18. Related Party Transactions

Certain of our employees are shared employees with Western. At the closing of the Offering, we entered into a services agreement with Western under which Western agreed to share certain employees with us. These employees are responsible for operation, maintenance and other services related to the assets we own and operate. Western employees provide these services under our direction, supervision and control pursuant to this services agreement. Western also provides us with support for accounting, legal, human resources and various other administrative functions.

We have incurred indirect charges from Western for the allocation of services including executive oversight, accounting, treasury, tax, legal, procurement, engineering, logistics, maintenance, information technology and similar items. We classify these indirect charges between operating and maintenance expenses and general and administrative expenses based on the functional nature of the employee and other services that Western provides for our operations. Indirect charges from Western that we include within our general and administrative and operating and maintenance expenses were as follows:



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2015		2014		2015		2014
	(In thousands)
Indirect charges:
Operating and maintenance expenses	$	9,527	$	8,056	$	27,214	$	25,227
General and administrative expenses	1,882		936		6,152		4,762
Total indirect charges	$	11,409	$	8,992	$	33,366	$	29,989

Our management believes the indirect charges allocated to us from Western are a reasonable reflection of the utilization of Western's service to our operations. We also incur direct charges to our operations and administration. The indirect allocations noted above may not fully reflect the additional expenses that we would have incurred had we been a stand-alone company during the periods presented.

Commercial Agreements with Western

Logistics Segment Agreements

We derive substantially all of our logistics revenues from two ten-year, fee-based agreements with Western supported by minimum volume commitments and annual adjustments to fees. We and Western entered into those agreements in connection with the Offering and may renew them for two additional five-year periods upon mutual agreement. Western has committed to provide us with minimum fees based on minimum monthly throughput volumes of crude oil and refined and other products and reserved storage capacity.

Pipeline and Gathering Services Agreement

We are party to a pipeline and gathering services agreement with Western under which we agreed to transport crude oil on our Permian Basin system primarily for use at Western’s El Paso refinery and on our Four Corners system to Western’s Gallup refinery. We charge Western fees for pipeline movements, truck offloading and product storage.

Terminalling, Transportation and Storage Services Agreement

We are party to a terminalling, transportation and storage services agreement with Western under which we have agreed to, among other things, distribute products produced at Western’s refineries, connect Western’s refineries to third-party pipelines and systems and provide fee-based asphalt terminalling and processing services. At our network of crude oil and refined products terminals and related assets and storage facilities, we charge Western fees for crude oil, blendstock and refined product storage, shipments into and out of storage and additive and blending services. At our asphalt plant and terminal in El Paso and our three stand-alone asphalt terminals, we charge Western fees for asphalt storage, shipments into and out of asphalt storage and asphalt processing and blending.

Western’s obligations under these commercial agreements will not terminate if Western no longer controls our General Partner. Our commercial agreements include provisions that permit Western to suspend, reduce or terminate its obligations under the applicable agreement if certain events occur. These events include Western deciding to permanently or indefinitely suspend refining operations at one or both of its refineries, as well as our being subject to certain force majeure events that would prevent us from performing required services under the applicable agreement.

Wholesale Segment Agreements

In connection with the Wholesale Acquisition, we entered into the following ten-year agreements with Western. These agreements include certain minimum volume commitments by Western.

Product Supply Agreement

Western will supply, and we will purchase, approximately 79,000 barrels per day of refined products. The price per barrel will be based upon OPIS or Platts indices on the day of delivery. We will review the pricing with Western annually. The agreement provides for make-up payments to us in any month that our average margin on non-delivered rack sales is less than a certain amount.

Fuel Distribution and Supply Agreement

Western agreed to purchase all of its branded and unbranded motor fuels for its retail and unmanned fleet fueling sites at a price per gallon that is $0.03 above our cost. Western has agreed to purchase a minimum of 645,000 barrels per month of branded and unbranded motor fuels for its retail and unmanned fleet fueling sites. In any month that Western doesn’t purchase the minimum volume, Western will pay us $0.03 per gallon shortfall. In any month in which Western purchases volumes in excess of the minimum, we will pay Western $0.03 per gallon over the minimum until the balance of the trailing twelve month shortfall payments is reduced to $0.

Crude Oil Trucking Transportation Services Agreement

Western has agreed to pay a flat rate per mile per barrel plus monthly fuel adjustments and customary applicable surcharges. We will review the rates with Western annually. Western has agreed to contract a minimum of 1.525 million barrels of crude oil to us for hauling each month.

