UNIT-BASED COMPENSATION

As of December 31, 2012, we sponsored following long-term incentive plans:

•

The Third Amended and Restated 2000 Long-Term Incentive Plan (the 2000 LTIP) under which NuStar GP, LLC may award NuStar Energy (NS) common units. Awards under the 2000 LTIP can include NS unit options, restricted units, performance awards, distribution equivalent rights (DER) and contractual rights to receive common units. The 2000 LTIP was amended in May 2011 to increase the units authorized for award from 1,500,000 at December 31, 2010 to 3,250,000 at December 31, 2011.


•	The 2002 Unit Option Plan (the UOP) under which NuStar GP, LLC may award up to 200,000 NS unit options to officers and directors of NuStar GP, LLC or its affiliates.


•	The 2003 Employee Unit Incentive Plan (the UIP) under which NuStar GP, LLC may award up to 500,000 NS common units to employees of NuStar GP, LLC or its affiliates, excluding officers and directors of NuStar GP, LLC and its affiliates. Awards under the UIP can include NS unit options, restricted units and DER.


•	The 2006 Long-Term Incentive Plan (the 2006 LTIP) under which NuStar GP Holdings may award up to 2,000,000 NuStar GP Holdings (NSH) units to our employees, consultants and directors who perform services for us or our affiliates. Awards under the 2006 LTIP can include NSH unit options, performance awards, DER, restricted units, phantom units, unit grants and unit appreciation rights.

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

The number of awards granted under the above-noted plans were as follows:

Year Ended December 31,

2012

2011

2010

Granted

Vesting

Granted

Vesting

Granted

Vesting

2000 LTIP:

Performance awards

33,445

(a)

27,111

(a)

21,380

(a)

Restricted units

231,855

1/5 per year

208,195

1/5 per year

191,430

1/5 per year

Restricted units (grants to non-employee directors of NuStar GP, LLC)

8,170

1/3 per year

6,760

1/3 per year

3,938

1/3 per year

UIP:

Restricted units (b)

15,382

1/5 per year

14,005

1/5 per year

11,520

1/5 per year

2006 LTIP:

Restricted units

25,640

1/5 per year

24,970

1/5 per year

21,935

1/5 per year

Restricted units (grants to non-employee directors of NuStar GP Holdings) (c)

10,601

1/3 per year

9,987

1/3 per year

6,156

1/3 per year


(a)	Performance awards vest 1/3 per year if certain performance measures are met, as defined in the award agreements.


(b)	The UIP restricted unit grants include 3,392, 2,880 and 2,460 restricted unit awards granted to certain international employees for the years ended December 31, 2012, 2011 and 2010, respectively, that vest 1/3 per year, as defined in the award agreements.


(c)	Expenses resulting from our awards to non-employee directors are not reimbursed by NuStar Energy and are included in “general and administrative expenses” on our consolidated statements of comprehensive income (loss).

As of December 31, 2012 and 2011, we had accrued $10.4 million and $15.6 million, respectively, for the outstanding awards of NS unit options, performance awards and restricted units in “Accrued compensation expense” on our consolidated balance sheets. As of December 31, 2012, NS common units that remained available to be awarded totaled 1,569,173 under the 2000 LTIP and 226,277 under the UIP. Substantially all approved awards under the UOP have been granted as of December 31, 2012. NSH units that remained available totaled 1,510,791 under the 2006 LTIP as of December 31, 2012.

The following table summarizes information pertaining to long-term incentive plan compensation expenses:



	Year Ended December 31,
	2012		2011		2010
	(Thousands of Dollars)
Long-term incentive plan compensation expense charged to NuStar Energy	$	7,745	$	8,521	$	20,349
Expenses resulting from NuStar GP Holdings awards to non-employee directors	305		305		225

Unit Options

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

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

On November 16, 2007, we granted 324,100 NSH unit options at $31.55, which was our only grant of options under the 2006 LTIP. These options expire seven years from the grant date and vest in annual one-third increments beginning on November 16, 2010. The total intrinsic value of unit options exercised during each of the years ended December 31, 2012 and December 31, 2010 was $0.1 million. As of December 31, 2012, the aggregate intrinsic value of NSH unit options outstanding and exercisable was zero as their market value at December 31, 2012 was less than their exercise price. The number of NSH unit options exercised during each of the years ended December 31, 2012 and 2010 was 11,667. No NSH unit options were exercised during the year ended December 31, 2011. The balance of NSH unit options outstanding was 300,766 and 312,433 as of December 31, 2012 and 2011, respectively.

The following table summarizes the status of vested NSH unit options granted under the 2006 LTIP:



	Number of Unit Options	Weighted- Average Exercise Price Per Unit		Weighted- Average Remaining Contractual Term
				(in years)
Outstanding and exercisable as of December 31, 2012	300,766	$	31.55	1.9

Restricted Units

The following table summarizes information related to outstanding NSH restricted units awarded under the 2006 LTIP:



	Restricted Unit Grants to Employees		Restricted Unit Grants to Non- Employee Directors		Total		Weighted- Average Grant-Date Fair Value Per Unit
Balance as of January 1, 2012	66,671		16,967		83,638		$	29.77
Granted	25,640		10,601		36,241		$	28.77
Vested	(26,893	)	(8,257	)	(35,150	)	$	28.82
Balance as of December 31, 2012	65,418		19,311		84,729		$	29.74

The weighted-average grant-date fair value of NSH restricted units granted during the years ended December 31, 2012, 2011 and 2010 was $28.77, $30.53 and $36.54 per unit, respectively. The total fair value of NSH restricted units that vested during the years ended December 31, 2012, 2011 and 2010 was $1.0 million, $0.7 million and $0.8 million, respectively.