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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2013
OR
[    ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission File Number 1-32940
NUSTAR GP HOLDINGS, LLC
(Exact name of registrant as specified in its charter)
Delaware
 
85-0470977
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
19003 IH-10 West
 
78257
San Antonio, Texas
 
(Zip Code)
(Address of principal executive offices)
 
 
Registrant’s telephone number, including area code (210) 918-2000
Securities registered pursuant to Section 12(b) of the Act: Units representing limited liability company membership interests listed on the New York Stock Exchange.
Securities registered pursuant to 12(g) of the Act: None.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [X] No [    ]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [    ] No [X]
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [    ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [     ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule12b-2 of the Exchange Act (Check one) :
Large accelerated filer [X]
Accelerated filer [    ]
Non-accelerated filer [    ]  (Do not check if a smaller reporting company)
Smaller reporting company [    ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [    ] No [X]
The aggregate market value of units held by non-affiliates was approximately $925 million based on the last sales price quoted as of June 28, 2013, the last business day of the registrant’s most recently completed second quarter.
The number of units outstanding as of January 31, 2013 was 42,656,281
 
 
 
 
 

Table of Contents

TABLE OF CONTENTS
 
Items 1., 1A. and 2.
 
 
 
 
 
 
 
 
 
 
Item 1B.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
Item X.
 
Item 5.
 
 
 
Item 6.
 
 
 
Item 7.
 
 
 
Item 7A.
 
 
 
Item 8.
 
 
 
Item 9.
 
 
 
Item 9A.
 
 
 
Item 9B.
 
Item 10.
 
 
 
Item 11.
 
 
 
Item 12.
 
 
 
Item 13.
 
 
 
Item 14.
 
 
 
Item 15.
 
 
 
 


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PART I
Unless otherwise indicated, the terms “NuStar GP Holdings,” “we,” “our” and “us” are used in this report to refer to NuStar GP Holdings, LLC, to one or more of our consolidated subsidiaries or to all of them taken as a whole. In the following Items 1., 1A. and 2., “Business, Risk Factors and Properties,” we make certain forward-looking statements, including statements regarding our plans, strategies, objectives, expectations, intentions and resources. The words “forecasts,” “intends,” “believes,” “expects,” “plans,” “scheduled,” “goal,” “may,” “anticipates,” “estimates” and similar expressions identify forward-looking statements. We do not undertake to update, revise or correct any of the forward-looking information. You are cautioned that such forward-looking statements should be read in conjunction with our disclosures beginning on page 26 of this report under the heading: “CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION.”

ITEMS 1., 1A. and 2. BUSINESS, RISK FACTORS AND PROPERTIES

OVERVIEW

NuStar GP Holdings, LLC (NuStar GP Holdings), a Delaware limited liability company, was formed in June 2000. Our units are traded on the New York Stock Exchange (NYSE) under the symbol “NSH.” Our principal executive offices are located at 19003 IH-10 West, San Antonio, Texas 78257 and our telephone number is (210) 918-2000.

Our only cash generating assets are our ownership interests in NuStar Energy L.P. (NuStar Energy), a publicly traded Delaware limited partnership (NYSE: NS). NuStar Energy is engaged in the terminalling and storage of petroleum products, the transportation of petroleum products and anhydrous ammonia, and the marketing of petroleum products. NuStar Energy has terminal and storage facilities in the United States, Canada, Mexico, the Netherlands, including St. Eustatius in the Caribbean, the United Kingdom and Turkey. As of December 31, 2013 , our aggregate ownership interests in NuStar Energy consisted of the following:
•
the 2% general partner interest;
•
100% of the incentive distribution rights issued by NuStar Energy, which entitle us to receive increasing percentages of the cash distributed by NuStar Energy, currently at the maximum percentage of 23% ; and
•
10,228,945 common units of NuStar Energy representing a 12.9% limited partner interest.

Our primary objective is to increase per unit distributions to our unitholders by actively supporting NuStar Energy in executing its business strategy, which includes continued growth through expansion projects and strategic acquisitions. We may facilitate NuStar Energy’s growth through the use of our capital resources, which could involve capital contributions, loans or other forms of financial support.

NuStar Energy’s partnership agreement requires that it distributes all “Available Cash” to its partners each quarter, and this term is defined in its partnership agreement as cash on hand at the end of the quarter, plus certain permitted borrowings made subsequent to the end of the quarter, less cash reserves determined by NuStar Energy’s board of directors. Similarly, we are required by our limited liability company agreement to distribute all of our available cash at the end of each quarter, less reserves established by our board of directors. However, unlike NuStar Energy, we do not have a general partner or incentive distribution rights. Therefore, all of our distributions are made on our units, which are our only class of securities outstanding.

Our internet website address is http://www.nustargpholdings.com. Information contained on our website is not part of this report. Our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K filed with (or furnished to) the Securities and Exchange Commission (SEC) are available on our internet website, free of charge, as soon as reasonably practicable after we file or furnish such material (select the “Investors” link, then the “SEC Filings” link). We also post our corporate governance guidelines, code of business conduct and ethics, code of ethics for senior financial officers and the charters of our board’s committees on our internet website free of charge (select “Investors” link, then the “Corporate Governance” link). Our governance documents are available in print to any unitholder that makes a written request to Corporate Secretary, NuStar GP Holdings, LLC, 19003 IH-10 West, San Antonio, Texas 78257.

RECENT DEVELOPMENTS

NuStar Energy’s Divestment of ownership interest in Asphalt JV
On February 26, 2014, NuStar Energy sold its then-remaining 50% ownership interest in NuStar Asphalt LLC (Asphalt JV), which constitutes all of NuStar Energy’s equity interest in the entity it retained after the first sale in 2012. The purchaser, Lindsay Goldberg LLC (Lindsay Goldberg), a private investment firm, now owns 100% of Asphalt JV, and NuStar Energy has completed its exit from the asphalt business.

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ORGANIZATIONAL STRUCTURE

The following chart depicts our organizational structure and relationship with NuStar Energy as of December 31, 2013 :

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EMPLOYEES

Our wholly owned subsidiary, NuStar GP, LLC, provides administrative services to us. Employees of NuStar GP, LLC also provide services to NuStar Energy pursuant to the GP Services Agreement (defined in Note 5 of the Notes to Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary Data” ). As of December 31, 2013 , NuStar GP, LLC had 1,221 employees. We believe that NuStar GP, LLC’s relationship with these employees is satisfactory.

ENVIRONMENTAL AND SAFETY REGULATION

Our only cash generating assets are our indirect ownership interests in NuStar Energy. We have no independent operations.

PROPERTIES

Our only cash generating assets are our indirect ownership interests in NuStar Energy. We have no independent operations.

RISK FACTORS

RISKS INHERENT IN AN INVESTMENT IN US
Our only cash generating assets are our ownership interests in NuStar Energy. Our cash flow and ability to make distributions at current levels is, therefore, completely dependent upon the ability of NuStar Energy to make cash distributions at current levels to its partners, including us. If NuStar Energy does not make cash distributions at its current levels or reduces the level of cash distributions to its partners, we may not have sufficient cash to pay distributions at our current levels.
Our operating cash flow is currently completely dependent upon NuStar Energy making cash distributions at current levels to its partners, including us. The amount of cash that NuStar Energy can distribute to its partners each quarter principally depends upon the amount of cash it generates from its operations, which will fluctuate from quarter to quarter based on, among other things:
•
the amount of throughput volumes transported in its pipelines;
•
lease renewals or throughput volumes in its terminals and storage facilities;
•
tariff rates and fees it charges and the returns it realizes for its services;
•
the results of its marketing, trading and hedging activities, which fluctuate depending upon the relationship between refined product prices and prices of crude oil and other feedstocks;
•
demand for and supply of crude oil, refined products and anhydrous ammonia;
•
the effect of worldwide energy conservation measures;
•
its operating costs;
•
weather conditions;
•
domestic and foreign governmental regulations and taxes; and
•
prevailing economic conditions.
In addition, the amount of cash that NuStar Energy will have available for distribution will depend on other factors, including:
•
its debt service requirements and restrictions on distributions contained in its current or future debt agreements;
•
the sources of cash used to fund its acquisitions;
•
its capital expenditures;
•
fluctuations in its working capital needs;
•
its issuances of debt and equity securities; and
•
adjustments in cash reserves made by NuStar Energy’s general partner, in its discretion.
Because of these factors, NuStar Energy may not have sufficient available cash each quarter to continue paying distributions at its current level or at all. Furthermore, cash distributions to NuStar Energy unitholders depend primarily upon cash flow, and not solely on profitability, which is affected by non-cash items. Therefore, NuStar Energy may make cash distributions during periods when it records net losses and may not make cash distributions during periods when it records net income.
In the future, we may not have sufficient cash to pay distributions at our current quarterly distribution level or to increase distributions.
Because our only source of operating cash flow consists of cash distributions from NuStar Energy, the amount of distributions we are able to make to our unitholders may fluctuate based on the level of distributions NuStar Energy makes to its unitholders, including us. We cannot assure you that NuStar Energy will continue to make quarterly distributions at its current level of

