FAIR VALUE MEASUREMENTS

12 Months Ended

Dec. 31, 2012

FAIR VALUE MEASUREMENTS [Abstract]

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS

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

The following liabilities are measured at fair value on a recurring basis:

	December 31, 2012
	Level 1		Level 2		Level 3		Total
	(Thousands of Dollars)
Accrued compensation expense:
NuStar Energy restricted units and performance awards	$	10,376	$	—	$	—	$	10,376
NuStar Energy unit options	—		70		—		70
Total	$	10,376	$	70	$	—	$	10,446

	December 31, 2011
	Level 1		Level 2		Level 3		Total
	(Thousands of Dollars)
Accrued compensation expense:
NuStar Energy restricted units and performance awards	$	13,622	$	—	$	—	$	13,622
NuStar Energy unit options	—		1,953		—		1,953
Total	$	13,622	$	1,953	$	—	$	15,575

The fair value of NS unit options is determined using the Black-Scholes option-pricing model based on certain assumptions for expected life, volatility, distribution yield and risk-free interest rate. The expected life of NS unit options granted is the period of time from the valuation date to the date of expected exercise or other expected settlement. Expected volatility for NS unit options is based on closing prices of NS common units for periods corresponding to the life of options granted. Expected distribution yield is based on annualized distributions at the valuation date for NS unit options. The risk-free interest rate used is the implied yield currently available from the U.S. Treasury zero-coupon issues with a remaining term equal to the expected life of the options at the valuation date for NS unit options. Accrued compensation expense for NS unit options was determined using the Black-Scholes option-pricing model based on the following weighted-average assumptions:

	December 31,
	2012		2011
Expected life in years	6.5		6.3
Expected volatility	22.4	%	20.3	%
Expected distribution yield	10.3	%	7.7	%
Risk-free interest rate	0.2	%	0.1	%

Fair Value of Financial Instruments

We recognize cash equivalents, receivables, payables and debt in our consolidated balance sheets at their carrying amount. The fair values of these financial instruments approximate their carrying amounts.