COMMITMENTS AND CONTINGENCIES

Claims and Legal Proceedings

In the ordinary course of business, we are involved in various claims and legal proceedings, some of which are covered by insurance. We are generally unable to predict the timing or outcome of these claims and proceedings. Based upon our evaluation of existing claims and proceedings and the probability of losses relating to such contingencies, we have accrued certain amounts relating to such claims and proceedings, none of which are considered material.

Pennsauken Allisions. Our terminal located in Pennsauken, New Jersey suffered two allisions in the second half of 2014. The first occurred on August 5, 2014, when a vessel allided with our terminal’s “Ship Dock.” We immediately “arrested” the vessel and commenced litigation against its owner. Security for our claim was provided by the vessel owner’s insurers, in the amount of $19.0 million, reserving all of their defenses. The vessel owners soon stipulated to liability, so the only issue in dispute is the amount of Buckeye’s damages, which is now the subject of discovery. Reconstruction of the Ship Dock was completed in July 2015 and service has since resumed. The aggregate cost to reconstruct the dock was approximately $8.0 million. The second incident occurred on October 5, 2014, when a tug and barge struck and damaged the Pennsauken terminal's “Barge Dock.” The tug and barge owners have commenced proceedings to limit their liability to $1.0 million and $5.0 million, respectively. We have filed claims in the limitation proceedings for the reconstruction of the Barge Dock and response costs, together amounting to approximately $7.0 million. We have suffered and continue to suffer loss-of-use damages as a result of the above allisions, as the two incidents together impacted the ability of vessels of a certain size and/or carrying certain products to call at the terminal. In order to mitigate these business losses, we made modifications to two other berths at a cost of $1.4 million. Recovery for both the mitigation costs and business losses is being sought jointly from all of the respective responsible parties. We are insured for loss of use, subject to a 30 day deductible. Our insurers have been involved in the recovery efforts. In 2015, we received insurance recoveries of $5.1 million related to the loss of use of our terminal, which we have recognized within “Transportation, storage and other services” in our consolidated statement of operations.

BORCO Jetty. On May 25, 2012, a ship, Cape Bari, allided with a jetty at our BORCO facility while berthing, causing damage to portions of the jetty. Buckeye has insurance to cover this loss, subject to a $5.0 million deductible. On May 26, 2012, we commenced legal proceedings in The Bahamas against the vessel’s owner and the vessel to obtain security for the cost of repairs and other losses incurred as a result of the incident. Full security for our claim has been provided by the vessel owner’s insurers, reserving all of their defenses. We also have notified the customer on whose behalf the vessel was at the BORCO facility that we intend to hold them responsible for all damages and losses resulting from the incident pursuant to the terms of an agreement between the parties. Any disputes between us and our customer on this matter are subject to arbitration in New York, New York, and arbitration has commenced.

The vessel owner has claimed that it is entitled to limit its liability to $17.0 million, but we are contesting the right of the vessel owner to such limitation. The Bahamas court of first instance denied the vessel owner the right to limit its liability for the incident, leaving the vessel owner responsible for all provable damages. The vessel owner appealed, and The Bahamas Court of Appeals reversed, holding that the vessel owner may limit its liability. Our application for leave to appeal the Court of Appeals’ decision to the Privy Council was granted, the hearing occurred on February 23, 2016 and we await that decision. We can express no view on whether The Bahamas Court of Appeals decision ultimately will be affirmed or reversed.

We experienced no material interruption of service at the BORCO facility as a result of the incident, and the repairs and reconstruction of the damaged sections are complete.

The aggregate cost to repair and reconstruct the damaged portions of the jetty and pursue recovery in court has been $23.0 million. We recorded a loss on disposal due to the assets destroyed in the incident and other related costs incurred; however, since we believe recovery of our losses is probable, we recorded a corresponding receivable. As of December 31, 2015, we had a $6.4 million receivable included in “Other non-current assets” in our consolidated balance sheet, representing claims for reimbursement of the deductible and other third-party expenses. Additionally, we have received insurance reimbursements of $16.0 million, and to the extent the aggregate proceeds from the recovery of our losses is in excess of the carrying value of the destroyed assets or other costs incurred, we will recognize a gain when such proceeds are received and are not refundable. Our insurers have paid most of the claim and are now parties in The Bahamas litigation. As of December 31, 2015, no gain had been recognized; however, we recorded a $14.1 million deferred gain in “Accrued and other current liabilities” in our consolidated balance sheet, representing excess proceeds received over the loss on disposal and other costs incurred.

On May 12, 2014, the vessel owner filed a third-party complaint against BORCO and a BORCO subsidiary, Borco Towing Company Limited, alleging negligence by the pilots and tugs that assisted the Cape Bari berthing. We have investigated these allegations and believe that we have defenses and intend to defend ourselves and pursue our claims against the vessel owner. BORCO and Borco Towing Company Limited are insured for the alleged liability, subject to an applicable deductible, and the liability insurers are participating in the defense. The main proceeding and third-party actions have been consolidated and are expected to go to trial in May 2016.