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$1.095 per unit, or any other amount, or increase its quarterly distributions in the future. In addition, while we would expect to increase or decrease distributions to our unitholders if NuStar Energy increases or decreases distributions to us, the timing and amount of such changes in distributions, if any, will not necessarily be comparable to the timing and amount of any changes in distributions made by NuStar Energy to us. Our ability to distribute cash received from NuStar Energy to our unitholders is limited by a number of factors, including:  
•
interest expense and principal payments on any indebtedness we may incur;
•
restrictions on distributions contained in any future debt agreements;
•
our general and administrative expenses, including expenses we incur as a public company;
•
expenses of our subsidiaries, including tax liabilities of our corporate subsidiaries;
•
reserves necessary for us to make the necessary capital contributions to maintain our 2% general partner interest in NuStar Energy, as required by the partnership agreement of NuStar Energy upon the issuance of additional partnership securities by NuStar Energy; and
•
reserves our board of directors believes prudent for us to maintain for the proper conduct of our business or to provide for future distributions.
We cannot guarantee that in the future we will be able to pay distributions or that any distributions NuStar Energy pays to us will allow us to pay distributions at or above our current quarterly distribution of $0.545 per unit. The actual amount of cash that is available for distribution to our unitholders will depend on numerous factors, many of which are beyond our control or the control of NuStar Energy. Therefore, a reduction in the amount of cash distributed by NuStar Energy per unit or on the incentive distribution rights, or an increase in our expenses, may result in our not being able to pay our current quarterly distribution of $0.545 per unit.
NuStar Energy’s unitholders, excluding the owner of NuStar Energy’s general partner, have the right to remove NuStar Energy’s general partner by a simple majority vote, which would cause us to divest our general partner interest and incentive distribution rights in NuStar Energy in exchange for cash or common units of NuStar Energy and cause us to lose our ability to manage NuStar Energy.
We currently manage NuStar Energy through Riverwalk Logistics, L.P., NuStar Energy’s general partner and our indirect, wholly owned subsidiary. NuStar Energy’s partnership agreement, however, gives unitholders of NuStar Energy the right to remove the general partner of NuStar Energy upon the affirmative vote of holders of a majority of outstanding NuStar Energy common units, excluding the common units owned by us. As of December 31, 2013 , we own a 12.9% limited partner interest in NuStar Energy, and the public unitholders own 85.1%. If Riverwalk Logistics, L.P. were removed as the general partner of NuStar Energy, it would receive cash or common units in exchange for its 2% general partner interest and its incentive distribution rights and would lose its ability to manage NuStar Energy. While the common units or cash that Riverwalk Logistics, L.P. would receive are intended under the terms of NuStar Energy’s partnership agreement to fully compensate it in the event it is removed as general partner, these common units or the investments made with the cash over time may not provide us with as much distributable cash, or be as valuable, as the 2% general partner interest and incentive distribution rights had we retained them.
NuStar Energy’s general partner, with our consent, may limit or modify the incentive distributions we are entitled to receive in order to facilitate the growth strategy of NuStar Energy. Our board of directors can give this consent without a vote of our unitholders.
We indirectly own NuStar Energy’s general partner, which owns the incentive distribution rights in NuStar Energy that entitle us to receive increasing percentages, up to a maximum of 23%, of any cash distributed by NuStar Energy as it exceeds a distribution of $0.60 per NuStar Energy common unit in any quarter. A substantial portion of the cash flows we receive from NuStar Energy are provided by these incentive distributions. Our limited liability company agreement provides that our board of directors may consent to the elimination, reduction or modification of the incentive distribution rights without our unitholders’ approval if our board determines that the elimination, reduction or modification will not adversely affect our unitholders in any material respect.
Restrictions in our credit facility limit our ability to make distributions to our unitholders; credit facility matures in June 2014.
Our credit facility contains covenants limiting our ability to incur indebtedness, grant liens, engage in transactions with affiliates and make distributions to our unitholders. The credit facility also contains covenants requiring NuStar Energy to maintain certain financial ratios. Our and NuStar Energy’s ability to comply with any restrictions and covenants may be affected by events beyond our control, including prevailing economic, financial and industry conditions. If we or NuStar Energy are unable to comply with these restrictions and covenants, a significant portion of any indebtedness under our credit facility may become immediately due and payable, and our lenders’ commitment to make loans to us under our credit facility may terminate. We might not have, or be able to obtain, sufficient funds to make these accelerated payments.

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Our payment of principal and interest on any future indebtedness will reduce our cash available for distribution on our units. Our credit facility limits our ability to pay distributions to our unitholders during an event of default or if an event of default would result from the distribution.
In addition, this and any future levels of indebtedness may:
•
adversely affect our ability to obtain additional financing for future operations or capital needs;
•
limit our ability to pursue acquisitions and other business opportunities; or
•
make our results of operations more susceptible to adverse economic or operating conditions.
Our revolving credit facility matures in June 2014. It is possible that our lenders may not agree to renew our credit facility or may only agree to renew it at substantially less favorable terms. If our credit facility is renewed on substantially less favorable terms, or if our credit facility is not renewed and we must enter into alternative financing arrangements, various limitations in these financing agreements may reduce our ability to incur additional indebtedness, to engage in some transactions or to capitalize on business opportunities. In the event we are unable to obtain adequate financing and NuStar Energy issues additional units, we may not be able to make contributions to NuStar Energy necessary to maintain our 2% general partner interest.
Our ability to sell our ownership interests in NuStar Energy may be limited by securities laws restrictions and liquidity constraints.
All of the units of NuStar Energy that we own are unregistered, restricted securities, within the meaning of Rule 144 under the Securities Act of 1933. Unless we exercise our registration rights with respect to these units, we are limited to selling into the market in any three-month period an amount of NuStar Energy common units that does not exceed the greater of 1% of the total number of common units outstanding or the average weekly reported trading volume of the common units for the four calendar weeks prior to the sale. We face contractual limitations on our ability to sell our 2% general partner interest and incentive distribution rights, and the market for such interests is illiquid.
The market price of our units could be adversely affected by sales of substantial amounts of our units into public markets, including sales by our existing unitholders.
Sales by us or any of our existing unitholders, including William E. Greehey, Chairman of the Boards of Directors of NuStar GP Holdings and NuStar GP, LLC, of a substantial number of our units in the public markets, or the perception that such sales might occur, could have a material adverse effect on the price of our units or could impair our ability to obtain capital through an offering of equity securities. Mr. Greehey currently owns 18.9% of our outstanding units.
Distributions on our incentive distribution rights in NuStar Energy are more uncertain than distributions on the common units we hold.
Our indirect ownership of the incentive distribution rights in NuStar Energy entitles us to receive our pro rata share of specified percentages of total cash distributions made by NuStar Energy with respect to any particular quarter only in the event that NuStar Energy distributes more than $0.60 per unit for such quarter. As a result, the holders of NuStar Energy’s common units have a priority over the holders of NuStar Energy’s incentive distribution rights to the extent of cash distributions by NuStar Energy up to and including $0.60 per unit for any quarter.
Our incentive distribution rights entitle us to receive increasing percentages, up to 23%, of all cash distributed by NuStar Energy. Because the incentive distribution rights currently participate at the maximum 23% target cash distribution level in all distributions made by NuStar Energy at or above the current distribution level, future growth in distributions we receive from NuStar Energy will not result from an increase in the target cash distribution level associated with the incentive distribution rights.
Furthermore, a decrease in the amount of distributions by NuStar Energy to less than $0.66 per unit per quarter would reduce our percentage of the incremental cash distributions above $0.60 per unit per quarter from 23% to 8%. As a result, any such reduction in quarterly cash distributions from NuStar Energy would have the effect of disproportionately reducing the amount of all distributions that we receive from NuStar Energy based on our ownership interest in the incentive distribution rights in NuStar Energy as compared to cash distributions we receive from NuStar Energy on our 2% general partner interest in NuStar Energy and our NuStar Energy common units.
If NuStar Energy’s general partner is not fully reimbursed or indemnified for obligations and liabilities it incurs in managing the business and affairs of NuStar Energy, it may not be able to satisfy its obligations and its cash flows will be reduced.
The general partner of NuStar Energy and its affiliates may make expenditures on behalf of NuStar Energy for which they will seek reimbursement from NuStar Energy. In addition, under Delaware law, the general partner, in its capacity as the general partner of NuStar Energy, has unlimited liability for the obligations of NuStar Energy, such as its debts and environmental

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liabilities, except for those contractual obligations of NuStar Energy that are expressly made without recourse to the general partner. To the extent Riverwalk Logistics, L.P. incurs obligations on behalf of NuStar Energy, it is entitled to be reimbursed or indemnified by NuStar Energy. If NuStar Energy does not reimburse or indemnify its general partner, Riverwalk Logistics, L.P. may be unable to satisfy these liabilities or obligations, which would reduce its cash flows. In turn, Riverwalk Logistics, L.P. would have less cash to distribute to us.
If distributions on our units are not paid with respect to any fiscal quarter, our unitholders will not be entitled to receive such payments in the future.
Our distributions to our unitholders are not cumulative. Consequently, if distributions on our units are not paid with respect to any fiscal quarter at the current distribution rate, our unitholders will not be entitled to receive such payments in the future.
Our cash distribution policy limits our growth because we do not retain earnings to reinvest in any acquisitions or growth capital expenditures, and NuStar Energy’s distribution policy may limit NuStar Energy’s growth.
Because we distribute all of our available cash, our growth may not be as fast as businesses that reinvest their available cash to expand ongoing operations. In fact, our growth is currently completely dependent upon NuStar Energy’s ability to increase its quarterly distributions because our only cash-generating assets are indirect ownership interests in NuStar Energy. If we issue additional units or incur debt to fund acquisitions and growth capital expenditures, the payment of distributions on those additional units or interest on that debt could increase the risk that we will be unable to maintain or increase our current per unit distribution level.
Consistent with the terms of its partnership agreement, NuStar Energy distributes to its partners its available cash each quarter. In determining the amount of cash available for distribution, NuStar Energy sets aside cash reserves, which it uses to fund its growth capital expenditures. Additionally, it has relied upon external financing sources, including commercial borrowings and other debt and equity issuances, to fund its acquisition capital expenditures. Accordingly, to the extent NuStar Energy does not have sufficient cash reserves or is unable to finance growth externally, its cash distribution policy will significantly impair its ability to grow. In addition, to the extent NuStar Energy issues additional units in connection with any acquisitions or growth capital expenditures, the payment of distributions on those additional units may increase the risk that NuStar Energy will be unable to maintain or increase its per unit distribution level, which in turn may impact the available cash that we have to distribute to our unitholders. The incurrence of additional debt to finance its growth strategy would result in increased interest expense to NuStar Energy, which in turn may impact the available cash that we have to distribute to our unitholders.
If in the future we cease to manage NuStar Energy, we may be deemed to be an investment company under the Investment Company Act of 1940, which would cause us either to have to register as an investment company, obtain exemptive relief from the SEC, or modify our organizational structure or our contract rights.
If we cease to manage NuStar Energy as a consequence of Riverwalk Logistics, L.P.’s removal or withdrawal as NuStar Energy’s general partner or otherwise, and are deemed to be an investment company under the Investment Company Act of 1940 because of our ownership of NuStar Energy partnership interests, we would either have to register as an investment company under the Investment Company Act, obtain exemptive relief from the SEC, or modify our organizational structure or our contract rights to fall outside the definition of an investment company. Registering as an investment company could, among other things, materially limit our ability to engage in transactions with affiliates, including the sale and purchase of certain securities or other property to or from our affiliates, restrict our ability to borrow funds or engage in other transactions involving leverage.
An increase in interest rates may cause the market price of our units to decline.
As interest rates rise, the ability of investors to obtain higher risk-adjusted rates of return by purchasing government-backed debt securities may cause a corresponding decline in demand for riskier investments generally, including yield-based equity investments, such as limited liability company membership interests. Reduced demand for our units resulting from investors seeking other more favorable investment opportunities may cause the trading price of our units to decline.
We may issue an unlimited number of additional securities without the consent of our unitholders, which will dilute each unitholder’s ownership interest in us and may increase the risk that we will not have sufficient available cash to maintain or increase our per unit distribution level.
At any time we may issue an unlimited number of additional securities without the approval of our unitholders on terms and conditions determined by our board of directors. The issuance by us of additional units or other equity securities of equal or senior rank will have the following effects:
•
our unitholders’ proportionate ownership interest in us will decrease;
•
the amount of cash available for distribution on each unit may decrease;
•
the relative voting strength of each previously outstanding unit may be diminished;
•
the ratio of taxable income to distributions may increase; and

