Related-Party Transactions

9 Months Ended

Sep. 30, 2014

Related Party Transactions [Abstract]

Related Party Transactions

Related-Party Transactions

Sales and Receivables

Sales to related parties include motor fuels and asphalt sold to other Alon Energy subsidiaries at prices substantially determined by reference to market commodity pricing information. These sales are included in net sales in the consolidated statements of operations. Accounts receivable from related parties include sales of motor fuels and are shown separately on the consolidated balance sheets.

Costs Allocated from Alon Energy

The Partnership is a subsidiary of Alon Energy and is operated as a component of the integrated operations of Alon Energy. As such, the executive officers of Alon Energy, who are employed by another subsidiary of Alon Energy, also serve as executive officers of the General Partner and Alon Energy’s other subsidiaries.

(a) Corporate Overhead Allocations

Alon Energy performs general corporate and administrative services and functions for us and their other subsidiaries, which include accounting, treasury, cash management, tax, information technology, insurance administration and claims processing, legal, environmental, risk management, audit, payroll and employee benefit processing and internal audit services. Alon Energy allocates the expenses actually incurred in performing these services to the Partnership based primarily on the estimated amount of time the individuals performing such services devote to our business and affairs relative to the amount of time they devote to the business and affairs of Alon Energy’s other subsidiaries. The management of Alon Energy and the General Partner consider these allocations to be reasonable. We record the amount of such allocations as selling, general and administrative expenses. Our allocation for selling, general and administrative expenses were $2,486 and $2,124, for the three months ended September 30, 2014 and 2013, respectively, and $8,454 and $8,568 for the nine months ended September 30, 2014 and 2013, respectively.

(b) Labor Costs

As we are operated as a component of Alon Energy’s integrated operations, we have no employees. As a result, employee expense costs for Alon Energy employees working in our operations have been allocated to us and recorded as payroll expense in direct operating expenses. The allocated portion of Alon Energy’s employee expense costs included in direct operating expenses were $6,485 and $6,211 for the three months ended September 30, 2014 and 2013, respectively, and $20,191 and $18,169 for the nine months ended September 30, 2014 and 2013, respectively.

(c) Insurance Costs

Insurance costs related to the Big Spring refinery and wholesale marketing operations are allocated to us by Alon Energy based on estimated insurance premiums on a stand-alone basis relative to Alon Energy’s total insurance premium. Our allocation for insurance costs included in direct operating expenses were $1,799 and $3,038 for the three months ended September 30, 2014 and 2013, respectively, and $5,435 and $8,300 for the nine months ended September 30, 2014 and 2013, respectively.

Leasing Agreements

In June 2014, we entered into six year lease agreements with a subsidiary of Alon Energy to lease equipment at the Big Spring refinery. The lease agreements were effective July 1, 2014 and require fixed monthly payments amounting to $4,920 annually. Rent payments were $1,230 and $1,230 for the three and nine months ended September 30, 2014, respectively.

These agreements were reviewed and approved by the Conflicts Committee of the General Partner.

Distributions

During the nine months ended September 30, 2014, we paid cash distributions of $62,506, or $1.00 per unit. Total cash distributions paid to Alon Energy were $51,000. During the nine months ended September 30, 2013, we paid cash distributions of $172,506, or $2.76 per unit. Total cash distributions paid to Alon Energy were $140,760.