Note 3 - Related-Party Transactions

Commercial Agreements

We have various long-term, fee-based commercial agreements with our Sponsor, under which we provide pipeline transportation, wholesale, trucking, terminal distribution and storage services to Marathon, and Marathon commits to provide us with minimum monthly throughput volumes of crude oil, refined products and other. If, in any calendar month, Marathon fails to meet its minimum volume commitments under these agreements, it will be required to pay us a shortfall payment. These shortfall payments may be applied as a credit against any amounts due above their minimum volume commitments for up to twelve months after the shortfall occurs. Each of these agreements has fees that are indexed annually for inflation or, in certain circumstances, allows for a quarterly rate adjustment based on a comparison of competitive rates.

Commercial Agreements with Marathon



				Termination Provisions
Commercial Agreement	Initiation Date	Term Years	Renewals	Refinery Shutdown Notice Period (a)	Force Majeure
Amended Transportation Services Agreement (High Plains System)	Apr-11	10	2 x 5 years	12 months	Unilateral
Second Amended and Restated Master Terminalling Agreement	Apr-11	10	2 x 5 years	12 months	Unilateral
Salt Lake City Storage Agreement	Apr-11	10	2 x 5 years	12 months	Unilateral
Amended and Restated Transportation Services Agreement (Salt Lake City Short Haul Pipeline)	Apr-11	10	2 x 5 years	12 months	Unilateral
Amorco Terminal Use and Throughput Agreement (Martinez Marine)	Apr-12	10	2 x 5 years	12 months	Unilateral
Transportation Services Agreement (LAR Short Haul Pipelines)	Sep-12	10	2 x 5 years	N/A	Unilateral
Amended Anacortes Track Use and Throughput Agreement	Nov-12	10	2 x 5 years	N/A	Unilateral
Long Beach Storage Services Agreement	Dec-12	10	2 x 5 years	N/A	Unilateral
Terminalling Services Agreement for Northwest Pipeline System	Jun-13	1	Year to year	N/A	Unilateral
Southern California Terminalling & Dedicated Services Agreement	Jun-13	10	2 x 5 years	N/A	Unilateral
Amended Carson Storage Services Agreement	Jun-13	10	2 x 5 years	N/A	Unilateral
Carson Tank Farm Storage Agreement	Jun-13	10	2 x 5 years	N/A	Unilateral
Amended Terminalling, Transportation and Storage Services Agreement (WNRL)	Oct-13	10	2 x 5 years	12 months	Unilateral
Amended Pipeline and Gathering Services Agreement (WNRL)	Oct-13	10	2 x 5 years	12 months	Unilateral
Carson Coke Handling Service Agreement	Dec-13	10	2 x 5 years	N/A	Unilateral
Amended and Restated Long Beach Berth Access Use and Throughput Agreement	Dec-13	10	2 x 5 years	N/A	Unilateral
Long Beach Pipeline Throughput Agreement (b)	Dec-13	10	2 x 5 years	N/A	Unilateral
Amended Transportation Services Agreement (SoCal Pipelines)	Dec-13	10	2 x 5 years	N/A	Unilateral
Bakken Area Storage Hub Storage - TRMC Tanks	Apr-14	5	2 x 5 years	N/A	Unilateral
Terminalling & Dedicated Storage Services Agreement - Martinez	Jul-14	10	2 x 5 years	N/A	Unilateral
Terminalling & Dedicated Storage Services Agreement - Anacortes	Jul-14	10	2 x 5 years	N/A	Unilateral
THPP Reversal Open Season Northbound Commitment	Sep-14	7	None	N/A	Unilateral
Tesoro Alaska Pipeline Throughput Agreement	Sep-14	10	2 x 5 years	N/A	Unilateral
Amended Crude Oil Trucking Transportation Services Agreement (WNRL)	Oct-14	10	None	N/A	Unilateral
Fuel Distribution and Supply Agreement (WNRL)	Oct-14	10	None	N/A	Unilateral
Amended Product Supply Agreement (WNRL)	Oct-14	10	None	N/A	Unilateral
Keep-Whole Commodity Fee Agreement	Dec-14	5	1 year auto	90 days prior to expiration	Bilateral
Sale of Natural Gas	Oct-15	1 month	Evergreen	N/A	Bilateral
Amended Asphalt Trucking Services Agreement (WNRL)	Jan-16	10	2 x 5 years	N/A	Unilateral
Green River Processing Crude Oil Sales Agreement	Feb-16	1	Evergreen	N/A	Bilateral
Tank #2030 Use, Storage and Throughput Agreement	Apr-16	6 months	6 months	N/A	Bilateral
Asphalt and Propane Rack Loading Services Agreement (Kenai)	May-16	10	2 x 5 years	N/A	Unilateral
Kenai Storage Services Agreement	Jul-16	10	2 x 5 years	N/A	Unilateral