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•
the market price of the units may decline.
NuStar Energy may issue additional NuStar Energy units, which may increase the risk that NuStar Energy will not have sufficient available cash to maintain or increase its per unit cash distribution level and that we will have to make a capital contribution to NuStar Energy.
NuStar Energy may issue additional NuStar Energy units, including units that rank senior to the NuStar Energy common units and the incentive distribution rights as to quarterly cash distributions, on the terms and conditions established by its general partner. Additionally, we are required to make additional capital contributions to NuStar Energy upon NuStar Energy’s issuance of additional units in order to maintain our 2% general partner interest in NuStar Energy. Furthermore, to the extent NuStar Energy issues units that are senior to the NuStar Energy common units and the incentive distribution rights, their issuance will render more uncertain the payment of distributions on the common units and the incentive distribution rights. Neither the common units nor the incentive distribution rights are entitled to any arrearages from prior quarters. The payment of distributions on any additional NuStar Energy units may increase the risk that NuStar Energy will be unable to maintain or increase its per unit cash distribution level and the requirement that we make capital contributions to NuStar Energy to maintain our 2% general partner interest may impact the available cash that we have to distribute to our unitholders.
Anti-takeover provisions in our limited liability company agreement may make an acquisition of us complicated and the removal and replacement of our directors and executive officers difficult.
Our limited liability company agreement contains provisions that may delay or prevent a change in control. These provisions may also make it difficult for unitholders to remove and replace our board of directors and executive officers.
Section 203. Our limited liability company agreement effectively adopts Section 203 of the Delaware General Corporation Law (DGCL). Section 203 of the DGCL, as it applies to us, prevents an interested unitholder, defined as a person who owns 15% or more of our outstanding units, from engaging in business combinations with us for three years following the time such person becomes an interested unitholder. Section 203 broadly defines “business combination” to encompass a wide variety of transactions with or caused by an interested unitholder, including mergers, asset sales and other transactions in which the interested unitholder receives a benefit on other than a pro rata basis with other unitholders. This provision of our limited liability company agreement could have an anti-takeover effect with respect to transactions not approved in advance by our board of directors, including discouraging takeover attempts that might result in a premium over the market price for our units.
Limited Voting Rights. Our limited liability company agreement provides that if any person or group other than our affiliates acquires beneficial ownership of 20% or more of any class of units, that person or group loses voting rights on all of its units. This loss of voting rights does not apply to any person or group that acquires all of its units from our affiliates or any transferees of that person or group approved by our board of directors or to any person or group who acquires the units with the prior approval of our board of directors.
Staggered Board. In addition, our limited liability company agreement divides our board of directors into two classes serving staggered two-year terms and permits the board to be divided into three classes serving staggered three-year terms upon the election of a fifth director to our board. This provision, when coupled with the provision of our limited liability company agreement authorizing only the board of directors to fill vacant or newly created directorships or increase the size of the board of directors and the provision providing that directors may only be removed at a meeting of unitholders and cannot be done by written consent, may deter a unitholder from gaining control of our board of directors by removing incumbent directors or increasing the number of directorships and simultaneously filling the vacancies or newly created directorships with its own nominees.
Preferred Unit Purchase Rights. On July 19, 2006, we entered into a rights agreement with Computershare Investor Services, LLC, as amended by the first amendment effective February 28, 2008 and the second amendment effective October 23, 2012, under which our board of directors declared a distribution of one preferred unit purchase right for each of our outstanding units. The rights become exercisable under specified circumstances, including any person or group (an “acquiring person”) becoming the beneficial owner of 15% or more of our outstanding units, subject to specified exceptions. If events specified in the rights agreement occur, each holder of rights, other than an acquiring person, can exercise their rights. When a holder exercises a right, the holder will be entitled to receive units valued at some multiple of the exercise price of the right. In some cases, the holder will receive cash, property or other securities instead of units. We may redeem the rights prior to a person or group becoming an acquiring person.
These provisions may delay or prevent a third party from acquiring us and any such delay or prevention could cause the market price of our units to decline.

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NuStar Energy’s unitholders may not have limited liability if a court finds that limited partner actions constitute control of NuStar Energy’s business and may, therefore, become liable for certain of NuStar Energy’s obligations, which may have an impact on the cash we have available to make distributions.
Under Delaware law, unitholders could be held liable for NuStar Energy’s obligations to the same extent as a general partner if a court determined that actions of a unitholder constituted participation in the “control” of NuStar Energy’s business.
Under Delaware law, the general partner generally has unlimited liability for the obligations of the partnership, such as its debts and environmental liabilities, except for those contractual obligations of the partnership that are expressly made without recourse to the general partner. In addition, Section 17-607 of the Delaware Revised Uniform Limited Partnership Act provides that, under some circumstances, a limited partner may be liable to NuStar Energy for the amount of a distribution for a period of three years from the date of the distribution.

RISKS RELATED TO CONFLICTS OF INTEREST
Although we manage NuStar Energy through our indirect ownership of its general partner, NuStar Energy’s general partner owes fiduciary duties to NuStar Energy and NuStar Energy’s unitholders, which may conflict with our interests.
Conflicts of interest exist and may arise in the future as a result of the relationships between us and our affiliates, including NuStar Energy’s general partner, on the one hand, and NuStar Energy and its limited partners, on the other hand. The directors and officers of NuStar GP, LLC have fiduciary duties to manage NuStar Energy’s business in a manner beneficial to us, its owner. At the same time, NuStar GP, LLC has a fiduciary duty to manage NuStar Energy in a manner beneficial to NuStar Energy and its unitholders. The board of directors of NuStar GP, LLC or its conflicts committee will resolve any such conflict and have broad latitude to consider the interests of all parties to the conflict. Our independent directors will not be the same as the independent directors who serve on the conflicts committee of NuStar GP, LLC. The resolution of these conflicts may not always be in our best interest or that of our unitholders.
For example, conflicts of interest may arise in the following situations:
•
the allocation of shared overhead expenses to NuStar Energy and us;
•
the determination and timing of the amount of cash to be distributed to NuStar Energy’s partners and the amount of cash to be reserved for the future conduct of NuStar Energy’s business;
•
any proposal by NuStar GP, LLC to eliminate, reduce or modify the incentive distribution rights;
•
the decision whether NuStar Energy should make acquisitions, and on what terms;
•
the determination of whether NuStar Energy should use cash on hand, borrow or issue equity to raise cash to finance acquisitions or expansion capital projects, repay indebtedness, meet working capital needs, pay distributions to NuStar Energy’s partners or otherwise; and
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any decision we make in the future to engage in business activities independent of, or in competition with, NuStar Energy.
Our limited liability agreement limits and modifies our directors’ fiduciary duties and the fiduciary duties of our officers and directors may conflict with those of the general partner of NuStar Energy’s general partner’s officers and directors.
Our limited liability company agreement contains provisions that modify and limit our directors’ fiduciary duties to our unitholders. For example, our limited liability company agreement provides that:
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our directors will not have any liability to us or our unitholders for decisions made in good faith, meaning they believed the decision was in our best interests; and
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our board of directors will not be liable for monetary damages to us or our unitholders for any acts or omissions unless there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining that the board of directors acted in bad faith or engaged in fraud or willful misconduct or, in the case of a criminal matter, acted with knowledge that such conduct was unlawful.
Our directors and officers have fiduciary duties to manage our business in a manner beneficial to us and our unitholders. Simultaneously, two of our directors and all of our officers are also directors and officers of NuStar GP, LLC, the general partner of NuStar Energy’s general partner, and have fiduciary duties to manage the business of NuStar Energy in a manner beneficial to NuStar Energy and its unitholders. For instance, William E. Greehey is our Chairman of the Board as well as the Chairman of the Board of NuStar GP, LLC. Consequently, these directors and officers may encounter situations in which their fiduciary obligations to NuStar Energy, on the one hand, and us, on the other hand, are in conflict. The resolution of these conflicts may not always be in our best interest or that of our unitholders. For example, we share certain executive officers and administrative personnel with NuStar GP, LLC to operate both our business and NuStar Energy’s business. Our executive officers, who are also the executive officers of NuStar GP, LLC, will allocate, in their reasonable and sole discretion, their time

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spent on our behalf and on behalf of NuStar Energy. These allocations may not be the result of arms-length negotiations between NuStar GP, LLC and us, and therefore the allocations may not exactly match the actual time and overhead spent.

RISKS RELATED TO NUSTAR ENERGY’S BUSINESS
Reduced demand for refined products could affect NuStar Energy’s results of operations and ability to make distributions to its partners at current levels, including us.
Any sustained decrease in demand for refined products in the markets served by NuStar Energy’s pipelines, terminals or fuels marketing operations could result in a significant reduction in throughputs in its pipelines, storage in its terminals or earnings in its fuels marketing operations, which would reduce NuStar Energy’s cash flow and its ability to make distributions at current levels to its partners, including us. Factors that could lead to a decrease in market demand include:

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a recession or other adverse economic condition that results in lower spending by consumers on gasoline, diesel, and travel;
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higher fuel taxes or other governmental or regulatory actions that increase, directly or indirectly, the cost of gasoline;
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an increase in automotive engine fuel economy, whether as a result of a shift by consumers to more fuel-efficient vehicles or technological advances by manufacturers;
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an increase in the market price of crude oil that leads to higher refined product prices, which may reduce demand for refined products and drive demand for alternative products. Market prices for crude oil and refined products, including fuel oil, are subject to wide fluctuation in response to changes in global and regional supply that are beyond NuStar Energy’s control, and increases in the price of crude oil may result in a lower demand for refined products that NuStar Energy markets, including fuel oil;
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a decrease in corn acres planted, which may reduce demand for anhydrous ammonia; and
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the increased use of alternative fuel sources, such as battery-powered engines.
A decrease in lease renewals or throughputs in NuStar Energy’s assets would cause NuStar Energy’s revenues to decline and could adversely affect NuStar Energy’s ability to make cash distributions to its unitholders, including us.
A decrease in lease renewals or throughputs in NuStar Energy’s assets would cause NuStar Energy’s revenues to decline and could adversely affect NuStar Energy’s ability to make cash distributions at current levels to its unitholders, including us. Such a decrease could result from a customer’s failure to renew a lease, a temporary or permanent decline in the amount of crude oil or refined products stored at and transported from the refineries NuStar Energy serves or construction by NuStar Energy’s competitors of new transportation or storage assets in the markets it serves. Factors that could result in such a decline include:  
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a material decrease in the supply of crude oil;
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a material decrease in demand for refined products in the markets served by NuStar Energy’s pipelines and terminals;
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scheduled refinery turnarounds or unscheduled refinery maintenance;
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operational problems or catastrophic events at a refinery;
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environmental proceedings or other litigation that compel the cessation of all or a portion of the operations at a refinery;
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a decision by NuStar Energy’s current customers to redirect refined products transported in NuStar Energy’s pipelines to markets not served by NuStar Energy’s pipelines or to transport crude oil or refined products by means other than NuStar Energy’s pipelines;
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increasingly stringent environmental regulations; or
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a decision by NuStar Energy’s current customers to sell one or more of the refineries NuStar Energy serves to a purchaser that elects not to use NuStar Energy’s pipelines and terminals.
If NuStar Energy is unable to complete capital projects at their expected costs and/or in a timely manner, or if the market conditions assumed in its project economics deteriorate, NuStar Energy’s financial condition, results of operations, or cash flows could be affected materially and adversely.
Delays or cost increases related to capital spending programs involving construction of new facilities (or improvements and repairs to our existing facilities) could adversely affect NuStar Energy’s ability to achieve forecasted operating results. Although NuStar Energy evaluates and monitors each capital spending project and tries to anticipate difficulties that may arise, such delays or cost increases may arise as a result of factors that are beyond its control, including:
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denial or delay in issuing requisite regulatory approvals and/or permits;
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unplanned increases in the cost of construction materials or labor;
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disruptions in transportation of modular components and/or construction materials;

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severe adverse weather conditions, natural disasters or other events (such as equipment malfunctions, explosions, fires or spills) affecting NuStar Energy’s facilities, or those of vendors and suppliers;
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shortages of sufficiently skilled labor, or labor disagreements resulting in unplanned work stoppages;
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market-related increases in a project’s debt or equity financing costs; or
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non-performance by, or disputes with, vendors, suppliers, contractors or sub-contractors involved with a project.
NuStar Energy’s forecasted operating results are also based upon its projections of future market fundamentals that are not within its control, including changes in general economic conditions, availability to its customers of attractively priced alternative solutions for storage, transportation or supplies of crude oil and refined products and overall customer demand.
NuStar Energy’s operations are subject to operational hazards and unforeseen interruptions, and NuStar Energy does not insure against all potential losses. Therefore, NuStar Energy could be seriously harmed by unexpected liabilities.
NuStar Energy’s operations are subject to operational hazards and unforeseen interruptions such as natural disasters, adverse weather, accidents, fires, explosions, hazardous materials releases, mechanical failures and other events beyond its control. These events might result in a loss of equipment or life, injury or extensive property damage, as well as an interruption in NuStar Energy’s operations. In the event any of NuStar Energy’s facilities are forced to shut down for a significant period of time, it may have a material adverse effect on NuStar Energy’s earnings, its other results of operations and its financial condition as a whole.
NuStar Energy may not be able to maintain or obtain insurance of the type and amount it desires at reasonable rates. As a result of market conditions, premiums and deductibles for certain of NuStar Energy’s insurance policies have increased substantially and could escalate further. Certain insurance coverage could become unavailable or available only for reduced amounts of coverage and at higher rates. For example, NuStar Energy’s insurance carriers require broad exclusions for losses due to terrorist acts. If NuStar Energy were to incur a significant liability for which it is not fully insured, such a liability could have a material adverse effect on NuStar Energy’s financial position and its ability to make distributions at current levels to its unitholders, including us, and to meet its debt service requirements.
The price volatility of crude oil and refined products can reduce NuStar Energy’s revenues and ability to make distributions to its unitholders, including us.
Revenues associated with NuStar Energy’s fuels marketing operations result primarily from blending and trading operations and fuel oil sales. NuStar Energy also maintains product inventory related to these activities. The price and market value of crude oil and refined products is volatile. NuStar Energy’s revenues will be adversely affected by this volatility during periods of decreasing prices because of the reduction in the value and resale price of NuStar Energy’s inventory. Conversely, during periods of increasing petroleum product prices, its revenues may be adversely affected because of the increased costs associated with obtaining its inventory. Future price volatility could have an adverse impact on NuStar Energy’s results of operations, cash flow and ability to make distributions to its unitholders, including us.
NuStar Energy’s purchase and sale of crude oil and refined products may expose NuStar Energy to trading losses and hedging losses, and non-compliance with NuStar Energy’s related risk management policies could result in significant financial losses.
In order to manage NuStar Energy’s exposure to commodity price fluctuations associated with its fuels marketing segment, NuStar Energy may engage in crude oil and refined product hedges. As a result, NuStar Energy’s marketing and trading of crude oil and refined products may expose NuStar Energy to price volatility risk for the purchase and sale of crude oil and petroleum products, including distillates and fuel oil. NuStar Energy attempts to mitigate this volatility risk through hedging, but it is still exposed to basis risk. NuStar Energy may also be exposed to inventory and financial liquidity risk due to the inability to trade certain products or rising costs of carrying some inventories. Further, NuStar Energy’s marketing and trading activities, including any hedging activities, may cause volatility in NuStar Energy’s earnings. In addition, NuStar Energy will be exposed to credit risk in the event of non-performance by counterparties.
NuStar Energy’s risk management policies may not eliminate all price risk since open trading positions will expose it to price volatility. Further, there is a risk that NuStar Energy’s risk management policies will not be complied with. Although NuStar Energy has designed procedures to anticipate and detect non-compliance, there are no assurances these steps will detect and prevent all violations of NuStar Energy’s trading policies and procedures, particularly if deception and other intentional misconduct are involved.
As a result of the risks described above, the activities associated with NuStar Energy’s marketing and trading business may expose NuStar Energy to volatility in earnings and financial losses, which may adversely affect its financial condition and ability to distribute cash to its unitholders, including us.

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Hedging transactions may limit NuStar Energy’s potential gains or result in significant financial losses.
While intended to reduce the effects of volatile crude oil and refined product prices, hedging transactions, depending on the hedging instrument used, may limit NuStar Energy’s potential gains if crude oil and refined product prices were to rise substantially over the price established by the hedge. In addition, such transactions may expose NuStar Energy to the risk of financial loss in certain circumstances, including instances in which:
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the counterparties to NuStar Energy’s futures contracts fail to perform under the contracts; or
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there is a change in the expected differential between the underlying price in the hedging agreement and the actual prices received.
The accounting standards regarding hedge accounting are complex, and even when NuStar Energy engages in hedging transactions that are effective economically, these transactions may not be considered effective for accounting purposes. Accordingly, NuStar Energy’s financial statements will reflect increased volatility due to these hedges, even when there is no underlying economic impact at that point. In addition, it is not possible for NuStar Energy to engage in a hedging transaction that completely mitigates its exposure to commodity prices. NuStar Energy’s financial statements may reflect a gain or loss arising from an exposure to commodity prices for which NuStar Energy is unable to enter into an effective hedge.
NuStar Energy is exposed to counterparty credit risk. Nonpayment and nonperformance by NuStar Energy’s customers, vendors or derivative counterparties could reduce its revenues, increase its expenses or otherwise have a negative impact on its operating results, cash flows and ability to make distributions to its unitholders, including us.
NuStar Energy is subject to risks of loss resulting from nonpayment or nonperformance by its customers to whom it extends credit. In addition, nonperformance by vendors who have committed to provide NuStar Energy with products or services could result in higher costs or interfere with its ability to successfully conduct its business. Furthermore, nonpayment by the counterparties to any of NuStar Energy’s outstanding commodity derivatives could expose NuStar Energy to additional commodity price risk. Weak economic conditions and widespread financial stress could reduce the liquidity of its customers, vendors or counterparties, making it more difficult for them to meet their obligations to NuStar Energy. Any substantial increase in the nonpayment and nonperformance by NuStar Energy’s customers, vendors or counterparties could have a material adverse effect on its results of operations, cash flows and ability to make distributions at current levels to its unitholders, including us.
NuStar Energy ’ s future financial and operating flexibility may be adversely affected by its significant leverage, downgrades of its credit ratings, restrictions in its debt agreements or disruptions in the financial markets.
As of December 31, 2013, NuStar Energy’s consolidated debt was $2.7 billion. Among other things, this significant leverage may be viewed negatively by credit rating agencies, which could result in increased costs for NuStar Energy to access the capital markets. The ratings of NuStar Logistics, L.P. (NuStar Logistics) were downgraded to Ba1 (negative outlook) by Moody’s Investor Service Inc. (Moody’s) in January 2013, BB+ (stable outlook) by Standard & Poor’s Ratings Services (S&P) in July 2012 and BB (stable outlook) by Fitch, Inc. in November 2012. As a result of the S&P’s and Moody’s downgrades, interest rates on borrowings under NuStar Energy’s credit facilities and its 7.65% senior notes due 2018 increased. NuStar Energy may also be required to post cash collateral under certain of its hedging arrangements, which it expects to fund with borrowings under its five-year revolving credit agreement (the 2012 Revolving Credit Agreement). Any future downgrade could result in additional increases to the interest rates on borrowings under NuStar Energy’s credit facilities and its 7.65% senior notes due 2018, significantly increasing NuStar Energy’s capital costs and adversely affecting its ability to raise capital in the future.
NuStar Energy’s 2012 Revolving Credit Agreement contains restrictive covenants, including a requirement that, as of the end of each rolling period, which consists of any period of four consecutive fiscal quarters, NuStar Energy maintains a consolidated debt coverage ratio (consolidated indebtedness to consolidated EBITDA, as defined in the 2012 Revolving Credit Agreement) not to exceed 5.00-to-1.00. Failure to comply with any of the restrictive covenants in the 2012 Revolving Credit Agreement will result in a default under the terms of this credit agreement and could result in acceleration of this and possibly other indebtedness.
Debt service obligations, restrictive covenants in NuStar Energy’s credit facilities and the indentures governing its outstanding senior and subordinated notes and maturities resulting from this leverage may adversely affect NuStar Energy’s ability to finance future operations, pursue acquisitions and fund other capital needs and its ability to pay cash distributions at current levels to its unitholders, including us. In addition, this leverage may make NuStar Energy’s results of operations more susceptible to adverse economic or operating conditions. For example, during an event of default under any of NuStar Energy’s debt agreements, NuStar Energy would be prohibited from making cash distributions to its unitholders, including us. If NuStar Energy’s lenders file for bankruptcy or experience severe financial hardship, they may not honor their pro rata share of NuStar Energy’s borrowing requests under the 2012 Revolving Credit Agreement, which may significantly reduce its available borrowing capacity and, as a result, materially adversely affect NuStar Energy’s financial condition and ability to pay

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distributions at current levels to its unitholders, including us. Additionally, NuStar Energy may not be able to access the capital markets in the future at economically attractive terms, which may adversely affect its future financial and operating flexibility and its ability to pay cash distributions at current levels.

