Tesoro Logistics LP (Notes)

6 Months Ended

Jun. 30, 2014

Variable Interest Entity, Measure of Activity [Abstract]

TESORO LOGISTICS LP

TESORO LOGISTICS LP

TLLP is a publicly traded limited partnership that was formed to own, operate, develop and acquire logistics assets. Its assets are integral to the success of Tesoro’s refining and marketing operations and generate revenue by charging fees for gathering crude oil using its High Plains System and for terminalling, transporting and storing crude oil and refined products using terminal facilities and pipelines in the western United States. Tesoro Logistics GP, LLC (“TLGP”), a fully consolidated subsidiary, serves as the general partner of TLLP. We held an approximate 36% interest in TLLP at June 30, 2014 and December 31, 2013, including the general partner interest. This interest at June 30, 2014 includes 19,110,714 common units and 1,110,282 general partner units. During the quarter, all subordinated units converted to common units. All intercompany transactions with TLLP are eliminated upon consolidation.

TLLP provides us with various pipeline transportation, trucking, terminal distribution, storage and coke-handling services under long-term, fee-based commercial agreements. Each of these agreements, with the exception of the storage and transportation services agreement, contain minimum volume commitments. We do not provide financial or equity support through any liquidity arrangements or financial guarantees to TLLP.

Effective June 23, 2014, TLLP entered into a transaction to purchase certain terminalling and pipeline assets owned by Tesoro and two of our subsidiaries for total consideration of $270 million to be completed in two phases.  On July 1, 2014, TLLP purchased the first phase consisting of three marketing terminals and a storage facility in exchange for consideration of $241 million, comprised of approximately $214 million in cash, and the issuance of equity to us with a fair value of $27 million.  TLLP’s acquisition of a refined products pipeline in the second phase is pending regulatory approval.