10-K

2021

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)
☒	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended	December 31, 2021
	OR
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from		to
	Commission file number:	001-36011

Phillips 66 Partners LP

(Exact name of registrant as specified in its charter)

Delaware	38-3899432
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

2331 CityWest Blvd., Houston, Texas 77042

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (855) 283-9237

Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Units, Representing Limited Partner Interests	PSXP	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.						☒	Yes	☐	No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.						☐	Yes	☒	No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.						☒	Yes	☐	No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).						☒	Yes	☐	No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer	☒	Accelerated filer	☐	Non-accelerated filer	☐
Smaller reporting    company	☐	Emerging growth    company	☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.						☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.						☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).						☐	Yes	☒	No

The aggregate market value of the registrant’s common units held by non-affiliates of the registrant on June 30, 2021, the last business day of the registrant’s most recently completed second fiscal quarter, based on the closing price on that date of $39.46, was $2,302 million. This figure excludes common units beneficially owned by the directors and executive officers of Phillips 66 Partners GP LLC, our General Partner, and Phillips 66 and its subsidiaries.

The registrant had 228,340,146 common units outstanding as of January 31, 2022.

Documents incorporated by reference:

None

PHILLIPS 66 PARTNERS LP

TABLE OF CONTENTS
Item	Page
PART I
1 and 2. Business and Properties	1
1A. Risk Factors	15
1B. Unresolved Staff Comments	30
3. Legal Proceedings	30
4. Mine Safety Disclosures	30
PART II
5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	31
6. [Reserved]	31
7. Management's Discussion and Analysis of Financial Condition and Results of Operations	32
7A. Quantitative and Qualitative Disclosures About Market Risk	51
Cautionary Statement Regarding Forward-Looking Statements	53
8. Financial Statements and Supplementary Data	55
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	94
9A. Controls and Procedures	94
9B. Other Information	94
9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	94
PART III
10. Directors, Executive Officers and Corporate Governance	95
11. Executive Compensation	99
12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	104
13. Certain Relationships and Related Transactions, and Director Independence	106
14. Principal Accountant Fees and Services	108
PART IV
15. Exhibit and Financial Statement Schedules	109
16. Form 10-K Summary	109
Signatures	115

Unless otherwise stated or the context otherwise indicates, all references to “Phillips 66 Partners LP,” “the Partnership,” “us,” “our,” “we,” or similar expressions refer to Phillips 66 Partners LP, including its consolidated subsidiaries, and references to “Phillips 66” include its consolidated subsidiaries. This Annual Report on Form 10-K contains forward-looking statements including, without limitation, statements relating to our plans, strategies, objectives, expectations and intentions. The words “anticipate,” “estimate,” “believe,” “budget,” “continue,” “could,” “intend,” “may,” “plan,” “potential,” “predict,” “seek,” “should,” “will,” “would,” “expect,” “objective,” “projection,” “forecast,” “goal,” “guidance,” “outlook,” “effort,” “target” and similar expressions often identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. The Partnership does not undertake to update, revise or correct any forward-looking information unless required to do so under the federal securities laws. Readers are cautioned that such forward-looking statements should be read in conjunction with the Partnership’s disclosures under the headings “Risk Factors” and “CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS.”

PART I

Items 1 and 2. BUSINESS AND PROPERTIES

ORGANIZATIONAL STRUCTURE

Phillips 66 Partners LP, headquartered in Houston, Texas, is a Delaware limited partnership formed in 2013 by Phillips 66 Company and Phillips 66 Partners GP LLC (our General Partner), both wholly owned subsidiaries of Phillips 66. On July 26, 2013, we completed our initial public offering, and our common units trade on the New York Stock Exchange (NYSE) under the symbol PSXP. As of December 31, 2021, Phillips 66, through wholly owned subsidiaries, owned 169,760,137 common units, representing a 74% limited partner interest. The public owned 58,580,009 common units, representing a 26% limited partner interest. The public also owned 13,451,263 perpetual convertible preferred units.

We are a master limited partnership formed to own, operate, develop and acquire primarily fee-based midstream assets. We are managed and operated by the executive officers of our General Partner, with oversight provided by its Board of Directors. Neither we nor our subsidiaries have any employees. Our General Partner has the sole responsibility for providing the employees and other personnel necessary to conduct our operations.

We primarily generate revenue by providing fee-based transportation, terminaling, processing, storage and fractionation services to Phillips 66 and other customers. Our equity affiliates primarily generate revenue from transporting and terminaling crude oil, refined petroleum products and natural gas liquids (NGL). Since we do not own any of the crude oil, refined petroleum products and NGL we handle and do not engage in the trading of those commodities, we have limited direct exposure to risks associated with fluctuating commodity prices, although these risks indirectly influence our activities and results of operations over the long term.

Many of our assets are physically connected to, and integral to the operations of, Phillips 66’s wholly owned Bayway, Billings, Ferndale, Lake Charles, Ponca City and Sweeny refineries and its jointly owned Borger and Wood River refineries. We have entered into long-term, fee-based commercial agreements with Phillips 66 to provide transportation, terminaling, storage, stevedoring, fractionation, processing and rail terminal services. Under these agreements, Phillips 66 commits to provide us with minimum transportation, throughput or storage volumes, or minimum monthly service fees. If Phillips 66 does not meet its minimum volume commitments, Phillips 66 pays us deficiency payments based on the calculations described in the agreements. We believe these agreements promote stable and predictable cash flows, and they are the source of a substantial portion of our revenue. We also have several other agreements with Phillips 66, including an amended omnibus agreement and an operational services agreement. See Note 14—Related Party Transactions, in the Notes to Consolidated Financial Statements, for a summary of all related party agreements.

Our operations are all conducted in the United States and comprise one reportable segment. See Item 8. Financial Statements and Supplementary Data, for financial information on our operations and assets.

1

Pending Merger with Phillips 66

On October 26, 2021, we entered into a definitive merger agreement with Phillips 66 and its wholly owned subsidiaries, Phillips 66 Company, Phillips 66 Project Development, Inc. (Phillips 66 PDI), and Phoenix Sub LLC, and our General Partner pursuant to which Phillips 66 would acquire all of the publicly held common units representing limited partner interests in the Partnership not already owned by Phillips 66 and its subsidiaries on the closing date of the transaction. The agreement provides for an all-stock transaction in which each outstanding common unitholder would receive 0.50 shares of Phillips 66 common stock for each common unit. Pursuant to our partnership agreement, the Partnership’s perpetual convertible preferred units would be converted into common units at a premium to the original issuance price prior to exchange for Phillips 66 common stock. The merger is expected to close in March 2022, subject to customary closing conditions.

In connection with the merger transaction, our partnership agreement was amended, effective October 26, 2021, to provide for automatic conversion of the preferred units upon the acquisition by Phillips 66 of our common units at a conversion ratio determined by dividing (i) the product of the original issuance price multiplied by a premium of 147.5%, less distributions paid after June 30, 2021, and before the closing date of the transaction, by (ii) the closing unit price of the Partnership on the last trading day prior to completion of the merger.

Phillips 66 PDI, a wholly owned subsidiary of Phillips 66 that owns a majority of our common units, has delivered a written consent approving the transaction. This written consent constitutes the requisite vote of the holders of our common units to approve the transaction.

The terms of the transaction were unanimously approved by the Board of Directors of our General Partner based on the unanimous approval and recommendation of its conflicts committee, comprised entirely of independent directors.

Upon closing, we will become an indirect wholly owned subsidiary of Phillips 66, and our common units will cease to be listed on the NYSE and will be subsequently deregistered under the Exchange Act.

See Note 1—Business and Basis of Presentation, in the Notes to Consolidated Financial Statements, for additional information regarding the merger agreement.

2021 DEVELOPMENTS

We own a 25% interest in the South Texas Gateway Terminal, which connects to the Gray Oak Pipeline in Corpus Christi, Texas. In the first quarter of 2021, the South Texas Gateway terminal commissioned additional storage capacity, bringing the total capacity to 8.6 million barrels and marking the completion of the final construction phase. The marine export terminal has two deepwater docks with up to 800,000 BPD of export capacity.

We completed construction of the C2G Pipeline, a 16 inch ethane pipeline that connects our Clemens Caverns storage facility to petrochemical facilities in Gregory, Texas, near Corpus Christi. The pipeline began commercial operations in the fourth quarter of 2021 and is supported by long-term commitments.

In the first half of 2021, we exited the Liberty Pipeline project and transferred our ownership interest in the joint venture to our co-venturer. See Note 4—Equity Investments, in the Notes to Consolidated Financial Statements, for additional information regarding the Liberty Pipeline project.

We own a 25% interest in the Dakota Access Pipeline. See Note 4—Equity Investments, in the Notes to Consolidated Financial Statements, for additional information regarding recent developments.

2

SUMMARY OF ASSETS AND OPERATIONS

Pipeline Assets

The following table presents certain information regarding our pipeline assets as of December 31, 2021. Each system listed below has an associated commercial agreement with Phillips 66.

System Name	State of Origination/Terminus	Commodity Handled	Interest		Length (Miles)	Gross Capacity (MBD)	Associated Phillips 66 Refinery
Billings Crude System
Glacier	Montana	Crude Oil	79	%	623	124	Billings
Billings Products System
Seminoe	Montana/Wyoming	Refined Petroleum Products	100		342	44	Billings
Borger Crude System
Line O	Oklahoma/Texas	Crude Oil	100		276	38	Borger
New Mexico Crude	New Mexico/Texas	Crude Oil	100		129	106	Borger
West Texas Crude	Texas	Crude Oil	100		699	140	Borger
Borger Products System
ATA Line	Texas/New Mexico	Refined Petroleum Products	50		293	34	Borger
Borger to Amarillo	Texas	Refined Petroleum Products	100		93	74	Borger
SAAL	Texas	Refined Petroleum Products	33		102	32	Borger
SAAL	Texas	Refined Petroleum Products	54		19	30	Borger
C2G Pipeline	Texas	Natural Gas Liquids	100		155	135	Sweeny
Clifton Ridge Crude System	Louisiana	Crude Oil	100		10	260	Lake Charles
Cross-Channel Connector Products System	Texas	Refined Petroleum Products	100		5	184	Sweeny
Eagle Ford Gathering System	Texas	Crude Oil	100		28	58	Sweeny
Gold Line Products System
Gold Line Pipeline	Texas/Illinois	Refined Petroleum Products	100		686	120	Borger/Ponca City
Paola Products Pipeline	Kansas	Refined Petroleum Products	100		106	120	Borger/Ponca City
Hartford Connector Products System
Hartford, Illinois to Explorer Pipeline	Illinois	Refined Petroleum Products	100		1	430	Wood River
Wood River Refinery to Hartford, Illinois	Illinois	Refined Petroleum Products	100		3	80	Wood River
Lake Charles Products Pipeline	Louisiana	Refined Petroleum Products	100		1	240	Lake Charles
Ponca Crude System
CushPo	Oklahoma	Crude Oil	100		62	130	Ponca City
North Texas Crude	Texas	Crude Oil	100		142	34	Ponca City
Oklahoma Crude	Texas/Oklahoma	Crude Oil	100		217	100	Ponca City
Ponca Products System
Brown Line	Oklahoma/Kansas	Natural Gas Liquids	100		76	26	Ponca City
Cherokee East	Oklahoma/Missouri	Refined Petroleum Products	100		292	59	Ponca City
Cherokee North	Oklahoma/Kansas	Refined Petroleum Products	100		29	55	Ponca City
Cherokee South	Oklahoma	Refined Petroleum Products	100		98	47	Ponca City
Medford	Oklahoma	Natural Gas Liquids	100		42	25	Ponca City
River Parish NGL System	Louisiana	Natural Gas Liquids	100		499	104	N/A
Standish Pipeline	Oklahoma/Kansas	Refined Petroleum Products	100		92	77	Ponca City
Sweeny to Pasadena Products System	Texas	Refined Petroleum Products	100		120	335	Sweeny

3

The following table presents certain information regarding our equity investment pipeline assets as of December 31, 2021.

System Name	State of Origination/Terminus	Commodity Handled	Interest		Length (Miles)	Gross Capacity (MBD)
Bakken Pipeline	North Dakota/Texas	Crude Oil	25.00	%	1,918	750
Bayou Bridge Pipeline	Texas/Louisiana	Crude Oil	40.00		213	480
Explorer Pipeline	Texas/Indiana	Refined Petroleum Products	21.94		1,830	660
Gray Oak Pipeline*	Texas	Crude Oil	42.25		862	900
Sacagawea Pipeline	North Dakota	Crude Oil	49.50		95	183
Sacagawea Gas Pipeline**	North Dakota	Natural Gas	49.50		24	0.18
Sand Hills Pipeline	New Mexico/Texas	Natural Gas Liquids	33.34		1,400	500
Southern Hills Pipeline	Kansas/Texas	Natural Gas Liquids	33.34		981	192
STACK Pipeline	Oklahoma	Crude Oil	50.00		149	250

*Interest reflects our proportionate share, excluding a noncontrolling interest held in a 65 percent-owned consolidated subsidiary. See the “Gray Oak Pipeline, LLC” section of Note 4—Equity Investments, in the Notes to Consolidated Financial Statements, for a discussion of the ownership structure.

**Natural Gas pipeline in billion cubic feet per day.

4

Terminal, Rail Rack and Storage Assets

The following table presents certain information regarding our wholly owned terminal, rail rack and storage assets as of December 31, 2021. Each asset listed below has an associated commercial agreement with Phillips 66.

Facility Name	Location	Commodity Handled	Gross Storage Capacity (MBbl)	Gross Loading Capacity (MBD)	Associated Phillips 66 Refinery
Bayway Products System
Linden	New Jersey	Refined Petroleum Products	360	95	Bayway
Tremley Point	New Jersey	Refined Petroleum Products	1,701	25	Bayway
Bayway Rail Rack	New Jersey	Crude Oil	N/A	75	Bayway
Billings Crude System
Buffalo Crude	Montana	Crude Oil	303	N/A	Billings
Billings Crude	Montana	Crude Oil	236	N/A	Billings
Cut Bank	Montana	Crude Oil	315	N/A	Billings
Billings Products System
Casper	Wyoming	Refined Petroleum Products	365	7	Billings
Sheridan	Wyoming	Refined Petroleum Products	94	6	Billings
Borger Crude System
Buxton Crude	Oklahoma	Crude Oil	400	N/A	Borger
Odessa Crude	Texas	Crude Oil	521	N/A	Borger
Borger Products System
Albuquerque Products	New Mexico	Refined Petroleum Products	274	20	Borger
Amarillo Products	Texas	Refined Petroleum Products	296	23	Borger
Lubbock Products	Texas	Refined Petroleum Products	182	18	Borger
Clemens Caverns	Texas	Natural Gas Liquids	16,500	N/A	N/A
Clifton Ridge Crude System
Clifton Ridge	Louisiana	Crude Oil	3,800	N/A	Lake Charles
Pecan Grove Storage	Louisiana	Lubricant Base Stocks, Refined Petroleum Products	177	N/A	Lake Charles
Ferndale Rail Rack	Washington	Crude Oil	N/A	35	Ferndale
Gold Line Products System
East St. Louis	Illinois	Refined Petroleum Products	1,529	55	Borger/ Ponca City
Jefferson City	Missouri	Refined Petroleum Products	103	15	Borger/ Ponca City
Kansas City	Kansas	Refined Petroleum Products	1,410	50	Borger/ Ponca City
Paola	Kansas	Refined Petroleum Products	978	N/A	Borger/ Ponca City
Wichita North	Kansas	Refined Petroleum Products	769	20	Borger/ Ponca City
Hartford Connector Products System
Hartford	Illinois	Refined Petroleum Products	1,468	21	Wood River
Medford Spheres	Oklahoma	Natural Gas Liquids	70	N/A	Ponca City
Ponca Crude System
Cushing	Oklahoma	Crude Oil	275	N/A	Ponca City
Ponca City	Oklahoma	Crude Oil	1,229	N/A	Ponca City
Wichita Falls	Texas	Crude Oil	225	N/A	Ponca City
Ponca Products System
Glenpool	Oklahoma	Refined Petroleum Products	571	18	Ponca City
Mount Vernon Products	Missouri	Refined Petroleum Products	365	40	Ponca City
Mount Vernon NGL	Missouri	Natural Gas Liquids	105	16	Ponca City
Oklahoma City Products	Oklahoma	Refined Petroleum Products	345	42	Ponca City
Ponca City Products	Oklahoma	Refined Petroleum Products	63	22	Ponca City
Ponca City NGL	Oklahoma	Natural Gas Liquids	N/A	6	Ponca City
Wichita South	Kansas	Refined Petroleum Products	272	N/A	Ponca City
River Parish NGL System	Louisiana	Natural Gas Liquids	1,500	N/A	N/A
Sweeny to Pasadena Products System
Pasadena	Texas	Refined Petroleum Products, Natural Gas Liquids	3,558	65	Sweeny

5

The following table presents certain information regarding our equity investment terminal, rail rack and storage assets as of December 31, 2021.

System Name	Location	Commodity Handled	Interest		Gross Storage Capacity (MBbl)	Active Terminaling Capacity* (MBD)
Keene Terminal	North Dakota	Crude Oil	50	%	503	N/A
Palermo Terminal	North Dakota	Crude Oil	70		235	100
South Texas Gateway Terminal	Texas	Crude Oil	25		8,600	N/A

*Active terminaling capacity represents the amount of railcar loading capacity currently available for use by our customers.

Marine Assets

The following table presents certain information regarding our wholly owned marine assets as of December 31, 2021. Each asset listed below has an associated commercial agreement with Phillips 66.

System Name	Location	Commodity Handled	Gross Loading Capacity (MBbl/h)*	Associated Phillips 66 Refinery
Clifton Ridge Crude System
Clifton Ridge Ship Dock	Louisiana	Crude Oil, Refined Petroleum Products	50	Lake Charles
Pecan Grove Barge Dock	Louisiana	Lubricant Base Stocks, Refined Petroleum Products	6	Lake Charles
Hartford Connector Products System
Hartford Barge Dock	Illinois	Refined Petroleum Products	3	Wood River
Bayway Products System
Tremley Point	New Jersey	Refined Petroleum Products	7	Bayway

*Marine capacity is in thousands of barrels per hour.

The following table presents certain information regarding our equity investment marine asset as of December 31, 2021.

System Name	Location	Commodity Handled	Interest		Gross Loading Capacity* (MBbl/h)
South Texas Gateway Terminal	Texas	Crude Oil	25	%	120
*Marine capacity is in thousands of barrels per hour.

Processing Assets

The following table presents certain information regarding our other wholly owned assets as of December 31, 2021. Each asset listed below has an associated commercial agreement with Phillips 66.

Asset Name	Location	Commodity Handled	Gross Processing Capacity (MBD)
Lake Charles Isomerization Unit	Louisiana	Refined Petroleum Products	25
Merey Sweeny
Delayed coker unit	Texas	Crude Oil Residuals	70
Vacuum distillation unit	Texas	Crude Oil Residuals	125
Sweeny Fractionator	Texas	Natural Gas Liquids	100

6

COMPETITION

Many of our assets are subject to contractual relationships with Phillips 66 under our commercial agreements and are directly connected to Phillips 66’s owned or operated refineries. As a result, we believe that we will not face significant competition from other pipelines, terminals, storage facilities, rail racks, fractionators and processing units for Phillips 66’s transportation and terminaling requirements to and from the refineries we support. If Phillips 66’s customers were to reduce their purchases of refined petroleum products, Phillips 66 might only ship the minimum volumes through our pipelines (or make the shortfall payment if it does not ship the minimum volumes), which would cause a decrease in our revenue. Phillips 66 competes with integrated petroleum companies, which have their own crude oil supplies and distribution and marketing systems, as well as with independent refiners, many of which also have their own distribution and marketing systems. Phillips 66 also competes with other suppliers that purchase refined petroleum products for resale. Many of the entities in which we hold equity investments compete with other interstate and intrastate pipelines, rail and truck fleet operations, including those affiliated with major integrated petroleum and petrochemical companies, in terms of transportation fees, reliability and quality of customer service. Competition in any particular geographic area is significantly affected by the volume of products produced by refineries in that area, the volume of crude oil and NGL gathered and transported, and the availability of products and the cost of transportation to that area from distant locations.

Additionally, our crude oil pipelines could face competition from other crude oil pipeline companies, major integrated oil companies, and independent crude oil gathering and marketing companies.  Competition is based primarily on quality of customer service, competitive pricing and proximity to customers and market hubs.

RATES AND SAFETY REGULATIONS

Pipeline Rates

Our common carrier pipeline systems are subject to regulation by various federal, state and local agencies. The Federal Energy Regulatory Commission (FERC) regulates interstate transportation on our common carrier pipeline systems under the Interstate Commerce Act (ICA), the Energy Policy Act of 1992 (EPAct 1992) and the rules and regulations promulgated under those laws. FERC regulations require that rates for interstate service pipelines that transport crude oil and refined petroleum products (collectively referred to as “petroleum pipelines”) and certain other liquids be just and reasonable and must not be unduly discriminatory or confer any undue preference upon any shipper. FERC regulations also require interstate common carrier petroleum pipelines to file with FERC and publicly post tariffs stating their interstate transportation rates and terms and conditions of service. Under the ICA, FERC or interested persons may challenge existing or changed rates or services. FERC is authorized to investigate such changes and may suspend the effectiveness of a new rate for up to seven months. A successful rate challenge could result in a common carrier paying refunds together with interest for the period the rate was in effect. FERC may also order a pipeline to change its rates and may require a common carrier to pay shippers reparations for damages sustained for a period up to two years prior to the filing of a complaint. EPAct 1992 deemed certain interstate petroleum pipeline rates then in effect to be just and reasonable under the ICA. These rates are commonly referred to as “grandfathered rates.” Our rates in effect at the time of the passage of EPAct 1992 for interstate transportation service were deemed just and reasonable and therefore are grandfathered rates. New rates have been established subsequent to EPAct 1992 for certain of our pipeline systems. FERC may change grandfathered rates upon complaint only after it is shown that:

•A substantial change has occurred since enactment in either the economic circumstances or the nature of the services that were a basis for the rate.

•The complainant was contractually barred from challenging the rate prior to enactment of EPAct 1992 and filed the complaint within 30 days of the expiration of the contractual bar.

•A provision of the tariff is unduly discriminatory or preferential.

7

EPAct 1992 required FERC to establish a simplified methodology to adjust non-market-based tariff rates for inflation for interstate petroleum pipelines. As a result, FERC adopted an indexing rate methodology which, as currently in effect, allows common carriers to change their rates within prescribed ceiling levels that are tied to changes in the Producer Price Index (PPI) for finished goods. FERC’s indexing methodology is subject to review every five years. The indexing methodology is applicable to existing rates, including grandfathered rates, with the exclusion of market-based rates. On December 17, 2020, FERC issued an Order Establishing Index Level concluding its five-year review of the indexing methodology.  FERC established an index level permitting annual adjustment of an indexed ceiling by PPI for finished goods plus 0.78% for the five-year period commencing July 1, 2021, and ending June 30, 2026. A pipeline is not required to increase its rates up to the indexed ceiling but is permitted to do so. Rate increases made under the index are presumed to be just and reasonable unless a protesting party can demonstrate that the portion of the rate increase resulting from application of the index is substantially in excess of the pipeline’s increase in costs. Under the indexing rate methodology, in any year in which the index is negative, pipelines must file to lower their rates if those rates would otherwise be above the rate ceiling.

While common carriers often use the indexing methodology to change their rates, they may elect to support proposed rates by using other methodologies such as cost-of-service rate making, market-based rates and settlement rates. A pipeline can follow a cost-of-service approach when seeking to increase its rates above the rate ceiling (or when seeking to avoid lowering rates to the reduced rate ceiling). A common carrier can charge market-based rates if it establishes that it lacks significant market power in the affected markets. In addition, a common carrier can establish rates under settlement if agreed upon by all current shippers. We primarily use indexed rates and settlement rates for our different pipeline systems.

Intrastate services provided by certain of our pipeline systems are subject to regulation by state regulatory authorities. These state regulatory authorities use a complaint-based system of regulation, both as to matters involving rates and priority of access. State regulatory authorities could limit our ability to increase our rates or to set rates based on our costs or order us to reduce our rates and require the payment of refunds to shippers. FERC and state regulatory authorities generally have not investigated rates, unless the rates are the subject of a protest or a complaint. Phillips 66 has agreed not to contest our tariff rates applicable for our transportation services agreements for the term of those agreements. However, FERC or a state regulatory authority could investigate our rates on its own initiative or at the urging of a third party, and this could lead to a refund of previously collected revenue.

Pipeline Safety

Our assets are subject to increasingly strict safety laws and regulations. The transportation and storage of crude oil, natural gas liquids and refined petroleum products involves a risk that hazardous liquids may be released into the environment, potentially causing harm to the public or the environment. In turn, any such incidents may result in substantial expenditures for response actions, significant government penalties, liability to government agencies for natural resources damages, and significant business interruption. The United States Department of Transportation (DOT) has adopted safety regulations with respect to the design, construction, operation, maintenance, inspection and management of pipeline assets. These regulations contain requirements for the development and implementation of pipeline integrity management programs, which include the inspection and testing of pipelines and necessary maintenance or repairs. These regulations also require that pipeline operation and maintenance personnel meet certain qualifications and that pipeline operators develop comprehensive spill response plans. We are subject to regulation by the DOT under the Hazardous Liquid Pipeline Safety Act of 1979 (HLPSA). The HLPSA delegated to DOT the authority to develop, prescribe, and enforce minimum federal safety standards for the transportation of hazardous liquids by pipeline. Congress also enacted the Pipeline Safety Act of 1992 (PSA), which added the environment to the list of statutory factors that must be considered in establishing safety standards for hazardous liquid pipelines, required regulations be issued to define the term “gathering line” and establish safety standards for certain “regulated gathering lines,” and mandated that regulations be issued to establish criteria for operators to use in identifying and inspecting pipelines located in High Consequence Areas (HCAs), defined as those areas that are unusually sensitive to environmental damage, that cross a navigable waterway, or that have a high population density. In 1996, Congress enacted the Accountable Pipeline Safety and Partnership Act (APSPA), which limited the operator identification requirement mandate to pipelines that cross a waterway where a substantial likelihood of commercial navigation exists, required that certain areas where a pipeline rupture would likely cause permanent or long-term environmental damage be considered in determining whether an area is unusually sensitive to environmental damage, and mandated that regulations be issued for the qualification and testing of certain pipeline personnel.

8

In the Pipeline Inspection, Protection, Enforcement, and Safety Act of 2006, Congress required mandatory inspections for certain U.S. crude oil and natural gas transmission pipelines in HCAs and mandated that regulations be issued for low-stress hazardous liquid pipelines and pipeline control room management. We are also subject to the Pipeline Safety, Regulatory Certainty and Job Creation Act of 2011, which increased penalties for safety violations, established additional safety requirements for newly constructed pipelines, and required studies of certain safety issues that could result in the adoption of new regulatory requirements for existing pipelines.

DOT’s Pipeline and Hazardous Materials Safety Administration (PHMSA) administers compliance with these statutes and has promulgated comprehensive safety standards and regulations for the transportation of hazardous liquid by pipeline, including regulations for (i) the design and construction of new pipeline systems or those that have been relocated, replaced, or otherwise changed; (ii) pressure testing of new pipelines; (iii) operation and maintenance of pipeline systems, establishing programs for public awareness and damage prevention, and managing the operation of pipeline control rooms; (iv) protection of steel pipelines from the adverse effects of internal and external corrosion; and (v) integrity management requirements for pipelines in HCAs.

We monitor the structural integrity of our pipelines through a program of periodic internal assessments using high resolution internal inspection tools, as well as hydrostatic testing and direct assessment that conforms to regulatory standards. We accompany these assessments with a review of the data and repair anomalies, as required, to ensure the integrity of the pipeline. We then utilize sophisticated risk algorithms and a comprehensive data integration effort to ensure that the highest risk-assessed pipelines receive priority for subsequent integrity assessments. We use external coatings and impressed-current cathodic protection systems to protect against external corrosion. We conduct all cathodic protection work in accordance with National Association of Corrosion Engineers standards. We continually monitor, test and record the effectiveness of these corrosion inhibiting systems.

Product Quality Standards

Refined petroleum products that we transport are generally sold by our customers for use by the public. Various federal, state and local agencies have the authority to prescribe product quality specifications for products. Changes in product quality specifications or blending requirements could reduce our throughput volumes, require us to incur additional handling costs or require capital expenditures. For example, different product specifications for different markets affect the fungibility of the products in our system and could require the construction of additional storage. If we are unable to recover these costs through increased revenue, our cash flows and ability to pay cash distributions could be adversely affected. In addition, changes in the product quality of the products we receive on our product pipeline systems could reduce or eliminate our ability to blend products.

Terminal and Processing Unit Safety

Our operations are subject to regulations promulgated by the U.S. Occupational Safety and Health Administration (OSHA), DOT and comparable state and local regulations. We have identified which assets are subject to the jurisdiction of OSHA or DOT. Certain of our facilities are under the dual jurisdiction of OSHA and DOT, whereby certain portions of the facility are subject to OSHA regulation and other assets at the facility are subject to DOT regulation due to the type of asset and the configuration of the facility. Our facilities are operated in a manner consistent with industry safety practices and standards. The tanks designed for crude oil and refined petroleum product storage at our facilities are equipped with appropriate emission controls to promote safety. Our facilities have response plans, spill prevention and control plans, and other programs to respond to emergencies.

Rail Safety

Our rail operations involve crude oil loading, receiving and unloading activities. Generally, rail operations are subject to regulations promulgated by the U.S. Department of Transportation Federal Railroad Administration, PHMSA and comparable state and local regulations. We believe our rail operations are in material compliance with all applicable regulations and meet or exceed current industry standards and practices.

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Security

We are also subject to Department of Homeland Security Chemical Facility Anti-Terrorism Standards, which are designed to regulate the security of high-risk chemical facilities, the Transportation Security Administration’s Pipeline Security Guidelines, and other comparable state and local regulations. We have an internal program of inspection designed to monitor and provide for compliance with all of these requirements. We believe that we are in material compliance with all applicable laws and regulations regarding the security of our facilities. However, these laws and regulations are subject to changes, or to changes in their interpretation, by the regulatory authorities, and continued and future compliance with such laws and regulations may require us to incur significant expenditures.  In addition, any incidents may result in substantial expenditures for response actions, government penalties and business interruption.

With respect to the protection of computer-based systems and technology from cyber threats and attacks, we are subject to two federal Cybersecurity Directives. The first, Security Directive Pipeline-2021-01A, requires that we report cyber incidents to the Cybersecurity and Infrastructure Security Agency as soon as practicable (but no later than 12 hours after a cybersecurity incident is identified). The second is Security Directive Pipeline-2021-02B, which requires cybersecurity mitigation actions, contingency planning, and testing. We are currently working our development and implementation plan to comply with these directives. We also continue to implement and improve our own cyber security programs and protocols; however, we cannot guarantee their effectiveness.

ENVIRONMENTAL REGULATIONS

General

Our operations are subject to extensive and frequently changing federal, state and local laws, regulations and ordinances relating to the protection of the environment. Among other things, these laws and regulations govern the emission or discharge of pollutants into or onto the land, air and water, the handling and disposal of solid and hazardous wastes and the remediation of contamination. As with the industry generally, our compliance with existing and anticipated environmental laws and regulations increases our overall cost of business, including our capital costs to construct, maintain, operate and upgrade equipment and facilities. While these laws and regulations affect our maintenance capital expenditures and net income, we believe they do not affect our competitive position, as the operations of our competitors are largely affected in a similar manner. We believe our facilities are in substantial compliance with applicable environmental laws and regulations. However, these laws and regulations are subject to changes, or to changes in their interpretation, by regulatory authorities, and continued and future compliance with such laws and regulations may require us to incur significant expenditures. Additionally, violation of environmental laws, regulations and permits can result in the imposition of significant administrative, civil and criminal penalties, injunctions limiting our operations, investigatory or remedial liabilities or construction bans or delays in the construction of additional facilities or equipment. Further, a release of hydrocarbons or hazardous substances into the environment could, to the extent the event is not insured, subject us to substantial expenses, including costs to comply with applicable laws and regulations and to resolve claims by third parties for personal injury or property damage, or by the U.S. federal government or state governments for natural resources damages. These impacts could directly and indirectly affect our business and have an adverse impact on our financial position, results of operations and liquidity. We cannot currently determine the amounts of such future impacts.

Expensed environmental costs were $2 million in 2021 and are expected to be less than $5 million in 2022 and 2023. The majority of the environmental expenses forecasted for 2022 and 2023 relate to environmental matters attributable to ownership of our assets prior to their acquisition from Phillips 66. Phillips 66 has agreed to retain responsibility for these liabilities. Accordingly, although these amounts would be expensed by us, there would be no required cash outflow from us. See the “Indemnification and Excluded Liabilities” section to follow for additional information on Phillips 66-retained liabilities. Capitalized environmental costs were $11 million in 2021 and are expected to be approximately the same in 2022 and 2023. These amounts do not include capital expenditures made for other purposes that have an indirect benefit on environmental compliance.

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Air Emissions and Climate Change

We are subject to the Federal Clean Air Act (FCAA) and its regulations and comparable state and local statutes and regulations in connection with air emissions from our operations. Under these laws, permits may be required before construction can commence on a new source of potentially significant air emissions, and operating permits may be required for sources that are already constructed. These permits may require controls on our air emission sources, and we may become subject to more stringent regulations requiring the installation of additional emission control technologies.

Future expenditures may be required to comply with the FCAA and other federal, state and local requirements for our various sites, including our pipeline and storage facilities. The impact of future legislative and regulatory developments, if enacted or adopted, could result in increased compliance costs and additional operating restrictions on our business, all of which could have an adverse impact on our financial position, results of operations and liquidity.

Air emissions requirements also affect Phillips 66’s domestic refineries from which we directly or indirectly receive the majority of our revenue. Phillips 66 has been required in the past, and will likely be required in the future, to incur significant capital expenditures to comply with new legislative and regulatory requirements relating to its operations. To the extent these capital expenditures have a material effect on Phillips 66, they could have a material effect on our business and results of operations.

In December 2007, Congress passed the Energy Independence and Security Act (EISA) that created a second Renewable Fuels Standard (RFS2). This standard requires the total volume of renewable transportation fuels (including ethanol and advanced biofuels) required to be blended into transportation fuels sold or introduced annually in the United States to rise to 36 billion gallons by 2022. The requirements could reduce future demand for petroleum products and thereby have an indirect effect on certain aspects of our business. On December 7, 2021, the U.S. Environmental Protection Agency (EPA) proposed RFS volumes for the 2021 and 2022 compliance years, which essentially holds the 2021 RFS volumes to actual volumes of biofuel consumption, while increasing the volumes in 2022. The EPA also reproposed the compliance year 2020 RFS volumes, also holding them to actual volumes. It is uncertain how various future requirements contained in EISA, and the regulations promulgated thereunder, may be implemented and what their full impact may be on our operations.

Currently, various legislative and regulatory measures to address greenhouse gas (GHG) emissions (including carbon dioxide, methane and other gases) are in various phases of discussion or implementation. These include existing requirements to report emissions of GHGs to the EPA, and proposed federal legislation and regulation as well as state actions to develop statewide or regional programs, each of which require or could require reductions in our GHG emissions or those of Phillips 66. In addition, the United Nations Framework Convention on Climate Change, commonly known as the Paris Agreement, entered into force on November 4, 2016. In 2017, President Trump announced his intention to withdraw the United States from the Paris Agreement and that withdrawal became effective on November 4, 2020. On January 20, 2021, President Biden signed the “Acceptance on Behalf of the United States of America,” which allows the United States to rejoin the Paris Agreement. The United States rejoined the Paris Agreement in February 2021, which could lead to further GHG emission reduction requirements. Requiring reductions in GHG emissions could result in increased costs to (1) operate and maintain our facilities, (2) install new emission controls at our facilities and (3) administer and manage any GHG emissions programs, including acquiring emission credits or allotments. These requirements may also impact Phillips 66’s domestic refinery operations and may have an indirect effect on our business, financial condition and results of operations.

In addition, the EPA has proposed and may adopt further regulations under the FCAA addressing GHGs, some of which may directly impact Phillips 66’s domestic refinery operations, while others, such as the EPA’s Clean Power Plan (CO2 emission rules for existing fossil fuel-fired electric generating units), which remains the subject of litigation and administrative reconsideration, may indirectly affect such operations. Both types of impacts may affect our business. In October 2017, the EPA commenced rulemaking proceedings to rescind the Clean Power Plan, and in December 2017, the EPA published an Advanced Notice of Proposed Rulemaking, announcing an intent to commence a new rulemaking to replace the Clean Power Plan with an alternative framework for regulating carbon dioxide. In August 2018, the EPA proposed the Affordable Clean Energy (ACE) rule as a replacement for the Clean Power Plan. On January 19, 2021, the U.S. Court of Appeals for the District of Columbia invalidated the ACE rule and remanded the matter to the EPA, essentially restarting the rulemaking process.

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Congress continues to consider legislation on GHG emissions, which may include a delay in the implementation of GHG regulations by the EPA or a limitation on the EPA’s authority to regulate GHGs, although the ultimate adoption and form of any federal legislation cannot presently be predicted. The impact of future regulatory and legislative developments, if adopted or enacted, including any cap-and-trade program, is likely to result in increased compliance costs, increased utility costs, additional operating restrictions on our business and an increase in the cost of products generally. Although such costs may impact our business directly or indirectly by impacting Phillips 66’s facilities or operations, the extent and magnitude of that impact cannot be reliably or accurately estimated due to the present uncertainty regarding the additional measures and how they will be implemented.

Waste Management and Related Liabilities

To some extent, the environmental laws and regulations affecting our operations relate to the release of hazardous substances or solid wastes into soils, groundwater, and surface water and include measures to control pollution of the environment. These laws generally regulate the generation, storage, treatment, transportation and disposal of solid and liquid hazardous waste. They also require corrective action, including investigation and remediation, at a facility where such waste may have been released or disposed.

The Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), which is also known as Superfund, and comparable state laws impose liability, without regard to fault or to the legality of the original conduct, on certain classes of persons that contributed to the release of a “hazardous substance” into the environment. These persons include the former and present owner or operator of the site where the release occurred and the transporters and generators of the hazardous substances found at the site. Under CERCLA, these persons may be subject to joint and several liabilities for the costs of cleaning up the hazardous substances released into the environment, for damages to natural resources, and for the costs of certain health studies. CERCLA also authorizes the EPA and, in some instances, third parties to act in response to threats to the public health or the environment and to seek to recover from the responsible classes of persons the costs they incur. It is not uncommon for neighboring landowners and other third parties to file claims for personal injury and property damage allegedly caused by hazardous substances or other pollutants released into the environment. In the course of our ordinary operations, we generate waste that falls within CERCLA’s definition of a “hazardous substance,” and, as a result, we may be jointly and severally liable under CERCLA for all or part of the costs required to clean up certain sites where we are alleged to have liability.

We also generate solid wastes, including hazardous wastes, that are subject to the requirements of the Resource Conservation and Recovery Act (RCRA) and comparable state statutes. From time to time, the EPA considers the adoption of stricter disposal standards for non-hazardous wastes. Hazardous wastes are subject to more rigorous and costly disposal requirements than are non-hazardous wastes. Any changes in the regulations could increase our maintenance capital expenditures and operating expenses. We continue to seek methods to minimize the generation of hazardous wastes in our operations.

We currently own and lease, and Phillips 66 has in the past owned and leased, properties where hydrocarbons are being handled or for many years have been handled. Although we utilized operating and disposal practices that were standard in the industry at the time, hydrocarbons or other waste may have been disposed of or released on or under the properties owned or leased by us or on or under other locations where these wastes have been transported for disposal. In addition, many of these properties were operated by third parties whose treatment and disposal or release of hydrocarbons or other wastes were not under our control. These properties and wastes disposed thereon may be subject to CERCLA, RCRA and analogous state laws. Under these laws, we could be required to remove or remediate previously disposed wastes (including wastes disposed of or released by prior owners or operators), to clean up contaminated property (including contaminated groundwater), or to perform remedial operations to prevent further contamination.

Water

Our operations can result in the discharge of pollutants, including crude oil and petroleum products. Regulations under the Water Pollution Control Act of 1972 (Clean Water Act), Oil Pollution Act of 1990 (OPA 90) and comparable state laws impose regulatory burdens on our operations. Spill Prevention Control and Countermeasure (SPCC) requirements of federal laws and some state laws require containment to prevent or mitigate contamination of navigable waters in the event of an oil overflow, rupture, or leak. For example, the Clean Water Act requires us to maintain SPCC plans at many of our facilities. We maintain numerous discharge permits as required under the National Pollutant Discharge Elimination System program of the Clean Water Act and have implemented systems to oversee our compliance efforts.

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In addition, the transportation and storage of crude oil and petroleum products over and adjacent to water involves risk and subjects us to the provisions of OPA 90 and related state requirements. Among other requirements, OPA 90 requires the owner or operator of a vessel or a facility to maintain an emergency plan to respond to releases of oil or hazardous substances. Also, in case of any such release, OPA 90 requires the responsible entity to pay resulting removal costs and damages. OPA 90 also provides for civil penalties and imposes criminal sanctions for violations of its provisions. We operate facilities at which releases of oil and hazardous substances could occur. We have implemented emergency spill response plans for all of our components and facilities covered by OPA 90, and we have established SPCC plans for facilities subject to Clean Water Act SPCC requirements. Construction or maintenance of our pipelines, terminals and storage facilities may impact wetlands, which are also regulated under the Clean Water Act by the EPA and the United States Army Corps of Engineers. Regulatory requirements governing wetlands (including associated mitigation projects) may result in the delay of our projects while we obtain necessary permits and may increase the cost of new projects and maintenance activities.

Workplace Safety

We are subject to requirements promulgated by OSHA and comparable state statutes that regulate the protection of the health and safety of workers. In addition, the OSHA hazard communication standard requires that information be maintained about hazardous materials used or produced in our operations and that this information be provided to employees, state and local government authorities and citizens. We believe our operations are in substantial compliance with OSHA requirements, including general industry standards, record keeping requirements and monitoring of occupational exposure to regulated substances.

Endangered Species Act

The Endangered Species Act and its state law equivalents restrict activities that may affect endangered species or their habitats. While some of our facilities are in areas that may be designated as habitats for endangered species, we believe we are in substantial compliance with the Endangered Species Act. However, the discovery of previously unidentified endangered species could cause us to incur additional costs or become subject to operating restrictions or bans in the affected area.

Hazardous Materials Transportation Requirements

The DOT regulations affecting pipeline safety require pipeline operators to implement measures designed to reduce the environmental impact of crude oil and petroleum products discharge from onshore crude oil and petroleum product pipelines. These regulations require operators to maintain comprehensive spill response plans, including extensive spill response training for pipeline personnel. In addition, the DOT regulations contain detailed specifications for pipeline operation and maintenance. We believe our operations are in substantial compliance with these regulations. The DOT also has a pipeline integrity management rule, with which we are in substantial compliance.

Indemnification and Excluded Liabilities

Under our amended omnibus agreement and pursuant to the terms of various agreements under which we acquired assets from Phillips 66, Phillips 66 will indemnify us, or assume responsibility, for certain environmental liabilities, tax liabilities, litigation and any other liabilities attributable to the ownership or operation of the assets contributed to us and that arose prior to the effective date of each acquisition. These indemnifications and exclusions from liability have, in some cases, time limits and deductibles. When Phillips 66 performs under any of these indemnifications or exclusions from liability, we recognize non-cash expenses and associated non-cash capital contributions from our General Partner, as these are considered liabilities paid for by a principal unitholder.

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GENERAL

Major Customer

Phillips 66 accounted for 97%, 98% and 97% of our total operating revenues in the years ended December 31, 2021, 2020 and 2019, respectively. Through our wholly owned and joint venture operations, we provide crude oil, refined petroleum products and NGL transportation, terminaling, storage, stevedoring, fractionation, processing and rail terminal services to Phillips 66.

Seasonality

The volumes of crude oil, refined petroleum products and NGL transported in our wholly owned and joint venture pipelines, stored in our terminals, rail racks and storage facilities and processed through our fractionator and processing units are directly affected by the level of supply and demand for crude oil, refined petroleum products and NGL in the markets served directly or indirectly by our assets. The effects of seasonality on our cash flows should be substantially mitigated through the use of fee-based commercial agreements that include minimum volume commitments.

Pipeline Control Operations

Our wholly owned pipeline systems are operated from a central control room owned and operated by Phillips 66. The control center operates with a supervisory control and data acquisition system equipped with computer systems designed to continuously monitor operational data. Monitored data includes pressures, temperatures, gravities, flow rates and alarm conditions. The control center operates remote pumps, motors and valves associated with the receipt and delivery of crude oil and refined petroleum products, and provides for the remote-controlled shutdown of pump stations on the pipeline systems. A fully functional back-up operations center is also maintained and routinely operated throughout the year to ensure safe and reliable operations.

Employees and Human Capital

We are managed and operated by the executive officers of our General Partner with oversight provided by its Board of Directors. Neither we nor our subsidiaries have any employees and as such, there are no human capital objectives or measures material to an understanding of our business. Our General Partner has the sole responsibility for providing the employees and other personnel necessary to conduct our operations. As of December 31, 2021, Phillips 66 employed approximately 600 people who provided direct support for our operations.

Website Access to SEC Reports

Our Internet website address is http://www.phillips66partners.com. Information contained on our Internet website is not part of this Annual Report on Form 10-K.

Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as well as any amendments and exhibits to these reports, filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, are available on our website, free of charge, as soon as reasonably practicable after such reports are filed with, or furnished to, the Securities and Exchange Commission (SEC). Alternatively, you may access these reports at the SEC’s website at http://www.sec.gov. We also post on our website our beneficial ownership reports filed by officers and directors of our General Partner, as well as principal security holders, under Section 16(a) of the Securities Exchange Act of 1934, governance guidelines, audit and conflicts committee charters, code of business ethics and conduct, and information on how to contact our General Partner’s Board of Directors.

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Item 1A. RISK FACTORS

You should carefully consider the risks described below with all of the other information included in this Annual Report on Form 10-K. Each of these risk factors could adversely affect our business, operating results and financial condition, as well as adversely affect the value of an investment in our common units, if we are unable to complete our merger with Phillips 66. These risk factors do not identify all risks that we face; our operations could also be affected by factors, events or uncertainties that are not presently known to us or that we do not currently consider to present significant risks to our operations.

COVID-19 Pandemic Risk

The Coronavirus Disease 2019 (COVID-19) pandemic resulted in a significant decrease in demand for petroleum products, which has decreased demand for our transportation and midstream services and has had and could continue to have a material adverse effect on our business, financial condition, results of operations and cash flow. Any future outbreak of a widespread health epidemic could materially and adversely impact our business in the future.

Our operations expose us to risks associated with public health crises and outbreaks of epidemics, pandemics, or contagious diseases, such as COVID-19. The COVID-19 pandemic and the associated containment efforts had a serious adverse impact on the economy and a material adverse effect on the volumes of products we transport and terminal. During fiscal 2020, demand for these products was significantly reduced. If government authorities impose any new mandatory closures, work-from-home orders and social distancing protocols, or other restrictions to mitigate the further spread of COVID-19, it is likely that demand for the products we transport and terminal will again be impacted and our business will be negatively affected.

Even if a virus or other illness does not spread significantly, the perceived risk of infection or health risk may result in reduced demand for the products we transport and terminal and materially affect our business. As we cannot predict the duration or scope of COVID-19 or any pandemic, the negative financial impact to our results cannot be reasonably estimated and could be material. Factors that will influence the impact on our business and operations include the duration and extent of the pandemic, including the virulence and spread of different strains of a virus and the level and timing of vaccine development and distribution across the world and their impact on economic recovery and growth, the extent of imposed or recommended containment and mitigation measures and their impact on our operations, and the general economic consequences of the pandemic.

To the extent the COVID-19 pandemic or other widespread public health crises adversely affected or affects our business and financial results, it may also have the effect of heightening many of the other risks that could adversely affect our business described below, such as risks associated with industry capacity utilization, material adverse changes in the ability of Phillips 66 and our joint venture partners to perform their obligations under agreements with us, and economic and competitive conditions.

Risks Related to Our Business

Any substantial reductions in the volume of NGL, crude oil and refined petroleum products we or our joint ventures transport, store or process would have a material adverse effect on our financial condition, results of operations, cash flows and ability to make distributions to our unitholders.

Our and our joint ventures’ financial results depend on continued demand for petroleum products, crude oil production, and operation of refineries that supply or are supplied by our and our joint ventures’ operations. Disruption or decreases to this demand, production or operation can materially and negatively impact our results of operations and/or the results of operations of our joint ventures. Global economic conditions and other factors, including an increase in the use of alternative fuels and significant fluctuations in the market prices of petroleum products, can result in the reduced demand for NGL, crude oil and refined petroleum products and consequently for the services we and our joint ventures provide.

Additionally, crude oil production can decrease as a result of lower overall crude prices, exhaustion of reserves, weather or other natural causes, adverse legal or regulatory developments, or lower overall demand for crude oil and the products derived from crude oil. Any such decreased production also would negatively impact the demand for our services.

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Other factors that could negatively impact the volume of products we transport, store and process include outages at refineries or reduced or interrupted throughput on gathering systems or pipelines due to weather related or other natural causes, competitive forces, testing, line repair, damage, reduced operating pressures and other causes that reduce shipments.

Phillips 66 accounts for a significant portion of our revenues and any loss of Phillips 66’s business would have a material and adverse effect on our financial condition, results of operations, cash flows and ability to make distributions to our unitholders.

We derive a substantial portion of our revenue from Phillips 66 and we believe that Phillips 66 will continue to account for a large portion of our revenues in the future. We have no control over the business decisions and operations of Phillips 66, and it could elect to pursue a business strategy that does not favor us and our business. Additionally, any event that materially and adversely affects Phillips 66 could affect the level of volumes we transport, store or process for Phillips 66. Accordingly, we are indirectly subject to the operational and business risks of Phillips 66, particularly risks of reduced demand for Phillips 66’s products and disruptions to the operations of its facilities.

We have entered into commercial agreements with Phillips 66, but it is not obligated to use our services in excess of the minimum volume commitments under those agreements. Additionally, certain of the agreements include provisions that permit Phillips 66 to suspend, reduce or terminate its obligations if certain events occur. Any such reduction, suspension or termination of Phillips 66’s obligations could have a material adverse effect on our financial condition, results of operations, cash flows and ability to make distributions to our unitholders.

Competition could negatively impact our earnings and reduce the amount of cash we or our joint ventures generate.

We and our joint ventures compete with other pipelines and terminals that provide similar services in the same markets as our assets. We compete on the basis of many factors, including but not limited to rates, service levels and offerings, geographic location, connectivity and reliability. Our competitors could construct new assets or redeploy existing assets in a manner that would result in more intense competition. Additionally, we could be required to increase our costs or reduce the fees we charge in order to retain our customers.

We and our joint ventures have made and continue to make significant investments in new infrastructure projects to meet market demand. Similar investments have been made, and additional investments may be made in the future, by us, our competitors or by new entrants to the markets we serve. The success of these investments largely depends on the realization of anticipated market demand, and these projects typically require significant development periods, during which time demand for such infrastructure may change, or additional investments by competitors may be made.

Any of these or other competitive forces could materially adversely affect our results of operations, financial position or cash flows, as well as our ability to pay cash distributions.

Our operations are subject to operational hazards, as are those of our customers, including Phillips 66. Any resulting business interruptions or shutdowns could significantly reduce the volume of products we transport, store or process and adversely affect our results of operations. Additionally, we may not be adequately insured for any such events.

We are subject to all of the risks and operational hazards inherent in processing, fractionating, transporting, terminaling and storing crude oil, NGL and refined petroleum products, which could lead to business interruptions or shutdowns of our facilities or assets. We are also subject to the risk that our customers, including Phillips 66, experience casualty events, thereby suspending their operations and reducing their need for our services. Certain of the risks and operational hazards that could cause business interruptions or shutdowns of our assets or facilities, or those of our customers, include, but are not limited to:

•Damages to pipelines, terminals and facilities, related equipment and surrounding properties caused by earthquakes, tornados, hurricanes, floods, fires, severe weather, explosions and other natural disasters, geopolitical conflicts, acts of terrorism and inadvertent damage to pipelines from construction, farm and utility equipment.

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•Maintenance, repairs, or mechanical or structural failures, including electrical shortages, power disruptions and power grid failures.

•Damages to and loss of availability of interconnecting third-party pipelines, terminals and other means of delivering crude oil, feedstocks, NGL and refined petroleum products.

•Disruption or failure of information technology systems and network infrastructure due to various causes, including unauthorized access or attack.

•Curtailments of operations due to severe weather.

•Riots, strikes, lockouts or other industrial disturbances.

These risks could also result in substantial losses due to personal injury and/or loss of life, severe damage to and destruction of property and equipment and pollution or other environmental damage. Any such event could have a material adverse effect on our business, financial condition and results of operations.

Additionally, we do not maintain insurance coverage against all potential losses and could suffer losses for uninsurable or uninsured risks or in amounts in excess of existing insurance coverage. We carry separate policies for certain property damage, business interruption and third-party liabilities, which includes pollution liabilities, and are also insured under certain Phillips 66 liability policies and are subject to Phillips 66’s policy limits under these policies. The occurrence of an event that is not fully covered by insurance or failure by one or more insurers to honor its coverage commitments for an insured event could have a material adverse effect on our business, financial condition and results of operations.

We and our equity affiliates may be unable to obtain, maintain or renew permits necessary for our operations, which could interrupt current or future operations. Additionally, legal actions related to the Dakota Access Pipeline, or similar challenges with respect to other pipelines, could cause interruptions to those operations. Any of these events could have an adverse effect on our business and results of operations.

Pipelines and other midstream assets operate under a number of federal and state permits, licenses and approvals with terms and conditions containing a significant number of prescriptive limits and performance standards in order to operate. All of these permits, licenses, approval limits and standards require a significant amount of monitoring, record keeping and reporting in order to demonstrate compliance with their terms and conditions. Noncompliance or incomplete documentation of our compliance status may result in the imposition of fines, penalties and injunctive relief.

Since 2016, there has been ongoing litigation challenging permits and easements issued by the U.S. Army Corps of Engineers to Dakota Access, LLC related to the Dakota Access Pipeline. The outcome of the litigation is uncertain, and there can be no assurances that the pipeline will not be shut down, either temporarily or permanently.

