Related Party Transactions

Related party transactions include transactions with SPLC and Shell, including those entities in which Shell has an ownership interest but does not have control.

Acquisition Agreements

See the description of the Purchase and Sale Agreement relating to the May 2015 Acquisition, the Poseidon Contribution Agreement relating to the July 2015 Acquisition, the Pecten Contribution Agreement relating to the November 2015 Acquisition, the May 2016 Contribution Agreement relating to the May 2016 Acquisition, the Share Purchase and Sale Agreement relating to the August 2016 Acquisition and the October 2016 Purchase and Sale Agreement relating to the October 2016 Acquisition as further described in Note 3–Acquisitions.

Omnibus Agreement

On November 3, 2014, in connection with the IPO and the acquisition of Zydeco, we entered into an Omnibus Agreement with SPLC and our general partner concerning our payment of an annual general and administrative services fee to SPLC as well as our reimbursement of certain costs incurred by SPLC on our behalf. This agreement addresses the following matters:


•	our payment of an annual general and administrative fee of $8.5 million for the provision of certain services by SPLC;


•	our obligation to reimburse SPLC for certain direct or allocated costs and expenses incurred by SPLC on our behalf;


•	our obligation to reimburse SPLC for all expenses incurred by SPLC as a result of us becoming and continuing as a publicly traded entity; we will reimburse our general partner for these expenses to the extent the fees relating to such services are not included in the general and administrative fee; and


•	the granting of a license from Shell to us with respect to use certain Shell trademarks and trade names.

Under the Omnibus Agreement, certain costs are indemnified by SPLC. The legal and environmental indemnifications are subject to individual $0.5 million deductibles, while we have an aggregate limit of $15.0 million, of which $10.7 million is remaining. As of December 31, 2016, only the environmental indemnification remains and it will expire in November 2017. During 2016, we did not make any claims for indemnification under the Omnibus Agreement.

Indemnification for any unknown environmental liabilities is limited to liabilities due to occurrences prior to the closing of the IPO and that are identified before the third anniversary of the closing of the IPO. SPLC will indemnify us for tax liabilities which are identified prior to the date that is 60 days after the expiration of the statute of limitations applicable to such liabilities. We have agreed to indemnify SPLC for events and conditions associated with the ownership or operation of our assets (other than any environmental liabilities for which SPLC is specifically required to indemnify us as described above). There is no limit on the amount for which we will indemnify SPLC under the Omnibus Agreement.

During 2015, we received reimbursements from SPLC related to the indemnification for the Partnership’s share of these expenses which are included in other contributions from Parent. Mars has incurred maintenance expense for an underground cavern integrity project including inspections, plug and abandonment, installations and integrity tests to return the Mars Cavern 4 to service. Zydeco has incurred general and administrative expenses including expert fees related to a legal matter regarding FERC tariff rates and has also recognized an estimated settlement provision. Refer to Note 13 – Commitments and Contingencies – Legal Proceedings for additional information.

Tax Sharing Agreement

Zydeco has entered into a tax sharing agreement with an affiliate of Shell pursuant to which Zydeco has agreed to reimburse Shell for state and local franchise taxes attributable to Zydeco’s activity that is reported on Shell’s state or local income or franchise tax returns filed on a combined or unitary basis. Reimbursements under the agreement equal the amount of tax Zydeco would be required to pay if it were to file a consolidated, combined or unitary tax return separate from Shell. Shell will compute and invoice Zydeco for the reimbursement amount within 90 days of Shell filing the combined or unitary tax return on which Zydeco’s activity is included. Zydeco may be required to make prepayments toward the reimbursement amount to the extent that Shell is required to make estimated tax payments.

Other Agreements

In connection with the IPO and our acquisitions from Shell, we have entered into several customary agreements with SPLC and Shell. These agreements include pipeline operating agreements, reimbursement agreements and services agreements.

Shell Auger and Lockport Operations

In connection with the November 2015 Acquisition, we entered into the following agreements with SPLC.

Maintenance expense and capital expenditures for certain projects associated with the Lockport Terminal have been incurred. These projects improve the existing drainage system to eliminate the crossing of storm water between the Lockport Terminal and adjacent properties. In addition, these projects include inspections and tank repairs of a storage tank. Under the Pecten Contribution Agreement, SPLC has agreed to reimburse us for the maintenance expense and capital expenditures related to these projects. During 2016, we recognized $1.6 million for these reimbursements as other contributions from Parent.