NuStar Energy may become liable as a result of its financing arrangements and guarantees of Asphalt JV.
In connection with the sale of NuStar Energy’s 50% ownership interest in Asphalt JV, NuStar Logistics agreed to convert the existing revolving credit facility with Asphalt JV into a $190 million term loan (the NuStar Facility), which such amount will be reduced to $175 million by December 31, 2014 and then $150 million by September 30, 2015. The NuStar Facility must be repaid in full no later than September 2019; earlier repayment is possible, depending on the amount of excess cash flows (if any) generated by Asphalt JV over the next several years. NuStar Energy also agreed to continue to provide credit support to Asphalt JV in the form of guarantees or letters of credit of up to $150 million (the Credit Support) until February 2016, at which point the amount of Credit Support will begin to decline until the obligation is terminated no later than September 2019.

In addition to the NuStar Facility (which included the Credit Support), Asphalt JV also entered into a third-party asset-based revolving credit facility (ABL Facility). In the event that Asphalt JV defaults on any of its obligations under the NuStar Facility, NuStar Energy would have available only those measures available to an unsecured creditor with the rights and limitations provided in the NuStar Facility, and, to the extent provided in the agreements, the ABL Facility lenders would be senior to those rights. In the event of a default on any of the obligations underlying the Credit Support, NuStar Energy would be responsible for Asphalt JV’s liabilities for the default and have only the rights of repayment associated with that instrument. In either scenario, the liability imposed on NuStar Energy may have an adverse impact on its financial condition, results of operations and ability to pay distributions at current levels to its unitholders, including us.
Increases in interest rates could adversely affect NuStar Energy’s business and the trading price of NuStar Energy’s units.
NuStar Energy has significant exposure to increases in interest rates. As of December 31, 2013 , NuStar Energy had approximately $2.7 billion of consolidated debt, of which $1.8 billion was at fixed interest rates and $0.9 billion was at variable interest rates. In addition, prior ratings downgrades on NuStar Energy’s existing indebtedness caused interest rates under its 2012 Revolving Credit Agreement and its senior notes due 2018 to increase effective January 2013, and future downgrades may cause such interest rates to increase further. NuStar Energy’s results of operations, cash flows and financial position could be materially adversely affected by significant increases in interest rates above current levels. Further, the trading price of NuStar Energy’s common units is sensitive to changes in interest rates and any rise in interest rates could adversely impact such trading price.
NuStar Energy could be subject to damages based on claims brought against it by its customers or lose customers as a result of the failure of its products to meet certain quality specifications.
Certain of NuStar Energy’s products are produced to precise customer specifications. If a product fails to perform in a manner consistent with the detailed quality specifications required by the customer, the customer could seek replacement of the product or damages for costs incurred as a result of the product failing to perform as guaranteed. A successful claim or series of claims against NuStar Energy could result in a loss of one or more customers.
Potential future acquisitions and expansions, if any, may increase substantially the level of NuStar Energy’s indebtedness and contingent liabilities, and NuStar Energy may be unable to integrate them effectively into its existing operations.
From time to time, NuStar Energy evaluates and acquires assets and businesses that it believes complement or diversify its existing assets and businesses. Acquisitions may require substantial capital or the incurrence of substantial indebtedness. If NuStar Energy consummates any future material acquisitions, its capitalization and results of operations may change significantly, and you will not have the opportunity to evaluate the economic, financial and other relevant information that NuStar Energy will consider in connection with any future acquisitions.
Acquisitions and business expansions involve numerous risks, including difficulties in the assimilation of the assets and operations of the acquired businesses, inefficiencies and difficulties that arise because of unfamiliarity with new assets and the businesses associated with them and new geographic areas. Further, unexpected costs and challenges may arise whenever businesses with different operations or management are combined. Successful business combinations will require NuStar Energy’s management and other personnel to devote significant amounts of time to integrating the acquired businesses with NuStar Energy’s existing operations. These efforts may temporarily distract their attention from day-to-day business, the development or acquisition of new properties and other business opportunities. If NuStar Energy does not successfully integrate any past or future acquisitions, or if there is any significant delay in achieving such integration, NuStar Energy’s business and financial condition could be adversely affected.
Moreover, part of NuStar Energy’s business strategy includes acquiring additional assets that complement NuStar Energy’s existing asset base and distribution capabilities or provide entry into new markets. NuStar Energy may not be able to identify suitable acquisitions, or it may not be able to purchase or finance any acquisitions on terms that it finds acceptable.

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Additionally, NuStar Energy competes against other companies for acquisitions, and NuStar Energy may not be successful in the acquisition of any assets or businesses appropriate for its growth strategy.
NuStar Energy may have liabilities from its assets that pre-exist NuStar Energy’s acquisition of those assets, but that may not be covered by indemnification rights NuStar Energy may have against the sellers of the assets.
In some cases, NuStar Energy may have indemnified the previous owners and operators of acquired assets. Some of NuStar Energy’s assets have been used for many years to transport and store crude oil and refined products. Releases may have occurred in the past that could require costly future remediation. If a significant release or event occurred in the past, the liability for which was not retained by the seller, or for which indemnification from the seller is not available, it could adversely affect NuStar Energy’s financial position and results of operations.
Climate change legislation and regulatory initiatives may decrease demand for the products NuStar Energy stores, transports and sells and increase NuStar Energy’s operating costs.
Scientific studies have suggested that emissions of certain gases, commonly referred to as “greenhouse gases” and including carbon dioxide and methane, may be contributing to warming of the Earth’s atmosphere. In response to such studies, the U.S. Congress has considered legislation to reduce emissions of greenhouse gases. In addition, at least one-third of the states, either individually or through multi-state regional initiatives, have already taken legal measures to reduce emissions of greenhouse gases, primarily through the planned development of greenhouse gas emission inventories and/or greenhouse gas cap and trade programs. As an alternative to reducing emission of greenhouse gases under cap and trade programs, Congress may consider the implementation of a program to tax the emission of carbon dioxide and other greenhouse gases. In December 2009, the Environmental Protection Agency (the EPA) issued an endangerment finding that greenhouse gases may reasonably be anticipated to endanger public health and welfare and are a pollutant to be regulated under the Clean Air Act. Passage of climate change legislation or other regulatory initiatives by Congress or various states of the United States or the adoption of regulations by the EPA or analogous state agencies that regulate or restrict emissions of greenhouse gases in areas in which NuStar Energy conducts business, could result in changes to the demand for the products NuStar Energy stores, transports and sells, and could increase the costs of its operations, including costs to operate and maintain its facilities, install new emission controls on its facilities, acquire allowances to authorize its greenhouse gas emissions, pay any taxes related to its greenhouse gas emissions and administer and manage a greenhouse gas emissions program. NuStar Energy may be unable to recover any such lost revenues or increased costs in the rates it charges its customers, and any such recovery may depend on events beyond NuStar Energy’s control, including the outcome of future rate proceedings before the Federal Energy Regulatory Commission (the FERC) and the provisions of any final legislation or regulations. Reductions in NuStar Energy’s revenues or increases in its expenses as a result of climate control initiatives could have adverse effects on its business, financial position, results of operations and prospects.

NuStar Energy operates a global business that exposes it to additional risks.
NuStar Energy operates in seven foreign countries and a significant portion of its revenues comes from its business in these countries. Its operations outside the United States may be affected by changes in trade protection laws, policies and measures, and other regulatory requirements affecting trade and investment, including the Foreign Corrupt Practices Act, the United Kingdom Bribery Act and other foreign laws prohibiting corrupt payments. NuStar Energy has assets in certain emerging markets, and the developing nature of these markets presents a number of risks. Deterioration of social, political, labor or economic conditions in a specific country or region and difficulties in staffing and managing foreign operations may also adversely affect its operations or financial results.
NuStar Energy’s operations are subject to federal, state and local laws and regulations, in the U.S. and in the foreign countries in which it operates, relating to environmental protection and operational safety that could require NuStar Energy to make substantial expenditures.
NuStar Energy’s operations are subject to increasingly stringent environmental and safety laws and regulations. Transporting and storing petroleum products produces a risk that these products may be released into the environment, potentially causing substantial expenditures for a response action, significant government penalties, liability to government agencies for damages to natural resources, personal injury or property damages to private parties and significant business interruption. NuStar Energy owns or leases a number of properties that have been used to store or distribute refined products for many years. Many of these properties were operated by third parties whose handling, disposal or release of hydrocarbons and other wastes was not under NuStar Energy’s control.
If NuStar Energy were to incur a significant liability pursuant to environmental or safety laws or regulations, such a liability could have a material adverse effect on its financial position and its ability to make distributions at current levels to its unitholders, including us, and its ability to meet its debt service requirements.