A decision by a government agency to deny or delay issuing a new or renewed material permit or approval, or a decision by such agency or a court to revoke or substantially modify an existing permit or approval, could have a material adverse effect on our ability to continue operations and on our financial condition, results of operations and cash flows.

In addition, certain interest groups have also proposed ballot initiatives and constitutional amendments designed to restrict crude oil and natural gas development generally. If ballot initiatives, local, state, or national restrictions or prohibitions are adopted and result in more stringent limitations on the products we transport and terminal and our ability to transport and terminal those products.

If legislative and regulatory initiatives cause a material decrease in the drilling of new wells and related servicing activities, it may reduce crude oil, natural gas and NGL supplies, negatively affecting the volume of products available to transport and terminal, resulting in a material adverse effect on our financial position, results of operations and cash flows.

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We do not control, and therefore may not be able to cause or prevent certain actions by, certain of our joint ventures.

Certain of our operations are conducted through joint ventures, some of which have their own governing boards. With respect to our joint ventures, we share ownership and management responsibilities with partners that may not share our goals and objectives. Consequently, it may be difficult or impossible for us to cause the joint venture entity to take actions that we believe would be in the joint venture’s best interests. Likewise, we may be unable to prevent actions of the joint venture. Differences in views among joint venture partners may result in delayed decisions or failures to agree on major matters, such as the timing and amount of distributions, large expenditures or contractual commitments, the construction or acquisition of assets or borrowing money, among others. Delay or failure to agree may prevent action with respect to such matters, even though such action may serve our best interest or that of the joint venture. Accordingly, delayed decisions and disagreements could adversely affect the business and operations of the joint ventures and, in turn, our business and operations.

Additionally, our joint venture participants may be unable to meet their economic or other obligations, and we may be required to fulfill those obligations alone. If we fail to make a required capital contribution, we could be deemed to be in default under the applicable joint venture agreement. Our joint venture partners may be permitted to pursue a variety of remedies, including funding any deficiency resulting from our failure to make any such capital contribution, which would result in a dilution of our ownership interest, or, in some cases, our joint venture partners may have the option to purchase all of our existing interest in the subject joint venture.

We do not own all of the land on which our operations are located, and we may not be able to maintain or obtain real property rights, which could result in disruptions to our operations.

We do not own all of the land on which our operations are located. We obtain the rights to construct and operate our pipelines on land owned by third parties and governmental agencies, and some of our agreements may grant us those rights for only a specific period of time. Therefore, we are subject to the possibility of more onerous terms and increased costs to retain necessary land use if our leases, rights-of-way or other property rights lapse, terminate or are reduced or it is determined that we do not have valid leases, rights-of-way or other property rights. Any loss of or reduction in these rights, including loss or reduction due to legal, governmental or other actions or difficulty renewing leases, right-of-way agreements or permits on satisfactory terms or at all, could have a material adverse effect on our business, results of operations, financial condition and ability to make cash distributions to our unitholders.

Certain components of our revenue have exposure to direct commodity price risk.

We have exposure to direct commodity price risk through the loss allowance provisions of our regulated tariffs and the commodity imbalance provisions of our commercial agreements. Any future losses due to our commodity price risk exposure could adversely affect our results of operations and financial condition and our ability in the future to make distributions to our unitholders. See Item 7A. Quantitative and Qualitative Disclosures About Market Risk, for more information.

Many of our assets have been in service for many years and require significant expenditures to maintain them. As a result, our maintenance or repair costs may increase in the future.

Our pipelines, terminals, fractionator, processing and storage assets are generally long-lived assets, and many of them have been in service for many years. The age and condition of our assets could result in increased maintenance or repair expenditures in the future. Any significant increase in these expenditures could adversely affect our results of operations, financial position or cash flows, as well as our ability to make cash distributions to our unitholders.

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Indebtedness Risk

Our significant indebtedness and the restrictions in our debt agreements may adversely affect our future financial and operating flexibility.

We have significant indebtedness and may incur substantial additional indebtedness in the future. Our debt service obligations reduce the funds available for our operations, business opportunities and distributions to unitholders because of the amount of our cash flow required to make interest payments on our debt. Additionally, our ability to service our debt depends on, among other things, our future financial and operating performance, which will be affected by prevailing economic conditions and financial, business, regulatory and other factors, some of which are beyond our control. If our operating results are not sufficient to service any future indebtedness, we will be forced to take actions such as reducing distributions, reducing or delaying our business activities, investments or capital expenditures, selling assets or issuing equity, which could materially and adversely affect our financial condition, results of operations, cash flows and ability to make distributions to unitholders, as well as the trading price of our common units. We may not be able to affect any of these actions on satisfactory terms or at all.

In addition, a failure to comply with the provisions of our revolving credit facility could result in an event of default that would enable our lenders to terminate their commitments and accelerate the maturity of any outstanding principal of that debt, together with accrued interest. If the payment of our debt is accelerated, defaults under our debt instruments may be triggered. If triggered, our assets may be insufficient to repay such debt in full, and the holders of our units could experience a partial or total loss of their investment. See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Capital Resources and Liquidity, for additional information about our revolving credit facility.

Environmental and Climate Risks

Climate change and severe weather may adversely affect our facilities and our ongoing operations.

The potential physical effects of climate change and severe weather on our operations are highly uncertain and depend upon the unique geographic and environmental factors present. Examples of such effects include rising sea levels at our coastal facilities, changing storm patterns and intensities, and changing temperature levels. We operate facilities or serve refineries located in coastal regions of the United States, which have been affected by hurricanes requiring us temporarily to shut down operations at those sites. Extended periods of such disruption could have an adverse effect on our results of operations. The potential physical effects of climate change and severe weather also could affect the facilities and operations of Phillips 66 with which our facilities and operations are connected.

Evolving environmental laws and regulations on climate change could adversely affect our results of operations and financial condition.

Potential additional laws and regulations regarding climate change could affect our operations. Currently, various U.S. legislative and regulatory agencies and bodies are considering various measures in regard to GHG emissions. These measures include EPA programs to control GHG emissions and state actions to develop statewide or regional programs, each of which could impose reductions in GHG emissions. These actions could result in increased (i) costs to operate and maintain our facilities, (ii) capital expenditures to install new emission controls on our facilities and (iii) costs to administer and manage any potential GHG emissions regulations or carbon trading or tax programs. These actions could also have an indirect adverse effect on our business if Phillips 66’s refinery operations are adversely affected. See Items 1 and 2. Business and Properties—Environmental Regulations—Air Emissions and Climate Change, for additional information.

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Evolving environmental laws and regulations on hydraulic fracturing could have an indirect effect on our financial performance.

Hydraulic fracturing is a common practice used to stimulate production of crude oil and/or natural gas from dense subsurface rock formations, and presently, is primarily regulated by state agencies. If new or more stringent federal, state or local legal restrictions relating to drilling activities or to the hydraulic fracturing process are adopted in areas where producers of product we ship operate, those producers could incur potentially significant added costs to comply with such requirements and experience delays or curtailment in the pursuit of production or development activities. The producers’ added costs or delays could reduce demand for our transportation and midstream services, negatively impacting our results of operations.

New and proposed regulations governing fuel efficiency and renewable fuels could have an indirect but material adverse effect on our business.

Increases in fuel mileage standards and the increased use of renewable fuels could decrease demand for refined petroleum products, which could have an indirect, but material, adverse effect on our business, financial condition and results of operations. For example, in 2007, Congress enacted legislation that, among other things, sets a miles per gallon target for the combined fleet of cars and light trucks in the United States and contains a second renewable fuels standard. In 2012, the National Highway Traffic Safety Administration enacted regulations establishing an average industry fleet fuel economy standard. The second renewable fuels standard has required, and may in the future continue to require, additional capital expenditures or expenses by Phillips 66 to accommodate increased renewable fuels use. Phillips 66 may experience a decrease in demand for refined petroleum products due to an increase in combined fleet mileage or due to the replacement of refined petroleum products with renewable fuels or the increased electrification of the transportation sector. Any such decrease could in turn reduce the need for our transportation and midstream services.

Continuing political and social concerns about the issues of climate change may result in changes to our business and significant expenditures, including litigation-related expenses.

Increasing attention to global climate change has resulted in increased investor attention and an increased risk of public and private litigation, which could increase our costs or otherwise adversely affect our business. For example, investor activism has recently been increasing in our industry, which could result in changes to our business or governance. Additionally, cities, counties, and other governmental entities in several states in the U.S. have filed lawsuits against energy companies seeking damages allegedly associated with climate change. We believe these lawsuits are an inappropriate vehicle to address the challenges associated with climate change. Should we be named in any such lawsuit, we would vigorously defend against them for lacking factual and legal merit, however we could still incur substantial legal costs associated with defending any such lawsuits in the future. Additionally, any of these risks could result in unexpected costs, negative sentiments about our company, disruptions in our operations, and increases to our operating expenses, which in turn could have an adverse effect on our business, financial condition and results of operations.

Risks Related to Terrorism and Cybersecurity

Terrorist attacks and threats, cyberattacks, or escalation of military activity in response to these attacks could have a material adverse effect on our business, financial condition or results of operations.

Terrorist attacks and threats, cyberattacks, or escalation of military activity in response to these attacks may have significant effects on general economic conditions, fluctuations in consumer confidence and spending and market liquidity, each of which could materially and adversely affect our business. Strategic targets, such as energy-related assets and transportation assets, may be at greater risk of future terrorist or cyberattacks than other targets in the United States. Any future terrorist attack on our facilities, those of our customers and, in some cases, those of other pipelines, could have a material adverse effect on our business. Similarly, any future terrorist attacks that severely disrupt the markets we serve could materially and adversely affect our results of operations, financial position and cash flows.

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We rely on the performance of information technology systems, and the interruption or failure of any information technology system, including an interruption or failure due to a cybersecurity breach, could have an adverse effect on our business, financial condition, results of operations and cash flows.

We are increasingly dependent on information technology systems, including Phillips 66’s information technology infrastructure and cloud applications, for the safe and effective operation of our business. We rely on such systems to process, transmit and store electronic information, and to manage or support a variety of business processes, including our pipeline operations. The systems and networks we rely on, as well as those of our vendors and counterparties, may become the target of cyberattacks or information security breaches, which in turn could result in the unauthorized release and misuse of confidential or proprietary information as well as disruption of our operations or damage to our facilities. Additionally, as cyber incidents continue to evolve and escalate, we may be required to reimburse Phillips 66 for additional costs incurred associated with the modification or enhancement of systems or networks that directly serve our operations in order to prevent or remediate such attacks. We do not maintain specialized insurance for possible liability or loss resulting from a cyberattack on our assets that may shut down all or part of our business. It is possible that any of these occurrences, or a combination of them, could have a material adverse effect on our business, financial condition and results of operations.

Industry Regulation Risks

Our assets and operations are subject to federal, state and local laws and regulations relating to environmental protection and safety, including spills, releases, and pipeline integrity, any of which could require us to make substantial expenditures.

Our operations are subject to increasingly stringent federal, state and local laws and regulations related to protection of the environment. These laws and regulations have raised operating costs for the crude oil, NGL and refined petroleum products industry, and compliance with such laws and regulations may cause us to incur potentially material capital expenditures.

Transportation of crude oil, NGL and refined petroleum products involves inherent risks of spills and releases. We have contracted with various spill response service companies in the areas in which we transport or store crude oil and refined petroleum products; however, these companies may not be able to adequately contain a “worst case discharge” in all instances, and we cannot ensure that all of their services would be available at any given time. In these and other cases, we may be subject to liability in connection with the discharge of crude oil or petroleum products. We could incur potentially significant additional expenses should we determine that any of our assets are not in compliance with applicable laws and regulations.

Our failure to comply with environmental, safety or pipeline-related regulations could result in the assessment of administrative, civil, or criminal penalties, the imposition of investigatory and remedial liabilities, and the issuance of injunctions that may subject us to additional operational constraints. Any such penalties or liability could have a material adverse effect on our business, financial condition, or results of operations.

Even if we are insured or indemnified against such risks, we may be responsible for costs or penalties to the extent our insurers or indemnitors do not fulfill their obligations to us. See Items 1 and 2. Business and Properties—Environmental Regulations and Items 1 and 2. Business and Properties—Rates and Safety Regulations—Pipeline Safety, for additional information.

We may incur greater than anticipated costs and liabilities in order to comply with safety regulations, including pipeline integrity management program testing and related repairs.

The U.S. government has adopted regulations requiring, among other things, pipeline operators to develop integrity management programs for certain transmission pipelines. The regulations require operators, including us, to, among other matters, perform ongoing assessments of pipeline integrity; repair and remediate pipelines as necessary; and implement preventative and mitigating actions.

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Revisions to the integrity management requirements or the inclusion of additional pipelines subject to the regulation’s requirements could have a material adverse effect on our operations and costs of transportation services.

Although some of our facilities fall within a class that is currently not subject to these requirements, we may incur significant costs and liabilities associated with repair, remediation, preventative or mitigation measures associated with our non-exempt pipelines. We have not estimated the costs for any repair, remediation, preventative or mitigating actions that may be determined to be necessary as a result of these safety regulations, which could be substantial, or any lost cash flows resulting from shutting down our pipelines during the pendency of such repairs. Additionally, should we fail to comply with these or comparable state regulations, we could be subject to penalties and fines.

The tariff rates of our regulated assets are subject to review and possible adjustment by federal and state regulators, which could adversely affect our revenue and our ability to make distributions to our unitholders.

Certain of our pipelines provide interstate service that is subject to regulation by FERC. FERC uses prescribed rate methodologies to develop regulated tariff rates for interstate oil and product pipelines. Our tariff rates approved by FERC may not recover all of our costs of providing services. In addition, these methodologies, changes to the methodologies, or challenges to our application of an approved methodology could adversely affect our rates.

Shippers may protest (and FERC may investigate) the lawfulness of new or changed tariff rates. FERC can suspend those tariff rates for up to seven months and can also require refunds of amounts collected pursuant to rates that are ultimately found to be unlawful, and prescribe new rates prospectively. FERC and interested parties can also challenge tariff rates that have become final and effective. Under our existing commercial agreements, Phillips 66 has agreed not to challenge, or to cause others to challenge, our tariff rates in effect during the term of the agreements, except to the extent changes to the base tariff rate are inconsistent with FERC’s indexing methodology or other rate changing methodologies. This agreement does not prevent other shippers or interested persons from challenging our tariffs, including our tariff rates and proration rules. Due to the complexity of rate making, the lawfulness of any rate is never assured. A successful challenge of our rates could adversely affect our revenues and our ability to make distributions to our unitholders.

Our pipelines are common carriers and, as a consequence, we may be required to provide service to customers with credit and other performance characteristics with whom we would otherwise choose not to do business.

Certain of our pipelines provide intrastate service that is subject to regulation by various state agencies. These state agencies could limit our ability to increase our rates or to set rates based on our costs or could order us to reduce our rates and could require the payment of refunds to shippers. Such regulation or a successful challenge to our intrastate pipeline rates could adversely affect our financial position, cash flows or results of operations. See Items 1 and 2. Business and Properties—Rates and Safety Regulations, for additional information.

Risks Inherent in an Investment in Us

We have agreed to merge with Phillips 66 in a transaction in which each of our unitholders will receive 0.50 shares of Phillips 66 common stock for each of our common units. Because the exchange ratio is fixed and because the market price of Phillips 66 common stock will fluctuate prior to the completion of our merger with Phillips 66, our unitholders cannot be certain of the market value of the Phillips 66 common stock they will receive as merger consideration relative to the value of our common units they exchange.

The market value of the consideration that our unitholders will receive in our merger will depend on the trading price of Phillips 66 common stock on the closing date of the transaction. The exchange ratio that determines the number of shares of Phillips 66 common stock that our unitholders will receive in this transaction is fixed at 0.50 shares of Phillips 66 common stock for each common unit. This means that there is no mechanism contained in the definitive merger agreement that would adjust the number of shares of Phillips 66 common stock that our unitholders will receive based on any decreases or increases in the trading price of Phillips 66 common stock. Stock or unit price changes may result from a variety of factors (many of which are beyond Phillips 66’s and our control), including:

•changes in Phillips 66’s or our business, operations and prospects;

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•changes in market assessments of Phillips 66’s or our business, operations and prospects;

•interest rates, commodity prices, general market, industry and economic conditions and other factors generally affecting the price of Phillips 66’s common stock or our common units; and

•federal, state and local legislation, governmental regulation and legal developments in the businesses in which Phillips 66 and we operate.

If the price of Phillips 66 common stock on the closing date of the merger is less than the price of Phillips 66 common stock on the date the merger agreement was executed, then the market value of the merger consideration will be less than contemplated at the time the merger agreement was executed.

The timing of the completion of our merger with Phillips 66 is not certain, which affects when our common unitholders will receive the merger consideration. If the merger is not consummated, the market price of our common units may decline.

Completion of our merger with Phillips 66 is subject to several conditions, not all of which are controllable by us. Accordingly, the date on which our unitholders will receive the merger consideration depends on the completion date of the merger, which is uncertain. If any of the conditions to completing the merger are not satisfied or waived, the merger may not occur, even though Phillips 66 PDI has already delivered a written consent approving the merger. If the merger does not occur, the market price of our common units may decline.

Securities class action and derivative lawsuits could result in substantial costs and may delay or prevent the closing of our merger with Phillips 66.

Companies that have entered into merger agreements often become the target of securities class action lawsuits and derivative lawsuits that seek to enjoin the relevant merger or seek monetary relief. We are currently a defendant in lawsuits relating to the merger with and into Phillips 66 and, even if the pending or any future lawsuits involving us or Phillips 66 are without merit, defending against these claims can result in substantial costs and divert management time and resources. We cannot predict the outcome of these lawsuits, or other proceedings, nor can we predict the amount of time and expense that will be required to resolve such litigation. An unfavorable resolution of any such litigation surrounding the merger could delay or prevent its consummation. In addition, the costs of defending the litigation, even if resolved in our favor, could be substantial, and such litigation could distract from pursuing the consummation of the merger and other potentially beneficial business opportunities.

Our General Partner’s discretion in establishing cash reserves may reduce the amount of cash we have available to distribute to our unitholders.

Our partnership agreement permits our General Partner to reduce available cash by establishing cash reserves for the proper conduct of our business, to comply with applicable law or agreements, or to provide funds for future distributions. These cash reserves will affect the amount of cash we have available to distribute to our unitholders.

Our General Partner and its affiliates, including Phillips 66, have conflicts of interest with us, and they may favor their own interests to our detriment and that of our unitholders.

Conflicts of interest may arise between Phillips 66 and its affiliates, including our General Partner, on the one hand, and us and our unitholders, on the other hand. In resolving these conflicts, our General Partner may favor its own interests and the interests of its affiliates, including Phillips 66, over the interests of our common unitholders. Examples of these conflicts include, among others:

•Phillips 66, as our primary customer, has an incentive to cause us to not seek higher tariff rates, even if such higher rates or fees would reflect rates and fees that could be obtained in arm’s length, third-party transactions.

•Our General Partner determines the amount and timing of investment transactions, borrowings, issuance of additional partnership securities and the creation, reduction or increase of cash reserves, each of which can affect the amount of cash that is distributed to our unitholders.

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•Our General Partner determines the amount and timing of many of our cash expenditures and whether each such expenditure is classified as an expansion or a maintenance capital expenditure, which can affect the amount of available cash from operating surplus that is distributed to our unitholders and the amount of adjusted operating surplus generated in any given period.

•Our General Partner determines which costs incurred by it and its affiliates are reimbursable by us and the amount of the reimbursements. Additionally, our partnership agreement does not restrict our General Partner from entering into additional contractual arrangements with any of these entities on our behalf.

•Our General Partner may cause us to borrow funds in order to permit the payment of cash distributions.

•Our General Partner controls the enforcement of obligations owed to us by our General Partner and its affiliates, including our commercial agreements with Phillips 66.

Affiliates of our General Partner may compete with us, and neither our General Partner nor its affiliates have any obligation to present business opportunities to us.

Neither Phillips 66 nor any other affiliates of our General Partner, including DCP Midstream LLC and Chevron Phillips Chemical Company, is prohibited from owning assets or engaging in businesses that compete with us. Additionally, if our General Partner or any of its affiliates become aware of a potential transaction or other matter that may be an opportunity for us, they have no duty to communicate or offer such opportunity to us. Consequently, they may acquire, construct or dispose of additional midstream assets in the future without any obligation to offer us the opportunity first. As a result, competition from Phillips 66 and other affiliates of our General Partner could materially and adversely impact our results of operations and distributable cash flow.

Our partnership agreement replaces our General Partner’s fiduciary duties to holders of our common units with contractual standards and restricts holders’ remedies for actions that might otherwise constitute a breach of fiduciary duty.

As permitted by Delaware law, our partnership agreement eliminates the fiduciary standards to which our General Partner would otherwise be subject and replaces those duties with several different contractual standards. For example, our partnership agreement permits our General Partner to make a number of decisions in its individual capacity, as opposed to in its capacity as our General Partner, free of any duties to us and our unitholders other than the implied contractual covenant of good faith and fair dealing. This provision entitles our General Partner to consider only the interests and factors that it desires and relieves it of any duty or obligation to give any consideration to any interest of, or factors affecting, us, our affiliates or our limited partners. By purchasing a common unit, a unitholder is treated as having consented to the provisions in our partnership agreement, including these provisions.

When acting in its capacity as our General Partner, our General Partner is required to make determinations in good faith, meaning that it subjectively believes that the decision is in the best interests of the partnership. Unless a court determines that our General Partner or its officers and directors, as the case may be, acted in bad faith or engaged in fraud or willful misconduct or, in the case of a criminal matter, acted with knowledge that the conduct was criminal, they will not be liable for any damages to us or our limited partners.

Additionally, our General Partner will not be in breach of its obligations under our partnership agreement or its fiduciary duties if a transaction with an affiliate or the resolution of a conflict of interest is approved in accordance with our partnership agreement. Under our partnership agreement, our Conflicts Committee and the Board of Directors of our General Partner are entitled to a presumption that they acted in good faith. In any proceeding brought by or on behalf of any limited partner or the partnership, the person bringing such proceeding will have the burden of overcoming such presumption.

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Our partnership agreement designates the Delaware Court of Chancery as the exclusive forum for certain proceedings brought by our limited partners, which would limit their ability to choose the forum for disputes with us or our General Partner’s directors, officers or other employees.

Our partnership agreement provides that, with certain limited exceptions, any claims arising out of or relating to our partnership agreement brought in a derivative manner on our behalf asserting a claim of breach of a duty owed to us, arising pursuant to Delaware’s limited partnership laws, or governed by the internal affairs doctrine, must be brought in the Delaware Court of Chancery. By purchasing our units, unitholders are deemed to have received notice of and consented to the exclusive forum provisions.

To the fullest extent permitted by law, this exclusive forum provision will apply to state and federal law claims, although limited partners will not be deemed to have waived our compliance with the U.S. federal securities laws and the rules and regulations thereunder.

The enforceability of similar forum provisions has been challenged, and it is possible that a court could find the provisions contained in our partnership agreement to be inapplicable or unenforceable, including with respect to claims arising under the U.S. federal securities laws.

The exclusive forum provision may limit the ability of a limited partner to commence litigation in a forum the partner prefers, and commencing litigation in Delaware may be more expensive for such partner, each of which may discourage lawsuits against us or our General Partner’s directors or officers. Alternatively, if a court were to find the exclusive forum provision inapplicable or unenforceable, we may incur additional costs associated with resolving such matters in other jurisdictions, which could negatively affect our results of operations and financial condition.

Unitholders have very limited voting rights and, even if they are dissatisfied, they cannot remove our General Partner without its consent.

Unlike the holders of common stock in a corporation, unitholders have only limited voting rights and, therefore, limited ability to influence management’s decisions. Additionally, the Board of Directors of our General Partner is chosen by the member of our General Partner, which is a wholly owned subsidiary of Phillips 66; unitholders have no right to elect our General Partner or the Board of Directors of our General Partner. Unitholders’ voting rights are further restricted by the partnership agreement provision providing that any units held by a person that owns 20% or more of any class of units then outstanding, other than our General Partner, its affiliates, their transferees, and persons who acquired such units with the prior approval of the Board of Directors of our General Partner, cannot vote on any matter.

Our unitholders currently do not own sufficient units to remove our General Partner. The vote of the holders of at least 66 2/3% of all outstanding common units and Series A preferred units (on an as-converted basis) voting as a single class is required to remove our General Partner. As of December 31, 2021, our General Partner and its affiliates owned approximately 70% of all outstanding units.

The control of our General Partner may be transferred to a third party and new general partners could be admitted to the partnership without unitholder consent.

There is no restriction in our partnership agreement on the ability of Phillips 66 to transfer its membership interest in our General Partner to a third party. The new owner of our General Partner would then be in a position to replace the Board of Directors and officers of our General Partner with its own choices. Additionally, we could issue general partner interests to a person who is not an affiliate of Phillips 66, causing the management of our business to no longer reside solely with our General Partner. Affiliates of any newly admitted general partner may compete with us, and neither that general partner nor such affiliates would have any obligation to present business opportunities to us.

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We may issue additional units without unitholder approval, which would dilute unitholder interests, and Phillips 66 may sell the common units it owns, which could negatively impact the trading price of the common units.

At any time, we may issue an unlimited number of general partner interests or limited partner interests of any type without the approval of our unitholders and our unitholders have no preemptive or other rights (solely as a result of their status as unitholders) to purchase any such general partner interests or limited partner interests. Further, there are no limitations in our partnership agreement on our ability to issue equity securities that rank equal or senior to our common units as to distributions or in liquidation or that have special voting and other rights. The issuance by us of additional common units or other equity securities of equal or senior rank will dilute current unitholders’ ownership interest and may decrease per unit distributions, relative voting strength, the market price for our common units, and increase the ratio of taxable income to distributions.

At December 31, 2021, Phillips 66 indirectly owned 169,760,137 common units. Phillips 66 has certain registration rights under applicable securities laws and the sale by Phillips 66 of its common units in the public markets could have an adverse impact on the trading price of our common units.

Our General Partner has a limited call right that may require unitholders to sell their common units at an undesirable time or price.

If at any time our General Partner and its affiliates own more than 80% of our then-outstanding common units, our General Partner has the right, but not the obligation, to acquire all, but not less than all, of the common units held by unaffiliated persons at a price not less than their then-current market price. As a result, unitholders may be required to sell their common units at an undesirable time or price and may not receive any return on their investment. Unitholders may also incur a tax liability upon a sale of their units. Our General Partner and its affiliates owned approximately 74% of our total outstanding common units, and approximately 70% of our total outstanding common units and Series A preferred units (on an as-converted basis) in the aggregate, as of December 31, 2021.

If a unitholder is not both a citizenship eligible holder and a rate eligible holder, its common units may be subject to redemption.

In order to avoid (i) any material adverse effect on the maximum applicable rates that can be charged to customers by our subsidiaries on assets that are subject to rate regulation by FERC or any analogous regulatory body, and (ii) any substantial risk of cancellation or forfeiture of any property, including any governmental permit, endorsement or other authorization, in which we have an interest, we have adopted certain requirements regarding those investors who may own our common units. Citizenship eligible holders are individuals or entities whose nationality, citizenship or other related status does not create a substantial risk of cancellation or forfeiture of any property, including any governmental permit, endorsement or authorization, in which we have an interest, and will generally include individuals and entities who are U.S. citizens. Rate eligible holders are individuals or entities subject to U.S. federal income taxation on the income generated by us or entities not subject to U.S. federal income taxation on the income generated by us, as all of the entity’s owners are subject to such taxation. A unitholder that does not meet the requirements to be a citizenship eligible holder and a rate eligible holder runs the risk of having its units redeemed by us at the market price as of the date three days before the date the notice of redemption is mailed. In addition, a unitholder who does not meet the requirements to be a citizenship eligible holder will not be entitled to voting rights.

Increases in interest rates could adversely impact the price of our common units, our ability to issue equity, or our ability to make distributions at our intended levels.

Similar to other yield-oriented securities, our common unit price is impacted by our level of distributions and the implied distribution yield of our common units. The distribution yield is often utilized by investors to compare and rank yield-oriented securities for investment decision-making purposes. Therefore, changes in interest rates, either positive or negative, may affect the yield requirements of investors who invest in our units, and a rising interest rate environment could have an adverse impact on the price of our common units, our ability to issue equity, or our ability to make distributions at our intended levels.

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The NYSE does not require a publicly traded limited partnership like us to comply with certain of its corporate governance requirements.

We currently list our common units on the NYSE under the symbol PSXP. Because we are a publicly traded limited partnership, the NYSE does not require us to have a majority of independent directors on our General Partner’s Board of Directors or to establish a compensation committee or a nominating and corporate governance committee. Additionally, any future issuance of additional common units or other securities, including to affiliates, will not be subject to the NYSE’s shareholder approval rules that apply to a corporation. Accordingly, unitholders do not have the same protections afforded to certain corporations that are subject to all of the NYSE corporate governance requirements. See Item 10. Directors, Executive Officers and Corporate Governance, for additional information.

Tax Risks

Our tax treatment depends on our status as a partnership for federal income tax purposes. If the Internal Revenue Service (IRS) were to treat us as a corporation for federal income tax purposes, which would subject us to entity-level taxation, or if we were otherwise subjected to a material amount of additional entity-level taxation, then our distributable cash flow to our unitholders would be substantially reduced.

The anticipated after-tax economic benefit of an investment in the common units depends largely on our being treated as a partnership for federal income tax purposes. We have not requested a ruling from the IRS on this or any other tax matter affecting us.

Although we are a limited partnership under Delaware law, it is possible in certain circumstances for a partnership such as ours to be treated as a corporation for federal income tax purposes. A change in our business or a change in current law could cause us to be treated as a corporation for federal income tax purposes or otherwise subject us to taxation as an entity.

If we were treated as a corporation for federal income tax purposes, we would pay federal income tax on our taxable income at the corporate tax rate, which is currently a maximum of 21%, and would likely pay state and local income tax at varying rates. Distributions would generally be taxable to the unitholder as corporate dividends (to the extent of our current and accumulated earnings and profits), and no income, gains, losses, deductions, or credits would flow through to unitholders. If a tax is imposed upon us as a corporation, our distributable cash flow would be substantially reduced. In addition, changes in current state law may subject us to additional entity-level taxation by individual states. Several states are evaluating ways to subject partnerships to entity-level taxation through the imposition of state income, franchise and other forms of taxation. Imposition of any such taxes may substantially reduce the cash available for distribution to unitholders. Therefore, if we were treated as a corporation for federal income tax purposes or otherwise subjected to a material amount of entity-level taxation, there would be a material reduction in the anticipated cash flow and after-tax return to our unitholders, likely causing a substantial reduction in the value of our common units.

Our partnership agreement provides that, if a law is enacted or existing law is modified or interpreted in a manner that subjects us to taxation as a corporation or otherwise subjects us to entity-level taxation for federal, state or local income tax purposes, the minimum quarterly distribution amount and the target distribution levels may be adjusted to reflect the impact of that law on us.

The present federal income tax treatment of publicly traded partnerships, including us, may be modified by administrative, legislative or judicial interpretation at any time. For example, from time to time, members of Congress propose and consider substantive changes to the existing federal income tax laws that affect publicly traded partnerships. Any modification to the federal income tax laws and interpretations thereof may or may not be retroactively applied and could make it more difficult or impossible to meet the exception for us to be treated as a partnership for federal income tax purposes. We are unable to predict whether any such changes will ultimately be enacted. However, it is possible that a change in law could affect us, and any such changes could negatively impact the value of an investment in our common units.

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If the IRS contests the federal income tax positions we take, the market for our common units may be adversely impacted and the cost of any IRS contest will reduce our distributable cash flow to our unitholders.

We have not requested a ruling from the IRS with respect to our treatment as a partnership for federal income tax purposes or any other matter affecting us. The IRS may adopt positions that differ from the positions we take, and the IRS’s positions may ultimately be sustained. It may be necessary to resort to administrative or court proceedings to sustain some or all of the positions we take and such positions may not ultimately be sustained. A court may not agree with some or all of the positions we take. Any contest with the IRS, and the outcome of any IRS contest, may have a material adverse impact on the market for our common units and the price at which they trade. In addition, our costs of any contest with the IRS will be borne indirectly by our unitholders and our General Partner because the costs will reduce our distributable cash flow.

If the IRS makes audit adjustments to our income tax returns for tax years beginning after 2017, it may collect any resulting taxes (including any applicable penalties and interest) directly from us, in which case our cash available for distribution to our unitholders might be substantially reduced.

Pursuant to the Bipartisan Budget Act of 2015, if the IRS makes audit adjustments to our income tax returns for tax years beginning after 2017, it may collect any resulting taxes (including any applicable penalties and interest) directly from us. We will generally have the ability to shift any such tax liability to our General Partner and our unitholders in accordance with their interests in us during the year under audit, but there can be no assurance that we will be able to do so under all circumstances. If we are required to make payments of taxes, penalties and interest resulting from audit adjustments, our cash available for distribution to our unitholders might be substantially reduced.

We treat each purchaser of common units as having the same tax benefits without regard to the actual common units purchased. The IRS may challenge this treatment, which could adversely affect the value of our common units.

Because we cannot match transferors and transferees of common units and because of other reasons, we adopt depreciation and amortization positions that may not conform to all aspects of existing Treasury Regulations. A successful IRS challenge to those positions could adversely affect the amount of tax benefits available to unitholders. It also could affect the timing of these tax benefits or the amount of gain from sale of common units and could have a negative impact on the value of our common units or result in audit adjustments to our unitholders’ tax returns.

We prorate our items of income, gain, loss and deduction for federal income tax purposes between transferors and transferees of our units each month based upon the ownership of our units on the first business day of each month, instead of on the basis of the date a particular unit is transferred. The IRS may challenge aspects of our proration method, and, if successful, we would be required to change the allocation of items of income, gain, loss and deduction among our unitholders.

We prorate our items of income, gain, loss and deduction for federal income tax purposes between transferors and transferees of our units each month based upon the ownership of our units on the first business day of each month, instead of on the basis of the date a particular unit is transferred. Treasury Regulations permit publicly traded partnerships to use a monthly simplifying convention that is similar to ours, but they do not specifically authorize all aspects of the proration method we have adopted. If the IRS were to successfully challenge this method, we could be required to change the allocation of items of income, gain, loss and deduction among our unitholders.

We have adopted certain valuation methodologies in determining a unitholder’s allocations of income, gain, loss and deduction. The IRS may challenge these methodologies or the resulting allocations, and such a challenge could adversely affect the value of our common units.

In determining the items of income, gain, loss and deduction allocable to our unitholders, in certain circumstances, including when we issue additional units, we must determine the fair market value of our assets. Although we may, from time to time, consult with professional appraisers regarding valuation matters, we make many fair market value estimates using a methodology based on the market value of our common units as a means to measure the fair market value of our assets. The IRS may challenge these valuation methods and the resulting allocations of income, gain, loss and deduction.

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A successful IRS challenge to these methods or allocations could adversely affect the amount, character and timing of taxable income or loss being allocated to our unitholders. It also could affect the amount of gain from our unitholders’ sale of common units and could have a negative impact on the value of the common units or result in audit adjustments to our unitholders’ tax returns without the benefit of additional deductions.

We may be required to deduct and withhold amounts from distributions to foreign unitholders related to withholding tax obligations arising from the sale or disposition of our units by foreign unitholders.

Upon the sale, exchange or other disposition of a unit by a foreign unitholder, the transferee is generally required to withhold 10% of the amount realized on such sale, exchange or other disposition if any portion of the gain on such sale, exchange or other disposition would be treated as effectively connected with a U.S. trade or business. The U.S. Department of the Treasury and the IRS recently issued final regulations providing guidance on the application of these rules for transfers of certain publicly traded partnership interests, including transfers of our units. Under these regulations, the “amount realized” on a transfer of our units will generally be the amount of gross proceeds paid to the broker effecting the applicable transfer on behalf of the transferor, and such broker will generally be responsible for the relevant withholding obligations. Distributions to foreign persons may also be subject to additional withholding under these rules to the extent a portion of a distribution is attributable to an amount in excess of our cumulative net income that has not previously been distributed. The U.S. Department of the Treasury and the IRS have provided that these rules will generally not apply to transfers of, or distributions on, our common units occurring before January 1, 2023.

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Item 1B. UNRESOLVED STAFF COMMENTS

None.

Item 3. LEGAL PROCEEDINGS

Although we may, from time to time, be involved in litigation and claims arising out of our operations in the normal course of business, we are not a party to any reportable litigation or governmental or other proceeding, including those involving governmental authorities under federal, state and local laws regulating the discharge of materials into the environment, that we reasonably believe will be in excess of $300,000 or have a material adverse impact on our consolidated financial position.

Under our amended omnibus agreement, and pursuant to the terms of various agreements under which we acquired assets from Phillips 66, Phillips 66 indemnifies us or assumes responsibility, for certain liabilities relating to litigation and environmental matters attributable to the ownership or operation of our assets prior to their contribution to us from Phillips 66.

See Note 11—Contingencies, in the Notes to Consolidated Financial Statements, for additional information.

Item 4. MINE SAFETY DISCLOSURES

Not applicable.

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PART II

Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common units trade on the New York Stock Exchange (NYSE) under the symbol PSXP. At January 31, 2022, there were 15 unitholders of record of our common units.

Item 6. [RESERVED]

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Item 7.     MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s Discussion and Analysis is the Partnership’s analysis of its financial performance and financial condition, and of significant trends that may affect future performance. It should be read in conjunction with the consolidated financial statements and notes thereto included elsewhere in this Annual Report on Form 10-K.

EXECUTIVE OVERVIEW AND BUSINESS ENVIRONMENT

Partnership Overview

We are a Delaware limited partnership formed in 2013 by Phillips 66 Company and Phillips 66 Partners GP LLC (our General Partner), both wholly owned subsidiaries of Phillips 66. On August 1, 2019, all of the outstanding incentive distribution rights (IDRs) held by our General Partner were eliminated and its general partner interest in us was converted to a noneconomic interest in exchange for common units issued to Phillips 66 Project Development Inc. (Phillips 66 PDI). We are a master limited partnership formed to own, operate, develop and acquire primarily fee-based midstream assets. Our common units trade on the New York Stock Exchange under the symbol PSXP.

Pending Merger with Phillips 66

On October 26, 2021, we entered into a definitive merger agreement with Phillips 66 and its wholly owned subsidiaries, Phillips 66 Company, Phillips 66 PDI, and Phoenix Sub LLC, and our General Partner pursuant to which Phillips 66 would acquire all of the publicly held common units representing limited partner interests in the Partnership not already owned by Phillips 66 and its subsidiaries on the closing date of the transaction. The agreement provides for an all-stock transaction in which each outstanding common unitholder would receive 0.50 shares of Phillips 66 common stock for each common unit. Pursuant to our partnership agreement, the Partnership’s perpetual convertible preferred units would be converted into common units at a premium to the original issuance price prior to exchange for Phillips 66 common stock. The merger is expected to close in March 2022, subject to customary closing conditions.

Upon closing, we will become an indirect wholly owned subsidiary of Phillips 66, and our common units will cease to be listed on the NYSE and will be subsequently deregistered under the Exchange Act. See Note 1—Business and Basis of Presentation, in the Notes to Consolidated Financial Statements, for additional information regarding the merger agreement.

Executive Overview

Net income attributable to the Partnership was $735 million in 2021. We generated cash from operations of $1,153 million and received $137 million of return of investment distributions from equity affiliates. This cash was primarily used to fund our capital expenditures and investments and make quarterly cash distributions to our common and preferred unitholders. As of December 31, 2021, we had cash and cash equivalents of $62 million and $749 million of unused capacity under our $750 million revolving credit facility.

How We Evaluate Our Operations

Our management uses a variety of financial and operating metrics to analyze our performance, including: (1) volumes handled; (2) operating and maintenance expenses; (3) net income (loss) before net interest expense, income taxes, depreciation and amortization (EBITDA); (4) adjusted EBITDA; and (5) distributable cash flow.

Volumes Handled

The amount of revenue we generate primarily depends on the volumes of crude oil, refined petroleum products and natural gas liquids (NGL) that we handle in our pipeline, terminal, rail rack, processing, storage and fractionator systems. In addition, our equity affiliates generate revenue from transporting and terminaling crude oil, refined petroleum products and NGL. These volumes are primarily affected by the supply of, and demand for, crude oil, refined petroleum products and NGL in the markets served directly or indirectly by our assets, as well as the operational status of the refineries served by our assets. Phillips 66 has committed to minimum throughput volumes under many of our commercial agreements.

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Operating and Maintenance Expenses

Our management seeks to maximize the profitability of our operations by effectively managing operating and maintenance expenses. These expenses primarily consist of labor expenses (including contractor services), utility costs, and repair and maintenance expenses. Operating and maintenance expenses generally remain relatively stable across broad ranges of throughput volumes but can fluctuate from period to period depending on the mix of activities, particularly maintenance activities, performed during the period. Our processing assets are periodically subject to major maintenance, or turnaround activities, which can significantly increase operating and maintenance expenses in a given year. Although we seek to manage our maintenance expenditures on our facilities to avoid significant variability in our quarterly cash flows, we balance this approach with our high standards of safety and environmental stewardship, such that critical maintenance is regularly performed.

Our operating and maintenance expenses are also affected by volumetric gains/losses resulting from variances in meter readings and other measurement methods, as well as volume fluctuations due to pressure and temperature changes. Under certain commercial agreements with Phillips 66, the value of any crude oil, refined petroleum product and NGL volumetric gains and losses are determined by reference to the monthly average reference price for the applicable commodity. Any gains/losses under these provisions decrease or increase, respectively, our operating and maintenance expenses in the period in which they are realized. These contractual volumetric gain/loss provisions could increase variability in our operating and maintenance expenses.

EBITDA, Adjusted EBITDA and Distributable Cash Flow

We define EBITDA as net income plus net interest expense, income taxes, depreciation and amortization.

Adjusted EBITDA is EBITDA attributable to the Partnership after deducting the adjusted EBITDA attributable to noncontrolling interest, further adjusted for:

•The proportional share of equity affiliates’ net interest expense, income taxes, depreciation and amortization, and impairments.

•Transaction costs associated with acquisitions.

•Certain other noncash items, including gains and losses on asset sales and asset impairments.

Distributable cash flow is defined as adjusted EBITDA less (i) equity affiliate distributions less than proportional adjusted EBITDA, (ii) maintenance capital expenditures, (iii) net interest expense, (iv) income taxes paid and (v) preferred unit distributions, plus adjustments for deferred revenue impacts.

EBITDA, adjusted EBITDA, and distributable cash flow are not presentations made in accordance with generally accepted accounting principles in the United States (GAAP). EBITDA, adjusted EBITDA and distributable cash flow are non-GAAP supplemental financial measures that management believes external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies, may find useful to assess:

•Our operating performance as compared to other publicly traded partnerships in the midstream energy industry, without regard to historical cost basis or, in the case of EBITDA and adjusted EBITDA, financing methods.

•The ability of our business to generate sufficient cash to support our decision to make distributions to our unitholders.

•Our ability to incur and service debt and fund capital expenditures.

•The viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities.

The GAAP performance measure most directly comparable to EBITDA and adjusted EBITDA is net income. The GAAP liquidity measure most directly comparable to EBITDA and distributable cash flow is net cash provided by operating activities. These non-GAAP financial measures should not be considered alternatives to GAAP net income or net cash provided by operating activities. They have important limitations as analytical tools because they exclude some items that affect net income and net cash provided by operating activities.

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Additionally, because EBITDA, adjusted EBITDA, and distributable cash flow may be defined differently by other companies in our industry, our definition of these non-GAAP financial measures may not be comparable to similarly titled measures of other companies, thereby diminishing their utility.

Business Environment

We do not own any of the crude oil, refined petroleum products and NGL we handle and do not engage in the trading of those commodities, and therefore have limited direct exposure to risks associated with fluctuating commodity prices, although these risks indirectly influence our activities and results of operations over the long term.

Our throughput volumes primarily depend on the volume of crude oil processed and refined petroleum products produced at Phillips 66’s owned or operated refineries with which our assets are integrated. These volumes are primarily dependent on Phillips 66’s refining margins and maintenance schedules. Refining margins depend on the price of crude oil or other feedstocks and the price of refined petroleum products. These prices are affected by numerous factors beyond our or Phillips 66’s control, including the domestic and global supply of and demand for crude oil and refined petroleum products. Throughput volumes of our equity affiliates primarily depend on upstream drilling activities, refinery performance and product supply and demand.

The Coronavirus Disease 2019 (COVID-19) pandemic continues to impact global economic activity. Our results in 2021 reflect the gradual recovery of demand for refined petroleum products following the administration of COVID-19 vaccines and the easing of pandemic restrictions since the beginning of 2021. However, uncertainty remains regarding the depth and duration of the pandemic.

While we believe we and the majority of our joint ventures have substantially mitigated our indirect exposure to commodity price fluctuations through the minimum volume commitments included in our commercial agreements, our ability to execute our growth strategy will depend, in part, on the availability of attractively priced crude oil in the areas served by our crude oil pipelines and rail racks, demand for refined petroleum products in the markets served by our refined petroleum product pipelines and terminals, and the general demand for midstream services, including NGL transportation and fractionation.

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RESULTS OF OPERATIONS

	Millions of Dollars
Years Ended December 31	2021		2020	2019
Revenues and Other Income
Operating revenues—related parties	$	1,116	1,008	1,097
Operating revenues—third parties	30		30	29
Equity in earnings of affiliates	595		493	535
Gain from equity interest transfer	—		84	—
Other income	13		3	6
Total revenues and other income	1,754		1,618	1,667
Costs and Expenses
Operating and maintenance expenses	383		342	405
Depreciation	141		135	120
Impairments	208		96	—
General and administrative expenses	71		66	67
Taxes other than income taxes	41		40	39
Interest and debt expense	128		121	108
Other expenses	1		7	2
Total costs and expenses	973		807	741
Income before income taxes	781		811	926
Income tax expense	4		3	3
Net Income	777		808	923
Less: Net income attributable to noncontrolling interest	42		17	—
Net Income Attributable to the Partnership	735		791	923
Less: Preferred unitholders’ interest in net income attributable to the Partnership	48		41	37
Less: General partner’s interest in net income attributable to the Partnership	—		—	140
Limited Partners’ Interest in Net Income Attributable to the Partnership	$	687	750	746
Net Cash Provided by Operating Activities	$	1,153	955	1,016
Adjusted EBITDA	$	1,393	1,221	1,268
Distributable Cash Flow	$	1,035	970	989

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	Year Ended December 31
	2021		2020	2019
Wholly Owned Operating Data
Pipelines
Pipeline revenues (millions of dollars)	$	490	436	473
Pipeline volumes(1) (thousands of barrels daily)
Crude oil	923		864	991
Refined petroleum products and NGL	977		869	947
Total	1,900		1,733	1,938
Average pipeline revenue per barrel (dollars)	$	0.70	0.68	0.67
Terminals
Terminal revenues (millions of dollars)	$	175	153	167
Terminal throughput (thousands of barrels daily)
Crude oil(2)	410		354	470
Refined petroleum products	782		713	804
Total	1,192		1,067	1,274
Average terminaling revenue per barrel (dollars)	$	0.40	0.39	0.35
Storage, processing and other revenues (millions of dollars)	$	481	449	486
Total Operating Revenues (millions of dollars)	$	1,146	1,038	1,126
Joint Venture Operating Data(3)
Crude oil, refined petroleum products and NGL (thousands of barrels     daily)	1,255		1,007	760

(1) Represents the sum of volumes transported through each separately tariffed pipeline segment.

(2) Bayway and Ferndale rail rack volumes included in crude oil terminals.

(3) Proportional share of total pipeline and terminal volumes of joint ventures consistent with recognized equity in earnings of affiliates.

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The following tables present reconciliations of EBITDA and adjusted EBITDA to net income, and EBITDA and distributable cash flow to net cash provided by operating activities, the most directly comparable GAAP financial measures, for each of the periods indicated.

	Millions of Dollars
	Year Ended December 31
	2021		2020	2019
Reconciliation to Net Income Attributable to the Partnership
Net Income Attributable to the Partnership	$	735	791	923
Plus:
Net income attributable to noncontrolling interest	42		17	—
Net Income	777		808	923
Plus:
Depreciation	141		135	120
Net interest expense	127		120	105
Income tax expense	4		3	3
EBITDA	1,049		1,066	1,151
Plus:
Proportional share of equity affiliates’ net interest, taxes, depreciation and amortization, and impairments	201		172	116
Expenses indemnified or prefunded by Phillips 66	1		2	1
Transaction costs associated with acquisitions	—		1	—
Impairments	208		96	—
Less:
Gain from equity interest transfer	—		84	—
Adjusted EBITDA attributable to noncontrolling interest	66		32	—
Adjusted EBITDA	1,393		1,221	1,268
Plus:
Deferred revenue impacts* †	(7)		8	(6)
Less:
Equity affiliate distributions less than proportional adjusted EBITDA	59		—	56
Maintenance capital expenditures†	115		97	74
Net interest expense	127		120	105
Preferred unit distributions	48		41	37
Income taxes paid	2		1	1
Distributable Cash Flow	$	1,035	970	989

*Difference between cash receipts and revenue recognition.

†Excludes Merey Sweeny capital reimbursements and turnaround impacts.

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	Millions of Dollars
	Year Ended December 31
	2021		2020	2019
Reconciliation to Net Cash Provided by Operating Activities
Net Cash Provided by Operating Activities	$	1,153	955	1,016
Plus:
Net interest expense	127		120	105
Income tax expense	4		3	3
Changes in working capital	(29)		15	34
Undistributed equity earnings	4		(7)	3
Impairments	(208)		(96)	—
Gain from equity interest transfer	—		84	—
Deferred revenues and other liabilities	4		4	(5)
Other	(6)		(12)	(5)
EBITDA	1,049		1,066	1,151
Plus:
Proportional share of equity affiliates’ net interest, taxes, depreciation and amortization, and impairments	201		172	116
Expenses indemnified or prefunded by Phillips 66	1		2	1
Transaction costs associated with acquisitions	—		1	—
Impairments	208		96	—
Less:
Gain from equity interest transfer	—		84	—
Adjusted EBITDA attributable to noncontrolling interest	66		32	—
Adjusted EBITDA	1,393		1,221	1,268
Plus:
Deferred revenue impacts*†	(7)		8	(6)
Less:
Equity affiliate distributions less than proportional adjusted EBITDA	59		—	56
Maintenance capital expenditures†	115		97	74
Net interest expense	127		120	105
Preferred unit distributions	48		41	37
Income taxes paid	2		1	1
Distributable Cash Flow	$	1,035	970	989

*Difference between cash receipts and revenue recognition.

†Excludes Merey Sweeny capital reimbursements and turnaround impacts.

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Statement of Income Analysis

2021 vs. 2020

Operating revenues increased $108 million, or 10%, in 2021. The increase was primarily attributable to higher volumes resulting from improved market conditions, additional assets placed into service and improved rates on our processing units, partially offset by the effects of the winter storms impacting the Central and Gulf Coast regions in the first quarter of 2021.

Equity in earnings of affiliates increased $102 million, or 21%, in 2021. The increase was primarily due to higher volumes, including volumes from Gray Oak Pipeline, LLC, which commenced full operations during the second quarter of 2020, South Texas Gateway Terminal LLC, which commenced full operations in the first quarter of 2021, and Dakota Access, LLC and Energy Transfer Crude Oil Company, LLC. These increases were partially offset by a decrease in earnings from DCP Sand Hills Pipeline, LLC (Sand Hills). See Note 4—Equity Investments, in the Notes to Consolidated Financial Statements, for additional information.

Gain on equity interest transfer reflects the second-quarter 2020 gain recognition related to a co-venturer’s acquisition of a 35% interest in the consolidated holding company that owns an interest in Gray Oak Pipeline, LLC. See Note 4—Equity Investments, in the Notes to Consolidated Financial Statements, for additional information.

Operating and maintenance expenses increased $41 million, or 12%, in 2021. The increase was primarily due to higher utility costs.

Impairments reflects the 2021 impairment of our investment in Liberty Pipeline LLC (Liberty) and the cancellation of the ACE Pipeline project, and the 2020 impairments of our investments in Phillips 66 Partners Terminal LLC and STACK Pipeline LLC. See Note 4—Equity Investments and Note 7—Properties, Plants and Equipment in the Notes to Consolidated Financial Statements, for additional information.

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2020 vs. 2019

Operating revenues decreased $88 million, or 8%, in 2020. The decrease was primarily attributable to the recognition of deferred revenues related to turnaround activity at Merey Sweeny LLC (Merey Sweeny) in the first quarter of 2019, as well as lower volumes in 2020, partially offset by additional assets placed in operation, including the isomerization unit at the Phillips 66 Lake Charles Refinery in mid-2019 and additional storage capacity at the Clemens Caverns in mid-2020.

Equity in earnings of affiliates decreased $42 million, or 8%, in 2020. The decrease was primarily due to decreased volumes, partially offset by an increase in equity earnings from Gray Oak Pipeline, LLC, which commenced full operations during the second quarter of 2020, and South Texas Gateway Terminal, which commenced partial operations in the third quarter of 2020. See Note 4—Equity Investments, in the Notes to Consolidated Financial Statements, for additional information.

Gain on equity interest transfer reflects the second-quarter 2020 gain recognition related to a co-venturer’s prior-year acquisition of a 35% interest in the consolidated holding company that owns an interest in Gray Oak Pipeline, LLC. See Note 4—Equity Investments, in the Notes to Consolidated Financial Statements, for additional information.

Operating and maintenance expenses decreased $63 million, or 16%, in 2020. The decrease was primarily due to turnaround activity at Merey Sweeny in 2019.

Depreciation increased $15 million, or 13%, in 2020. The increase was attributable to additional assets placed in operation, including the isomerization unit at the Phillips 66 Lake Charles Refinery in mid-2019 and additional storage capacity at the Clemens Caverns in mid-2020.

Impairments reflects the fourth-quarter 2020 impairments of our investments in Phillips 66 Partners Terminal LLC and STACK Pipeline LLC. See Note 4—Equity Investments, in the Notes to Consolidated Financial Statements, for additional information.

Interest and debt expense increased $13 million, or 12%, in 2020. The increase was primarily attributable to lower capitalized interest associated with the Gray Oak Pipeline, which commenced full operations during the second quarter of 2020, and increased debt.