Buckeye Texas Partners Contractor Dispute. Buckeye Texas Processing LLC, a wholly owned subsidiary of Buckeye Texas, is party to a contract with Ventech Engineers USA, LLC (“Ventech”). The contract required Ventech to design, supply, fabricate, and install two condensate splitters in Corpus Christi, Texas (the “Splitter Project”). Ventech’s primary subcontractor on the Splitter Project was Bay, Ltd. (“Bay”). Certain disputes arose on the Splitter Project relating to payment, delays, cost overruns, defective work, and other issues. On October 14, 2015, Bay filed a lawsuit in Harris County District Court against us and Ventech, claiming breach of contract, fraud, and other causes of action primarily premised on alleged non-payment of amounts due on the Splitter Project. We also believe that, if the matter is not resolved, Ventech may claim that it is also owed additional money for its work on the Splitter Project. We disagree with assertions that we owe Ventech and Bay additional amounts and, if resolution cannot be reached, we intend to pursue claims against Ventech and Bay relating to the delays, cost overruns, defective work, and other issues on the Splitter Project. In addition, Ventech provided a bond on the Splitter Project that may help to satisfy some of our losses. Our damages may exceed the damages claimed by Ventech and Bay. The parties have agreed to mediate to seek to resolve the disputes between them, and settlement discussions are ongoing.

Federal Energy Regulatory Commission (“FERC”) Proceedings

FERC Docket No. OR12-28-000 — Airlines Complaint against Buckeye Pipe Line Company, L.P. (“BPLC”) New York City Jet Fuel Rates. On September 20, 2012, a complaint was filed with FERC by Delta Air Lines, JetBlue Airways, United/Continental Air Lines, and US Airways challenging BPLC’s rates for transportation of jet fuel from New Jersey to three New York City airports. The complaint was not directed at BPLC’s rates for service to other destinations and did not involve pipeline systems and terminals owned by Buckeye’s other operating subsidiaries. The complaint challenged these jet fuel transportation rates as generating revenues in excess of costs and thus being “unjust and unreasonable” under the Interstate Commerce Act. On February 22, 2013, FERC issued an order setting the airline complaint in Docket (“Dkt.”) No. OR12-28-000 for hearing, but holding the hearing in abeyance and setting the dispute for settlement procedures before a settlement judge. On March 8, 2013, an order was issued consolidating, for settlement purposes, this complaint proceeding with the proceeding regarding BPLC’s application for market-based rates in the New York City market in Dkt. No. OR13-3-000 (discussed below), and settlement discussions under the supervision of the FERC settlement judge continued until April 1, 2014, when it was reported that the parties had been unable to reach a settlement. As a result, the matter proceeded to hearing, which was concluded on April 1, 2015. As a result of developments in ongoing settlement talks regarding Dkt. Nos. OR12-28-000, OR13-3-000 (discussed below) and OR 14-41-000 (discussed below), we recorded an accrual and a corresponding reduction in revenue in the amount of $40.0 million for the year ended December 31, 2014 in our Domestic Pipelines & Terminals segment based upon a settlement offer made by BPLC to satisfy the claims for alleged past excessive charges through December 31, 2014.

In parallel with the hearing in the OR12-28-000 proceeding, BPLC and the airlines continued to pursue settlement. On June 19, 2015, BPLC and the airlines submitted an Offer of Settlement at the FERC (the “Settlement”) to resolve the complaints in Dkt. Nos. OR12-28-000, et al. and OR14-41-000, as well as BPLC’s application in Dkt. No. OR13-3-000. Under the terms of the Settlement, BPLC agreed to reduce its jet fuel rates prospectively, to make settlement payments to the airlines, to install facilities to increase the flexibility and capacity of its system in shipping jet fuel to John F. Kennedy International Airport, and to resolve its application in Dkt. No. OR13-3-000 as described further below. As a result of submission of the Settlement, we recorded an additional accrual and corresponding reduction in revenue in the amount of $15.2 million during the year ended December 31, 2015 in our Domestic Pipelines & Terminals segment, which, together with the previously recorded $40.0 million reduction in revenue, represented anticipated settlement payments and other expenses associated with the Settlement. On September 29, 2015, the FERC approved the Settlement without modification. On October 1, 2015, BPLC filed a tariff to implement the terms of the Settlement, including the agreed-upon reductions in jet fuel rates effective November 1, 2015 (the “Settlement Tariff”) in Dkt. No. IS16-7-000. On October 16, 2015, a jet fuel marketer and three airlines not parties to the Settlement protested the tariff, alleging that certain provisions of an incentive rate program provided for in the Settlement are unduly discriminatory (the “Protest”). On October 30, 2015, the FERC rejected the Protest on the merits and accepted the Settlement Tariff, permitting the reduced rates to go into effect on November 1, 2015. On October 29, 2015, the same jet fuel marketer and airlines sought late intervention and rehearing at the FERC to challenge the FERC’s approval of the Settlement, alleging, on a basis similar to the Protest, that certain provisions of the Settlement’s incentive rate program are unduly discriminatory. BPLC and the settling airlines responded that the Protest's claims were invalid and untimely. On December 2, 2015, the FERC denied the late intervention request, which had the effect of barring the rehearing request. During the quarter ended December 31, 2015, we made payments of $52.8 million related to the Settlement.