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NuStar Energy’s interstate common carrier pipelines are subject to regulation by the FERC.
The FERC regulates the tariff rates for interstate oil movements on NuStar Energy’s common carrier pipelines. Shippers may protest NuStar Energy’s pipeline tariff filings, and the FERC may investigate new or changed tariff rates. Further, other than for rates set under market-based rate authority, the FERC may order refunds of amounts collected under newly filed rates that are determined by the FERC to exceed what the FERC determines to be a just and reasonable level. In addition, shippers may challenge tariff rates even after the rates have been deemed final and effective. The FERC may also investigate such rates absent shipper complaint. If existing rates are challenged and are determined by the FERC to be in excess of a just and reasonable level, a shipper may obtain reparations for damages sustained during the two years prior to the date the shipper filed a complaint.
NuStar Energy uses various FERC-authorized rate change methodologies for its interstate pipelines, including indexing, cost-of-service rates, market-based rates and settlement rates. Typically, NuStar Energy adjusts its rates annually in accordance with FERC indexing methodology, which currently allows a pipeline to change their rates within prescribed ceiling levels that are tied to an inflation index. The current index (which runs through June 30, 2014) is measured by the year-over-year change in the Bureau of Labor’s producer price index for finished goods, plus 2.65%. Shippers may protest rate increases made within the ceiling levels, but such protests must show that the portion of the rate increase resulting from application of the index is substantially in excess of the pipeline’s increase in costs from the previous year. However, if the index results in a negative adjustment, NuStar Energy will typically be required to reduce any rates that exceed the new maximum allowable rate. In addition, changes in the index might not be large enough to fully reflect actual increases in NuStar Energy’s costs. If the FERC’s rate-making methodologies change, any such change or new methodologies could result in rates that generate lower revenues and cash flow and could adversely affect NuStar Energy’s ability to make distributions at current levels to its unitholders, including us, and to meet its debt service requirements. Additionally, competition constrains NuStar Energy’s rates in various markets. As a result, NuStar Energy may from time to time be forced to reduce some of its rates to remain competitive.
Changes to FERC rate-making principles could have an adverse impact on NuStar Energy’s ability to recover the full cost of operating its pipeline facilities and its ability to make distributions at current levels to its unitholders, including us.
In May 2005, the FERC issued a statement of general policy stating it will permit pipelines to include in cost of service a tax allowance to reflect actual or potential tax liability on their public utility income attributable to all partnership or limited liability company interests, if the ultimate owner of the interest has an actual or potential income tax liability on such income. Whether a pipeline’s owners have such actual or potential income tax liability will be reviewed by the FERC on a case-by-case basis. Although this policy is generally favorable for pipelines that are organized as pass-through entities, it still entails rate risk due to the case-by-case review requirement. This tax allowance policy and the FERC’s application of that policy were appealed to the United States Court of Appeals for the District of Columbia Circuit (D.C. Court), and on May 29, 2007, the D.C. Court issued an opinion upholding the FERC’s tax allowance policy.
In December 2006, the FERC issued an order addressing income tax allowance in rates, in which it reaffirmed prior statements regarding its income tax allowance policy, but raised a new issue regarding the implications of the FERC’s policy statement for publicly traded partnerships. The FERC noted that the tax deferral features of a publicly traded partnership may cause some investors to receive, for some indeterminate duration, cash distributions in excess of their taxable income, creating an opportunity for those investors to earn additional return, funded by ratepayers. Responding to this concern, the FERC adjusted the equity rate of return of the pipeline at issue downward based on the percentage by which the publicly traded partnership’s cash flow exceeded taxable income. Requests for rehearing of the order are currently pending before the FERC.
Because the extent to which an interstate oil pipeline is entitled to an income tax allowance is subject to a case-by-case review at the FERC, the level of income tax allowance to which NuStar Energy will ultimately be entitled is not certain. Although the FERC’s current income tax allowance policy is generally favorable for pipelines that are organized as pass-through entities, it still entails rate risks due to the case-by-case review requirement. How the FERC’s policy statement is applied in practice to pipelines owned by publicly traded partnerships could impose limits on NuStar Energy’s ability to include a full income tax allowance in cost of service.
The FERC instituted a rulemaking proceeding in July 2007 to determine whether any changes should be made to the FERC’s methodology for determining pipeline equity returns to be included in cost-of-service based rates. The FERC determined that it would retain its current methodology for determining return on equity but that, when stock prices and cash distributions of tax pass-through entities are used in the return on equity calculations, the growth forecasts for those entities should be reduced by 50%. Despite the FERC’s determination, some complainants in rate proceedings have advocated that the FERC disallow the full use of cash distributions in the return on equity calculation. If the FERC were to disallow the use of full cash distributions in the return on equity calculation, such a result might adversely affect NuStar Energy’s ability to achieve a reasonable return.

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The rates that NuStar Energy may charge on its interstate ammonia pipeline are subject to regulation by the Surface Transportation Board (STB).
The STB, a part of the United States Department of Transportation, has jurisdiction over interstate pipeline transportation and rate regulations of anhydrous ammonia. Transportation rates must be reasonable, and a pipeline carrier may not unreasonably discriminate among its shippers. If the STB finds that a carrier’s rates violate these statutory commands, it may prescribe a reasonable rate. In determining a reasonable rate, the STB will consider, among other factors, the effect of the rate on the volumes transported by that carrier, the carrier’s revenue needs and the availability of other economic transportation alternatives. The STB does not provide rate relief unless shippers lack effective competitive alternatives. If the STB determines that effective competitive alternatives are not available and NuStar Energy holds market power, then it may be required to show that its rates are reasonable.
Increases in natural gas and power prices could adversely affect NuStar Energy’s operating expenses and its ability to make distributions at current levels to its unitholders, including us.
Power costs constitute a significant portion of NuStar Energy’s operating expenses. For the year ended December 31, 2013 , NuStar Energy’s power costs equaled approximately $40.1 million, or 8.8% of NuStar Energy’s operating expenses for the year. NuStar Energy uses mainly electric power at its pipeline pump stations, terminals and refineries, and such electric power is furnished by various utility companies that primarily use natural gas to generate electricity. Accordingly, NuStar Energy’s power costs typically fluctuate with natural gas prices. Increases in natural gas prices may cause NuStar Energy’s power costs to increase further. If natural gas prices increase, NuStar Energy’s cash flows may be adversely affected, which could adversely affect NuStar Energy’s ability to make distributions at current levels to its unitholders, including us.
Terrorist attacks and the threat of terrorist attacks have resulted in increased costs to NuStar Energy’s business. Continued hostilities in the Middle East or other sustained military campaigns may adversely impact NuStar Energy’s results of operations.
Increased security measures taken by NuStar Energy as a precaution against possible terrorist attacks have resulted in increased costs to its business. Uncertainty surrounding continued hostilities in the Middle East or other sustained military campaigns may affect NuStar Energy’s operations in unpredictable ways, including disruptions of crude oil supplies and markets for refined products, and the possibility that infrastructure facilities could be direct targets of, or indirect casualties of, an act of terror or instability in the financial markets that could restrict NuStar Energy’s ability to raise capital.

TAX RISKS TO OUR UNITHOLDERS
If we or NuStar Energy were treated as a corporation for federal or state income tax purposes, then our cash available for distribution to our unitholders would be substantially reduced.
The anticipated after-tax benefit of an investment in our units depends largely on our being treated as a partnership for federal income tax purposes. We have not requested, and do not plan to request, a ruling from the Internal Revenue Service (the IRS) on this matter.
The value of our investment in NuStar Energy depends largely on NuStar Energy being treated as a partnership for federal income tax purposes.
If we were treated as a corporation for federal income tax purposes, we would pay federal income tax on our taxable income at the corporate tax rate, which is currently a maximum of 35%. Distributions to unitholders would generally be taxed again as corporate distributions, and no income, gains, losses, deductions or credits would flow through to unitholders. Thus, treatment of us as a corporation would result in a material reduction in our anticipated cash flow and after-tax return to unitholders, likely causing a substantial reduction in the value of our units.
If NuStar Energy were treated as a corporation for federal income tax purposes, it would pay federal income tax on its taxable income at the corporate tax rate. Distributions to us would generally be taxed again as corporate distributions, and no income, gains, losses, deductions or credits would flow through to us. As a result, there would be a material reduction in our anticipated cash flow, likely causing a substantial reduction in the value of our units.
Current law may change, causing us or NuStar Energy to be treated as a corporation for federal income tax purposes or otherwise subjecting us or NuStar Energy to entity level taxation. In addition, because of widespread state budget deficits, and other reasons, several states are evaluating ways to subject partnerships to entity level taxation through the imposition of state income, franchise or other forms of taxation. Partnerships and limited liability companies, unless specifically exempted, are also subject to a state level tax imposed on revenues. Imposition of an entity-level tax on us or NuStar Energy by states in which we operate will reduce the cash available for distribution to our unitholders.

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A successful IRS contest of the federal income tax positions we or NuStar Energy take may adversely impact the market for our or NuStar Energy’s units, and the costs of any contest will reduce cash available for distribution to our unitholders.
The IRS may adopt positions that differ from the positions we or NuStar Energy take, even positions taken with the advice of counsel. It may be necessary to resort to administrative or court proceedings to sustain some or all of the positions we or NuStar Energy take. A court may not agree with all of the positions we or NuStar Energy take. Any contest with the IRS may materially and adversely impact the market for our or NuStar Energy’s units and the prices at which they trade. In addition, the costs of any contest between NuStar Energy and the IRS will result in a reduction in cash available for distribution to NuStar Energy unitholders and thus will be borne indirectly by us, as a unitholder and as the owner of the general partner of NuStar Energy, and by the other unitholders of NuStar Energy. Moreover, the costs of any contest between us and the IRS will result in a reduction in cash available for distribution to our unitholders and thus will be borne indirectly by our unitholders.
Even if unitholders do not receive any cash distributions from us, unitholders will be required to pay taxes on their respective share of our taxable income.
Unitholders will be required to pay federal income taxes and, in some cases, state and local income taxes on their respective share of our taxable income, whether or not the unitholders receive cash distributions from us. Unitholders may not receive cash distributions from us equal to their respective share of our taxable income or even equal to the actual tax liability that results from their respective share of our taxable income.
The sale or exchange of 50% or more of our or NuStar Energy’s capital and profits interests, within a twelve-month period, will result in the termination of our or NuStar Energy’s partnership for federal income tax purposes.
A termination would, among other things, result in the closing of our taxable year for all unitholders and would result in a deferral of depreciation and cost recovery deductions allowable in computing our taxable income. If our partnership were terminated for federal income tax purposes, each of our unitholders would be allocated an increased amount of federal taxable income for the year in which the partnership is considered terminated and the subsequent years as a percentage of the cash distributed to the unitholder with respect to that period.
Tax gain or loss on the disposition of our units could be different than expected.
If a unitholder sells units, the selling unitholder will recognize a gain or loss equal to the difference between the amount realized and the unitholder’s tax basis in those units. Prior distributions to the selling unitholder in excess of the total net taxable income the unitholder was allocated for a unit, which decreased the unitholder’s tax basis in that unit, will, in effect, become taxable income to the selling unitholder if the unit is sold at a price greater than the unitholder’s tax basis in that unit, even if the price the unitholder receives is less than the units’ original cost. A substantial portion of the amount realized, whether or not representing gain, may be ordinary income to the selling unitholder.
Tax-exempt entities and foreign persons face unique tax issues from owning units that may result in adverse tax consequences to them.
Investment in units by tax-exempt entities, such as individual retirement accounts (known as IRAs) and non-United States persons raises issues unique to them. For example, virtually all of our income allocated to organizations exempt from federal income tax, including individual retirement accounts and other retirement plans, will be unrelated business taxable income and will be taxable to them. Distributions to non-United States persons will be reduced by withholding taxes at the highest applicable effective tax rate, and non-United States persons will be required to file United States federal income tax returns and pay tax on their share of our taxable income.
We will treat each purchaser of our units as having the same tax benefits without regard to the units purchased. The IRS may challenge this treatment, which could adversely affect the value of our units.
Because we cannot match transferors and transferees of units, we will adopt depreciation and amortization positions that may not conform with all aspects of existing United States Department of Treasury regulations. A successful IRS challenge to those positions could adversely affect the amount of tax benefits available to you. It also could affect the timing of these tax benefits or the amount of gain from a unitholder’s sale of units and could have a negative impact on the value of our units or result in audit adjustments to the unitholder’s tax returns.
Unitholders will likely be subject to state and local taxes and return filing requirements as a result of investing in our units.
In addition to federal income taxes, unitholders will likely be subject to other taxes, such as state and local income taxes, unincorporated business taxes and estate, inheritance or intangible taxes that are imposed by the various jurisdictions in which we or NuStar Energy do business or own property. Unitholders will likely be required to file state and local income tax returns and pay state and local income taxes in some or all of these various jurisdictions. Further, unitholders may be subject to penalties for failure to comply with those requirements. We or NuStar Energy may own property or conduct business in other states or foreign countries in the future. It is each unitholder’s responsibility to file all federal, state and local tax returns.