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CAPITAL RESOURCES AND LIQUIDITY

Significant Sources of Capital

Our sources of liquidity include cash generated from operations, distributions from our equity affiliates, borrowings from related parties and under our revolving credit facility, issuances of additional debt and equity securities, and funding from joint venture partners. We believe that cash generated from these sources will be sufficient to meet our short-term working capital requirements, long-term capital expenditure requirements and our quarterly cash distributions.

Operating Activities

During 2021, we generated $1,153 million in cash from operations, an increase of $198 million, compared with cash from operations of $955 million in 2020. The increase was primarily attributable to higher operating distributions from equity affiliates and higher operating revenues due to improved volumes.

During 2020, cash provided by operating activities was $955 million, a decrease of $61 million, compared with cash from operations of $1,016 million in 2019. The decrease was primarily attributable to lower distributions from equity affiliates and increased interest payments in 2020.

Equity Affiliate Distributions

Our operating and investing cash flows are impacted by distribution decisions made by our equity affiliates. Over the three years ended December 31, 2021, we received aggregate distributions from our equity affiliates of $2,004 million. We cannot control the amount or timing of future distributions from equity affiliates; therefore, future distributions are not assured.

Revolving Credit Facility

Our $750 million revolving credit facility may be used for direct bank borrowings and as support for issuances of letters of credit. We have an option to increase the overall capacity to $1 billion, subject to certain conditions. We also have the option to extend the facility for two additional one-year terms after its July 30, 2024, maturity date, subject to, among other things, the consent of the lenders holding the majority of the commitments and of each lender extending its commitment.

The facility is with a broad syndicate of financial institutions and contains covenants that are usual and customary for an agreement of this type, including that, as of the last day of each fiscal quarter, the ratio of total debt to EBITDA for the prior four fiscal quarters must be no greater than 5.0:1.0 (and 5.5:1.0 during the period following certain specified acquisitions). The facility has customary events of default, such as nonpayment of principal when due; nonpayment of interest, fees or other amounts; and violation of covenants.

Outstanding revolving borrowings under the facility bear interest, at our option, at either: (a) the Eurodollar rate in effect from time to time plus the applicable margin; or (b) the reference rate (as described in the facility) plus the applicable margin. The facility also provides for customary fees, including commitment fees. The pricing levels for the commitment fees and interest-rate margins are determined based on our credit ratings in effect from time to time. Borrowings under the facility may be short-term or long-term in duration, and we may at any time prepay outstanding borrowings under the facility, in whole or in part, without premium or penalty. At December 31, 2021, no borrowings were outstanding under this facility, compared with $415 million borrowings outstanding under this facility at December 31, 2020. At both December 31, 2021 and 2020, $1 million in letters of credit had been issued that were supported by this facility.

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ATM Program

We have authorized an aggregate of $750 million under three $250 million continuous offerings of common units, or at-the-market (ATM) programs. The first two programs concluded in June 2018 and December 2019, respectively. At December 31, 2021, we have $248 million of available capacity under our $250 million ATM program. We suspended issuances under the ATM program in the first quarter of 2020 due to low common unit prices. We did not issue any common units under the ATM program during the twelve months ended December 31, 2021. During the year ended December 31, 2020, on a settlement-date basis, we issued an aggregate of 40,570 common units, generating net proceeds of $2 million. Since inception in June 2016 through December 31, 2021, we issued an aggregate of 9,487,055 common units under our ATM programs, and generated net proceeds of $494 million, after broker commissions of $5 million and other costs of $3 million. The net proceeds from sales under the ATM programs are used for general partnership purposes, which may include debt repayment, acquisitions, capital expenditures and additions to working capital.

On October 26, 2021, we entered into a definitive merger agreement with Phillips 66. If this merger is consummated, our common units will no longer be publicly traded and, as a result, we would not expect any issuances of common units under our ATM Program before or after the closing date of this transaction. See Note 1—Business and Basis of Presentation, in the Notes to Consolidated Financial Statements, for additional information regarding the merger agreement.

2019 Senior Notes

On September 6, 2019, we closed on a public offering of $900 million aggregate principal amount of unsecured notes consisting of:

•$300 million aggregate principal amount of 2.450% Senior Notes due December 15, 2024.

•$600 million aggregate principal amount of 3.150% Senior Notes due December 15, 2029.

Interest on each series of senior notes is payable semi-annually in arrears on June 15 and December 15 of each year, commencing on June 15, 2020. Total proceeds received from the offering were $892 million, net of underwriting discounts and commissions. Net proceeds from the Senior Notes offering were used for general partnership purposes, including debt repayments. On September 13, 2019, we used a portion of the proceeds to repay the $400 million outstanding principal balance of the senior unsecured term loan facility that was drawn during the first half of 2019. On October 15, 2019, we used a portion of the proceeds to repay the aggregate $300 million outstanding principal balance of our 2.646% Senior Notes due February 2020.

Term Loans

On April 6, 2021, we entered into a $450 million term loan agreement and borrowed the full amount. The term loan agreement has a maturity date of April 5, 2022, and the outstanding borrowings can be repaid at any time and from time to time, in whole or in part, without premium or penalty. Borrowings bear interest at a floating rate based on either a Eurodollar rate or a reference rate, plus a margin of 0.875%. Proceeds were primarily used to repay amounts borrowed under our $750 million revolving credit facility.

On March 22, 2019, we entered into a senior unsecured term loan facility with a borrowing capacity of $400 million due March 20, 2020. We borrowed an aggregate amount of $400 million under the facility during the first half of 2019. The proceeds were used for general partnership purposes, including repayment of amounts borrowed under our $750 million revolving credit facility. The outstanding principal balance of the senior unsecured term loan facility was repaid in full in September 2019.

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Transfers of Equity Interests

In April 2021, we transferred our 50% ownership interest in Liberty to our co-venturer for cash and certain pipeline assets with a value that approximated our book value of $46 million at March 31, 2021.

Gray Oak Pipeline, LLC was formed to develop and construct the Gray Oak Pipeline, which transports crude oil from the Permian and Eagle Ford to Texas Gulf Coast destinations that include Corpus Christi, Texas, and the Sweeny area, including the Phillips 66 Sweeny Refinery. We have a consolidated holding company that owns 65% of Gray Oak Pipeline, LLC.

In December 2018, a third party exercised its option to acquire a 35% interest in the holding company. Because the holding company’s sole asset was its ownership interest in Gray Oak Pipeline, LLC, which was considered a financial asset, and because certain restrictions were placed on the third party’s ability to transfer or sell its interest in the holding company during the construction of the Gray Oak Pipeline, the legal sale of the 35% interest did not qualify as a sale under GAAP at that time. The Gray Oak Pipeline commenced full operations in the second quarter of 2020 and the restrictions placed on the co-venturer were lifted on June 30, 2020, resulting in the recognition of the sale under GAAP. Accordingly, at June 30, 2020, the co-venturer’s 35% interest in the holding company was recharacterized from a long-term obligation to a noncontrolling interest on our consolidated balance sheet, and the premium of $84 million previously paid by the co-venturer in 2019 was recharacterized from a long-term obligation to a gain in our consolidated statement of income. During 2020 and 2019, the co-venturer contributed an aggregate of $61 million and $342 million, respectively, into the holding company, and the holding company used these contributions to fund its portion of Gray Oak Pipeline, LLC’s cash calls.

In February 2019, Gray Oak Holdings LLC transferred a 10% interest in Gray Oak Pipeline, LLC, to a third party that exercised a purchase option, for proceeds of $81 million. The proceeds received from this sale are reflected as an investing cash inflow in the “proceeds from sale of equity interest” line item on our consolidated statement of cash flows.

See Note 4—Equity Investments, in the Notes to Consolidated Financial Statements, for additional information regarding these transactions.

Off-Balance Sheet Arrangements

Dakota Access, LLC (Dakota Access) and Energy Transfer Crude Oil Company, LLC (ETCO)

In 2020, the trial court presiding over litigation regarding the Dakota Access Pipeline ordered the U.S. Army Corps of Engineers (USACE) to prepare an Environmental Impact Statement (EIS) relating to an easement under Lake Oahe in North Dakota and later vacated the easement. Although the easement has been vacated, the USACE has indicated that it will not take action to stop pipeline operations while it proceeds with the EIS, which is expected to be completed in the second half of 2022. In May 2021, the court denied a request for an injunction to shut down the pipeline while the EIS is being prepared and in June 2021, dismissed the litigation. It is possible that the litigation could be reopened or new litigation challenging the EIS, once completed, could be filed. In September 2021, Dakota Access filed a writ of certiorari, requesting the U.S. Supreme Court to review the lower court’s judgment that ordered the EIS and vacated the easement.

In March 2019, a wholly owned subsidiary of Dakota Access closed an offering of $2.5 billion aggregate principal amount of senior unsecured notes consisting of:

•$650 million aggregate principal amount of 3.625% Senior Notes due 2022.

•$1.0 billion aggregate principal amount of 3.900% Senior Notes due 2024.

•$850 million aggregate principal amount of 4.625% Senior Notes due 2029.

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Dakota Access and ETCO have guaranteed repayment of the notes. In addition, we and our co-venturers in Dakota Access provided a Contingent Equity Contribution Undertaking (CECU) in conjunction with the notes offering. Under the CECU, the co-venturers may be severally required to make proportionate equity contributions to Dakota Access if there is an unfavorable final judgment in the above mentioned ongoing litigation. Contributions may be required if Dakota Access determines that the issues included in any such final judgment cannot be remediated and Dakota Access has or is projected to have insufficient funds to satisfy repayment of the notes. If Dakota Access undertakes remediation to cure issues raised in a final judgment, contributions may be required if any series of the notes become due, whether by acceleration or at maturity, during such time, to the extent Dakota Access has or is projected to have insufficient funds to pay such amounts. At December 31, 2021, our share of the maximum potential equity contributions under the CECU was approximately $631 million.

If the pipeline is required to cease operations, and should Dakota Access and ETCO not have sufficient funds to pay ongoing expenses, we also could be required to support our share of the ongoing expenses, including scheduled interest payments on the notes of approximately $25 million annually, in addition to the potential obligations under the CECU. If we are required to perform under the CECU, we would expect to fund such performance with cash, capacity available under our revolving credit facility, third-party debt financing, and/or sponsor loans from Phillips 66.

Capital Requirements

Capital Expenditures and Investments

Our operations are capital intensive and require investments to expand, upgrade, maintain or enhance existing operations and to meet environmental and operational requirements of our wholly owned and joint venture entities. Our capital requirements consist of maintenance and expansion capital expenditures, as well as contributions to our joint ventures. Maintenance capital expenditures are those made to replace partially or fully depreciated assets, to maintain the existing operating capacity of our assets and to extend their useful lives, or to maintain existing system volumes and related cash flows. In contrast, expansion capital expenditures are those made to expand and upgrade our systems and facilities and to construct or acquire new systems or facilities to grow our business, including contributions to joint ventures that are using the contributed funds for such purposes.

Our capital expenditures and investments represent the total spending for our capital requirements. Our adjusted capital spending is a non-GAAP financial measure that demonstrates our net share of capital spending, and reflects an adjustment for the portion of consolidated capital spending funded by certain joint venture partners. Additionally, the disaggregation of adjusted capital spending between expansion and maintenance is not a distinction recognized under GAAP. We disaggregate adjusted capital spending because our partnership agreement requires that we treat expansion and maintenance capital differently for operating and capital surplus determinations. Further, we generally fund expansion capital spending with both operating and financing cash flows and fund maintenance capital spending with operating cash flows.

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Our capital expenditures and investments for the years ended December 31, 2021, 2020 and 2019 were:

	Millions of Dollars
	2021		2020	2019
Capital Expenditures and Investments
Capital expenditures and investments	$	296	915	1,082
Capital expenditures and investments funded by joint venture partners*	—		(61)	(423)
Adjusted Capital Spending	$	296	854	659
Expansion	$	181	757	579
Maintenance	115		97	80

*See Note 4—Equity Investments, in the Notes to Consolidated Financial Statements, for additional information.

Our capital expenditures and investments for the three-year period ended December 31, 2021, included:

•Contributions to the Gray Oak Pipeline project and South Texas Gateway Terminal development activities.

•Construction activities related to the C2G Pipeline, a new 16 inch ethane pipeline that connects our Clemens Caverns storage facility to petrochemical facilities in Gregory, Texas, near Corpus Christi.

•Construction activities related to increasing storage capacity at Clemens Caverns.

•Construction activities related to increasing capacity on the Sweeny to Pasadena refined petroleum products pipeline.

•Contributions to Dakota Access for a pipeline optimization project.

•Construction of our new isomerization unit at the Phillips 66 Lake Charles Refinery.

•Contributions to Bayou Bridge Pipeline, LLC for the completion of a pipeline from Nederland, Texas, to Lake Charles, Louisiana, and a pipeline segment from Lake Charles to St. James, Louisiana.

•Contributions to Sand Hills to increase capacity on its NGL system.

•Spending associated with other return, reliability and maintenance projects.

2022 Capital Budget

Our 2022 capital budget is $338 million, including expansion capital of $203 million which will be directed toward pipeline operations and completing optimization and near-term committed projects, and repayment of our 25% share of Dakota Access’ debt due in 2022. The capital budget also includes $135 million for maintenance projects to improve system reliability and pipeline integrity.

Repurchase of Preferred Units

On June 29, 2021, we repurchased 368,528 of the outstanding Series A Perpetual Convertible Preferred Units with an aggregate carrying value of $20 million for $24 million in cash, or $65.124 per unit. Upon the repurchase, these preferred units were canceled and are no longer outstanding.

Restructuring Transaction

On August 1, 2019, we closed on the transactions contemplated by the Partnership Interests Restructuring Agreement, dated July 24, 2019, entered into with our General Partner. Pursuant to this agreement, all of the outstanding IDRs held by our General Partner were eliminated and its approximately 2% general partner interest in us was converted into a non-economic general partner interest; both in exchange for an aggregate of 101 million common units issued to Phillips 66 PDI. Because these transactions were between entities under common control, the common units issued to Phillips 66

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PDI were not assigned any value; rather, our General Partner’s negative equity balance of $1.4 billion at August 1, 2019, was transferred to Phillips 66’s limited partner equity account.

Cash Distributions

On January 18, 2022, the Board of Directors of our General Partner declared a quarterly cash distribution of $0.875 per common unit, which resulted in a total distribution to common unitholders of $200 million attributable to the fourth quarter of 2021. This distribution was paid February 14, 2022, to common unitholders of record as of January 31, 2022.

The following table summarizes our quarterly cash distributions for 2021 and 2020 to our common unitholders:

Quarter Ended	Quarterly Cash Distribution Per Common Unit* (Dollars)			Total Quarterly Cash Distribution (Millions of Dollars)			Date of Distribution
December 31, 2021		$	0.875		$	200	February 14, 2022
September 30, 2021		0.875			200		November 12, 2021
June 30, 2021		0.875			199		August 13, 2021
March 31, 2021		0.875			200		May 14, 2021
December 31, 2020		0.875			200		February 12, 2021
September 30, 2020		0.875			200		November 13, 2020
June 30, 2020		0.875			200		August 13, 2020
March 31, 2020		0.875			199		May 14, 2020

*Cash distributions declared attributable to the indicated periods.

Beginning with the distribution to preferred unitholders attributable to the fourth quarter of 2020, the preferred unitholders are entitled to receive cumulative quarterly distributions equal to the greater of $0.678375 per unit, or the per-unit distribution amount paid to the common unitholders. Preferred unitholders received $12 million of distributions attributable to the fourth quarter of 2021. This distribution was paid February 14, 2022, to preferred unitholders of record as of January 31, 2022.

On October 26, 2021, we entered into a definitive merger agreement with Phillips 66. This agreement provides that, unless prohibited by the partnership agreement or applicable law, our General Partner shall cause the Partnership to declare, authorize and pay regular quarterly cash distributions on our common units in an amount not less than $0.875 per unit for the quarterly period ending December 31, 2021, and for each full quarterly period thereafter, unless the merger closes prior to the applicable record date. See Note 1—Business and Basis of Presentation, in the Notes to Consolidated Financial Statements, for additional information regarding the merger agreement.

Contractual Obligations

Our contractual obligations primarily consist of purchase obligations, outstanding debt principal and interest obligations, operating lease obligations, and asset retirement and environmental obligations.

Purchase Obligations

Our purchase obligations represent agreements to purchase goods or services that are enforceable, legally binding and specify all significant terms. We expect to fulfill these purchase obligations with operating cash flows in the period when due. As of December 31, 2021, our purchase obligations totaled $110 million, with $100 million due within one year.

In addition to the contractual obligations discussed above, we are party to an amended omnibus agreement with Phillips 66. The amended omnibus agreement contractually requires us to pay a monthly operational and administrative support fee in the amount of $8 million to Phillips 66 for certain administrative and operational support services provided to us. The amended omnibus agreement generally remains in full force and effect so long as Phillips 66 controls our General Partner.

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Our preferred units are contractually entitled to receive cumulative quarterly distributions. Subject to certain conditions, we or the holders of the preferred units may convert the preferred units into common units at certain anniversary dates after the issuance date. See Note 13—Equity, in the Notes to Consolidated Financial Statements, for additional information.

Debt Principal and Interest Obligations

As of December 31, 2021, our aggregate principal amount of outstanding debt was $3.9 billion, with $450 million due within one year. Our obligations for interest on the debt totaled $1.7 billion, with $134 million due within one year. See Note 10—Debt, in the Notes to Consolidated Financial Statements, for additional information regarding our outstanding debt principal and interest obligations.

Operating Lease Obligations

See Note 9—Lease Assets and Liabilities, in the Notes to Consolidated Financial Statements, for information regarding our lease obligations and timing of our expected lease payments.

Asset Retirement and Environmental Obligations

See Note 12—Asset Retirement Obligations and Accrued Environmental Costs, in the Notes to Consolidated Financial Statements, for information regarding asset retirement and environmental obligations.

Contingencies

From time to time, lawsuits involving a variety of claims that arise in the ordinary course of business are filed against us. We also may be required to remove or mitigate the effects on the environment of the placement, storage, disposal or release of certain chemical, mineral and petroleum substances at various sites. We regularly assess the need for accounting recognition or disclosure of these contingencies. In the case of all known contingencies (other than those related to income taxes), we accrue a liability when the loss is probable and the amount is reasonably estimable. If a range of amounts can be reasonably estimated and no amount within the range is a better estimate than any other amount, then the minimum of the range is accrued. We do not reduce these liabilities for potential insurance or third-party recoveries. If applicable, we accrue receivables for probable insurance or other third-party recoveries. In the case of income-tax-related contingencies, we use a cumulative probability-weighted loss accrual in cases where sustaining a tax position is uncertain.

Based on currently available information, we believe it is remote that future costs related to known contingent liability exposures will exceed current accruals by an amount that would have a material adverse impact on our consolidated financial statements. As we learn new facts concerning contingencies, we reassess our position both with respect to accrued liabilities and other potential exposures. Estimates particularly sensitive to future changes include any contingent liabilities recorded for environmental remediation, tax and legal matters. Estimated future environmental remediation costs are subject to change due to such factors as the uncertain magnitude of cleanup costs, the unknown time and extent of such remedial actions that may be required, and the determination of our liability in proportion to that of other potentially responsible parties. Estimated future costs related to tax and legal matters are subject to change as events evolve and as additional information becomes available during the administrative and litigation processes.

Regulatory Matters

Our interstate common carrier crude oil and refined petroleum products pipeline operations are subject to rate regulation by the Federal Energy Regulatory Commission under the Interstate Commerce Act and Energy Policy Act of 1992, and certain of our pipeline systems providing intrastate service are subject to rate regulation by applicable state authorities under their respective laws and regulations. Our pipeline, rail rack and terminal operations are also subject to safety regulations adopted by the Department of Transportation, as well as to state regulations.

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Legal and Tax Matters

Under our amended omnibus agreement, Phillips 66 provides certain services for our benefit, including legal and tax support services, and we pay an operational and administrative support fee for these services. Phillips 66’s legal and tax organizations apply their knowledge, experience and professional judgment to the specific characteristics of our cases and uncertain tax positions. Phillips 66’s legal organization employs a litigation management process to manage and monitor the legal proceedings against us. The process facilitates the early evaluation and quantification of potential exposures in individual cases and enables tracking of those cases that have been scheduled for trial and/or mediation. Based on professional judgment and experience in using these litigation management tools and available information about current developments in all our cases, Phillips 66’s legal organization regularly assesses the adequacy of current accruals and recommends if adjustment of existing accruals, or establishment of new accruals, is required. As of December 31, 2021 and 2020, we did not have any material accrued contingent liabilities associated with litigation matters.

Environmental

We are subject to extensive federal, state and local environmental laws and regulations. These requirements, which frequently change, regulate the discharge of materials into the environment or otherwise relate to protection of the environment. Compliance with these laws and regulations may require us to remediate environmental damage from any discharge of petroleum or chemical substances from our facilities or require us to install additional pollution control equipment at or on our facilities. Our failure to comply with these or any other environmental or safety-related regulations could result in the assessment of administrative, civil, or criminal penalties, the imposition of investigatory and remedial liabilities, and the issuance of governmental orders that may subject us to additional operational constraints. Future expenditures may be required to comply with the Federal Clean Air Act and other federal, state and local requirements in respect of our various sites, including our pipelines and storage assets. The impact of legislative and regulatory developments, if enacted or adopted, could result in increased compliance costs and additional operating restrictions on our business, each of which could have an adverse impact on our financial position, results of operations and liquidity.

As with all costs, if these expenditures are not ultimately recovered in the tariffs and other fees we receive for our services, our operating results will be adversely affected. We believe that substantially all similarly situated parties and holders of comparable assets must comply with similar environmental laws and regulations. However, the specific impact on each may vary depending on a number of factors, including, but not limited to, the age and location of its operating facilities.

We accrue for environmental remediation activities when the responsibility to remediate is probable and the amount of associated costs can be reasonably estimated. As environmental remediation matters proceed toward ultimate resolution or as additional remediation obligations arise, charges in excess of those previously accrued may be required. New or expanded environmental requirements, which could increase our environmental costs, may arise in the future. We believe we are in substantial compliance with all legal obligations regarding the environment and have established the environmental accruals that are currently required; however, it is not possible to predict all of the ultimate costs of compliance, including remediation costs that may be incurred and penalties that may be imposed, because not all of the costs are fixed or presently determinable (even under existing legislation) and the costs may be affected by future legislation or regulations.

Indemnification and Excluded Liabilities

Under our amended omnibus agreement and pursuant to the terms of various agreements under which we acquired assets from Phillips 66, Phillips 66 will indemnify us, or assume responsibility, for certain environmental liabilities, tax liabilities, litigation and any other liabilities attributable to the ownership or operation of the assets contributed to us and that arose prior to the effective date of each acquisition. These indemnifications and exclusions from liability have, in some cases, time limits and deductibles. When Phillips 66 performs under any of these indemnifications or exclusions from liability, we recognize non-cash expenses and associated non-cash capital contributions from our General Partner, as these are considered liabilities paid for by a principal unitholder.

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CRITICAL ACCOUNTING ESTIMATES

The preparation of financial statements in conformity with GAAP requires management to select appropriate accounting policies and to make estimates and assumptions about future events that affect the reported amounts of assets, liabilities, revenues and expenses.

See Note 2—Summary of Significant Accounting Policies, in the Notes to Consolidated Financial Statements, for descriptions of our significant accounting policies. Certain of these accounting policies involve judgments and uncertainties to such an extent that there is a reasonable likelihood that materially different amounts would have been reported under different conditions, or if different assumptions had been used. The following discussions of critical accounting estimates, along with the discussion of contingencies in this report, address all important accounting areas where the nature of accounting estimates or assumptions could be material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change.

Depreciation

We calculate depreciation expense using the straight-line method over the estimated useful lives of our properties, plants and equipment (PP&E), currently ranging from 3 years to 45 years. Changes in the estimated useful lives of our PP&E could have a material effect on our results of operations.

Impairments

Long-lived assets used in operations are assessed for impairment whenever changes in facts and circumstances indicate the carrying value of an asset group may not be recoverable. If the sum of the undiscounted expected future pretax cash flows of an asset group is less than the carrying value, including applicable liabilities, the carrying value is written down to estimated fair value. Individual assets are grouped for impairment purposes based on a judgmental assessment of the lowest level for which there are identifiable cash flows that are largely independent of the cash flows of other assets, generally at a pipeline system, terminal, processing or fractionation system level. Because there usually is a lack of quoted market prices for long-lived assets, the fair value of impaired assets is typically determined using one or more of the following methods: present value of expected future cash flows using discount rates and other assumptions believed to be consistent with those used by principal market participants; estimated replacement cost; a market multiple of earnings for similar assets; or historical market transactions of similar assets, adjusted using principal market participant assumptions when necessary. The expected future cash flows used for impairment reviews and related fair value calculations are based on judgmental assessments of future volumes, commodity prices, operating costs, margins, discount rates and capital project decisions, considering all available information at the date of review.

Investments in nonconsolidated entities accounted for under the equity method are reviewed for impairment when there is evidence of a loss in value. Such evidence of a loss in value might include our inability to recover the carrying amount, the lack of sustained earnings capacity which would justify the current investment amount, or a current fair value less than the investment’s carrying amount. When it is determined such a loss in value is other than temporary, an impairment charge is recognized for the difference between the investment’s carrying value and its estimated fair value. When determining whether a decline in value is other than temporary, management considers factors such as the duration and extent of the decline, the investee’s financial condition and near-term prospects, and our ability and intention to retain our investment for a period that will be sufficient to allow for any anticipated recovery in the market value of the investment. When quoted market prices are not available, the fair value is usually based on the present value of expected future cash flows using discount rates and other assumptions believed to be consistent with those used by principal market participants and a market analysis of comparable assets, if appropriate. Different assumptions could affect the timing and the amount of an impairment of an investment in any period. See Note 4—Equity Investments, and Note 7—Properties, Plants and Equipment, in the Notes to Consolidated Financial Statements, for additional information on impairments recorded in 2021 and 2020.

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Asset Retirement Obligations

Under various contracts, permits and regulations, we have legal obligations to remove tangible equipment and restore the land at the end of operations at certain operational sites. Our largest asset removal obligations involve the abandonment or removal of pipelines. Fair values of legal obligations to abandon or remove long-lived assets are recorded in the period in which the obligation arises. Estimating the timing and cost of future asset removals is difficult and involves judgment in determining the estimated asset removal obligation. Most of these removal obligations are many years, or decades, in the future and the contracts and regulations often have vague descriptions of what removal practices and criteria must be met when the removal event actually occurs. Asset removal technologies and costs, regulatory and other compliance considerations, expenditure timing, and other inputs into valuation of the obligation, including discount and inflation rates, are also subject to change.

Goodwill

At December 31, 2021, we had $185 million of goodwill recorded in conjunction with past business combinations. The majority of our goodwill is related to acquisitions from Phillips 66. In these common control transactions, the net assets acquired are recorded at Phillips 66’s historical carrying value, including any associated goodwill. Goodwill is not amortized. Instead, goodwill is subject to at least annual tests for impairment at a reporting unit level. A reporting unit is an operating segment or a component that is one level below an operating segment and they are determined primarily based on the manner in which the business is managed. We have one reporting unit with a goodwill balance.

We perform our annual goodwill impairment test using a qualitative assessment and a quantitative assessment, if one is deemed necessary. As part of our qualitative assessment, we evaluate relevant events and circumstances that could affect the fair value of our reporting unit, including macroeconomic conditions, overall industry and market considerations and regulatory changes, as well as partnership-specific market metrics, performance and events. The evaluation of partnership-specific events and circumstances includes evaluating changes in our unit price and cost of capital, actual and forecasted financial performance, as well as the effect of significant asset dispositions.

If our qualitative assessment indicates it is likely the fair value of our reporting unit has declined below its carrying value (including goodwill), a quantitative assessment is performed. When a quantitative assessment is performed, management applies judgment in determining the estimated fair value of our reporting unit because a quoted market price for this reporting unit is not available. Management uses available information to make this fair value determination, including estimated cash flows, cost of capital, observed market earnings multiples of comparable companies and partnerships, our common unit price and associated total partnership market capitalization.

We completed our annual qualitative impairment test as of October 1, 2021, and concluded that the fair value of our reporting unit continued to exceed its respective carrying value (including goodwill) by a significant percentage. A decline in the estimated fair value of our reporting unit in the future could result in an impairment. As such, we continue to monitor for indicators of impairment until our next annual impairment assessment is performed.

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Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the risk of loss arising from adverse fluctuations in interest rates, the exchange rates of foreign currency markets, and commodity prices. Since we conduct our business in U.S. dollars, we are not exposed to foreign currency exchange-rate risk.

Commodity Price Risk

Since we neither take ownership of the crude oil, refined petroleum products or NGL we transport or store for our customers nor engage in commodity trading, we have limited direct exposure to risks associated with fluctuating commodity prices. Certain of our pipeline tariffs include a contractual loss allowance, calculated as a percentage of throughput volume multiplied by the quoted market price of the commodities shipped. This loss allowance, which represented 2% of our total operating revenues in 2021 and 2020, and 3% of our total operating revenues in 2019, is more volatile than tariffs and terminaling fees, as it depends on and fluctuates with the commodity prices of the products we transport and store; however, we do not intend to mitigate this risk to our revenues by hedging this commodity price exposure.

Interest Rate Risk

Our use of fixed- or variable-rate debt directly exposes us to interest rate risk. Fixed-rate debt, such as our senior notes, exposes us to changes in the fair value of our debt due to changes in market interest rates. Fixed-rate debt also exposes us to the risk that we may need to refinance maturing debt with new debt at higher rates, or that we may be obligated to pay rates higher than the current market. Variable-rate debt, such as borrowings under our revolving credit facility and tax-exempt bonds, exposes us to short-term changes in market rates that impact our interest expense.

The following tables provide information about our debt instruments that are sensitive to changes in U.S. interest rates. These tables present principal cash flows and related weighted-average interest rates by expected maturity dates. Weighted-average variable rates are based on effective rates at the reporting date. The carrying amount of our floating-rate debt approximates its fair value. The fair value of the fixed-rate financial instruments is estimated based on observable market prices.

	Millions of Dollars, Except as Indicated
Expected Maturity Date	Fixed-Rate Maturity		Weighted-Average Interest Rate		Floating Rate Maturity		Weighted-Average Interest Rate
At December 31, 2021
2022	$	—			$	450	1.0	%
2023	—				—
2024	300		2.5	%	—
2025	500		3.6	%	—
2026	500		3.6	%	—
Thereafter	2,175		4.1	%	—
Total	$	3,475			$	450
Fair value	$	3,810			$	450

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	Millions of Dollars, Except as Indicated
Expected Maturity Date	Fixed-Rate Maturity		Weighted-Average Interest Rate		Floating Rate Maturity		Weighted-Average Interest Rate
At December 31, 2020
2021	$	—			$	465	1.3	%
2022	—				—
2023	—				—
2024	300		2.5	%	—
2025	500		3.6	%	—
Thereafter	2,675		4.0	%	—
Total	$	3,475			$	465
Fair value	$	3,752			$	465

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This report includes forward-looking statements. You can normally identify our forward-looking statements by the words “anticipate,” “estimate,” “believe,” “budget,” “continue,” “could,” “intend,” “may,” “plan,” “potential,” “predict,” “seek,” “should,” “will,” “would,” “expect,” “objective,” “projection,” “forecast,” “goal,” “guidance,” “outlook,” “effort,” “target” and similar expressions, although the absence of these words does not mean that statement is not forward-looking.

We based the forward-looking statements on our current expectations, estimates and projections about us, our operations, the operations of our joint ventures and the entities in which we own equity interests, as well as the industries in which we and they operate in general. We caution you these statements are not guarantees of future performance as they involve assumptions that, while made in good faith, may prove to be incorrect, and involve risks and uncertainties we cannot predict. In addition, we based many of these forward-looking statements on assumptions about future events that may prove to be inaccurate. Accordingly, our actual outcomes and results may differ materially from what we have expressed or forecast in the forward-looking statements. Any differences could result from a variety of factors, including the following:

•The timing and completion of the pending merger with Phillips 66.

•The continuing effects of the COVID-19 pandemic and its negative impact on the demand for crude oil and refined petroleum products, as well as the extent and duration of recovery of economies and the demand for crude oil and refined petroleum products after the pandemic subsides.

•Reductions in the volume of crude oil, refined petroleum products and NGL we or our equity affiliates transport, fractionate, process, terminal and store.

•The continued ability of Phillips 66 to satisfy its obligations under our commercial and other agreements.

•Fluctuations in the prices and demand for crude oil, refined petroleum products and NGL, including as a result of actions taken by OPEC and other countries impacting supply and demand and, correspondingly, commodity prices.

•Changes in governmental policies relating to crude oil, refined petroleum products or NGL pricing, regulation, taxation, or exports.

•Political and societal concerns about climate change that could result in changes to our business or increase expenditures, including litigation-related expenses.

•Potential liabilities associated with the risks and operational hazards inherent in transporting, fractionating, processing, terminaling and storing crude oil, refined petroleum products and NGL.

•Curtailment of operations due to severe weather (including as a result of climate change) disruption or natural disasters; riots, strikes, lockouts or other industrial disturbances.

•Accidents or other unscheduled shutdowns affecting our pipelines, processing, fractionating, terminaling, and storage facilities or equipment, or those of our equity affiliates, suppliers or customers.

•Our, and our equity affiliates’, inability to obtain or maintain permits, in a timely manner, or at all, and the possibility of the revocation or modification of such permits.

•The operation, financing and distribution decisions of our joint ventures, which we may not control.

•The inability to comply with government regulations or make capital expenditures required to maintain compliance.

•The failure to complete construction of announced and future capital projects in a timely manner, cost overruns associated with such projects, and the ability to obtain or maintain permits necessary for such projects.

•Costs or liabilities associated with federal, state, and local laws and regulations relating to environmental protection and safety, including spills, releases and pipeline integrity.

•Failure of information technology systems due to various causes, including unauthorized access or attack.

•Changes to the tariff rates with respect to volumes transported through regulated assets, which rates are subject to review and possible adjustment by federal and state regulators.

•Changes in revenues we realize under the loss allowance provisions of our regulated tariffs resulting from changes in underlying commodity prices.

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•Costs associated with compliance with evolving environmental laws and regulations on climate change.

•Costs associated with compliance with safety regulations, including pipeline integrity management program testing and related repairs.

•Changes in the cost or availability of third-party vessels, pipelines, railcars and other means of delivering and transporting crude oil, refined petroleum products and NGL.

•General domestic and international economic and political developments including armed hostilities, expropriation of assets, social unrest, insurrections, and other political, economic or diplomatic developments, including those caused by public health issues and outbreaks of diseases and pandemics.

•Direct or indirect effects on our business resulting from actual or threatened terrorist incidents or acts of war.

•Our ability to comply with the terms of our credit facility, indebtedness and other financing arrangements, which, if accelerated, we may not be able to repay.

•Our ability to incur additional indebtedness or our ability to obtain financing on terms that we deem acceptable, including the refinancing of our current obligations; higher interest rates and costs of financing would increase our expenses.

•Changes in tax, environmental and other laws and regulations.

•The factors generally described in “Item 1A. Risk Factors” in this report.

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Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

PHILLIPS 66 PARTNERS LP

INDEX TO FINANCIAL STATEMENTS

	Page
Report of Management	56
Reports of Independent Registered Public Accounting Firm (PCAOB ID: 42)	57
Report of Independent Registered Public Accounting Firm (DCP Sand Hills Pipeline, LLC) (PCAOB ID: 34)	60
Report of Independent Registered Public Accounting Firm (DCP Southern Hills Pipeline, LLC) (PCAOB ID: 34)	61
Report of Independent Registered Public Accounting Firm (Dakota Access, LLC) (PCAOB ID: 248)	62
Consolidated Financial Statements of Phillips 66 Partners LP:
Consolidated Statement of Income for the years ended December 31, 2021, 2020 and 2019	63
Consolidated Statement of Comprehensive Income for the years ended December 31, 2021, 2020 and 2019	64
Consolidated Balance Sheet at December 31, 2021 and 2020	65
Consolidated Statement of Cash Flows for the years ended December 31, 2021, 2020 and 2019	66
Consolidated Statement of Changes in Equity for the years ended December 31, 2021, 2020 and 2019	67
Notes to Consolidated Financial Statements	69

55

Report of Management

The accompanying consolidated financial statements of Phillips 66 Partners LP (the Partnership) and the other information appearing in this Annual Report were prepared by, and are the responsibility of, management of the Partnership’s general partner, Phillips 66 Partners GP LLC. The consolidated financial statements present fairly the Partnership’s financial position, results of operations and cash flows in conformity with generally accepted accounting principles in the United States. In preparing its consolidated financial statements, the Partnership includes amounts that are based on estimates and judgments management of the Partnership’s general partner believes are reasonable under the circumstances. The Partnership’s financial statements have been audited by Ernst & Young LLP, an independent registered public accounting firm appointed by the Audit Committee of the Phillips 66 Partners GP LLC Board of Directors. The management of the Partnership’s general partner has made available to Ernst & Young LLP all of the Partnership’s financial records and related data, as well as the minutes of directors’ meetings.

Assessment of Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting. Phillips 66 Partners’ internal control system was designed to provide reasonable assurance to the management and directors of the Partnership’s general partner regarding the preparation and fair presentation of published financial statements.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Management assessed the effectiveness of the Partnership’s internal control over financial reporting as of December 31, 2021. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework (2013). Based on this assessment, management concluded the Partnership’s internal control over financial reporting was effective as of December 31, 2021.

Ernst & Young LLP has issued an audit report on the Partnership’s internal control over financial reporting as of December 31, 2021, and their report is included herein.

/s/ Greg C. Garland	/s/ Kevin J. Mitchell
Greg C. Garland	Kevin J. Mitchell
Chairman of the Board of Directors and Chief Executive Officer Phillips 66 Partners GP LLC (the general partner of Phillips 66 Partners LP)	Director, Vice President and Chief Financial Officer Phillips 66 Partners GP LLC (the general partner of Phillips 66 Partners LP)

Date: February 18, 2022

56

Report of Independent Registered Public Accounting Firm

To the Board of Directors of Phillips 66 Partners GP LLC and

Unitholders of Phillips 66 Partners LP

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Phillips 66 Partners LP (the “Partnership”) as of December 31, 2021 and 2020, the related consolidated statements of income, comprehensive income, changes in equity and cash flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “financial statements”). In our opinion, based on our audits and the reports of other auditors, the financial statements present fairly, in all material respects, the consolidated financial position of the Partnership at December 31, 2021 and 2020, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles.

We did not audit the consolidated financial statements of DCP Sand Hills Pipeline, LLC and DCP Southern Hills Pipeline, LLC (the “Pipelines”) and Dakota Access, LLC (“Dakota”). The Partnership accounts for its 33.34% interest in each of the Pipelines and its 25% interest in Dakota using the equity method of accounting. In the financial statements, the Partnership’s total investment in the Pipelines is stated at $794 million and $799 million as of December 31, 2021 and 2020, respectively, and the Partnership’s total equity in net income of the Pipelines is stated at $169 million, $180 million and $193 million for the years ended December 31, 2021, 2020, and 2019, respectively. In the financial statements, the Partnership’s total investment in Dakota is stated at $453 million and $448 million as of December 31, 2021 and 2020, respectively, and the Partnership’s total equity in net income of Dakota is stated at $154 million, $139 million, and $177 million for the years ended December 31, 2021, 2020, and 2019, respectively. The Pipelines’ and Dakota’s consolidated financial statements were audited by other auditors whose reports have been furnished to us, and our opinion, insofar as it relates to the amounts included for the Pipelines and Dakota for 2021, 2020 and 2019, are based on the reports of the other auditors.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Partnership's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 18, 2022 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the management of the Partnership’s general partner, Phillips 66 Partners GP LLC. Our responsibility is to express an opinion on the Partnership’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Partnership in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits and the reports of other auditors provide a reasonable basis for our opinion.

57

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

	Assessment of Equity Method Investment Impairment
Description of the Matter	As discussed in Note 4 to the consolidated financial statements, the Partnership has investments in nonconsolidated entities accounted for using the equity method totaling $2.9 billion as of December 31, 2021. The carrying value of each equity method investment is evaluated for impairment when indicators of a loss in value below the carrying value exist, including a lack of sustained earnings or a deterioration of market conditions, among others. Auditing the Partnership’s impairment assessments of whether an impairment indicator for its equity method investments exists was complex and judgmental due to the estimation required in determining whether an investment had an indicator of impairment.
How We Addressed the Matter in Our Audit	We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Partnership’s equity method impairment review process, including controls over the identification of factors that may indicate an equity method investment is impaired. In order to test whether an impairment was indicated, we tested the Partnership’s qualitative evaluation of the presence, or lack of, impairment indicators for its equity method investments. This included, but was not limited to, an evaluation of the investments’ earnings history and sustainability under current and expected market conditions. We exercised professional judgement based on our knowledge of the industry and the investee’s business to assess the appropriateness of the management’s qualitative evaluation. For example, we performed inquiries of management, considered historical operating results of the investments being analyzed, their projected recovery periods, and current and expected market conditions affecting their results.

/s/ Ernst & Young LLP

Houston, Texas

February 18, 2022

We have served as the Partnership’s auditor since 2012.

58

Report of Independent Registered Public Accounting Firm

To the Board of Directors of Phillips 66 Partners GP LLC and

Unitholders of Phillips 66 Partners LP

Opinion on Internal Control over Financial Reporting

We have audited Phillips 66 Partners LP's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Phillips 66 Partners LP (the Partnership) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Partnership as of December 31, 2021 and 2020, and the related consolidated statements of income, comprehensive income, changes in equity and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and our report dated February 18, 2022, expressed an unqualified opinion thereon.

Basis for Opinion

Management of the Partnership’s general partner, Phillips 66 Partners GP LLC, is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included under the heading “Assessment of Internal Control Over Financial Reporting” in the accompanying “Report of Management.” Our responsibility is to express an opinion on the Partnership's internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Partnership in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

Houston, Texas

February 18, 2022

59

Report of Independent Registered Public Accounting Firm

To the Management Committee and Members of

DCP Sand Hills Pipeline, LLC

Opinion on the Financial Statements

We have audited the consolidated balance sheets of DCP Sand Hills Pipeline, LLC and subsidiary (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of operations, changes in members’ equity, and cash flows, for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020 and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

Emphasis of a Matter

As discussed in Note 4 and Note 5 to the financial statements, the Company has significant transactions with related parties.

Basis for Opinion

The financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

Critical audit matters are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.

/s/ Deloitte & Touche LLP

Denver, Colorado

February 4, 2022

We have served as the Company’s auditor since 2013.

60

Report of Independent Registered Public Accounting Firm

To the Management Committee and Members of

DCP Southern Hills Pipeline, LLC

Opinion on the Financial Statements

We have audited the consolidated balance sheets of DCP Southern Hills Pipeline, LLC and subsidiary (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of operations, changes in members’ equity, and cash flows, for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

Emphasis of a Matter

As discussed in Note 4 and Note 5 to the financial statements, the Company has significant transactions with related parties.

Basis for Opinion

The financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

Critical audit matters are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.

/s/ Deloitte & Touche LLP

Denver, Colorado

February 4, 2022

We have served as the Company’s auditor since 2013.

61

Report of Independent Registered Public Accounting Firm

Board of Managers and Members

Dakota Access, LLC

Opinion on the financial statements

We have audited the consolidated balance sheets of Dakota Access, LLC (a Delaware limited liability company) and subsidiaries (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of operations, members’ equity, and cash flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

Basis for opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical audit matters

Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to those charged with governance of the Company and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.

/s/ GRANT THORNTON LLP

We have served as the Company’s auditor since 2015.

Dallas, Texas

February 9, 2022

62

Consolidated Statement of Income Phillips 66 Partners LP

	Millions of Dollars
Years Ended December 31	2021		2020	2019
Revenues and Other Income
Operating revenues—related parties	$	1,116	1,008	1,097
Operating revenues—third parties	30		30	29
Equity in earnings of affiliates	595		493	535
Gain from equity interest transfer	—		84	—
Other income	13		3	6
Total revenues and other income	1,754		1,618	1,667
Costs and Expenses
Operating and maintenance expenses	383		342	405
Depreciation	141		135	120
Impairments	208		96	—
General and administrative expenses	71		66	67
Taxes other than income taxes	41		40	39
Interest and debt expense	128		121	108
Other expenses	1		7	2
Total costs and expenses	973		807	741
Income before income taxes	781		811	926
Income tax expense	4		3	3
Net Income	777		808	923
Less: Net income attributable to noncontrolling interest	42		17	—
Net Income Attributable to the Partnership	735		791	923
Less: Preferred unitholders’ interest in net income attributable to the Partnership	48		41	37
Less: General partner’s interest in net income attributable to the Partnership	—		—	140
Limited Partners’ Interest in Net Income Attributable to the Partnership	$	687	750	746
Net Income Attributable to the Partnership Per Limited Partner Unit (dollars)
Common units—basic	$	3.00	3.29	4.45
Common units—diluted	3.00		3.27	4.29
Weighted-Average Limited Partner Units Outstanding (thousands)
Common units—basic	228,340		228,333	167,655
Common units—diluted	228,340		242,153	181,475
See Notes to Consolidated Financial Statements.

63

Consolidated Statement of Comprehensive Income Phillips 66 Partners LP

	Millions of Dollars
Years Ended December 31	2021		2020	2019
Net Income	$	777	808	923
Defined benefit plans
Plan sponsored by equity affiliates, net of income taxes	(1)		—	—
Other comprehensive loss	(1)		—	—
Comprehensive Income	776		808	923
Less: Comprehensive income attributable to noncontrolling interest	42		17	—
Comprehensive Income Attributable to the Partnership	$	734	791	923
See Notes to Consolidated Financial Statements.

64

Consolidated Balance Sheet Phillips 66 Partners LP

	Millions of Dollars
At December 31	2021		2020
Assets
Cash and cash equivalents	$	62	7
Accounts receivable—related parties	119		103
Accounts receivable—third parties	7		3
Materials and supplies	16		16
Prepaid expenses and other current assets	7		11
Total current assets	211		140
Equity investments	2,929		3,244
Net properties, plants and equipment	3,727		3,639
Goodwill	185		185
Other assets	49		50
Total Assets	$	7,101	7,258
Liabilities
Accounts payable—related parties	$	30	19
Accounts payable—third parties	67		73
Accrued interest	35		35
Deferred revenues	23		27
Short-term debt	450		465
Accrued property and other taxes	16		11
Other current liabilities	6		3
Total current liabilities	627		633
Long-term debt	3,447		3,444
Other liabilities	90		90
Total Liabilities	4,164		4,167
Equity
Preferred unitholders (2021—13,451,263 units issued and outstanding; 2020—13,819,791 units issued and outstanding)	729		749
Common unitholders—public (2021 and 2020—58,580,009 units issued and outstanding)	2,676		2,706
Common unitholder—Phillips 66 (2021 and 2020—169,760,137 units issued and outstanding)	(743)		(656)
Accumulated other comprehensive loss	(2)		(1)
Total unitholders’ equity	2,660		2,798
Noncontrolling interest	277		293
Total Equity	2,937		3,091
Total Liabilities and Equity	$	7,101	7,258
See Notes to Consolidated Financial Statements.

65

Consolidated Statement of Cash Flows Phillips 66 Partners LP

	Millions of Dollars
Years Ended December 31	2021		2020	2019
Cash Flows From Operating Activities
Net income	$	777	808	923
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation	141		135	120
Impairments	208		96	—
Undistributed equity earnings	(4)		7	(3)
Gain from equity interest transfer	—		(84)	—
Other	2		8	10
Working capital adjustments
Accounts receivable	(19)		(1)	(11)
Materials and supplies	21		(1)	—
Prepaid expenses and other current assets	4		(1)	10
Accounts payable	19		(16)	7
Accrued interest	—		(7)	5
Deferred revenues	(4)		11	(45)
Other accruals	8		—	—
Net Cash Provided by Operating Activities	1,153		955	1,016
Cash Flows From Investing Activities
Cash capital expenditures and investments	(311)		(910)	(1,095)
Advances/loans—related party	—		—	(95)
Collection of advances/loans—related party	—		—	95
Liberty acquisition	—		(75)	—
Return of investment from equity affiliates	137		177	67
Proceeds from sale of equity interest	22		—	81
Net Cash Used in Investing Activities	(152)		(808)	(947)
Cash Flows From Financing Activities
Issuance of debt	450		415	1,758
Repayment of debt	(465)		(25)	(1,286)
Issuance of common units	—		2	169
Debt issuance costs	(1)		—	(8)
Repurchase of preferred units	(24)		—	—
Quarterly distributions to preferred unitholders	(48)		(38)	(37)
Quarterly distributions to common unitholders—public	(205)		(205)	(192)
Quarterly distributions to common unitholder—Phillips 66	(594)		(594)	(321)
Quarterly distributions to General Partner—Phillips 66	—		—	(206)
Net proceeds from equity interest transfer	—		40	342
Proceeds from noncontrolling interest	—		3	—
Distributions to noncontrolling interest	(58)		(32)	—
Other contributions from (distributions to) Phillips 66	(1)		8	(3)
Net Cash Provided by (Used in) Financing Activities	(946)		(426)	216
Net Change in Cash and Cash Equivalents	55		(279)	285
Cash and cash equivalents at beginning of period	7		286	1
Cash and Cash Equivalents at End of Period	$	62	7	286
See Notes to Consolidated Financial Statements.

66

Consolidated Statement of Changes in Equity						Phillips 66 Partners LP
	Millions of Dollars
	Partnership
	Preferred Unitholders Public		Common Unitholders Public	Common Unitholder Phillips 66	General Partner Phillips 66	Accum. Other Comprehensive Loss	Noncontrolling Interest	Total
December 31, 2018	$	746	2,485	592	(1,313)	(1)	—	2,509
Cumulative effect of accounting change	—		(1)	—	—	—	—	(1)
Issuance of common units	—		173	—	—	—	—	173
Net income	37		252	494	140	—	—	923
Quarterly cash distributions to unitholders and General Partner ($3.400 per common unit)	(37)		(192)	(321)	(206)	—	—	(756)
Conversion of GP economic interest	—		—	(1,385)	1,381	—	—	(4)
Other distributions to Phillips 66	—		—	(8)	(2)	—	—	(10)
December 31, 2019	746		2,717	(628)	—	(1)	—	2,834
Issuance of common units	—		2	—	—	—	—	2
Net income	41		192	558	—	—	17	808
Quarterly cash distributions to unitholders ($3.500 per common unit)	(38)		(205)	(594)	—	—	—	(837)
Transfer of equity interest	—		—	—	—	—	305	305
Proceeds from noncontrolling interest	—		—	—	—	—	3	3
Distributions to noncontrolling interest	—		—	—	—	—	(32)	(32)
Other contributions from Phillips 66	—		—	8	—	—	—	8
December 31, 2020	749		2,706	(656)	—	(1)	293	3,091
Net income	48		176	511	—	—	42	777
Other comprehensive loss	—		—	—	—	(1)	—	(1)
Quarterly cash distributions to unitholders ($3.500 per common unit)	(48)		(205)	(594)	—	—	—	(847)
Repurchase of preferred units	(20)		(1)	(3)	—	—	—	(24)
Distributions to noncontrolling interest	—		—	—	—	—	(58)	(58)
Other distributions to Phillips 66	—		—	(1)	—	—	—	(1)
December 31, 2021	$	729	2,676	(743)	—	(2)	277	2,937
See Notes to Consolidated Financial Statements.

67

	Units
	Preferred Units Public	Common Units Public	Common Units Phillips 66	General Partner Units Phillips 66	Total Units
December 31, 2018	13,819,791	55,343,918	68,760,137	2,480,051	140,403,897
Units issued in public equity offerings	—	3,195,521	—	—	3,195,521
Units issued in conversion of GP economic interest	—	—	101,000,000	(2,480,051)	98,519,949
December 31, 2019	13,819,791	58,539,439	169,760,137	—	242,119,367
Units issued in public equity offerings	—	40,570	—	—	40,570
December 31, 2020	13,819,791	58,580,009	169,760,137	—	242,159,937
Units issued in public equity offerings	—	—	—	—	—
Repurchase of preferred units	(368,528)	—	—	—	(368,528)
December 31, 2021	13,451,263	58,580,009	169,760,137	—	241,791,409
See Notes to Consolidated Financial Statements.

68

Notes to Consolidated Financial Statements Phillips 66 Partners LP

Note 1—Business and Basis of Presentation

Unless otherwise stated or the context otherwise indicates, all references to “Phillips 66 Partners,” “the Partnership,” “us,” “our,” “we,” or similar expressions refer to Phillips 66 Partners LP, including its consolidated subsidiaries. References to Phillips 66 may refer to Phillips 66 and/or its subsidiaries, depending on the context. References to our “General Partner” or “GP” refer to Phillips 66 Partners GP LLC, and references to “Phillips 66 PDI” refer to Phillips 66 Project Development Inc., the Phillips 66 subsidiary that holds a limited partner interest in us and wholly owns our General Partner.

Description of the Business

We are a Delaware limited partnership formed in 2013 by wholly owned subsidiaries of Phillips 66. We are a master limited partnership formed to own, operate, develop and acquire primarily fee-based midstream assets.

Our operations consist of crude oil, refined petroleum products and natural gas liquids (NGL) transportation, terminaling, processing and storage assets. We conduct our operations through both wholly owned and joint venture operations. The majority of our wholly owned assets are associated with, and are integral to the operation of, eight of Phillips 66’s owned or joint venture refineries. Our operations consist of one reportable segment.

We primarily generate revenue by providing fee-based transportation, terminaling, processing, storage and fractionation services to Phillips 66 and other customers. Our equity affiliates primarily generate revenue from transporting and terminaling crude oil, refined petroleum products and NGL. Since we do not own any of the crude oil, refined petroleum products and NGL we handle and do not engage in the trading of those commodities, we have limited direct exposure to risks associated with fluctuating commodity prices, although these risks indirectly influence our activities and results of operations over the long term.

