Related Party Transactions

12 Months Ended

Dec. 31, 2012

Related Party Transactions [Abstract]

Related Party Transactions

Related Party Transactions

We serve HFC's refineries under long-term pipeline and terminal, tankage and throughput agreements expiring from 2019 to 2026. Under these agreements, HFC agreed to transport, store and throughput volumes of refined product and crude oil on our pipelines and terminal, tankage and loading rack facilities that result in minimum annual payments to us. These minimum annual payments or revenues are subject to annual tariff rate adjustments on July 1, based on the Producer Price Index (“PPI”) or Federal Energy Regulatory Commission (“FERC”) index. Additionally such agreements require HFC to reimburse us for certain costs. As of December 31, 2012, these agreements with HFC will result in minimum annualized payments to us of $217.2 million.

If HFC fails to meet its minimum volume commitments under the agreements in any quarter, it will be required to pay us in cash the amount of any shortfall 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.

In November 2011, we reached an agreement with HFC that clarifies certain terms of a crude pipelines and tankage throughput agreement, whereby HFC agreed to pay us $5.5 million for certain past deliveries on our crude pipeline system. We recognized this settlement as revenue in the fourth quarter of 2011 that will be billed in six equal quarterly installments through March 2013.

Under certain provisions of an omnibus agreement we have with HFC (the “Omnibus Agreement”) we pay HFC an annual administrative fee for the provision by HFC or its affiliates of various general and administrative services to us, currently $2.3 million. This fee does not include the salaries of personnel employed by HLS who perform services for us 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 $245.6 million, $168.3 million and $146.4 million for the years ended December 31, 2012, 2011 and 2010, respectively.

• HFC charged us general and administrative services under the Omnibus Agreement of $2.3 million for each of the three years ended December 31, 2012, 2011 and 2010.

• We reimbursed HFC for costs of employees supporting our operations of $31.1 million, $21.4 million and $18.6 million for the years ended December 31, 2012, 2011 and 2010, respectively.

• HFC reimbursed us $13.4 million, $11.9 million and $3.7 million for the years ended December 31, 2012, 2011 and 2010, respectively, for certain reimbursable costs and capital projects.

• We distributed $64.0 million, $40.6 million and $35.9 million, for the years ended December 31, 2012, 2011 and 2010, respectively, to HFC as regular distributions on its common units and general partner interest, including general partner incentive distributions.

• Accounts receivable from HFC were $31.6 million and $31.9 million at December 31, 2012 and 2011, respectively.

• Accounts payable to HFC were $5.0 million and $6.5 million at December 31, 2012 and 2011, respectively.

• Revenues for the years ended December 31, 2012, 2011 and 2010 include $7.8 million, $3.3 million and $3.6 million of shortfall payments billed in 2011, 2010 and 2009, respectively, as HFC did not exceed its minimum volume commitment in any of the subsequent four quarters in 2012, 2011 and 2010. Additionally revenues for the year ended December 31, 2012 include $3.8 million due to capacity constraints on our UNEV pipeline system. Deferred revenue in the consolidated balance sheets at December 31, 2012 and 2011, includes $5.1 million and $4.0 million, respectively, relating to certain shortfall billings. It is possible that HFC may not exceed its minimum obligations to receive credit for any of the $5.1 million deferred at December 31, 2012.

• We acquired from HFC a 75% interest in the UNEV Pipeline in July 2012 and certain tankage and terminal assets in November 2011 and March 2010. See Note 3 for a description of these transactions.