In connection with the formation of Pecten on October 1, 2015, Pecten entered into an Operating and Administrative Management Agreement with SPLC. Pursuant to this agreement, SPLC performs physical operations and maintenance services for Lockport and Auger and provides general and administrative services for Pecten. Pecten is required to reimburse SPLC for costs and expenses incurred in connection with such services. Also pursuant to the agreement, SPLC and Pecten agree to standard indemnifications as operator and asset owner, respectively.

Noncontrolling Interest

Noncontrolling interest consists of SPLC’s 7.5% retained ownership interest in Zydeco as of December 31, 2016 and 37.5% retained ownership interest in Zydeco as of December 31, 2015. Noncontrolling interest was 57.0% at the time of IPO, decreased to 37.5% with the May 2015 acquisition, and further decreased to 7.5% with the May 2016 acquisition.

Other Related Party Balances

Other related party balances consist of the following:



	December 31,
	2016		2015
Accounts receivable	$	10.1	$	9.8
Prepaid expenses	2.7		2.8
Accounts payable⁽¹⁾	5.2		9.3
Deferred revenue	7.9		3.6
Accrued liabilities ⁽²⁾	5.1		3.6
Debt payable ⁽³⁾	686.0		457.6
Lease liability	24.9		22.8


⁽¹⁾	Accounts payable – related parties reflects amounts owed to SPLC for reimbursement of third-party expenses incurred by SPLC for our benefit.


⁽²⁾	As of December 31, 2016 Accrued liabilities -- related parties reflects $2.6 million accrued interest, $1.6 million fuel accrual and $0.9 million other accrued liabilities. As of December 31, 2015 Accrued liabilities -- related parties reflects $1.3 million accrued interest, $1.2 million fuel accrual, $0.6 million FERC accrual and $0.5 million other accrued liabilities.


⁽³⁾	Debt payable reflects borrowings outstanding after taking into account unamortized debt issuance cost of $0.9 million and $0.6 million as of December 31, 2016 and 2015, respectively.

Related Party Revolving Credit Facilities

We have entered into two revolving credit facilities with Shell Treasury Centre (West) Inc. (“STCW”), an affiliate of Shell, the Five-Year Revolver and the 364-Day Revolver. Zydeco has also entered into the Zydeco Revolver with STCW. For additional information regarding these credit facilities, see Note 8 – Related Party Debt.

Related Party Revenues and Expenses

We provide crude oil transportation and storage services to related parties under long-term contracts. We entered into these contracts in the normal course of our business and the services are based on the same terms as those provided to third parties. Our transportation revenue and storage services revenue from related parties for 2016, 2015 and 2014 is disclosed in Note 2- Summary of Significant Accounting Policies - Revenue Recognition.

In 2016 and 2015, we converted excess allowance oil to cash through sales to affiliates of Shell and included gains of $0.9 million and $0.1 million, respectively, from such sales in Operations and maintenance expense. In 2014 we converted excess allowance oil to cash through sales to affiliates of Shell and included loss of $0.4 million from such sales in Operations and maintenance expense.

During the years ended December 31, 2016 and 2015, and the three months ended December 31, 2014, Zydeco, Bengal, Odyssey, Mars, Poseidon, Colonial and Explorer paid cash distributions to us of $253.6 million, $174.5 million, and $33.3 million, respectively, of which $119.6 million, $88.9 million, and $19.0 million respectively, related to Zydeco. For the three months ended December 31, 2014, the pro rata share of distributions received prior to the effective date of our IPO was paid back to SPLC. The total amount paid back to SPLC during 2015 was $11.9 million, of which $6.8 million relates to Zydeco.

For a discussion of services performed by SPLC and Shell on our behalf, see Note 1 – Description of the Business and Basis of Presentation – Basis of Presentation. During 2016, 2015 and 2014, we were allocated $6.1 million, $5.8 million and $9.9 million, respectively, of indirect general corporate expenses incurred by SPLC and Shell which are included within general and administrative expenses in the accompanying consolidated statements of income.

Beginning July 1, 2014, Zydeco entered into the Management Agreement with SPLC under which SPLC provides general management and administrative services to us. We no longer receive allocated corporate expenses from SPLC or Shell. We will continue to receive direct and allocated field and regional expenses, including payroll expenses not covered under the Management Agreement. In addition, beginning October 1, 2015, Pecten entered into an operating and management agreement under which we receive direct and allocated field and regional expenses from SPLC. These expenses are primarily allocated to us on the basis of headcount, labor or other measure. These expense allocations have been determined on a basis that both SPLC and we consider to be a reasonable reflection of the utilization of services provided or the benefit received by us during the periods presented.

