Related Party Transactions

12 Months Ended

Dec. 31, 2015

Related Party Transactions [Abstract]

Related Party Transactions

Related Party Transactions

We serve HFC's refineries under long-term pipeline, terminal, tankage and refinery processing unit throughput agreements expiring from 2019 to 2030. Under these agreements, HFC agrees to transport, store, and process throughput volumes of refined product, crude oil and feedstocks on our pipelines, terminal, 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 based on the PPI or FERC index. As of December 31, 2015, these agreements with HFC require minimum annualized payments to us of $257.6 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 an omnibus agreement we have with HFC (the “Omnibus Agreement”), we pay HFC an annual administrative fee ($2.4 million in 2015 and currently $2.5 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 $292.2 million, $275.2 million and $252.4 million for the years ended December 31, 2015, 2014 and 2013, respectively.

• HFC charged us general and administrative services under the Omnibus Agreement of $2.4 million for the year ended December 31, 2015, and $2.3 million for each of the years ended December 31, 2014 and 2013.

• We reimbursed HFC for costs of employees supporting our operations of $34.5 million, $38.9 million and $34.6 million for the years ended December 31, 2015, 2014 and 2013, respectively. Netted against the cost of employees for the year ended December 31, 2013, is a $3.5 million refund from HFC related to refunds of taxes covering a multi-year period.

• HFC reimbursed us $13.5 million, $16.8 million and $21.6 million for the years ended December 31, 2015, 2014 and 2013, respectively, for certain reimbursable costs and capital projects.

• We distributed $90.4 million, $80.5 million and $71.4 million, for the years ended December 31, 2015, 2014 and 2013, respectively, to HFC as regular distributions on its common units and general partner interest, including general partner incentive distributions.

• Accounts receivable from HFC were $32.5 million and $33.4 million at December 31, 2015 and 2014, respectively.

• Accounts payable to HFC were $11.6 million and $5.2 million at December 31, 2015 and 2014, respectively.

• Revenues for the years ended December 31, 2015, 2014 and 2013 include $7.3 million, $10.1 million and $5.1 million, respectively, of shortfall payments billed in 2014, 2013 and 2012, respectively, as HFC did not exceed its minimum volume commitment in any of the subsequent four quarters. Deferred revenue in the consolidated balance sheets at December 31, 2015 and 2014, includes $6.4 million and $7.3 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 $6.4 million deferred at December 31, 2015.

• In November 2015, we acquired from HFC all the outstanding membership interests in El Dorado Operating which owns the newly constructed naphtha fractionation and hydrogen generation units at HFC’s El Dorado refinery. See Note 2 for a description of this transaction.