we included customer obligations related to minimum volume requirements in guaranteed minimum lease payments. Portions of our minimum guaranteed pipeline tariffs for assets subject to sales-type lease accounting are recorded as interest income with the remaining amounts recorded as a reduction in net investment in leases. We recognized any billings for throughput volumes in excess of minimum volume requirements as variable lease payments, and these variable lease payments were recorded in lease revenues.

Annual minimum undiscounted lease payments under our leases were as follows as of June 30, 2020:

	Operating		Finance		Sales-type
Years Ending December 31,	(In thousands)
Remainder of 2020	$	155,376	$	1,060	$	6,198
2021	306,771		2,128		12,396
2022	304,315		2,145		12,396
2023	273,362		2,162		12,396
2024	235,280		2,179		12,396
2025 and thereafter	739,158		40,787		72,432
Total	$	2,014,262	$	50,461	$	128,214

Net investments in leases recorded on our balance sheet were composed of the following:

	June 30, 2020				December 31, 2019
	Sales-type Leases		Direct Financing Leases		Sales-type Leases		Direct Financing Leases
	(In thousands)				(In thousands)
Lease receivables (1)	$	92,041	$	16,486	$	68,457	$	16,511
Unguaranteed residual assets	63,134		—		52,933		—
Net investment in leases	$	155,175	$	16,486	$	121,390	$	16,511

(1)

Current portion of lease receivables included in prepaid and other current assets on the balance sheet.

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Financial Instruments

6 Months Ended

Jun. 30, 2020

Fair Value Disclosures [Abstract]

Financial Instruments

Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are derived using inputs (assumptions that market participants would use in pricing an asset or liability) including assumptions about risk. GAAP categorizes inputs used in fair value measurements into three broad levels as follows:

• (Level 1) Quoted prices in active markets for identical assets or liabilities.

• (Level 2) Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, similar assets and liabilities in markets that are not active or can be corroborated by observable market data.

• (Level 3) Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes valuation techniques that involve significant unobservable inputs.

Financial Instruments

Our financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable, and debt. The carrying amounts of cash equivalents, accounts receivable and accounts payable approximate fair value due to the short-term maturity of these instruments. Debt consists of outstanding principal under our revolving credit agreement (which approximates fair value as interest rates are reset frequently at current interest rates) and our fixed interest rate senior notes.

The carrying amounts and estimated fair values of our senior notes were as follows:

		June 30, 2020		December 31, 2019
Financial Instrument	Fair Value Input Level	Carrying Value	Fair Value	Carrying Value	Fair Value
		(In thousands)
Liabilities:
6% Senior Notes	Level 2	—	—	496,531	522,045
5% Senior Notes	Level 2	491,648	477,835	—	—

Level 2 Financial Instruments

Our senior notes are measured at fair value using Level 2 inputs. The fair value of the senior notes is based on market values provided by a third-party bank, which were derived using market quotes for similar type debt instruments. See Note 9 for additional information.

Non-Recurring Fair Value Measurements

For gains on sales-type leases recognized during the second quarter of 2020, the estimated fair value of the underlying leased assets at contract inception and the present value of the estimated unguaranteed residual asset at the end of the lease term are used in determining the net investment in leases and related gain on sales-type leases recorded. The asset valuation estimates include Level 3 inputs based on a replacement cost valuation method.

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Properties and Equipment

6 Months Ended

Jun. 30, 2020

Property, Plant and Equipment [Abstract]

Properties and Equipment

Properties and Equipment 

The carrying amounts of our properties and equipment are as follows:

	June 30, 2020		December 31, 2019
	(In thousands)
Pipelines, terminals and tankage	$	1,610,916	$	1,602,231
Refinery assets	349,030		348,093
Land and right of way	87,076		86,190
Construction in progress	30,892		10,930
Other	9,829		14,110
	2,087,743		2,061,554
Less accumulated depreciation	628,809		594,455
	$	1,458,934	$	1,467,099

We capitalized $24 thousand and $8 thousand during the six months ended June 30, 2020 and 2019, respectively, in interest attributable to construction projects.

Depreciation expense was $41.7 million and $41.3 million for the six months ended June 30, 2020 and 2019, respectively, and includes depreciation of assets acquired under capital leases.

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Intangible Assets

6 Months Ended

Jun. 30, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets

Intangible Assets

Intangible assets include transportation agreements and customer relationships that represent a portion of the total purchase price of certain assets acquired from Delek in 2005, from HFC in 2008 prior to HEP becoming a consolidated VIE of HFC, from Plains in 2017, and from other minor acquisitions in 2018.

The carrying amounts of our intangible assets are as follows:

	Useful Life	June 30, 2020		December 31, 2019
		(In thousands)
Delek transportation agreement	30 years	$	59,933	$	59,933
HFC transportation agreement	10-15 years	75,131		75,131
Customer relationships	10 years	69,683		69,683
Other		50		50
		204,797		204,797
Less accumulated amortization		110,479		103,475
		$	94,318	$	101,322

Amortization expense was $7.0 million for both of the six months ended June 30, 2020 and 2019. We estimate amortization expense to be $14.0 million for each of the next two years, $9.9 million in 2023, and $9.1 million in 2024 and 2025.

We have additional transportation agreements with HFC resulting from historical transactions consisting of pipeline, terminal and tankage assets contributed to us or acquired from HFC. These transactions occurred while we were a consolidated variable interest entity of HFC; therefore, our basis in these agreements is zero and does not reflect a step-up in basis to fair value.

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Employees, Retirement and Incentive Plans

6 Months Ended

Jun. 30, 2020

Share-based Payment Arrangement [Abstract]

Employees, Retirement and Incentive Plans

Employees, Retirement and Incentive Plans

Direct support for our operations is provided by Holly Logistic Services, L.L.C. (“HLS”), an HFC subsidiary, which utilizes personnel employed by HFC who are dedicated to performing services for us. Their costs, including salaries, bonuses, payroll taxes, benefits and other direct costs, are charged to us monthly in accordance with an omnibus agreement that we have with HFC (the “Omnibus Agreement”). These employees participate in the retirement and benefit plans of HFC. Our share of retirement and benefit plan costs was $1.6 million and $1.7 million for the three months ended June 30, 2020 and 2019, respectively, and $3.7 million for the six months ended June 30, 2020 and 2019.

Under HLS’s secondment agreement with HFC (the “Secondment Agreement”), certain employees of HFC are seconded to HLS to provide operational and maintenance services for certain of our processing, refining, pipeline and tankage assets, and HLS reimburses HFC for its prorated portion of the wages, benefits, and other costs related to these employees.

We have a Long-Term Incentive Plan for employees and non-employee directors who perform services for us. The Long-Term Incentive Plan consists of four components: restricted or phantom units, performance units, unit options and unit appreciation rights. Our accounting policy for the recognition of compensation expense for awards with pro-rata vesting (a significant proportion of our awards) is to expense the costs ratably over the vesting periods.

As of June 30, 2020, we had two types of incentive-based awards outstanding, which are described below. The compensation cost charged against income was $0.5 million and $0.6 million for the three months ended June 30, 2020 and 2019, respectively, and $1.0 million and $1.2 million for the six months ended June 30, 2020 and 2019. We currently purchase units in the open market instead of issuing new units for settlement of all unit awards under our Long-Term Incentive Plan. As of June 30, 2020, 2,500,000 units were authorized to be granted under our Long-Term Incentive Plan, of which 1,119,542 have not yet been granted, assuming no forfeitures of the unvested units and full achievement of goals for the unvested performance units.

Restricted and Phantom Units

Under our Long-Term Incentive Plan, we grant restricted units to non-employee directors and phantom units to selected employees who perform services for us, with most awards vesting over a period of one to three years. Although full ownership of the units does not transfer to the recipients until the units vest, the recipients have distribution rights on these units from the date of grant, and the recipients of the restricted units have voting rights on the restricted units from the date of grant.

The fair value of each restricted or phantom unit award is measured at the market price as of the date of grant and is amortized on a straight-line basis over the requisite service period for each separately vesting portion of the award.

A summary of restricted and phantom unit activity and changes during the six months ended June 30, 2020, is presented below:

Restricted and Phantom Units	Units		Weighted Average Grant-Date Fair Value
Outstanding at January 1, 2020 (nonvested)	145,205		$	26.22
Vesting and transfer of full ownership to recipients	(4,397	)	30.29
Forfeited	(5,890	)	25.33
Outstanding at June 30, 2020 (nonvested)	134,918		$	26.13

The grant date fair values of phantom units that were vested and transferred to recipients during the six months ended June 30, 2020 were $0.1 million. No restricted or phantom units were vested and transferred to recipients during the six months ended June 30, 2019. As of June 30, 2020, there was $1.4 million of total unrecognized compensation expense related to unvested restricted and phantom unit grants, which is expected to be recognized over a weighted-average period of 1.2 years.

Performance Units

Under our Long-Term Incentive Plan, we grant performance units to selected officers who perform services for us. Performance units granted are payable in common units at the end of a three-year performance period based upon meeting certain criteria over the performance period. Under the terms of our performance unit grants, some awards are subject to the growth in our distributable cash flow per common unit over the performance period while other awards are subject to "financial performance" and "market performance." Financial performance is based on meeting certain earnings before interest, taxes, depreciation and amortization ("EBITDA") targets, while market performance is based on the relative standing of total unitholder return achieved by HEP compared to peer group companies. The number of units ultimately issued under these awards can range from 50% to 150% or 0% to 200%. As of June 30, 2020, estimated unit payouts for outstanding nonvested performance unit awards ranged between 100% and 150% of the target number of performance units granted.

We did not grant any performance units during the six months ended June 30, 2020. Although common units are not transferred to the recipients until the performance units vest, the recipients have distribution rights with respect to the target number of performance units subject to the award from the date of grant at the same rate as distributions paid on our common units.

A summary of performance unit activity and changes for the six months ended June 30, 2020, is presented below:

Performance Units	Units
Outstanding at January 1, 2020 (nonvested)	53,445
Vesting and transfer of common units to recipients	(11,634	)
Outstanding at June 30, 2020 (nonvested)	41,811

The grant date fair value of performance units vested and transferred to recipients during the six months ended June 30, 2020 and 2019 was $0.4 million and $0.3 million, respectively. Based on the weighted-average fair value of performance units outstanding at June 30, 2020, of $1.2 million, there was $0.4 million of total unrecognized compensation expense related to nonvested performance units, which is expected to be recognized over a weighted-average period of 1.6 years.

During the six months ended June 30, 2020, we did not purchase any of our common units in the open market for the issuance and settlement of unit awards under our Long-Term Incentive Plan.

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Debt

6 Months Ended

Jun. 30, 2020

Debt Instruments [Abstract]

Debt

Debt

Credit Agreement

We have a $1.4 billion senior secured revolving credit facility (the “Credit Agreement”) expiring in July 2022. The Credit Agreement is available to fund capital expenditures, investments, acquisitions, distribution payments and working capital and for general partnership purposes. The Credit Agreement is also available to fund letters of credit up to a $50 million sub-limit, and it contains an accordion feature giving us the ability to increase the size of the facility by up to $300 million with additional lender commitments.

Our obligations under the Credit Agreement are collateralized by substantially all of our assets, and indebtedness under the Credit Agreement is guaranteed by our material, wholly-owned subsidiaries.  The Credit Agreement requires us to maintain compliance with certain financial covenants consisting of total leverage, senior secured leverage, and interest coverage.  It also limits or restricts our ability to engage in certain activities.  If, at any time prior to the expiration of the Credit Agreement, HEP obtains two investment grade credit ratings, the Credit Agreement will become unsecured and many of the covenants, limitations, and restrictions will be eliminated.

We may prepay all loans at any time without penalty, except for tranche breakage costs.  If an event of default exists under the Credit Agreement, the lenders will be able to accelerate the maturity of all loans outstanding and exercise other rights and remedies.  We were in compliance with the covenants as of June 30, 2020.

Senior Notes

As of December 31, 2019, we had $500 million aggregate principal amount of 6% senior unsecured notes due in 2024 (the "6% Senior Notes") outstanding. The 6% Senior Notes were unsecured and imposed certain restrictive covenants, including limitations on our ability to incur additional indebtedness, make investments, sell assets, incur certain liens, pay distributions, enter into transactions with affiliates and enter into mergers.

On February 4, 2020, we closed a private placement of $500 million in aggregate principal amount of 5% senior unsecured notes due in 2028 (the "5% Senior Notes"). On February 5, 2020, we redeemed the existing $500 million 6% Senior Notes at a redemption cost of $522.5 million, at which time we recognized a $25.9 million early extinguishment loss consisting of a $22.5 million debt redemption premium and unamortized financing costs of $3.4 million. We funded the $522.5 million redemption with net proceeds from the issuance of our 5% Senior Notes and borrowings under our Credit Agreement.

The 5% Senior Notes are unsecured and impose certain restrictive covenants, including limitations on our ability to incur additional indebtedness, make investments, sell assets, incur certain liens, pay distributions, enter into transactions with affiliates, and enter into mergers. We were in compliance with the restrictive covenants for the 5% Senior Notes as of June 30, 2020. At any time when the 5% Senior Notes are rated investment grade by either Moody’s or Standard & Poor’s and no default or event of default exists, we will not be subject to many of the foregoing covenants. Additionally, we have certain redemption rights at varying premiums over face value under the 5% Senior Notes.

Indebtedness under the 5% Senior Notes is guaranteed by all of our existing wholly-owned subsidiaries (other than Holly Energy Finance Corp. and certain immaterial subsidiaries).

Long-term Debt

The carrying amounts of our long-term debt was as follows:

	June 30, 2020			December 31, 2019
	(In thousands)
Credit Agreement
Amount outstanding	995,000			$	965,500
6% Senior Notes
Principal	—			500,000
Unamortized premium and debt issuance costs	—			(3,469		)
	—			496,531
5% Senior Notes
Principal	500,000			—
Unamortized premium and debt issuance costs	(8,352		)	—
	491,648			—
Total long-term debt	$	1,486,648		$	1,462,031

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Related Party Transactions

6 Months Ended

Jun. 30, 2020

Related Party Transactions [Abstract]

Related Party Transactions

Related Party Transactions

We serve HFC’s refineries under long-term pipeline, terminal and tankage throughput agreements, and refinery processing unit tolling agreements expiring from 2021 to 2036, and revenues from these agreements accounted for 83% and 81% of our total revenues for the three months and six months ended June 30, 2020, respectively. Under these agreements, HFC agrees to transport, store and process throughput volumes of refined product, crude oil and feedstocks on our pipelines, terminals, tankage, loading rack facilities and refinery processing units that result in minimum annual payments to us. These minimum annual payments or revenues are subject to annual rate adjustments on July 1st each year generally based on increases or decreases in PPI or the FERC index. As of July 1, 2020, these agreements with HFC require minimum annualized payments to us of $351.1 million.