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NuStar Energy has adopted certain valuation methodologies that may result in a shift of income, gain, loss and deduction between us and the public unitholders of NuStar Energy. The IRS may challenge this treatment, which could adversely affect the value of NuStar Energy’s common units and our common units.
When we or NuStar Energy issue additional units or engage in certain other transactions, NuStar Energy determines the fair market value of its assets and allocates any unrealized gains or losses attributable to such assets to the capital accounts of NuStar Energy’s public unitholders and us. NuStar Energy’s methodology may be viewed as understating the value of NuStar Energy’s assets. In that case, there may be a shift of income, gain, loss and deduction between certain NuStar Energy public unitholders and us, which may be unfavorable to such NuStar Energy unitholders. Moreover, under our current valuation methods, subsequent purchasers of our common units may have a greater portion of their Internal Revenue Code Section 743(b) adjustment allocated to NuStar Energy’s intangible assets and a lesser portion allocated to NuStar Energy’s tangible assets. The IRS may challenge NuStar Energy’s valuation methods, our methods, or NuStar Energy’s allocation of the Section 743(b) adjustment attributable to NuStar Energy’s tangible and intangible assets, and allocations of income, gain, loss and deduction between us and certain of NuStar Energy’s public unitholders.
A successful IRS challenge to these methods or allocations could adversely affect the amount of taxable income or loss being allocated to our unitholders or the NuStar Energy unitholders. It also could affect the amount of gain on the sale of common units by our unitholders or NuStar Energy’s unitholders and could have a negative impact on the value of our common units or those of NuStar Energy or result in audit adjustments to our or NuStar Energy’s unitholders’ tax returns without the benefit of additional deductions.
We expect that our ratio of taxable income to cash distributions will be higher than the ratio applicable to holders of common units in NuStar Energy.
We expect that our ratio of taxable income to cash distributions will be higher than the ratio applicable to holders of common units in NuStar Energy. Other holders of common units in NuStar Energy will receive remedial allocations of deductions from NuStar Energy. Any remedial allocations of deductions to us from NuStar Energy will be very limited. In addition, our ownership of NuStar Energy incentive distribution rights will cause more taxable income to be allocated to us from NuStar Energy. If NuStar Energy is successful in increasing its distributions over time, our income allocations from our NuStar Energy incentive distribution rights will increase, and, therefore, our ratio of taxable income to cash distributions will increase.
Items of our income, gain, loss and deduction will be allocated among our unitholders to account for the difference between the fair market value and tax basis of our assets at the time of an offering.
Specified items of income, gain, loss and deduction will be allocated to us from NuStar Energy and among our unitholders to account for the difference between the fair market value and tax basis of NuStar Energy’s assets and our assets at the time the assets were contributed to NuStar Energy (or its predecessors) or at any other offering. The effect of these allocations will be to allocate to us from NuStar Energy and to our unitholders, gains attributable to our share of the difference between the fair market value and the tax basis of NuStar Energy’s assets at these times (including gain attributable to our ownership of the incentive distribution rights). The effect of these allocations to a unitholder purchasing units will be essentially the same as if the tax basis of our and NuStar Energy’s assets were equal to their fair market values at the time of the purchase, with the result that a unitholder purchasing units will not bear the federal income tax burden associated with any existing difference between the fair market value and tax basis of our or NuStar Energy’s assets. The federal income tax burden associated with the difference between the fair market value and the tax basis of our assets immediately prior to purchasing units will be borne by our existing unitholders as of that time.


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ITEM 1B. UNRESOLVED STAFF COMMENTS
None.

ITEM 3. LEGAL PROCEEDINGS
We are not currently a party to any material legal proceedings. We are insured against various business risks to the extent we believe is prudent; however, there can be no assurance that the nature and amount of such insurance will be adequate, in every case, to indemnify us against liabilities arising from future legal proceedings as a result of our ordinary business activity.
NuStar Energy is named as a defendant in litigation relating to NuStar Energy’s normal business operations, including regulatory and environmental matters. NuStar Energy is also insured against various business risks to the extent its management believes is prudent; however, NuStar Energy cannot be assured that the nature and amount of such insurance will be adequate, in every case, to protect it against liabilities arising from future legal proceedings as a result of its ordinary business activity.
ENVIRONMENTAL AND SAFETY COMPLIANCE MATTERS
With respect to the environmental proceeding listed below, if it was decided against NuStar Energy, we believe that it would not have a material effect on its consolidated financial position. However, it is not possible to predict the ultimate outcome of the proceeding or whether such ultimate outcome may have a material effect on NuStar Energy’s consolidated financial position. We are reporting this proceeding to comply with Securities and Exchange Commission regulations, which require us to disclose proceedings arising under federal, state or local provisions regulating the discharge of materials into the environment or protecting the environment if we reasonably believe that such proceedings will result in monetary sanctions of $100,000 or more.
In particular, NuStar Energy’s wholly owned subsidiary, Shore Terminals LLC (Shore) owns a refined product terminal in Portland, Oregon located adjacent to the Portland Harbor. The EPA has classified portions of the Portland Harbor, including the portion adjacent to the Shore terminal, as a federal “Superfund” site due to sediment contamination (the Portland Harbor Site). Portland Harbor is contaminated with metals (such as mercury), pesticides, herbicides, polynuclear aromatic hydrocarbons, polychlorinated biphenyls, semi-volatile organics and dioxin/furans. Shore and more than 90 other parties have received a “General Notice” of potential liability from the EPA relating to the Portland Harbor Site. The letter advised Shore that it may be liable for the costs of investigation and remediation (which liability may be joint and several with other potentially responsible parties), as well as for natural resource damages resulting from releases of hazardous substances to the Portland Harbor Site. NuStar Energy has agreed to work with more than 90 other potentially responsible parties to attempt to negotiate an agreed method of allocating costs associated with the clean-up. The precise nature and extent of any clean-up of the Portland Harbor Site, the parties to be involved, the process to be followed for any clean-up and the allocation of any costs for the clean-up among responsible parties have not yet been determined. It is unclear to what extent, if any, Shore will be liable for environmental costs or damages associated with the Portland Harbor Site. It is also unclear to what extent natural resource damage claims or third party contribution or damage claims will be asserted against Shore.
NuStar Energy is also a party to additional claims and legal proceedings arising in the ordinary course of its business. Due to the inherent uncertainty of litigation, there can be no assurance that the resolution of any particular claim or proceeding would not have a material adverse effect on NuStar Energy’s results of operations, financial position or liquidity.

ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.


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ITEM X. EXECUTIVE OFFICERS OF THE REGISTRANT
 
Name
 
Age  
 
Position Held with NuStar GP Holdings, LLC
William E. Greehey
 
77
 
Chairman of the Board
Bradley C. Barron
 
48
 
President, Chief Executive Officer and Director
Mary Rose Brown
 
57
 
Executive Vice President and Chief Administrative Officer
Douglas W. Comeau
 
57
 
Executive Vice President
Thomas R. Shoaf
 
55
 
Executive Vice President and Chief Financial Officer
Amy L. Perry
 
45
 
Senior Vice President, General Counsel-Corporate & Commercial Law and Corporate Secretary
Karen M. Thompson
 
46
 
Senior Vice President, General Counsel-Litigation, Regulatory & Environmental
Jorge A. del Alamo
 
44
 
Vice President and Controller
Mr. Greehey became the Chairman of the board of directors of NuStar GP Holdings in March 2006. He has also been the Chairman of the board of directors of NuStar GP, LLC since January 2002. Mr. Greehey served as Chairman of the board of directors of Valero Energy Corporation (Valero Energy) from 1979 through January 2007. Mr. Greehey was Chief Executive Officer of Valero Energy from 1979 through December 2005, and President of Valero Energy from 1998 until January 2003.
Mr. Barron became Chief Executive Officer, President and a Director of NuStar GP Holdings and NuStar GP, LLC in January 2014. He served as Executive Vice President and General Counsel of NuStar GP Holdings and NuStar GP, LLC from February 2012 until his promotion in January 2014. From April 2007 to February 2012, he served as a Senior Vice President and General Counsel of NuStar GP Holdings and NuStar GP, LLC. Mr. Barron also served as Secretary of NuStar GP Holdings and NuStar GP, LLC from April 2007 to February 2009. He served as Vice President, General Counsel and Secretary of NuStar GP Holdings from March 2006 until April 2007 and as Vice President, General Counsel and Secretary of NuStar GP, LLC from January 2007 until April 2007. He has been with NuStar GP, LLC since July 2003 and prior to that, was with Valero Energy from January 2001 until July 2003.
Ms. Brown became Executive Vice President and Chief Administrative Officer of NuStar GP Holdings and NuStar GP, LLC in April 2013. She served as Executive Vice President–Administration of NuStar GP Holdings and NuStar GP, LLC from February 2012 until her promotion in April 2013. Ms. Brown served as Senior Vice President–Administration of NuStar GP, LLC from April 2008 through February 2012. She served as Senior Vice President–Corporate Communications of NuStar GP, LLC from April 2007 through April 2008. Prior to her service to NuStar GP, LLC, Ms. Brown served as Senior Vice President–Corporate Communications for Valero Energy from September 1997 to April 2007.
Mr. Comeau became Executive Vice President of NuStar GP Holdings and NuStar GP, LLC in September 2012. He served as Senior Vice President–Corporate Development and Strategic Planning of NuStar GP, LLC from March 2012 until his promotion in September 2012. Prior to his service to NuStar GP, LLC, Mr. Comeau served as Vice President and General Manager of the Benecia Refinery for Valero Energy from August 2003 to March 2012. He served as Vice President-Strategic Capital Review for Valero Energy from January 2001 to August 2003.
Mr. Shoaf became Executive Vice President and Chief Financial Officer of NuStar GP Holdings and NuStar GP, LLC in January 2014. He served as Senior Vice President and Controller of NuStar GP Holdings and NuStar GP, LLC from February 2012 until his promotion in January 2014. Mr. Shoaf served as Vice President and Controller of NuStar GP Holdings from March 2006 to February 2012 and Vice President and Controller of NuStar GP, LLC from July 2005 to February 2012. He served as Vice President–Structured Finance of Valero Energy Corporate Services Company, a subsidiary of Valero Energy, from 2001 until his appointment with NuStar GP, LLC.
Ms. Perry became Senior Vice President, General Counsel–Corporate & Commercial Law and Corporate Secretary of NuStar GP Holdings and NuStar GP, LLC in January 2014. She served as Corporate Secretary of NuStar GP Holdings and Vice President, Assistant General Counsel and Corporate Secretary of NuStar GP, LLC from February 2010 until her promotion in January 2014. From March 2006 to February 2010 she served as Assistant Secretary of NuStar GP Holdings and from June 2005 to February 2010, Assistant General Counsel and Assistant Secretary of NuStar GP, LLC. Prior to her service at NuStar GP, LLC, Ms. Perry served as Counsel to Valero Energy.
Ms. Thompson became Senior Vice President, General Counsel–Litigation, Regulatory & Environmental of NuStar GP Holdings and NuStar GP, LLC in January 2014. She served as Vice President, Assistant General Counsel and Assistant Secretary of NuStar GP, LLC from February 2010 until her promotion in January 2014. From April 2007 to February 2010 she