FERC Docket No. OR14-41-000 — American Airlines Complaint against BPLC New York City Jet Fuel Rates. On September 17, 2014, a complaint was filed with FERC by American Airlines, raising claims similar to the Dkt. No. OR12-28-000 complaint (see above). As noted above, the Settlement to resolve this complaint was approved by the FERC on September 29, 2015.

FERC Docket No. OR13-3-000 — BPLC’s Market-Based Rate Application. On October 15, 2012, BPLC filed an application with FERC seeking authority to charge market-based rates for deliveries of liquid petroleum products to the New York City-area market (the “Application”). In the Application, BPLC sought to charge market-based rates from its three origin points in northeastern New Jersey to its five destinations on its Long Island System, including deliveries of jet fuel to the Newark, LaGuardia, and JFK airports. On December 14, 2012, Delta Air Lines, JetBlue Airways, United/Continental Air Lines, and US Airways filed a joint intervention and protest challenging the Application and requesting its rejection. Following further pleadings, on February 28, 2013, FERC set the Application for hearing but held the hearing in abeyance and set the dispute for settlement procedures before a settlement judge.

After unsuccessful settlement talks, litigation as to the Application proceeded separately from the complaint proceeding. Prior to the hearing, the airlines and BPLC reached an agreement in principle, and as noted above, submitted an Offer of Settlement to the FERC to resolve the airlines’ objections to the Application. Under the terms of the Settlement, BPLC agreed, inter alia, to withdraw the portions of the Application addressing transportation of jet fuel within the New York City market, including transportation of jet fuel to the three airports, while remaining free to pursue market-based rates for transportation of other refined petroleum products to other destinations within the New York City market. As noted above, the Settlement was approved by the FERC on September 29, 2015, and on October 5, 2015, BPLC filed a notice withdrawing the Application except as to the transportation of other refined petroleum products from Linden, New Jersey to Inwood and Long Island City, New York. On February 11, 2016, BPLC submitted a joint motion with the support of FERC Trial Staff requesting that FERC waive the issuance of an initial decision, and instead issue an order addressing the revised application of BPLC, based on evidence submitted by Commission Trial Staff and BPLC, both of whose additional evidence found that BPLC lacked significant market power over the transportation of other refined petroleum products from Linden, New Jersey to Inwood and Long Island City, New York. FERC has not yet issued an order in response to the filing submitted on February 11, 2016.

Environmental Contingencies

We recorded operating expenses, net of recoveries, of $6.2 million, $3.0 million and $3.5 million during the years ended December 31, 2015, 2014 and 2013, respectively, related to environmental remediation liabilities unrelated to claims and legal proceedings. As of December 31, 2015 and 2014, we recorded environmental remediation liabilities of $48.0 million and $52.3 million, respectively. See Notes 13 and 15 for further information. Costs ultimately incurred may be in excess of our estimates, which may have a material impact on our financial condition, results of operations or cash flows. At December 31, 2015 and 2014, we had $10.9 million and $13.6 million, respectively, of receivables related to these environmental remediation liabilities covered by insurance or third-party claims.

Leases —Where We are Lessee

We lease certain property, plant and equipment under noncancelable and cancelable operating leases. Rental expense is charged to operating expenses on a straight-line basis over the period of expected benefit. Contingent rental payments are expensed as incurred. Total rental expense for the years ended December 31, 2015, 2014 and 2013 was $31.0 million, $26.9 million and $24.9 million, respectively. The following table presents minimum lease payment obligations under our operating leases with terms in excess of one year for the years ending December 31st (in thousands):



	Office Space and Other		Equipment (1)		Land Leases (2)		Total

2016	$	3,885	$	4,010	$	2,398	$	10,293
2017	3,984		986		2,398		7,368
2018	3,132		—		2,398		5,530
2019	2,927		—		2,398		5,325
2020	3,008		—		2,398		5,406
Thereafter	3,404		—		89,865		93,269
Total	$	20,340	$	4,996	$	101,855	$	127,191

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(1)	Includes BORCO facility leases for tugboats and a barge in our Global Marine Terminals segment.


(2)	Includes leases for properties in connection with both the jetty and inland dock operations in the Global Marine Terminals segment.

Additionally, our rights-of-way payments for the years ended December 31, 2015, 2014 and 2013 were $7.0 million, $6.5 million and $6.1 million, respectively; and are subject to an annual escalation for the remaining life of all pipelines and terminals.