If HFC fails to meet its minimum volume commitments under the agreements in any quarter, it will be required to pay us the amount of any shortfall in cash by the last day of the month following the end of the quarter. Under certain of these agreements, a shortfall payment may be applied as a credit in the following four quarters after its minimum obligations are met.

Under certain provisions of the Omnibus Agreement, we pay HFC an annual administrative fee (currently $2.6 million) for the provision by HFC or its affiliates of various general and administrative services to us. This fee does not include the salaries of personnel employed by HFC who perform services for us on behalf of HLS or the cost of their employee benefits, which are charged to us separately by HFC. Also, we reimburse HFC and its affiliates for direct expenses they incur on our behalf.

Related party transactions with HFC are as follows:

• Revenues received from HFC were $95.6 million and $102.4 million for the three months ended June 30, 2020 and 2019, respectively, and $197.0 million and $205.7 million for the six months ended June 30, 2020 and 2019, respectively.

• HFC charged us general and administrative services under the Omnibus Agreement of $0.7 million and $0.6 million for the three months ended June 30, 2020 and 2019, and $1.3 million for the six months ended June 30, 2020 and 2019.

• We reimbursed HFC for costs of employees supporting our operations of $13.2 million for the three months ended June 30, 2020 and 2019, and $27.3 million and $26.8 million for the six months ended June 30, 2020 and 2019.

• HFC reimbursed us $0.9 million and $3.6 million for the three months ended June 30, 2020 and 2019, respectively, for expense and capital projects, and $4.0 million and $5.8 million for the six months ended June 30, 2020 and 2019.

• We distributed $18.4 million and $37.5 million in the three months ended June 30, 2020 and 2019, respectively, and $56.0 million and $74.8 million for the six months ended June 30, 2020 and 2019, respectively, to HFC as regular distributions on its common units.

• Accounts receivable from HFC were $49.8 million and $49.7 million at June 30, 2020, and December 31, 2019, respectively.

• Accounts payable to HFC were $7.3 million and $16.7 million at June 30, 2020, and December 31, 2019, respectively.

• Deferred revenue in the consolidated balance sheets at June 30, 2020 and December 31, 2019, included $0.3 million and $0.5 million, respectively, relating to certain shortfall billings to HFC.

• We received direct financing lease payments from HFC for use of our Artesia and Tulsa railyards of $0.5 million for the three months ended June 30, 2020 and 2019, respectively, and $1.0 million for both the six months ended June 30, 2020 and 2019 .

• We received sales-type lease payments of $2.4 million from HFC that were not included in revenues for the three months ended June 30, 2020 and no payments for the same period in 2019, respectively, and $4.8 million for the six months ended June 30, 2020 and no payments for the same period in 2019.

•

On October 31, 2017, we closed on an equity restructuring transaction with HEP Logistics, a wholly-owned subsidiary of HFC and the general partner of HEP, pursuant to which the incentive distribution rights held by HEP Logistics were canceled, and HEP Logistics' 2% general partner interest in HEP was converted into a non-economic general partner interest in HEP. In consideration, we issued 37,250,000 of our common units to HEP Logistics. In addition, HEP Logistics agreed to waive $2.5 million of limited partner cash distributions for each of twelve consecutive quarters beginning with the first quarter the units issued as consideration were eligible to receive distributions. This waiver of limited partner cash distributions will expire after the cash distribution for the second quarter of 2020, which will be made during the third quarter of 2020.

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Partners' Equity, Income Allocations and Cash Distributions

6 Months Ended

Jun. 30, 2020

Partners' Capital [Abstract]

Partners' Equity, Income Allocations and Cash Distributions

Partners’ Equity, Income Allocations and Cash Distributions

As of June 30, 2020, HFC held 59,630,030 of our common units, constituting a 57% limited partner interest in us, and held the non-economic general partner interest.

Continuous Offering Program

We have a continuous offering program under which we may issue and sell common units from time to time, representing limited partner interests, up to an aggregate gross sales amount of $200 million. As of June 30, 2020, HEP has issued 2,413,153 units under this program, providing $82.3 million in gross proceeds.

Allocations of Net Income

Net income attributable to HEP is allocated to the partners based on their weighted-average ownership percentage during the period.

Cash Distributions

On July 23, 2020, we announced our cash distribution for the second quarter of 2020 of $0.35 per unit. The distribution is payable on all common units and will be paid August 13, 2020, to all unitholders of record on August 3, 2020. However, HEP Logistics waived $2.5 million in limited partner cash distributions due to them as discussed in Note 1.

Our regular quarterly cash distribution to the limited partners will be $34.5 million for the three months ended June 30, 2020 and was $68.5 million for the three months ended June 30, 2019. For the six months ended June 30, 2020, the regular quarterly distribution to the limited partners will be $68.9 million and was $136.7 million for the six months ended June 30, 2019. Our distributions are declared subsequent to quarter end; therefore, these amounts do not reflect distributions paid during the respective period.

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Net Income per Limited Partner Unit

6 Months Ended

Jun. 30, 2020

Net Income per Limited Partner Unit [Abstract]

Net Income Per Limited Partner Unit

Net Income Per Limited Partner Unit

Basic net income per unit applicable to the limited partners is calculated as net income attributable to the partners divided by the weighted average limited partners’ units outstanding. Diluted net income per unit assumes, when dilutive, the issuance of the net incremental units from restricted units, phantom units and performance units.To the extent net income attributable to the partners exceeds or is less than cash distributions, this difference is allocated to the partners based on their weighted-average ownership percentage during the period, after consideration of any priority allocations of earnings. Our dilutive securities are immaterial for all periods presented.

Net income per limited partner unit is computed as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
	(In thousands, except per unit data)
Net income attributable to the partners	$	76,470	$	45,690	$	101,331	$	96,872
Weighted average limited partners' units outstanding	105,440		105,440		105,440		105,440
Limited partners' per unit interest in earnings - basic and diluted	$	0.73	$	0.43	$	0.96	$	0.92

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Environmental

6 Months Ended

Jun. 30, 2020

Accrual for Environmental Loss Contingencies [Abstract]

Environmental

Environmental

We expensed $0.5 million and $0.7 million for the three and six months ended June 30, 2020, for environmental remediation obligations, and we expensed $0.1 million for the three and six months ended June 30, 2019. The accrued environmental liability, net of expected recoveries from indemnifying parties, reflected in our consolidated balance sheets was $5.7 million and $5.5 million at June 30, 2020 and December 31, 2019, respectively, of which $3.5 million was classified as other long-term liabilities for both periods. These accruals include remediation and monitoring costs expected to be incurred over an extended period of time.

Under the Omnibus Agreement and certain transportation agreements and purchase agreements with HFC, HFC has agreed to indemnify us, subject to certain monetary and time limitations, for environmental noncompliance and remediation liabilities associated with certain assets transferred to us from HFC and occurring or existing prior to the date of such transfers. Our consolidated balance sheets included additional accrued environmental liabilities of $0.4 million and $0.5 million for HFC indemnified liabilities for the periods ending June 30, 2020 and December 31, 2019, respectively, and other assets included equal and offsetting balances representing amounts due from HFC related to indemnifications for environmental remediation liabilities.

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Contingencies

6 Months Ended

Jun. 30, 2020

Commitments and Contingencies Disclosure [Abstract]

Contingencies

Contingencies

We are a party to various legal and regulatory proceedings, none of which we believe will have a material adverse impact on our financial condition, results of operations or cash flows.

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Operating Segments

6 Months Ended

Jun. 30, 2020

Segment Reporting [Abstract]

Operating Segments

Segment Information

Although financial information is reviewed by our chief operating decision makers from a variety of perspectives, they view the business in two reportable operating segments: pipelines and terminals, and refinery processing units. These operating segments adhere to the accounting polices used for our consolidated financial statements.

Pipelines and terminals have been aggregated as one reportable segment as both pipeline and terminals (1) have similar economic characteristics, (2) similarly provide logistics services of transportation and storage of petroleum products, (3) similarly support the petroleum refining business, including distribution of its products, (4) have principally the same customers and (5) are subject to similar regulatory requirements.

We evaluate the performance of each segment based on its respective operating income. Certain general and administrative expenses and interest and financing costs are excluded from segment operating income as they are not directly attributable to a specific reportable segment. Identifiable assets are those used by the segment, whereas other assets are principally equity method investments, cash, deposits and other assets that are not associated with a specific reportable reportable segment.

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
	(In thousands)
Revenues:
Pipelines and terminals - affiliate	$	75,990		$	82,970		$	157,534		$	164,510
Pipelines and terminals - third-party	19,244			28,382			45,670			59,520
Refinery processing units - affiliate	19,573			19,399			39,457			41,218
Total segment revenues	$	114,807		$	130,751		$	242,661		$	265,248
Segment operating income:
Pipelines and terminals	$	45,630		$	57,936		$	104,533		$	121,168
Refinery processing units	9,406			7,966			19,398			17,888
Total segment operating income	55,036			65,902			123,931			139,056
Unallocated general and administrative expenses	(2,535		)	(1,988		)	(5,237		)	(4,608		)
Interest and financing costs, net	(10,966		)	(18,679		)	(26,515		)	(37,173		)
Loss on early extinguishment of debt	—			—			(25,915		)	—
Equity in earnings of equity method investments	2,156			1,783			3,870			3,883
Gain on sales-type leases	33,834			—			33,834			—
Gain (loss) on sale of assets and other	468			111			974			(199		)
Income before income taxes	$	77,993		$	47,129		$	104,942		$	100,959
Capital Expenditures:
Pipelines and terminals	$	11,798		$	7,034		$	30,416		$	17,752
Refinery processing units	—			—			324			—
Total capital expenditures	$	11,798		$	7,034		$	30,740		$	17,752

	June 30, 2020		December 31, 2019
	(In thousands)
Identifiable assets:
Pipelines and terminals (1)	$	1,765,038	$	1,749,843
Refinery processing units	307,900		305,897
Other	148,845		143,492
Total identifiable assets	$	2,221,783	$	2,199,232

(1) Includes goodwill of $270.3 million as of June 30, 2020 and December 31, 2019.

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Supplemental Guarantor / Non-Guarantor Financial Information

6 Months Ended

Jun. 30, 2020

Supplemental Guarantor / Non-Guarantor Financial Information [Abstract]

Supplemental Guarantor / Non-Guarantor Financial Information

Supplemental Guarantor/Non-Guarantor Financial Information

Obligations of HEP (“Parent”) under the 5% Senior Notes have been jointly and severally guaranteed by each of its direct and indirect 100% owned subsidiaries (“Guarantor Subsidiaries”). These guarantees are full and unconditional, subject to certain customary release provisions. These circumstances include (i) when a Guarantor Subsidiary is sold or sells all or substantially all of its assets, (ii) when a Guarantor Subsidiary is declared “unrestricted” for covenant purposes, (iii) when a Guarantor Subsidiary’s guarantee of other indebtedness is terminated or released and (iv) when the requirements for legal defeasance or covenant defeasance or to discharge the senior notes have been satisfied.

The following financial information presents condensed consolidating balance sheets, statements of comprehensive income, and statements of cash flows of the Parent, the Guarantor Subsidiaries and the Non-Guarantor Subsidiaries. The information has been presented as if the Parent accounted for its ownership in the Guarantor Subsidiaries, and the Guarantor Restricted Subsidiaries accounted for the ownership of the Non-Guarantor Non-Restricted Subsidiaries, using the equity method of accounting.

Condensed Consolidating Balance Sheet

June 30, 2020		Parent		Guarantor Restricted Subsidiaries			Non-Guarantor Non-Restricted Subsidiaries		Eliminations			Consolidated
		(In thousands)
ASSETS
Current assets:
Cash and cash equivalents		$	3,927	$	(766	)	$	15,752	$	—		$	18,913
Accounts receivable		—		58,197			7,840		(1,261		)	64,776
Prepaid and other current assets		337		6,992			576					7,905
Total current assets		4,264		64,423			24,168		(1,261		)	91,594
Properties and equipment, net		—		1,110,139			348,795		—			1,458,934
Operating lease right-of-use assets	0	—		3,185			192		—			3,377
Net investment in leases		—		168,153					—			168,153
Investment in subsidiaries		1,868,595		282,348			—		(2,150,943		)	—
Intangible assets, net		—		94,318			—		—			94,318
Goodwill		—		270,336			—		—			270,336
Equity method investments		—		83,484			39,815		—			123,299
Other assets		5,497		6,275			—		—			11,772
Total assets		$	1,878,356	$	2,082,661		$	412,970	$	(2,152,204	)	$	2,221,783
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable		$	—	$	14,343		$	8,843	$	(1,261	)	$	21,925
Accrued interest		10,683		—			—		—			10,683
Deferred revenue		—		10,502			500		—			11,002
Accrued property taxes		—		2,732			2,794		—			5,526
Current operating lease liabilities		—		1,145			68		—			1,213
Current finance lease liabilities		—		3,293			—		—			3,293
Other current liabilities		42		2,819			114		—			2,975
Total current liabilities		10,725		34,834			12,319		(1,261		)	56,617
Long-term debt		1,486,648		—			—		—			1,486,648
Noncurrent operating lease liabilities		—		2,530			—		—			2,530
Noncurrent finance lease liabilities		—		70,039			—		—			70,039
Other long-term liabilities		260		12,909			520		—			13,689
Deferred revenue		—		42,692			—		—			42,692
Class B unit		—		51,062			—		—			51,062
Equity - partners		380,723		1,868,595			282,348		(2,150,943		)	380,723
Equity - noncontrolling interest		—		—			117,783		—			117,783
Total liabilities and equity		$	1,878,356	$	2,082,661		$	412,970	$	(2,152,204	)	$	2,221,783