Pending Merger with Phillips 66

On October 26, 2021, we entered into a definitive merger agreement with Phillips 66 and its wholly owned subsidiaries, Phillips 66 Company, Phillips 66 PDI, and Phoenix Sub LLC, and our General Partner pursuant to which Phillips 66 would acquire all of the publicly held common units representing limited partner interests in the Partnership not already owned by Phillips 66 and its subsidiaries on the closing date of the transaction. The agreement provides for an all-stock transaction in which each outstanding common unitholder would receive 0.50 shares of Phillips 66 common stock for each common unit. Pursuant to our partnership agreement, the Partnership’s perpetual convertible preferred units would be converted into common units at a premium to the original issuance price prior to exchange for Phillips 66 common stock. The merger is expected to close in March 2022, subject to customary closing conditions.

In connection with the merger transaction, our partnership agreement was amended, effective October 26, 2021, to provide for automatic conversion of the preferred units upon the acquisition by Phillips 66 of our common units at a conversion ratio determined by dividing (i) the product of the original issuance price multiplied by a premium of 147.5%, less distributions paid after June 30, 2021, and before the closing date of the transaction, by (ii) the closing unit price of the Partnership on the last trading day prior to completion of the merger.

Phillips 66 PDI, a wholly owned subsidiary of Phillips 66 that owns a majority of our common units, has delivered a written consent approving the transaction. This written consent constitutes the requisite vote of the holders of our common units to approve the transaction.

The terms of the transaction were unanimously approved by the Board of Directors of our General Partner based on the unanimous approval and recommendation of its conflicts committee, comprised entirely of independent directors.

Upon closing, we will become an indirect wholly owned subsidiary of Phillips 66, and our common units will cease to be listed on the NYSE and will be subsequently deregistered under the Exchange Act.

See Note 5—Net Income Per Limited Partner Unit, for additional information regarding the merger agreement.

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Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (GAAP).

Note 2—Summary of Significant Accounting Policies

Consolidation Principles and Investments in Affiliates

Our consolidated financial statements include the accounts of majority-owned, controlled subsidiaries. The equity method is used to account for investments in affiliates in which we have the ability to exert significant influence over the affiliates’ operating and financial policies, including any variable interest entities of which we are not the primary beneficiary. Undivided interests in pipelines are consolidated on a proportionate basis.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and the disclosure of contingent assets and liabilities. Actual results could differ from these estimates.

Common Control Transactions

Businesses acquired from Phillips 66 and its subsidiaries are accounted for as common control transactions whereby the net assets acquired are combined with ours at their carrying value. Any difference between carrying value and recognized consideration is treated as a capital transaction. Cash consideration up to the carrying value of net assets acquired is presented as an investing activity in our consolidated statement of cash flows. Cash consideration in excess of the carrying value of net assets acquired is presented as a financing activity in our consolidated statement of cash flows.

Revenue Recognition

Revenues are primarily recognized for pipeline transportation, terminaling, storage, processing and fractionation services generated under long-term agreements. A significant portion of our revenues are derived from Phillips 66. The majority of these agreements with Phillips 66 are considered operating leases under GAAP.

We account for lease and service elements of contracts classified as leases on a combined basis under the provisions of Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) No. 2016-02, “Leases (Topic 842),” except for leases of processing-type assets, which contain non-ratable fees related to turnaround activity. For these types of leases, we continued to separate the lease and service elements based on relative standalone prices and applied the new lease standard to the lease element and the revenue standard to the service element.

For new or modified leases, our determination of lease classification involves estimates, primarily related to the fair value of the leased asset based on comparable replacement cost and obsolescence estimates, and the allocation of contract consideration between the lease and non-lease components based on the relative stand-alone selling price.

Revenues from fixed minimum volume commitments are recognized over the performance obligation period for stand-ready service contracts. Revenues from the variable element of these stand-ready contracts and other contracts without fixed elements are recognized based on the actual volumes transported, stored, processed and fractionated at contractual rates because the actual volumes specifically relate to our efforts to transfer the distinct services. Generally, our services are billed and payments are received on a monthly basis.

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Billings to Phillips 66 for shortfall volumes under its quarterly minimum volume commitments are recorded as “Deferred revenues” in our consolidated balance sheet, as Phillips 66 generally has the right to make up the shortfall volumes in the following four quarters. For the lease element of the contracts, the deferred revenue will be recognized at the earlier of when shortfall volumes are made up, when the make-up rights contractually expire or when we determine the system will not have the necessary capacity to enable a customer to make up the shortfall volumes. For the service element of the contracts, the deferred revenue will be recognized when the performance obligation is complete or it is probable that the shortfall volumes will not be made up.

Billings for tolling services relating to maintenance turnaround activities are billed in advance of such activities.  These billings are initially recorded as “Deferred revenues” in our consolidated balance sheet and are recognized when the maintenance turnaround activity commences.  Deferred revenue relating to maintenance turnaround operating expenses is recognized in the period the work is performed.  Deferred revenue relating to capital projects performed concurrently with a maintenance turnaround is recognized ratably over the remaining tolling services agreement once the equipment is placed into service.

Cash Equivalents

Cash equivalents are highly liquid, short-term investments that are readily convertible to known amounts of cash and will mature within 90 days or less from the date of acquisition. We carry these at cost plus accrued interest, which approximates fair value.

Imbalances

We do not purchase or produce crude oil, refined petroleum or NGL product inventories. We experience imbalances as a result of variances in meter readings and in other measurement methods, and volume fluctuations within our crude oil, refined petroleum products and NGL systems due to pressure and temperature changes. Certain of our transportation contracts provide for the shipper to pay a contractual loss allowance, which is valued using quoted market prices of the applicable commodity being shipped. These contractual loss allowances, which are received from the shipper irrespective of, and independently calculated from, actual volumetric gains or losses, are recorded as revenue. Any actual volumetric gains or losses are valued using quoted market prices of the applicable commodities and are recorded as decreases or increases to operating and maintenance expenses, respectively.

Fair Value Measurements

We measure assets and liabilities requiring fair value presentation or disclosure using the price that would be received to sell an asset or paid to transfer a liability (i.e., an exit price), and disclose such amounts according to the quality of valuation inputs under the following hierarchy:

Level 1:    Quoted prices in an active market for identical assets or liabilities.

Level 2:    Observable inputs other than quoted prices included within Level 1 for the asset or liability, either directly or indirectly through market-corroborated inputs.

Level 3:    Unobservable inputs that are significant to the fair value of assets or liabilities.

We classify the fair value of an asset or liability based on the lowest level of input significant to its measurement. A fair value initially reported as Level 3 will be subsequently reported as Level 2 if the unobservable inputs become inconsequential to its measurement, or corroborating market data becomes available. Asset and liability fair values initially reported as Level 2 will be subsequently reported as Level 3 if corroborating market data becomes unavailable.

The carrying amounts of our trade receivables and payables approximate fair value.

Nonrecurring Fair Value Measurements

We apply the fair value measurements criteria to determine the fair value of nonfinancial assets and liabilities that are measured at fair value on a nonrecurring basis, primarily asset retirement obligations and, when impaired, long-lived assets.

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Properties, Plants and Equipment (PP&E)

PP&E is recorded at cost. Costs of maintenance and repairs, which are not significant improvements, are expensed when incurred. Depreciation of PP&E is determined by the individual-unit-straight-line method or the group-straight-line method (for those individual units that are highly integrated with other units).

Capitalized Interest

Interest from external borrowings is capitalized on major projects with an expected construction period of six months or longer. Capitalized interest is added to the cost of the underlying asset’s PP&E or the applicable equity investment and is amortized over the useful life of the asset.

Major Maintenance Activities

Costs for planned integrity management projects are expensed in the period incurred. These types of costs include inspection services, contractor repair services, materials and supplies, equipment rentals and labor costs.

Impairment of PP&E

PP&E used in operations are assessed for impairment whenever changes in facts and circumstances indicate a possible significant deterioration in the future cash flows expected to be generated by an asset group. If, upon review, the sum of the undiscounted expected future pretax cash flows of an asset group is less than the carrying value of the asset group, including applicable liabilities, then the carrying value is written down to estimated fair value and the write down is reported as an impairment in the period in which the determination is made. Individual assets are grouped for impairment purposes at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets—generally at the pipeline system, terminal, or processing or fractionation system level. Since there usually is a lack of quoted market prices for our long-lived assets, the fair value of potentially impaired assets is typically determined based on the present value of expected future cash flows using discount rates and other assumptions believed to be consistent with those used by principal market participants, based on estimated replacement cost, or based on a multiple of operating cash flow validated with historical market transactions of similar assets where possible.

The expected future cash flows used for impairment reviews and related fair value calculations are based on estimated future throughputs, tariffs and fees, operating costs and capital project decisions, considering all available evidence at the date of review. See Note 7—Properties, Plants and Equipment, for additional information regarding the PP&E impairment we recorded in the third quarter of 2021.

Impairment of Investments in Nonconsolidated Entities

Investments in nonconsolidated entities are assessed for impairment whenever changes in the facts and circumstances indicate a loss in value has occurred. When indicators exist, the fair value is estimated and compared to the investment carrying value. If any impairment is judgmentally determined to be other than temporary, the carrying value of the investment is written down to fair value. The fair value of the impaired investment is determined based on quoted market prices, if available, or upon the present value of expected future cash flows using discount rates and other assumptions believed to be consistent with those used by principal market participants and a market analysis of comparable assets, if appropriate. See Note 4—Equity Investments, for additional information on impairments recorded in 2021 and 2020.

Goodwill

Goodwill represents the excess of the purchase price over the estimated fair value of the net assets acquired in the acquisition of a business. Goodwill is not amortized, but rather is assessed for impairment annually and when events or changes in circumstances indicate that the fair value of the reporting unit with goodwill has been reduced below carrying value. The majority of our goodwill is related to acquisitions from Phillips 66. In these common control transactions, the net assets acquired are recorded at Phillips 66’s historical carrying value, including any associated goodwill. We have one reporting unit for our goodwill impairment assessment.

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Asset Retirement Obligations and Environmental Costs

Fair values of legal obligations to abandon or remove long-lived assets are recorded in the period in which the obligation arises. When the liability is initially recorded, we capitalize this cost by increasing the carrying amount of the related PP&E. Over time, the liability is increased for the change in its present value, and the capitalized cost in PP&E is depreciated over the useful life of the related asset. Our estimate may change after initial recognition of the obligation, in which case we record an adjustment to the liability and PP&E.

Environmental expenditures are expensed or capitalized, depending upon their future economic benefit. Expenditures relating to an existing condition caused by past operations, and those having no future economic benefit, are expensed. Liabilities for environmental expenditures are recorded on an undiscounted basis (unless acquired in a business combination) when environmental assessments or cleanups are probable and the costs can be reasonably estimated.

Income Taxes

We follow the asset and liability method of accounting for income taxes. Under this method, deferred income taxes are recognized for the tax consequences of temporary differences between the financial statement carrying amounts and the tax basis of our assets and liabilities. Our operations are treated as a partnership for federal and state income tax purposes, with each partner being separately taxed on its share of taxable income. Therefore, we have excluded income taxes from these consolidated financial statements, except for the income tax provision resulting from state laws that apply to entities organized as partnerships. Our tax provision is computed as if we were a stand-alone tax paying entity. Any interest and penalties related to income taxes would be reported in interest and debt expense and operating and maintenance expenses, respectively, in our consolidated statement of income.

Distributions from Equity Affiliates

Distributions received from our equity affiliates are classified on our consolidated statement of cash flows pursuant to the cumulative earnings approach. Under this approach, a distribution received from an equity affiliate is considered a return on investment and is classified as an operating cash inflow unless cumulative distributions received from the equity affiliate exceed cumulative equity in earnings. If cumulative distributions from an equity affiliate exceed cumulative equity in earnings, the excess is considered a return of investment and is classified as an investing cash inflow on our consolidated statement of cash flows.

Note 3—Operating Revenues

Operating revenues are primarily generated from long-term pipeline transportation, terminaling, storage, processing and fractionation lease and service agreements, mainly with Phillips 66. These agreements typically include escalation clauses to adjust transportation tariffs and terminaling and storage fees to reflect changes in price indices. In addition, most of these agreements contain renewal options, which typically require the mutual consent of both our customers and us.

Total operating revenues disaggregated by asset type were as follows:

	Millions of Dollars
	2021		2020	2019
Pipelines	$	490	436	473
Terminals	175		153	167
Storage, processing and other revenues	481		449	486
Total operating revenues	$	1,146	1,038	1,126

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The majority of our agreements with Phillips 66 are considered operating leases under GAAP. The classification of a lease as either an operating or a financing lease requires judgment in assessing the contract’s lease and service components and in determining the asset’s fair value. We have elected to account for lease and service elements of contracts classified as leases on a combined basis under the provisions of ASU No. 2016-02, except for leases of processing-type assets, which contain non-ratable fees related to turnaround activity. For these types of leases, we continue to separate the lease and service elements based on relative standalone prices and apply the lease standard to the lease element and the revenue standard to the service element.

Total operating revenues disaggregated by lease and service revenues were as follows:

	Millions of Dollars
	2021		2020
Lease revenues	$	944	875
Service revenues	202		163
Total operating revenues	$	1,146	1,038

Accounts Receivable

We bill our customers, mainly Phillips 66, under our lease and service contracts generally on a monthly basis.

Total accounts receivable by revenue type was as follows:

	Millions of Dollars
	2021		2020
Lease receivables	$	98	87
Service receivables	28		19
Total accounts receivable	$	126	106

Deferred Revenues

Our deferred revenues represent payments received from our customers, mainly Phillips 66, in advance of the period in which lease and service contract performance obligations have been fulfilled. The majority of our deferred revenues relate to a tolling agreement and a storage agreement that are classified as leases. The remainder of our deferred revenues relate to lease and service agreements that contain minimum volume commitments with recovery provisions. Our deferred revenues are recorded in the “Deferred revenues” and “Other liabilities” line items on our consolidated balance sheet.

Total deferred revenues under our lease and service agreements were as follows:

	Millions of Dollars
	2021		2020
Deferred lease revenues	$	31	45
Deferred service revenues	9		4
Total deferred revenues	$	40	49

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Future Minimum Lease Payments from Customers

At December 31, 2021, future minimum payments to be received under our lease agreements with customers were estimated to be:

	Millions of Dollars
2022	$	763
2023	715
2024	591
2025	532
2026	359
Remaining years	923
Total future minimum lease payments from customers	$	3,883

Remaining Performance Obligations

We typically have long-term service contracts with our customers, of which the original durations range from 5 to 15 years. The weighted-average remaining duration of these contracts is 14 years. These contracts include both fixed and variable transaction price components. At December 31, 2021, future service revenues expected to be recognized for the fixed component of the transaction price of our remaining performance obligations from service contracts with our customers that have an original expected duration of greater than one year were:

	Millions of Dollars
2022	$	187
2023	180
2024	155
2025	151
2026	141
Remaining years	971
Total future service revenues	$	1,785

For the remaining service performance obligations, we applied the exemption for variable prices allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied promise to transfer distinct services as part of a performance obligation.

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Note 4—Equity Investments

The following table summarizes the carrying value of our equity investments:

			Millions of Dollars
	Percentage Ownership		2021		2020
Dakota Access, LLC and Energy Transfer Crude Oil Company, LLC (Bakken Pipeline)	25.00	%	$	574	577
Bayou Bridge Pipeline, LLC (Bayou Bridge)	40.00		277		288
DCP Sand Hills Pipeline, LLC (Sand Hills)	33.34		577		582
DCP Southern Hills Pipeline, LLC (Southern Hills)	33.34		217		217
Explorer Pipeline Company (Explorer)	21.94		83		92
Gray Oak Pipeline, LLC	65.00		812		860
Liberty Pipeline LLC (Liberty)*	—		—		241
Paradigm Pipeline LLC (Paradigm)	50.00		137		141
Phillips 66 Partners Terminal LLC (Phillips 66 Partners Terminal)	70.00		15		15
South Texas Gateway Terminal LLC (South Texas Gateway Terminal)	25.00		175		167
STACK Pipeline LLC (STACK)	50.00		62		64
Total equity investments			$	2,929	3,244

*In April 2021, we transferred our 50% ownership interest in Liberty to our co-venturer.

Earnings (losses) from our equity investments were as follows:

	Millions of Dollars
	2021		2020	2019
Bakken Pipeline	$	194	173	226
Bayou Bridge	38		31	31
Sand Hills	120		138	150
Southern Hills	49		42	43
Explorer	30		20	33
Gray Oak Pipeline, LLC	117		68	3
Paradigm	23		15	14
Phillips 66 Partners Terminal	1		(2)	25
South Texas Gateway Terminal	20		5	—
STACK	3		3	10
Total equity in earnings of affiliates	$	595	493	535

Distributions received from our equity affiliates were $728 million, $677 million, and $599 million in 2021, 2020 and 2019, respectively.

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Dakota Access, LLC (Dakota Access) and Energy Transfer Crude Oil Company, LLC (ETCO)

Dakota Access owns a pipeline system that transports crude oil from the Bakken/Three Forks production area in North Dakota to Patoka, Illinois, and ETCO owns a connecting crude oil pipeline system from Patoka to Nederland, Texas. These two pipeline systems collectively form the Bakken Pipeline system, which is operated by a co-venturer. The Bakken Pipeline system went into service in June 2017. We have a positive basis difference of $46 million for this investment, which represents capitalized interest incurred during construction of the pipeline and a capital contribution disbursed to the co-venturer. The positive basis difference is being amortized over periods between 16 and 41 years.

In 2020, the trial court presiding over litigation regarding the Dakota Access Pipeline ordered the U.S. Army Corps of Engineers (USACE) to prepare an Environmental Impact Statement (EIS) relating to an easement under Lake Oahe in North Dakota and later vacated the easement. Although the easement has been vacated, the USACE has indicated that it will not take action to stop pipeline operations while it proceeds with the EIS, which is expected to be completed in the second half of 2022. In May 2021, the court denied a request for an injunction to shut down the pipeline while the EIS is being prepared and in June 2021, dismissed the litigation. It is possible that the litigation could be reopened or new litigation challenging the EIS, once completed, could be filed. In September 2021, Dakota Access filed a writ of certiorari, requesting the U.S. Supreme Court to review the lower court’s judgment that ordered the EIS and vacated the easement.

In March 2019, a wholly owned subsidiary of Dakota Access closed an offering of $2.5 billion aggregate principal amount of senior unsecured notes consisting of:

•$650 million aggregate principal amount of 3.625% Senior Notes due 2022.

•$1.0 billion aggregate principal amount of 3.900% Senior Notes due 2024.

•$850 million aggregate principal amount of 4.625% Senior Notes due 2029.

Dakota Access and ETCO have guaranteed repayment of the notes. In addition, we and our co-venturers in Dakota Access provided a Contingent Equity Contribution Undertaking (CECU) in conjunction with the notes offering. Under the CECU, the co-venturers may be severally required to make proportionate equity contributions to Dakota Access if there is an unfavorable final judgment in the above mentioned ongoing litigation. Contributions may be required if Dakota Access determines that the issues included in any such final judgment cannot be remediated and Dakota Access has or is projected to have insufficient funds to satisfy repayment of the notes. If Dakota Access undertakes remediation to cure issues raised in a final judgment, contributions may be required if any series of the notes become due, whether by acceleration or at maturity, during such time, to the extent Dakota Access has or is projected to have insufficient funds to pay such amounts. At December 31, 2021, our share of the maximum potential equity contributions under the CECU was approximately $631 million.

If the pipeline is required to cease operations, and should Dakota Access and ETCO not have sufficient funds to pay ongoing expenses, we also could be required to support our share of the ongoing expenses, including scheduled interest payments on the notes of approximately $25 million annually, in addition to the potential obligations under the CECU.

Gray Oak Pipeline, LLC

Gray Oak Pipeline, LLC was formed to develop and construct the Gray Oak Pipeline, which transports crude oil from the Permian and Eagle Ford to Texas Gulf Coast destinations that include Corpus Christi, Texas, and the Sweeny area, including the Phillips 66 Sweeny Refinery. We have a consolidated holding company that owns 65% of Gray Oak Pipeline, LLC.

In April 2018, we entered into a Purchase and Sale Agreement with Phillips 66 PDI to acquire its 100% interest in Gray Oak Holdings LLC (Holdings LLC), a limited liability company that, at that time, owned a 100% interest in Gray Oak Pipeline, LLC. We accounted for the acquisition of Holdings LLC as an acquisition of assets under common control. Also in April 2018, a co-venturer acquired a 25% interest in Gray Oak Pipeline, LLC, along with sufficient voting rights over key governance provisions such that we no longer could assert control over Gray Oak Pipeline, LLC. As a result, we (through our consolidated subsidiary Holdings LLC) began using the equity method of accounting for our investment in Gray Oak Pipeline, LLC at that time.

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In December 2018, a third party exercised its option to acquire a 35% interest in Holdings LLC. Because Holdings LLC’s sole asset was its 75% ownership interest in Gray Oak Pipeline, LLC, which was considered a financial asset, and because certain restrictions were placed on the third party’s ability to transfer or sell its interest in Holdings LLC during the construction of the Gray Oak Pipeline, the legal sale of the 35% interest did not qualify as a sale under GAAP.

Rather, the third party’s subsequent cash contributions to Holdings LLC to fund its share of previously incurred and future construction costs plus a premium to us were reflected as a long-term obligation in the “Obligation from equity interest transfer” line item on our consolidated balance sheet and as financing cash inflows in the “Proceeds from equity interest transfer” line item on our consolidated statement of cash flows. The Gray Oak Pipeline commenced full operations in the second quarter of 2020 and the restrictions placed on the co-venturer were lifted on June 30, 2020, resulting in the recognition of the sale under GAAP. Accordingly, at June 30, 2020, the co-venturer’s 35% interest in the holding company was recharacterized from a long-term obligation to a noncontrolling interest on our consolidated balance sheet, and the premium of $84 million previously paid by the co-venturer in 2019 was recharacterized from a long-term obligation to a gain in our consolidated statement of income. During 2020 and 2019, the co-venturer contributed an aggregate of $61 million and $342 million, respectively, into Holdings LLC, and Holdings LLC used these contributions to fund its portion of Gray Oak Pipeline, LLC’s cash calls. We have an effective ownership interest of 42.25% in Gray Oak Pipeline, LLC, after considering our co-venturer’s 35% interest in the consolidated holding company.

In February 2019, Holdings LLC transferred a 10% interest in Gray Oak Pipeline, LLC, to a third party that exercised a purchase option, for proceeds of $81 million. The proceeds received from this sale are reflected as an investing cash inflow in the “Proceeds from sale of equity interest” line item on our consolidated statement of cash flows.

In June 2019, Gray Oak Pipeline, LLC entered into a third-party term loan facility. We and our co-venturers provided a guarantee through an equity contribution agreement requiring proportionate equity contributions to Gray Oak Pipeline, LLC up to the total outstanding loan amount. The net proceeds from the term loan were used by Gray Oak Pipeline, LLC for construction of the Gray Oak Pipeline and repayment of amounts borrowed under a related party loan agreement that we and our co-venturers executed in March 2019 and terminated upon the repayment by Gray Oak Pipeline, LLC in June 2019. Our total related party loan to and repayment received from Gray Oak Pipeline, LLC was $95 million.

In September 2020, Gray Oak Pipeline, LLC closed its offering of $1.4 billion aggregate principal amount of senior unsecured notes with maturities ranging from 2023 to 2027. These senior notes are not guaranteed by the Partnership or any of its co-venturers. Net proceeds from the offering were used to repay the $1,379 million outstanding under the third-party term loan facility described above, and for general company purposes. Concurrent with the full repayment of the third-party term loan facility, the associated guarantee we issued through an equity contribution agreement was terminated.

During its development phase, Gray Oak Pipeline, LLC was considered a variable interest entity (VIE) because it did not have sufficient equity at risk to fully fund the construction of all assets required for principal operations. We determined we were not the primary beneficiary because we and our co-venturers jointly directed the activities of Gray Oak Pipeline, LLC that most significantly impact economic performance. The Gray Oak Pipeline commenced full operations in the second quarter of 2020 and ceased being a VIE.

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Liberty

In February 2020, we entered into a Purchase and Sale Agreement with Phillips 66 PDI to acquire its 50% interest in the Liberty Pipeline joint venture for $75 million. The purchase price reflected the reimbursement of project costs incurred by Phillips 66 prior to the effective date of the transaction. The transaction was funded through a combination of cash on hand and our revolving credit facility, and closed on March 2, 2020. Liberty was a joint venture formed to develop and construct the Liberty Pipeline system. In the first quarter of 2021, we decided to exit the Liberty Pipeline project, which had previously been deferred due to the challenging business environment created by the Coronavirus Disease 2019 pandemic. As a result, we recorded a $198 million impairment to reduce the book value of our investment in Liberty at March 31, 2021, to our share of the estimated fair value of the joint venture’s pipeline assets and net working capital. The impairment is included in the “Impairments” line item on our consolidated statement of income. This valuation resulted in a Level 3 nonrecurring fair value measurement.

In April 2021, we transferred our 50% ownership interest in Liberty to our co-venturer for cash and certain pipeline assets with a value that approximated our book value of $46 million at March 31, 2021.

Bayou Bridge

Bayou Bridge is a joint venture that owns a pipeline that transports crude oil from Nederland, Texas, to St. James, Louisiana. The Bayou Bridge Pipeline is operated by our co-venturer.

Sand Hills

Sand Hills is a joint venture with DCP Partners that owns an NGL pipeline system that extends from the Permian Basin and Eagle Ford to facilities along the Texas Gulf Coast and the Mont Belvieu, Texas market hub. The Sand Hills Pipeline system is operated by DCP Partners.

Southern Hills

Southern Hills is a joint venture with DCP Partners that owns an NGL pipeline system that extends from the Midcontinent region to the Mont Belvieu market hub. The Southern Hills Pipeline system is operated by DCP Partners. We have a negative basis difference of $86 million for this investment, which originated when the pipeline, formerly known as Seaway Products, was sold by Phillips 66 to a related party. The negative basis difference represents a deferred gain and is being amortized over 40 years.

Explorer

Explorer owns and operates a pipeline system that extends from the Texas Gulf Coast to Indiana. The Explorer Pipeline system transports refined petroleum products to more than 70 major cities in 16 U.S. states. We have a positive basis difference of $65 million for this investment, which represents fair value adjustments attributable to ownership increases in the pipeline. The positive basis difference is being amortized over periods between 6 and 14 years.

Paradigm

Paradigm is a joint venture that owns the Sacagawea pipelines and Keene Terminal in North Dakota. We account for the joint venture under the equity method of accounting due to governance provisions that require supermajority or unanimous voting on all decisions that significantly impact the governance, management and economic performance of the joint venture.

Phillips 66 Partners Terminal
Phillips 66 Partners Terminal is a joint venture that owns the Palermo Terminal in North Dakota. We account for the joint venture under the equity method of accounting due to governance provisions that require supermajority or unanimous voting on all decisions that significantly impact the governance, management and economic performance of the joint venture.

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At December 31, 2020, we estimated the fair value of our investment in Phillips 66 Partners Terminal was below our book value, and we concluded the decline in fair value was not temporary, based upon our projections of future crude oil production in the joint venture’s area of operation. As a result, we recorded a $50 million impairment in the fourth quarter of 2020. The impairment is included in the “Impairments” line item on our consolidated statement of income. The fair value of this equity method investment was calculated by weighting the results of different economic scenarios using the income approach. The income approach uses a discounted cash flow model that requires various observable and unobservable inputs, including volumes, rates, expenses and discount rates. This valuation resulted in a Level 3 nonrecurring fair value measurement.

South Texas Gateway Terminal

In April 2018, we acquired a 25% interest in the South Texas Gateway Terminal under construction by a co-venturer, which connects to the Gray Oak Pipeline in Corpus Christi. The first dock of the marine export terminal began crude oil export operations in July 2020. The second dock commenced crude oil export operations in the fourth quarter of 2020. In the first quarter of 2021, the South Texas Gateway terminal commissioned additional storage capacity, bringing the total capacity to 8.6 million barrels and marking the completion of the final construction phase. The marine export terminal has two deepwater docks with up to 800,000 BPD of export capacity.

During its development phase, South Texas Gateway Terminal was considered a VIE because it did not have sufficient equity at risk to fully fund the construction of all assets required for principal operations. We determined we were not the primary beneficiary because we and our co-venturers jointly directed the activities of the terminal that most significantly impact economic performance. South Texas Gateway Terminal commenced primary operations in the fourth quarter of 2020 and ceased being a VIE.

STACK

STACK is a joint venture that owns and operates a crude storage terminal and a common carrier pipeline that transports crude oil from the Sooner Trend, Anadarko Basin, Canadian and Kingfisher Counties play in northwestern Oklahoma to Cushing, Oklahoma.

At December 31, 2020, we estimated the fair value of our investment in STACK was below our book value, and we concluded the decline in fair value was not temporary, based upon our projections of future crude oil production in the joint venture’s area of operation. As a result, we recorded a $46 million impairment in the fourth quarter of 2020. The impairment is included in the “Impairments” line item on our consolidated statement of income. The fair value of this equity method investment was calculated by weighting the results of different economic scenarios using the income approach. The income approach uses a discounted cash flow model that requires various observable and unobservable inputs, including volumes, tariffs, expenses and discount rates. This valuation resulted in a Level 3 nonrecurring fair value measurement.

Summarized 100% financial information for all equity investments is presented on a combined basis below:

	Millions of Dollars
	2021		2020	2019
Revenues	$	3,034	2,670	2,753
Income before income taxes	1,963		1,583	1,894
Net income	1,904		1,545	1,832
Current assets	716		671	642
Noncurrent assets	12,812		12,884	12,072
Current liabilities	1,144		381	662
Noncurrent liabilities	4,001		4,673	4,322

From acquisition date forward.

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Note 5—Net Income Per Limited Partner Unit

We calculate net income attributable to the Partnership per limited partner unit by dividing the limited partners’ interest in net income by the weighted-average number of common units outstanding for the period. After considering the period’s cash distributions declared, the remaining undistributed earnings or excess distributions declared over earnings, if any, are allocated to participating securities in accordance with the contractual terms of our partnership agreement and as prescribed under the two-class method for those periods in which we have participating securities. Our preferred units became participating securities effective October 1, 2020. The earnings amount allocated to the limited partner common unitholders is adjusted for any premiums paid to repurchase preferred units. Participating securities included general partner units and associated incentive distribution rights (IDRs) prior to the restructuring transaction effective August 1, 2019. See Note 13—Equity for information on the restructuring transaction and our preferred units.

For the diluted net income per limited partner unit calculation, the preferred units are assumed to be converted at the beginning of the period into limited partner common units on a one-for-one basis, and the distribution formula for available cash in our partnership agreement is recalculated, using the original available cash amount increased only for the preferred distributions declared which would not have been paid after conversion. Any potentially dilutive securities are excluded from the diluted earnings per unit computation if the effect of including such securities would be anti-dilutive.

	Millions of Dollars
	2021		2020	2019
Net income attributable to the Partnership	$	735	791	923
Less:
General partner’s distributions declared (including IDRs)*	—		—	139
Limited partners’ distributions declared on preferred units*	48		41	37
Limited partners’ distributions declared on common units*	799		799	609
Distributions less than (more than) net income attributable to the Partnership	$	(112)	(49)	138

*Distributions declared are attributable to the indicated periods.

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	2021
	Limited Partners’ Common Units		Limited Partners’ Preferred Units	Total
Net income attributable to the Partnership (millions):
Distributions declared	$	799	48	847
Distributions more than net income attributable to the Partnership	(112)		—	(112)
Net income attributable to the Partnership	687		48	735
Premium paid for the repurchase of preferred units	(4)
Net income attributable to the Partnership—basic	683
Dilutive effect of preferred units	—
Net income attributable to the Partnership—diluted	$	683
Weighted-average units outstanding—basic	228,340,146
Dilutive effect of preferred units	—
Weighted-average units outstanding—diluted	228,340,146
Net income attributable to the Partnership per limited partner unit—basic (dollars)	$	3.00
Net income attributable to the Partnership per limited partner unit—diluted (dollars)	3.00

	2020
	Limited Partners’ Common Units		Limited Partners’ Preferred Units	Total
Net income attributable to the Partnership (millions):
Distributions declared	$	799	41	840
Distributions less than net income attributable to the Partnership	(49)		—	(49)
Net income attributable to the Partnership—basic	750		41	791
Dilutive effect of preferred units	41
Net income attributable to the Partnership—diluted	$	791
Weighted-average units outstanding—basic	228,333,213
Dilutive effect of preferred units	13,819,791
Weighted-average units outstanding—diluted	242,153,004
Net income attributable to the Partnership per limited partner unit—basic (dollars)	$	3.29
Net income attributable to the Partnership per limited partner unit—diluted (dollars)	3.27

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	2019
	Limited Partners’ Common Units		General Partner (including IDRs)	Limited Partners’ Preferred Units	Total
Net income attributable to the Partnership (millions):
Distributions declared	$	609	139	37	785
Distributions less than net income attributable to the Partnership	137		1	—	138
Net income attributable to the Partnership—basic	746		140	37	923
Dilutive effect of preferred units(1)	32
Net income attributable to the Partnership—diluted	$	778
Weighted-average units outstanding—basic	167,655,306
Dilutive effect of preferred units(1)	13,819,791
Weighted-average units outstanding—diluted	181,475,097
Net income attributable to the Partnership per limited partner unit—basic (dollars)	$	4.45
Net income attributable to the Partnership per limited partner unit—diluted (dollars)	4.29

(1) The dilutive effect of the preferred units assumes the reallocation of net income attributable to the Partnership to the limited and general partners, including a reallocation associated with IDRs, pursuant to the available cash formula in the partnership agreement.

On January 18, 2022, the Board of Directors of our General Partner declared a quarterly cash distribution of $0.875 per common unit, which resulted in a total distribution to common unitholders of $200 million attributable to the fourth quarter of 2021. This distribution was paid February 14, 2022, to common unitholders of record as of January 31, 2022.

Beginning with the distribution to preferred unitholders attributable to the fourth quarter of 2020, the preferred unitholders are entitled to receive cumulative quarterly distributions equal to the greater of $0.678375 per unit, or the per-unit distribution amount paid to the common unitholders. Preferred unitholders received $12 million of distributions attributable to the fourth quarter of 2021. This distribution was paid February 14, 2022, to preferred unitholders of record as of January 31, 2022.

On October 26, 2021, we entered into a definitive merger agreement with Phillips 66. This agreement provides that, unless prohibited by the partnership agreement or applicable law, our General Partner shall cause the Partnership to declare, authorize and pay regular quarterly cash distributions on our common units in an amount not less than $0.875 per unit for the quarterly period ending December 31, 2021, and for each full quarterly period thereafter, unless the merger closes prior to the applicable record date. See Note 1—Business and Basis of Presentation, for additional information regarding the merger agreement.

Note 6—Major Customer and Concentration of Credit Risk

Phillips 66 accounted for 97%, 98% and 97% of our total operating revenues for the years ended December 31, 2021, 2020 and 2019, respectively. Through our wholly owned and joint venture operations, we provide crude oil, refined petroleum products and NGL pipeline transportation, terminaling and storage, and crude oil gathering, NGL fractionation, crude oil processing, and rail-unloading services to Phillips 66 and other related parties.

We are potentially exposed to concentration of credit risk primarily through our accounts receivable from Phillips 66. These receivables have payment terms of 30 days or less and are settled against any existing payables we may have to Phillips 66 through Phillips 66’s interaffiliate settlement process. We monitor the creditworthiness of Phillips 66, which has an investment grade credit rating.

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Note 7—Properties, Plants and Equipment

Our investment in PP&E, with the associated accumulated depreciation, at December 31 was:

	Estimated Useful Lives	Millions of Dollars
		2021		2020
Land		$	19	19
Buildings and improvements	3 to 30 years	118		115
Pipelines and related assets*	10 to 45 years	1,986		1,518
Terminals and related assets*	25 to 45 years	853		847
Rail racks and related assets*	33 years	137		137
Processing and related assets*	25 years	1,064		1,063
Caverns and related assets*	25 to 45 years	733		732
Construction-in-progress		137		394
Gross PP&E		5,047		4,825
Accumulated depreciation		(1,320)		(1,186)
Net PP&E		$	3,727	3,639

*Assets for which we are the lessor.

In the third quarter of 2021, we decided not to pursue the ACE Pipeline project. Accordingly, we wrote-off the capitalized costs associated with this project of $10 million. This charge is included in the “Impairments” line item on our consolidated statement of income.

Note 8—Goodwill

The carrying amount of goodwill was as follows:

	Millions of Dollars
	2021		2020
Beginning balance January 1	$	185	185
Activity during the year	—		—
Ending balance December 31	$	185	185

Note 9—Lease Assets and Liabilities

We have agreements with Phillips 66 to lease land underlying or associated with certain of our assets. These agreements are classified as operating leases. Due to the economic infeasibility of canceling these leases, we consider them non-cancellable. Certain leases include escalation clauses for adjusting rental payments to reflect changes in price indices. Our lease agreements do not impose any significant restrictions on distribution payments, asset dispositions or borrowing ability.

Effective with our implementation of ASU No. 2016-02, we elected to discount lease obligations using our incremental borrowing rate. For all leases, we elected the practical expedient not to separate service and lease costs. Our right-of way agreements in effect prior to January 1, 2019, were not accounted for as leases as they were not initially determined to be leases at their commencement dates. However, modifications to these agreements or new agreements will be assessed and accounted for accordingly under ASU No. 2016-02. For short-term leases, which are leases that, at the commencement date, have a lease term of 12 months or less and do not include an option to purchase the underlying asset that is reasonably certain to be exercised, we elected to not recognize the ROU asset and corresponding lease liability on our consolidated balance sheet.

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Operating lease ROU assets are recorded in the “Other assets” line item and lease liabilities are recorded in the “Other current liabilities” and “Other liabilities” line items on our consolidated balance sheet. During the years ended December 31, 2021 and 2020, the total operating lease ROU asset was $43 million and $44 million, respectively.

Future minimum lease payments and recorded short- and long-term lease liabilities at December 31, 2021, for operating leases were:

	Millions of Dollars
2022	$	3
2023	3
2024	3
2025	3
2026	3
Remaining years	84
Future minimum lease payments	99
Amount representing interest or discounts	(56)
Total lease liabilities	43
Short-term lease liabilities	(1)
Long-term lease liabilities	$	42

Operating lease costs and operating cash outflows for the year ended December 31, 2021 and 2020, were not material.

The weighted-average remaining lease term for our operating leases as of December 31, 2021 and 2020, was 33 and 34 years, respectively. The weighted-average discount rate for our operating leases as of December 31, 2021 and 2020, was 5.9%.

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Note 10—Debt

Debt at December 31 was:

	Millions of Dollars
	2021		2020
2.450% Senior Notes due December 2024	$	300	300
3.605% Senior Notes due February 2025	500		500
3.550% Senior Notes due October 2026	500		500
3.750% Senior Notes due March 2028	500		500
3.150% Senior Notes due December 2029	600		600
4.680% Senior Notes due February 2045	450		450
4.900% Senior Notes due October 2046	625		625
Floating Rate Term Loan due April 2022 at rate of 0.978% at year-end 2021	450		—
Tax-exempt bonds due April 2021 at weighted-average rate of 0.360% at year-end 2020	—		50
Revolving credit facility borrowings due January 2021 at weighted-average rate of 1.397% at year-end 2020	—		415
Debt at face value	3,925		3,940
Net unamortized discounts and debt issuance costs	(28)		(31)
Total debt	3,897		3,909
Short-term debt	(450)		(465)
Long-term debt	$	3,447	3,444

The fair value of our fixed-rate and floating-rate debt is estimated based on observable market prices and is classified as Level 2 of the fair value hierarchy. The fair value of our fixed-rate debt amounted to $3,810 million and $3,752 million at December 31, 2021 and 2020, respectively. The fair value of our floating-rate debt approximated carrying value of $450 million and $465 million at December 31, 2021 and 2020, respectively.

Maturities of borrowings outstanding at December 31, 2021, inclusive of net unamortized discounts and debt issuance costs, for the five-year period ending 2026 were $450 million in 2022, $298 million in 2024, $499 million in 2025 and $498 million in 2026.

During the year ended December 31, 2021, our debt at face value decreased $15 million due to:

.

•Payments of $415 million under the revolving credit facility.

•Repayments of $50 million of tax-exempt bonds.

•Issuance of $450 million under term loan due April 2022.

Revolving Credit Facility

Our $750 million revolving credit facility may be used for direct bank borrowings and as support for issuances of letters of credit. We have an option to increase the overall capacity to $1 billion, subject to certain conditions. We also have the option to extend the facility for two additional one-year terms after its July 30, 2024, maturity date, subject to, among other things, the consent of the lenders holding the majority of the commitments and of each lender extending its commitment.

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The facility is with a broad syndicate of financial institutions and contains covenants that are usual and customary for an agreement of this type, including that, as of the last day of each fiscal quarter, the ratio of total debt to EBITDA for the prior four fiscal quarters must be no greater than 5.0:1.0 (and 5.5:1.0 during the period following certain specified acquisitions). The facility has customary events of default, such as nonpayment of principal when due; nonpayment of interest, fees or other amounts; and violation of covenants.

Outstanding revolving borrowings under the facility bear interest, at our option, at either: (a) the Eurodollar rate in effect from time to time plus the applicable margin; or (b) the reference rate (as described in the facility) plus the applicable margin. The facility also provides for customary fees, including commitment fees. The pricing levels for the commitment fees and interest-rate margins are determined based on our credit ratings in effect from time to time. Borrowings under the facility may be short-term or long-term in duration, and we may at any time prepay outstanding borrowings under the facility, in whole or in part, without premium or penalty. At December 31, 2021, no borrowings were outstanding under this facility, compared with $415 million borrowings outstanding under this facility at December 31, 2020. At both December 31, 2021 and 2020, $1 million in letters of credit had been issued that were supported by this facility.

Term Loan Agreement

On April 6, 2021, we entered into a $450 million term loan agreement and borrowed the full amount. The term loan agreement has a maturity date of April 5, 2022, and the outstanding borrowings can be repaid at any time and from time to time, in whole or in part, without premium or penalty. Borrowings bear interest at a floating rate based on either a Eurodollar rate or a reference rate, plus a margin of 0.875%. Proceeds were primarily used to repay amounts borrowed under our $750 million revolving credit facility.

Tax-Exempt Bonds

In 2017, we assumed four $25 million tranches of tax-exempt bonds issued by the Brazos River Harbor Navigation District. We repaid one tranche in 2018 and another tranche in April 2020. The two remaining tranches, totaling $50 million, were repaid in April 2021.

The tranches accrued interest monthly based on a daily rate derived by the remarketing agent for the bonds. The interest rates are designed to represent the lowest rate acceptable by the tax-exempt, variable-rate bond market and approximate the tax-exempt bonds trading at par.

2019 Senior Notes

On September 6, 2019, we closed on a public offering of $900 million aggregate principal amount of unsecured notes consisting of:

•$300 million aggregate principal amount of 2.450% Senior Notes due December 15, 2024.

•$600 million aggregate principal amount of 3.150% Senior Notes due December 15, 2029.

Interest on each series of senior notes is payable semi-annually in arrears on June 15 and December 15 of each year, commencing on June 15, 2020. Total proceeds received from the offering were $892 million, net of underwriting discounts and commissions. Net proceeds from the Senior Notes offering were used for general partnership purposes, including debt repayments. On September 13, 2019, we used a portion of the proceeds to repay the $400 million outstanding principal balance of the senior unsecured term loan facility that was drawn during the first half of 2019. On October 15, 2019, we used a portion of the proceeds to repay the aggregate $300 million outstanding principal balance of our 2.646% Senior Notes due February 2020.

Note 11—Contingencies

From time to time, lawsuits involving a variety of claims that arise in the ordinary course of business are filed against us. We also may be required to remove or mitigate the effects on the environment of the placement, storage, disposal or release of certain chemical, mineral and petroleum substances at various sites. We regularly assess the need for accounting recognition or disclosure of these contingencies. In the case of all known contingencies (other than those related to income taxes), we accrue a liability when the loss is probable and the amount is reasonably estimable.

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If a range of amounts can be reasonably estimated and no amount within the range is a better estimate than any other amount, then the minimum of the range is accrued. We do not reduce these liabilities for potential insurance or third-party recoveries. If applicable, we accrue receivables for probable insurance or other third-party recoveries. In the case of income-tax-related contingencies, we use a cumulative probability-weighted loss accrual in cases where sustaining a tax position is uncertain.

Based on currently available information, we believe it is remote that future costs related to known contingent liability exposures will exceed current accruals by an amount that would have a material adverse impact on our consolidated financial statements. As we learn new facts concerning contingencies, we reassess our position both with respect to accrued liabilities and other potential exposures. Estimates particularly sensitive to future changes include any contingent liabilities recorded for environmental remediation, tax and legal matters. Estimated future environmental remediation costs are subject to change due to such factors as the uncertain magnitude of cleanup costs, the unknown time and extent of such remedial actions that may be required, and the determination of our liability in proportion to that of other potentially responsible parties. Estimated future costs related to tax and legal matters are subject to change as events evolve and as additional information becomes available during the administrative and litigation processes.

Environmental

We are subject to federal, state and local environmental laws and regulations. We record accruals for contingent environmental liabilities based on management’s best estimates, using all information that is available at the time. We measure estimates and base liabilities on currently available facts, existing technology, and presently enacted laws and regulations, taking into account stakeholder and business considerations. When measuring environmental liabilities, we also consider our prior experience in remediation of contaminated sites, other companies’ cleanup experience, and data released by the U.S. Environmental Protection Agency or other organizations. We consider unasserted claims in our determination of environmental liabilities, and we accrue them in the period they are both probable and reasonably estimable. At December 31, 2021, and 2020, our total environmental accruals were not material.

In the future, we may be involved in additional environmental assessments, cleanups and proceedings.

Legal Proceedings

Under our amended omnibus agreement, Phillips 66 provides certain services for our benefit, including legal support services, and we pay an operational and administrative support fee for these services. Phillips 66’s legal organization applies its knowledge, experience and professional judgment to the specific characteristics of our cases, employing a litigation management process to manage and monitor the legal proceedings against us. The process facilitates the early evaluation and quantification of potential exposures in individual cases and enables tracking of those cases that have been scheduled for trial and/or mediation. Based on professional judgment and experience in using these litigation management tools and available information about current developments in all our cases, Phillips 66’s legal organization regularly assesses the adequacy of current accruals and determines if adjustment of existing accruals, or establishment of new accruals, is required. At December 31, 2021 and 2020, we did not have any material accrued contingent liabilities associated with litigation matters.

Indemnification and Excluded Liabilities

Under our amended omnibus agreement and pursuant to the terms of various agreements under which we acquired assets from Phillips 66, Phillips 66 will indemnify us, or assume responsibility, for certain environmental liabilities, tax liabilities, litigation and any other liabilities attributable to the ownership or operation of the assets contributed to us and that arose prior to the effective date of each acquisition. These indemnifications and exclusions from liability have, in some cases, time limits and deductibles. When Phillips 66 performs under any of these indemnifications or exclusions from liability, we recognize noncash expenses and associated noncash capital contributions from our General Partner, as these are considered liabilities paid for by a principal unitholder.

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Note 12—Asset Retirement Obligations and Accrued Environmental Costs

Asset retirement obligations and accrued environmental costs at December 31 were:

	Millions of Dollars
	2021		2020
Asset retirement obligations	$	11	11
Accrued environmental costs	1		2
Total asset retirement obligations and accrued environmental costs	12		13
Asset retirement obligations and accrued environmental costs due within one year	—		(1)
Long-term asset retirement obligations and accrued environmental costs	$	12	12

Asset Retirement Obligations

We have asset retirement obligations we are required to perform under law or contract once an asset is permanently taken out of service. These obligations primarily relate to the abandonment or removal of certain pipelines. Most of these obligations are not expected to be paid until many years in the future.

During 2021 and 2020, our asset retirement obligations changed as follows:

	Millions of Dollars
	2021		2020
Balance at January 1	$	11	11
Accretion of discount	—		1
Changes in estimates of existing obligations	—		(1)
Balance at December 31	$	11	11

Note 13—Equity

ATM Programs

We have authorized an aggregate of $750 million under three $250 million continuous offerings of common units, or at-the-market (ATM) programs. The first two programs concluded in June 2018 and December 2019, respectively. At December 31, 2021, we have $248 million of available capacity under our $250 million ATM program. We suspended issuances under the ATM program in the first quarter of 2020 due to low common unit prices. We did not issue any common units under the ATM program during the twelve months ended December 31, 2021. During the year ended December 31, 2020, on a settlement-date basis, we issued an aggregate of 40,570 common units, generating net proceeds of $2 million. Since inception in June 2016 through December 31, 2021, we issued an aggregate of 9,487,055 common units under our ATM programs, and generated net proceeds of $494 million, after broker commissions of $5 million and other costs of $3 million. The net proceeds from sales under the ATM programs are used for general partnership purposes, which may include debt repayment, acquisitions, capital expenditures and additions to working capital.

On October 26, 2021, we entered into a definitive merger agreement with Phillips 66. If this merger is consummated, our common units will no longer be publicly traded and, as a result, we would not expect any issuances of common units under our ATM program before or after the closing date of this transaction. See Note 1—Business and Basis of Presentation, for additional information regarding the merger agreement.

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Preferred Units

On June 29, 2021, we repurchased 368,528 of the outstanding Series A Perpetual Convertible Preferred Units with an aggregate carrying value of $20 million for $24 million in cash, or $65.124 per unit. Upon the repurchase, these preferred units were canceled and are no longer outstanding.

On October 26, 2021, we entered into a definitive merger agreement with Phillips 66. See Note 1—Description of the Business, and Note 5—Net Income Per Limited Partner Unit, for additional information regarding the merger agreement.

The preferred units rank senior to all common units with respect to distributions and rights upon liquidation. The holders of the preferred units were entitled to receive cumulative quarterly distributions equal to $0.678375 per unit, beginning for the quarter ended December 31, 2017, with a prorated amount from the date of issuance. Beginning with the distribution to preferred unitholders attributable to the fourth quarter of 2020, the preferred unitholders are entitled to receive cumulative quarterly distributions equal to the greater of $0.678375 per unit, or the per-unit distribution amount paid to the common unitholders as if such preferred units had converted into common units immediately prior to the record date.

The holders of the preferred units may convert their preferred units into common units, on a one-for-one basis, at any time after the second anniversary of the issuance date, in full or in part, subject to minimum conversion amounts and conditions. After the third anniversary of the issuance date, we may convert the preferred units into common units at any time, in whole or in part, subject to certain minimum conversion amounts and conditions, if the arithmetic average of the volume-weighted trading price of our common units is greater than $73.2645 per unit for the 20 day trading period immediately preceding the conversion notice date and the average trading volume of the common units is at least 100,000 for the preceding 20 trading days. The conversion rate for the preferred units shall be the quotient of (a) the sum of (i) $54.27, plus (ii) any unpaid cash distributions on the applicable preferred unit, divided by (b) $54.27. The holders of the preferred units are entitled to vote on an as-converted basis with the common unitholders and have certain other class voting rights with respect to any amendment to our partnership agreement that would adversely affect any rights, preferences or privileges of the preferred units. In addition, upon certain events involving a change in control, the holders of preferred units may elect, among other potential elections, to convert their preferred units to common units at the then change of control conversion rate.

Restructuring Transaction

On August 1, 2019, we closed on the transactions contemplated by the Partnership Interests Restructuring Agreement, dated July 24, 2019, entered into with our General Partner. Pursuant to this agreement, all of the outstanding IDRs held by our General Partner were eliminated and its approximately 2% general partner interest in us was converted into a non-economic general partner interest; both in exchange for an aggregate of 101 million common units issued to Phillips 66 PDI. Because these transactions were between entities under common control, the common units issued to Phillips 66 PDI were not assigned any value; rather, our General Partner’s negative equity balance of $1.4 billion at August 1, 2019, was transferred to Phillips 66’s limited partner equity account.

Note 14—Related Party Transactions

Commercial Agreements

We have entered into long-term, fee-based commercial agreements with Phillips 66 to provide transportation, terminaling, storage, stevedoring, fractionation, processing, and rail terminal services. Under these agreements, Phillips 66 commits to provide us with minimum transportation, throughput or storage volumes, or minimum monthly service fees. If Phillips 66 does not meet its minimum volume commitments under an agreement, Phillips 66 pays us a deficiency payment based on the calculation described in the agreement.

Amended and Restated Operational Services Agreement

Under our amended and restated operational services agreement, we reimburse Phillips 66 for certain operational services provided in support of our pipelines, terminaling, processing, and storage facilities. These services include routine and emergency maintenance and repair services, routine operational activities, routine administrative services, construction and related services and such other services as we and Phillips 66 may mutually agree upon from time to time.

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Amended Omnibus Agreement

The amended omnibus agreement addresses our payment of an operating and administrative support fee and our obligation to reimburse Phillips 66 for all other direct or allocated costs and expenses incurred by Phillips 66 in providing general and administrative services. Additionally, the omnibus agreement addresses Phillips 66’s indemnification to us and our indemnification to Phillips 66 for certain environmental and other liabilities. Further, it addresses the granting of a license from Phillips 66 to us with respect to the use of certain Phillips 66 trademarks.

The operational and administrative support fee is for the provision of certain services, including: logistical services; asset oversight, such as operational management and supervision; corporate engineering services, including asset integrity and regulatory services; business development services; executive services; financial and administrative services (including treasury and accounting); information technology; legal services; corporate health, safety and environmental services; facility services; human resources services; procurement services; investor relations; tax matters; and public company reporting services. We pay Phillips 66 an operational and administrative support fee under the terms of our amended omnibus agreement in the amount of $8 million per month.

We also reimburse Phillips 66 for all other direct or allocated costs incurred on behalf of us, pursuant to the terms of our amended omnibus agreement. The classification of these charges between operating and maintenance expenses and general and administrative expenses is based on the functional nature of the services performed for our operations. Under our amended and restated operational services agreement, we reimburse Phillips 66 for the provision of certain operational services in support of our operating assets. Additionally, we pay Phillips 66 for insurance services provided to us, and recoveries under these policies are recorded as an offset to our expenses. Operating and maintenance expenses also include volumetric gains and losses associated with volumes transported by Phillips 66.

Tax Sharing Agreement

Under our tax sharing agreement, we reimburse Phillips 66 for our share of state and local income and other taxes incurred by Phillips 66 due to our results of operations being included in a combined or consolidated tax return filed by Phillips 66. Any reimbursement is limited to the tax that we (and our subsidiaries) would have paid had we not been included in a combined group with Phillips 66. Phillips 66 may use its tax attributes to cause its combined or consolidated group to owe no tax; however, we would nevertheless reimburse Phillips 66 for the tax we would have owed, even though Phillips 66 had no cash expense for that period.

