UNIT-BASED COMPENSATION PLANS

We award unit-based compensation to employees and directors primarily under the LTIP, which was approved by the Partnership’s unitholders in June 2013. The LTIP replaced the 2009 Long-Term Incentive Plan (the “2009 Plan”), which was merged with and into the LTIP, and no further grants will be made under the 2009 Plan. We formerly awarded options to acquire LP Units to employees pursuant to the Buckeye Partners, L.P. Unit Option and Distribution Equivalent Plan (the “Option Plan”).

We recognized compensation expense related to the LTIP, which includes awards under the 2009 Plan, and the Option Plan of $29.3 million, $21.5 million and $21.8 million for the years ended December 31, 2015, 2014 and 2013, respectively.

LTIP

The LTIP, which is overseen by the Compensation Committee of the Board of Directors of Buckeye GP (the “Compensation Committee”), provides for the grant of phantom units, performance units and in certain cases, distribution equivalent rights (“DERs”), which provide the participant a right to receive payments based on distributions we make on our LP Units. Phantom units are notional LP Units whose vesting is subject to service-based restrictions or other conditions established by the Compensation Committee in its discretion. Phantom units entitle a participant to receive an LP Unit without payment of an exercise price upon vesting. Performance units are notional LP Units whose vesting is subject to the attainment of one or more performance goals, and which entitle a participant to receive LP Units without payment of an exercise price upon vesting. DERs are rights to receive a cash payment per phantom unit or performance unit, as applicable, equal to the per unit cash distribution we pay on our LP Units. The number of LP Units that may be granted to any one individual in a calendar year will not exceed 100,000. If awards are forfeited, terminated or otherwise not paid in full, the LP Units underlying such awards will again be available for purposes of the LTIP. Persons eligible to receive grants under the LTIP are (i) officers and employees of Buckeye GP and any of our affiliates who provide services to us and (ii) independent members of the Board of Directors of Buckeye GP. Phantom units or performance units may be granted to participants at any time as determined by the Compensation Committee.

After giving effect to the issuance or forfeiture of phantom unit and performance unit awards through the year end, awards representing a total of 2,610,765 LP Units were available for issuance under the LTIP as of December 31, 2015.

Deferral Plan under the LTIP

On December 16, 2009, the Compensation Committee approved the terms of the Buckeye Partners, L.P. Unit Deferral and Incentive Plan (“Deferral Plan”). The Compensation Committee is expressly authorized to adopt the Deferral Plan under the terms of the LTIP, which grants the Compensation Committee the authority to establish a program pursuant to which our phantom units may be awarded in lieu of cash compensation at the election of the employee. At December 31, 2015, 2014 and 2013, eligible employees were allowed to defer up to 50% of their 2015, 2014, and 2013 compensation award under our Annual Incentive Compensation Plan or other discretionary bonus program in exchange for grants of phantom units equal in value to the amount of their cash award deferral (each such unit, a “Deferral Unit”). Participants also receive one matching phantom unit for each Deferral Unit. Deferral Units and their matching phantom units vest on December 15 of the second year after the year in which such units are granted. At December 31, 2015, $3.1 million of 2015 compensation awards had been deferred, for which phantom units will be granted in 2016. At December 31, 2014, $1.7 million of 2014 compensation awards had been deferred, for which 54,592 phantom units (including matching units) were granted during 2015. At December 31, 2013, $2.7 million of 2013 compensation awards had been deferred, for which 75,870 phantom units (including matching units) were granted during 2014. These grants are included as granted in the LTIP activity table below.

Awards under the LTIP

During the year ended December 31, 2015, the Compensation Committee granted 202,176 phantom units to employees (including the 54,592 phantom units granted pursuant to the Deferral Plan discussed above), 22,001 phantom units to independent directors of Buckeye GP and 210,494 performance units to employees. The vesting criteria for the performance units are the attainment of certain performance goals during the third year of a three-year period and remaining employed by us throughout such three-year period.

Phantom unit grantees will be paid quarterly distributions on DERs associated with phantom units over their respective vesting periods of one-year or three-years in the same amounts per phantom unit as distributions paid on our LP Units over those same one-year or three-year periods. The amount paid with respect to phantom unit distributions was $2.6 million and $2.0 million for the years ended December 31, 2015 and 2014, respectively. Distributions may be paid on performance units at the end of the three-year vesting period. In such case, DERs will be paid on the number of LP Units for which the performance units will be settled. Quarterly distributions related to DERs associated with phantom and performance units are recorded as a reduction of our Limited Partners’ Capital on our consolidated balance sheets.

The following table sets forth the LTIP activity for the periods indicated (in thousands, except per unit amounts):



	Number of LP Units		Weighted Average Grant Date Fair Value per LP Unit (1)
Unvested at January 1, 2014	813		$	59.36
Granted	409		71.79
Vested	(231	)	63.27
Forfeited	(85	)	63.92
Unvested at December 31, 2014	906		$	63.56
Granted	435		73.45
Vested	(312	)	62.08
Forfeited	(18	)	67.32
Unvested at December 31, 2015	1,011		$	68.20

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(1)	Determined by dividing the aggregate grant date fair value of awards by the number of awards issued. The weighted-average grant date fair value per LP Unit for forfeited and vested awards is determined before an allowance for forfeitures.

At December 31, 2015, we expect to recognize $28.9 million of compensation expense related to the LTIP over a weighted average period of 1.7 years.

Unit Option and Distribution Equivalent Plan

We also sponsor the Option Plan pursuant to which we historically granted options to employees to purchase LP Units at the market price of our LP Units on the date of grant. Generally, the options vest three years from the date of grant and expire ten years from the date of grant. As unit options are exercised, we issue new LP Units to the holder. We have not historically repurchased, and do not expect to repurchase in 2016, any of our LP Units. Following the adoption of the 2009 Plan effective March 20, 2009, we ceased making additional grants under the Option Plan.

The following is a summary of the changes in the options outstanding (all of which are vested) under the Option Plan for the periods indicated (in thousands, except per unit amounts):



	Number of LP Units		Weighted- Average Strike Price ($/LP Unit)		Weighted- Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (1)

Outstanding at January 1, 2014	46		$	47.32	2.4	$	1,080
Exercised	(18	)	46.62
Forfeited, cancelled or expired	(2	)	$	42.10

Outstanding at December 31, 2014	26		$	48.18	1.6	$	703
Exercised	(5	)	47.38
Forfeited, cancelled or expired	(4	)	46.65

Outstanding at December 31, 2015	17		$	48.71	0.9	$	300

Exercisable at December 31, 2015	17		$	48.71	0.9	$	300

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(1)	Aggregate intrinsic value reflects fully vested LP Unit options at the date indicated. Intrinsic value is determined by calculating the difference between our closing LP Unit price on the last trading day in 2015 and the exercise price, multiplied by the number of exercisable, in-the-money options.

The total intrinsic value of options exercised during the years ended December 31, 2015, 2014 and 2013 was $0.1 million, $0.5 million and $0.6 million, respectively. At December 31, 2015 and 2014, there was no unrecognized compensation cost related to unvested options, as all options were vested as of November 24, 2011. At December 31, 2015, 333,000 LP Units were available for grant in connection with the Option Plan. The fair value of options vested was zero for each of the years ended December 31, 2015, 2014 and 2013, respectively.