Other Agreements with Western

Omnibus Agreement

In connection with the Offering, we entered into an omnibus agreement with Western, certain of its subsidiaries and our General Partner. The omnibus agreement addresses the following items:


•	our obligation to reimburse Western for the provision by Western of certain general and administrative services (this reimbursement is in addition to certain expenses of our General Partner and its affiliates that are reimbursed under our partnership agreement and services agreement), as well as certain other direct or allocated costs and expenses incurred by Western on our behalf;


•	our rights of first offer to acquire certain logistics assets from Western;


•	an indemnity by Western for certain environmental and other liabilities, and our obligation to indemnify Western for events and conditions associated with the operation of our assets that occur after closing of the Offering and for environmental liabilities related to our assets to the extent Western is not required to indemnify us;


•	Western’s transfer of certain environmental permits related to our assets to us and our use of such permits prior to the transfer thereof; and


•	the granting of a license from Western to us with respect to use of certain Western trademarks and our granting of a license to Western with respect to use of certain of our trademarks.

The omnibus agreement generally terminates in the event of a change of control of us or our General Partner.

Contribution, Conveyance and Assumption Agreement

In connection with the Offering, we entered into a Contribution, Conveyance and Assumption Agreement with Western under which we acquired all of the outstanding limited liability company interests of WRW, which owned substantially all of Western’s southwest wholesale assets. Among other things, Western agreed to indemnify us with respect to liabilities related to certain assets and operations historically owned by WRW that were not contributed to us in the Wholesale Acquisition. In addition, Western made certain representations and warranties regarding the assets of WRW, including with respect to environmental matters, and agreed to indemnify us for breaches of those representations and warranties, subject to specified deductibles, caps and other limitations. See Note 3, Acquisitions, for additional information regarding our acquisition of WRW.

Services Agreements

In connection with the Offering, we entered into a services agreement with Western under which we reimburse Western for its provision to us of certain personnel to provide operational services to us and under our supervision in support of our pipelines and gathering assets and terminalling and storage facilities, including routine and emergency maintenance and repair services, routine operational activities, routine administrative services, construction and related services and such other services as we and Western may mutually agree upon from time to time. Western will prepare a maintenance, operating and capital budget on an annual basis subject to our approval. Western submits actual expenditures for reimbursement on a monthly basis, and we reimburse Western for providing these services.

We may terminate any of the services provided by the personnel provided by Western upon 30 days prior written notice. Either party may terminate this agreement upon prior written notice if the other party is in material default under the agreement and such party fails to cure the material default within 20 business days. The services agreement has an initial term of ten years and may be renewed by two additional five-year terms upon our agreement with Western evidenced in writing prior to the end of the initial term of ten years or the first renewal term of five years. If a force majeure event prevents a party from carrying out its obligations (other than to make payments due) under the agreement, such obligations, to the extent affected by force majeure, will be suspended during the continuation of the force majeure event. These force majeure events include acts of God, strikes, lockouts or other industrial disturbances, wars, riots, fires, floods, storms, orders of courts or governmental authorities, explosions, terrorist acts, accidental disruption of service, breakage, breakdown of machinery, storage tanks or lines of pipe and inability to obtain or unavoidable delays in obtaining material or equipment and any other circumstances not reasonably within the control of the party claiming suspension and that by the exercise of due diligence such party is unable to prevent or overcome.

On May 4, 2015, we entered into a Joinder Agreement with Western and Northern Tier Energy ("NTI") that joined WNRL as a party to the Shared Services Agreement, dated October 30, 2014, between Western and NTI and under which Western and NTI provide services to each other in support of their operations. Under the Joinder Agreement, WNRL will initially provide certain scheduling and other services in support of NTI’s operations, and NTI will reimburse WNRL for the costs associated with providing such services. As of September 30, 2015, we incurred expenses of $0.2 million that are reimbursable from NTI under the shared services agreement.

Leasing Agreements

In connection with the Offering, we entered into three separate ground lease and access agreements with Western. All three agreements are for 10-year terms with provision for automatic renewal of up to four consecutive 10-year periods. Under each separate agreement, WNRL pays nominal annual rents. We also entered into two leasing agreements with Western for certain storage tanks and associated facilities in the Permian Basin and Four Corners area. Rents due under these agreements in the aggregate are less than $0.1 million over the initial term of the agreements.