Related Party Transactions

Significant related party transactions included in our costs and expenses were:

	Millions of Dollars
	2021		2020	2019
Operating and maintenance expenses	$	212	184	258
General and administrative expenses	61		62	65

Other related party balances were included in the following line items on our consolidated balance sheet, all of which were related to commercial agreements with Phillips 66:

	Millions of Dollars
	2021		2020
Prepaid expenses and other current assets	$	4	7
Other assets	46		47
Deferred revenues	21		27
Other current liabilities	1		1
Other liabilities	60		64

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Equity Affiliate Arrangements

In March 2019, we and our co-venturers in Dakota Access provided a CECU in conjunction with a senior unsecured notes offering. See Note 4—Equity Investments, for additional information.

Note 15—Employee Benefit Plans

Pension and Retirement Savings Plans

Neither we nor our subsidiaries have any employees. Our General Partner has the sole responsibility for providing the employees and other personnel necessary to conduct our operations. All of the employees that conduct our wholly owned businesses are employed by Phillips 66. Those employees participate in benefit plans sponsored by Phillips 66. Most employees of Phillips 66 who provide direct support to our operations do so under the provisions of the amended and restated operational services agreement, which fees include a burden for benefit costs.

Note 16—Unit-Based Compensation

In 2013, the Board of Directors of our General Partner adopted the Phillips 66 Partners LP 2013 Incentive Compensation Plan (the ICP).  Awards under the ICP are available for officers, directors and employees of our General Partner or its affiliates, and any consultants or other individuals who perform services for the Partnership.  The ICP allows for the grant of unit awards, restricted units, phantom units, unit options, unit appreciation rights, distribution equivalent rights, profits interest units and other unit-based awards.  The ICP limits the number of common units that may be delivered pursuant to awards to 2,500,000, subject to proportionate adjustment in the event of unit splits and similar events.

From the closing of our initial public offering through December 31, 2021, we have only issued phantom units under the ICP and have only made issuances to non-employee directors.  A phantom unit entitles the recipient to receive cash equal to the fair market value of a common unit on the date the phantom unit is settled after the vesting period (settlement date), and to also receive a distribution equivalent each quarter between the grant date and the settlement date in an amount equal to any cash distributions paid on a common unit during that time. During the year ended December 31, 2021, we granted a total of 13,848 phantom units to non-employee directors of the Partnership. For the years ended December 31, 2020 and 2019, we granted a total of 6,092 and 4,950 phantom units, respectively. On the grant date, phantom units awarded to non-employee directors become non-forfeitable; therefore, we immediately recognize expense equal to the grant-date fair value of the award. Phantom units awarded under the ICP do not have voting rights.

Note 17—Income Taxes

We are not a taxable entity for U.S. federal income tax purposes or for the majority of states that impose an income tax. Taxes on our net income are borne generally by our limited partners through the allocation of taxable income. Our income tax provision results from state laws that apply to entities organized as partnerships. For us, this is primarily the state of Texas.

At December 31, 2021 and 2020, we had a net deferred tax liability of $14 million and $10 million, respectively. The net deferred tax liability was primarily associated with PP&E and equity investments.

Our effective tax rate was less than 1% for the years ended December 31, 2021, 2020 and 2019.

At December 31, 2021 and 2020, we had no liability recorded for uncertain tax positions. We also did not have any interest or penalties related to income taxes for the years ended December 31, 2021, 2020 and 2019. Texas tax returns for the years 2014 and forward are subject to examination.

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Note 18—Cash Flow Information

Capital Expenditures and Investments

Our capital expenditures and investments consisted of:

	Millions of Dollars
	2021		2020	2019
Cash capital expenditures and investments	$	311	910	1,095
Change in capital expenditure accruals	(15)		5	(13)
Total capital expenditures and investments	$	296	915	1,082

	Millions of Dollars
	2021		2020	2019
Cash Payments
Interest and debt expense	$	125	124	100

Note 19—Other Financial Information

	Millions of Dollars
	2021		2020	2019
Interest and Debt Expense
Incurred
Debt	$	139	138	133
Other	4		4	3
	143		142	136
Capitalized	(15)		(21)	(28)
Expensed	$	128	121	108
Other Income
Interest income	$	—	1	3
Other	13		2	3
Total other income	$	13	3	6

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Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

Item 9A. CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in reports we file or submit under the Securities Exchange Act of 1934, as amended (the Act), is recorded, processed, summarized and reported within the time periods specified in the U.S. Securities and Exchange Commission (the SEC) rules and forms, and that such information is accumulated and communicated to our General Partner’s management, including its principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure. As of December 31, 2021, our General Partner’s Chairman and Chief Executive Officer and its Vice President and Chief Financial Officer, with the participation of the General Partner’s management, carried out an evaluation, pursuant to Rule 13a-15(b) of the Act, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Act). Based upon that evaluation, our General Partner’s Chairman and Chief Executive Officer and its Vice President and Chief Financial Officer concluded that our disclosure controls and procedures were operating effectively as of December 31, 2021.

There have been no changes in our internal control over financial reporting, as defined in Rule 13a-15(f) of the Act, in the quarterly period ended December 31, 2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Management’s Annual Report on Internal Control Over Financial Reporting

This report is included in Item 8. Financial Statements and Supplementary Data and is incorporated herein by reference.

Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting

This report is included in Item 8. Financial Statements and Supplementary Data and is incorporated herein by reference.

Item 9B. OTHER INFORMATION

None.

Item 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Not applicable.

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PART III

Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Management of Phillips 66 Partners LP

Phillips 66 Partners GP LLC, our General Partner, is a wholly-owned subsidiary of Phillips 66. Our General Partner manages our operations and activities through its directors and executive officers. Our unitholders do not nominate candidates for, or vote for the election of, the directors of our General Partner. Through its indirect ownership of all of the membership interests in our General Partner, Phillips 66 elects all members of our General Partner’s board of directors (the “Board”). Directors are elected by the sole member of our General Partner and hold office until their successors have been elected or qualified or until their earlier death, resignation, removal or disqualification. Our General Partner’s executive officers are appointed by, and serve at the discretion of, the Board.

References in this Part III to our “Board,” “directors” or “officers” refer to the board, directors and officers of our General Partner.

Neither we nor our subsidiaries have any employees. Our General Partner has the sole responsibility for providing the employees and other personnel necessary to conduct our operations. All of the employees that conduct our business are directly employed by affiliates of our General Partner, but we sometimes refer to these individuals as our employees for ease of reference.

Directors and Executive Officers of Phillips 66 Partners GP LLC

The following table shows our directors and executive officers and their ages as of February 15, 2022.

Name		Age
Greg C. Garland	Chairman of the Board of Directors and Chief Executive Officer	64
Kevin J. Mitchell	Director, Vice President and Chief Financial Officer	55
Timothy D. Roberts	Director, Vice President and Chief Operating Officer	60
Robert A. Herman	Director	62
P.D. (David) Bairrington	Director	66
Mark A. Haney	Director	66
C. Douglas Johnson	Director	62
Joseph W. O’Toole	Director	83
J. Scott Pruitt	Vice President and Controller	57

Greg C. Garland has served as Chief Executive Officer and Chairman of the Board since March 2013. He has been Chairman of the Board of Directors and Chief Executive Officer of Phillips 66 since April 2012. Mr. Garland previously served as Senior Vice President, Exploration and Production—Americas for ConocoPhillips from 2010 to 2012 and as President and Chief Executive Officer of Chevron Phillips Chemical Company LLC (CPChem) from 2008 to 2010.

Qualifications: Mr. Garland brings to the Board extensive energy industry expertise and knowledge of all aspects of our business.

Other Public Company Directorships: Phillips 66 (since 2012) and Amgen Inc. (since 2013)

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Kevin J. Mitchell was elected to the Board in January 2016 and has served as Vice President and Chief Financial Officer since that time. Mr. Mitchell has been Executive Vice President, Finance and Chief Financial Officer of Phillips 66 since January 2016, having previously served as Vice President, Investor Relations since September 2014. Mr. Mitchell also has been a member of the board of directors of CPChem since 2016.

Qualifications: Mr. Mitchell brings to the Board extensive energy industry experience, specifically in the areas of finance and accounting, compliance, risk management, and investor relations.

Other Public Company Directorship: None in the past five years.

Timothy D. Roberts was elected to the Board in April 2016 and has been Vice President and Chief Operating Officer, since November 2020. Mr. Roberts previously served as Vice President, Operations, from August 2018 to November 2020. Mr. Roberts has been Executive Vice President, Midstream for Phillips 66 since August 2018, previously serving as Executive Vice President, Marketing and Commercial from January 2017 to August 2018 and Executive Vice President, Strategy and Business Development from April 2016 through January 2017. Before joining Phillips 66, Mr. Roberts was a senior executive at LyondellBasell Industries NV, where he served in various executive positions. Mr. Roberts also has been a member of the board of directors of CPChem since 2018.

Qualifications: Mr. Roberts brings to the Board significant industry experience in the energy industry as well as unique perspective and guidance from his role as Executive Vice President, Midstream for Phillips 66.

Other Public Company Directorships: None in the past five years.

Robert A. Herman was elected to the Board in June 2014. Mr. Herman also currently serves as a Vice President and previously served as our Senior Vice President, Operations from 2014 to 2018. Mr. Herman has been Executive Vice President, Refining of Phillips 66 since September 2017, previously serving as Executive Vice President, Midstream, from June 2014 to September 2017.

Qualifications: Mr. Herman brings to the Board significant industry experience he has gained over more than 35 years in various technical and leadership roles within the oil and gas industry, including his prior role as Executive Vice President, Midstream of Phillips 66.

Other Public Company Directorships: None in the past five years.

P.D. (David) Bairrington was elected to the Board in August 2016. Mr. Bairrington is the managing partner of a family owned real estate development company, JDMD Development, LLC. Mr. Bairrington previously spent 33 years in the energy industry with Phillips Petroleum Company and ConocoPhillips, from which he retired in June 2011, including a number of executive positions as a former board member of joint venture companies.

Qualifications: Mr. Bairrington brings extensive experience in the energy industry, including leadership experience with operating responsibilities and oversight of joint ventures.

Other Public Company Directorships: None in the past five years.

Mark A. Haney was elected to the Board in July 2013. Mr. Haney previously served in various executive and management roles at CPChem, including as Executive Vice President of Olefins and Polyolefins of CPChem until his retirement in December 2011. Prior to that, Mr. Haney served in numerous management roles with Phillips Petroleum Company.

Qualifications: Mr. Haney brings extensive experience in the energy industry, including leadership experience with operating responsibilities as well as other public company board service.

Other Public Company Directorships: Advanced Drainage Systems, Inc. (since 2014)

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C. Douglas Johnson was elected to the Board in October 2020. Mr. Johnson served as Vice President and Controller of both Phillips 66 Partners and Phillips 66 from 2012 to 2014. Prior to that, Mr. Johnson served in various finance roles at ConocoPhillips. Mr. Johnson also served as a member of the board of directors of CPChem from 2012 to 2014.

Qualifications: Mr. Johnson brings to the Board considerable energy industry expertise, particularly in finance and accounting, as well as experience serving on public company boards.

Other Public Company Directorships: Gulfport Energy Corporation (2015-2021) and Altus Midstream Company (2018-2020)

Joseph W. O’Toole was elected to the Board in July 2014. Mr. O’Toole is currently the managing partner of Maeve Investment Company, LP, a private investment company. Mr. O’Toole retired as Vice President General Tax Officer and General Tax Counsel of Phillips Petroleum Company in 1999, a position he held since 1977.

Qualifications: Mr. O’Toole brings extensive experience in the energy industry and knowledge of industry accounting, tax and financial practices.

Other Public Company Directorships: None in the past five years.

J. Scott Pruitt has served as Vice President and Controller since July 2021. Mr. Pruitt has also served as Vice President and Controller of Phillips 66 since July 2021. Mr. Pruitt previously served as the General Auditor of Phillips 66 since 2020. Before that, he served as Phillips 66’s Assistant Controller, External Reporting and Policy, from 2012 to 2020. Before joining Phillips 66 in 2012, Mr. Pruitt served in several finance leadership roles at ConocoPhillips.

Other Public Company Directorships: None in the past five years.

Paula A. Johnson, 58, was a member of the Board from October 2020 through January 2022. Ms. Johnson served as our Vice President, General Counsel and Secretary from 2013 until her retirement in January 2022. Ms. Johnson was Executive Vice President, Legal and Government Affairs, General Counsel and Corporate Secretary of Phillips 66 from 2012 until her retirement in January 2022. Prior to joining Phillips 66, Ms. Johnson held a series of positions between 2002 and 2012 in the ConocoPhillips legal department.

DIRECTOR INDEPENDENCE

The Board currently consists of eight directors. The NYSE does not require a publicly traded limited partnership like us to have a majority of independent directors on our Board. We are, however, required to have an Audit Committee comprised solely of independent directors. The Board considered all relevant facts and circumstances including, without limitation, transactions between the director directly or organizations with which the director is affiliated and us, any service by the director on the board of a company with which we conduct business, and the frequency and dollar amounts associated with these transactions, and has determined that each of Messrs. Haney, O’Toole, Bairrington and Johnson meets the independence standards and has no material relationship with us other than as a director, and satisfies the independence requirements of the NYSE and applicable SEC rules.

BOARD LEADERSHIP STRUCTURE

Our Corporate Governance Guidelines provide the Board with the flexibility to determine the optimal leadership for the Board depending upon our particular needs and circumstances. The Board has determined that Mr. Garland is in the best position at this time to serve as Chairman due to his extensive knowledge of all aspects of our business, as well as our continued relationship with Phillips 66. Mr. Haney, an independent director, has been appointed as the Lead Director to preside at executive sessions of the non-management and independent Board of Directors.

COMMITTEES OF THE BOARD

Our Board has a standing Audit Committee and Conflicts Committee, and may have such other committees as the Board shall determine from time to time. Each committee operates under a written charter, which is available on the “Corporate Governance” page of our website. Each charter requires the applicable committee to annually assess and report to the Board on the adequacy of the charter. Because we are a limited partnership, we are not required to have a compensation committee or a nominating/corporate governance committee.

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Audit Committee

Our General Partner has an Audit Committee consisting of four directors, each of whom meets the independence and experience standards established by the NYSE and the SEC. The members of the Audit Committee are Messrs. Bairrington, Haney, O’Toole and Johnson. Mr. O’Toole serves as the chair of the Audit Committee, and the Board has determined that Mr. O’Toole is an audit committee financial expert. The Audit Committee assists the Board in its oversight of the integrity of our financial statements and our compliance with legal and regulatory requirements and corporate policies and controls. The Audit Committee has the sole authority to retain and terminate our independent registered public accounting firm, pre-approve all auditing services and related fees and the terms thereof, and pre-approve any non-audit services to be rendered by our independent registered public accounting firm. The Audit Committee is also responsible for confirming the independence and objectivity of our independent registered public accounting firm. Our independent registered public accounting firm has unrestricted access to the Audit Committee. The Audit Committee has a written charter adopted by the Board, which is available on our website.

Conflicts Committee

The Conflicts Committee reviews specific matters that may involve conflicts of interest in accordance with the terms of our partnership agreement. The members of our Conflicts Committee may not be officers or employees of our General Partner or directors, officers, or employees of its affiliates, and must meet the independence and experience standards established by the NYSE and the SEC to serve on an audit committee of a board of directors. In addition, the members of our Conflicts Committee may not own any interest in our General Partner or its affiliates other than common units or awards under our incentive compensation plan. The members of the Conflicts Committee are Messrs. Bairrington and Haney. Mr. Haney serves as the chair. The Board determines whether to refer a matter to the Conflicts Committee on a case-by-case basis.

Code of Business Ethics and Conduct

Our General Partner has adopted a Code of Business Ethics and Conduct that applies to all directors and employees designed to help directors and employees resolve ethical issues in an increasingly complex global business environment. Our Code of Business Ethics and Conduct covers topics including, but not limited to, conflicts of interest, insider trading, competition and fair dealing, discrimination and harassment, confidentiality, payments to government personnel, anti-boycott laws, U.S. embargoes and sanctions, compliance procedures and employee complaint procedures. We also have a Code of Ethics for the Principal Executive Officer and Senior Financial Officers. This code supplements the Code of Business Ethics and Conduct and is applicable to our Chief Executive Officer, Chief Financial Officer and Controller. Any amendments to or waivers from the Code of Ethics for the Principal Executive Officer and Senior Financial Officers will be posted on our website. Both codes are available on our website under the “Corporate Governance” caption. Unitholders may also request printed copies of our Code of Business Ethics and Conduct by following the instructions located under the section “Website Access to SEC Reports” in Items 1 and 2. Business and Properties.

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Item 11. EXECUTIVE COMPENSATION

Neither we nor our General Partner employ the individuals who serve as executive officers of our General Partner and are responsible for managing our business. We are managed by our General Partner, the executive officers of which are employees of Phillips 66. We and our General Partner have entered into an omnibus agreement, as amended, with Phillips 66 pursuant to which, among other matters:

•Phillips 66 makes available to our General Partner the services of the Phillips 66 employees who serve as the executive officers of our General Partner.

•Our General Partner is obligated to reimburse Phillips 66 for an allocated portion of the costs that Phillips 66 incurs in providing compensation and benefits to certain Phillips 66 employees, including the executive officers of our General Partner who devote at least a majority of their working time to our business (but not the executive officers of our General Partner who devote less than a majority of their working time to our business).

•Our General Partner pays an operational and administrative support fee to Phillips 66 to cover, among other things, the services provided to us by the executive officers of our General Partner who devote less than a majority of their working time to our business.

Pursuant to SEC rules, we are required to disclose certain compensation information for our “named executive officers,” which generally includes our chief executive officer, chief financial officer and the three other most highly compensated executive officers serving as such as of the end of the last fiscal year. As of December 31, 2021, our named executive officers (NEOs) were:

•Greg C. Garland, Chairman and Chief Executive Officer

•Kevin J. Mitchell, Vice President and Chief Financial Officer

•Timothy D. Roberts, Vice President and Chief Operating Officer

•Robert A. Herman, Vice President

•Paula A. Johnson, Vice President, General Counsel and Secretary (retired January 2022)

Compensation Discussion and Analysis

Each of our NEOs was also an officer of Phillips 66 during 2021, devoted the majority of their time to their respective roles at Phillips 66 and also spent time, as needed, directly managing our business and affairs. Pursuant to the terms of the amended omnibus agreement, we pay a fixed operational and administrative support fee to Phillips 66, which covers, among other things, the services provided to us by these individuals. Our NEOs do not receive any separate amounts of compensation for their services to our business or as executive officers of our General Partner and, except for the fixed operational and administrative support fee we pay to Phillips 66, we did not otherwise pay or reimburse any compensation amounts to or for them during 2021.

Neither we nor our General Partner has a compensation committee. The Human Resources and Compensation Committee of the Board of Directors of Phillips 66 (the Compensation Committee) has ultimate decision-making authority with respect to the compensation of Phillips 66’s senior officers. The elements of compensation discussed below, and Phillips 66’s decisions with respect to determinations on payments, were approved by the Compensation Committee, and were not subject to approvals by the Board of Directors of our General Partner.

See Note 14—Related Party Transactions—Amended Omnibus Agreement, in the Notes to Consolidated Financial Statements, for additional information.

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Elements of Compensation

For a detailed discussion of the compensation and benefits that Phillips 66 provides to its NEOs, and its philosophy, objectives and policies related to executive compensation, please refer to the Compensation Discussion and Analysis section of Phillips 66’s 2022 Proxy Statement, which will be available upon its filing on the SEC’s website at http://www.sec.gov.

Our Incentive Compensation Plan

Our General Partner adopted the ICP for officers, directors and employees of our General Partner or its affiliates, and any consultants, affiliates of our General Partner or other individuals who perform services for us. Our General Partner may issue our executive officers and other service providers long-term equity-based awards under the ICP. These awards are intended to compensate the recipients thereof based on the performance of our common units and their continued employment during the vesting period, as well as align their long-term interests with those of our unitholders. We will be responsible for the cost of awards granted under the ICP, and all determinations with respect to awards to be made under the ICP will be made by the Board of Directors of our General Partner or any committee thereof that may be established for such purpose or by any delegate of the Board of Directors or such committee, subject to applicable law, which we refer to as the plan administrator. The Board of Directors of our General Partner is currently designated as the plan administrator. The following description reflects the principal terms of the ICP.

General. The ICP provides for the grant, from time to time at the discretion of the Board of Directors of our General Partner or any applicable committee or delegate thereof, subject to applicable law, of unit awards, restricted units, phantom units, unit options, unit appreciation rights, distribution equivalent rights, profits interest units and other unit-based awards. The purpose of awards under the ICP is to provide additional incentive compensation to individuals providing services to us, and to align the economic interests of such individuals with the interests of our unitholders. The ICP limits the number of units that may be delivered pursuant to vested awards to 2,500,000 common units, subject to proportionate adjustment in the event of unit splits and similar events. Common units subject to awards that are canceled, forfeited, or otherwise terminated without delivery of the common units will be available for delivery pursuant to other awards. Common units canceled for payment of taxes will not be available for delivery pursuant to other awards.

Restricted Units and Phantom Units. A restricted unit is a common unit that is subject to forfeiture if the terms of vesting are not met. Upon vesting, the forfeiture restrictions lapse and the recipient holds a common unit that is not subject to forfeiture. A phantom unit is a notional unit that entitles the grantee to receive a common unit upon the vesting of the phantom unit or on a deferred basis upon specified future dates or events or, in the discretion of the plan administrator, cash equal to the fair market value of a common unit. The plan administrator may make grants of restricted and phantom units under the ICP that contain such terms, consistent with the ICP, as the administrator may determine are appropriate, including the period over which restricted or phantom units will vest. The plan administrator may, in its discretion, base vesting on the grantee’s completion of a period of service or upon the achievement of specified financial objectives or other criteria or upon a change of control (as defined in the ICP) or as otherwise described in an award agreement. Distributions made by us with respect to awards of restricted units may be subject to the same vesting requirements as the restricted units.

Distribution Equivalent Rights. The plan administrator, in its discretion, may also grant distribution equivalent rights, either as stand-alone awards or in tandem with other awards. Distribution equivalent rights are rights to receive an amount in cash, restricted units or phantom units equal to all or a portion of the cash distributions made on units during the period in which an award remains outstanding.

Unit Options and Unit Appreciation Rights. The ICP also permits the grant of options covering common units. Unit options represent the right to purchase a number of common units at a specified exercise price. Unit appreciation rights represent the right to receive the appreciation in the value of a number of common units over a specified exercise price, either in cash or in common units. Unit options and unit appreciation rights may be granted to such eligible individuals and with such terms as the plan administrator may determine, consistent with the ICP; however, a unit option or unit appreciation right must have an exercise price equal to at least the fair market value of a common unit on the date of grant.

Unit Awards. Awards covering common units may be granted under the ICP with such terms and conditions, including restrictions on transferability, as the plan administrator may establish.

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Profits Interest Units. Awards granted to grantees who are partners, or granted to grantees in anticipation of the grantee becoming a partner or granted as otherwise determined by the plan administrator, may consist of profits interest units. The plan administrator will determine the applicable vesting dates, conditions to vesting and restrictions on transferability and any other restrictions for profits interest awards.

Other Unit-Based Awards. The ICP may also permit the grant of “other unit-based awards,” which are awards that, in whole or in part, are valued or based on or related to the value of a common unit. The vesting of another unit-based award may be based on a participant’s continued service, the achievement of performance criteria or other measures. On vesting or on a deferred basis upon specified future dates or events, other unit-based awards may be paid in cash and/or in units (including restricted units), or any combination thereof as the plan administrator may determine.

Source of Common Units. Common units to be delivered with respect to awards may be newly issued units, common units acquired by us or our General Partner in the open market, common units already owned by our General Partner or us, common units acquired by our General Partner directly from us or any other person or any combination of the foregoing.

Anti-Dilution Adjustments and Change in Control. If an “equity restructuring” event occurs, and any adjustments to awards under the ICP with respect to such event were discretionary, the plan administrator will equitably adjust the number and type of units covered by each outstanding award and the terms and conditions of such award to equitably reflect the restructuring event, and the plan administrator will adjust the number and type of units with respect to which future awards may be granted under the ICP. With respect to other similar events, including, for example, a combination or exchange of units, a merger or consolidation or an extraordinary distribution of our assets to unitholders, that would not result in an accounting charge if adjustment to awards were discretionary, the plan administrator will have discretion to adjust awards in the manner it deems appropriate and to make equitable adjustments, if any, with respect to the number of units available under the ICP and the kind of units or other securities available for grant under the ICP. Furthermore, upon any such event, including a change in control of us or our General Partner, or a change in any law or regulation affecting the ICP or outstanding awards or any relevant change in accounting principles, the plan administrator will generally have discretion to (1) accelerate the time of exercisability or vesting or payment of an award, (2) require awards to be surrendered in exchange for a cash payment or substitute other rights or property for the award, (3) provide for the award to be assumed by a successor or one of its affiliates, with appropriate adjustments thereto, (4) cancel unvested awards without payment or (5) make other adjustments to awards as the plan administrator deems appropriate to reflect the applicable transaction or event.

Termination of Employment. The consequences of the termination of a grantee’s employment, membership on our General Partner’s Board of Directors or other service arrangement will generally be determined by the Compensation Committee in the terms of the relevant award agreement.

Amendment or Termination of ICP. The plan administrator, at its discretion, may terminate the ICP at any time with respect to the common units for which a grant has not previously been made. The ICP automatically terminates in July 2023. The plan administrator also has the right to alter or amend the ICP or any part of it from time to time or to amend any outstanding award made under the ICP, provided that no change in any outstanding award may be made that would materially impair the vested rights of the participant without the consent of the affected participant or result in taxation to the participant under Section 409A of the Internal Revenue Code.

Compensation Consultants

Our General Partner does not have a compensation committee, and its Board of Directors did not retain a compensation consultant in 2021.

Unit Ownership Requirements

Our General Partner does not have established unit ownership requirements.

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Guidelines for Trading by Insiders

We maintain policies that govern trading in our units by the officers and directors of our General Partner who are required to report under Section 16 of the Exchange Act, as well as certain other employees who may have regular access to material non-public information about us. These policies include pre-approval requirements for all trades and periodic trading “black-out” periods designed with reference to our quarterly financial reporting schedule. We also require pre-approval of all trading plans adopted pursuant to Rule 10b5-1 promulgated under the Exchange Act. These policies also prohibit speculative transactions in our units that are designed to hedge the economic risks of unit ownership, as well as pledging our units.

Compensation Risk Assessment

The Compensation Committee oversees the risk assessment performed by Phillips 66 management of all elements of its compensation programs, policies and practices for all employees. A discussion of this risk assessment will be included in the Compensation Discussion and Analysis section of Phillips 66’s 2022 Proxy Statement, which will be available upon its filing on the SEC’s website at http://www.sec.gov.

Chief Executive Officer Pay Ratio

Neither we nor our General Partner have any employees. As a result, we have no basis for disclosing the annual compensation and corresponding ratio as required under Item 402(u) of Regulation S-K.

Compensation Committee Interlocks and Insider Participation

As discussed above, the listing rules of the New York Stock Exchange (NYSE) do not require us to maintain, and we do not maintain, a compensation committee.

Compensation Committee Report

The independent directors of our General Partner (the Independent Directors) have reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Independent Directors recommended to the Board of Directors of our General Partner that the Compensation Discussion and Analysis be included in this Annual Report on Form 10-K.

The Independent Directors have submitted this Report to the Board of Directors as of February 18, 2022:

•P.D. (David) Bairrington

•Mark A. Haney

•C. Douglas Johnson

•Joseph W. O’Toole

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Compensation of Our Directors

The officers or employees of our General Partner or of Phillips 66 who also serve as directors of our General Partner do not receive additional compensation for their service as a director of our General Partner. Directors of our General Partner who are not officers or employees of our General Partner or of Phillips 66, or independent directors, receive compensation as described below. In addition, independent directors are reimbursed for out-of-pocket expenses in connection with attending meetings of the Board of Directors or its committees. Each director will be indemnified for their actions associated with being a director to the fullest extent permitted under Delaware law.

Each of our General Partner’s independent directors receives an annual compensation package, which currently consists of $95,000 in annual cash compensation and $105,000 in annual equity-based compensation. In addition, the chairman of the Audit Committee and the chairman of the Conflicts Committee each receives an additional $15,000 in annual cash compensation and each member of the Conflicts Committee other than the Chairman receives a cash retainer of $10,000. Our Board of Directors periodically benchmarks our independent director compensation with a group of peer partnerships.

The equity portion of the independent directors’ compensation consists of phantom units granted under the ICP, which are subject to a three-year restriction period. The phantom units are expected to be granted in tandem with distribution equivalent rights and will be settled upon the expiration of the three-year restriction period. No deferral elections are expected to be permitted with respect to the equity-based portion of the annual compensation package. The cash portion of the annual compensation package is paid monthly, unless a timely election is made by the independent director to defer payment.

Non-Employee Director Compensation Table

The following table summarizes the compensation for our non-employee directors for 2021.

Name	Fees Earned or Paid in Cash(1) ($)	Unit Awards(2) ($)	Option Awards ($)	Non-Equity Incentive Plan Compensation ($)	Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)	All Other Compensation(3) ($)	Total ($)
P.D. (David) Bairrington	105,000	105,002	—	—	—	10,000	220,002
Mark A. Haney	110,000	105,002	—	—	—	—	215,002
C. Douglas Johnson	98,333	105,002	—	—	—	—	203,335
Joseph W. O’Toole	110,000	105,002	—	—	—	15,000	230,002

(1) Reflects 2021 base cash compensation of $95,000 payable to each non-employee director and the applicable committee retainers. In 2021, non-employee directors serving in specified committee positions also received the additional cash compensation described above. Compensation amounts reflect adjustments related to various changes in committee assignments by board members through the year, if any. Amounts shown in the “Fees Earned or Paid in Cash” column include any amounts that were voluntarily deferred. No directors elected to defer their cash compensation in 2021.

(2) Amounts represent the grant date fair value of unit awards. In 2021, non-employee directors received a grant of phantom units valued at $105,000 on the date of grant based on the average of the high and low prices for Phillips 66 Partners LP units on the grant date. These grants are made in whole units with fractional units rounded up, resulting in units with a value of $105,002 being granted on January 25, 2021.

(3) “All Other Compensation” is made up primarily of certain gifts by directors to charities and educational institutions (excluding certain religious, political, fraternal, or athletic organizations) that are tax-exempt under Section 501(c)(3) of the IRC or meet similar requirements under the applicable law of other countries that we match under our Matching Gifts Program (Mr. Bairrington $10,000 and Mr. O’Toole $15,000). For active directors, the program matches up to $15,000 with regard to each program year. The amounts shown reflect the actual payments made by us in 2021, which due to processing delays can include contributions in 2020 that were matched by the Company in 2021 and therefore reported in 2021. “All Other Compensation” also includes any smaller gifts, such as books, ornaments and jackets, as well as associated tax protection.

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Item 12.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Equity Compensation Plan Information

The following table sets forth information about Phillips 66 Partners LP common units that may be issued under all existing equity compensation plans as of December 31, 2021.

Plan Category	Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights(1)		Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights(3)		Number of Securities  Remaining Available for  Future Issuance  Under Equity  Compensation Plans  (Excluding Securities Reflected in Column (a))
	(a)		(b)		(c)
Equity compensation plans approved by security holders	24,890	(2)	$	—	2,452,435
Equity compensation plans not approved by security holders	—		—		—
Total	24,890		$	—	2,452,435

(1) Includes awards issued under the Incentive Compensation Plan (ICP).

(2) Includes 24,890 phantom units issued to non-employee directors that will be settled in cash upon lapsing of restrictions; however, the Partnership reserves the right to settle the phantom units with common units representing limited partner interests.

(3) There were no options outstanding under the ICP as of December 31, 2021.

Security Ownership of Certain Beneficial Owners

The following table sets forth information regarding persons who we know to be the beneficial owners of more than 5% of our issued and outstanding common units and Series A preferred units as of February 15, 2022. Percentages shown in the table are based on 228,340,146 common units and 13,819,791 Series A preferred units outstanding as of February 15, 2022.

Name and Address	Common Units Beneficially Owned	Percentage of Common Units Beneficially Owned		Series A Preferred Units Beneficially Owned	Percentage of Series A Preferred Units Beneficially Owned
Phillips 66 Project Development Inc.(1) 2331 CityWest Blvd. Houston, TX 77042	168,062,536	73.6	%	—	—
Stonepeak Screwdriver SPV LLC 717 5th Avenue New York, NY 10022	—	—		11,608,624	84.0	%
FR XIII PSXP Holdings Holdco, L.L.C. One Lafayette Place Greenwich, CT 06830	—	—		1,842,639	13.3	%

(1) Phillips 66 is the parent company of Phillips 66 Company, which is the parent company of Phillips 66 Project Development Inc., the sole owner of the member interests of our General Partner. Phillips 66 and Phillips 66 Company may, therefore, be deemed to beneficially own the units held by Phillips 66 Project Development Inc., in addition to the 1,697,601 common units directly owned by Phillips 66 Company.

104

Security Ownership of Directors and Executive Officers

The following table sets forth the number of our common units and shares of Phillips 66 common stock beneficially owned as of February 15, 2022 by each director and named executive officer of our General Partner, and by all directors and executive officers of our General Partner as a group. The address for each person named below is 2331 CityWest Blvd., Houston, Texas 77042.

	Amount and Nature of Beneficial Ownership		Percent of Total Outstanding (%)
Name of Beneficial Owner	Phillips 66 Partners Common Units	Phillips 66 Common Stock(1)	Phillips 66 Partners	Phillips 66
Greg C. Garland	35,000	1,576,002	*	*
Kevin J. Mitchell	10,000	254,036	*	*
Timothy D. Roberts	—	162,545	*	*
J. Scott Pruitt	—	21,236	*	*
Robert A. Herman	25,000	232,133	*	*
P.D. (David) Bairrington	43,698	—	*	*
Mark A. Haney	32,477	—	*	*
C. Douglas Johnson	8,000	—	*	*
Joseph W. O’Toole	35,000	—	*	*
All Directors and Executive Officers as a Group (9 Persons)	189,175	2,245,952	*	*

* Less than 1% of common units or common stock outstanding, as applicable.

(1) Phillips 66 Common Stock ownership amounts include:

•Stock options exercisable within 60 days of February 15, 2022 as follows: Mr. Garland, 953,233; Mr. Mitchell, 172,559; Mr. Roberts, 122,166; Mr. Pruitt, 8,066; and Mr. Herman, 169,866

•Restricted or deferred stock units that may be voted or sold upon the passage of time as follows: Mr. Garland, 108,316; Mr. Mitchell, 38,292; Mr. Roberts, 29,012; Mr. Pruitt, 12,856; and Mr. Herman, 27,893

105

Item 13.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

At December 31, 2021, our General Partner, Phillips 66 Partners GP LLC, and its affiliates owned 169,760,137 common units, representing approximately 74% of our total outstanding common units, and approximately 70% of our total outstanding common units and Series A preferred units (on an as-converted basis) in the aggregate.

Distributions and Payments to Our General Partner and Its Affiliates

The following table summarizes the distributions and payments to be made by us to our General Partner and its affiliates in connection with the ongoing operations or liquidation of Phillips 66 Partners LP. These distributions and payments were determined by and among affiliated entities and, consequently, are not the result of arm’s-length negotiations. Upon our liquidation, the partners will be entitled to receive liquidating distributions according to their respective capital account balances.

Distributions of available cash to our General Partner and its affiliates We generally make cash distributions to the unitholders pro rata, including Phillips 66 Project Development Inc. and its affiliates, as a holder of 169,760,137 common units.

Payments to our General Partner and its affiliates
Under our partnership agreement, we are required to reimburse our General Partner and its affiliates for all costs and expenses that they incur on our behalf for managing and controlling our business and operations. Except to the extent specified under certain agreements described below, our General Partner determines the amount of these expenses, which must be made in good faith under the terms of our partnership agreement. Under our amended omnibus agreement, we reimburse Phillips 66 for expenses incurred by Phillips 66 and its affiliates in providing operational support and general and administrative services to us, including the provision of executive management services by certain officers of our General Partner. The expenses of other employees are allocated to us based on the amount of time actually spent by those employees on our business. These reimbursable expenses also include an allocable portion of the compensation and benefits of employees and executive officers of other affiliates of our General Partner who provide services to us. The costs and expenses for which we are required to reimburse our General Partner and its affiliates are not subject to any caps or other limits.

Under our amended and restated operational services agreement, we pay Phillips 66 for any direct costs actually incurred by Phillips 66 in providing our pipelines, terminals, processing and storage facilities with certain maintenance, operational, administrative and construction services.

Under our tax sharing agreement, we reimburse Phillips 66 for our share of state and local income and other taxes incurred by Phillips 66 as a result of our results of operations being included in a combined or consolidated tax return filed by Phillips 66 with respect to taxable periods on or after the completion of our initial public offering in 2013.

Withdrawal or removal of our General Partner If our General Partner withdraws or is removed, its general partner interest will either be sold to the new general partner for cash or converted into common units, in each case for an amount equal to the fair market value of those interests.

106

Transactions and Commercial and Other Agreements with Phillips 66 and Related Parties

See “2021 Developments” in Items 1 and 2. Business and Properties, for a description of our transactions and related agreements with Phillips 66 in 2021. See the “Commercial Agreements,” “Amended and Restated Operational Services Agreement,” “Amended Omnibus Agreement” and “Tax Sharing Agreement” sections of Note 14—Related Party Transactions, in the Notes to Consolidated Financial Statements, for summaries of the terms of these and other agreements with Phillips 66.

Procedures for Review, Approval and Ratification of Related Person Transactions

The Board of Directors of our General Partner adopted a related person transactions policy that provides that the Board of Directors of our General Partner or its authorized committee will review on at least a quarterly basis all related person transactions that are required to be disclosed under the SEC rules and, when appropriate, initially authorize or ratify all such transactions. In the event that the Board of Directors of our General Partner or its authorized committee considers ratification of a related person transaction and determines not to so ratify, the Code of Business Ethics and Conduct provides that our management will make all reasonable efforts to cancel or annul the transaction.

The related person transactions policy provides that, in determining whether or not to recommend the initial approval or ratification of a related person transaction, the Board of Directors of our General Partner or its authorized committee should consider all of the relevant facts and circumstances available, including (if applicable) but not limited to: (1) whether there is an appropriate business justification for the transaction; (2) the benefits that accrue to us as a result of the transaction; (3) the terms available to unrelated third parties entering into similar transactions; (4) the impact of the transaction on a director’s independence (in the event the related person is a director, an immediate family member of a director or an entity in which a director or an immediate family member of a director is a partner, shareholder, member or executive officer); (5) the availability of other sources for comparable products or services; (6) whether it is a single transaction or a series of ongoing, related transactions; and (7) whether entering into the transaction would be consistent with the Code of Business Ethics and Conduct.

Director Independence

See Item 10. Directors, Executive Officers and Corporate Governance, for information on director independence required by Item 407(a) of Regulation S-K.

107

Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following table presents fees for the years ended December 31, 2021 and 2020, for professional services performed by our independent registered public accounting firm, Ernst & Young LLP (EY).

	Millions of Dollars
	2021		2020
Fees
Audit fees(1)	$	0.8	0.9
Audit-related fees	—		—
Tax fees	—		—
All other fees	—		—
Total	$	0.8	0.9

(1) Fees for audit services related to the fiscal year consolidated audit, quarterly reviews and registration statements.

The Audit Committee has adopted a pre-approval policy that provides guidelines for the audit, audit-related, tax and other non-audit services that may be provided by EY to the Partnership. All of the fees in the table above were approved in accordance with this policy. The policy (a) identifies the guiding principles that must be considered by the Audit Committee in approving services to ensure that EY’s independence is not impaired; (b) describes the audit, audit-related, tax and other services that may be provided and the non-audit services that are prohibited; and (c) sets forth pre-approval requirements for all permitted services. Under the policy, all services to be provided by EY must be pre-approved by the Audit Committee. The Audit Committee has delegated authority to approve permitted services to the Audit Committee’s Chair. Such approval must be reported to the entire Audit Committee at the next scheduled Audit Committee meeting.

108

PART IV

Item 15. EXHIBIT AND FINANCIAL STATEMENT SCHEDULES

(a)	1.	Financial Statements and Supplementary Data The financial statements and supplementary data listed in the Index to Financial Statements, which appears on page 55, are filed as part of this Annual Report on Form 10-K.
	2.	Financial Statement Schedules Financial statement schedules are omitted because they are not required, not significant, not applicable or the information is shown in the Financial Statements or the Notes to Consolidated Financial Statements.
	3.	Exhibits The exhibits listed in the Index to Exhibits, which appears on pages 110 to 114, are filed as part of this Annual Report on Form 10-K.

Item 16. FORM 10-K SUMMARY

None.

109

PHILLIPS 66 PARTNERS LP

INDEX TO EXHIBITS

		Incorporated by Reference
Exhibit Number	Exhibit Description	Form	Exhibit Number	Filing Date	SEC File No.
2.1	Agreement and Plan of Merger, dated as of October 26, 2021, by and among Phillips 66, Phillips 66 Company, Phillips 66 Project Development Inc., Phoenix Sub LLC, Phillips 66 Partners LP, and Phillips 66 Partners GP LLC.	8-K	2.1	10/27/2021	001-36011
3.1	Certificate of Limited Partnership of Phillips 66 Partners LP.	S-1	3.1	3/27/2013	333-187582
3.2	Amendment to Certificate of Limited Partnership, dated October 5, 2017.	8-K	3.1	10/10/2017	001-36011
3.3	Third Amended and Restated Agreement of Limited Partnership of Phillips 66 Partners LP dated as of August 1, 2019.	8-K	3.1	8/1/2019	001-36011
3.4	Amendment No. 1 to the Third Amended and Restated Agreement of Limited Partnership of Phillips 66 Partners LP, dated as of October 26, 2021.	8-K	3.1	10/27/2021	001-36011
4.1	Registration Rights Agreement dated as of October 6, 2017 by and among Phillips 66 Partners LP and the Purchasers party thereto.	8-K	4.1	10/10/2017	001-36011
4.2	Description of Phillips 66 Partners L.P.’s securities.	10-K	4.2	2/21/2020	001-36011
4.3	Indenture, dated as of February 23, 2015, between Phillips 66 Partners LP and The Bank of New York Mellon Trust Company, N.A., as trustee, in respect of senior debt securities of Phillips 66 Partners L.P.	8-K	4.1	2/23/2015	001-36011
4.4	First Supplemental Indenture, dated as of February 23, 2015, between Phillips 66 Partners LP and The Bank of New York Mellon Trust Company, N.A., as trustee, in respect of the 2020 Notes.	8-K	4.2	2/23/2015	001-36011
4.5	Second Supplemental Indenture, dated as of February 23, 2015, between Phillips 66 Partners LP and The Bank of New York Mellon Trust Company, N.A., as trustee, in respect of the 2025 Notes.	8-K	4.3	2/23/2015	001-36011
4.6	Third Supplemental Indenture, dated as of February 23, 2015, between Phillips 66 Partners LP and The Bank of New York Mellon Trust Company, N.A., as trustee, in respect of the 2045 Notes.	8-K	4.4	2/23/2015	001-36011
4.7	Fourth Supplemental Indenture, dated as of October 14, 2016, between Phillips 66 Partners LP and the Bank of New York Mellon Trust Company, N.A., as trustee, in respect of the 2026 Notes.	8-K	4.2	10/17/2016	001-36011
4.8	Fifth Supplemental Indenture, dated as of October 14, 2016, between Phillips 66 Partners LP and The Bank of New York Mellon Trust Company, N.A., as trustee, in respect of the 2046 Notes.	8-K	4.3	10/17/2016	001-36011

110

		Incorporated by Reference
Exhibit Number	Exhibit Description	Form	Exhibit Number	Filing Date	SEC File No.
4.9	Sixth Supplemental Indenture, dated as of October 13, 2017, between Phillips 66 Partners LP and The Bank of New York Mellon Trust Company, N.A., as trustee, in respect of the 2028 Notes.	8-K	4.2	10/13/2017	001-36011
4.10	Indenture, dated as of July 26, 2019, between Phillips 66 Partners LP and U.S. Bank National Association, as trustee, in respect of senior debt securities of Phillips 66 Partners LP.	S-3	4.5	7/26/2019	333-232865
4.11	First Supplemental Indenture, dated as of September 6, 2019, between Phillips 66 Partners LP and U.S. Bank National Association, as trustee, in respect of the 2024 Notes.	8-K	4.2	9/6/2019	001-36011
4.12	Second Supplemental Indenture, dated as of September 6, 2019, between Phillips 66 Partners LP and U.S. Bank National Association, as trustee, in respect of the 2029 Notes.	8-K	4.3	9/6/2019	001-36011
10.1	Credit Agreement, dated as of April 6, 2021, by and among Phillips 66 Partners LP, Phillips 66 Partners Holdings LLC, the lenders party thereto, The Bank of Nova Scotia, Houston Branch, as administrative agent, and The Bank of Nova Scotia, BofA Securities, Inc. and Sumitomo Mitsui Banking Corporation as joint lead arrangers and joint bookrunners.	8-K	10.1	4/12/2021	001-36011
10.2	Eighth Amendment to the Omnibus Agreement, dated as of March 1, 2020, by and among Phillips 66 Partners LP, Phillips 66 Partners GP LLC, Phillips 66 Company, Phillips 66 Pipeline LLC, Phillips 66 Partners Holdings LLC, and Phillips 66 Carrier LLC.	10-Q	10.1	5/1/2020	001-36011
10.3	Contingent Equity Contribution Undertaking (Senior Notes), dates as of March 11, 2019, between Energy Transfer Operating, L.P., Phillips 66 Partners LP, Enbridge Inc., and MPLX LP, as Contributors, and Midwest Connector Capital Company LLC, as the Company, and U.S. Bank National Association, as trustee, in respect of the Senior Notes.	10-Q	10.1	5/1/2020	001-36011
10.4	Amended and Restated Credit Agreement dated as of July 30, 2019, among Phillips 66 Partners Holdings LLC, the lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent.	8-K	10.1	8/1/2019	001-36011
10.5	Omnibus Agreement dated as of July 26, 2013, by and among Phillips 66 Company, Phillips 66 Pipeline LLC, Phillips 66 Partners LP, Phillips 66 Partners Holdings LLC, Phillips 66 Carrier LLC, and Phillips 66 Partners GP LLC.	8-K	10.2	7/30/2013	001-36011
10.6	First Amendment to the Omnibus Agreement, dated as of February 28, 2014, by and among Phillips 66 Company, on behalf of itself and the other Phillips 66 Entities (as defined in the Omnibus Agreement), Phillips 66 Pipeline LLC, Phillips 66 Partners LP, Phillips 66 Partners Holdings LLC, Phillips 66 Carrier LLC and Phillips 66 Partners GP LLC.	8-K	10.1	3/3/2014	001-36011

111

		Incorporated by Reference
Exhibit Number	Exhibit Description	Form	Exhibit Number	Filing Date	SEC File No.
10.7	Second Amendment to the Omnibus Agreement, dated as of December 1, 2014, by and among Phillips 66 Company, on behalf of itself and the other Phillips 66 Entities (as defined in the Omnibus Agreement), Phillips 66 Pipeline LLC, Phillips 66 Partners LP, Phillips 66 Partners Holdings LLC, Phillips 66 Carrier LLC and Phillips 66 Partners GP LLC.	8-K	10.1	12/2/2014	001-36011
10.8	Third Amendment to the Omnibus Agreement, dated as of March 2, 2015, by and among Phillips 66 Company, on behalf of itself and the other Phillips 66 Entities (as defined in the Omnibus Agreement), Phillips 66 Pipeline LLC, Phillips 66 Partners LP, Phillips 66 Partners Holdings LLC, Phillips 66 Carrier LLC and Phillips 66 Partners GP LLC.	8-K	10.1	3/2/2015	001-36011
10.9	Fourth Amendment to the Omnibus Agreement, dated as of March 1, 2016, by and among Phillips 66 Company, on behalf of itself and the other Phillips 66 Entities (as defined in the Omnibus Agreement), Phillips 66 Pipeline LLC, Phillips 66 Partners LP, Phillips 66 Partners Holdings LLC, Phillips 66 Carrier LLC and Phillips 66 Partners GP LLC.	8-K	10.1	3/1/2016	001-36011
10.10	Fifth Amendment to the Omnibus Agreement, dated as of October 14, 2016, by and among Phillips 66 Partners LP, Phillips 66 Partners GP LLC, Phillips 66 Company, Phillips 66 Pipeline LLC, Phillips 66 Partners Holdings LLC, and Phillips 66 Carrier LLC.	8-K	10.1	10/17/2016	001-36011
10.11	Sixth Amendment to the Omnibus Agreement, dated as of January 11, 2017, by and among Phillips 66 Partners LP, Phillips 66 Partners GP LLC, Phillips 66 Company, Phillips 66 Pipeline LLC, Phillips 66 Partners Holdings LLC, and Phillips 66 Carrier LLC.	10-K	10.19	2/17/2017	001-36011
10.12	Seventh Amendment to the Omnibus Agreement, dated as of October 1, 2017, by and among Phillips 66 Partners LP, Phillips 66 Partners GP LLC, Phillips 66 Company, Phillips 66 Pipeline LLC, Phillips 66 Partners Holdings LLC, and Phillips 66 Carrier LLC.	8-K	10.1	10/10/2017	001-36011
10.13	Amended and Restated Operational Services Agreement, dated as of October 1, 2017, by and among Phillips 66 Carrier LLC, Phillips 66 Partners Holdings LLC, and Phillips 66 Pipeline LLC.	8-K	10.2	10/10/2017	001-36011
10.14	First Amendment to the Amended and Restated Operational Services Agreement, dated as of May 30, 2018, by and among Phillips 66 Carrier LLC, Phillips 66 Partners Holdings LLC, and Phillips 66 Pipeline LLC.	10-Q	10.1	7/27/2018	001-36011
10.15	Tax Sharing Agreement dated as of July 26, 2013, between Phillips 66 and Phillips 66 Partners LP.	8-K	10.9	7/30/2013	001-36011
10.16	Natural Gas Liquids Storage Agreement (Clemens Facility), dated March 1, 2016, by and between Phillips 66 Sweeny Frac LLC and Phillips 66 Company.	8-K	10.4	3/1/2016	001-36011
10.17	Fractionation Agreement, dated March 1, 2016, by and between Phillips 66 Sweeny Frac LLC and Phillips 66 Company.	8-K	10.3	3/1/2016	001-36011

112

		Incorporated by Reference
Exhibit Number	Exhibit Description	Form	Exhibit Number	Filing Date	SEC File No.
10.18	Amendment No. 1 to Fractionation Agreement, dated December 11, 2019, by and between Phillips 66 Sweeny Frac LLC and Phillips 66 Company.	8-K	10.15	2/21/2020	001-36011
10.19†	Amended and Restated Tolling Services Agreement, dated as of October 1, 2017, by and between Merey Sweeny, L.P. and Phillips 66 Company.	8-K	10.3	10/10/2017	001-36011
10.20**	Phillips 66 Partners LP 2013 Incentive Compensation Plan.	8-K	10.1	7/26/2013	001-36011
10.21**	Phillips 66 Partners GP LLC Deferred Compensation Plan for Non-Employee Directors.	10-Q	10.12	8/20/2013	001-36011
10.22**	Form of Phantom Unit Award Agreement for Non-Employee Directors under the Phillips 66 Partners LP 2013 Incentive Compensation Plan.	10-Q	10.13	8/20/2013	001-36011
10.23	Equity Distribution Agreement, dated as of February 25, 2020, by and among the Partnership and the General Partner, on the one hand, and RBC Capital Markets, LLC, BofA Securities, Inc., Barclays Capital Inc., BMO Capital Markets Corp., BNP Paribas Securities Corp., BTIG, LLC, CIBC World Markets Corp., Citigroup Global Markets Inc., Commerz Markets LLC, Credit Agricole Securities (USA) Inc., Credit Suisse Securities (USA) LLC, Goldman Sachs & Co. LLC, HSBC Securities (USA) Inc., J.P. Morgan Securities LLC, Jefferies LLC, Mizuho Securities USA LLC, MUFG Securities Americas Inc., Scotia Capital (USA) Inc., SMBC Nikko Securities America, Inc., SunTrust Robinson Humphrey, Inc., TD Securities (USA) LLC, and Wells Fargo Securities, LLC.	8-K	1.1	2/25/2020	001-36011
21*	List of Subsidiaries of Phillips 66 Partners LP.
23.1*	Consent of Ernst & Young LLP, independent registered public accounting firm.
23.2*	Consent of Deloitte & Touche LLP, independent registered public accounting firm.
23.3*	Consent of Grant Thornton, independent registered public accounting firm.
31.1*	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.
31.2*	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.
32*	Certifications pursuant to 18 U.S.C. Section 1350.
99*	The financial statements of Dakota Access LLC, pursuant to Rule 3-09 of Regulation S-X.
101.INS*	Inline XBRL Instance Document.
101.SCH*	Inline XBRL Taxonomy Extension Schema Document.

113

101.CAL*	Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF*	Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*	Inline XBRL Taxonomy Extension Labels Linkbase Document.
101.PRE*	Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104*	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
* Filed herewith.
** Compensatory plan or arrangement.
† Confidential treatment has been requested for certain portions of this Exhibit pursuant to a confidential treatment request filed with the Securities and Exchange Commission on October 10, 2017. Such portions have been omitted and filed separately with the Securities and Exchange Commission.

114

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		PHILLIPS 66 PARTNERS LP
		By: Phillips 66 Partners GP LLC, its general partner
Date:	February 18, 2022	/s/ Greg C. Garland
		Greg C. Garland Chairman of the Board of Directors and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below, as of February 18, 2022, by the following persons on behalf of the registrant and in the capacities indicated.

