Equity-Based Compensation (Notes)

3 Months Ended

Mar. 31, 2012

Equity Based Compensation [Abstract]

Equity-Based Compensation

EQUITY-BASED COMPENSATION

Unit-based compensation expense related to the Partnership that was included in our condensed statements of combined consolidated operations was as follows (in thousands):

	Three Months Ended March 31, 2012
Service phantom units	$	29
Performance phantom units	349
Total Unit-Based Compensation Expense	$	378

Service Phantom Unit Awards. During the three months ended March 31, 2012, our general partner issued service phantom unit awards with tandem distribution equivalent rights to certain directors under the 2011 TLLP Long-Term Incentive Plan. The fair value of each phantom unit on the grant date is equal to the market price of our common unit on that date. The estimated fair value of our phantom units is amortized over the vesting period using the straight-line method. Non-employee director awards vest at the end of a one-year service period and employee awards granted in 2011 vest ratably over a three-year service period. Total unrecognized compensation cost related to our nonvested service phantom units totaled $0.3 million as of March 31, 2012, which is expected to be recognized over a weighted-average period of 1.4 years. The fair value of nonvested service phantom units outstanding as of March 31, 2012, totaled $0.6 million.

A summary of our service phantom unit award activity for the three months ended March 31, 2012, is set forth below:

	Number of Service Phantom Units		Weighted-Average Grant Date Fair Value
Nonvested at January 1, 2012	14,073		$	23.24
Granted	5,554		36.44
Forfeited	(3,557	)	28.52
Nonvested at March 31, 2012	16,070		26.63

Performance Phantom Unit Awards. Our general partner granted performance phantom unit awards to certain officers in February 2012. These performance phantom unit awards represent the right to receive a TLLP common unit at the end of the approximate three-year performance period depending on the Partnership's achievement of pre-established performance measures. The value of the award ultimately paid will be based on our relative total unitholder return against the performance peer group over the performance period. The performance phantom unit awards can range from 0% to 200% of the targeted award value. The estimated weighted-average payout for these awards was 175% based on results through March 31, 2012. The fair value of each performance phantom unit award is estimated at the grant date using a Monte Carlo simulation model. The estimated fair value is amortized over the vesting period, generally three years, using the straight-line method. Total unrecognized compensation cost related to our nonvested performance phantom units totaled $1.9 million as of March 31, 2012, which is expected to be recognized over a weighted-average period of 2.4 years.

A summary of our performance phantom unit award activity for the three months ended March 31, 2012, is set forth below:

	Number of Performance Phantom Units	Weighted-Average Grant Date Fair Value
Nonvested at January 1, 2012	36,800	$	32.99
Granted	36,000	39.19
Nonvested at March 31, 2012	72,800	36.06

Sponsor's Stock-based Compensation. Certain Tesoro employees supporting the Predecessors' operations were historically granted long-term incentive compensation awards under Tesoro's stock-based compensation programs, which primarily consist of stock options, restricted common stock and stock appreciation rights. The Predecessors were allocated expenses for stock-based compensation costs. These costs are included in the Predecessors' general and administrative expenses. The Predecessors' allocated expense was $0.7 million for the three months ended March 31, 2011. There was an immaterial amount of stock-based compensation related to the Predecessors in the three months ended March 31, 2012. The Partnership has not been allocated these stock-based compensation costs as they are included with the services provided under the Amended Omnibus Agreement.