				Termination Provisions
Commercial Agreement	Initiation Date	Term Years	Renewals	Refinery Shutdown Notice Period (a)	Force Majeure
Terminalling, Transportation and Storage Services Agreement (St. Paul Park)	Sep-16	10	2 x 5 years	12 months	Unilateral
Alaska Terminalling Services Agreement	Sep-16	10	2 x 5 years	N/A	Unilateral
Martinez Storage Services Agreement	Nov-16	10	2 x 5 years	N/A	Unilateral
Avon Marine Terminal Use and Throughput Agreement	Jan-17	10	2 x 5 years	N/A	Unilateral
Belfield Crude & Oil Gathering	Jan-17	2	None	N/A	Unilateral
Amended Renewal Trucking Transportation Services Agreement	Apr-17	1	Evergreen	2 months prior to expiration	Unilateral
Transportation Services Agreement (Anacortes Short Haul Pipelines)	Nov-17	10	2 x 5 years	N/A	Unilateral
Anacortes Manifest Rail Terminalling Services Agreement	Nov-17	10	2 x 5 years	N/A	Unilateral
Anacortes Marine Terminal Operating Agreement	Nov-17	17	None	N/A	Unilateral
Storage Services Agreement - Anacortes II	Nov-17	10	2 x 5 years	N/A	Unilateral
Product Transportation Agreement (TRMC, WRSW, WRCLP, SPPRC)	Jan-18	1	Evergreen	N/A	Unilateral
Plant Dedication Agreement (Robinson Lake and Belfield)	Apr-18	3	Month to month	N/A	Bilateral
Product Sales Agreement - Robinson Lake	Apr-18	3	N/A	N/A	Bilateral
Product Sales Agreement - Belfield	Apr-18	3	N/A	N/A	Bilateral
Product Sales Agreement Y-Grade - Robinson Lake	May-18	1 month	Month to month	N/A	Bilateral
SLC Core Crude Throughput	May-18	0.2	Evergreen	N/A	Unilateral
Truck Loading (H2S) Little Knife	Jun-18	6	None	N/A	Unilateral
Truck Unloading Facility Throughput Agreement (Stanley LACT)	Jun-18	3	None	N/A	Unilateral
Transportation Services Agreement (LAR Interconnecting Pipelines)	Aug-18	10	2 x 5 years	12 months	Unilateral
Amended Master Terminalling Services Agreement - Clearbrook, Fryburg, Jal, LAR, Mandan, Wingate	Aug-18	10	2 x 5 years	N/A	Unilateral
Master Unloading and Storage Agreement (WNRL)	Aug-18	10	2 x 5 years	N/A	Unilateral
Amended Asphalt Terminalling, Transportation and Storage Services Agreement	Aug-18	10	2 x 5 years	30 days	Unilateral
Fryburg Terminal Services Agreement	Aug-18	2.6	1 month	N/A	Unilateral
Transloading Services Agreement - Salt Lake City Spur	Oct-18	3	None	N/A	Unilateral
Natural Gas Liquids Marketing Agreement	Oct-18	3	3 year extension with 60 days notice by AFS	N/A	Bilateral


(a)	Fixed minimum volumes remain in effect during routine turnarounds.


(b)	Agreement gives Marathon the option to renew for two five-year terms, or Marathon may modify the term of the agreements to a twenty-year term by providing notice in accordance with each agreement.

We charge fixed fees based on the total storage capacity of our assets under several of our agreements with Marathon. We recognized $407 million, $277 million and $193 million of revenue under these agreements where we were considered to be the lessor during the years ended December 31, 2018, 2017 and 2016, respectively. Committed minimum payments for each of the five years following December 31, 2018, are expected to be approximately $478 million to $530 million per year and an aggregate $1.5 billion remaining after 2023.

