XML 33 R16.htm IDEA: XBRL DOCUMENT v3.20.2
Related Party Transactions
9 Months Ended
Sep. 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 79% and 80% of our total revenues for the three months and nine months ended September 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 September 30, 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 $101.0 million and $106.0 million for the three months ended September 30, 2020 and 2019, respectively, and $298.0 million and $311.8 million for the nine months ended September 30, 2020 and 2019, respectively.
HFC charged us general and administrative services under the Omnibus Agreement of $0.7 million for both of the three months ended September 30, 2020 and 2019, and $2.0 million and 1.9 million for the nine months ended September 30, 2020 and 2019, respectively.
We reimbursed HFC for costs of employees supporting our operations of $14.0 million and $13.7 million for the three months ended September 30, 2020 and 2019, respectively, and $41.3 million and $40.5 million for the nine months ended September 30, 2020 and 2019, respectively.
HFC reimbursed us $2.3 million and $4.6 million for the three months ended September 30, 2020 and 2019, respectively, for expense and capital projects, and $6.3 million and $10.4 million for the nine months ended September 30, 2020 and 2019, respectively.
We distributed $18.4 million and $37.6 million in the three months ended September 30, 2020 and 2019, respectively, and $74.3 million and $112.4 million for the nine months ended September 30, 2020 and 2019, respectively, to HFC as regular distributions on its common units.
Accounts receivable from HFC were $46.5 million and $49.7 million at September 30, 2020, and December 31, 2019, respectively.
Accounts payable to HFC were $6.9 million and $16.7 million at September 30, 2020, and December 31, 2019, respectively.
Deferred revenue in the consolidated balance sheets at September 30, 2020 and December 31, 2019, included $0.4 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 rail yards of $0.5 million for both of the three months ended September 30, 2020 and 2019, and $1.5 million for both of the nine months ended September 30, 2020 and 2019 .
We received sales-type lease payments of $2.4 million from HFC for both of the three months ended September 30, 2020 and 2019, respectively, and $7.1 million and $2.4 million for the nine months ended September 30, 2020 and 2019, respectively.
On October 31, 2017, we closed 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 expired after the cash distribution for the second quarter of 2020, which was made during the third quarter of 2020.