Condensed Consolidating Balance Sheet

December 31, 2019	Parent		Guarantor Restricted Subsidiaries			Non-Guarantor Non-Restricted Subsidiaries		Eliminations			Consolidated
	(In thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	4,790	$	(709	)	$	9,206	$	—		$	13,287
Accounts receivable	—		60,229			8,549		(331		)	68,447
Prepaid and other current assets	282		6,710			637		—			7,629
Total current assets	5,072		66,230			18,392		(331		)	89,363
Properties and equipment, net	—		1,133,534			333,565		—			1,467,099
Operating lease right-of-use assets	—		3,243			12		—			3,255
Net investment in leases	—		134,886			—		—			134,886
Investment in subsidiaries	1,844,812		275,279			—		(2,120,091		)	—
Intangible assets, net	—		101,322			—		—			101,322
Goodwill	—		270,336			—		—			270,336
Equity method investments	—		82,987			37,084		—			120,071
Other assets	6,722		6,178			—		—			12,900
Total assets	$	1,856,606	$	2,073,995		$	389,053	$	(2,120,422	)	$	2,199,232
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	—	$	29,895		$	4,991	$	(331	)	$	34,555
Accrued interest	13,206		—			—		—			13,206
Deferred revenue	—		9,740			650		—			10,390
Accrued property taxes	—		2,737			1,062		—			3,799
Current operating lease liabilities	—		1,114			12		—			1,126
Current finance lease liabilities	—		3,224			—		—			3,224
Other current liabilities	6		2,293			6		—			2,305
Total current liabilities	13,212		49,003			6,721		(331		)	68,605
Long-term debt	1,462,031		—			—		—			1,462,031
Noncurrent operating lease liabilities	—		2,482			—		—			2,482
Noncurrent finance lease liabilities	—		70,475			—		—			70,475
Other long-term liabilities	260		12,150			398		—			12,808
Deferred revenue	—		45,681			—		—			45,681
Class B unit	—		49,392			—		—			49,392
Equity - partners	381,103		1,844,812			275,279		(2,120,091		)	381,103
Equity - noncontrolling interest	—		—			106,655		—			106,655
Total liabilities and equity	$	1,856,606	$	2,073,995		$	389,053	$	(2,120,422	)	$	2,199,232

Condensed Consolidating Statement of Comprehensive Income

Three Months Ended June 30, 2020	Parent			Guarantor Restricted Subsidiaries			Non-Guarantor Non-restricted Subsidiaries			Eliminations			Consolidated
	(In thousands)
Revenues:
Affiliates	$	—		$	89,417		$	6,146		$	—		$	95,563
Third parties	—			15,887			3,357			—			19,244
	—			105,304			9,503			—			114,807
Operating costs and expenses:
Operations (exclusive of depreciation and amortization)	—			30,980			3,757			—			34,737
Depreciation and amortization	—			20,739			4,295			—			25,034
General and administrative	780			1,755			—			—			2,535
	780			53,474			8,052			—			62,306
Operating income (loss)	(780		)	51,830			1,451			—			52,501
Other income (expense):
Equity in earnings of subsidiaries	89,893			1,510			—			(91,403		)	—
Equity in earnings of equity method investments	—			1,449			707			—			2,156
Interest expense	(12,740		)	(1,039		)	—			—			(13,779		)
Interest income	26			2,787			—			—			2,813
Gain on sales-type lease	—			33,834			—			—			33,834
Gain on sale of assets and other	71			396			1			—			468
	77,250			38,937			708			(91,403		)	25,492
Income before income taxes	76,470			90,767			2,159			(91,403		)	77,993
State income tax expense	—			(39		)	—			—			(39		)
Net income	76,470			90,728			2,159			(91,403		)	77,954
Allocation of net income attributable to noncontrolling interests	—			(835		)	(649		)	—			(1,484		)
Net income attributable to the partners	$	76,470		$	89,893		$	1,510		$	(91,403	)	$	76,470

Condensed Consolidating Statement of Comprehensive Income

Three Months Ended June 30, 2019	Parent			Guarantor Restricted Subsidiaries			Non-Guarantor Non-Restricted Subsidiaries			Eliminations			Consolidated
	(In thousands)
Revenues:
Affiliates	$	—		$	96,221		$	6,148		$	—		$	102,369
Third parties	—			23,700			4,682			—			28,382
	—			119,921			10,830			—			130,751
Operating costs and expenses:
Operations (exclusive of depreciation and amortization)	—			36,701			3,901			—			40,602
Depreciation and amortization				20,027			4,220			—			24,247
General and administrative	745			1,243			—			—			1,988
	745			57,971			8,121			—			66,837
Operating income (loss)	(745		)	61,950			2,709			—			63,914
Other income (expense):
Equity in earnings of subsidiaries	65,431			2,063			—			(67,494		)	—
Equity in earnings of equity method investments	—			1,783			—			—			1,783
Interest expense	(18,996		)	(234		)	—			—			(19,230		)
Interest income	—			551			—			—			551
Gain (loss) on sale of assets and other	—			69			42			—			111
	46,435			4,232			42			(67,494		)	(16,785		)
Income before income taxes	45,690			66,182			2,751			(67,494		)	47,129
State income tax benefit	—			30			—			—			30
Net income	45,690			66,212			2,751			(67,494		)	47,159
Allocation of net income attributable to noncontrolling interests	—			(781		)	(688		)	—			(1,469		)
Net income attributable to the partners	$	45,690		$	65,431		$	2,063		$	(67,494	)	$	45,690

Condensed Consolidating Statement of Comprehensive Income

Six Months Ended June 30, 2020	Parent			Guarantor Restricted Subsidiaries			Non-Guarantor Non-restricted Subsidiaries				Eliminations				Consolidated
	(In thousands)
Revenues:
Affiliates	$	—		$	184,172		$	12,819			$	—			$	196,991
Third parties	—			35,042			10,628				—				45,670
	—			219,214			23,447				—				242,661
Operating costs and expenses:
Operations (exclusive of depreciation and amortization)	—			62,111			7,607				—				69,718
Depreciation and amortization	—			40,492			8,520				—				49,012
General and administrative	1,879			3,358			—				—				5,237
	1,879			105,961			16,127				—				123,967
Operating income (loss)	(1,879		)	113,253			7,320				—			—	118,694
Other income (expense):
Equity in earnings of subsidiaries	158,428			5,805			—				(164,233		)		—
Equity in earnings of equity method investments	—			3,537			333			—	—				3,870
Interest expense	(29,470		)	(2,076		)	—				—				(31,546		)
Interest income	26			5,005			—				—				5,031
Loss on early extinguishment of debt	(25,915		)	—			—				—				(25,915		)
Gain on sales-type lease	—			33,834			—				—				33,834
Gain on sale of assets and other	141			816			17			—	—				974
	103,210			46,921			350				(164,233		)		(13,752		)
Income before income taxes	101,331			160,174			7,670				(164,233		)		104,942
State income tax expense	—			(76		)	—				—				(76		)
Net income	101,331			160,098			7,670				(164,233		)		104,866
Allocation of net income attributable to noncontrolling interests	—			(1,670		)	(1,865		)		—				(3,535		)
Net income attributable to the partners	$	101,331		$	158,428		$	5,805			$	(164,233	)		$	101,331

Condensed Consolidating Statement of Comprehensive Income

Six Months Ended June 30, 2019	Parent			Guarantor Restricted Subsidiaries			Non-Guarantor Non-restricted Subsidiaries				Eliminations			Consolidated
	(In thousands)
Revenues:
Affiliates	$	—		$	193,614		$	12,114			$	—		$	205,728
Third parties	—			45,765			13,755				—			59,520
	—			239,379			25,869				—			265,248
Operating costs and expenses:
Operations (exclusive of depreciation and amortization)	—			70,778			7,343				—			78,121
Depreciation and amortization				39,563			8,508				—			48,071
General and administrative	1,821			2,787			—				—			4,608
	1,821			113,128			15,851				—			130,800
Operating income (loss)	(1,821		)	126,251			10,018				—			134,448
Other income (expense):
Equity in earnings of subsidiaries	136,730			7,559			—				(144,289		)	—
Equity in earnings of equity method investments	—			3,883			—			—	—			3,883
Interest expense	(38,037		)	(215		)	—				—			(38,252		)
Interest income	—			1,079			—			—	—			1,079
Gain on sale of assets and other	—			(260		)	61				—			(199		)
	98,693			12,046			61				(144,289		)	(33,489		)
Income before income taxes	96,872			138,297			10,079				(144,289		)	100,959
State income tax expense	—			(6		)	—				—			(6		)
Net income	96,872			138,291			10,079				(144,289		)	100,953
Allocation of net income attributable to noncontrolling interests	—			(1,561		)	(2,520		)		—			(4,081		)
Net income attributable to the partners	$	96,872		$	136,730		$	7,559			$	(144,289	)	$	96,872

Condensed Consolidating Statement of Cash Flows

Six Months Ended June 30, 2020	Parent			Guarantor Restricted Subsidiaries			Non-Guarantor Non-Restricted Subsidiaries			Eliminations			Consolidated
	(In thousands)
Cash flows from operating activities	$	(31,103	)	$	151,331		$	20,277		$	(5,911	)	$	134,594
Cash flows from investing activities
Additions to properties and equipment	—			(8,883		)	(21,857		)	—			(30,740		)
Investment in Cushing Connect	—			(13,263		)	(2,400		)	13,263			(2,400		)
Proceeds from sale of assets	—			816			—			—			816
Distributions in excess of equity in earnings of equity investments	—			6,559			—			(6,089		)	470
	—			(14,771		)	(24,257		)	7,174			(31,854		)
Cash flows from financing activities
Net borrowings under credit agreement	29,500			—			—			—			29,500
Net intercompany financing activities	134,645			(134,645		)	—			—			—
Redemption of senior notes	(522,500		)	—			—			—			(522,500		)
Proceeds from issuance of senior notes	500,000			—			—			—			500,000
Contribution from general partner	435			—			13,263			(13,263		)	435
Contribution from noncontrolling interest	—			—			13,263			—			13,263
Distributions to HEP unitholders	(102,979		)	—			—			—			(102,979		)
Distributions to noncontrolling interests	—			—			(16,000		)	12,000			(4,000		)
Units withheld for tax withholding obligations	(147		)	—			—			—			(147		)
Deferred financing costs	(8,714		)	—			—			—			(8,714		)
Payments on finance leases	—			(1,972		)	—			—			(1,972		)
	30,240			(136,617		)	10,526			(1,263		)	(97,114		)
Cash and cash equivalents
Increase (decrease) for the period	(863		)	(57		)	6,546			—			5,626
Beginning of period	4,790			(709		)	9,206			—			13,287
End of period	$	3,927		$	(766	)	$	15,752		$	—		$	18,913

Condensed Consolidating Statement of Cash Flows

Six Months Ended June 30, 2019	Parent			Guarantor Restricted Subsidiaries			Non-Guarantor Non-Restricted Subsidiaries			Eliminations			Consolidated
	(In thousands)
Cash flows from operating activities	$	(37,005	)	$	165,882		$	23,671		$	(7,559	)	$	144,989
Cash flows from investing activities
Additions to properties and equipment	—			(17,274		)	(478		)	—			(17,752		)
Distributions from UNEV in excess of earnings	—			8,191			—			(8,191		)	—
Proceeds from sale of assets	—			194			—			—			194
Distributions in excess of equity in earnings of equity investments	—			299			—			—			299
	—			(8,590		)	(478		)	(8,191		)	(17,259		)
Cash flows from financing activities
Net borrowings under credit agreement	18,500			—			—			—			18,500
Net intercompany financing activities	155,225			(155,225		)	—			—			—
Distributions to HEP unitholders	(136,207		)	—			—			—			(136,207		)
Distributions to noncontrolling interests	—			—			(21,000		)	15,750			(5,250		)
Units withheld for tax withholding obligations	(119		)	—			—			—			(119		)
Purchase units for incentive grants	(255		)				—			—			(255		)
Payments on finance leases	(139		)	(364		)	—			—			(503		)
	37,005			(155,589		)	(21,000		)	15,750			(123,834		)
Cash and cash equivalents
Increase for the period	—			1,703			2,193			—			3,896
Beginning of period	2			—			3,043			—			3,045
End of period	$	2		$	1,703		$	5,236		$	—		$	6,941

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Description of Business and Presentation of Financial Statements (Policies)

6 Months Ended

Jun. 30, 2020

Accounting Policies [Abstract]

Credit Loss, Financial Instrument [Policy Text Block]

Credit Losses Measurement

In June 2016, ASU 2016-13, “Measurement of Credit Losses on Financial Instruments,” was issued requiring measurement of all expected credit losses for certain types of financial instruments, including trade receivables, held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. We adopted this standard effective January 1, 2020, and adoption of the standard did not have a material impact on our financial condition, results of operations or cash flows.

Consolidation

Principles of Consolidation and Common Control Transactions

The consolidated financial statements include our accounts and those of subsidiaries and joint ventures that we control. All significant intercompany transactions and balances have been eliminated.

Most of our acquisitions from HFC occurred while we were a consolidated variable interest entity (“VIE”) of HFC. Therefore, as an entity under common control with HFC, we recorded these acquisitions on our balance sheets at HFC's historical basis instead of our purchase price or fair value.

Goodwill Impairment Testing

Goodwill Impairment Testing

In January 2017, Accounting Standard Update (“ASU”) 2017-04, “Simplifying the Test for Goodwill Impairment,” was issued amending the testing for goodwill impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. Under this standard, goodwill impairment is measured as the excess of the carrying amount of the reporting unit over the related fair value. We adopted this standard effective in the second quarter of 2019, and the adoption of this standard had no effect on our financial condition, results of operations or cash flows.

Lessee, Leases

Leases

In February 2016, ASU No. 2016-02, “Leases” (“ASC 842”) was issued requiring leases to be measured and recognized as a lease liability, with a corresponding right-of-use asset on the balance sheet. We adopted this standard effective January 1, 2019, and we elected to adopt using the modified retrospective transition method, whereby comparative prior period financial information will not be restated and will continue to be reported under the lease accounting standard in effect during those periods. We also elected practical expedients provided by the new standard, including the package of practical expedients and the short-term lease recognition practical expedient, which allow an entity to not recognize on the balance sheet leases with a term of 12 months or less. Upon adoption of this standard, we recognized $78.4 million of lease liabilities and corresponding right-of-use assets on our consolidated balance sheet. Adoption of this standard did not have a material impact on our results of operations or cash flows. See Notes 3 and 4 for additional information on our lease policies.