Signature	Title
/s/ Greg C. Garland	Chairman of the Board of Directors
Greg C. Garland	and Chief Executive Officer
	(Principal executive officer)
	Phillips 66 Partners GP LLC
/s/ Kevin J. Mitchell	Director, Vice President
Kevin J. Mitchell	and Chief Financial Officer
	(Principal financial officer)
	Phillips 66 Partners GP LLC
/s/ J. Scott Pruitt	Vice President and Controller
J. Scott Pruitt	(Principal accounting officer)
	Phillips 66 Partners GP LLC

115

/s/ P.D. Bairrington	Director
P.D. Bairrington	Phillips 66 Partners GP LLC
/s/ Mark A. Haney	Director
Mark A. Haney	Phillips 66 Partners GP LLC
/s/ Robert A. Herman	Director
Robert A. Herman	Phillips 66 Partners GP LLC
/s/ C. Doug Johnson	Director
C. Doug Johnson	Phillips 66 Partners GP LLC
/s/ Joseph W. O’Toole	Director
Joseph W. O’Toole	Phillips 66 Partners GP LLC
/s/ Timothy D. Roberts	Director
Timothy D. Roberts	Phillips 66 Partners GP LLC

116

EX-21

Exhibit 21

SUBSIDIARY LISTING OF PHILLIPS 66 PARTNERS LP

At December 31, 2021

Company Name	Incorporation Location
ACE Pipeline LLC	Delaware
Gray Oak Holdings LLC	Delaware
Merey Sweeny LLC	Delaware
Phillips 66 Carrier LLC	Delaware
Phillips 66 DAPL Holdings LLC	Delaware
Phillips 66 ETCO Holdings LLC	Delaware
Phillips 66 LCR Isomerization LLC	Delaware
Phillips 66 Partners Finance Corporation	Delaware
Phillips 66 Partners Holdings LLC	Delaware
Phillips 66 Sand Hills LLC	Delaware
Phillips 66 Southern Hills LLC	Delaware
Phillips 66 Sweeny Frac LLC	Delaware

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the following Registration Statements:

(1)Amendment No. 1 to the Registration Statement (Form S-3 No. 333-234334) of Phillips 66 Partners LP,

(2)Registration Statement (Form S-3 No. 333-232865) of Phillips 66 Partners LP,

(3)Amendment No. 1 to the Registration Statement (Form S-3 No. 333-221353) of Phillips 66 Partners LP,

(4)Registration Statement (Form S-8 No. 333-190195) of Phillips 66 Partners LP, and

(5)Amendment No. 1 to the Registration Statement (Form S-4 No. 333-261605) of Phillips 66;

of our reports dated February 18, 2022, with respect to the consolidated financial statements of Phillips 66 Partners LP and the effectiveness of internal control over financial reporting of Phillips 66 Partners LP included in this Annual Report (Form 10-K) of Phillips 66 Partners LP for the year ended December 31, 2021.

/s/ Ernst & Young LLP

Houston, Texas

February 18, 2022

EX-23.2

Exhibit 23.2

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the following Registration Statements of our reports dated February 4, 2022, relating to the financial statements of DCP Sand Hills Pipeline, LLC, and the financial statements of DCP Southern Hills Pipeline, LLC, each appearing in this Annual Report on Form 10-K of Phillips 66 Partners LP for the year ended December 31, 2021:

•Registration Statement No. 333-190195 on Form S-8 of Phillips 66 Partners LP,

•Amendment No. 1 to Registration Statement Nos. 333-221353 and 333-234334 on Form S-3 of Phillips 66 Partners LP,

•Registration Statement No. 333-232865 on Form S-3 of Phillips 66 Partners LP, and

•Amendment No. 1 to Registration Statement No. 333-261605 on Form S-4 of Phillips 66.

/s/ Deloitte & Touche LLP

Denver, Colorado

February 18, 2022    

EX-23.3

Exhibit 23.3

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We have issued our report dated February 9, 2022, with respect to the consolidated financial statements of Dakota Access, LLC, included in the Annual Report of Phillips 66 Partners LP on Form 10-K for the year ended December 31, 2021. We consent to the incorporation by reference of the aforementioned report in the Registration Statements of Phillips 66 Partners LP on Forms S-3 (File No. 333-234334, File No. 333-232865 and File No. 333-221353), Form S-8 (File No. 333-190195) and to the Registration Statement of Phillips 66 on Form S-4 (File No. 333-261605).

/s/ GRANT THORNTON LLP

Dallas, Texas

February 18, 2022

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Greg C. Garland, certify that:

1.I have reviewed this Annual Report on Form 10-K of Phillips 66 Partners LP;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 18, 2022

/s/ Greg C. Garland

Greg C. Garland

Chairman of the Board of Directors and

Chief Executive Officer

Phillips 66 Partners GP LLC

(the general partner of Phillips 66 Partners LP)

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Kevin J. Mitchell, certify that:

1.I have reviewed this Annual Report on Form 10-K of Phillips 66 Partners LP;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 18, 2022

/s/ Kevin J. Mitchell

Kevin J. Mitchell

Director, Vice President and
Chief Financial Officer

Phillips 66 Partners GP LLC
(the general partner of Phillips 66 Partners LP)

EX-32

Exhibit 32

CERTIFICATIONS PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the Annual Report of Phillips 66 Partners LP (the Partnership) on Form 10-K for the year ended December 31, 2021, as filed with the U.S. Securities and Exchange Commission on the date hereof (the Report), each of the undersigned hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to their knowledge:

(1)The Report fully complies with the requirements of Sections 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership.

Date: February 18, 2022

/s/ Greg C. Garland

Greg C. Garland

Chairman of the Board of Directors and

 Chief Executive Officer

Phillips 66 Partners GP LLC

(the general partner of Phillips 66 Partners LP)

/s/ Kevin J. Mitchell

Kevin J. Mitchell

Director, Vice President and

Chief Financial Officer

Phillips 66 Partners GP LLC

(the general partner of Phillips 66 Partners LP)

EX-99

Exhibit 99

Dakota Access, LLC

Consolidated Financial Statements

As of December 31, 2021 & 2020

And for the Three Years Ended December 31, 2021

Dakota Access, LLCTable of Contents

	Page
Report of Independent Registered Public Accounting Firm	1
Consolidated Balance Sheets as of December 31, 2021 and 2020	2
Consolidated Statements of Operations for the Years Ended December 31, 2021, 2020 and 2019	3
Consolidated Statement of Members' Equity for the Years Ended December 31, 2021, 2020 and 2019	4
Consolidated Statements of Cash Flows for the Years Ended December 31, 2021, 2020 and 2019	5
Notes to Consolidated Financial Statements	6

Report of Independent Registered Public Accounting Firm

Board of Managers and Members

Dakota Access, LLC

Opinion on the financial statements

We have audited the accompanying consolidated balance sheets of Dakota Access, LLC (a Delaware limited liability company) and subsidiaries (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of operations, members’ equity, and cash flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “financial statements”). In our opinion, the consolidatedfinancial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

Basis for opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical audit matters

Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to those charged with governance of the Company and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.

/s/ GRANT THORNTON LLP

We have served as the Company’s auditor since 2015.

Dallas, Texas

February 9, 2022

Dakota Access, LLC

Consolidated Balance SheetsDecember 31,
(Dollars in thousands)

	2021		2020
ASSETS
Current assets:
Cash and cash equivalents	$	70,429	$	35,251
Accounts receivable	76,272		48,333
Accounts receivable from affiliates	75,328		111,717
Materials and supplies	10,062		15,561
Affiliated interest receivable	6,114		2,038
Current affiliate note receivable	45,500		—
Other current assets	560		2,195
Total current assets	284,265		215,095
Property, plant and equipment	4,407,129		4,220,179
Accumulated depreciation	(496,806)		(382,437)
Property, plant and equipment, net	3,910,323		3,837,742
Other non-current assets	1,723		1,500
Affiliate note receivable	130,000		175,500
Total assets	$	4,326,311	$	4,229,837
LIABILITIES AND MEMBERS' EQUITY
Current liabilities:
Accounts payable	$	2,763	$	1,618
Accounts payable to affiliates	49,948		33,013
Accrued interest	25,752		25,752
Accrued and other current liabilities	66,281		63,220
Current portion of long-term debt	650,000		—
Total current liabilities	794,744		123,603
Long-term debt	1,838,251		2,484,324
Other non-current liabilities	68,255		19,466
Commitments and contingencies
Members' equity	1,625,061		1,602,444
Total liabilities and members' equity	$	4,326,311	$	4,229,837

The accompanying notes are an integral part of the consolidated financial statements.
2

Dakota Access, LLC
Consolidated Statements of Operations
For the Years Ended December 31,
(Dollars in thousands)

	2021		2020		2019
Revenues:
Third party revenues	$	505,273	$	440,341	$	513,046
Affiliate revenues	418,749		410,457		495,498
Total revenues	924,022		850,798		1,008,544
Operating expenses:
Operation and maintenance expenses	82,704		76,690		76,036
General and administrative expenses	7,539		6,709		8,437
Depreciation expense	114,370		108,303		106,176
Total operating expenses	204,613		191,702		190,649
Operating income	719,409		659,096		817,895
Interest expense	(105,802)		(105,803)		(107,342)
Affiliate interest income	8,152		8,152		6,587
Other, net	238		1,639		(951)
Net income	$	621,997	$	563,084	$	716,189

The accompanying notes are an integral part of the consolidated financial statements.
3

Dakota Access, LLC
Consolidated Statement of Members' Equity
For the Years Ended December 31, 2021, 2020 and 2019
(Dollars in thousands)

	Dakota Access Holdings LLC		Phillips 66 DAPL Holdings LLC		Total
Balance, December 31, 2018	$	1,266,636	$	422,212	$	1,688,848
Net income	537,142		179,047		716,189
Contributions from members	45,741		15,247		60,988
Distributions to members	(615,486)		(205,162)		(820,648)
Balance, December 31, 2019	$	1,234,033	$	411,344	$	1,645,377
Net income	422,313		140,771		563,084
Contributions from members	84,509		28,170		112,679
Distributions to members	(539,022)		(179,674)		(718,696)
Balance, December 31, 2020	$	1,201,833	$	400,611	$	1,602,444
Net income	466,498		155,499		621,997
Contributions from members	127,484		42,494		169,978
Distributions to members	(577,019)		(192,339)		(769,358)
Balance, December 31, 2021	$	1,218,796	$	406,265	$	1,625,061

The accompanying notes are an integral part of the consolidated financial statements.
4

Dakota Access, LLC
Consolidated Statements of Cash Flows
For the Years Ended December 31,
(Dollars in thousands)

	2021		2020		2019
OPERATING ACTIVITIES:
Net income	$	621,997	$	563,084	$	716,189
Reconciliation of net income to cash provided by operations:
Depreciation expense	114,370		108,303		106,176
Amortization in interest expense	3,927		3,928		3,970
Loss on debt refinancing	—		—		2,195
Changes in operating assets and liabilities:
Accounts receivable	(27,939)		(17,347)		18,737
Accounts receivable from affiliates	36,389		10,425		(67,985)
Affiliate interest receivable	(4,076)		—		(2,038)
Other current assets	7,134		320		1,245
Accounts payable and accrued liabilities	1,144		(392)		2,890
Accounts payable to affiliates	16,934		130		(10,319)
Accrued interest	—		—		13,021
Other non-current assets and liabilities, net	56,021		10,950		(4,144)
Net cash provided by operating activities	825,901		679,401		779,937
INVESTING ACTIVITIES:
Capital expenditures	(191,343)		(104,489)		(44,010)
Net cash used in investing activities	(191,343)		(104,489)		(44,010)
FINANCING ACTIVITIES:
Contributions from members	169,978		117,773		55,894
Distributions to members	(769,358)		(718,696)		(820,648)
Proceeds from long-term debt issuance	—		—		2,500,000
Debt issuance costs	—		(30)		(22,813)
Repayment of borrowings	—		—		(2,325,017)
Issuance of affiliate note receivable	—		—		(175,500)
Net cash used in financing activities	(599,380)		(600,953)		(788,084)
Increase (decrease) in cash and cash equivalents	35,178		(26,041)		(52,157)
Cash and cash equivalents, beginning of period	35,251		61,292		113,449
Cash and cash equivalents, end of period	$	70,429	$	35,251	$	61,292
Supplemental cash flow information:
Accrued capital expenditures	$	4,729	$	25,762	$	16,221
Cash paid for interest	$	101,875	$	101,875	$	81,127
Accrued contribution	$	—	$	—	$	5,094

The accompanying notes are an integral part of the consolidated financial statements.
5

Dakota Access, LLC

Notes to Consolidated Financial Statements

1.Business and Organization:

Business

The consolidated financial statements presented herein reflect the results of Dakota Access, LLC, a Delaware limited liability company, and its wholly-owned subsidiaries, Dakota Access Truck Terminals, LLC, a Delaware limited liability company, and Midwest Connector Capital Company LLC ("MCCC"), a Delaware limited liability company (collectively, the "Company"). The Company is owned 75% by Dakota Access Holdings LLC (“Holdings”) and 25% by Phillips 66 DAPL Holdings LLC, a subsidiary of Phillips 66 Partners LP (“P66”). Holdings is wholly owned by Bakken Pipeline Investments LLC, which is owned 51% by Bakken Holdings Company LLC ("Bakken Holdings"), a subsidiary of Energy Transfer, L.P. ("ET"), and 49% by MarEn Bakken Company LLC ("MarEn"), an entity jointly owned by MPLX LP and Enbridge Energy Partners, L.P.

The Company owns and operates the Dakota Access Pipeline (“DAPL”), a 1,172-mile crude oil pipeline, which began commercial operations in June 2017.

The Company, together with Energy Transfer Crude Oil Company, LLC ("ETCOP"), comprise the Bakken Pipeline project. DAPL provides for the delivery of crude oil from the Bakken/Three Forks production area in North Dakota to market centers in the Midwest and access to ETCOP. DAPL enables shippers to access Midwestern refineries and the Gulf Coast market through an interconnection in Patoka, Illinois with ETCOP.

Organization

The Company is operated under the terms of its limited liability company agreement. Under the terms of this agreement, the Company is managed by a board consisting of one board member appointed by each of Holdings and P66.

2.Summary of Significant Accounting Policies:

Basis of Presentation

The consolidated financial statements have been prepared on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of all controlled subsidiaries after the elimination of all intercompany accounts and transactions.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers cash and cash equivalents to include investments with original maturities of three months or less. As of December 31, 2021 and 2020, the Company held cash in amounts greater than federally insured limits.

Property, Plant and Equipment

Property, plant and equipment are carried at cost or at the fair value of the assets as of the acquisition date. The Company capitalizes all costs related to the construction of assets, including interest. Depreciation for financial reporting purposes is computed by the straight-line method over the estimated useful asset lives.

The Company assesses property, plant and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Recoverability is assessed by comparing the carrying amount of an asset to the undiscounted future net cash flows expected to be generated by the asset. If the asset is considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount exceeds the estimated fair value of the asset. No impairment was recorded for the years ended December 31, 2021, 2020 or 2019.

6

Asset Retirement Obligation

The Company follows guidance on asset retirement and environmental obligations, which requires the fair value of a liability related to the retirement of long-lived assets to be recorded at the time a legal obligation is incurred, if the liability can be reasonably estimated. When the liability is initially recorded, the carrying amount of the related asset is increased by the amount of the liability. Where there is an obligation to perform an asset retirement activity, even with the existence of uncertainties about timing or method of settlement, an entity is required to recognize a liability for the fair value of a conditional asset retirement obligation if the fair value of the liability can be determined.

The Company's operating assets primarily consist of recently constructed pipeline assets. Management is unable to predict when, or if, the Company's pipelines and related facilities will become obsolete and require decommissioning. Accordingly, the Company recorded no liability or corresponding asset in conjunction with the guidance, as amounts and future dates of when such costs might be incurred are indeterminable.

Accounts Receivable

The Company establishes an allowance for credit losses on trade receivables based on the expected ultimate recovery of these receivables and considers many factors including historical customer collection experience, general and specific economic trends, and known specific issues related to individual customers, sectors, and transactions that might impact collectibility. Changes in the allowance are recorded as a component of operating expenses; reductions in the allowance are recorded when receivables are subsequently collected or written-off. Past due receivable balances are written-off when the Company's efforts have been unsuccessful in collecting the amount due. The Company's allowance for credit losses was not material as of December 31, 2021 or 2020.

Accounts Receivable from Affiliates

Receivables from affiliates consist of amounts due from Phillips 66, MPLX LP, and subsidiaries of Energy Transfer as discussed in Note 5.

Income Tax

The Company is a limited liability company that has elected to be treated as a partnership for income tax purposes. Accordingly, no provision for federal or state income taxes has been recorded in the financial statements of the Company and the tax effects of the Company’s activities generally accrue to the members.

Accrued and Other Current Liabilities

Accrued and other current liabilities consist primarily of accrued capital expenditures and accrued property tax as of December 31, 2021 and 2020.

3.Revenue:

Contract Balances with Customers

The Company satisfies its obligations by transferring goods or services in exchange for consideration from customers. The timing of performance may differ from the timing that the associated consideration is paid to or received from the customer, thus resulting in the recognition of a contract asset or a contract liability.

The Company recognizes a contract asset when making upfront consideration payments to certain customers or when providing services to customers prior to the time at which the Company is contractually allowed to bill for such services. As of December 31, 2021 and 2020, no contract assets have been recognized.

7

The Company recognizes a contract liability if the customer's payment of consideration precedes the Company's fulfillment of the performance obligations. Certain contracts contain provisions requiring customers to pay a fixed fee for a right to use the Company's assets, but allows customers to apply such fees against services to be provided at a future point in time. These amounts are reflected as deferred revenue until the customer applies the deficiency fees to services provided or becomes unable to use the fees as payment for future services due to expiration of the contractual period the fees can be applied or physical inability of the customer to utilize the fees due to capacity constraints. Contract liabilities are reflected in accrued and other current liabilities and other non-current liabilities on the consolidated balance sheets.

The following table summarizes the activity of the Company's contract liabilities (in thousands):
	Contract Liabilities
Balance, December 31, 2019	$    2,868
Additions	38,161
Revenue recognized	(21,378)
Balance, December 31, 2020	19,651
Additions	79,419
Revenue recognized	(24,819)
Balance, December 31, 2021	$    74,251

Performance Obligations

At contract inception, the Company assesses the goods and services promised in its contracts with customers and identifies a performance obligation for each promise to transfer a good or service (or bundle of goods or services) that is distinct. To identify the performance obligations, the Company considers all the goods or services promised in the contract, whether explicitly stated or implied based on customary business practices. For a contract that has more than one performance obligation, the Company allocates the total contract consideration it expects to be entitled to, to each distinct performance obligation based on a standalone-selling price basis. Revenue is recognized when (or as) the performance obligations are satisfied, that is, when the customer obtains control of the good or service. Certain of the Company's contracts contain variable components, which, when combined with the fixed component are considered a single performance obligation. For these types of contracts, only the fixed component of the contracts are included in the table below.

As of December 31, 2021, the aggregate amount of transaction price allocated to unsatisfied (or partially satisfied) performance obligations is $6.4 billion, and the Company expects to recognize this amount as revenue within the time bands illustrated below:

	Years Ending December 31,
	2022		2023		2024		Thereafter		Total
	(Dollars in thousands)
Revenue expected to be recognized on contracts with customers existing as of December 31, 2021	$	1,128,449	$	1,205,564	$	1,034,423	$	2,985,507	$	6,353,943

Practical Expedients Utilized by the Company

The Company elected the following practical expedients in accordance with GAAP:

Right to invoice - The Company elected to utilize an output method to recognize revenue that is based on the amount to which the Company has a right to invoice a customer for services performed to date, if that amount corresponds directly with the value provided to the customer for the related performance or its obligation completed to date. As such, the Company recognized revenue in the amount to which it had the right to invoice customers.

8

Significant financing component - The Company elected not to adjust the promised amount of consideration for the effects of significant financing component if the Company expects, at contract inception, that the period between the transfer of a promised good or service to a customer and when the customer pays for that good or service will be one year or less.

Unearned variable consideration - The Company elected to only disclose the unearned fixed consideration associated with unsatisfied performance obligations related to its various customer contracts which contain both fixed and variable components.

4.Property, Plant and Equipment:

Property, plant and equipment and estimated useful lives consist of the following:

	December 31,
	2021		2020
	(Dollars in thousands)
Land	$	34,979	$	34,789
Buildings (33 years)	108,229		105,413
Pipelines and equipment (31 to 38 years)	3,624,691		3,491,658
Right of way (40 years)	439,756		451,943
Other (5 to 25 years)	109,081		115,158
Construction work in progress	90,393		21,219
Property, plant and equipment	$	4,407,129	$	4,220,179

5.Related Party Transactions:

Energy Transfer is the operator of the Company; therefore, the employees of Energy Transfer perform services to support its operations. The Company reimburses Energy Transfer for all costs related to these employees. Energy Transfer has an agreement to provide the Company with various general and administrative services. For the years ended December 31, 2021, 2020 and 2019, $5.5 million, $4.9 million and $4.9 million, respectively, of expense related to these services has been recorded in operating and general and administrative expenses.

Energy Transfer is also the construction manager for DAPL and receives a fee for construction services. For the year ended December 31, 2021, 2020 and 2019, the Company recorded $5.0 million, $2.5 million, and $1.2 million, respectively in construction management fees, all of which have been capitalized as costs of construction.

The Company has also entered into commercial transactions with affiliated entities, recording revenues from affiliates of $418.7 million, $410.5 million and $495.5 million for the years ended December 31, 2021, 2020 and 2019, respectively.

The Company had accounts receivable from and payable to affiliates of $75.3 million and $50 million, respectively, as of December 31, 2021 and $111.7 million and $33 million, respectively, as of December 31, 2020, primarily related to affiliate margin activity.

In connection with the Senior Notes issuance discussed below, the Company entered into an affiliate note agreement with ETCOP equal to approximately 7% of the aggregate amount of principal of the Senior Notes. The affiliate note contains the same payment terms, maturities and conditions as the series of Senior Notes discussed below to which it corresponds. The affiliate interest is payable semi-annually on April 1 and October 1. The Company had an outstanding balance on the affiliate note receivable of $175.5 million as of December 31, 2021 and recorded affiliate interest income of $8.2 million, $8.2 million and $6.6 million, respectively, for the years ended December 31, 2021, 2020 and 2019.

9

6.Long-Term Debt:

In March 2019, MCCC issued the following senior notes (together, the "Senior Notes"):

•$650 million aggregate principal amount of 3.625% senior notes due 2022;

•$1.00 billion aggregate principal amount of 3.90% senior notes due 2024; and

•$850 million aggregate principal amount of 4.625% senior notes due 2029.

The $2.48 billion in net proceeds from the offering were used to repay in full all amounts outstanding on the previous $2.5 billion credit facility, and the facility was terminated.

As of December 31, 2021, the Company had $2.50 billion aggregate principal amount of Senior Notes outstanding. The Company's carrying balance as of December 31, 2021 is net of $11.7 million of unamortized discounts and debt issuance costs.

For the years ended December 31, 2021 and 2020, the Company amortized $3.9 million, respectively, in discounts and debt issuance costs, which was recognized as interest expense, and incurred $101.9 million, respectively, of interest expense related to the Senior Notes.

For the year ended December 31, 2019, the Company amortized $731.7 thousand in debt fees, which was recognized as interest expense, and incurred $21 million of interest expense on the credit facility.

The Senior Notes are fully and unconditionally guaranteed by the Company and ETCOP. The indentures governing the Senior Notes contain covenants that, among other things, limit the Company's and MCCC's ability to incur debt, create liens, engage in sale-leaseback transactions or consolidate, merge, or transfer all or substantially all of its assets.

The Company intends to satisfy the maturity of the $650 million Senior Notes due 2022 through member contributions.

Based on the estimated borrowing rates currently available to the Company and its subsidiaries for loans with similar terms and average maturities, the aggregate fair value and carrying amount of the Company's consolidated debt obligations as of December 31, 2021 was $2.6 billion and $2.5 billion, respectively.

The following table reflects future maturities of long-term debt for each of the next five years and thereafter (in thousands). These amounts exclude $11.7 million in unamortized deferred financing fees and discounts:

2022	$	650,000
2023	—
2024	1,000,000
2025	—
2026	—
Thereafter	850,000
	$	2,500,000

7.Commitments and Contingencies:

The Company may be subject to various legal proceedings and claims that arise in the ordinary course of business. In the opinion of management, the amount of any ultimate liability with respect to any such actions will not materially affect the Company's financial position or results of operations.

Legal actions against the Company's pipeline project

On July 27, 2016, the Standing Rock Sioux Tribe (“SRST”) filed a lawsuit in the United States District Court for the District of Columbia (“District Court”) challenging permits issued by the United States Army Corps of Engineers (“USACE”) that allowed the Company to cross the Missouri River at Lake Oahe in North Dakota. The case was subsequently amended to challenge an easement issued by the USACE that allowed the pipeline to cross land owned by the USACE adjacent to the Missouri River. The Company and the Cheyenne River Sioux Tribe (“CRST”) intervened.

10

Separate lawsuits filed by the Oglala Sioux Tribe (“OST”) and the Yankton Sioux Tribe (“YST”) were consolidated with this action and several individual tribal members intervened (collectively, with SRST and CRST, the “Tribes”). On March 25, 2020, the District Court remanded the case back to the USACE for preparation of an Environment Impact Statement (“EIS”). On July 6, 2020, the District Court vacated the easement and ordered the Company to be shut down and emptied of oil by August 5, 2020. The Company and the USACE appealed to the United States Court of Appeals for the District of Columbia (“Court of Appeals”) which granted an administrative stay of the District Court’s July 6 order and ordered further briefing on whether to fully stay the July 6 order. On August 5, 2020, the Court of Appeals 1) granted a stay of the portion of the District Court order that required the Company to shut the pipeline down and empty it of oil, 2) denied a motion to stay the March 25 order pending a decision on the merits by the Court of Appeals as to whether the USACE would be required to prepare an EIS, and 3) denied a motion to stay the District Court’s order to vacate the easement during this appeal process. The August 5 order also states that the Court of Appeals expected the USACE to clarify its position with respect to whether USACE intended to allow the continued operation of the pipeline notwithstanding the vacatur of the easement and that the District Court may consider additional relief, if necessary.

On August 10, 2020, the District Court ordered the USACE to submit a status report by August 31, 2020, clarifying its position with regard to its decision-making process with respect to the continued operation of the pipeline. On August 31, 2020, the USACE submitted a status report that indicated that it considered the presence of the pipeline at the Lake Oahe crossing without an easement to constitute an encroachment on federal land, and that it was still considering whether to exercise its enforcement discretion regarding this encroachment. The Tribes subsequently filed a motion seeking an injunction to stop the operation of the pipeline and both USACE and the Company filed briefs in opposition of the motion for injunction. The motion for injunction was fully briefed as of January 8, 2021.

On January 26, 2021, the Court of Appeals affirmed the District Court’s March 25, 2020 order requiring an EIS and its July 6, 2020 order vacating the easement. In this same January 26 order, the Court of Appeals also overturned the District Court’s July 6, 2020 order that the pipeline shut down and be emptied of oil. The Company filed for rehearing en banc on April 12, 2021, which the Court of Appeals denied. On September 20, 2021, The Company filed a petition with the U.S. Supreme Court to hear the case. Oppositions were filed by the Solicitor General (December 17, 2021) and the Tribes (December 16, 2021). The Company filed their reply on January 4, 2022.

The District Court scheduled a status conference for February 10, 2021 to discuss the effects of the Court of Appeals’ January 26, 2021 order on the pending motion for injunctive relief, as well as USACE’s expectations as to how it will proceed regarding its enforcement discretion regarding the easement. On May 3, 2021, USACE advised the District Court that it had not changed its position with respect to its opposition to the Tribes’ motion for injunction. The USACE also advised the District Court that it expected that the EIS will be completed by March 2022. On May 21, 2021 the District Court denied the Plaintiffs’ request for an injunction.

On June 22, 2021, the District Court terminated the consolidated lawsuits and dismissed all remaining outstanding counts without prejudice.

The pipeline continues to operate pending completion of the EIS. The USACE now estimates that the EIS will be complete by the end of 2022. The Company cannot determine when or how future lawsuits will be resolved or the impact they may have on the Company's pipelines; however, the Company expects after the law and complete record are fully considered, any such proceeding will be resolved in a manner that will allow the pipeline to continue to operate.

Risks and Uncertainties

The impact of weather, public health crises such as pandemics (including COVID-19), and other events of nature on the supply and demand of oil could impact future oil prices and could impact the future financial results of the Company. Specifically, the global spread of COVID-19 and related pandemic has created significant volatility, uncertainty and economic disruption in 2021 and 2020 and its future impacts cannot be predicted.

8.Subsequent Events:

Management has evaluated subsequent events that occurred through February 9, 2022, the date the financial statements were available to be issued. Any material subsequent events that occurred through this date have been properly recognized or disclosed in the financial statements.

11

XML

Cover - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2021	Jan. 31, 2022	Jun. 30, 2021
Cover [Abstract]
Document Type	10-K
Document Annual Report	true
Document Period End Date	Dec. 31, 2021
Current Fiscal Year End Date	--12-31
Document Transition Report	false
Entity File Number	001-36011
Entity Registrant Name	Phillips 66 Partners LP
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	38-3899432
Entity Address, Address Line One	2331 CityWest Blvd.
Entity Address, City or Town	Houston
Entity Address, State or Province	TX
Entity Address, Postal Zip Code	77042
City Area Code	855
Local Phone Number	283-9237
Title of 12(b) Security	Common Units, Representing Limited Partner Interests
Trading Symbol	PSXP
Security Exchange Name	NYSE
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
ICFR Auditor Attestation Flag	true
Entity Shell Company	false
Entity Public Float			$ 2,302
Entity Common Units, Units Outstanding (in shares)		228,340,146
Documents Incorporated by Reference	None
Entity Central Index Key	0001572910
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	FY
Amendment Flag	false

XML

Audit Information	12 Months Ended
	Dec. 31, 2021
Auditor [Line Items]
Auditor Firm ID	42
Auditor Name	Ernst & Young LLP
Auditor Location	Houston, Texas
DCP Sand Hills Pipeline, LLC (Sand Hills)
Auditor [Line Items]
Auditor Firm ID	34
Auditor Name	Deloitte & Touche LLP
Auditor Location	Denver, Colorado
DCP Southern Hills Pipeline, LLC (Southern Hills)
Auditor [Line Items]
Auditor Firm ID	34
Auditor Name	Deloitte & Touche LLP
Auditor Location	Denver, Colorado
Dakota Access, LLC
Auditor [Line Items]
Auditor Firm ID	248
Auditor Name	GRANT THORNTON LLP
Auditor Location	Dallas, Texas

XML

Consolidated Statement of Income - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Revenues and Other Income
Revenues	$ 1,146	$ 1,038	$ 1,126
Equity in earnings of affiliates	595	493	535
Gain from equity interest transfer	0	84	0
Other income	13	3	6
Total Revenues and Other Income	1,754	1,618	1,667
Costs and Expenses
Operating and maintenance expenses	383	342	405
Depreciation	141	135	120
Impairments	208	96	0
General and administrative expenses	71	66	67
Taxes other than income taxes	41	40	39
Interest and debt expense	128	121	108
Other expenses	1	7	2
Total costs and expenses	973	807	741
Income before income taxes	781	811	926
Income tax expense	4	3	3
Net Income	777	808	923
Less: Net income attributable to noncontrolling interest	42	17	0
Net Income Attributable to the Partnership	735	791	923
Less: Preferred unitholders’ interest in net income attributable to the Partnership	48	41	37
Less: General partner’s interest in net income attributable to the Partnership	0	0	140
Limited Partners’ Interest in Net Income Attributable to the Partnership	$ 687	$ 750	$ 746
Common Units
Net Income Attributable to the Partnership Per Limited Partner Unit (dollars)
Common units—basic (in usd per share)	$ 3.00	$ 3.29	$ 4.45
Common units—diluted (in usd per share)	$ 3.00	$ 3.27	$ 4.29
Weighted-Average Limited Partner Units Outstanding (thousands)
Common units—basic (in shares)	228,340,146	228,333,213	167,655,306
Common units—diluted (in shares)	228,340,000	242,153,000	181,475,000
Related Party Sales
Revenues and Other Income
Revenues	$ 1,116	$ 1,008	$ 1,097
Third Party
Revenues and Other Income
Revenues	$ 30	$ 30	$ 29

XML

Consolidated Statement of Comprehensive Income - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Statement of Comprehensive Income [Abstract]
Net Income	$ 777	$ 808	$ 923
Defined benefit plans
Plan sponsored by equity affiliates, net of income taxes	(1)	0	0
Other comprehensive loss	(1)	0	0
Comprehensive Income	776	808	923
Less: Comprehensive income attributable to noncontrolling interest	42	17	0
Comprehensive Income Attributable to the Partnership	$ 734	$ 791	$ 923

XML

Consolidated Balance Sheet - USD ($) $ in Millions	Dec. 31, 2021	Dec. 31, 2020
Assets
Cash and cash equivalents	$ 62	$ 7
Accounts receivable—related parties	119	103
Accounts receivable—third parties	7	3
Materials and supplies	16	16
Prepaid expenses and other current assets	7	11
Total current assets	211	140
Equity investments	2,929	3,244
Net properties, plants and equipment	3,727	3,639
Goodwill	185	185
Other assets	49	50
Total Assets	7,101	7,258
Liabilities
Accounts payable—related parties	30	19
Accounts payable—third parties	67	73
Accrued interest	35	35
Deferred revenues	23	27
Short-term debt	450	465
Accrued property and other taxes	16	11
Other current liabilities	6	3
Total current liabilities	627	633
Long-term debt	3,447	3,444
Other liabilities	90	90
Total Liabilities	4,164	4,167
Equity
Accumulated other comprehensive loss	(2)	(1)
Total unitholders’ equity	2,660	2,798
Noncontrolling interest	277	293
Total Equity	2,937	3,091
Total Liabilities and Equity	7,101	7,258
Public | Preferred Unitholders Public
Equity
Preferred unitholders (2021—13,451,263 units issued and outstanding; 2020—13,819,791 units issued and outstanding)	729	749
Total Equity	729	749
Public | Common Units
Equity
Common unitholders	2,676	2,706
Total Equity	2,676	2,706
Non-public | Common Units | Phillips 66
Equity
Common unitholders	(743)	(656)
Total Equity	$ (743)	$ (656)

XML

Consolidated Balance Sheet (Parenthetical) - shares	Dec. 31, 2021	Dec. 31, 2020
Public
Preferred units, issued (in shares)	13,451,263	13,819,791
Preferred units, outstanding (in shares)	13,451,263	13,819,791
Common Units | Public
Common units issued (in shares)	58,580,009	58,580,009
Common units outstanding (in shares)	58,580,009	58,580,009
Common Units | Non-public | Phillips 66
Common units issued (in shares)	169,760,137	169,760,137
Common units outstanding (in shares)	169,760,137	169,760,137

XML

Consolidated Statement of Cash Flows - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Cash Flows From Operating Activities
Net Income	$ 777	$ 808	$ 923
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation	141	135	120
Impairments	208	96	0
Undistributed equity earnings	(4)	7	(3)
Gain from equity interest transfer	0	(84)	0
Other	2	8	10
Working capital adjustments
Accounts receivable	(19)	(1)	(11)
Materials and supplies	21	(1)	0
Prepaid expenses and other current assets	4	(1)	10
Accounts payable	19	(16)	7
Accrued interest	0	(7)	5
Deferred revenues	(4)	11	(45)
Other accruals	8	0	0
Net Cash Provided by Operating Activities	1,153	955	1,016
Cash Flows From Investing Activities
Cash capital expenditures and investments	(311)	(910)	(1,095)
Advances/loans—related party	0	0	(95)
Collection of advances/loans—related party	0	0	95
Liberty acquisition	0	(75)	0
Return of investment from equity affiliates	137	177	67
Proceeds from sale of equity interest	22	0	81
Net Cash Used in Investing Activities	(152)	(808)	(947)
Cash Flows From Financing Activities
Issuance of debt	450	415	1,758
Repayment of debt	(465)	(25)	(1,286)
Issuance of common units	0	2	169
Debt issuance costs	(1)	0	(8)
Repurchase of preferred units	(24)	0	0
Net proceeds from equity interest transfer	0	40	342
Proceeds from noncontrolling interest	0	3	0
Distributions to noncontrolling interest	(58)	(32)	0
Other contributions from (distributions to) Phillips 66	(1)	8	(3)
Net Cash Provided by (Used in) Financing Activities	(946)	(426)	216
Net Change in Cash and Cash Equivalents	55	(279)	285
Cash and cash equivalents at beginning of period	62	7	286
Cash and Cash Equivalents at End of Period	7	286	1
Preferred Unitholders Public
Cash Flows From Financing Activities
Quarterly distributions to common unitholders/General Partner	(48)	(38)	(37)
Public | Preferred Unitholders Public
Cash Flows From Operating Activities
Net Income	48	41	37
Public | Common Units
Cash Flows From Operating Activities
Net Income	176	192	252
Cash Flows From Financing Activities
Quarterly distributions to common unitholders/General Partner	(205)	(205)	(192)
General Partner
Cash Flows From Financing Activities
Quarterly distributions to common unitholders/General Partner	0	0	(206)
Phillips 66 | Non-public | Common Units
Cash Flows From Operating Activities
Net Income	511	558	494
Cash Flows From Financing Activities
Quarterly distributions to common unitholders/General Partner	$ (594)	$ (594)	$ (321)

XML

Consolidated Statement of Changes in Equity - USD ($) $ in Millions	Total	Cumulative Effect, Period of Adoption, Adjustment	Noncontrolling Interest	Accum. Other Comprehensive Loss	Preferred Units Public	Common Unitholders Public	Common Unitholders Public Cumulative Effect, Period of Adoption, Adjustment	Common Unitholders Non-public Phillips 66	General Partner Units Non-public
Beginning Balance at Dec. 31, 2018	$ 2,509	$ (1)	$ 0	$ (1)	$ 746	$ 2,485	$ (1)	$ 592	$ (1,313)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common units	173					173
Net Income	923				37	252		494	140
Quarterly cash distributions to unitholders and General Partner	(756)				(37)	(192)		(321)	(206)
Conversion of GP economic interest	(4)							(1,385)	1,381
Other distributions to Phillips 66	(10)							(8)	(2)
Ending Balance at Dec. 31, 2019	$ 2,834		0	(1)	$ 746	$ 2,717		$ (628)	$ 0
Beginning balance (in shares) at Dec. 31, 2018	140,403,897				13,819,791	55,343,918		68,760,137	2,480,051
Units Outstanding
Units issued in a public equity offering (in shares)	3,195,521					3,195,521
Units issued in conversion of GP economic interest (in shares)	98,519,949							101,000,000	(2,480,051)
Ending balance (in shares) at Dec. 31, 2019	242,119,367				13,819,791	58,539,439		169,760,137	0
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common units	$ 2					$ 2
Net Income	808		17		$ 41	192		$ 558
Quarterly cash distributions to unitholders and General Partner	(837)				(38)	(205)		(594)
Transfer of equity interest	305		305
Proceeds from noncontrolling interest	3		3
Distributions to noncontrolling interest	(32)		(32)
Other distributions to Phillips 66	8							8
Ending Balance at Dec. 31, 2020	$ 3,091		293	(1)	$ 749	$ 2,706		$ (656)	$ 0
Units Outstanding
Units issued in a public equity offering (in shares)	40,570					40,570
Ending balance (in shares) at Dec. 31, 2020	242,159,937				13,819,791	58,580,009		169,760,137	0
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net Income	$ 777		42		$ 48	$ 176		$ 511
Other comprehensive loss	(1)			(1)
Quarterly cash distributions to unitholders and General Partner	(847)				(48)	(205)		(594)
Repurchase of preferred units	(24)				(20)	(1)		(3)
Distributions to noncontrolling interest	(58)		(58)
Other distributions to Phillips 66	(1)							(1)
Ending Balance at Dec. 31, 2021	$ 2,937		$ 277	$ (2)	$ 729	$ 2,676		$ (743)	$ 0
Units Outstanding
Units issued in a public equity offering (in shares)	0
Repurchase of preferred units share (in shares)	(368,528)				(368,528)
Ending balance (in shares) at Dec. 31, 2021	241,791,409				13,451,263	58,580,009		169,760,137	0

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Consolidated Statement of Changes in Equity (Parenthetical) - $ / shares	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Statement of Stockholders' Equity [Abstract]
Cash distribution paid per common unit (in USD per share)	$ 3.500	$ 3.500	$ 3.400

XML

Business and Basis of Presentation

12 Months Ended

Dec. 31, 2021

Description of Business [Abstract]

Business and Basis of Presentation

Note 1—Business and Basis of Presentation

Unless otherwise stated or the context otherwise indicates, all references to “Phillips 66 Partners,” “the Partnership,” “us,” “our,” “we,” or similar expressions refer to Phillips 66 Partners LP, including its consolidated subsidiaries. References to Phillips 66 may refer to Phillips 66 and/or its subsidiaries, depending on the context. References to our “General Partner” or “GP” refer to Phillips 66 Partners GP LLC, and references to “Phillips 66 PDI” refer to Phillips 66 Project Development Inc., the Phillips 66 subsidiary that holds a limited partner interest in us and wholly owns our General Partner.

Description of the Business

We are a Delaware limited partnership formed in 2013 by wholly owned subsidiaries of Phillips 66. We are a master limited partnership formed to own, operate, develop and acquire primarily fee-based midstream assets.

Our operations consist of crude oil, refined petroleum products and natural gas liquids (NGL) transportation, terminaling, processing and storage assets. We conduct our operations through both wholly owned and joint venture operations. The majority of our wholly owned assets are associated with, and are integral to the operation of, eight of Phillips 66’s owned or joint venture refineries. Our operations consist of one reportable segment.

We primarily generate revenue by providing fee-based transportation, terminaling, processing, storage and fractionation services to Phillips 66 and other customers. Our equity affiliates primarily generate revenue from transporting and terminaling crude oil, refined petroleum products and NGL. Since we do not own any of the crude oil, refined petroleum products and NGL we handle and do not engage in the trading of those commodities, we have limited direct exposure to risks associated with fluctuating commodity prices, although these risks indirectly influence our activities and results of operations over the long term.

Pending Merger with Phillips 66

On October 26, 2021, we entered into a definitive merger agreement with Phillips 66 and its wholly owned subsidiaries, Phillips 66 Company, Phillips 66 PDI, and Phoenix Sub LLC, and our General Partner pursuant to which Phillips 66 would acquire all of the publicly held common units representing limited partner interests in the Partnership not already owned by Phillips 66 and its subsidiaries on the closing date of the transaction. The agreement provides for an all-stock transaction in which each outstanding common unitholder would receive 0.50 shares of Phillips 66 common stock for each common unit. Pursuant to our partnership agreement, the Partnership’s perpetual convertible preferred units would be converted into common units at a premium to the original issuance price prior to exchange for Phillips 66 common stock. The merger is expected to close in March 2022, subject to customary closing conditions.

In connection with the merger transaction, our partnership agreement was amended, effective October 26, 2021, to provide for automatic conversion of the preferred units upon the acquisition by Phillips 66 of our common units at a conversion ratio determined by dividing (i) the product of the original issuance price multiplied by a premium of 147.5%, less distributions paid after June 30, 2021, and before the closing date of the transaction, by (ii) the closing unit price of the Partnership on the last trading day prior to completion of the merger.

Phillips 66 PDI, a wholly owned subsidiary of Phillips 66 that owns a majority of our common units, has delivered a written consent approving the transaction. This written consent constitutes the requisite vote of the holders of our common units to approve the transaction.

The terms of the transaction were unanimously approved by the Board of Directors of our General Partner based on the unanimous approval and recommendation of its conflicts committee, comprised entirely of independent directors.

Upon closing, we will become an indirect wholly owned subsidiary of Phillips 66, and our common units will cease to be listed on the NYSE and will be subsequently deregistered under the Exchange Act.

See Note 5—Net Income Per Limited Partner Unit, for additional information regarding the merger agreement.

Basis of Presentation The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (GAAP).

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Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2021

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Note 2—Summary of Significant Accounting Policies

Consolidation Principles and Investments in Affiliates

Our consolidated financial statements include the accounts of majority-owned, controlled subsidiaries. The equity method is used to account for investments in affiliates in which we have the ability to exert significant influence over the affiliates’ operating and financial policies, including any variable interest entities of which we are not the primary beneficiary. Undivided interests in pipelines are consolidated on a proportionate basis.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and the disclosure of contingent assets and liabilities. Actual results could differ from these estimates.

Common Control Transactions

Businesses acquired from Phillips 66 and its subsidiaries are accounted for as common control transactions whereby the net assets acquired are combined with ours at their carrying value. Any difference between carrying value and recognized consideration is treated as a capital transaction. Cash consideration up to the carrying value of net assets acquired is presented as an investing activity in our consolidated statement of cash flows. Cash consideration in excess of the carrying value of net assets acquired is presented as a financing activity in our consolidated statement of cash flows.

Revenue Recognition

Revenues are primarily recognized for pipeline transportation, terminaling, storage, processing and fractionation services generated under long-term agreements. A significant portion of our revenues are derived from Phillips 66. The majority of these agreements with Phillips 66 are considered operating leases under GAAP.

We account for lease and service elements of contracts classified as leases on a combined basis under the provisions of Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) No. 2016-02, “Leases (Topic 842),” except for leases of processing-type assets, which contain non-ratable fees related to turnaround activity. For these types of leases, we continued to separate the lease and service elements based on relative standalone prices and applied the new lease standard to the lease element and the revenue standard to the service element.

For new or modified leases, our determination of lease classification involves estimates, primarily related to the fair value of the leased asset based on comparable replacement cost and obsolescence estimates, and the allocation of contract consideration between the lease and non-lease components based on the relative stand-alone selling price.

Revenues from fixed minimum volume commitments are recognized over the performance obligation period for stand-ready service contracts. Revenues from the variable element of these stand-ready contracts and other contracts without fixed elements are recognized based on the actual volumes transported, stored, processed and fractionated at contractual rates because the actual volumes specifically relate to our efforts to transfer the distinct services. Generally, our services are billed and payments are received on a monthly basis.

Billings to Phillips 66 for shortfall volumes under its quarterly minimum volume commitments are recorded as “Deferred revenues” in our consolidated balance sheet, as Phillips 66 generally has the right to make up the shortfall volumes in the following four quarters. For the lease element of the contracts, the deferred revenue will be recognized at the earlier of when shortfall volumes are made up, when the make-up rights contractually expire or when we determine the system will not have the necessary capacity to enable a customer to make up the shortfall volumes. For the service element of the contracts, the deferred revenue will be recognized when the performance obligation is complete or it is probable that the shortfall volumes will not be made up.

Billings for tolling services relating to maintenance turnaround activities are billed in advance of such activities.  These billings are initially recorded as “Deferred revenues” in our consolidated balance sheet and are recognized when the maintenance turnaround activity commences.  Deferred revenue relating to maintenance turnaround operating expenses is recognized in the period the work is performed.  Deferred revenue relating to capital projects performed concurrently with a maintenance turnaround is recognized ratably over the remaining tolling services agreement once the equipment is placed into service.

Cash Equivalents

Cash equivalents are highly liquid, short-term investments that are readily convertible to known amounts of cash and will mature within 90 days or less from the date of acquisition. We carry these at cost plus accrued interest, which approximates fair value.

Imbalances

We do not purchase or produce crude oil, refined petroleum or NGL product inventories. We experience imbalances as a result of variances in meter readings and in other measurement methods, and volume fluctuations within our crude oil, refined petroleum products and NGL systems due to pressure and temperature changes. Certain of our transportation contracts provide for the shipper to pay a contractual loss allowance, which is valued using quoted market prices of the applicable commodity being shipped. These contractual loss allowances, which are received from the shipper irrespective of, and independently calculated from, actual volumetric gains or losses, are recorded as revenue. Any actual volumetric gains or losses are valued using quoted market prices of the applicable commodities and are recorded as decreases or increases to operating and maintenance expenses, respectively.

Fair Value Measurements

We measure assets and liabilities requiring fair value presentation or disclosure using the price that would be received to sell an asset or paid to transfer a liability (i.e., an exit price), and disclose such amounts according to the quality of valuation inputs under the following hierarchy:

Level 1:    Quoted prices in an active market for identical assets or liabilities.

Level 2:    Observable inputs other than quoted prices included within Level 1 for the asset or liability, either directly or indirectly through market-corroborated inputs.

Level 3:    Unobservable inputs that are significant to the fair value of assets or liabilities.

We classify the fair value of an asset or liability based on the lowest level of input significant to its measurement. A fair value initially reported as Level 3 will be subsequently reported as Level 2 if the unobservable inputs become inconsequential to its measurement, or corroborating market data becomes available. Asset and liability fair values initially reported as Level 2 will be subsequently reported as Level 3 if corroborating market data becomes unavailable.

The carrying amounts of our trade receivables and payables approximate fair value.

Nonrecurring Fair Value Measurements

We apply the fair value measurements criteria to determine the fair value of nonfinancial assets and liabilities that are measured at fair value on a nonrecurring basis, primarily asset retirement obligations and, when impaired, long-lived assets.

Properties, Plants and Equipment (PP&E)

PP&E is recorded at cost. Costs of maintenance and repairs, which are not significant improvements, are expensed when incurred. Depreciation of PP&E is determined by the individual-unit-straight-line method or the group-straight-line method (for those individual units that are highly integrated with other units).

Capitalized Interest

Interest from external borrowings is capitalized on major projects with an expected construction period of six months or longer. Capitalized interest is added to the cost of the underlying asset’s PP&E or the applicable equity investment and is amortized over the useful life of the asset.

Major Maintenance Activities

Costs for planned integrity management projects are expensed in the period incurred. These types of costs include inspection services, contractor repair services, materials and supplies, equipment rentals and labor costs.

Impairment of PP&E

PP&E used in operations are assessed for impairment whenever changes in facts and circumstances indicate a possible significant deterioration in the future cash flows expected to be generated by an asset group. If, upon review, the sum of the undiscounted expected future pretax cash flows of an asset group is less than the carrying value of the asset group, including applicable liabilities, then the carrying value is written down to estimated fair value and the write down is reported as an impairment in the period in which the determination is made. Individual assets are grouped for impairment purposes at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets—generally at the pipeline system, terminal, or processing or fractionation system level. Since there usually is a lack of quoted market prices for our long-lived assets, the fair value of potentially impaired assets is typically determined based on the present value of expected future cash flows using discount rates and other assumptions believed to be consistent with those used by principal market participants, based on estimated replacement cost, or based on a multiple of operating cash flow validated with historical market transactions of similar assets where possible.

The expected future cash flows used for impairment reviews and related fair value calculations are based on estimated future throughputs, tariffs and fees, operating costs and capital project decisions, considering all available evidence at the date of review. See Note 7—Properties, Plants and Equipment, for additional information regarding the PP&E impairment we recorded in the third quarter of 2021.

Impairment of Investments in Nonconsolidated Entities

Investments in nonconsolidated entities are assessed for impairment whenever changes in the facts and circumstances indicate a loss in value has occurred. When indicators exist, the fair value is estimated and compared to the investment carrying value. If any impairment is judgmentally determined to be other than temporary, the carrying value of the investment is written down to fair value. The fair value of the impaired investment is determined based on quoted market prices, if available, or upon the present value of expected future cash flows using discount rates and other assumptions believed to be consistent with those used by principal market participants and a market analysis of comparable assets, if appropriate. See Note 4—Equity Investments, for additional information on impairments recorded in 2021 and 2020.

Goodwill

Goodwill represents the excess of the purchase price over the estimated fair value of the net assets acquired in the acquisition of a business. Goodwill is not amortized, but rather is assessed for impairment annually and when events or changes in circumstances indicate that the fair value of the reporting unit with goodwill has been reduced below carrying value. The majority of our goodwill is related to acquisitions from Phillips 66. In these common control transactions, the net assets acquired are recorded at Phillips 66’s historical carrying value, including any associated goodwill. We have one reporting unit for our goodwill impairment assessment.

Asset Retirement Obligations and Environmental Costs

Fair values of legal obligations to abandon or remove long-lived assets are recorded in the period in which the obligation arises. When the liability is initially recorded, we capitalize this cost by increasing the carrying amount of the related PP&E. Over time, the liability is increased for the change in its present value, and the capitalized cost in PP&E is depreciated over the useful life of the related asset. Our estimate may change after initial recognition of the obligation, in which case we record an adjustment to the liability and PP&E.

Environmental expenditures are expensed or capitalized, depending upon their future economic benefit. Expenditures relating to an existing condition caused by past operations, and those having no future economic benefit, are expensed. Liabilities for environmental expenditures are recorded on an undiscounted basis (unless acquired in a business combination) when environmental assessments or cleanups are probable and the costs can be reasonably estimated.

Income Taxes

We follow the asset and liability method of accounting for income taxes. Under this method, deferred income taxes are recognized for the tax consequences of temporary differences between the financial statement carrying amounts and the tax basis of our assets and liabilities. Our operations are treated as a partnership for federal and state income tax purposes, with each partner being separately taxed on its share of taxable income. Therefore, we have excluded income taxes from these consolidated financial statements, except for the income tax provision resulting from state laws that apply to entities organized as partnerships. Our tax provision is computed as if we were a stand-alone tax paying entity. Any interest and penalties related to income taxes would be reported in interest and debt expense and operating and maintenance expenses, respectively, in our consolidated statement of income.

Distributions from Equity Affiliates

Distributions received from our equity affiliates are classified on our consolidated statement of cash flows pursuant to the cumulative earnings approach. Under this approach, a distribution received from an equity affiliate is considered a return on investment and is classified as an operating cash inflow unless cumulative distributions received from the equity affiliate exceed cumulative equity in earnings. If cumulative distributions from an equity affiliate exceed cumulative equity in earnings, the excess is considered a return of investment and is classified as an investing cash inflow on our consolidated statement of cash flows.

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Operating Revenues

12 Months Ended

Dec. 31, 2021

Revenue from Contract with Customer [Abstract]

Operating Revenues

Note 3—Operating Revenues

Operating revenues are primarily generated from long-term pipeline transportation, terminaling, storage, processing and fractionation lease and service agreements, mainly with Phillips 66. These agreements typically include escalation clauses to adjust transportation tariffs and terminaling and storage fees to reflect changes in price indices. In addition, most of these agreements contain renewal options, which typically require the mutual consent of both our customers and us.