The majority of our insurance coverage is provided by Shell with the remaining coverage by third-party insurers. The related party portion of insurance expense in 2016, 2015 and 2014 was $4.0 million, $3.6 million and $5.2 million, respectively.

The following table shows related party expenses, including personnel costs described above, incurred by Shell and SPLC on our behalf that are reflected in the accompanying consolidated statements of income for the indicated periods:



	2016		2015		2014
Operations and maintenance - related parties	$	20.7	$	18.5	$	21.7
General and administrative - related parties ⁽¹⁾	23.1		24.6		17.0

(1) For 2016, 2015 and 2014, we incurred $7.7 million, $7.4 million and $3.5 million, respectively, under the Management Agreement and $8.5 million, $8.5 million and $1.4 million, respectively, under the Omnibus Agreement for general and administrative services.

Pension and retirement savings plans

Employees who directly or indirectly support our operations participate in the pension, postretirement health and life insurance, and defined contribution benefit plans sponsored by Shell, which include other Shell subsidiaries. Our share of pension and postretirement health and life insurance costs for 2016, 2015 and 2014 was $2.9 million, $3.0 million and $3.2 million, respectively. Our share of defined contribution benefit plan costs for 2016, 2015 and 2014 was $1.1 million, $1.3 million and $1.3 million, respectively. Pension and defined contribution benefit plan expenses are included in either general and administrative expenses or operations and maintenance expenses in the accompanying consolidated statements of income, depending on the nature of the employee’s role in our operations.

Share-based compensation

Certain SPLC and Shell employees supporting our operations as well as other Shell operations were historically granted awards under the Performance Share Plan (“PSP”), Shell’s incentive compensation program. These share-based compensation costs have been allocated to us as part of the cost allocations from Shell related to Ho-Ho (for the periods prior to June 30, 2014) and related to Pecten (for the periods prior to October 1, 2015). Beginning July 1, 2014, we did not receive any allocated share-based compensation for Ho-Ho, and beginning October 1, 2015, we did not receive any allocated share –based compensation for Pecten. Share-based compensation expense is included in general and administrative expenses in the accompanying consolidated statements of income. These costs for 2016, 2015 and 2014 was less than $0.1 million, less than $0.1 million and approximately $0.2 million, respectively.

Equity and Cost Method Investments

We have equity and cost method investments in entities, including Odyssey, Mars, Colonial and Explorer in which SPLC also owns interests. In some cases we may be required to make capital contributions or other payments to these entities. See Note 5 – Equity Method Investments for additional details.

Reimbursements from Our General Partner

The following table reflects other contributions from our Parent in 2016 and 2015:



	2016		2015
Contribution of JV Partner payment ⁽¹⁾	$	—	$	4.5
Reimbursement of Zydeco directional drill ⁽²⁾	1.4		2.3
Mars cavern integrity project indemnification ⁽³⁾	—		2.9
Reimbursement for Zydeco FERC rate case ⁽⁴⁾	—		1.4
Reimbursement by SPLC ⁽⁵⁾	—		1.8
Reimbursement of Lockport Stormwater project ⁽⁶⁾	1.6		—
Total contributions ⁽⁷⁾	$	3.0	$	12.9

(1) The JV partner agreed to pay us $4.5 million in 2015 in order to secure a waiver of rights of refusal from SOPUS and us permitting the JV partner to acquire another owner’s interest in Poseidon.

(2) Contractual reimbursement by SPLC pursuant to the Purchase and Sale Agreement for our proportionate share of costs and expenses incurred by Zydeco after April 1, 2015 regarding a directional drilling project.

(3) Environmental indemnification by SPLC under the Omnibus Agreement regarding maintenance expense for Mars underground cavern integrity project including inspections, plug and abandonment, installations and integrity tests to return the Mars Cavern 4 to service.

(4) Legal indemnification by SPLC under the Omnibus Agreement for expenses and settlement payments relating to the Zydeco FERC rate case.

(5) Contractual reimbursement by SPLC pursuant to the Pecten Contribution Agreement regarding costs and expenses for maintenance projects at Lockport.

(6) Contractual reimbursement by SPLC pursuant to the Purchase and Sale Agreement for our proportionate share of costs and expenses incurred by Lockport regarding the storm water improvement project.

(7) Total contributions for 2016 include $2.8 million of cash received and $0.2 million contribution receivable from our Parent. Total contributions for 2015 include $11.1 million of cash received and $1.8 million contribution receivable from our Parent.