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Revenues (Tables)

6 Months Ended

Jun. 30, 2020

Revenue from Contract with Customer [Abstract]

Schedule of Contract Asset and Contract Liability Balances

Our consolidated balance sheets included the contract assets and liabilities in the table below:

	June 30, 2020			December 31, 2019
	(In thousands)
Contract assets	$	6,064		$	5,675
Contract liabilities	$	(500	)	$	(650	)

Schedule of Future Performance Obligations

We expect to recognize revenue for these unfulfilled performance obligations as shown in the table below (amounts shown in table include both service and lease revenues):

Years Ending December 31,	(In millions)
Remainder of 2020	$	185
2021	362
2022	332
2023	295
2024	257
2025	188
Thereafter	650
Total	$	2,269

Schedule of Disaggregated Revenue

Disaggregated revenues were as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
	(In thousands)
Pipelines	$	58,954	$	72,263	$	129,426	$	147,363
Terminals, tanks and loading racks	36,280		39,089		73,778		76,667
Refinery processing units	19,573		19,399		39,457		41,218
	$	114,807	$	130,751	$	242,661	$	265,248

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Leases (Tables)

6 Months Ended

Jun. 30, 2020

Leases [Abstract]

Schedule of Supplemental Balance Sheet Information

Supplemental balance sheet information related to leases was as follows (in thousands, except for lease term and discount rate):

	June 30, 2020			December 31, 2019
Operating leases:
Operating lease right-of-use assets, net	$	3,377		3,255
Current operating lease liabilities	1,213			1,126
Noncurrent operating lease liabilities	2,530			2,482
Total operating lease liabilities	$	3,743		3,608
Finance leases:
Properties and equipment	$	6,851		6,968
Accumulated amortization	(3,358		)	(4,547	)
Properties and equipment, net	$	3,493		2,421
Current finance lease liabilities	$	3,293		3,224
Noncurrent finance lease liabilities	70,039			70,475
Total finance lease liabilities	$	73,332		73,699
Weighted average remaining lease term (in years)
Operating leases	6.1			6.5
Finance leases	16.3			17.0
Weighted average discount rate
Operating leases	4.8%			5.0%
Finance leases	5.6%			6.0%

Schedule of Supplemental Cash Flow Information and Components of Lease Expense

The components of lease expense were as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
	(In thousands)
Operating lease costs	$	230	$	1,798	$	503	$	3,568
Finance lease costs
Amortization of assets	273		254		515		498
Interest on lease liabilities	1,040		24		2,077		51
Variable lease cost	46		35		95		71
Total net lease cost	$	1,589	$	2,111	$	3,190	$	4,188

Supplemental cash flow and other information related to leases were as follows:

	Six Months Ended June 30,
	2020		2019
	(In thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows on operating leases	$	518	$	3,589
Operating cash flows on finance leases	$	2,157	$	51
Financing cash flows on finance leases	$	1,972	$	503

Sales-Type Lease, Gain Recognized

Therefore, we recognized a gain on sales-type leases during the three months ending June 30, 2020 composed of the following:

	(In thousands)
Net investment in leases	$	35,319
Properties and equipment, net	(1,485		)
Gain on sales-type leases	$	33,834

Schedule of Operating Lease Maturities

Maturities of lease liabilities were as follows:

	June 30, 2020
	Operating			Finance
	(In thousands)
2020	$	491		$	3,865
2021	906			7,411
2022	627			7,285
2023	607			7,332
2024	494			6,856
2025 and thereafter	1,179			80,313
Total lease payments	4,304			113,062
Less: Imputed interest	(561		)	(39,730		)
Total lease obligations	3,743			73,332
Less: Current lease liabilities	(1,213		)	(3,293		)
Noncurrent lease liabilities	$	2,530		$	70,039

Schedule of Finance Lease Maturities

Maturities of lease liabilities were as follows:

	June 30, 2020
	Operating			Finance
	(In thousands)
2020	$	491		$	3,865
2021	906			7,411
2022	627			7,285
2023	607			7,332
2024	494			6,856
2025 and thereafter	1,179			80,313
Total lease payments	4,304			113,062
Less: Imputed interest	(561		)	(39,730		)
Total lease obligations	3,743			73,332
Less: Current lease liabilities	(1,213		)	(3,293		)
Noncurrent lease liabilities	$	2,530		$	70,039

Schedule of Lease Income

Lease income recognized was as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
	(In thousands)
Operating lease revenues	$	84,872	$	94,783	$	175,671	$	188,287
Direct financing lease interest income	524		509		1,048		1,019
Gain on sales-type leases	33,834		—		33,834		—
Sales-type lease interest income	2,286		—		3,940		—
Lease revenues relating to variable lease payments not included in measurement of the sales-type lease receivable	1,474		—		3,822		—

Schedule of Minimum Undiscounted Lease Payments

Annual minimum undiscounted lease payments under our leases were as follows as of June 30, 2020:

	Operating		Finance		Sales-type
Years Ending December 31,	(In thousands)
Remainder of 2020	$	155,376	$	1,060	$	6,198
2021	306,771		2,128		12,396
2022	304,315		2,145		12,396
2023	273,362		2,162		12,396
2024	235,280		2,179		12,396
2025 and thereafter	739,158		40,787		72,432
Total	$	2,014,262	$	50,461	$	128,214

Schedule of Net Investment in Leases

Net investments in leases recorded on our balance sheet were composed of the following:

	June 30, 2020				December 31, 2019
	Sales-type Leases		Direct Financing Leases		Sales-type Leases		Direct Financing Leases
	(In thousands)				(In thousands)
Lease receivables (1)	$	92,041	$	16,486	$	68,457	$	16,511
Unguaranteed residual assets	63,134		—		52,933		—
Net investment in leases	$	155,175	$	16,486	$	121,390	$	16,511

(1)

Current portion of lease receivables included in prepaid and other current assets on the balance sheet.

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Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2020

Fair Value Disclosures [Abstract]

Schedule of Fair Value, Financial Instruments Measured on Recurring Basis

The carrying amounts and estimated fair values of our senior notes were as follows:

		June 30, 2020		December 31, 2019
Financial Instrument	Fair Value Input Level	Carrying Value	Fair Value	Carrying Value	Fair Value
		(In thousands)
Liabilities:
6% Senior Notes	Level 2	—	—	496,531	522,045
5% Senior Notes	Level 2	491,648	477,835	—	—

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Properties and Equipment (Tables)

6 Months Ended

Jun. 30, 2020

Property, Plant and Equipment [Abstract]

Schedule of Properties and Equipment

The carrying amounts of our properties and equipment are as follows:

	June 30, 2020		December 31, 2019
	(In thousands)
Pipelines, terminals and tankage	$	1,610,916	$	1,602,231
Refinery assets	349,030		348,093
Land and right of way	87,076		86,190
Construction in progress	30,892		10,930
Other	9,829		14,110
	2,087,743		2,061,554
Less accumulated depreciation	628,809		594,455
	$	1,458,934	$	1,467,099

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Intangible Assets (Tables)

6 Months Ended

Jun. 30, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Finite-Lived Intangible Assets by Major Class

The carrying amounts of our intangible assets are as follows:

	Useful Life	June 30, 2020		December 31, 2019
		(In thousands)
Delek transportation agreement	30 years	$	59,933	$	59,933
HFC transportation agreement	10-15 years	75,131		75,131
Customer relationships	10 years	69,683		69,683
Other		50		50
		204,797		204,797
Less accumulated amortization		110,479		103,475
		$	94,318	$	101,322

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Employees, Retirement and Incentive Plans (Tables)

6 Months Ended

Jun. 30, 2020

Share-based Payment Arrangement [Abstract]

Schedule of Nonvested Restricted Stock Units Activity

A summary of restricted and phantom unit activity and changes during the six months ended June 30, 2020, is presented below:

Restricted and Phantom Units	Units		Weighted Average Grant-Date Fair Value
Outstanding at January 1, 2020 (nonvested)	145,205		$	26.22
Vesting and transfer of full ownership to recipients	(4,397	)	30.29
Forfeited	(5,890	)	25.33
Outstanding at June 30, 2020 (nonvested)	134,918		$	26.13

Schedule of Nonvested Performance-based Units Activity

A summary of performance unit activity and changes for the six months ended June 30, 2020, is presented below:

Performance Units	Units
Outstanding at January 1, 2020 (nonvested)	53,445
Vesting and transfer of common units to recipients	(11,634	)
Outstanding at June 30, 2020 (nonvested)	41,811

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Debt (Tables)

6 Months Ended

Jun. 30, 2020

Debt Instruments [Abstract]

Schedule of Long-term Debt Instruments

The carrying amounts of our long-term debt was as follows:

	June 30, 2020			December 31, 2019
	(In thousands)
Credit Agreement
Amount outstanding	995,000			$	965,500
6% Senior Notes
Principal	—			500,000
Unamortized premium and debt issuance costs	—			(3,469		)
	—			496,531
5% Senior Notes
Principal	500,000			—
Unamortized premium and debt issuance costs	(8,352		)	—
	491,648			—
Total long-term debt	$	1,486,648		$	1,462,031

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Net Income per Limited Partner Unit (Tables)

6 Months Ended

Jun. 30, 2020

Net Income per Limited Partner Unit [Abstract]

Schedule of Allocation to Limited Partner Interest in Net Income

Net income per limited partner unit is computed as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
	(In thousands, except per unit data)
Net income attributable to the partners	$	76,470	$	45,690	$	101,331	$	96,872
Weighted average limited partners' units outstanding	105,440		105,440		105,440		105,440
Limited partners' per unit interest in earnings - basic and diluted	$	0.73	$	0.43	$	0.96	$	0.92

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Operating Segments (Tables)

6 Months Ended

Jun. 30, 2020

Segment Reporting [Abstract]

Schedule of Segment Reporting Information, by Segment

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
	(In thousands)
Revenues:
Pipelines and terminals - affiliate	$	75,990		$	82,970		$	157,534		$	164,510
Pipelines and terminals - third-party	19,244			28,382			45,670			59,520
Refinery processing units - affiliate	19,573			19,399			39,457			41,218
Total segment revenues	$	114,807		$	130,751		$	242,661		$	265,248
Segment operating income:
Pipelines and terminals	$	45,630		$	57,936		$	104,533		$	121,168
Refinery processing units	9,406			7,966			19,398			17,888
Total segment operating income	55,036			65,902			123,931			139,056
Unallocated general and administrative expenses	(2,535		)	(1,988		)	(5,237		)	(4,608		)
Interest and financing costs, net	(10,966		)	(18,679		)	(26,515		)	(37,173		)
Loss on early extinguishment of debt	—			—			(25,915		)	—
Equity in earnings of equity method investments	2,156			1,783			3,870			3,883
Gain on sales-type leases	33,834			—			33,834			—
Gain (loss) on sale of assets and other	468			111			974			(199		)
Income before income taxes	$	77,993		$	47,129		$	104,942		$	100,959
Capital Expenditures:
Pipelines and terminals	$	11,798		$	7,034		$	30,416		$	17,752
Refinery processing units	—			—			324			—
Total capital expenditures	$	11,798		$	7,034		$	30,740		$	17,752

	June 30, 2020		December 31, 2019
	(In thousands)
Identifiable assets:
Pipelines and terminals (1)	$	1,765,038	$	1,749,843
Refinery processing units	307,900		305,897
Other	148,845		143,492
Total identifiable assets	$	2,221,783	$	2,199,232

(1) Includes goodwill of $270.3 million as of June 30, 2020 and December 31, 2019.

XML

Supplemental Guarantor / Non-Guarantor Financial Information (Tables)

6 Months Ended

Jun. 30, 2020

Supplemental Guarantor / Non-Guarantor Financial Information [Abstract]

Condensed Consolidating Balance Sheet

Condensed Consolidating Balance Sheet

June 30, 2020		Parent		Guarantor Restricted Subsidiaries			Non-Guarantor Non-Restricted Subsidiaries		Eliminations			Consolidated
		(In thousands)
ASSETS
Current assets:
Cash and cash equivalents		$	3,927	$	(766	)	$	15,752	$	—		$	18,913
Accounts receivable		—		58,197			7,840		(1,261		)	64,776
Prepaid and other current assets		337		6,992			576					7,905
Total current assets		4,264		64,423			24,168		(1,261		)	91,594
Properties and equipment, net		—		1,110,139			348,795		—			1,458,934
Operating lease right-of-use assets	0	—		3,185			192		—			3,377
Net investment in leases		—		168,153					—			168,153
Investment in subsidiaries		1,868,595		282,348			—		(2,150,943		)	—
Intangible assets, net		—		94,318			—		—			94,318
Goodwill		—		270,336			—		—			270,336
Equity method investments		—		83,484			39,815		—			123,299
Other assets		5,497		6,275			—		—			11,772
Total assets		$	1,878,356	$	2,082,661		$	412,970	$	(2,152,204	)	$	2,221,783
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable		$	—	$	14,343		$	8,843	$	(1,261	)	$	21,925
Accrued interest		10,683		—			—		—			10,683
Deferred revenue		—		10,502			500		—			11,002
Accrued property taxes		—		2,732			2,794		—			5,526
Current operating lease liabilities		—		1,145			68		—			1,213
Current finance lease liabilities		—		3,293			—		—			3,293
Other current liabilities		42		2,819			114		—			2,975
Total current liabilities		10,725		34,834			12,319		(1,261		)	56,617
Long-term debt		1,486,648		—			—		—			1,486,648
Noncurrent operating lease liabilities		—		2,530			—		—			2,530
Noncurrent finance lease liabilities		—		70,039			—		—			70,039
Other long-term liabilities		260		12,909			520		—			13,689
Deferred revenue		—		42,692			—		—			42,692
Class B unit		—		51,062			—		—			51,062
Equity - partners		380,723		1,868,595			282,348		(2,150,943		)	380,723
Equity - noncontrolling interest		—		—			117,783		—			117,783
Total liabilities and equity		$	1,878,356	$	2,082,661		$	412,970	$	(2,152,204	)	$	2,221,783