Total operating revenues disaggregated by asset type were as follows:

	Millions of Dollars
	2021		2020	2019
Pipelines	$	490	436	473
Terminals	175		153	167
Storage, processing and other revenues	481		449	486
Total operating revenues	$	1,146	1,038	1,126

The majority of our agreements with Phillips 66 are considered operating leases under GAAP. The classification of a lease as either an operating or a financing lease requires judgment in assessing the contract’s lease and service components and in determining the asset’s fair value. We have elected to account for lease and service elements of contracts classified as leases on a combined basis under the provisions of ASU No. 2016-02, except for leases of processing-type assets, which contain non-ratable fees related to turnaround activity. For these types of leases, we continue to separate the lease and service elements based on relative standalone prices and apply the lease standard to the lease element and the revenue standard to the service element.

Total operating revenues disaggregated by lease and service revenues were as follows:

	Millions of Dollars
	2021		2020
Lease revenues	$	944	875
Service revenues	202		163
Total operating revenues	$	1,146	1,038

Accounts Receivable

We bill our customers, mainly Phillips 66, under our lease and service contracts generally on a monthly basis.

Total accounts receivable by revenue type was as follows:

	Millions of Dollars
	2021		2020
Lease receivables	$	98	87
Service receivables	28		19
Total accounts receivable	$	126	106

Deferred Revenues

Our deferred revenues represent payments received from our customers, mainly Phillips 66, in advance of the period in which lease and service contract performance obligations have been fulfilled. The majority of our deferred revenues relate to a tolling agreement and a storage agreement that are classified as leases. The remainder of our deferred revenues relate to lease and service agreements that contain minimum volume commitments with recovery provisions. Our deferred revenues are recorded in the “Deferred revenues” and “Other liabilities” line items on our consolidated balance sheet.

Total deferred revenues under our lease and service agreements were as follows:

	Millions of Dollars
	2021		2020
Deferred lease revenues	$	31	45
Deferred service revenues	9		4
Total deferred revenues	$	40	49

Future Minimum Lease Payments from Customers

At December 31, 2021, future minimum payments to be received under our lease agreements with customers were estimated to be:

	Millions of Dollars
2022	$	763
2023	715
2024	591
2025	532
2026	359
Remaining years	923
Total future minimum lease payments from customers	$	3,883

Remaining Performance Obligations

We typically have long-term service contracts with our customers, of which the original durations range from 5 to 15 years. The weighted-average remaining duration of these contracts is 14 years. These contracts include both fixed and variable transaction price components. At December 31, 2021, future service revenues expected to be recognized for the fixed component of the transaction price of our remaining performance obligations from service contracts with our customers that have an original expected duration of greater than one year were:

	Millions of Dollars
2022	$	187
2023	180
2024	155
2025	151
2026	141
Remaining years	971
Total future service revenues	$	1,785

For the remaining service performance obligations, we applied the exemption for variable prices allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied promise to transfer distinct services as part of a performance obligation.

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Equity Investments

12 Months Ended

Dec. 31, 2021

Equity Method Investments and Joint Ventures [Abstract]

Equity Investments

Note 4—Equity Investments

The following table summarizes the carrying value of our equity investments:

			Millions of Dollars
	Percentage Ownership		2021		2020
Dakota Access, LLC and Energy Transfer Crude Oil Company, LLC (Bakken Pipeline)	25.00	%	$	574	577
Bayou Bridge Pipeline, LLC (Bayou Bridge)	40.00		277		288
DCP Sand Hills Pipeline, LLC (Sand Hills)	33.34		577		582
DCP Southern Hills Pipeline, LLC (Southern Hills)	33.34		217		217
Explorer Pipeline Company (Explorer)	21.94		83		92
Gray Oak Pipeline, LLC	65.00		812		860
Liberty Pipeline LLC (Liberty)*	—		—		241
Paradigm Pipeline LLC (Paradigm)	50.00		137		141
Phillips 66 Partners Terminal LLC (Phillips 66 Partners Terminal)	70.00		15		15
South Texas Gateway Terminal LLC (South Texas Gateway Terminal)	25.00		175		167
STACK Pipeline LLC (STACK)	50.00		62		64
Total equity investments			$	2,929	3,244

*In April 2021, we transferred our 50% ownership interest in Liberty to our co-venturer.

Earnings (losses) from our equity investments were as follows:

	Millions of Dollars
	2021		2020	2019
Bakken Pipeline	$	194	173	226
Bayou Bridge	38		31	31
Sand Hills	120		138	150
Southern Hills	49		42	43
Explorer	30		20	33
Gray Oak Pipeline, LLC	117		68	3
Paradigm	23		15	14
Phillips 66 Partners Terminal	1		(2)	25
South Texas Gateway Terminal	20		5	—
STACK	3		3	10
Total equity in earnings of affiliates	$	595	493	535

Distributions received from our equity affiliates were $728 million, $677 million, and $599 million in 2021, 2020 and 2019, respectively.

Dakota Access, LLC (Dakota Access) and Energy Transfer Crude Oil Company, LLC (ETCO)

Dakota Access owns a pipeline system that transports crude oil from the Bakken/Three Forks production area in North Dakota to Patoka, Illinois, and ETCO owns a connecting crude oil pipeline system from Patoka to Nederland, Texas. These two pipeline systems collectively form the Bakken Pipeline system, which is operated by a co-venturer. The Bakken Pipeline system went into service in June 2017. We have a positive basis difference of $46 million for this investment, which represents capitalized interest incurred during construction of the pipeline and a capital contribution disbursed to the co-venturer. The positive basis difference is being amortized over periods between 16 and 41 years.

In 2020, the trial court presiding over litigation regarding the Dakota Access Pipeline ordered the U.S. Army Corps of Engineers (USACE) to prepare an Environmental Impact Statement (EIS) relating to an easement under Lake Oahe in North Dakota and later vacated the easement. Although the easement has been vacated, the USACE has indicated that it will not take action to stop pipeline operations while it proceeds with the EIS, which is expected to be completed in the second half of 2022. In May 2021, the court denied a request for an injunction to shut down the pipeline while the EIS is being prepared and in June 2021, dismissed the litigation. It is possible that the litigation could be reopened or new litigation challenging the EIS, once completed, could be filed. In September 2021, Dakota Access filed a writ of certiorari, requesting the U.S. Supreme Court to review the lower court’s judgment that ordered the EIS and vacated the easement.

In March 2019, a wholly owned subsidiary of Dakota Access closed an offering of $2.5 billion aggregate principal amount of senior unsecured notes consisting of:

•$650 million aggregate principal amount of 3.625% Senior Notes due 2022.

•$1.0 billion aggregate principal amount of 3.900% Senior Notes due 2024.

•$850 million aggregate principal amount of 4.625% Senior Notes due 2029.

Dakota Access and ETCO have guaranteed repayment of the notes. In addition, we and our co-venturers in Dakota Access provided a Contingent Equity Contribution Undertaking (CECU) in conjunction with the notes offering. Under the CECU, the co-venturers may be severally required to make proportionate equity contributions to Dakota Access if there is an unfavorable final judgment in the above mentioned ongoing litigation. Contributions may be required if Dakota Access determines that the issues included in any such final judgment cannot be remediated and Dakota Access has or is projected to have insufficient funds to satisfy repayment of the notes. If Dakota Access undertakes remediation to cure issues raised in a final judgment, contributions may be required if any series of the notes become due, whether by acceleration or at maturity, during such time, to the extent Dakota Access has or is projected to have insufficient funds to pay such amounts. At December 31, 2021, our share of the maximum potential equity contributions under the CECU was approximately $631 million.

If the pipeline is required to cease operations, and should Dakota Access and ETCO not have sufficient funds to pay ongoing expenses, we also could be required to support our share of the ongoing expenses, including scheduled interest payments on the notes of approximately $25 million annually, in addition to the potential obligations under the CECU.

Gray Oak Pipeline, LLC

Gray Oak Pipeline, LLC was formed to develop and construct the Gray Oak Pipeline, which transports crude oil from the Permian and Eagle Ford to Texas Gulf Coast destinations that include Corpus Christi, Texas, and the Sweeny area, including the Phillips 66 Sweeny Refinery. We have a consolidated holding company that owns 65% of Gray Oak Pipeline, LLC.

In April 2018, we entered into a Purchase and Sale Agreement with Phillips 66 PDI to acquire its 100% interest in Gray Oak Holdings LLC (Holdings LLC), a limited liability company that, at that time, owned a 100% interest in Gray Oak Pipeline, LLC. We accounted for the acquisition of Holdings LLC as an acquisition of assets under common control. Also in April 2018, a co-venturer acquired a 25% interest in Gray Oak Pipeline, LLC, along with sufficient voting rights over key governance provisions such that we no longer could assert control over Gray Oak Pipeline, LLC. As a result, we (through our consolidated subsidiary Holdings LLC) began using the equity method of accounting for our investment in Gray Oak Pipeline, LLC at that time.

In December 2018, a third party exercised its option to acquire a 35% interest in Holdings LLC. Because Holdings LLC’s sole asset was its 75% ownership interest in Gray Oak Pipeline, LLC, which was considered a financial asset, and because certain restrictions were placed on the third party’s ability to transfer or sell its interest in Holdings LLC during the construction of the Gray Oak Pipeline, the legal sale of the 35% interest did not qualify as a sale under GAAP.

Rather, the third party’s subsequent cash contributions to Holdings LLC to fund its share of previously incurred and future construction costs plus a premium to us were reflected as a long-term obligation in the “Obligation from equity interest transfer” line item on our consolidated balance sheet and as financing cash inflows in the “Proceeds from equity interest transfer” line item on our consolidated statement of cash flows. The Gray Oak Pipeline commenced full operations in the second quarter of 2020 and the restrictions placed on the co-venturer were lifted on June 30, 2020, resulting in the recognition of the sale under GAAP. Accordingly, at June 30, 2020, the co-venturer’s 35% interest in the holding company was recharacterized from a long-term obligation to a noncontrolling interest on our consolidated balance sheet, and the premium of $84 million previously paid by the co-venturer in 2019 was recharacterized from a long-term obligation to a gain in our consolidated statement of income. During 2020 and 2019, the co-venturer contributed an aggregate of $61 million and $342 million, respectively, into Holdings LLC, and Holdings LLC used these contributions to fund its portion of Gray Oak Pipeline, LLC’s cash calls. We have an effective ownership interest of 42.25% in Gray Oak Pipeline, LLC, after considering our co-venturer’s 35% interest in the consolidated holding company.

In February 2019, Holdings LLC transferred a 10% interest in Gray Oak Pipeline, LLC, to a third party that exercised a purchase option, for proceeds of $81 million. The proceeds received from this sale are reflected as an investing cash inflow in the “Proceeds from sale of equity interest” line item on our consolidated statement of cash flows.

In June 2019, Gray Oak Pipeline, LLC entered into a third-party term loan facility. We and our co-venturers provided a guarantee through an equity contribution agreement requiring proportionate equity contributions to Gray Oak Pipeline, LLC up to the total outstanding loan amount. The net proceeds from the term loan were used by Gray Oak Pipeline, LLC for construction of the Gray Oak Pipeline and repayment of amounts borrowed under a related party loan agreement that we and our co-venturers executed in March 2019 and terminated upon the repayment by Gray Oak Pipeline, LLC in June 2019. Our total related party loan to and repayment received from Gray Oak Pipeline, LLC was $95 million.

In September 2020, Gray Oak Pipeline, LLC closed its offering of $1.4 billion aggregate principal amount of senior unsecured notes with maturities ranging from 2023 to 2027. These senior notes are not guaranteed by the Partnership or any of its co-venturers. Net proceeds from the offering were used to repay the $1,379 million outstanding under the third-party term loan facility described above, and for general company purposes. Concurrent with the full repayment of the third-party term loan facility, the associated guarantee we issued through an equity contribution agreement was terminated.

During its development phase, Gray Oak Pipeline, LLC was considered a variable interest entity (VIE) because it did not have sufficient equity at risk to fully fund the construction of all assets required for principal operations. We determined we were not the primary beneficiary because we and our co-venturers jointly directed the activities of Gray Oak Pipeline, LLC that most significantly impact economic performance. The Gray Oak Pipeline commenced full operations in the second quarter of 2020 and ceased being a VIE.

Liberty

In February 2020, we entered into a Purchase and Sale Agreement with Phillips 66 PDI to acquire its 50% interest in the Liberty Pipeline joint venture for $75 million. The purchase price reflected the reimbursement of project costs incurred by Phillips 66 prior to the effective date of the transaction. The transaction was funded through a combination of cash on hand and our revolving credit facility, and closed on March 2, 2020. Liberty was a joint venture formed to develop and construct the Liberty Pipeline system. In the first quarter of 2021, we decided to exit the Liberty Pipeline project, which had previously been deferred due to the challenging business environment created by the Coronavirus Disease 2019 pandemic. As a result, we recorded a $198 million impairment to reduce the book value of our investment in Liberty at March 31, 2021, to our share of the estimated fair value of the joint venture’s pipeline assets and net working capital. The impairment is included in the “Impairments” line item on our consolidated statement of income. This valuation resulted in a Level 3 nonrecurring fair value measurement.

In April 2021, we transferred our 50% ownership interest in Liberty to our co-venturer for cash and certain pipeline assets with a value that approximated our book value of $46 million at March 31, 2021.

Bayou Bridge

Bayou Bridge is a joint venture that owns a pipeline that transports crude oil from Nederland, Texas, to St. James, Louisiana. The Bayou Bridge Pipeline is operated by our co-venturer.

Sand Hills

Sand Hills is a joint venture with DCP Partners that owns an NGL pipeline system that extends from the Permian Basin and Eagle Ford to facilities along the Texas Gulf Coast and the Mont Belvieu, Texas market hub. The Sand Hills Pipeline system is operated by DCP Partners.

Southern Hills

Southern Hills is a joint venture with DCP Partners that owns an NGL pipeline system that extends from the Midcontinent region to the Mont Belvieu market hub. The Southern Hills Pipeline system is operated by DCP Partners. We have a negative basis difference of $86 million for this investment, which originated when the pipeline, formerly known as Seaway Products, was sold by Phillips 66 to a related party. The negative basis difference represents a deferred gain and is being amortized over 40 years.

Explorer

Explorer owns and operates a pipeline system that extends from the Texas Gulf Coast to Indiana. The Explorer Pipeline system transports refined petroleum products to more than 70 major cities in 16 U.S. states. We have a positive basis difference of $65 million for this investment, which represents fair value adjustments attributable to ownership increases in the pipeline. The positive basis difference is being amortized over periods between 6 and 14 years.

Paradigm

Paradigm is a joint venture that owns the Sacagawea pipelines and Keene Terminal in North Dakota. We account for the joint venture under the equity method of accounting due to governance provisions that require supermajority or unanimous voting on all decisions that significantly impact the governance, management and economic performance of the joint venture.

Phillips 66 Partners Terminal
Phillips 66 Partners Terminal is a joint venture that owns the Palermo Terminal in North Dakota. We account for the joint venture under the equity method of accounting due to governance provisions that require supermajority or unanimous voting on all decisions that significantly impact the governance, management and economic performance of the joint venture.

At December 31, 2020, we estimated the fair value of our investment in Phillips 66 Partners Terminal was below our book value, and we concluded the decline in fair value was not temporary, based upon our projections of future crude oil production in the joint venture’s area of operation. As a result, we recorded a $50 million impairment in the fourth quarter of 2020. The impairment is included in the “Impairments” line item on our consolidated statement of income. The fair value of this equity method investment was calculated by weighting the results of different economic scenarios using the income approach. The income approach uses a discounted cash flow model that requires various observable and unobservable inputs, including volumes, rates, expenses and discount rates. This valuation resulted in a Level 3 nonrecurring fair value measurement.

South Texas Gateway Terminal

In April 2018, we acquired a 25% interest in the South Texas Gateway Terminal under construction by a co-venturer, which connects to the Gray Oak Pipeline in Corpus Christi. The first dock of the marine export terminal began crude oil export operations in July 2020. The second dock commenced crude oil export operations in the fourth quarter of 2020. In the first quarter of 2021, the South Texas Gateway terminal commissioned additional storage capacity, bringing the total capacity to 8.6 million barrels and marking the completion of the final construction phase. The marine export terminal has two deepwater docks with up to 800,000 BPD of export capacity.

During its development phase, South Texas Gateway Terminal was considered a VIE because it did not have sufficient equity at risk to fully fund the construction of all assets required for principal operations. We determined we were not the primary beneficiary because we and our co-venturers jointly directed the activities of the terminal that most significantly impact economic performance. South Texas Gateway Terminal commenced primary operations in the fourth quarter of 2020 and ceased being a VIE.

STACK

STACK is a joint venture that owns and operates a crude storage terminal and a common carrier pipeline that transports crude oil from the Sooner Trend, Anadarko Basin, Canadian and Kingfisher Counties play in northwestern Oklahoma to Cushing, Oklahoma.

At December 31, 2020, we estimated the fair value of our investment in STACK was below our book value, and we concluded the decline in fair value was not temporary, based upon our projections of future crude oil production in the joint venture’s area of operation. As a result, we recorded a $46 million impairment in the fourth quarter of 2020. The impairment is included in the “Impairments” line item on our consolidated statement of income. The fair value of this equity method investment was calculated by weighting the results of different economic scenarios using the income approach. The income approach uses a discounted cash flow model that requires various observable and unobservable inputs, including volumes, tariffs, expenses and discount rates. This valuation resulted in a Level 3 nonrecurring fair value measurement.

Summarized 100% financial information for all equity investments is presented on a combined basis below:

	Millions of Dollars
	2021		2020	2019
Revenues	$	3,034	2,670	2,753
Income before income taxes	1,963		1,583	1,894
Net income	1,904		1,545	1,832
Current assets	716		671	642
Noncurrent assets	12,812		12,884	12,072
Current liabilities	1,144		381	662
Noncurrent liabilities	4,001		4,673	4,322

From acquisition date forward.

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Net Income Per Limited Partner Unit

12 Months Ended

Dec. 31, 2021

Partners' Capital Notes [Abstract]

Net Income Per Limited Partner Unit

Note 5—Net Income Per Limited Partner Unit

We calculate net income attributable to the Partnership per limited partner unit by dividing the limited partners’ interest in net income by the weighted-average number of common units outstanding for the period. After considering the period’s cash distributions declared, the remaining undistributed earnings or excess distributions declared over earnings, if any, are allocated to participating securities in accordance with the contractual terms of our partnership agreement and as prescribed under the two-class method for those periods in which we have participating securities. Our preferred units became participating securities effective October 1, 2020. The earnings amount allocated to the limited partner common unitholders is adjusted for any premiums paid to repurchase preferred units. Participating securities included general partner units and associated incentive distribution rights (IDRs) prior to the restructuring transaction effective August 1, 2019. See Note 13—Equity for information on the restructuring transaction and our preferred units.

For the diluted net income per limited partner unit calculation, the preferred units are assumed to be converted at the beginning of the period into limited partner common units on a one-for-one basis, and the distribution formula for available cash in our partnership agreement is recalculated, using the original available cash amount increased only for the preferred distributions declared which would not have been paid after conversion. Any potentially dilutive securities are excluded from the diluted earnings per unit computation if the effect of including such securities would be anti-dilutive.

	Millions of Dollars
	2021		2020	2019
Net income attributable to the Partnership	$	735	791	923
Less:
General partner’s distributions declared (including IDRs)*	—		—	139
Limited partners’ distributions declared on preferred units*	48		41	37
Limited partners’ distributions declared on common units*	799		799	609
Distributions less than (more than) net income attributable to the Partnership	$	(112)	(49)	138

*Distributions declared are attributable to the indicated periods.

	2021
	Limited Partners’ Common Units		Limited Partners’ Preferred Units	Total
Net income attributable to the Partnership (millions):
Distributions declared	$	799	48	847
Distributions more than net income attributable to the Partnership	(112)		—	(112)
Net income attributable to the Partnership	687		48	735
Premium paid for the repurchase of preferred units	(4)
Net income attributable to the Partnership—basic	683
Dilutive effect of preferred units	—
Net income attributable to the Partnership—diluted	$	683
Weighted-average units outstanding—basic	228,340,146
Dilutive effect of preferred units	—
Weighted-average units outstanding—diluted	228,340,146
Net income attributable to the Partnership per limited partner unit—basic (dollars)	$	3.00
Net income attributable to the Partnership per limited partner unit—diluted (dollars)	3.00

	2020
	Limited Partners’ Common Units		Limited Partners’ Preferred Units	Total
Net income attributable to the Partnership (millions):
Distributions declared	$	799	41	840
Distributions less than net income attributable to the Partnership	(49)		—	(49)
Net income attributable to the Partnership—basic	750		41	791
Dilutive effect of preferred units	41
Net income attributable to the Partnership—diluted	$	791
Weighted-average units outstanding—basic	228,333,213
Dilutive effect of preferred units	13,819,791
Weighted-average units outstanding—diluted	242,153,004
Net income attributable to the Partnership per limited partner unit—basic (dollars)	$	3.29
Net income attributable to the Partnership per limited partner unit—diluted (dollars)	3.27

	2019
	Limited Partners’ Common Units		General Partner (including IDRs)	Limited Partners’ Preferred Units	Total
Net income attributable to the Partnership (millions):
Distributions declared	$	609	139	37	785
Distributions less than net income attributable to the Partnership	137		1	—	138
Net income attributable to the Partnership—basic	746		140	37	923
Dilutive effect of preferred units(1)	32
Net income attributable to the Partnership—diluted	$	778
Weighted-average units outstanding—basic	167,655,306
Dilutive effect of preferred units(1)	13,819,791
Weighted-average units outstanding—diluted	181,475,097
Net income attributable to the Partnership per limited partner unit—basic (dollars)	$	4.45
Net income attributable to the Partnership per limited partner unit—diluted (dollars)	4.29

(1) The dilutive effect of the preferred units assumes the reallocation of net income attributable to the Partnership to the limited and general partners, including a reallocation associated with IDRs, pursuant to the available cash formula in the partnership agreement.

On January 18, 2022, the Board of Directors of our General Partner declared a quarterly cash distribution of $0.875 per common unit, which resulted in a total distribution to common unitholders of $200 million attributable to the fourth quarter of 2021. This distribution was paid February 14, 2022, to common unitholders of record as of January 31, 2022.

Beginning with the distribution to preferred unitholders attributable to the fourth quarter of 2020, the preferred unitholders are entitled to receive cumulative quarterly distributions equal to the greater of $0.678375 per unit, or the per-unit distribution amount paid to the common unitholders. Preferred unitholders received $12 million of distributions attributable to the fourth quarter of 2021. This distribution was paid February 14, 2022, to preferred unitholders of record as of January 31, 2022.

On October 26, 2021, we entered into a definitive merger agreement with Phillips 66. This agreement provides that, unless prohibited by the partnership agreement or applicable law, our General Partner shall cause the Partnership to declare, authorize and pay regular quarterly cash distributions on our common units in an amount not less than $0.875 per unit for the quarterly period ending December 31, 2021, and for each full quarterly period thereafter, unless the merger closes prior to the applicable record date. See Note 1—Business and Basis of Presentation, for additional information regarding the merger agreement.

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Major Customer and Concentration of Credit Risk

12 Months Ended

Dec. 31, 2021

Risks and Uncertainties [Abstract]

Major Customer and Concentration of Credit Risk

Note 6—Major Customer and Concentration of Credit Risk

Phillips 66 accounted for 97%, 98% and 97% of our total operating revenues for the years ended December 31, 2021, 2020 and 2019, respectively. Through our wholly owned and joint venture operations, we provide crude oil, refined petroleum products and NGL pipeline transportation, terminaling and storage, and crude oil gathering, NGL fractionation, crude oil processing, and rail-unloading services to Phillips 66 and other related parties.

We are potentially exposed to concentration of credit risk primarily through our accounts receivable from Phillips 66. These receivables have payment terms of 30 days or less and are settled against any existing payables we may have to Phillips 66 through Phillips 66’s interaffiliate settlement process. We monitor the creditworthiness of Phillips 66, which has an investment grade credit rating.

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Properties, Plants and Equipment

12 Months Ended

Dec. 31, 2021

Property, Plant and Equipment [Abstract]

Properties, Plants and Equipment

Note 7—Properties, Plants and Equipment

Our investment in PP&E, with the associated accumulated depreciation, at December 31 was:

	Estimated Useful Lives	Millions of Dollars
		2021		2020
Land		$	19	19
Buildings and improvements	3 to 30 years	118		115
Pipelines and related assets*	10 to 45 years	1,986		1,518
Terminals and related assets*	25 to 45 years	853		847
Rail racks and related assets*	33 years	137		137
Processing and related assets*	25 years	1,064		1,063
Caverns and related assets*	25 to 45 years	733		732
Construction-in-progress		137		394
Gross PP&E		5,047		4,825
Accumulated depreciation		(1,320)		(1,186)
Net PP&E		$	3,727	3,639

*Assets for which we are the lessor.

In the third quarter of 2021, we decided not to pursue the ACE Pipeline project. Accordingly, we wrote-off the capitalized costs associated with this project of $10 million. This charge is included in the “Impairments” line item on our consolidated statement of income.

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Goodwill

12 Months Ended

Dec. 31, 2021

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

Note 8—Goodwill

The carrying amount of goodwill was as follows:

	Millions of Dollars
	2021		2020
Beginning balance January 1	$	185	185
Activity during the year	—		—
Ending balance December 31	$	185	185

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Lease Assets and Liabilities

12 Months Ended

Dec. 31, 2021

Leases [Abstract]

Lease Assets and Liabilities

Note 9—Lease Assets and Liabilities

We have agreements with Phillips 66 to lease land underlying or associated with certain of our assets. These agreements are classified as operating leases. Due to the economic infeasibility of canceling these leases, we consider them non-cancellable. Certain leases include escalation clauses for adjusting rental payments to reflect changes in price indices. Our lease agreements do not impose any significant restrictions on distribution payments, asset dispositions or borrowing ability.

Effective with our implementation of ASU No. 2016-02, we elected to discount lease obligations using our incremental borrowing rate. For all leases, we elected the practical expedient not to separate service and lease costs. Our right-of way agreements in effect prior to January 1, 2019, were not accounted for as leases as they were not initially determined to be leases at their commencement dates. However, modifications to these agreements or new agreements will be assessed and accounted for accordingly under ASU No. 2016-02. For short-term leases, which are leases that, at the commencement date, have a lease term of 12 months or less and do not include an option to purchase the underlying asset that is reasonably certain to be exercised, we elected to not recognize the ROU asset and corresponding lease liability on our consolidated balance sheet.

Operating lease ROU assets are recorded in the “Other assets” line item and lease liabilities are recorded in the “Other current liabilities” and “Other liabilities” line items on our consolidated balance sheet. During the years ended December 31, 2021 and 2020, the total operating lease ROU asset was $43 million and $44 million, respectively.

Future minimum lease payments and recorded short- and long-term lease liabilities at December 31, 2021, for operating leases were:

	Millions of Dollars
2022	$	3
2023	3
2024	3
2025	3
2026	3
Remaining years	84
Future minimum lease payments	99
Amount representing interest or discounts	(56)
Total lease liabilities	43
Short-term lease liabilities	(1)
Long-term lease liabilities	$	42

Operating lease costs and operating cash outflows for the year ended December 31, 2021 and 2020, were not material.

The weighted-average remaining lease term for our operating leases as of December 31, 2021 and 2020, was 33 and 34 years, respectively. The weighted-average discount rate for our operating leases as of December 31, 2021 and 2020, was 5.9%.

Lease Assets and Liabilities

Note 9—Lease Assets and Liabilities

We have agreements with Phillips 66 to lease land underlying or associated with certain of our assets. These agreements are classified as operating leases. Due to the economic infeasibility of canceling these leases, we consider them non-cancellable. Certain leases include escalation clauses for adjusting rental payments to reflect changes in price indices. Our lease agreements do not impose any significant restrictions on distribution payments, asset dispositions or borrowing ability.

Effective with our implementation of ASU No. 2016-02, we elected to discount lease obligations using our incremental borrowing rate. For all leases, we elected the practical expedient not to separate service and lease costs. Our right-of way agreements in effect prior to January 1, 2019, were not accounted for as leases as they were not initially determined to be leases at their commencement dates. However, modifications to these agreements or new agreements will be assessed and accounted for accordingly under ASU No. 2016-02. For short-term leases, which are leases that, at the commencement date, have a lease term of 12 months or less and do not include an option to purchase the underlying asset that is reasonably certain to be exercised, we elected to not recognize the ROU asset and corresponding lease liability on our consolidated balance sheet.

Operating lease ROU assets are recorded in the “Other assets” line item and lease liabilities are recorded in the “Other current liabilities” and “Other liabilities” line items on our consolidated balance sheet. During the years ended December 31, 2021 and 2020, the total operating lease ROU asset was $43 million and $44 million, respectively.

Future minimum lease payments and recorded short- and long-term lease liabilities at December 31, 2021, for operating leases were:

	Millions of Dollars
2022	$	3
2023	3
2024	3
2025	3
2026	3
Remaining years	84
Future minimum lease payments	99
Amount representing interest or discounts	(56)
Total lease liabilities	43
Short-term lease liabilities	(1)
Long-term lease liabilities	$	42

Operating lease costs and operating cash outflows for the year ended December 31, 2021 and 2020, were not material.

The weighted-average remaining lease term for our operating leases as of December 31, 2021 and 2020, was 33 and 34 years, respectively. The weighted-average discount rate for our operating leases as of December 31, 2021 and 2020, was 5.9%.

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Debt

12 Months Ended

Dec. 31, 2021

Debt Disclosure [Abstract]

Debt

Note 10—Debt

Debt at December 31 was:

	Millions of Dollars
	2021		2020
2.450% Senior Notes due December 2024	$	300	300
3.605% Senior Notes due February 2025	500		500
3.550% Senior Notes due October 2026	500		500
3.750% Senior Notes due March 2028	500		500
3.150% Senior Notes due December 2029	600		600
4.680% Senior Notes due February 2045	450		450
4.900% Senior Notes due October 2046	625		625
Floating Rate Term Loan due April 2022 at rate of 0.978% at year-end 2021	450		—
Tax-exempt bonds due April 2021 at weighted-average rate of 0.360% at year-end 2020	—		50
Revolving credit facility borrowings due January 2021 at weighted-average rate of 1.397% at year-end 2020	—		415
Debt at face value	3,925		3,940
Net unamortized discounts and debt issuance costs	(28)		(31)
Total debt	3,897		3,909
Short-term debt	(450)		(465)
Long-term debt	$	3,447	3,444

The fair value of our fixed-rate and floating-rate debt is estimated based on observable market prices and is classified as Level 2 of the fair value hierarchy. The fair value of our fixed-rate debt amounted to $3,810 million and $3,752 million at December 31, 2021 and 2020, respectively. The fair value of our floating-rate debt approximated carrying value of $450 million and $465 million at December 31, 2021 and 2020, respectively.

Maturities of borrowings outstanding at December 31, 2021, inclusive of net unamortized discounts and debt issuance costs, for the five-year period ending 2026 were $450 million in 2022, $298 million in 2024, $499 million in 2025 and $498 million in 2026.

During the year ended December 31, 2021, our debt at face value decreased $15 million due to:

.

•Payments of $415 million under the revolving credit facility.

•Repayments of $50 million of tax-exempt bonds.

•Issuance of $450 million under term loan due April 2022.

Revolving Credit Facility

Our $750 million revolving credit facility may be used for direct bank borrowings and as support for issuances of letters of credit. We have an option to increase the overall capacity to $1 billion, subject to certain conditions. We also have the option to extend the facility for two additional one-year terms after its July 30, 2024, maturity date, subject to, among other things, the consent of the lenders holding the majority of the commitments and of each lender extending its commitment.

The facility is with a broad syndicate of financial institutions and contains covenants that are usual and customary for an agreement of this type, including that, as of the last day of each fiscal quarter, the ratio of total debt to EBITDA for the prior four fiscal quarters must be no greater than 5.0:1.0 (and 5.5:1.0 during the period following certain specified acquisitions). The facility has customary events of default, such as nonpayment of principal when due; nonpayment of interest, fees or other amounts; and violation of covenants.

Outstanding revolving borrowings under the facility bear interest, at our option, at either: (a) the Eurodollar rate in effect from time to time plus the applicable margin; or (b) the reference rate (as described in the facility) plus the applicable margin. The facility also provides for customary fees, including commitment fees. The pricing levels for the commitment fees and interest-rate margins are determined based on our credit ratings in effect from time to time. Borrowings under the facility may be short-term or long-term in duration, and we may at any time prepay outstanding borrowings under the facility, in whole or in part, without premium or penalty. At December 31, 2021, no borrowings were outstanding under this facility, compared with $415 million borrowings outstanding under this facility at December 31, 2020. At both December 31, 2021 and 2020, $1 million in letters of credit had been issued that were supported by this facility.

Term Loan Agreement

On April 6, 2021, we entered into a $450 million term loan agreement and borrowed the full amount. The term loan agreement has a maturity date of April 5, 2022, and the outstanding borrowings can be repaid at any time and from time to time, in whole or in part, without premium or penalty. Borrowings bear interest at a floating rate based on either a Eurodollar rate or a reference rate, plus a margin of 0.875%. Proceeds were primarily used to repay amounts borrowed under our $750 million revolving credit facility.

Tax-Exempt Bonds

In 2017, we assumed four $25 million tranches of tax-exempt bonds issued by the Brazos River Harbor Navigation District. We repaid one tranche in 2018 and another tranche in April 2020. The two remaining tranches, totaling $50 million, were repaid in April 2021.

The tranches accrued interest monthly based on a daily rate derived by the remarketing agent for the bonds. The interest rates are designed to represent the lowest rate acceptable by the tax-exempt, variable-rate bond market and approximate the tax-exempt bonds trading at par.

2019 Senior Notes

On September 6, 2019, we closed on a public offering of $900 million aggregate principal amount of unsecured notes consisting of:

•$300 million aggregate principal amount of 2.450% Senior Notes due December 15, 2024.

•$600 million aggregate principal amount of 3.150% Senior Notes due December 15, 2029.

Interest on each series of senior notes is payable semi-annually in arrears on June 15 and December 15 of each year, commencing on June 15, 2020. Total proceeds received from the offering were $892 million, net of underwriting discounts and commissions. Net proceeds from the Senior Notes offering were used for general partnership purposes, including debt repayments. On September 13, 2019, we used a portion of the proceeds to repay the $400 million outstanding principal balance of the senior unsecured term loan facility that was drawn during the first half of 2019. On October 15, 2019, we used a portion of the proceeds to repay the aggregate $300 million outstanding principal balance of our 2.646% Senior Notes due February 2020.

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Contingencies

12 Months Ended

Dec. 31, 2021

Commitments and Contingencies Disclosure [Abstract]

Contingencies

Note 11—Contingencies

From time to time, lawsuits involving a variety of claims that arise in the ordinary course of business are filed against us. We also may be required to remove or mitigate the effects on the environment of the placement, storage, disposal or release of certain chemical, mineral and petroleum substances at various sites. We regularly assess the need for accounting recognition or disclosure of these contingencies. In the case of all known contingencies (other than those related to income taxes), we accrue a liability when the loss is probable and the amount is reasonably estimable.

If a range of amounts can be reasonably estimated and no amount within the range is a better estimate than any other amount, then the minimum of the range is accrued. We do not reduce these liabilities for potential insurance or third-party recoveries. If applicable, we accrue receivables for probable insurance or other third-party recoveries. In the case of income-tax-related contingencies, we use a cumulative probability-weighted loss accrual in cases where sustaining a tax position is uncertain.

Based on currently available information, we believe it is remote that future costs related to known contingent liability exposures will exceed current accruals by an amount that would have a material adverse impact on our consolidated financial statements. As we learn new facts concerning contingencies, we reassess our position both with respect to accrued liabilities and other potential exposures. Estimates particularly sensitive to future changes include any contingent liabilities recorded for environmental remediation, tax and legal matters. Estimated future environmental remediation costs are subject to change due to such factors as the uncertain magnitude of cleanup costs, the unknown time and extent of such remedial actions that may be required, and the determination of our liability in proportion to that of other potentially responsible parties. Estimated future costs related to tax and legal matters are subject to change as events evolve and as additional information becomes available during the administrative and litigation processes.

Environmental

We are subject to federal, state and local environmental laws and regulations. We record accruals for contingent environmental liabilities based on management’s best estimates, using all information that is available at the time. We measure estimates and base liabilities on currently available facts, existing technology, and presently enacted laws and regulations, taking into account stakeholder and business considerations. When measuring environmental liabilities, we also consider our prior experience in remediation of contaminated sites, other companies’ cleanup experience, and data released by the U.S. Environmental Protection Agency or other organizations. We consider unasserted claims in our determination of environmental liabilities, and we accrue them in the period they are both probable and reasonably estimable. At December 31, 2021, and 2020, our total environmental accruals were not material.

In the future, we may be involved in additional environmental assessments, cleanups and proceedings.

Legal Proceedings

Under our amended omnibus agreement, Phillips 66 provides certain services for our benefit, including legal support services, and we pay an operational and administrative support fee for these services. Phillips 66’s legal organization applies its knowledge, experience and professional judgment to the specific characteristics of our cases, employing a litigation management process to manage and monitor the legal proceedings against us. The process facilitates the early evaluation and quantification of potential exposures in individual cases and enables tracking of those cases that have been scheduled for trial and/or mediation. Based on professional judgment and experience in using these litigation management tools and available information about current developments in all our cases, Phillips 66’s legal organization regularly assesses the adequacy of current accruals and determines if adjustment of existing accruals, or establishment of new accruals, is required. At December 31, 2021 and 2020, we did not have any material accrued contingent liabilities associated with litigation matters.

Indemnification and Excluded Liabilities

Under our amended omnibus agreement and pursuant to the terms of various agreements under which we acquired assets from Phillips 66, Phillips 66 will indemnify us, or assume responsibility, for certain environmental liabilities, tax liabilities, litigation and any other liabilities attributable to the ownership or operation of the assets contributed to us and that arose prior to the effective date of each acquisition. These indemnifications and exclusions from liability have, in some cases, time limits and deductibles. When Phillips 66 performs under any of these indemnifications or exclusions from liability, we recognize noncash expenses and associated noncash capital contributions from our General Partner, as these are considered liabilities paid for by a principal unitholder.

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Assets Retirement Obligations and Accrued Environmental Costs

12 Months Ended

Dec. 31, 2021

Assets Retirement Obligations and Accrued Environmental Costs [Abstract]

Asset Retirement Obligations and Accrued Environmental Costs

Note 12—Asset Retirement Obligations and Accrued Environmental Costs

Asset retirement obligations and accrued environmental costs at December 31 were:

	Millions of Dollars
	2021		2020
Asset retirement obligations	$	11	11
Accrued environmental costs	1		2
Total asset retirement obligations and accrued environmental costs	12		13
Asset retirement obligations and accrued environmental costs due within one year	—		(1)
Long-term asset retirement obligations and accrued environmental costs	$	12	12

Asset Retirement Obligations

We have asset retirement obligations we are required to perform under law or contract once an asset is permanently taken out of service. These obligations primarily relate to the abandonment or removal of certain pipelines. Most of these obligations are not expected to be paid until many years in the future.

During 2021 and 2020, our asset retirement obligations changed as follows:

	Millions of Dollars
	2021		2020
Balance at January 1	$	11	11
Accretion of discount	—		1
Changes in estimates of existing obligations	—		(1)
Balance at December 31	$	11	11

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Equity

12 Months Ended

Dec. 31, 2021

Equity [Abstract]

Equity

Note 13—Equity

ATM Programs

We have authorized an aggregate of $750 million under three $250 million continuous offerings of common units, or at-the-market (ATM) programs. The first two programs concluded in June 2018 and December 2019, respectively. At December 31, 2021, we have $248 million of available capacity under our $250 million ATM program. We suspended issuances under the ATM program in the first quarter of 2020 due to low common unit prices. We did not issue any common units under the ATM program during the twelve months ended December 31, 2021. During the year ended December 31, 2020, on a settlement-date basis, we issued an aggregate of 40,570 common units, generating net proceeds of $2 million. Since inception in June 2016 through December 31, 2021, we issued an aggregate of 9,487,055 common units under our ATM programs, and generated net proceeds of $494 million, after broker commissions of $5 million and other costs of $3 million. The net proceeds from sales under the ATM programs are used for general partnership purposes, which may include debt repayment, acquisitions, capital expenditures and additions to working capital.

On October 26, 2021, we entered into a definitive merger agreement with Phillips 66. If this merger is consummated, our common units will no longer be publicly traded and, as a result, we would not expect any issuances of common units under our ATM program before or after the closing date of this transaction. See Note 1—Business and Basis of Presentation, for additional information regarding the merger agreement.

Preferred Units

On June 29, 2021, we repurchased 368,528 of the outstanding Series A Perpetual Convertible Preferred Units with an aggregate carrying value of $20 million for $24 million in cash, or $65.124 per unit. Upon the repurchase, these preferred units were canceled and are no longer outstanding.

On October 26, 2021, we entered into a definitive merger agreement with Phillips 66. See Note 1—Description of the Business, and Note 5—Net Income Per Limited Partner Unit, for additional information regarding the merger agreement.

The preferred units rank senior to all common units with respect to distributions and rights upon liquidation. The holders of the preferred units were entitled to receive cumulative quarterly distributions equal to $0.678375 per unit, beginning for the quarter ended December 31, 2017, with a prorated amount from the date of issuance. Beginning with the distribution to preferred unitholders attributable to the fourth quarter of 2020, the preferred unitholders are entitled to receive cumulative quarterly distributions equal to the greater of $0.678375 per unit, or the per-unit distribution amount paid to the common unitholders as if such preferred units had converted into common units immediately prior to the record date.

The holders of the preferred units may convert their preferred units into common units, on a one-for-one basis, at any time after the second anniversary of the issuance date, in full or in part, subject to minimum conversion amounts and conditions. After the third anniversary of the issuance date, we may convert the preferred units into common units at any time, in whole or in part, subject to certain minimum conversion amounts and conditions, if the arithmetic average of the volume-weighted trading price of our common units is greater than $73.2645 per unit for the 20 day trading period immediately preceding the conversion notice date and the average trading volume of the common units is at least 100,000 for the preceding 20 trading days. The conversion rate for the preferred units shall be the quotient of (a) the sum of (i) $54.27, plus (ii) any unpaid cash distributions on the applicable preferred unit, divided by (b) $54.27. The holders of the preferred units are entitled to vote on an as-converted basis with the common unitholders and have certain other class voting rights with respect to any amendment to our partnership agreement that would adversely affect any rights, preferences or privileges of the preferred units. In addition, upon certain events involving a change in control, the holders of preferred units may elect, among other potential elections, to convert their preferred units to common units at the then change of control conversion rate.

Restructuring Transaction

On August 1, 2019, we closed on the transactions contemplated by the Partnership Interests Restructuring Agreement, dated July 24, 2019, entered into with our General Partner. Pursuant to this agreement, all of the outstanding IDRs held by our General Partner were eliminated and its approximately 2% general partner interest in us was converted into a non-economic general partner interest; both in exchange for an aggregate of 101 million common units issued to Phillips 66 PDI. Because these transactions were between entities under common control, the common units issued to Phillips 66 PDI were not assigned any value; rather, our General Partner’s negative equity balance of $1.4 billion at August 1, 2019, was transferred to Phillips 66’s limited partner equity account.

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Related Party Transactions

12 Months Ended

Dec. 31, 2021

Related Party Transactions [Abstract]

Related Party Transactions

Note 14—Related Party Transactions

Commercial Agreements

We have entered into long-term, fee-based commercial agreements with Phillips 66 to provide transportation, terminaling, storage, stevedoring, fractionation, processing, and rail terminal services. Under these agreements, Phillips 66 commits to provide us with minimum transportation, throughput or storage volumes, or minimum monthly service fees. If Phillips 66 does not meet its minimum volume commitments under an agreement, Phillips 66 pays us a deficiency payment based on the calculation described in the agreement.

Amended and Restated Operational Services Agreement

Under our amended and restated operational services agreement, we reimburse Phillips 66 for certain operational services provided in support of our pipelines, terminaling, processing, and storage facilities. These services include routine and emergency maintenance and repair services, routine operational activities, routine administrative services, construction and related services and such other services as we and Phillips 66 may mutually agree upon from time to time.

Amended Omnibus Agreement

The amended omnibus agreement addresses our payment of an operating and administrative support fee and our obligation to reimburse Phillips 66 for all other direct or allocated costs and expenses incurred by Phillips 66 in providing general and administrative services. Additionally, the omnibus agreement addresses Phillips 66’s indemnification to us and our indemnification to Phillips 66 for certain environmental and other liabilities. Further, it addresses the granting of a license from Phillips 66 to us with respect to the use of certain Phillips 66 trademarks.

The operational and administrative support fee is for the provision of certain services, including: logistical services; asset oversight, such as operational management and supervision; corporate engineering services, including asset integrity and regulatory services; business development services; executive services; financial and administrative services (including treasury and accounting); information technology; legal services; corporate health, safety and environmental services; facility services; human resources services; procurement services; investor relations; tax matters; and public company reporting services. We pay Phillips 66 an operational and administrative support fee under the terms of our amended omnibus agreement in the amount of $8 million per month.

We also reimburse Phillips 66 for all other direct or allocated costs incurred on behalf of us, pursuant to the terms of our amended omnibus agreement. The classification of these charges between operating and maintenance expenses and general and administrative expenses is based on the functional nature of the services performed for our operations. Under our amended and restated operational services agreement, we reimburse Phillips 66 for the provision of certain operational services in support of our operating assets. Additionally, we pay Phillips 66 for insurance services provided to us, and recoveries under these policies are recorded as an offset to our expenses. Operating and maintenance expenses also include volumetric gains and losses associated with volumes transported by Phillips 66.

Tax Sharing Agreement

Under our tax sharing agreement, we reimburse Phillips 66 for our share of state and local income and other taxes incurred by Phillips 66 due to our results of operations being included in a combined or consolidated tax return filed by Phillips 66. Any reimbursement is limited to the tax that we (and our subsidiaries) would have paid had we not been included in a combined group with Phillips 66. Phillips 66 may use its tax attributes to cause its combined or consolidated group to owe no tax; however, we would nevertheless reimburse Phillips 66 for the tax we would have owed, even though Phillips 66 had no cash expense for that period.

Related Party Transactions

Significant related party transactions included in our costs and expenses were:

	Millions of Dollars
	2021		2020	2019
Operating and maintenance expenses	$	212	184	258
General and administrative expenses	61		62	65

Other related party balances were included in the following line items on our consolidated balance sheet, all of which were related to commercial agreements with Phillips 66:

	Millions of Dollars
	2021		2020
Prepaid expenses and other current assets	$	4	7
Other assets	46		47
Deferred revenues	21		27
Other current liabilities	1		1
Other liabilities	60		64

Equity Affiliate Arrangements

In March 2019, we and our co-venturers in Dakota Access provided a CECU in conjunction with a senior unsecured notes offering. See Note 4—Equity Investments, for additional information.

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Employee Benefit Plans

12 Months Ended

Dec. 31, 2021

Retirement Benefits [Abstract]

Employee Benefit Plans

Note 15—Employee Benefit Plans

Pension and Retirement Savings Plans

Neither we nor our subsidiaries have any employees. Our General Partner has the sole responsibility for providing the employees and other personnel necessary to conduct our operations. All of the employees that conduct our wholly owned businesses are employed by Phillips 66. Those employees participate in benefit plans sponsored by Phillips 66. Most employees of Phillips 66 who provide direct support to our operations do so under the provisions of the amended and restated operational services agreement, which fees include a burden for benefit costs.

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Unit-Based Compensation

12 Months Ended

Dec. 31, 2021

Share-based Payment Arrangement [Abstract]

Unit-Based Compensation

Note 16—Unit-Based Compensation

In 2013, the Board of Directors of our General Partner adopted the Phillips 66 Partners LP 2013 Incentive Compensation Plan (the ICP).  Awards under the ICP are available for officers, directors and employees of our General Partner or its affiliates, and any consultants or other individuals who perform services for the Partnership.  The ICP allows for the grant of unit awards, restricted units, phantom units, unit options, unit appreciation rights, distribution equivalent rights, profits interest units and other unit-based awards.  The ICP limits the number of common units that may be delivered pursuant to awards to 2,500,000, subject to proportionate adjustment in the event of unit splits and similar events.

From the closing of our initial public offering through December 31, 2021, we have only issued phantom units under the ICP and have only made issuances to non-employee directors.  A phantom unit entitles the recipient to receive cash equal to the fair market value of a common unit on the date the phantom unit is settled after the vesting period (settlement date), and to also receive a distribution equivalent each quarter between the grant date and the settlement date in an amount equal to any cash distributions paid on a common unit during that time. During the year ended December 31, 2021, we granted a total of 13,848 phantom units to non-employee directors of the Partnership. For the years ended December 31, 2020 and 2019, we granted a total of 6,092 and 4,950 phantom units, respectively. On the grant date, phantom units awarded to non-employee directors become non-forfeitable; therefore, we immediately recognize expense equal to the grant-date fair value of the award. Phantom units awarded under the ICP do not have voting rights.

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Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Note 17—Income Taxes

We are not a taxable entity for U.S. federal income tax purposes or for the majority of states that impose an income tax. Taxes on our net income are borne generally by our limited partners through the allocation of taxable income. Our income tax provision results from state laws that apply to entities organized as partnerships. For us, this is primarily the state of Texas.

At December 31, 2021 and 2020, we had a net deferred tax liability of $14 million and $10 million, respectively. The net deferred tax liability was primarily associated with PP&E and equity investments.

Our effective tax rate was less than 1% for the years ended December 31, 2021, 2020 and 2019.

At December 31, 2021 and 2020, we had no liability recorded for uncertain tax positions. We also did not have any interest or penalties related to income taxes for the years ended December 31, 2021, 2020 and 2019. Texas tax returns for the years 2014 and forward are subject to examination.

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Cash Flow Information

12 Months Ended

Dec. 31, 2021

Supplemental Cash Flow Information [Abstract]

Cash Flow Information

Note 18—Cash Flow Information

Capital Expenditures and Investments

Our capital expenditures and investments consisted of:

	Millions of Dollars
	2021		2020	2019
Cash capital expenditures and investments	$	311	910	1,095
Change in capital expenditure accruals	(15)		5	(13)
Total capital expenditures and investments	$	296	915	1,082

	Millions of Dollars
	2021		2020	2019
Cash Payments
Interest and debt expense	$	125	124	100

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Other Financial Information

12 Months Ended

Dec. 31, 2021

Other Income and Expenses [Abstract]

Other Financial Information

Note 19—Other Financial Information

	Millions of Dollars
	2021		2020	2019
Interest and Debt Expense
Incurred
Debt	$	139	138	133
Other	4		4	3
	143		142	136
Capitalized	(15)		(21)	(28)
Expensed	$	128	121	108
Other Income
Interest income	$	—	1	3
Other	13		2	3
Total other income	$	13	3	6

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Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2021

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (GAAP).

Consolidation Principles and Investments in Affiliates

Consolidation Principles and Investments in Affiliates

Our consolidated financial statements include the accounts of majority-owned, controlled subsidiaries. The equity method is used to account for investments in affiliates in which we have the ability to exert significant influence over the affiliates’ operating and financial policies, including any variable interest entities of which we are not the primary beneficiary. Undivided interests in pipelines are consolidated on a proportionate basis.

Use of Estimates

Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and the disclosure of contingent assets and liabilities. Actual results could differ from these estimates.

Common Control Transactions

Common Control Transactions

Businesses acquired from Phillips 66 and its subsidiaries are accounted for as common control transactions whereby the net assets acquired are combined with ours at their carrying value. Any difference between carrying value and recognized consideration is treated as a capital transaction. Cash consideration up to the carrying value of net assets acquired is presented as an investing activity in our consolidated statement of cash flows. Cash consideration in excess of the carrying value of net assets acquired is presented as a financing activity in our consolidated statement of cash flows.

Revenue Recognition

Revenue Recognition

Revenues are primarily recognized for pipeline transportation, terminaling, storage, processing and fractionation services generated under long-term agreements. A significant portion of our revenues are derived from Phillips 66. The majority of these agreements with Phillips 66 are considered operating leases under GAAP.

We account for lease and service elements of contracts classified as leases on a combined basis under the provisions of Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) No. 2016-02, “Leases (Topic 842),” except for leases of processing-type assets, which contain non-ratable fees related to turnaround activity. For these types of leases, we continued to separate the lease and service elements based on relative standalone prices and applied the new lease standard to the lease element and the revenue standard to the service element.

For new or modified leases, our determination of lease classification involves estimates, primarily related to the fair value of the leased asset based on comparable replacement cost and obsolescence estimates, and the allocation of contract consideration between the lease and non-lease components based on the relative stand-alone selling price.

Revenues from fixed minimum volume commitments are recognized over the performance obligation period for stand-ready service contracts. Revenues from the variable element of these stand-ready contracts and other contracts without fixed elements are recognized based on the actual volumes transported, stored, processed and fractionated at contractual rates because the actual volumes specifically relate to our efforts to transfer the distinct services. Generally, our services are billed and payments are received on a monthly basis.

Billings to Phillips 66 for shortfall volumes under its quarterly minimum volume commitments are recorded as “Deferred revenues” in our consolidated balance sheet, as Phillips 66 generally has the right to make up the shortfall volumes in the following four quarters. For the lease element of the contracts, the deferred revenue will be recognized at the earlier of when shortfall volumes are made up, when the make-up rights contractually expire or when we determine the system will not have the necessary capacity to enable a customer to make up the shortfall volumes. For the service element of the contracts, the deferred revenue will be recognized when the performance obligation is complete or it is probable that the shortfall volumes will not be made up.

Billings for tolling services relating to maintenance turnaround activities are billed in advance of such activities.  These billings are initially recorded as “Deferred revenues” in our consolidated balance sheet and are recognized when the maintenance turnaround activity commences.  Deferred revenue relating to maintenance turnaround operating expenses is recognized in the period the work is performed.  Deferred revenue relating to capital projects performed concurrently with a maintenance turnaround is recognized ratably over the remaining tolling services agreement once the equipment is placed into service.

Cash Equivalents

Cash Equivalents

Cash equivalents are highly liquid, short-term investments that are readily convertible to known amounts of cash and will mature within 90 days or less from the date of acquisition. We carry these at cost plus accrued interest, which approximates fair value.

