Related-Party Transactions (Notes)

3 Months Ended

Mar. 31, 2015

Related-Party Transactions

RELATED-PARTY TRANSACTIONS

Affiliate Agreements

The Partnership has various long-term, fee-based commercial agreements with Tesoro under which we provide pipeline transportation, trucking, terminal distribution, storage and petroleum-coke handling services to Tesoro, and Tesoro commits to provide us with minimum monthly throughput volumes of crude oil and refined products. We believe the terms and conditions under these agreements, as well as our other agreements with Tesoro, are generally no less favorable to either party than those that could have been negotiated with unaffiliated parties with respect to similar services.

We entered into the Third Amended and Restated Omnibus Agreement (the “Amended Omnibus Agreement”) and the Secondment and Logistics Services Agreement (the “Secondment Agreement”) in connection with the West Coast Logistics Assets Acquisition. We also entered into the First Amended and Restated Omnibus Agreement of QEPM (the “QEPM Omnibus Agreement”) and the Keep-Whole Commodity Fee Agreement (the “Keep-Whole Commodity Fee Agreement”) in connection with the Rockies Natural Gas Business Acquisition. See Notes 3 and 11 of our Annual Report on Form 10-K for the year ended December 31, 2014, for additional information regarding the terms and conditions of these agreements.

On February 20, 2015, we entered into an amendment to the Amended Omnibus Agreement. The amendment, effective December 31, 2014, clarifies certain provisions regarding the responsibilities for costs incurred by TLLP in connection with pressure testing conducted on our gathering and transportation system located in the Bakken Region.

Summary of Affiliate Transactions

A summary of revenue and expense transactions with Tesoro, including expenses directly charged and allocated to our Predecessors, are as follows (in millions):

	Three Months Ended March 31,
	2015		2014
Revenues (a)	$	148	$	111
Operating and maintenance expenses	25		20
Imbalance settlement gains and reimbursements from Tesoro (b)	8		7
General and administrative expenses	17		7

____________

(a) Tesoro accounted for 56% and 88% of our total revenues for the three months ended March 31, 2015 and 2014, respectively.

(b) Includes imbalance settlement gains of $2 million for both the three months ended March 31, 2015 and 2014. Also includes reimbursements primarily related to pressure testing and repairs and maintenance costs pursuant to the Amended Omnibus Agreement of $6 million and $5 million for the three months ended March 31, 2015 and 2014, respectively.

Predecessor Transactions. Related-party transactions of our Predecessor were settled through equity. The balance in receivables and accounts payable from affiliated companies represents the amount owed from or to Tesoro related to certain affiliate transactions. Our Predecessor did not record revenue for transactions with Tesoro in the Terminalling and Transportation segment, with the exception of regulatory tariffs charged to Tesoro on the refined products pipeline included in the West Coast Logistics Assets Acquisition.

Distributions. In accordance with our partnership agreement, the unitholders of our common and general partner interests are entitled to receive quarterly distributions of available cash. In connection with the Rockies Natural Gas Business Acquisition, our general partner has waived its right to $10 million of general partner distributions with respect to IDRs during 2015 (pro rata on a quarterly basis). For the three months ended March 31, 2015 our general partner waived $2.5 million of general partner distributions with respect to IDRs. During the three months ended March 31, 2015, we paid quarterly cash distributions of $35 million to Tesoro and TLGP, including IDRs. On April 22, 2015, we declared a quarterly cash distribution of $0.6950 per unit, which will be paid on May 15, 2015. The distribution will include payment of $33 million to Tesoro and TLGP, including IDRs.

Green River Processing, LLC

Related-Party Transactions

RELATED PARTY TRANSACTIONS

Transactions with QEP Resources and QEPFSC were considered related party for the period prior to the Acquisition, including the three months ended March 31, 2014. Subsequent to the Acquisition, including the three months ended March 31, 2015, transactions between QEPFS and TLLP are considered related party.

The following table summarizes the other affiliate revenue (expense) transactions with QEP Resources and QEPFSC (“QEP Entities”) and Tesoro, TRMC, Tesoro Logistics GP, LLC (“TLGP”), TLLP or any of TLLP’s subsidiaries (“Tesoro Entities”):

	Tesoro Entities		QEP Entities
	Three Months Ended March 31,
	2015		2014
	(in millions)
Revenue from affiliate	$	11	$	7
General and administrative	2		4

Centralized Cash Management

Operation of the Assets were funded by QEP Resources and managed under QEP Resources’ centralized cash management program prior to the Acquisition and are currently under TLLP’s cash management program. Sales and purchases related to third-party transactions were settled in cash but were received or paid by QEP Resources within the centralized cash management system for the three months ended March 31, 2014, or by TLLP for the three months ended March 31, 2015.

Allocation of Costs

The employees supporting Green River Processing’s operations were employees of QEPFSC and QEP Resources for the three months ended March 31, 2014 or TLGP, the general partner of TLLP, for the three months ended March 31, 2015. The financial statements of Green River Processing include direct charges for operations and support of our assets and costs allocated by QEP Resources, TLLP or TLGP. These allocated costs are reimbursed and relate to various business and corporate services and compensation-related costs.

Keep-Whole Commodity Fee Agreement

Effective December 2, 2014, following the completion of the Acquisition, Green River Processing entered into a five-year agreement with Tesoro Refining & Marketing Company LLC (“TRMC”), a wholly-owned subsidiary of Tesoro Corporation, which transfers Green River Processing’s commodity risk exposure associated with keep-whole processing agreements to TRMC (the “Keep-Whole Commodity Agreement”). Under a keep-whole agreement, a producer transfers title to the NGLs produced during gas processing, and the processor, in exchange, delivers to the producer natural gas with a British thermal unit (“BTU”) content equivalent to the NGLs removed. The operating margin for these contracts is determined by the spread between NGL sales prices and the price paid to purchase the replacement natural gas (“Shrink Gas”). Under the Keep-Whole Commodity Agreement with TRMC, TRMC pays Green River Processing a fee to process NGLs related to keep-whole agreements and delivers Shrink Gas to the producers on behalf of Green River Processing. Green River Processing pays TRMC a marketing fee in exchange for assuming the commodity risk.

Terms and pricing under this agreement are revised each year. The Keep-Whole Commodity Agreement minimizes the impact of commodity price movement during the annual period subsequent to renegotiation of terms and pricing each year. However, the annual fee we charge TRMC could be impacted as a result of any changes in the spread between NGL sales prices and the price of natural gas.

Annual General & Administrative Services Fee

As part of the Contribution, Green River Processing entered into the Limited Liability Company Agreement of Green River Processing, LLC (the “Operating Agreement”), which provided that Green River Processing pay QEPFSC an annual general and administrative services fee of $7 million. The rights and provisions of the Operating Agreement were transferred from QEPFSC to QEPFS in connection with the Acquisition, and there were no changes to the annual fee.

Gas Conditioning Agreement

The Blacks Fork processing complex is party to a gas conditioning agreement (the “Gas Conditioning Agreement”) with QEPM whereby QEPM has agreed to make available to TLLP at the Blacks Fork processing complex natural gas volumes that it has gathered under certain “life-of-reserves” and long-term, natural gas gathering agreements with several producer customers. Pursuant to the terms of the Gas Conditioning Agreement, the Blacks Fork processing complex has been assigned QEPM’s conditioning and keep-whole processing rights detailed in the underlying gathering agreements.