Condensed Consolidating Balance Sheet

December 31, 2019	Parent		Guarantor Restricted Subsidiaries			Non-Guarantor Non-Restricted Subsidiaries		Eliminations			Consolidated
	(In thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	4,790	$	(709	)	$	9,206	$	—		$	13,287
Accounts receivable	—		60,229			8,549		(331		)	68,447
Prepaid and other current assets	282		6,710			637		—			7,629
Total current assets	5,072		66,230			18,392		(331		)	89,363
Properties and equipment, net	—		1,133,534			333,565		—			1,467,099
Operating lease right-of-use assets	—		3,243			12		—			3,255
Net investment in leases	—		134,886			—		—			134,886
Investment in subsidiaries	1,844,812		275,279			—		(2,120,091		)	—
Intangible assets, net	—		101,322			—		—			101,322
Goodwill	—		270,336			—		—			270,336
Equity method investments	—		82,987			37,084		—			120,071
Other assets	6,722		6,178			—		—			12,900
Total assets	$	1,856,606	$	2,073,995		$	389,053	$	(2,120,422	)	$	2,199,232
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	—	$	29,895		$	4,991	$	(331	)	$	34,555
Accrued interest	13,206		—			—		—			13,206
Deferred revenue	—		9,740			650		—			10,390
Accrued property taxes	—		2,737			1,062		—			3,799
Current operating lease liabilities	—		1,114			12		—			1,126
Current finance lease liabilities	—		3,224			—		—			3,224
Other current liabilities	6		2,293			6		—			2,305
Total current liabilities	13,212		49,003			6,721		(331		)	68,605
Long-term debt	1,462,031		—			—		—			1,462,031
Noncurrent operating lease liabilities	—		2,482			—		—			2,482
Noncurrent finance lease liabilities	—		70,475			—		—			70,475
Other long-term liabilities	260		12,150			398		—			12,808
Deferred revenue	—		45,681			—		—			45,681
Class B unit	—		49,392			—		—			49,392
Equity - partners	381,103		1,844,812			275,279		(2,120,091		)	381,103
Equity - noncontrolling interest	—		—			106,655		—			106,655
Total liabilities and equity	$	1,856,606	$	2,073,995		$	389,053	$	(2,120,422	)	$	2,199,232

Condensed Consolidating Statement of Comprehensive Income

Condensed Consolidating Statement of Comprehensive Income

Three Months Ended June 30, 2020	Parent			Guarantor Restricted Subsidiaries			Non-Guarantor Non-restricted Subsidiaries			Eliminations			Consolidated
	(In thousands)
Revenues:
Affiliates	$	—		$	89,417		$	6,146		$	—		$	95,563
Third parties	—			15,887			3,357			—			19,244
	—			105,304			9,503			—			114,807
Operating costs and expenses:
Operations (exclusive of depreciation and amortization)	—			30,980			3,757			—			34,737
Depreciation and amortization	—			20,739			4,295			—			25,034
General and administrative	780			1,755			—			—			2,535
	780			53,474			8,052			—			62,306
Operating income (loss)	(780		)	51,830			1,451			—			52,501
Other income (expense):
Equity in earnings of subsidiaries	89,893			1,510			—			(91,403		)	—
Equity in earnings of equity method investments	—			1,449			707			—			2,156
Interest expense	(12,740		)	(1,039		)	—			—			(13,779		)
Interest income	26			2,787			—			—			2,813
Gain on sales-type lease	—			33,834			—			—			33,834
Gain on sale of assets and other	71			396			1			—			468
	77,250			38,937			708			(91,403		)	25,492
Income before income taxes	76,470			90,767			2,159			(91,403		)	77,993
State income tax expense	—			(39		)	—			—			(39		)
Net income	76,470			90,728			2,159			(91,403		)	77,954
Allocation of net income attributable to noncontrolling interests	—			(835		)	(649		)	—			(1,484		)
Net income attributable to the partners	$	76,470		$	89,893		$	1,510		$	(91,403	)	$	76,470

Condensed Consolidating Statement of Comprehensive Income

Three Months Ended June 30, 2019	Parent			Guarantor Restricted Subsidiaries			Non-Guarantor Non-Restricted Subsidiaries			Eliminations			Consolidated
	(In thousands)
Revenues:
Affiliates	$	—		$	96,221		$	6,148		$	—		$	102,369
Third parties	—			23,700			4,682			—			28,382
	—			119,921			10,830			—			130,751
Operating costs and expenses:
Operations (exclusive of depreciation and amortization)	—			36,701			3,901			—			40,602
Depreciation and amortization				20,027			4,220			—			24,247
General and administrative	745			1,243			—			—			1,988
	745			57,971			8,121			—			66,837
Operating income (loss)	(745		)	61,950			2,709			—			63,914
Other income (expense):
Equity in earnings of subsidiaries	65,431			2,063			—			(67,494		)	—
Equity in earnings of equity method investments	—			1,783			—			—			1,783
Interest expense	(18,996		)	(234		)	—			—			(19,230		)
Interest income	—			551			—			—			551
Gain (loss) on sale of assets and other	—			69			42			—			111
	46,435			4,232			42			(67,494		)	(16,785		)
Income before income taxes	45,690			66,182			2,751			(67,494		)	47,129
State income tax benefit	—			30			—			—			30
Net income	45,690			66,212			2,751			(67,494		)	47,159
Allocation of net income attributable to noncontrolling interests	—			(781		)	(688		)	—			(1,469		)
Net income attributable to the partners	$	45,690		$	65,431		$	2,063		$	(67,494	)	$	45,690

Condensed Consolidating Statement of Comprehensive Income

Six Months Ended June 30, 2020	Parent			Guarantor Restricted Subsidiaries			Non-Guarantor Non-restricted Subsidiaries				Eliminations				Consolidated
	(In thousands)
Revenues:
Affiliates	$	—		$	184,172		$	12,819			$	—			$	196,991
Third parties	—			35,042			10,628				—				45,670
	—			219,214			23,447				—				242,661
Operating costs and expenses:
Operations (exclusive of depreciation and amortization)	—			62,111			7,607				—				69,718
Depreciation and amortization	—			40,492			8,520				—				49,012
General and administrative	1,879			3,358			—				—				5,237
	1,879			105,961			16,127				—				123,967
Operating income (loss)	(1,879		)	113,253			7,320				—			—	118,694
Other income (expense):
Equity in earnings of subsidiaries	158,428			5,805			—				(164,233		)		—
Equity in earnings of equity method investments	—			3,537			333			—	—				3,870
Interest expense	(29,470		)	(2,076		)	—				—				(31,546		)
Interest income	26			5,005			—				—				5,031
Loss on early extinguishment of debt	(25,915		)	—			—				—				(25,915		)
Gain on sales-type lease	—			33,834			—				—				33,834
Gain on sale of assets and other	141			816			17			—	—				974
	103,210			46,921			350				(164,233		)		(13,752		)
Income before income taxes	101,331			160,174			7,670				(164,233		)		104,942
State income tax expense	—			(76		)	—				—				(76		)
Net income	101,331			160,098			7,670				(164,233		)		104,866
Allocation of net income attributable to noncontrolling interests	—			(1,670		)	(1,865		)		—				(3,535		)
Net income attributable to the partners	$	101,331		$	158,428		$	5,805			$	(164,233	)		$	101,331

Condensed Consolidating Statement of Comprehensive Income

Six Months Ended June 30, 2019	Parent			Guarantor Restricted Subsidiaries			Non-Guarantor Non-restricted Subsidiaries				Eliminations			Consolidated
	(In thousands)
Revenues:
Affiliates	$	—		$	193,614		$	12,114			$	—		$	205,728
Third parties	—			45,765			13,755				—			59,520
	—			239,379			25,869				—			265,248
Operating costs and expenses:
Operations (exclusive of depreciation and amortization)	—			70,778			7,343				—			78,121
Depreciation and amortization				39,563			8,508				—			48,071
General and administrative	1,821			2,787			—				—			4,608
	1,821			113,128			15,851				—			130,800
Operating income (loss)	(1,821		)	126,251			10,018				—			134,448
Other income (expense):
Equity in earnings of subsidiaries	136,730			7,559			—				(144,289		)	—
Equity in earnings of equity method investments	—			3,883			—			—	—			3,883
Interest expense	(38,037		)	(215		)	—				—			(38,252		)
Interest income	—			1,079			—			—	—			1,079
Gain on sale of assets and other	—			(260		)	61				—			(199		)
	98,693			12,046			61				(144,289		)	(33,489		)
Income before income taxes	96,872			138,297			10,079				(144,289		)	100,959
State income tax expense	—			(6		)	—				—			(6		)
Net income	96,872			138,291			10,079				(144,289		)	100,953
Allocation of net income attributable to noncontrolling interests	—			(1,561		)	(2,520		)		—			(4,081		)
Net income attributable to the partners	$	96,872		$	136,730		$	7,559			$	(144,289	)	$	96,872

Condensed Consolidating Statement of Cash Flows

Condensed Consolidating Statement of Cash Flows

Six Months Ended June 30, 2020	Parent			Guarantor Restricted Subsidiaries			Non-Guarantor Non-Restricted Subsidiaries			Eliminations			Consolidated
	(In thousands)
Cash flows from operating activities	$	(31,103	)	$	151,331		$	20,277		$	(5,911	)	$	134,594
Cash flows from investing activities
Additions to properties and equipment	—			(8,883		)	(21,857		)	—			(30,740		)
Investment in Cushing Connect	—			(13,263		)	(2,400		)	13,263			(2,400		)
Proceeds from sale of assets	—			816			—			—			816
Distributions in excess of equity in earnings of equity investments	—			6,559			—			(6,089		)	470
	—			(14,771		)	(24,257		)	7,174			(31,854		)
Cash flows from financing activities
Net borrowings under credit agreement	29,500			—			—			—			29,500
Net intercompany financing activities	134,645			(134,645		)	—			—			—
Redemption of senior notes	(522,500		)	—			—			—			(522,500		)
Proceeds from issuance of senior notes	500,000			—			—			—			500,000
Contribution from general partner	435			—			13,263			(13,263		)	435
Contribution from noncontrolling interest	—			—			13,263			—			13,263
Distributions to HEP unitholders	(102,979		)	—			—			—			(102,979		)
Distributions to noncontrolling interests	—			—			(16,000		)	12,000			(4,000		)
Units withheld for tax withholding obligations	(147		)	—			—			—			(147		)
Deferred financing costs	(8,714		)	—			—			—			(8,714		)
Payments on finance leases	—			(1,972		)	—			—			(1,972		)
	30,240			(136,617		)	10,526			(1,263		)	(97,114		)
Cash and cash equivalents
Increase (decrease) for the period	(863		)	(57		)	6,546			—			5,626
Beginning of period	4,790			(709		)	9,206			—			13,287
End of period	$	3,927		$	(766	)	$	15,752		$	—		$	18,913

Condensed Consolidating Statement of Cash Flows

Six Months Ended June 30, 2019	Parent			Guarantor Restricted Subsidiaries			Non-Guarantor Non-Restricted Subsidiaries			Eliminations			Consolidated
	(In thousands)
Cash flows from operating activities	$	(37,005	)	$	165,882		$	23,671		$	(7,559	)	$	144,989
Cash flows from investing activities
Additions to properties and equipment	—			(17,274		)	(478		)	—			(17,752		)
Distributions from UNEV in excess of earnings	—			8,191			—			(8,191		)	—
Proceeds from sale of assets	—			194			—			—			194
Distributions in excess of equity in earnings of equity investments	—			299			—			—			299
	—			(8,590		)	(478		)	(8,191		)	(17,259		)
Cash flows from financing activities
Net borrowings under credit agreement	18,500			—			—			—			18,500
Net intercompany financing activities	155,225			(155,225		)	—			—			—
Distributions to HEP unitholders	(136,207		)	—			—			—			(136,207		)
Distributions to noncontrolling interests	—			—			(21,000		)	15,750			(5,250		)
Units withheld for tax withholding obligations	(119		)	—			—			—			(119		)
Purchase units for incentive grants	(255		)				—			—			(255		)
Payments on finance leases	(139		)	(364		)	—			—			(503		)
	37,005			(155,589		)	(21,000		)	15,750			(123,834		)
Cash and cash equivalents
Increase for the period	—			1,703			2,193			—			3,896
Beginning of period	2			—			3,043			—			3,045
End of period	$	2		$	1,703		$	5,236		$	—		$	6,941

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Description of Business and Presentation of Financial Statements - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2020	Dec. 31, 2019	Jan. 01, 2019
Other Ownership Interests [Line Items]
Ownership percentage, controlling interest	57.00%	57.00%
Shares, Issued	37,250,000	37,250,000
Limited partner distribution		$ 2,500
Revenue, Remaining Performance Obligation, Amount	$ 17,600
Property, Plant, and Equipment, Salvage Value	88,500	88,500
Long-Lived Assets	28,100	28,100
Goodwill, Gross	68,700	68,700
Operating Lease, Liability	$ 3,743	$ 3,743	$ 3,608	$ 78,400
UNEV Pipeline
Other Ownership Interests [Line Items]
Equity Method Investment, Ownership Percentage	75.00%	75.00%
Frontier Pipeline [Member]
Other Ownership Interests [Line Items]
Equity Method Investment, Ownership Percentage	50.00%	50.00%

XML

Investment in Joint Venture (Details) $ in Millions	3 Months Ended
	Sep. 30, 2020 USD ($)
Subsequent Event
Business Acquisition [Line Items]
Payments to Acquire Interest in Joint Venture	$ 65

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Revenues - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended			6 Months Ended
	Jun. 30, 2020	Dec. 31, 2019	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Deferred revenue recognized	$ 5,100			$ 12,600
Document Period End Date				Jun. 30, 2020
Deferred revenue recognized. billed prior period				$ 700	$ 600
Contract With Customer, Asset, Revenue Recognized	200			400
Revenue from Contract with Customer, Excluding Assessed Tax	114,807		$ 130,751	242,661	265,248
Operating Lease, Lease Income	86,300			179,500
Revenue, Remaining Performance Obligation, Amount	2,269,000			2,269,000
Shortfall Payments
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Contract With Customer, Liability, Increase		$ 500	$ 0	300	$ 700
Deferred revenue shortfalls billed	500			500
Service, Other
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Revenue from Contract with Customer, Excluding Assessed Tax	$ 28,500			$ 63,200

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Revenues - Narrative, Remaining Performance Obligation (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Operating Lease, Lease Income	$ 86,300		$ 179,500
Contract with Customer, Liability, Revenue Recognized	5,100		12,600
Revenue, Remaining Performance Obligation, Amount	2,269,000		2,269,000
Contract With Customer, Liability, Revenue Recognized, Billed Prior Period			700	$ 600
Contract With Customer, Asset, Revenue Recognized	200		400
Revenue from Contract with Customer, Excluding Assessed Tax	114,807	$ 130,751	242,661	$ 265,248
Shortfall Payments
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Contract with Customer, Liability	500		500
Service, Other
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue from Contract with Customer, Excluding Assessed Tax	$ 28,500		$ 63,200