Fourth Amended and Restated Omnibus Agreement

We entered into an omnibus agreement with our Sponsor at the closing of our Initial Offering. The agreement has been amended for each of the Acquisitions from our Sponsor and was amended and restated in connection with the 2018 Drop Down. The amendment increased the annual administrative fee payable by us to our Sponsor under the Amended Omnibus Agreement to $17 million as of December 31, 2018, for the provision of various general and administrative services, including executive management, legal, accounting, treasury, human resources, health, safety and environmental, information technology, certain insurance coverage, administration and other corporate services. In addition, we reimburse our Sponsor for all other direct or allocated costs and expenses incurred by Marathon or its affiliates on our behalf. On January 1, 2019, the Amended Omnibus Agreement was further amended to add Marathon Petroleum Company LP (“MPCLP”) as a party to the agreement and to make certain other related conforming changes to reflect MPCLP’s addition.

Under the Amended Omnibus Agreement, Marathon indemnifies us for certain matters, including known environmental, title and tax matters associated with the ownership of our assets at or before the closing of the Initial Offering and the subsequent acquisitions from our Sponsor, with certain exceptions that are covered by the Carson Assets Indemnity Agreement. With respect to assets that we acquired from our Sponsor, indemnification for unknown environmental and title liabilities is limited to pre-closing conditions identified prior to the earlier of the date that our Sponsor no longer controls our general partner or five years after the date of closing. The indemnification under the Initial Offering for unknown environmental matters expired on April 26, 2016. Under the Amended Omnibus Agreement, the aggregate annual deductible for each type of liability (unknown environmental liabilities or title matters) is $1 million as of December 31, 2018, before we are entitled to indemnification in any calendar year in consideration of Initial Offering assets and all subsequent acquisitions from our Sponsor, with the exception of the indemnifications for the acquisition of the six marketing and storage terminal facilities (the “Los Angeles Terminal Assets”) and the acquisition of the remaining logistics assets (the “Los Angeles Logistics Assets”) initially acquired by us as part of the Los Angeles acquisition in Southern California (the “Los Angeles Logistics Assets Acquisition”). In addition, with respect to the assets that we acquired from our Sponsor, we have agreed to indemnify Marathon for events and conditions associated with the ownership or operation of our assets that occur after the closing of the Initial Offering, and the subsequent acquisitions from our Sponsor, and for environmental liabilities related to our assets to the extent Marathon is not required to indemnify us for such liabilities. See Note 10 for additional information regarding the Amended Omnibus Agreement.

Carson Assets Indemnity Agreement

We entered into the Carson Assets Indemnity Agreement at the closing of the Los Angeles Logistics Assets Acquisition effective December 6, 2013, establishing indemnification for certain matters including known and unknown environmental liabilities arising out of the use or operation of the Los Angeles Terminal Assets and the Los Angeles Logistics Assets prior to the respective acquisition dates.

Under the Carson Assets Indemnity Agreement, our Sponsor retained responsibility for remediation of known environmental liabilities due to the use or operation of the Los Angeles Terminal Assets and the Los Angeles Logistics Assets prior to the respective acquisition dates, and has indemnified us for any losses incurred by us arising out of those remediation obligations. The indemnification for unknown pre-closing remediation liabilities is limited to five years. However, with respect to Terminal 2 at the Long Beach marine terminal, which was included in the Los Angeles Logistics Assets Acquisition, the indemnification for unknown pre-closing remediation liabilities is limited to ten years. Indemnification of the Los Angeles Terminal Assets’ and the Los Angeles Logistics Assets’ environmental liabilities is not subject to a deductible. See Note 10 for additional information regarding the Carson Assets Indemnity Agreement.

Keep-Whole Commodity Fee Agreement

Following the completion of the Rockies Natural Gas Business Acquisition, we began processing gas for certain producers under keep-whole processing agreements. 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 BTU content equivalent to the NGLs removed. The operating margin for these contracts is typically determined by the spread between NGLs sales prices and the price paid to purchase the replacement natural gas (“Shrink Gas”). At that time, we entered into the Keep-Whole Commodity Agreement with our Sponsor. Under the Keep-Whole Commodity Agreement, our Sponsor pays us a processing fee for NGLs related to keep-whole agreements and delivers Shrink Gas to the producers on our behalf. We pay our Sponsor a marketing fee in exchange for assuming the commodity risk.

In February 2016, the parties entered into the First Amendment to the Keep-Whole Commodity Agreement (the “Keep-Whole Amendment”) that adjusted the contract to provide for a tiered pricing structure for different NGL production levels. The Keep-Whole Amendment continues to provide for annual purchase orders setting forth service fees for the base and incremental volumes; however, the Keep-Whole Amendment provides that the service fees payable for incremental volumes of natural gas liquids above 315,000 gallons per day shall be calculated with reference to the costs of (i) processing, (ii) conditioning, (iii) handling, (iv) fractionation, (v) storage, truck and rail loading at the Blacks Fork processing complex, and (vi) pipeline transportation fees on the MAPL pipeline system and fractionation fees at Mt. Belvieu, Texas for transportation and fractionation services provided to processors by MAPL, Cedar Bayou Fractionators, and Enterprise Products Partners L.P. for natural gas liquids sold pursuant to the Keep-Whole Commodity Agreement. The pricing for both the base and incremental volumes are subject to revision each year.