Imbalances

Imbalances

We do not purchase or produce crude oil, refined petroleum or NGL product inventories. We experience imbalances as a result of variances in meter readings and in other measurement methods, and volume fluctuations within our crude oil, refined petroleum products and NGL systems due to pressure and temperature changes. Certain of our transportation contracts provide for the shipper to pay a contractual loss allowance, which is valued using quoted market prices of the applicable commodity being shipped. These contractual loss allowances, which are received from the shipper irrespective of, and independently calculated from, actual volumetric gains or losses, are recorded as revenue. Any actual volumetric gains or losses are valued using quoted market prices of the applicable commodities and are recorded as decreases or increases to operating and maintenance expenses, respectively.

Fair Value Measurements

Fair Value Measurements

We measure assets and liabilities requiring fair value presentation or disclosure using the price that would be received to sell an asset or paid to transfer a liability (i.e., an exit price), and disclose such amounts according to the quality of valuation inputs under the following hierarchy:

Level 1:    Quoted prices in an active market for identical assets or liabilities.

Level 2:    Observable inputs other than quoted prices included within Level 1 for the asset or liability, either directly or indirectly through market-corroborated inputs.

Level 3:    Unobservable inputs that are significant to the fair value of assets or liabilities.

We classify the fair value of an asset or liability based on the lowest level of input significant to its measurement. A fair value initially reported as Level 3 will be subsequently reported as Level 2 if the unobservable inputs become inconsequential to its measurement, or corroborating market data becomes available. Asset and liability fair values initially reported as Level 2 will be subsequently reported as Level 3 if corroborating market data becomes unavailable.

The carrying amounts of our trade receivables and payables approximate fair value.

Nonrecurring Fair Value Measurements

We apply the fair value measurements criteria to determine the fair value of nonfinancial assets and liabilities that are measured at fair value on a nonrecurring basis, primarily asset retirement obligations and, when impaired, long-lived assets.

Properties, Plants and Equipment (PP&E)

Properties, Plants and Equipment (PP&E)

PP&E is recorded at cost. Costs of maintenance and repairs, which are not significant improvements, are expensed when incurred. Depreciation of PP&E is determined by the individual-unit-straight-line method or the group-straight-line method (for those individual units that are highly integrated with other units).

Capitalized Interest

Capitalized Interest

Interest from external borrowings is capitalized on major projects with an expected construction period of six months or longer. Capitalized interest is added to the cost of the underlying asset’s PP&E or the applicable equity investment and is amortized over the useful life of the asset.

Major Maintenance Activities

Major Maintenance Activities

Costs for planned integrity management projects are expensed in the period incurred. These types of costs include inspection services, contractor repair services, materials and supplies, equipment rentals and labor costs.

Impairment of PP&E

Impairment of PP&E

PP&E used in operations are assessed for impairment whenever changes in facts and circumstances indicate a possible significant deterioration in the future cash flows expected to be generated by an asset group. If, upon review, the sum of the undiscounted expected future pretax cash flows of an asset group is less than the carrying value of the asset group, including applicable liabilities, then the carrying value is written down to estimated fair value and the write down is reported as an impairment in the period in which the determination is made. Individual assets are grouped for impairment purposes at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets—generally at the pipeline system, terminal, or processing or fractionation system level. Since there usually is a lack of quoted market prices for our long-lived assets, the fair value of potentially impaired assets is typically determined based on the present value of expected future cash flows using discount rates and other assumptions believed to be consistent with those used by principal market participants, based on estimated replacement cost, or based on a multiple of operating cash flow validated with historical market transactions of similar assets where possible.

The expected future cash flows used for impairment reviews and related fair value calculations are based on estimated future throughputs, tariffs and fees, operating costs and capital project decisions, considering all available evidence at the date of review.

Impairment of Investments in Nonconsolidated Entities

Impairment of Investments in Nonconsolidated EntitiesInvestments in nonconsolidated entities are assessed for impairment whenever changes in the facts and circumstances indicate a loss in value has occurred. When indicators exist, the fair value is estimated and compared to the investment carrying value. If any impairment is judgmentally determined to be other than temporary, the carrying value of the investment is written down to fair value. The fair value of the impaired investment is determined based on quoted market prices, if available, or upon the present value of expected future cash flows using discount rates and other assumptions believed to be consistent with those used by principal market participants and a market analysis of comparable assets, if appropriate.

Goodwill

Goodwill

Goodwill represents the excess of the purchase price over the estimated fair value of the net assets acquired in the acquisition of a business. Goodwill is not amortized, but rather is assessed for impairment annually and when events or changes in circumstances indicate that the fair value of the reporting unit with goodwill has been reduced below carrying value. The majority of our goodwill is related to acquisitions from Phillips 66. In these common control transactions, the net assets acquired are recorded at Phillips 66’s historical carrying value, including any associated goodwill. We have one reporting unit for our goodwill impairment assessment.

Asset Retirement Obligations and Environmental Costs

Asset Retirement Obligations and Environmental Costs

Fair values of legal obligations to abandon or remove long-lived assets are recorded in the period in which the obligation arises. When the liability is initially recorded, we capitalize this cost by increasing the carrying amount of the related PP&E. Over time, the liability is increased for the change in its present value, and the capitalized cost in PP&E is depreciated over the useful life of the related asset. Our estimate may change after initial recognition of the obligation, in which case we record an adjustment to the liability and PP&E.

Environmental expenditures are expensed or capitalized, depending upon their future economic benefit. Expenditures relating to an existing condition caused by past operations, and those having no future economic benefit, are expensed. Liabilities for environmental expenditures are recorded on an undiscounted basis (unless acquired in a business combination) when environmental assessments or cleanups are probable and the costs can be reasonably estimated.

Income Taxes

Income Taxes

We follow the asset and liability method of accounting for income taxes. Under this method, deferred income taxes are recognized for the tax consequences of temporary differences between the financial statement carrying amounts and the tax basis of our assets and liabilities. Our operations are treated as a partnership for federal and state income tax purposes, with each partner being separately taxed on its share of taxable income. Therefore, we have excluded income taxes from these consolidated financial statements, except for the income tax provision resulting from state laws that apply to entities organized as partnerships. Our tax provision is computed as if we were a stand-alone tax paying entity. Any interest and penalties related to income taxes would be reported in interest and debt expense and operating and maintenance expenses, respectively, in our consolidated statement of income.

Distributions from Equity Affiliates

Distributions from Equity Affiliates

Distributions received from our equity affiliates are classified on our consolidated statement of cash flows pursuant to the cumulative earnings approach. Under this approach, a distribution received from an equity affiliate is considered a return on investment and is classified as an operating cash inflow unless cumulative distributions received from the equity affiliate exceed cumulative equity in earnings. If cumulative distributions from an equity affiliate exceed cumulative equity in earnings, the excess is considered a return of investment and is classified as an investing cash inflow on our consolidated statement of cash flows.

Net Income Per Limited Partner Unit

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Operating Revenues (Tables)

12 Months Ended

Dec. 31, 2021

Revenue from Contract with Customer [Abstract]

Schedule of Disaggregation of Revenue

Total operating revenues disaggregated by asset type were as follows:

	Millions of Dollars
	2021		2020	2019
Pipelines	$	490	436	473
Terminals	175		153	167
Storage, processing and other revenues	481		449	486
Total operating revenues	$	1,146	1,038	1,126

Total operating revenues disaggregated by lease and service revenues were as follows:

	Millions of Dollars
	2021		2020
Lease revenues	$	944	875
Service revenues	202		163
Total operating revenues	$	1,146	1,038

Schedule of Accounts Receivable

Total accounts receivable by revenue type was as follows:

	Millions of Dollars
	2021		2020
Lease receivables	$	98	87
Service receivables	28		19
Total accounts receivable	$	126	106

Schedule of Deferred Revenues

Total deferred revenues under our lease and service agreements were as follows:

	Millions of Dollars
	2021		2020
Deferred lease revenues	$	31	45
Deferred service revenues	9		4
Total deferred revenues	$	40	49

Schedule of Future Minimum Payments Receivable

At December 31, 2021, future minimum payments to be received under our lease agreements with customers were estimated to be:

	Millions of Dollars
2022	$	763
2023	715
2024	591
2025	532
2026	359
Remaining years	923
Total future minimum lease payments from customers	$	3,883

Schedule of Expected Timing of Satisfaction

At December 31, 2021, future service revenues expected to be recognized for the fixed component of the transaction price of our remaining performance obligations from service contracts with our customers that have an original expected duration of greater than one year were:

	Millions of Dollars
2022	$	187
2023	180
2024	155
2025	151
2026	141
Remaining years	971
Total future service revenues	$	1,785

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Equity Investments (Tables)

12 Months Ended

Dec. 31, 2021

Equity Method Investments and Joint Ventures [Abstract]

Schedule of Equity Investments

The following table summarizes the carrying value of our equity investments:

			Millions of Dollars
	Percentage Ownership		2021		2020
Dakota Access, LLC and Energy Transfer Crude Oil Company, LLC (Bakken Pipeline)	25.00	%	$	574	577
Bayou Bridge Pipeline, LLC (Bayou Bridge)	40.00		277		288
DCP Sand Hills Pipeline, LLC (Sand Hills)	33.34		577		582
DCP Southern Hills Pipeline, LLC (Southern Hills)	33.34		217		217
Explorer Pipeline Company (Explorer)	21.94		83		92
Gray Oak Pipeline, LLC	65.00		812		860
Liberty Pipeline LLC (Liberty)*	—		—		241
Paradigm Pipeline LLC (Paradigm)	50.00		137		141
Phillips 66 Partners Terminal LLC (Phillips 66 Partners Terminal)	70.00		15		15
South Texas Gateway Terminal LLC (South Texas Gateway Terminal)	25.00		175		167
STACK Pipeline LLC (STACK)	50.00		62		64
Total equity investments			$	2,929	3,244

*In April 2021, we transferred our 50% ownership interest in Liberty to our co-venturer.

Earnings (losses) from our equity investments were as follows:

	Millions of Dollars
	2021		2020	2019
Bakken Pipeline	$	194	173	226
Bayou Bridge	38		31	31
Sand Hills	120		138	150
Southern Hills	49		42	43
Explorer	30		20	33
Gray Oak Pipeline, LLC	117		68	3
Paradigm	23		15	14
Phillips 66 Partners Terminal	1		(2)	25
South Texas Gateway Terminal	20		5	—
STACK	3		3	10
Total equity in earnings of affiliates	$	595	493	535

Summarized 100% financial information for all equity investments is presented on a combined basis below:

	Millions of Dollars
	2021		2020	2019
Revenues	$	3,034	2,670	2,753
Income before income taxes	1,963		1,583	1,894
Net income	1,904		1,545	1,832
Current assets	716		671	642
Noncurrent assets	12,812		12,884	12,072
Current liabilities	1,144		381	662
Noncurrent liabilities	4,001		4,673	4,322

From acquisition date forward.

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Net Income Per Limited Partner Unit (Tables)

12 Months Ended

Dec. 31, 2021

Partners' Capital Notes [Abstract]

Schedule of Distributions Declared, Partners Interest in Partnership Net Income and Net Income per Unit by Class

	Millions of Dollars
	2021		2020	2019
Net income attributable to the Partnership	$	735	791	923
Less:
General partner’s distributions declared (including IDRs)*	—		—	139
Limited partners’ distributions declared on preferred units*	48		41	37
Limited partners’ distributions declared on common units*	799		799	609
Distributions less than (more than) net income attributable to the Partnership	$	(112)	(49)	138

*Distributions declared are attributable to the indicated periods.

	2021
	Limited Partners’ Common Units		Limited Partners’ Preferred Units	Total
Net income attributable to the Partnership (millions):
Distributions declared	$	799	48	847
Distributions more than net income attributable to the Partnership	(112)		—	(112)
Net income attributable to the Partnership	687		48	735
Premium paid for the repurchase of preferred units	(4)
Net income attributable to the Partnership—basic	683
Dilutive effect of preferred units	—
Net income attributable to the Partnership—diluted	$	683
Weighted-average units outstanding—basic	228,340,146
Dilutive effect of preferred units	—
Weighted-average units outstanding—diluted	228,340,146
Net income attributable to the Partnership per limited partner unit—basic (dollars)	$	3.00
Net income attributable to the Partnership per limited partner unit—diluted (dollars)	3.00

	2020
	Limited Partners’ Common Units		Limited Partners’ Preferred Units	Total
Net income attributable to the Partnership (millions):
Distributions declared	$	799	41	840
Distributions less than net income attributable to the Partnership	(49)		—	(49)
Net income attributable to the Partnership—basic	750		41	791
Dilutive effect of preferred units	41
Net income attributable to the Partnership—diluted	$	791
Weighted-average units outstanding—basic	228,333,213
Dilutive effect of preferred units	13,819,791
Weighted-average units outstanding—diluted	242,153,004
Net income attributable to the Partnership per limited partner unit—basic (dollars)	$	3.29
Net income attributable to the Partnership per limited partner unit—diluted (dollars)	3.27

	2019
	Limited Partners’ Common Units		General Partner (including IDRs)	Limited Partners’ Preferred Units	Total
Net income attributable to the Partnership (millions):
Distributions declared	$	609	139	37	785
Distributions less than net income attributable to the Partnership	137		1	—	138
Net income attributable to the Partnership—basic	746		140	37	923
Dilutive effect of preferred units(1)	32
Net income attributable to the Partnership—diluted	$	778
Weighted-average units outstanding—basic	167,655,306
Dilutive effect of preferred units(1)	13,819,791
Weighted-average units outstanding—diluted	181,475,097
Net income attributable to the Partnership per limited partner unit—basic (dollars)	$	4.45
Net income attributable to the Partnership per limited partner unit—diluted (dollars)	4.29

(1) The dilutive effect of the preferred units assumes the reallocation of net income attributable to the Partnership to the limited and general partners, including a reallocation associated with IDRs, pursuant to the available cash formula in the partnership agreement.

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Properties, Plants and Equipment (Tables)

12 Months Ended

Dec. 31, 2021

Property, Plant and Equipment [Abstract]

Summary of Property, Plant and Equipment

Our investment in PP&E, with the associated accumulated depreciation, at December 31 was:

	Estimated Useful Lives	Millions of Dollars
		2021		2020
Land		$	19	19
Buildings and improvements	3 to 30 years	118		115
Pipelines and related assets*	10 to 45 years	1,986		1,518
Terminals and related assets*	25 to 45 years	853		847
Rail racks and related assets*	33 years	137		137
Processing and related assets*	25 years	1,064		1,063
Caverns and related assets*	25 to 45 years	733		732
Construction-in-progress		137		394
Gross PP&E		5,047		4,825
Accumulated depreciation		(1,320)		(1,186)
Net PP&E		$	3,727	3,639

*Assets for which we are the lessor.

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Goodwill (Tables)

12 Months Ended

Dec. 31, 2021

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Goodwill

The carrying amount of goodwill was as follows:

	Millions of Dollars
	2021		2020
Beginning balance January 1	$	185	185
Activity during the year	—		—
Ending balance December 31	$	185	185

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Lease Assets and Liabilities (Tables)

12 Months Ended

Dec. 31, 2021

Leases [Abstract]

Schedule of Operating Lease, Liability

Future minimum lease payments and recorded short- and long-term lease liabilities at December 31, 2021, for operating leases were:

	Millions of Dollars
2022	$	3
2023	3
2024	3
2025	3
2026	3
Remaining years	84
Future minimum lease payments	99
Amount representing interest or discounts	(56)
Total lease liabilities	43
Short-term lease liabilities	(1)
Long-term lease liabilities	$	42

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Debt (Tables)

12 Months Ended

Dec. 31, 2021

Debt Disclosure [Abstract]

Schedule of Debt

Debt at December 31 was:

	Millions of Dollars
	2021		2020
2.450% Senior Notes due December 2024	$	300	300
3.605% Senior Notes due February 2025	500		500
3.550% Senior Notes due October 2026	500		500
3.750% Senior Notes due March 2028	500		500
3.150% Senior Notes due December 2029	600		600
4.680% Senior Notes due February 2045	450		450
4.900% Senior Notes due October 2046	625		625
Floating Rate Term Loan due April 2022 at rate of 0.978% at year-end 2021	450		—
Tax-exempt bonds due April 2021 at weighted-average rate of 0.360% at year-end 2020	—		50
Revolving credit facility borrowings due January 2021 at weighted-average rate of 1.397% at year-end 2020	—		415
Debt at face value	3,925		3,940
Net unamortized discounts and debt issuance costs	(28)		(31)
Total debt	3,897		3,909
Short-term debt	(450)		(465)
Long-term debt	$	3,447	3,444

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Assets Retirement Obligations and Accrued Environmental Costs (Tables)

12 Months Ended

Dec. 31, 2021

Assets Retirement Obligations and Accrued Environmental Costs [Abstract]

Schedule of Asset Retirement Obligations and Accrual for Environmental Costs

Asset retirement obligations and accrued environmental costs at December 31 were:

	Millions of Dollars
	2021		2020
Asset retirement obligations	$	11	11
Accrued environmental costs	1		2
Total asset retirement obligations and accrued environmental costs	12		13
Asset retirement obligations and accrued environmental costs due within one year	—		(1)
Long-term asset retirement obligations and accrued environmental costs	$	12	12

Schedule of Change in Asset Retirement Obligation

During 2021 and 2020, our asset retirement obligations changed as follows:

	Millions of Dollars
	2021		2020
Balance at January 1	$	11	11
Accretion of discount	—		1
Changes in estimates of existing obligations	—		(1)
Balance at December 31	$	11	11

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Related Party Transactions (Tables)

12 Months Ended

Dec. 31, 2021

Related Party Transactions [Abstract]

Summary of Related Party Charges

Significant related party transactions included in our costs and expenses were:

	Millions of Dollars
	2021		2020	2019
Operating and maintenance expenses	$	212	184	258
General and administrative expenses	61		62	65

Other related party balances were included in the following line items on our consolidated balance sheet, all of which were related to commercial agreements with Phillips 66:

	Millions of Dollars
	2021		2020
Prepaid expenses and other current assets	$	4	7
Other assets	46		47
Deferred revenues	21		27
Other current liabilities	1		1
Other liabilities	60		64

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Cash Flow Information (Tables)

12 Months Ended

Dec. 31, 2021

Supplemental Cash Flow Information [Abstract]

Summary of Capital Expenditures, Noncash Investing and Financing Activities and Cash Payments

Our capital expenditures and investments consisted of:

	Millions of Dollars
	2021		2020	2019
Cash capital expenditures and investments	$	311	910	1,095
Change in capital expenditure accruals	(15)		5	(13)
Total capital expenditures and investments	$	296	915	1,082

	Millions of Dollars
	2021		2020	2019
Cash Payments
Interest and debt expense	$	125	124	100

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Other Financial Information (Tables)

12 Months Ended

Dec. 31, 2021

Other Income and Expenses [Abstract]

Schedule of Other Financial Information

	Millions of Dollars
	2021		2020	2019
Interest and Debt Expense
Incurred
Debt	$	139	138	133
Other	4		4	3
	143		142	136
Capitalized	(15)		(21)	(28)
Expensed	$	128	121	108
Other Income
Interest income	$	—	1	3
Other	13		2	3
Total other income	$	13	3	6

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Business and Basis of Presentation (Details)		12 Months Ended
	Oct. 26, 2021 shares	Dec. 31, 2021 refinery segment
Variable Interest Entity [Line Items]
Number of reportable segments | segment		1
Merger With Phillips 66
Variable Interest Entity [Line Items]
Number of shares issued per acquiree share (in shares) | shares	0.50
Conversion price of preferred units to common units, percent	147.50%
Phillips 66
Variable Interest Entity [Line Items]
Number of owned or jointly owned refineries | refinery		8

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Summary of Significant Accounting Policies (Details)	12 Months Ended
	Dec. 31, 2021 reporting_unit
Accounting Policies [Abstract]
Expected construction period	6 months
Number of reporting units	1

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Operating Revenues - Disaggregated Revenues (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Revenue from External Customer [Line Items]
Revenues	$ 1,146	$ 1,038	$ 1,126
Pipelines
Revenue from External Customer [Line Items]
Revenues	490	436	473
Terminals
Revenue from External Customer [Line Items]
Revenues	175	153	167
Storage, processing and other revenues
Revenue from External Customer [Line Items]
Revenues	$ 481	$ 449	$ 486

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Operating Revenues - Operating Revenues (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Operating revenues	$ 1,146	$ 1,038	$ 1,126
Lease revenues
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Operating revenues	944	875
Deferred service revenues
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Operating revenues	$ 202	$ 163

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Operating Revenues - Accounts Receivable (Details) - USD ($) $ in Millions	Dec. 31, 2021	Dec. 31, 2020
Revenue from External Customer [Line Items]
Total accounts receivable	$ 126	$ 106
Lease receivables
Revenue from External Customer [Line Items]
Total accounts receivable	98	87
Service receivables
Revenue from External Customer [Line Items]
Total accounts receivable	$ 28	$ 19

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Operating Revenues - Deferred Revenue (Details) - USD ($) $ in Millions	Dec. 31, 2021	Dec. 31, 2020
Revenue from External Customer [Line Items]
Total deferred revenues	$ 40	$ 49
Deferred lease revenues
Revenue from External Customer [Line Items]
Total deferred revenues	31	45
Deferred service revenues
Revenue from External Customer [Line Items]
Total deferred revenues	$ 9	$ 4

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Operating Revenues - Schedule of Future Minimum Operating Lease Income (Details) $ in Millions	Dec. 31, 2021 USD ($)
Revenue from Contract with Customer [Abstract]
2022	$ 763
2023	715
2024	591
2025	532
2026	359
Remaining years	923
Total future minimum lease payments from customers	$ 3,883

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Operating Revenues - Narrative (Details)	12 Months Ended
	Dec. 31, 2021
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Customer contracts, average remaining duration	14 years
Minimum
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Customer contracts, term	5 years
Maximum
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Customer contracts, term	15 years

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Operating Revenues - Remaining Performance Obligations (Details) $ in Millions	Dec. 31, 2021 USD ($)
Revenue from External Customer [Line Items]
Remaining performance obligation	$ 1,785
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-01-01
Revenue from External Customer [Line Items]
Remaining performance obligation	$ 187
Timing of satisfaction of performance obligation	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-01-01
Revenue from External Customer [Line Items]
Remaining performance obligation	$ 180
Timing of satisfaction of performance obligation	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-01-01
Revenue from External Customer [Line Items]
Remaining performance obligation	$ 155
Timing of satisfaction of performance obligation	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2025-01-01
Revenue from External Customer [Line Items]
Remaining performance obligation	$ 151
Timing of satisfaction of performance obligation	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2026-01-01
Revenue from External Customer [Line Items]
Remaining performance obligation	$ 141
Timing of satisfaction of performance obligation	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2027-01-01
Revenue from External Customer [Line Items]
Remaining performance obligation	$ 971
Timing of satisfaction of performance obligation

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Equity Investments - Schedule of Carrying Value Equity Investments (Details) - USD ($) $ in Millions	Dec. 31, 2021	Apr. 30, 2021	Mar. 31, 2021	Dec. 31, 2020	Apr. 30, 2018
Schedule of Equity Method Investments [Line Items]
Carrying value	$ 2,929			$ 3,244
Dakota Access, LLC and Energy Transfer Crude Oil Company, LLC (Bakken Pipeline)
Schedule of Equity Method Investments [Line Items]
Percentage ownership	25.00%
Carrying value	$ 574			577
Bayou Bridge Pipeline, LLC (Bayou Bridge)
Schedule of Equity Method Investments [Line Items]
Percentage ownership	40.00%
Carrying value	$ 277			288
DCP Sand Hills Pipeline, LLC (Sand Hills)
Schedule of Equity Method Investments [Line Items]
Percentage ownership	33.34%
Carrying value	$ 577			582
DCP Southern Hills Pipeline, LLC (Southern Hills)
Schedule of Equity Method Investments [Line Items]
Percentage ownership	33.34%
Carrying value	$ 217			217
Explorer Pipeline Company (Explorer)
Schedule of Equity Method Investments [Line Items]
Percentage ownership	21.94%
Carrying value	$ 83			92
Gray Oak Pipeline, LLC
Schedule of Equity Method Investments [Line Items]
Percentage ownership	65.00%
Carrying value	$ 812			860
Liberty Pipeline LLC (Liberty)
Schedule of Equity Method Investments [Line Items]
Percentage ownership	0.00%	50.00%
Carrying value	$ 0		$ 46	241
Paradigm Pipeline LLC (Paradigm)
Schedule of Equity Method Investments [Line Items]
Percentage ownership	50.00%
Carrying value	$ 137			141
Phillips 66 Partners Terminal LLC (Phillips 66 Partners Terminal)
Schedule of Equity Method Investments [Line Items]
Percentage ownership	70.00%
Carrying value	$ 15			15
South Texas Gateway Terminal LLC (South Texas Gateway Terminal)
Schedule of Equity Method Investments [Line Items]
Percentage ownership	25.00%				25.00%
Carrying value	$ 175			167
STACK Pipeline LLC (STACK)
Schedule of Equity Method Investments [Line Items]
Percentage ownership	50.00%
Carrying value	$ 62			$ 64

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Equity Investments - Schedule of Equity Investment Earnings (Losses) (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Schedule of Equity Method Investments [Line Items]
Equity in earnings of affiliates	$ 595	$ 493	$ 535
Bakken Pipeline
Schedule of Equity Method Investments [Line Items]
Equity in earnings of affiliates	194	173	226
Bayou Bridge
Schedule of Equity Method Investments [Line Items]
Equity in earnings of affiliates	38	31	31
Sand Hills
Schedule of Equity Method Investments [Line Items]
Equity in earnings of affiliates	120	138	150
Southern Hills
Schedule of Equity Method Investments [Line Items]
Equity in earnings of affiliates	49	42	43
Explorer
Schedule of Equity Method Investments [Line Items]
Equity in earnings of affiliates	30	20	33
Gray Oak Pipeline, LLC
Schedule of Equity Method Investments [Line Items]
Equity in earnings of affiliates	117	68	3
Paradigm
Schedule of Equity Method Investments [Line Items]
Equity in earnings of affiliates	23	15	14
Phillips 66 Partners Terminal
Schedule of Equity Method Investments [Line Items]
Equity in earnings of affiliates	1	(2)	25
South Texas Gateway Terminal
Schedule of Equity Method Investments [Line Items]
Equity in earnings of affiliates	20	5	0
STACK
Schedule of Equity Method Investments [Line Items]
Equity in earnings of affiliates	$ 3	$ 3	$ 10

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Equity Investments - Narrative (Details) bbl in Thousands, $ in Millions		1 Months Ended			3 Months Ended			12 Months Ended
	Mar. 31, 2021 USD ($)	Sep. 30, 2020 USD ($)	Feb. 29, 2020 USD ($)	Feb. 28, 2019 USD ($)	Mar. 31, 2021 USD ($) dock bbl	Dec. 31, 2020 USD ($)	Jun. 30, 2020 USD ($)	Dec. 31, 2022 USD ($)	Dec. 31, 2021 USD ($) city pipeline_system state	Dec. 31, 2020 USD ($)	Dec. 31, 2019 USD ($)	Apr. 30, 2021	Sep. 06, 2019 USD ($)	Mar. 31, 2019 USD ($)	Dec. 31, 2018	Apr. 30, 2018
Schedule of Equity Method Investments [Line Items]
Distributions received from affiliates									$ 728	$ 677	$ 599
Gain from equity interest transfer									0	84	0
Proceeds from sale of equity interest									22	0	81
Repayments of debt									465	25	1,286
Equity investments						$ 3,244			$ 2,929	3,244
Total storage capacity | bbl					8,600
Liberty Pipeline LLC (Liberty)
Schedule of Equity Method Investments [Line Items]
Impairment recorded	$ 198
Common Control Transaction | Phillips 66 | Phillips 66 PDI | Liberty Pipeline LLC (Liberty)
Schedule of Equity Method Investments [Line Items]
Percentage of ownership			50.00%
Consideration transferred			$ 75
Gray Oak Pipeline, LLC
Schedule of Equity Method Investments [Line Items]
Repayments of debt		$ 1,379
Gray Oak Pipeline, LLC | Third Party
Schedule of Equity Method Investments [Line Items]
Proceeds from related party debt											95
Dakota Access and ETCO | Forecast
Schedule of Equity Method Investments [Line Items]
Debt instrument, periodic payment, interest								$ 25
Explorer
Schedule of Equity Method Investments [Line Items]
Number of cities in which entity operates | city									70
Number of states in which entity operates | state									16
Senior Notes
Schedule of Equity Method Investments [Line Items]
Debt instrument, face amount													$ 900
Senior Notes | Dakota Access, LLC
Schedule of Equity Method Investments [Line Items]
Debt instrument, face amount														$ 2,500
Senior Notes | Gray Oak Pipeline, LLC
Schedule of Equity Method Investments [Line Items]
Debt instrument, face amount		$ 1,400
Senior Notes Due 2022 | Senior Notes | Dakota Access, LLC
Schedule of Equity Method Investments [Line Items]
Debt instrument, face amount														$ 650
Interest rate, stated percentage														3.625%
Senior Notes Due 2024 | Senior Notes | Dakota Access, LLC
Schedule of Equity Method Investments [Line Items]
Debt instrument, face amount														$ 1,000
Interest rate, stated percentage														3.90%
Senior Notes Due 2029 | Senior Notes | Dakota Access, LLC
Schedule of Equity Method Investments [Line Items]
Debt instrument, face amount														$ 850
Interest rate, stated percentage														4.625%
Bakken Pipeline
Schedule of Equity Method Investments [Line Items]
Number of pipeline systems | pipeline_system									2
Basis difference positive (negative)									$ 46
Ownership interest, percentage									25.00%
Equity investments						577			$ 574	577
Bakken Pipeline | Minimum
Schedule of Equity Method Investments [Line Items]
Amortization period of basis difference, in years									16 years
Bakken Pipeline | Maximum
Schedule of Equity Method Investments [Line Items]
Amortization period of basis difference, in years									41 years
Dakota Access and ETCO
Schedule of Equity Method Investments [Line Items]
Maximum exposure, undiscounted									$ 631
Gray Oak Pipeline, LLC
Schedule of Equity Method Investments [Line Items]
Ownership interest, percentage									65.00%
Gain from equity interest transfer							$ 84
Effective ownership interest, percentage									42.25%
Equity investments						860			$ 812	860
Gray Oak Pipeline, LLC | Gray Oak Holdings LLC
Schedule of Equity Method Investments [Line Items]
Ownership interest, percentage									65.00%
Percentage of ownership															75.00%
Gray Oak Pipeline, LLC | Third Party
Schedule of Equity Method Investments [Line Items]
Percentage of ownership				10.00%												100.00%
Payments to fund cash calls										61	$ 342
Proceeds from sale of equity interest				$ 81
Gray Oak Pipeline, LLC | Co-Venturer
Schedule of Equity Method Investments [Line Items]
Percentage of ownership																25.00%
Gray Oak Holdings LLC | Third Party
Schedule of Equity Method Investments [Line Items]
Percentage of ownership							35.00%		35.00%						35.00%	100.00%
Liberty Pipeline LLC (Liberty)
Schedule of Equity Method Investments [Line Items]
Ownership interest, percentage									0.00%			50.00%
Equity investments	$ 46				$ 46	241			$ 0	241
DCP Southern Hills Pipeline, LLC (Southern Hills)
Schedule of Equity Method Investments [Line Items]
Basis difference positive (negative)									$ (86)
Amortization period of basis difference, in years									40 years
Ownership interest, percentage									33.34%
Equity investments						217			$ 217	217
Explorer
Schedule of Equity Method Investments [Line Items]
Basis difference positive (negative)									$ 65
Ownership interest, percentage									21.94%
Equity investments						92			$ 83	92
Explorer | Minimum
Schedule of Equity Method Investments [Line Items]
Amortization period of basis difference, in years									6 years
Explorer | Maximum
Schedule of Equity Method Investments [Line Items]
Amortization period of basis difference, in years									14 years
Phillips 66 Partners Terminal LLC (Phillips 66 Partners Terminal)
Schedule of Equity Method Investments [Line Items]
Ownership interest, percentage									70.00%
Impairment recorded						50
Equity investments						15			$ 15	15
South Texas Gateway Terminal LLC (South Texas Gateway Terminal)
Schedule of Equity Method Investments [Line Items]
Ownership interest, percentage									25.00%							25.00%
Equity investments						167			$ 175	167
Number of deep-water docks | dock					2
Daily export capacity | bbl					800
STACK Pipeline LLC (STACK)
Schedule of Equity Method Investments [Line Items]
Ownership interest, percentage									50.00%
Impairment recorded						46
Equity investments						$ 64			$ 62	$ 64

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Equity Investments - Summarized Financial Information (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Schedule of Equity Method Investments [Line Items]
Revenues	$ 1,146	$ 1,038	$ 1,126
Income before income taxes	781	811	926
Net income	735	791	923
Current assets	211	140
Current liabilities	627	633
Equity Method Investment, Nonconsolidated Investee or Group of Investees
Schedule of Equity Method Investments [Line Items]
Revenues	3,034	2,670	2,753
Income before income taxes	1,963	1,583	1,894
Net income	1,904	1,545	1,832
Current assets	716	671	642
Noncurrent assets	12,812	12,884	12,072
Current liabilities	1,144	381	662
Noncurrent liabilities	$ 4,001	$ 4,673	$ 4,322

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Net Income Per Limited Partner Unit - Narrative (Details) $ / shares in Units, $ in Millions			3 Months Ended	12 Months Ended			51 Months Ended
	Feb. 14, 2022 USD ($) $ / shares	Jan. 18, 2022 USD ($) $ / shares	Dec. 31, 2021 $ / shares	Dec. 31, 2021 $ / shares	Dec. 31, 2020 $ / shares	Dec. 31, 2019 $ / shares	Dec. 31, 2021 $ / shares
Net Income per Limited Partner Unit [Line Items]
Common units conversion ratio				1
Quarterly cash distributions per unit to limited partner (in usd per share)				$ 3.500	$ 3.500	$ 3.400
Common Units | Cash Distribution
Net Income per Limited Partner Unit [Line Items]
Quarterly cash distributions per unit to limited partner (in usd per share)			$ 0.875
Common Units | Cash Distribution | Subsequent Event
Net Income per Limited Partner Unit [Line Items]
Quarterly cash distributions per unit to limited partner (in usd per share)		$ 0.875
Quarterly cash distribution paid, per limited partner unit (in usd per share)	$ 0.875
Distribution made to limited partner, cash distributions declared | $		$ 200
Distribution made to limited partner, cash distributions paid | $	$ 200
Preferred Units | Cash Distribution
Net Income per Limited Partner Unit [Line Items]
Quarterly cash distributions per unit to limited partner (in usd per share)							$ 0.678375
Preferred Units | Cash Distribution | Subsequent Event
Net Income per Limited Partner Unit [Line Items]
Distribution made to limited partner, cash distributions paid | $	$ 12

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Net Income Per Limited Partner Unit - Schedule of Net Income By Class of Participating Securities Distributions (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Limited Partners' Capital Account [Line Items]
Net income attributable to the Partnership	$ 735	$ 791	$ 923
Less:
Distributions declared	847	840	785
Distributions less than (more than) net income attributable to the Partnership	(112)	(49)	138
General Partner
Less:
Distributions declared	0	0	139
Distributions less than (more than) net income attributable to the Partnership			1
Preferred Unitholders Public | Limited Partner
Limited Partners' Capital Account [Line Items]
Net income attributable to the Partnership	48
Less:
Distributions declared	48	41	37
Distributions less than (more than) net income attributable to the Partnership	0	0	0
Common Units | Limited Partner
Limited Partners' Capital Account [Line Items]
Net income attributable to the Partnership	687
Less:
Distributions declared	799	799	609
Distributions less than (more than) net income attributable to the Partnership	$ (112)	$ (49)	$ 137

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Net Income Per Limited Partner Unit - Schedule of Net Income By Class of Participating Securities (Details) - USD ($) $ / shares in Units, $ in Millions	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Partners' Capital [Abstract]
Distributions declared	$ 847	$ 840	$ 785
Distributions less than (more than) net income attributable to the Partnership	(112)	(49)	138
Net income attributable to the Partnership	$ 735	791	923
Net income attributable to the Partnership—basic		791	923
Common Units
Partners' Capital [Abstract]
Net income attributable to the Partnership—diluted		$ 791	$ 778
Weighted-average units outstanding—basic (in shares)	228,340,146	228,333,213	167,655,306
Dilutive effect of preferred units (in shares)	0	13,819,791	13,819,791
Weighted-average units outstanding—diluted (in shares)	228,340,146	242,153,004	181,475,097
Net income attributable to the Partnership per limited partner unit—basic (in usd per share)	$ 3.00	$ 3.29	$ 4.45
Net income attributable to the Partnership per limited partner unit—diluted (in usd per share)	$ 3.00	$ 3.27	$ 4.29
Limited Partner
Partners' Capital [Abstract]
Dilutive effect of preferred units		$ 41	$ 32
Limited Partner | Common Units
Partners' Capital [Abstract]
Distributions declared	$ 799	799	609
Distributions less than (more than) net income attributable to the Partnership	(112)	(49)	137
Net income attributable to the Partnership	687
Premium paid for the repurchase of preferred units	(4)
Net income attributable to the Partnership—basic	683	750	746
Dilutive effect of preferred units	0
Net income attributable to the Partnership—diluted	683
Limited Partner | Preferred Unitholders Public
Partners' Capital [Abstract]
Distributions declared	48	41	37
Distributions less than (more than) net income attributable to the Partnership	0	0	0
Net income attributable to the Partnership	48
Net income attributable to the Partnership—basic		41	37
General Partner
Partners' Capital [Abstract]
Distributions declared	$ 0	$ 0	139
Distributions less than (more than) net income attributable to the Partnership			1
Net income attributable to the Partnership—basic			$ 140

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Major Customer and Concentration of Credit Risk (Details)	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Concentration Risk [Line Items]
Payment terms	30 days
Phillips 66 | Customer Concentration Risk | Operating revenues
Concentration Risk [Line Items]
Concentration risk, percentage	97.00%	98.00%	97.00%

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Properties, Plants and Equipment (Details) - USD ($) $ in Millions	3 Months Ended	12 Months Ended
	Sep. 30, 2021	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Property, Plant and Equipment [Line Items]
Gross PP&E		$ 5,047	$ 4,825
Accumulated depreciation		(1,320)	(1,186)
Net PP&E		3,727	3,639
Impairments	$ 10	208	96	$ 0
Land
Property, Plant and Equipment [Line Items]
Gross PP&E		19	19
Buildings and improvements
Property, Plant and Equipment [Line Items]
Gross PP&E		$ 118	115
Buildings and improvements | Minimum
Property, Plant and Equipment [Line Items]
Estimated Useful Lives		3 years
Buildings and improvements | Maximum
Property, Plant and Equipment [Line Items]
Estimated Useful Lives		30 years
Pipelines and related assets
Property, Plant and Equipment [Line Items]
Gross PP&E		$ 1,986	1,518
Pipelines and related assets | Minimum
Property, Plant and Equipment [Line Items]
Estimated Useful Lives		10 years
Pipelines and related assets | Maximum
Property, Plant and Equipment [Line Items]
Estimated Useful Lives		45 years
Terminals and related assets
Property, Plant and Equipment [Line Items]
Gross PP&E		$ 853	847
Terminals and related assets | Minimum
Property, Plant and Equipment [Line Items]
Estimated Useful Lives		25 years
Terminals and related assets | Maximum
Property, Plant and Equipment [Line Items]
Estimated Useful Lives		45 years
Rail racks and related assets
Property, Plant and Equipment [Line Items]
Estimated Useful Lives		33 years
Gross PP&E		$ 137	137
Processing and related assets
Property, Plant and Equipment [Line Items]
Estimated Useful Lives		25 years
Gross PP&E		$ 1,064	1,063
Caverns and related assets
Property, Plant and Equipment [Line Items]
Gross PP&E		$ 733	732
Caverns and related assets | Minimum
Property, Plant and Equipment [Line Items]
Estimated Useful Lives		25 years
Caverns and related assets | Maximum
Property, Plant and Equipment [Line Items]
Estimated Useful Lives		45 years
Construction-in-progress
Property, Plant and Equipment [Line Items]
Gross PP&E		$ 137	$ 394

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Goodwill (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Goodwill [Roll Forward]
Beginning balance January 1	$ 185	$ 185
Activity during the year	0	0
Ending balance December 31	$ 185	$ 185

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Lease Assets and Liabilities - Narrative (Details) - USD ($) $ in Millions	Dec. 31, 2021	Dec. 31, 2020
Leases [Abstract]
Operating Lease, Right-of-Use Asset, Statement of Financial Position [Extensible Enumeration]	Other assets	Other assets
ROU asset	$ 43	$ 44
Weighted average remaining lease term	33 years	34 years
Weighted average discount rate	5.90%	5.90%

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Lease Assets and Liabilities - Future Minimum Lease Payments (Details) $ in Millions	Dec. 31, 2021 USD ($)
Leases [Abstract]
2022	$ 3
2023	3
2024	3
2025	3
2026	3
Remaining years	84
Future minimum lease payments	99
Amount representing interest or discounts	(56)
Total lease liabilities	$ 43
Operating Lease, Liability, Current, Statement of Financial Position [Extensible List]	Other current liabilities
Short-term lease liabilities	$ (1)
Operating Lease, Liability, Noncurrent, Statement of Financial Position [Extensible List]	Other liabilities
Long-term lease liabilities	$ 42

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Debt - Summary of Long-Term Debt (Details) - USD ($) $ in Millions	Dec. 31, 2021	Dec. 31, 2020	Sep. 13, 2019	Sep. 06, 2019
Debt Instrument [Line Items]
Debt current	$ 450	$ 465
Debt at face value	3,925	3,940
Net unamortized discounts and debt issuance costs	(28)	(31)
Total debt	3,897	3,909
Short-term debt	(450)	(465)
Long-term debt	3,447	$ 3,444
Revolving Credit Facility
Debt Instrument [Line Items]
Interest rate, stated percentage		1.397%
Credit facility	0	$ 415
Tax-exempt bonds due April 2021 at weighted-average rate of 0.360% at year-end 2020
Debt Instrument [Line Items]
Interest rate, stated percentage		0.36%
Debt current	0	$ 50
Short-term debt	$ 0	(50)
Senior Notes
Debt Instrument [Line Items]
Debt current			$ 400
Short-term debt			$ (400)
Senior Notes | 2.450% Senior Notes due December 2024
Debt Instrument [Line Items]
Interest rate, stated percentage	2.45%			2.45%
Long-term debt, gross	$ 300	300
Senior Notes | 3.605% Senior Notes due February 2025
Debt Instrument [Line Items]
Interest rate, stated percentage	3.605%
Long-term debt, gross	$ 500	500
Senior Notes | 3.550% Senior Notes due October 2026
Debt Instrument [Line Items]
Interest rate, stated percentage	3.55%
Long-term debt, gross	$ 500	500
Senior Notes | 3.750% Senior Notes due March 2028
Debt Instrument [Line Items]
Interest rate, stated percentage	3.75%
Long-term debt, gross	$ 500	500
Senior Notes | 3.150% Senior Notes due December 2029
Debt Instrument [Line Items]
Interest rate, stated percentage	3.15%			3.15%
Long-term debt, gross	$ 600	600
Senior Notes | 4.680% Senior Notes due February 2045
Debt Instrument [Line Items]
Interest rate, stated percentage	4.68%
Long-term debt, gross	$ 450	450
Senior Notes | 4.900% Senior Notes due October 2046
Debt Instrument [Line Items]
Interest rate, stated percentage	4.90%
Long-term debt, gross	$ 625	625
Loans Payable | Floating Rate Term Loan due April 2022 at rate of 0.978% at year-end 2021
Debt Instrument [Line Items]
Interest rate, stated percentage	0.978%
Debt current	$ 450	0
Short-term debt	$ (450)	$ 0

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Debt - Narrative (Details) $ in Millions				12 Months Ended
	Apr. 06, 2021 USD ($)	Oct. 15, 2019 USD ($)	Sep. 06, 2019 USD ($)	Dec. 31, 2021 USD ($) agreement	Dec. 31, 2020 USD ($)	Dec. 31, 2019 USD ($)	Apr. 30, 2021 USD ($) tranche	Sep. 13, 2019 USD ($)	Dec. 31, 2018 tranche	Dec. 31, 2017 USD ($) tranche
Debt Instrument [Line Items]
Repayments of principal, 2022				$ 450
Repayments of principal, 2024				298
Repayments of principal, 2025				499
Repayments of principal, 2026				498
Decrease in debt				15
Repayments of debt				465	$ 25	$ 1,286
Issuance of debt				450	415	$ 1,758
Revolving credit facility				0	415
Letters of credit outstanding				1	1
Borrowings, current				$ 450	$ 465
Revolving Credit Facility
Debt Instrument [Line Items]
Number or renewals available to extend the term of the credit agreement | agreement				2
Renewal term				1 year
Debt to EBITDA, ratio				5.0
Debt to EBITDA, acquisitions, ratio				5.5
Interest rate, stated percentage					1.397%
Credit Agreement | Revolving Credit Facility
Debt Instrument [Line Items]
Revolving credit agreement borrowing capacity				$ 750
Maximum borrowing capacity under option				1,000
Municipal Bonds
Debt Instrument [Line Items]
Repayments of debt				50
Borrowings, current				0	$ 50
Interest rate, stated percentage					0.36%
Municipal Bonds | Bakken Pipeline and MSLP Acquisition
Debt Instrument [Line Items]
Number of tranches | tranche							2		1	4
Long-term debt, gross										$ 25
Borrowings, current							$ 50
Senior Notes
Debt Instrument [Line Items]
Debt instrument, face amount			$ 900
Borrowings, current								$ 400
Proceeds from debt, net of issuance costs			892
Senior Notes | 2.450% Senior Notes due December 2024
Debt Instrument [Line Items]
Debt instrument, face amount			$ 300
Long-term debt, gross				$ 300	$ 300
Interest rate, stated percentage			2.45%	2.45%
Senior Notes | 3.150% Senior Notes due December 2029
Debt Instrument [Line Items]
Debt instrument, face amount			$ 600
Long-term debt, gross				$ 600	600
Interest rate, stated percentage			3.15%	3.15%
Senior Notes | Two Point Six Four Six Senior Notes Due Two Thousand Twenty
Debt Instrument [Line Items]
Repayments of debt		$ 300
Interest rate, stated percentage		2.646%
Line of Credit | Revolving Credit Facility
Debt Instrument [Line Items]
Repayments of debt				$ 415
Revolving credit agreement borrowing capacity				750
Loans Payable | Floating Rate Term Loan due April 2022 at rate of 0.978% at year-end 2021
Debt Instrument [Line Items]
Issuance of debt				450
Debt instrument, face amount	$ 450
Borrowings, current				$ 450	0
Interest rate, stated percentage				0.978%
Loans Payable | Floating Rate Term Loan due April 2022 at rate of 0.978% at year-end 2021 | Eurodollar
Debt Instrument [Line Items]
Basis spread on variable rate	0.875%
Loans Payable | Floating Rate Term Loan due April 2022 at rate of 0.978% at year-end 2021 | Reference Rate
Debt Instrument [Line Items]
Basis spread on variable rate	0.875%
Fair Value, Inputs, Level 2 | Floating Rate Term Loan due April 2022 at rate of 0.978% at year-end 2021
Debt Instrument [Line Items]
Debt, fair value				$ 450
Fair Value, Inputs, Level 2 | Municipal Bonds And Line Of Credits
Debt Instrument [Line Items]
Debt, fair value					465
Fair Value, Inputs, Level 2 | Senior Notes
Debt Instrument [Line Items]
Debt, fair value				$ 3,810	$ 3,752

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Assets Retirement Obligations and Accrued Environmental Costs - Summary of Asset Retirement Obligations and Accrued Environmental Costs (Details) - USD ($) $ in Millions	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Asset Retirement Obligations and Accrued Environmental Costs [Abstract]
Asset retirement obligations	$ 11	$ 11	$ 11
Accrued environmental costs	1	2
Total asset retirement obligations and accrued environmental costs	12	13
Asset retirement obligations and accrued environmental costs due within one year	0	(1)
Long-term asset retirement obligations and accrued environmental costs	$ 12	$ 12

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Assets Retirement Obligations and Accrued Environmental Costs - Schedule of Change in Asset Retirement Obligation (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Asset Retirement Obligation, Roll Forward Analysis [Roll Forward]
Balance at January 1	$ 11	$ 11
Accretion of discount	0	1
Changes in estimates of existing obligations	0	(1)
Balance at December 31	$ 11	$ 11

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Equity (Details) $ / shares in Units, $ in Millions				1 Months Ended		3 Months Ended	12 Months Ended			15 Months Ended	51 Months Ended	67 Months Ended
	Jan. 18, 2022 $ / shares	Jun. 29, 2021 USD ($) $ / shares shares	Aug. 01, 2019 USD ($) shares	Dec. 31, 2019 offering	Jun. 30, 2018 offering	Dec. 31, 2021 offering $ / shares	Dec. 31, 2021 USD ($) offering $ / shares shares	Dec. 31, 2020 USD ($) $ / shares shares	Dec. 31, 2019 USD ($) $ / shares shares	Dec. 31, 2021 offering $ / shares	Dec. 31, 2021 offering $ / shares	Dec. 31, 2021 USD ($) offering $ / shares shares
Limited Partners' Capital Account [Line Items]
Number of common units issued in public offering (in shares) | shares							0	40,570	3,195,521
Repurchase of preferred units							$ 24	$ 0	$ 0
Quarterly cash distributions per unit to limited partner (in usd per share) | $ / shares							$ 3.500	$ 3.500	$ 3.400
Common units conversion ratio							1
General Partner Interest To Be Converted Into Non-Economic General Partner Interest
Limited Partners' Capital Account [Line Items]
General partner interest, percent			2.00%
Common Units
Limited Partners' Capital Account [Line Items]
Shares, issued (in shares) | shares			101,000,000
General partners equity balance			$ 1,400
Common Units | Cash Distribution
Limited Partners' Capital Account [Line Items]
Quarterly cash distributions per unit to limited partner (in usd per share) | $ / shares						$ 0.875
Common Units | Cash Distribution | Subsequent Event
Limited Partners' Capital Account [Line Items]
Quarterly cash distributions per unit to limited partner (in usd per share) | $ / shares	$ 0.875
Common Units | Public
Limited Partners' Capital Account [Line Items]
Number of common units issued in public offering (in shares) | shares								40,570	3,195,521
Preferred Unitholders Public
Limited Partners' Capital Account [Line Items]
Average of the volume-weighted trading price, threshold (in usd per share) | $ / shares							$ 73.2645
Preferred units, convertible, threshold consecutive trading days							20 days
Convertible threshold average trading volume common units (in shares) | shares							100,000
Price per common limited partner unit (in usd per share) | $ / shares						$ 54.27	$ 54.27			$ 54.27	$ 54.27	$ 54.27
Preferred Unitholders Public | Cash Distribution
Limited Partners' Capital Account [Line Items]
Quarterly cash distributions per unit to limited partner (in usd per share) | $ / shares											$ 0.678375
Preferred Unitholders Public | Cash Distribution | Minimum
Limited Partners' Capital Account [Line Items]
Quarterly cash distributions per unit to limited partner (in usd per share) | $ / shares										$ 0.678375
Preferred Unitholders Public | Public
Limited Partners' Capital Account [Line Items]
Repurchase of preferred units, shares (in shares) | shares		368,528
Repurchase of preferred units, value		$ 20
Repurchase of preferred units		$ 24
Treasury stock acquired, average cost per share (in dollars per share) | $ / shares		$ 65.124
At The Market Offering Program
Limited Partners' Capital Account [Line Items]
Total authorized amount							$ 750
At The Market Offering Program | Common Units
Limited Partners' Capital Account [Line Items]
Number of continuous offerings | offering						3	3			3	3	3
Equity offering program, authorized amount, per program							$ 250
Number of continuous offerings concluded | offering				2	2
Equity offering program, authorized amount, available capacity							$ 248
Number of common units issued in public offering (in shares) | shares								40,570				9,487,055
Issuance of common units								$ 2				$ 494
Brokers commissions												5
Other costs												$ 3

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Related Party Transactions - Narrative (Details) $ in Millions	12 Months Ended
	Dec. 31, 2021 USD ($)
Phillips 66 | Amended Omnibus Agreement | Phillips 66
Related Party Transaction [Line Items]
Administrative fees expense by month	$ 8

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Related Party Transactions - Summary of Related Party Charges (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Related Party Transactions [Abstract]
Operating and maintenance expenses	$ 212	$ 184	$ 258
General and administrative expenses	$ 61	$ 62	$ 65

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Related Party Transactions - Other Related Party Balances (Details) - USD ($) $ in Millions	Dec. 31, 2021	Dec. 31, 2020
Related Party Transaction [Line Items]
Prepaid expenses and other current assets	$ 7	$ 11
Other assets	49	50
Deferred revenues	23	27
Other current liabilities	6	3
Other liabilities	90	90
Phillips 66
Related Party Transaction [Line Items]
Prepaid expenses and other current assets	4	7
Other assets	46	47
Deferred revenues	21	27
Other current liabilities	1	1
Other liabilities	$ 60	$ 64

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Unit-Based Compensation (Details) - Phillips 66 Partners LP 2013 Incentive Compensation Plan - shares	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2013
Phantom Units | Non Employee Directors
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of phantom units granted (in shares)	13,848	6,092	4,950
Common Units | Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of common units that may be delivered under the ICP plan (in shares)				2,500,000

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Income Taxes (Details) - USD ($)	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Income Tax Disclosure [Abstract]
Net deferred tax liability	$ 14,000,000	$ 10,000,000
Effective tax rate, percentage (less than)	1.00%	1.00%	1.00%
Unrecognized tax benefits	$ 0	$ 0
Income tax penalties and interest expense	$ 0	$ 0	$ 0

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Cash Flow Information - Summary of Cash Flow Information (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Capital Expenditures and Investments
Cash capital expenditures and investments	$ 311	$ 910	$ 1,095
Change in capital expenditure accruals	(15)	5	(13)
Total capital expenditures and investments	296	915	1,082
Cash Payments
Interest and debt expense	$ 125	$ 124	$ 100

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Other Financial Information (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Incurred
Debt	$ 139	$ 138	$ 133
Other	4	4	3
Incurred, Total	143	142	136
Capitalized	(15)	(21)	(28)
Expensed	128	121	108
Other Income
Interest income	0	1	3
Other	13	2	3
Total other income	$ 13	$ 3	$ 6