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Revenues - Schedule of Future Performance Obligations (Details) $ in Millions	Jun. 30, 2020 USD ($)
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, Remaining Performance Obligation, Amount	$ 2,269
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-07-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, Remaining Performance Obligation, Amount	$ 185
Unfulfilled performance obligations, expected timing	6 months
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-01-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, Remaining Performance Obligation, Amount	$ 362
Unfulfilled performance obligations, expected timing	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-01-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, Remaining Performance Obligation, Amount	$ 332
Unfulfilled performance obligations, expected timing	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-01-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, Remaining Performance Obligation, Amount	$ 295
Unfulfilled performance obligations, expected timing	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-01-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, Remaining Performance Obligation, Amount	$ 257
Unfulfilled performance obligations, expected timing	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2025-01-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, Remaining Performance Obligation, Amount	$ 188
Unfulfilled performance obligations, expected timing	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2026-01-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, Remaining Performance Obligation, Amount	$ 650
Unfulfilled performance obligations, expected timing

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Revenues - Schedule of Contract Asset and Liability Balances (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2020	Jun. 30, 2019	Dec. 31, 2019
Revenue from Contract with Customer [Abstract]
Document Period End Date		Jun. 30, 2020
Contract With Customer, Liability, Revenue Recognized, Billed Prior Period		$ 700	$ 600
Contract assets	$ 6,064	6,064		$ 5,675
Contract liabilities	(500)	(500)		$ (650)
Contract With Customer, Asset, Revenue Recognized	$ 200	$ 400

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Revenues - Schedule of Disaggregated Revenue (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Disaggregation of Revenue [Line Items]
Disaggregated Revenue	$ 114,807	$ 130,751	$ 242,661	$ 265,248
Pipelines
Disaggregation of Revenue [Line Items]
Disaggregated Revenue	58,954	72,263	129,426	147,363
Terminals, tanks and loading racks
Disaggregation of Revenue [Line Items]
Disaggregated Revenue	36,280	39,089	73,778	76,667
Refinery processing units
Disaggregation of Revenue [Line Items]
Disaggregated Revenue	$ 19,573	$ 19,399	$ 39,457	$ 41,218

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Leases - Narrative (Details) - USD ($) $ in Millions	Jun. 30, 2020	Dec. 31, 2019
Lessee, Lease, Description [Line Items]
Finance lease term	1 year
Operating lease renewal term	10 years
Capital Leased Assets, Gross	$ 6.9	$ 7.0
Capital Leases Accumulated Depreciation	$ 3.4	$ 4.5
Minimum
Lessee, Lease, Description [Line Items]
Operating lease term	1 year
Maximum
Lessee, Lease, Description [Line Items]
Operating lease term	25 years
Vehicles | Minimum
Lessee, Lease, Description [Line Items]
Operating lease term	33 months
Vehicles | Maximum
Lessee, Lease, Description [Line Items]
Operating lease term	48 months

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Leases - Supplemental Balance Sheet (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2020	Dec. 31, 2019	Jan. 01, 2019
Leases [Abstract]
Document Period End Date	Jun. 30, 2020
Operating leases:
Operating lease right-of-use assets	$ 3,377	$ 3,255
Current operating lease liabilities	1,213	1,126
Long-term lease obligations	2,530	2,482
Total operating lease liabilities	3,743	3,608	$ 78,400
Finance leases:
Properties, plants and equipment	6,851	6,968
Accumulated amortization	(3,358)	(4,547)
Properties, plants and equipment, net	3,493	2,421
Current finance lease liabilities	3,293	3,224
Noncurrent finance lease liabilities	70,039	70,475
Total finance lease liabilities	$ 73,332	$ 73,699
Weighted average remaining lease term (in years)
Operating leases	6 years 1 month 6 days	6 years 6 months
Finance leases	16 years 3 months 18 days	17 years
Weighted average discount rate
Operating leases	4.80%	5.00%
Finance leases	5.60%	6.00%

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Leases - Supplemental Cash Flow Information (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating lease	$ 518	$ 3,589
Operating cash flows from finance leases	2,157	51
Financing cash flows from finance leases	$ 1,972	$ 503

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Leases - Operating and Finance Lease Maturities (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2020	Dec. 31, 2019	Jan. 01, 2019
Leases [Abstract]
Document Period End Date	Jun. 30, 2020
Operating
2020	$ 491
2021	906
2022	627
2023	607
2024	494
2025 and thereafter	1,179
Total lease payments	4,304
Less: Imputed interest	(561)
Total operating lease liabilities	3,743	$ 3,608	$ 78,400
Less: Current obligations	(1,213)	(1,126)
Long-term lease obligations	2,530	2,482
Finance
2020	3,865
2021	7,411
2022	7,285
2023	7,332
2024	6,856
2025 and thereafter	80,313
Total lease payments	113,062
Less: Imputed interest	(39,730)
Total finance lease liabilities	73,332	73,699
Less: Current obligations	(3,293)	(3,224)
Long-term lease obligations	$ 70,039	$ 70,475

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Leases - Components of Lease Expense (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Leases [Abstract]
Operating lease costs	$ 230	$ 1,798	$ 503	$ 3,568
Amortization of assets	273	254	515	498
Interest on lease liabilities	1,040	24	2,077	51
Variable Lease, Cost	46	35	95	71
Total net lease cost	$ 1,589	$ 2,111	$ 3,190	$ 4,188

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Leases - Gain on Sales-Type Leases (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Leases [Abstract]
Net investment in leases	$ 35,319		$ 35,319
Properties and equipment, net	(1,485)
Gain on Sales-type Leases	$ 33,834	$ 0	$ 33,834	$ 0

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Leases - Schedule of Lease Income (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Leases [Abstract]
Operating lease revenues	$ 84,872	$ 94,783	$ 175,671	$ 188,287
Direct financing lease interest income	524	509	1,048	1,019
Sales-type lease interest income	2,286	0	3,940	0
Lease revenues relating to variable lease payments not included in measurement of the sales-type lease receivable	$ 1,474	$ 0	$ 3,822	$ 0

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Leases - Schedule of Minimum Undiscounted Lease Payments (Details) $ in Thousands	Jun. 30, 2020 USD ($)
Operating
Remainder of 2020	$ 155,376
2021	306,771
2022	304,315
2023	273,362
2024	235,280
Thereafter	739,158
Total	2,014,262
Finance
Sales-type and Direct Financing Leases, Lease Receivable, Fiscal Year Maturity [Abstract]
Remainder of 2020	1,060
2021	2,128
2022	2,145
2023	2,162
2024	2,179
Thereafter	40,787
Total	50,461
Sales-type
Sales-type and Direct Financing Leases, Lease Receivable, Fiscal Year Maturity [Abstract]
Remainder of 2020	6,198
2021	12,396
2022	12,396
2023	12,396
2024	12,396
Thereafter	72,432
Total	$ 128,214

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Leases - Net Investments in Leases (Details) - USD ($) $ in Thousands		6 Months Ended
		Jun. 30, 2020	Dec. 31, 2019
Lessor, Lease, Description [Line Items]
Document Period End Date		Jun. 30, 2020
Net investment in leases		$ 35,319
Sales-type Leases
Lessor, Lease, Description [Line Items]
Lease receivables	[1]	92,041	$ 68,457
Unguaranteed residual assets		63,134	52,933
Net investment in leases		155,175	121,390
Direct Financing Leases
Lessor, Lease, Description [Line Items]
Lease receivables	[1]	16,486	16,511
Unguaranteed residual assets		0	0
Net investment in leases		$ 16,486	$ 16,511

[1] Current portion of lease receivables included in prepaid and other current assets on the balance sheet.

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Financial Instruments - Narrative (Details) - Fair value inputs, Level 2 - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Carrying Value | 6% Senior notes
Debt Instrument [Line Items]
Financial Liabilities Fair Value Disclosure		$ 496,531
Carrying Value | Five Percent Senior Notes Due Two Thousand Twenty Eight [Member]
Debt Instrument [Line Items]
Financial Liabilities Fair Value Disclosure	$ 491,648
Fair Value | 6% Senior notes
Debt Instrument [Line Items]
Financial Liabilities Fair Value Disclosure	$ 477,835	$ 522,045

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Properties and Equipment - Schedule of Properties and Equipment (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Property, Plant and Equipment [Line Items]
Properties and equipment, gross	$ 2,087,743	$ 2,061,554
Less accumulated depreciation	628,809	594,455
Properties and equipment, net	1,458,934	1,467,099
Pipelines, terminals and tankage
Property, Plant and Equipment [Line Items]
Properties and equipment, gross	1,610,916	1,602,231
Refinery assets
Property, Plant and Equipment [Line Items]
Properties and equipment, gross	349,030	348,093
Land and right of way
Property, Plant and Equipment [Line Items]
Properties and equipment, gross	87,076	86,190
Construction in progress
Property, Plant and Equipment [Line Items]
Properties and equipment, gross	30,892	10,930
Other
Property, Plant and Equipment [Line Items]
Properties and equipment, gross	$ 9,829	$ 14,110

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Properties and Equipment - Narrative (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019
Property, Plant and Equipment [Abstract]
Capitalized Interest Costs	$ 24	$ 8
Depreciation expense	$ 41,700	$ 41,300

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Intangible Assets - Schedule of Intangible Assets (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2020	Dec. 31, 2019
Finite-Lived Intangible Assets, Net [Abstract]
Intangible assets, gross	$ 204,797	$ 204,797
Less accumulated amortization	110,479	103,475
Intangible assets, net	94,318	101,322
Delek transportation agreement
Finite-Lived Intangible Assets, Net [Abstract]
Intangible assets, gross	$ 59,933	59,933
Useful Life	30 years
HFC transportation agreement
Finite-Lived Intangible Assets, Net [Abstract]
Intangible assets, gross	$ 75,131	75,131
Customer relationships
Finite-Lived Intangible Assets, Net [Abstract]
Intangible assets, gross	$ 69,683	69,683
Useful Life	10 years
Other
Finite-Lived Intangible Assets, Net [Abstract]
Intangible assets, gross	$ 50	$ 50
Minimum | HFC transportation agreement
Finite-Lived Intangible Assets, Net [Abstract]
Useful Life	10 years
Maximum | HFC transportation agreement
Finite-Lived Intangible Assets, Net [Abstract]
Useful Life	15 years

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Intangible Assets - Narrative (Details) $ in Millions	6 Months Ended
	Jun. 30, 2020 USD ($)
Finite-Lived Intangible Assets [Line Items]
Estimated amortization expense, year five	$ 9.9
Estimated amortization expense, after year five	9.1
Amortization expense	7.0
Cost, Amortization	14.0
Estimated amortization expense, year two	14.0
Estimated amortization expense, year three	14.0
Estimated amortization expense, year four	$ 14.0

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Employees, Retirement and Incentive Plans Retirement and Benefit Plan Costs (Details) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2020 USD ($) shares	Jun. 30, 2019 USD ($)	Jun. 30, 2020 USD ($) Components shares	Jun. 30, 2019 USD ($)
Share-based Compensation Arrangements
Employee benefits and share-based compensation | $	$ 1.6	$ 1.7		$ 3.7
Long-term Incentive Plan, Components | Components			4
Number of incentive-based award plans	2		2
Compensation costs of incentive awards | $	$ 0.5	$ 0.6	$ 1.0	$ 1.2
Deferred Bonus
Share-based Compensation Arrangements
Units authorized under equity-based compensation plans (new) | shares	2,500,000		2,500,000
Number of units available for grant | shares	1,119,542		1,119,542

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Employees, Retirement and Incentive Plans Restricted Units (Details) - USD ($) $ / shares in Units, $ in Millions	6 Months Ended
	Jun. 30, 2020	Dec. 31, 2019
Share-based Compensation Arrangements
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period, Weighted Average Grant Date Fair Value	$ 100,000
Restricted and Phantom Units
Share-based Compensation Arrangements
Nonvested restricted units outstanding	134,918	145,205
Vesting and transfer of common units to recipients	4,397
Vested in Period	$ 30.29
Weighted average grant date fair value	$ 26.13	$ 26.22
Forfeitures	5,890
Weighted Average Grant Date Fair Value - Forfeitures	$ 25.33
Total unrecognized compensation related to nonvested units	$ 1.4
Weighted average remaining contractual term (years)	1 year 2 months 12 days
Performance Shares [Member]
Share-based Compensation Arrangements
Nonvested restricted units outstanding	41,811	53,445
Vesting and transfer of common units to recipients	11,634
Total unrecognized compensation related to nonvested units	$ 0.4
Weighted average remaining contractual term (years)	1 year 7 months 6 days

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Employees, Retirement and Incentive Plans Performance Units (Details) - USD ($) $ in Millions	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019
Share-based Compensation Arrangement Instruments [Roll Forward]
Weighted Average Fair Value of Units Outstanding	$ 1.2
Performance Shares [Member]
Share-based Compensation Arrangements
Estimated Share Payouts Unit Awards Minimum	100.00%
Estimated Share Payouts Unit Awards Maximum	150.00%
Share-based Compensation Arrangement Instruments [Roll Forward]
Outstanding at January 1, 2020 (nonvested)	53,445
Vesting and transfer of common units to recipients	(11,634)
Outstanding at March 31, 2020 (nonvested)	41,811
Fair value of vested units transferred to recipients	$ 0.4	$ 0.3
Total unrecognized compensation related to nonvested units	$ 0.4
Weighted average remaining contractual term (years)	1 year 7 months 6 days
Restricted and Phantom Units
Share-based Compensation Arrangement Instruments [Roll Forward]
Outstanding at January 1, 2020 (nonvested)	145,205
Vesting and transfer of common units to recipients	(4,397)
Forfeitures	(5,890)
Outstanding at March 31, 2020 (nonvested)	134,918
Total unrecognized compensation related to nonvested units	$ 1.4
Weighted average remaining contractual term (years)	1 year 2 months 12 days

