Note 3. Transactions with Affiliates

Revenues We derive a substantial portion of our revenues from commercial agreements with Noble. Revenues generated from commercial agreements with Noble and its affiliates consist of the following:



	Year Ended December 31,
(in thousands)	2017		2016		2015
Crude Oil, Natural Gas and Produced Water Gathering	$	142,864	$	94,160	$	56,042
Fresh Water Delivery	75,860		60,001		27,097
Crude Oil Treating	4,473		5,371		4,403
Other	1,204		1,192		295
Total Midstream Services — Affiliate	$	224,401	$	160,724	$	87,837

Expenses General and administrative expense consists of the following:



	Year Ended December 31,
(in thousands)	2017		2016		2015
General and Administrative Expense — Affiliate	$	7,323	$	6,984	$	2,285
General and Administrative Expense — Third Party	6,073		2,930		486
Total General and Administrative Expense	$	13,396	$	9,914	$	2,771

Asset Sale and Purchases — Affiliate During third quarter 2016, we sold certain equipment to Noble, at cost, and received proceeds of $1.9 million. No gain or loss was recognized for the transaction. During fourth quarter 2016, we purchased certain equipment from Noble, at market value, for approximately $0.9 million.

Agreements with Noble We have entered into various agreements with Noble, as summarized below:

Commercial Agreements Our commercial agreements with Noble provide for fees based on the type and scope of the midstream services we provide and the midstream system we use to provide our services, as follows:


•	Crude Oil Gathering Agreement - Under the applicable crude oil gathering agreement, we receive a volumetric fee per barrel (Bbl) for the crude oil gathering services we provide.


•	Natural Gas Gathering Agreement - Under the natural gas gathering agreement, we receive a volumetric fee per million British Thermal Units (MMBtu) for the natural gas gathering services we provide.

•

Produced Water Services Agreement - Under the applicable produced water services agreement, we receive a fee for collecting, cleaning or otherwise disposing of water produced from operating crude oil and natural gas wells in the dedication area. The fee is comprised of a volumetric component for services we provide directly and a pass through component for services we provide through contracts with third parties.


•	Fresh Water Services Agreement - Under the applicable fresh water services agreement, we receive a fee for delivering fresh water. The fee is comprised of a volumetric component for services we provide directly and a pass through component for services we provide through contracts with third parties. The cost of storing the fresh water is included in the delivery fee.


•	Crude Oil Treating Agreement - Under the crude oil treating agreement, we receive a monthly fee for the crude oil treating services we provide based on each well operated by Noble that is producing in paying quantities that is not connected to our crude oil gathering systems during such month.

Under each of these commercial agreements, the volumetric fees we charge Noble (other than pass through fees) are automatically increased each calendar year by 2.5%, expect for Blanco River DevCo LP Natural Gas Gathering. The volumetric fee for Blanco Gas Gathering is automatically increased by the Consumer Price Index (CPI) for the previous year; provided, however, that no such increase may exceed 2.5% for any given year. In addition, we will propose a redetermination of the fees charged under our various systems on an annual basis, taking into account, among other things, expected capital expenditures necessary to provide our services under the applicable development plan. However, if we and Noble are unable to agree on a fee redetermination (other than the automatic annual adjustment), the prior fee will remain in effect, which in effect allows Noble to unilaterally exercise control over the decision of whether to change the fee.

Omnibus Agreement Our omnibus agreement with Noble provides for:


•	our payment of an annual general and administrative fee, initially in the amount of $6.9 million (prorated for the first year of service), for the provision of certain services by Noble and its affiliates, which fee cannot be increased until after the third anniversary of the IPO with annual redetermination thereafter;


•	our right of first refusal on existing Noble and future Noble acquired assets and the right to provide certain services, including the right to provide crude oil gathering, natural gas gathering and processing, and water services on certain acreage owned, or to be acquired, by Noble;


•	our right of first offer to acquire Noble’s retained interests in each of the development companies; and


•	an indemnity by Noble for certain environmental and other liabilities, and our obligation to indemnify Noble for events and conditions associated with the operations of its assets that occur after the closing of the IPO and for environmental liabilities related to our assets to the extent Noble is not required to indemnify us.

Operational Services Agreement Our Operational Services and Secondment Agreement (Operational Services Agreement) with Noble provides for:

•

secondment by Noble of certain operational, construction, design and management employees and contractors to our general partner, us and our subsidiaries to provide management, maintenance and operational functions with respect to our assets. These functions include performing the activities and day-to-day management of the business pursuant to certain commercial agreements listed in the Operational Services Agreement, and designing, building, constructing and otherwise installing the infrastructure required by such agreements;


•	reimbursement by us to Noble of the cost of the seconded employees and contractors, including their wages and benefits, based on the percentage of the employee’s or contractor’s time spent working for us; and


•	an initial term of 15 years and automatic extensions for successive renewal terms of one year each, unless terminated by either party.