Secondment Agreements

We entered into the Andeavor Secondment Agreement with Andeavor to govern the provision of seconded employees to or from Andeavor, the Partnership, and its subsidiaries, as applicable. On August 6, 2018, TLGP and certain of its indirect subsidiaries amended and restated the Andeavor Secondment Agreement. As amended and restated, the Amended Secondment Agreement incorporated the changes made in previous amendments into the body of the agreement and added WNRL and its affiliates as parties. The Andeavor Secondment Agreement also governed the use of certain facilities of the parties by the various entities. The services to be provided by such seconded employees, along with the fees for such services, were provided on the service schedules attached to the Andeavor Secondment Agreement. Specialized services and the use of various facilities, along with the fees for such services, will be provided for in service orders to be executed by parties requesting and receiving the service. For the years ended December 31, 2018, 2017 and 2016, we charged our Sponsor $8 million, $8 million and $5 million, respectively, and our Sponsor charged us $77 million, $29 million and $18 million, respectively, pursuant to the Andeavor Secondment Agreement.

On January 30, 2019, TLGP and certain of its indirect subsidiaries entered into the 2019 Secondment Agreements with MPLS and MRLS. Under the 2019 Secondment Agreements, MPLS and MRLS will second certain employees to occupy positions within our business and organization and to conduct business on our behalf. While seconded by MPLS and MRLS to us, seconded employees will remain on the payroll of MPLS or MRLS, as the case may be, and will be eligible to participate in all MPLS or MRLS benefit plans that they would be eligible to participate in absent the secondment, but will work for and be under our general direction, supervision and control. We will reimburse MPLS or MRLS, as the case may be, for the payroll costs of the seconded employees, including base pay, bonuses and other incentive compensation plus a burden rate associated with benefits and other payroll costs for the portion of the employee’s time that is allocated to us. The 2019 Secondment Agreements are for a term of 10 years, but may be sooner terminated by us, MPLS or MRLS upon 60 days written notice. In connection with the entry into the 2019 Secondment Agreements, on January 30, 2019, our Sponsor entered into an agreement (the “Termination Agreement”) that terminated the Andeavor Secondment Agreement. The Termination Agreement had an effective date of January 1, 2019.

Summary of Affiliate Transactions

Summary of Revenue and Expense Transactions with Marathon, including Predecessors (in millions)



	Year Ended December 31,
	2018		2017		2016
Revenues	$	1,589	$	1,431	$	847
Operating expenses (exclusive of depreciation and amortization) (a)	272		251		308
General and administrative expenses	98		101		80

(a)

Includes net imbalance settlement gains of $12 million and $7 million in the years ended December 31, 2017 and 2016, respectively. Due to the adoption of ASC 606 effective January 1, 2018, imbalance settlement gains of $16 million in the year ended December 31, 2018 were included in revenues. Includes reimbursements primarily related to pressure testing and repairs and maintenance costs pursuant to the Amended Omnibus Agreement and the Carson Assets Indemnity Agreement of $15 million, $16 million and $17 million in the years ended December 31, 2018, 2017 and 2016, respectively.

Predecessor Transactions

Related-party transactions of our Predecessors were settled through equity. The balance in receivables and accounts payable from affiliated companies represents the amount owed from or to Marathon related to certain affiliate transactions. Other than WNRL and certain assets acquired from the 2018 Drop Down, our Predecessors did not record revenue for transactions with Marathon.

Distributions

In accordance with our partnership agreement, our limited partner interests are entitled to receive quarterly distributions of available cash. We paid quarterly cash distributions to our Sponsor, including IDRs, totaling $493 million, $336 million and $245 million in 2018, 2017 and 2016, respectively. In connection with the IDR/GP Transaction, our general partner no longer holds IDRs.

On January 25, 2019, in accordance with our partnership agreement, we announced the declaration of a quarterly cash distribution, based on the results of the fourth quarter of 2018, of $1.03 per unit, of which $146 million was paid to Marathon on February 14, 2019, to unitholders of record on February 5, 2019.