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Debt - Senior Notes (Details) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
	Feb. 05, 2020	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019	Feb. 04, 2020	Dec. 31, 2019
Debt Instrument [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity		$ 1,400,000		$ 1,400,000
Line of Credit Facility, Capacity Available for Trade Purchases		50,000		50,000
Line of Credit Facility, Accordion Feature		300,000		$ 300,000
Document Period End Date				Jun. 30, 2020
Gain (Loss) on Extinguishment of Debt	$ 25,900	0	$ 0	$ (25,915)	$ 0
Debt Instrument, Unamortized Premium	$ 22,500
Debt Instrument, Unamortized Discount (Premium) and Debt Issuance Costs, Net						$ 3,400
Senior Notes Aggregate Redemption Amount						$ 522,500
6% Senior notes
Debt Instrument [Line Items]
Principal		$ 500,000		$ 500,000			$ 500,000
Stated interest rate, senior notes		6.00%		6.00%			6.00%
Five Percent Senior Notes Due Two Thousand Twenty Eight [Member]
Debt Instrument [Line Items]
Stated interest rate, senior notes						5.00%

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Debt Long-Term Debt (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2020	Dec. 31, 2019
Debt Instrument [Line Items]
Document Period End Date	Jun. 30, 2020
Credit Agreement	$ 995,000	$ 965,500
Total long-term debt	1,486,648	1,462,031
6% Senior notes
Debt Instrument [Line Items]
Principal	500,000	500,000
Unamortized discount	$ (8,352)	$ (3,469)

XML

Debt - Interest Rate Risk Management (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Debt Instrument [Line Items]
Line of credit facility, amount outstanding	$ 995,000	$ 965,500

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Related Party Transactions - Narrative (Details)	3 Months Ended			6 Months Ended
	Jun. 30, 2020 USD ($) yr shares	Dec. 31, 2019 USD ($)	Jun. 30, 2019 USD ($)	Jun. 30, 2020 USD ($) yr shares	Jun. 30, 2019 USD ($)
Related Party Transaction [Line Items]
Sales-type Lease, Revenue			$ 0		$ 0
Concentration Risk, Percentage				83.00%
Document Period End Date				Jun. 30, 2020
Shares, Issued | shares	37,250,000			37,250,000
Administrative fee, related party				$ 2,600,000
Revenue from related parties	$ 95,600,000		102,400,000	197,000,000.0	205,700,000
Omnibus Agreement G & A expenses, related party	700,000		600,000		1,300,000
Employee expenses reimbursed to related party			13,200,000	27,300,000	26,800,000
Reimbursements received from related parties	900,000		3,600,000	4,000,000.0	5,800,000
Accounts receivable due from HFC	49,800,000	$ 49,700,000		49,800,000
Due to Affiliate	7,300,000	16,700,000		7,300,000
Lease Income	500,000			1,000,000.0
Sales-type Lease, Lease Income	2,400,000			4,800,000
Limited Partners' Capital Account, Distribution Amount				2,500,000
Affiliated Entity
Related Party Transaction [Line Items]
Minimum annualized payments	351,100,000			351,100,000
Distributions to HEP unitholders	$ 18,400,000		37,500,000	56,000,000.0	74,800,000
Shortfall Payments
Related Party Transaction [Line Items]
Shortfall billings deferred revenue		$ 500,000	$ 0	$ 300,000	$ 700,000
Minimum
Related Party Transaction [Line Items]
Revenue service commitments expiration | yr	2,021			2,021
Maximum
Related Party Transaction [Line Items]
Revenue service commitments expiration | yr	2,036			2,036

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Partners' Equity, Income Allocations and Cash Distributions - Issuances (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Partners' Capital [Abstract]
Limited Partners' Capital Account, Distribution Amount	$ 34.5	$ 68.5	$ 68.9	$ 136.7
Common units held by HFC (in shares)	59,630,030		59,630,030
Ownership percentage, controlling interest	57.00%		57.00%
Common Unit Issuance Program			$ 200.0
Partners' capital account, units, sale of units (in shares)			2,413,153
Gross proceeds from issuance of common units			$ 82.3

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Partners' Equity, Income Allocations and Cash Distributions - Cash Distributions (Details) - USD ($) $ in Millions				3 Months Ended		6 Months Ended
	Aug. 13, 2020	Aug. 03, 2020	Jul. 23, 2020	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Incentive Distribution Made to Managing Member or General Partner [Line Items]
Document Period End Date						Jun. 30, 2020
Partners' Capital Account, Units				59,630,030		59,630,030
Ownership percentage, controlling interest				57.00%		57.00%
Common Unit Issuance Program						$ 200.0
Partners' capital account, units, sale of units (in shares)						2,413,153
Limited partner distribution						$ 2.5
Gross proceeds from issuance of common units						82.3
Distributions declared				$ 34.5	$ 68.5	$ 68.9	$ 136.7
Subsequent Event
Incentive Distribution Made to Managing Member or General Partner [Line Items]
Dividends Payable, Date Declared			Jul. 23, 2020
Dividends Payable, Date to be Paid	Aug. 13, 2020
Dividends Payable, Date of Record		Aug. 03, 2020

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Net Income per Limited Partner Unit - Schedules of Computations (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Earnings per Unit by Type of Partner [Line Items]
Net income attributable to the partners	$ 76,470	$ 45,690	$ 101,331	$ 96,872
Weighted average limited partners’ units outstanding	105,440	105,440	105,440	105,440
Limited partners’ per unit interest in earnings—basic and diluted:	$ 0.73	$ 0.43	$ 0.96	$ 0.92
Limited Partner
Earnings per Unit by Type of Partner [Line Items]
Net income attributable to partnership	$ 76,470	$ 45,690	$ 101,331	$ 96,872

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Environmental Environmental (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019	Dec. 31, 2019
Loss Contingencies [Line Items]
Environmental remediation expense	$ 0.5	$ 0.1	$ 0.7	$ 0.1
Accrued environmental expense	5.7		5.7		$ 5.5
Accrued environmental expense, noncurrent	3.5		3.5
Affiliated Entity
Loss Contingencies [Line Items]
Accrued environmental expense	$ 0.4	$ 0.5	$ 0.4	$ 0.5

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Operating Segments - Schedule of Segment Information (Details) - USD ($) $ in Thousands			3 Months Ended		6 Months Ended
		Feb. 05, 2020	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019	Dec. 31, 2019
Segment Reporting Information [Line Items]
Revenues			$ 114,807	$ 130,751	$ 242,661	$ 265,248
Operating Income (Loss)			52,501	63,914	118,694	134,448
Segment operating profit			55,036	65,902	123,931	139,056
Unallocated general and administrative			(2,535)	(1,988)	(5,237)	(4,608)
Interest and financing costs, net			(10,966)	(18,679)	(26,515)	(37,173)
Gain (Loss) on Extinguishment of Debt		$ 25,900	0	0	(25,915)	0
Equity in earnings of unconsolidated affiliates			2,156	1,783	3,870	3,883
Gain on Sales-type Leases			33,834	0	33,834	0
Gain (loss) on sale of assets and other			468	111	974	(199)
Income before income taxes			77,993	47,129	104,942	100,959
Capital Expenditures			11,798	7,034	30,740	17,752
Assets			2,221,783		2,221,783		$ 2,199,232
Goodwill			270,336		270,336		270,336
Pipelines and terminal - affiliate
Segment Reporting Information [Line Items]
Revenues			75,990	82,970
Revenues					157,534	164,510
Pipelines and terminals - third party
Segment Reporting Information [Line Items]
Revenues			19,244	28,382
Revenues					45,670	59,520
Operating Income (Loss)			45,630	57,936	104,533	121,168
Capital Expenditures			11,798	7,034	30,416	17,752
Assets	[1]		1,765,038		1,765,038		1,749,843
Refinery processing units
Segment Reporting Information [Line Items]
Revenues			19,573	19,399	39,457	41,218
Revenues					39,457	41,218
Operating Income (Loss)			9,406	7,966	19,398	17,888
Capital Expenditures			0	$ 0	324	$ 0
Assets			307,900		307,900		305,897
Other
Segment Reporting Information [Line Items]
Assets			$ 148,845		$ 148,845		$ 143,492

[1] Includes goodwill of $270.3 million as of June 30, 2020 and December 31, 2019.

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Supplemental Guarantor / Non-Guarantor Financial Information Condensed Consolidated Balance Sheet (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019	Jun. 30, 2019	Dec. 31, 2018
Current assets:
Cash and cash equivalents	$ 18,913	$ 13,287	$ 6,941	$ 3,045
Accounts receivable	64,776	68,447
Prepaid and other current assets	7,905	7,629
Total current assets	91,594	89,363
Properties and equipment, net	1,458,934	1,467,099
Operating lease right-of-use assets	3,377	3,255
Net Investment in Lease	168,153	134,886
Investment in subsidiaries	0	0
Intangible assets, net	94,318	101,322
Goodwill	270,336	270,336
Equity method investments	123,299	120,071
Other assets	11,772	12,900
Assets	2,221,783	2,199,232
Current liabilities:
Accounts payable	21,925	34,555
Due to Affiliate	7,300	16,700
Accrued interest	10,683	13,206
Deferred revenue	11,002	10,390
Accrued property taxes	5,526	3,799
Current maturities of operating leases	1,213	1,126
Current maturities of finance leases	3,293	3,224
Other current liabilities	2,975	2,305
Total current liabilities	56,617	68,605
Long-term debt	1,486,648	1,462,031
Noncurrent operating lease liabilities	2,530	2,482
Noncurrent finance lease liabilities	70,039	70,475
Other long-term liabilities	13,689	12,808
Deferred revenue	42,692	45,681
Class B unit	51,062	49,392
Equity - partners	380,723	381,103
Equity - noncontrolling interest	117,783	106,655
Total liabilities and equity	2,221,783	2,199,232
Parent
Current assets:
Cash and cash equivalents	3,927	4,790	2	2
Accounts receivable	0	0
Prepaid and other current assets	337	282
Total current assets	4,264	5,072
Properties and equipment, net	0	0
Operating lease right-of-use assets	0	0
Net Investment in Lease	0	0
Investment in subsidiaries	1,868,595	1,844,812
Intangible assets, net	0	0
Goodwill	0	0
Equity method investments	0	0
Other assets	5,497	6,722
Assets	1,878,356	1,856,606
Current liabilities:
Accounts payable	0	0
Accrued interest	10,683	13,206
Deferred revenue	0	0
Accrued property taxes	0	0
Current maturities of operating leases	0	0
Current maturities of finance leases	0	0
Other current liabilities	42	6
Total current liabilities	10,725	13,212
Long-term debt	1,486,648	1,462,031
Noncurrent operating lease liabilities	0	0
Noncurrent finance lease liabilities	0	0
Other long-term liabilities	260	260
Deferred revenue	0	0
Class B unit	0	0
Equity - partners	380,723	381,103
Equity - noncontrolling interest	0	0
Total liabilities and equity	1,878,356	1,856,606
Guarantor Restricted Subsidiaries
Current assets:
Cash and cash equivalents	(766)	(709)	1,703	0
Accounts receivable	58,197	60,229
Prepaid and other current assets	6,992	6,710
Total current assets	64,423	66,230
Properties and equipment, net	1,110,139	1,133,534
Operating lease right-of-use assets	3,185	3,243
Net Investment in Lease	168,153	134,886
Investment in subsidiaries	282,348	275,279
Intangible assets, net	94,318	101,322
Goodwill	270,336	270,336
Equity method investments	83,484	82,987
Other assets	6,275	6,178
Assets	2,082,661	2,073,995
Current liabilities:
Accounts payable	14,343	29,895
Accrued interest	0	0
Deferred revenue	10,502	9,740
Accrued property taxes	2,732	2,737
Current maturities of operating leases	1,145	1,114
Current maturities of finance leases	3,293	3,224
Other current liabilities	2,819	2,293
Total current liabilities	34,834	49,003
Long-term debt	0	0
Noncurrent operating lease liabilities	2,530	2,482
Noncurrent finance lease liabilities	70,039	70,475
Other long-term liabilities	12,909	12,150
Deferred revenue	42,692	45,681
Class B unit	51,062	49,392
Equity - partners	1,868,595	1,844,812
Equity - noncontrolling interest	0	0
Total liabilities and equity	2,082,661	2,073,995
Non-Guarantor Non-Restricted Subsidiaries
Current assets:
Cash and cash equivalents	15,752	9,206	5,236	3,043
Accounts receivable	7,840	8,549
Prepaid and other current assets	576	637
Total current assets	24,168	18,392
Properties and equipment, net	348,795	333,565
Operating lease right-of-use assets	192	12
Net Investment in Lease		0
Investment in subsidiaries	0	0
Intangible assets, net	0	0
Goodwill	0	0
Equity method investments	39,815	37,084
Other assets	0	0
Assets	412,970	389,053
Current liabilities:
Accounts payable	8,843	4,991
Accrued interest	0	0
Deferred revenue	500	650
Accrued property taxes	2,794	1,062
Current maturities of operating leases	68	12
Current maturities of finance leases	0	0
Other current liabilities	114	6
Total current liabilities	12,319	6,721
Long-term debt	0	0
Noncurrent operating lease liabilities	0	0
Noncurrent finance lease liabilities	0	0
Other long-term liabilities	520	398
Deferred revenue	0	0
Class B unit	0	0
Equity - partners	282,348	275,279
Equity - noncontrolling interest	117,783	106,655
Total liabilities and equity	412,970	389,053
Eliminations
Current assets:
Cash and cash equivalents	0	0	$ 0	$ 0
Accounts receivable	(1,261)	(331)
Prepaid and other current assets		0
Total current assets	(1,261)	(331)
Properties and equipment, net	0	0
Operating lease right-of-use assets	0	0
Net Investment in Lease	0	0
Investment in subsidiaries	(2,150,943)	(2,120,091)
Intangible assets, net	0	0
Goodwill	0	0
Equity method investments	0	0
Other assets	0	0
Assets	(2,152,204)	(2,120,422)
Current liabilities:
Accounts payable	(1,261)	(331)
Accrued interest	0	0
Deferred revenue	0	0
Accrued property taxes	0	0
Current maturities of operating leases	0	0
Current maturities of finance leases	0	0
Other current liabilities	0	0
Total current liabilities	(1,261)	(331)
Long-term debt	0	0
Noncurrent operating lease liabilities	0	0
Noncurrent finance lease liabilities	0	0
Other long-term liabilities	0	0
Deferred revenue	0	0
Class B unit	0	0
Equity - partners	(2,150,943)	(2,120,091)
Equity - noncontrolling interest	0	0
Total liabilities and equity	$ (2,152,204)	$ (2,120,422)

XML

Supplemental Guarantor / Non-Guarantor Financial Information Condensed Consolidating Statement of Comprehensive Income (Details) - USD ($) $ in Thousands		3 Months Ended				6 Months Ended
	Feb. 05, 2020	Jun. 30, 2020	Mar. 31, 2020	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2020	Jun. 30, 2019
Revenues:
Revenues		$ 114,807		$ 130,751		$ 242,661	$ 265,248
Operating costs and expenses [Abstract]
Operations (exclusive of depreciation and amortization)		34,737		40,602		69,718	78,121
Depreciation and amortization		25,034		24,247		49,012	48,071
General and administrative		2,535		1,988		5,237	4,608
Total operating costs and expenses		62,306		66,837		123,967	130,800
Operating Income (Loss)		52,501		63,914		118,694	134,448
Equity in earnings of subsidiaries		0		0			0
Equity in earnings of equity method investments		2,156		1,783		3,870	3,883
Interest expense		(13,779)		(19,230)		(31,546)	(38,252)
Interest income		2,813		551		5,031	1,079
Gain (Loss) on Extinguishment of Debt	$ 25,900	0		0		(25,915)	0
Other Nonoperating Income (Expense)						974
Gain on Sales-type Leases		33,834		0		33,834	0
Gain on sale of assets and other		468		111		974	(199)
Nonoperating Income (Expense)		25,492		(16,785)		(13,752)	(33,489)
Income before income taxes		77,993		47,129		104,942	100,959
State income tax benefit (expense)		(39)		30		(76)	(6)
Net income		77,954	$ 26,912	47,159	$ 53,794	104,866	100,953
Allocation of net income attributable to noncontrolling interests		(1,484)		(1,469)		(3,535)	(4,081)
Net Income (Loss) Attributable to Parent		76,470		45,690		101,331	96,872
Other Comprehensive Income (Loss), Net of Tax						0
Net income attributable to the partners		76,470		45,690		101,331	96,872
Parent
Revenues:
Revenues		0		0		0	0
Operating costs and expenses [Abstract]
Operations (exclusive of depreciation and amortization)		0		0		0	0
Depreciation and amortization		0				0
General and administrative		780		745		1,879	1,821
Total operating costs and expenses		780		745		1,879	1,821
Operating Income (Loss)		(780)		(745)		(1,879)	(1,821)
Equity in earnings of subsidiaries		89,893		65,431			136,730
Equity in earnings of equity method investments		0		0		0	0
Interest expense		(12,740)		(18,996)		(29,470)	(38,037)
Interest income		26		0		26	0
Gain (Loss) on Extinguishment of Debt						(25,915)
Other Nonoperating Income (Expense)						141
Gain on Sales-type Leases		0				0
Gain on sale of assets and other		71		0			0
Nonoperating Income (Expense)		77,250		(46,435)		(103,210)	(98,693)
Income before income taxes		76,470		45,690		101,331	96,872
State income tax benefit (expense)		0		0		0	0
Net income		76,470		45,690		101,331	96,872
Allocation of net income attributable to noncontrolling interests		0		0		0	0
Other Comprehensive Income (Loss), Net of Tax						158,428
Net income attributable to the partners		76,470		45,690		101,331	96,872
Guarantor Restricted Subsidiaries
Revenues:
Revenues		105,304		119,921		219,214	239,379
Operating costs and expenses [Abstract]
Operations (exclusive of depreciation and amortization)		30,980		36,701		62,111	70,778
Depreciation and amortization		20,739		20,027		40,492	39,563
General and administrative		1,755		1,243		3,358	2,787
Total operating costs and expenses		53,474		57,971		105,961	113,128
Operating Income (Loss)		51,830		61,950		113,253	126,251
Equity in earnings of subsidiaries		1,510		2,063			7,559
Equity in earnings of equity method investments		1,449		1,783		3,537	3,883
Interest expense		(1,039)		(234)		(2,076)	(215)
Interest income		2,787		551		5,005	1,079
Gain (Loss) on Extinguishment of Debt						0
Other Nonoperating Income (Expense)						816
Gain on Sales-type Leases		33,834				33,834
Gain on sale of assets and other		396		69			(260)
Nonoperating Income (Expense)		38,937		4,232		46,921	12,046
Income before income taxes		90,767		66,182		160,174	138,297
State income tax benefit (expense)		(39)		30		(76)	(6)
Net income		90,728		66,212		160,098	138,291
Allocation of net income attributable to noncontrolling interests		(835)		(781)		(1,670)	(1,561)
Other Comprehensive Income (Loss), Net of Tax						5,805
Net income attributable to the partners		89,893		65,431		158,428	136,730
Non-Guarantor Non-Restricted Subsidiaries
Revenues:
Revenues		9,503		10,830		23,447	25,869
Operating costs and expenses [Abstract]
Operations (exclusive of depreciation and amortization)		3,757		3,901		7,607	7,343
Depreciation and amortization		4,295		4,220		8,520	8,508
General and administrative		0		0		0	0
Total operating costs and expenses		8,052		8,121		16,127	15,851
Operating Income (Loss)		1,451		2,709		7,320	10,018
Equity in earnings of subsidiaries		0		0			0
Equity in earnings of equity method investments		707		0		333	0
Interest expense		0		0		0	0
Interest income		0		0		0	0
Gain (Loss) on Extinguishment of Debt						0
Other Nonoperating Income (Expense)						17
Gain on Sales-type Leases		0				0
Gain on sale of assets and other		1		42			61
Nonoperating Income (Expense)		708		42		350	61
Income before income taxes		2,159		2,751		7,670	10,079
State income tax benefit (expense)		0		0		0	0
Net income		2,159		2,751		7,670	10,079
Allocation of net income attributable to noncontrolling interests		(649)		(688)		(1,865)	(2,520)
Other Comprehensive Income (Loss), Net of Tax						0
Net income attributable to the partners		1,510		2,063		5,805	7,559
Eliminations
Revenues:
Revenues		0		0		0	0
Operating costs and expenses [Abstract]
Operations (exclusive of depreciation and amortization)		0		0		0	0
Depreciation and amortization		0		0		0	0
General and administrative		0		0		0	0
Total operating costs and expenses		0		0		0	0
Operating Income (Loss)		0		0		0	0
Equity in earnings of subsidiaries		(91,403)		(67,494)			(144,289)
Equity in earnings of equity method investments		0		0		0	0
Interest expense		0		0		0	0
Interest income		0		0		0	0
Gain (Loss) on Extinguishment of Debt						0
Other Nonoperating Income (Expense)						0
Gain on Sales-type Leases		0				0
Gain on sale of assets and other		0		0			0
Nonoperating Income (Expense)		(91,403)		(67,494)		(164,233)	(144,289)
Income before income taxes		(91,403)		(67,494)		(164,233)	(144,289)
State income tax benefit (expense)		0		0		0	0
Net income		(91,403)		(67,494)		(164,233)	(144,289)
Allocation of net income attributable to noncontrolling interests		0		0		0	0
Other Comprehensive Income (Loss), Net of Tax						(164,233)
Net income attributable to the partners		(91,403)		(67,494)		(164,233)	(144,289)
Affiliates
Revenues:
Revenues		95,563		102,369		196,991	205,728
Affiliates | Parent
Revenues:
Revenues		0		0		0	0
Affiliates | Guarantor Restricted Subsidiaries
Revenues:
Revenues		89,417		96,221		184,172	193,614
Affiliates | Non-Guarantor Non-Restricted Subsidiaries
Revenues:
Revenues		6,146		6,148		12,819	12,114
Affiliates | Eliminations
Revenues:
Revenues		0		0		0	0
Third parties
Revenues:
Revenues		19,244		28,382		45,670	59,520
Third parties | Parent
Revenues:
Revenues		0		0		0	0
Third parties | Guarantor Restricted Subsidiaries
Revenues:
Revenues		15,887		23,700		35,042	45,765
Third parties | Non-Guarantor Non-Restricted Subsidiaries
Revenues:
Revenues		3,357		4,682		10,628	13,755
Third parties | Eliminations
Revenues:
Revenues		$ 0		$ 0		$ 0	$ 0

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Supplemental Guarantor / Non-Guarantor Financial Information Condensed Consolidating Statement of Cash Flows (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019
Condensed Financial Statements, Captions [Line Items]
Net cash provided by operating activities	$ 134,594	$ 144,989
Cash flows from investing activities
Additions to properties and equipment	(30,740)	(17,752)
Payments to Acquire Interest in Joint Venture	(2,400)	0
Distributions from UNEV in excess of earnings		0
Proceeds from sale of assets	816	194
Distributions in excess of equity in earnings of equity investments	470	299
Net cash provided by (used for) investing activities	(31,854)	(17,259)
Cash flows from financing activities
Net borrowings (repayments) under credit agreement	29,500	18,500
Net intercompany financing activities	0	0
Early Repayment of Senior Debt	(522,500)	0
Proceeds from Issuance of Senior Long-term Debt	500,000	0
Contributions from general partner	435	0
Contribution from Joint Venture Partner	13,263	0
Distributions to HEP unitholders	(102,979)	(136,207)
Distributions to noncontrolling interests	(4,000)	(5,250)
Units withheld for tax withholding obligations	(147)	(119)
Payments of Financing Costs		(255)
Payments of Debt Issuance Costs	(8,714)	0
Payments on finance leases	(1,972)	(503)
Other financing activities		(503)
Net cash provided by (used by) financing activities	(97,114)	(123,834)
Increase (decrease) for the period	5,626	3,896
Beginning of period	13,287	3,045
End of period	18,913	6,941
Parent
Condensed Financial Statements, Captions [Line Items]
Net cash provided by operating activities	(31,103)	(37,005)
Cash flows from investing activities
Additions to properties and equipment	0	0
Payments to Acquire Interest in Joint Venture	0
Distributions from UNEV in excess of earnings		0
Proceeds from sale of assets	0	0
Distributions in excess of equity in earnings of equity investments	0	0
Net cash provided by (used for) investing activities	0	0
Cash flows from financing activities
Net borrowings (repayments) under credit agreement	29,500	18,500
Net intercompany financing activities	134,645	155,225
Early Repayment of Senior Debt	(522,500)
Proceeds from Issuance of Senior Long-term Debt	500,000
Contributions from general partner	435	0
Contribution from Joint Venture Partner	0
Distributions to HEP unitholders	(102,979)	(136,207)
Distributions to noncontrolling interests	0	0
Units withheld for tax withholding obligations	(147)	(119)
Payments of Financing Costs		(255)
Payments of Debt Issuance Costs	(8,714)
Payments on finance leases	0
Other financing activities		(139)
Net cash provided by (used by) financing activities	30,240	37,005
Increase (decrease) for the period	(863)	0
Beginning of period	4,790	2
End of period	3,927	2
Guarantor Restricted Subsidiaries
Condensed Financial Statements, Captions [Line Items]
Net cash provided by operating activities	151,331	165,882
Cash flows from investing activities
Additions to properties and equipment	(8,883)	(17,274)
Payments to Acquire Interest in Joint Venture	(13,263)
Distributions from UNEV in excess of earnings		(8,191)
Proceeds from sale of assets	816	194
Distributions in excess of equity in earnings of equity investments	6,559	299
Net cash provided by (used for) investing activities	(14,771)	(8,590)
Cash flows from financing activities
Net borrowings (repayments) under credit agreement	0	0
Net intercompany financing activities	(134,645)	(155,225)
Early Repayment of Senior Debt	0
Proceeds from Issuance of Senior Long-term Debt	0
Contributions from general partner	0	0
Contribution from Joint Venture Partner	0
Distributions to HEP unitholders	0	0
Distributions to noncontrolling interests	0	0
Units withheld for tax withholding obligations	0	0
Payments of Financing Costs
Payments of Debt Issuance Costs	0
Payments on finance leases	(1,972)
Other financing activities		(364)
Net cash provided by (used by) financing activities	(136,617)	(155,589)
Increase (decrease) for the period	(57)	1,703
Beginning of period	(709)	0
End of period	(766)	1,703
Non-Guarantor Non-Restricted Subsidiaries
Condensed Financial Statements, Captions [Line Items]
Net cash provided by operating activities	20,277	23,671
Cash flows from investing activities
Additions to properties and equipment	(21,857)	(478)
Payments to Acquire Interest in Joint Venture	(2,400)
Distributions from UNEV in excess of earnings		0
Proceeds from sale of assets	0	0
Distributions in excess of equity in earnings of equity investments	0	0
Net cash provided by (used for) investing activities	(24,257)	(478)
Cash flows from financing activities
Net borrowings (repayments) under credit agreement	0	0
Net intercompany financing activities	0	0
Early Repayment of Senior Debt	0
Proceeds from Issuance of Senior Long-term Debt	0
Contributions from general partner	13,263	0
Contribution from Joint Venture Partner	13,263
Distributions to HEP unitholders	0	0
Distributions to noncontrolling interests	(16,000)	(21,000)
Units withheld for tax withholding obligations	0	0
Payments of Financing Costs		0
Payments of Debt Issuance Costs	0
Payments on finance leases	0
Other financing activities		0
Net cash provided by (used by) financing activities	10,526	(21,000)
Increase (decrease) for the period	6,546	2,193
Beginning of period	9,206	3,043
End of period	15,752	5,236
Eliminations
Condensed Financial Statements, Captions [Line Items]
Net cash provided by operating activities	(5,911)	(7,559)
Cash flows from investing activities
Additions to properties and equipment	0	0
Payments to Acquire Interest in Joint Venture	13,263
Distributions from UNEV in excess of earnings		(8,191)
Proceeds from sale of assets	0	0
Distributions in excess of equity in earnings of equity investments	(6,089)	0
Net cash provided by (used for) investing activities	7,174	(8,191)
Cash flows from financing activities
Net borrowings (repayments) under credit agreement	0	0
Net intercompany financing activities	0	0
Early Repayment of Senior Debt	0
Proceeds from Issuance of Senior Long-term Debt	0
Contributions from general partner	(13,263)	0
Contribution from Joint Venture Partner	0
Distributions to HEP unitholders	0	0
Distributions to noncontrolling interests	12,000	15,750
Units withheld for tax withholding obligations	0	0
Payments of Financing Costs		0
Payments of Debt Issuance Costs	0
Payments on finance leases	0
Other financing activities		0
Net cash provided by (used by) financing activities	(1,263)	15,750
Increase (decrease) for the period	0	0
Beginning of period	0	0
End of period	$ 0	$ 0