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served as Assistant General Counsel and Assistant Secretary of NuStar GP, LLC. Prior to her service at NuStar GP, LLC, Ms. Thompson served as Counsel to Valero Energy.
Mr. del Alamo became Vice President and Controller of NuStar GP Holdings and NuStar GP, LLC in January 2014. He served as Vice President and Assistant Controller of NuStar GP, LLC from July 2010 until his promotion in January 2014. From October 2005 to February 2010 he served as Assistant Controller of NuStar GP, LLC.


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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON UNITS, RELATED UNITHOLDER MATTERS AND ISSUER PURCHASES OF COMMON UNITS

Market Information, Holders and Distributions
Our common units are listed and traded on the New York Stock Exchange under the symbol “NSH.” At the close of business on February 10, 2014, we had 14 holders of record of our common units. The high and low sales prices (composite transactions) by quarter for the years ended December 31, 2013 and 2012 were as follows:
 
 
Price Range of
Common Unit
 
High
 
Low
Year 2013
 
 
 
4th Quarter
$
30.71

 
$
22.16

3rd Quarter
$
27.50

 
$
19.34

2nd Quarter
$
34.17

 
$
23.62

1st Quarter
$
32.74

 
$
28.32

Year 2012
 
 
 
4th Quarter
$
32.03

 
$
24.06

3rd Quarter
$
32.46

 
$
29.03

2nd Quarter
$
35.22

 
$
29.40

1st Quarter
$
36.75

 
$
32.22


We are required by our limited liability company agreement to distribute all of our available cash at the end of each quarter, less reserves established by our board of directors. All of our distributions are made on our common units, which are our only class of security outstanding.

The cash distributions applicable to each of the quarters in the years ended December 31, 2013 and 2012 were as follows:
 
 
Record Date
Payment Date
Amount
Per Unit
Year 2013
 
 
 
4th Quarter
February 10, 2014
February 18, 2014
$0.545
3rd Quarter
November 11, 2013
November 19, 2013
$0.545
2nd Quarter
August 5, 2013
August 14, 2013
$0.545
1st Quarter
May 6, 2013
May 15, 2013
$0.545
 
 
 
 
Year 2012
 
 
 
4th Quarter
February 11, 2013
February 19, 2013
$0.545
3rd Quarter
November 9, 2012
November 16, 2012
$0.545
2nd Quarter
August 7, 2012
August 14, 2012
$0.510
1st Quarter
May 8, 2012
May 15, 2012
$0.510


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The following Performance Graph is not “soliciting material,” is not deemed filed with the SEC, and is not to be incorporated by reference into any of NuStar GP Holdings, LLC’s filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, as amended, respectively. The stock price performance included in this graph is not necessarily indicative of future stock price performance.

The following graph compares the cumulative 5-year total return provided shareholders on NuStar GP Holdings, LLC’s common stock relative to the cumulative total returns of the NYSE Composite index and the Alerian MLP index. An investment of $100 (with reinvestment of all dividends) is assumed to have been made in our common stock and in each of the indexes on 12/31/2008 and its relative performance is tracked through 12/31/2013.
 

 
12/08

 
12/09

 
12/10

 
12/11

 
12/12

 
12/13

NuStar GP Holdings, LLC
100.00

 
164.18

 
235.28

 
227.66

 
202.55

 
222.57

NYSE Composite
100.00

 
128.28

 
145.46

 
139.87

 
162.23

 
204.87

Alerian MLP
 
100.00

 
171.51

 
232.41

 
269.67

 
282.00

 
360.95



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ITEM 6. SELECTED FINANCIAL DATA

The following table contains selected financial data derived from our audited financial statements.
 
 
Year Ended December 31,
 
2013
 
2012
 
2011
 
2010
 
2009
 
(Thousands of Dollars, Except Per Unit Data)
Statement of Comprehensive Income (Loss) Data:
 
 
 
 
 
 
 
 
 
Equity in (loss) earnings of NuStar Energy L.P.
$
(6,741
)
 
$
(4,578
)
 
$
65,783

 
$
66,859

 
$
65,573

Net (loss) income
(11,034
)
 
2,128

 
69,636

 
72,463

 
68,097

Basic and diluted net (loss) income per unit
(0.26
)
 
0.05

 
1.64

 
1.70

 
1.60

Cash distributions per unit
2.18

 
2.11

 
1.98

 
1.87

 
1.73

Other Financial Data:
 
 
 
 
 
 
 
 
 
Distributions received from NuStar Energy L.P.
$
96,134

 
$
92,628

 
$
86,106

 
$
82,426

 
$
76,585

 
 
 
 
 
 
 
 
 
 
 
December 31,
 
2013
 
2012
 
2011
 
2010
 
2009
 
(Thousands of Dollars)
Balance Sheet Data:
 
 
 
 
 
 
 
 
 
Total assets
$
412,382

 
$
517,716

 
$
589,027

 
$
605,234

 
$
593,259

Total short-term debt
26,000

 
20,000

 
16,500

 
16,000

 
14,300

Members’ equity
349,986

 
412,822

 
506,883

 
541,463

 
538,208

 

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following review of our results of operations and financial condition should be read in conjunction with Items 1., 1A. and 2. “Business, Risk Factors and Properties,” and Item 8. “Financial Statements and Supplementary Data,” included in this report.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

This Form 10-K contains certain estimates, predictions, projections, assumptions and other forward-looking statements that involve various risks and uncertainties. While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested in this report. These forward-looking statements can generally be identified by the words “anticipates,” “believes,” “expects,” “plans,” “intends,” “estimates,” “forecasts,” “budgets,” “projects,” “will,” “could,” “should,” “may” and similar expressions. These statements reflect our current views with regard to future events and are subject to various risks, uncertainties and assumptions. Please read Item 1A. “Risk Factors” for a discussion of certain of those risks.

If one or more of these risks or uncertainties materialize, or if the underlying assumptions prove incorrect, our actual results may vary materially from those described in any forward-looking statement. Other unknown or unpredictable factors could also have material adverse effects on our future results. Readers are cautioned not to place undue reliance on this forward-looking information, which is as of the date of the Form 10-K. We do not intend to update these statements unless it is required by the securities laws to do so, and we undertake no obligation to publicly release the result of any revisions to any such forward-looking statements that may be made to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events.

OVERVIEW
NuStar GP Holdings, LLC (NuStar GP Holdings) is a Delaware limited liability company. Our units are traded on the New York Stock Exchange (NYSE) under the symbol “NSH.” Unless otherwise indicated, the terms “NuStar GP Holdings,” “we,” “our” and “us” are used in this report to refer to NuStar GP Holdings, LLC, to one or more of our consolidated subsidiaries or to all of them taken as a whole. Our Management’s Discussion and Analysis of Financial Condition and Results of Operations is presented in five sections:
•
Overview
•
Results of Operations
•
Trends and Outlook
•
Liquidity and Capital Resources
•
Critical Accounting Policies

Our only cash generating assets are our ownership interests in NuStar Energy L.P. (NuStar Energy), a publicly traded Delaware limited partnership (NYSE: NS). As of December 31, 2013 , our aggregate ownership interests in NuStar Energy consisted of the following:
•
the 2% general partner interest;
•
100% of the incentive distribution rights (IDR) issued by NuStar Energy, which entitle us to receive increasing percentages of the cash distributed by NuStar Energy, currently at the maximum percentage of 23% ; and
•
10,228,945 common units of NuStar Energy representing a 12.9% limited partner interest.

We account for our ownership interest in NuStar Energy using the equity method. Therefore, our financial results reflect a portion of NuStar Energy’s net income based on our ownership interest. We have no separate operating activities apart from those conducted by NuStar Energy and therefore generate no revenues from operations.

NuStar Energy is engaged in the terminalling and storage of petroleum products, the transportation of petroleum products and anhydrous ammonia, and the marketing of petroleum products. NuStar Energy has terminal and storage facilities in the United States, Canada, Mexico, the Netherlands, including St. Eustatius in the Caribbean, the United Kingdom and Turkey.

NuStar Energy’s partnership agreement requires that it distributes all “Available Cash” to its partners each quarter, and this term is defined in its partnership agreement as cash on hand at the end of the quarter, plus certain permitted borrowings made subsequent to the end of the quarter, less cash reserves determined by NuStar Energy’s board of directors. Similarly, we are

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required by our limited liability company agreement to distribute all of our available cash at the end of each quarter, less reserves established by our board of directors.

On January 1, 2013, NuStar Energy sold its fuels refinery in San Antonio, Texas (the San Antonio Refinery) and related assets, which included inventory, a terminal in Elmendorf, Texas and a pipeline connecting the terminal and refinery for approximately $117.0 million (the San Antonio Refinery Sale). NuStar Energy presented the results of operations for the San Antonio Refinery and related assets as discontinued operations for all periods presented.

On December 13, 2012, NuStar Energy completed its acquisition of the TexStar Crude Oil Assets (as defined below), including 100% of the partnership interest in TexStar Crude Oil Pipeline, LP, from TexStar Midstream Services, LP and certain of its affiliates (collectively, TexStar) for $325.4 million (the TexStar Asset Acquisition). The TexStar Crude Oil Assets consist of approximately 140 miles of crude oil pipelines and gathering lines, as well as five terminals and storage facilities providing 0.6 million barrels of storage capacity.

On September 28, 2012, NuStar Energy sold a 50% ownership interest (the Asphalt Sale) in NuStar Asphalt LLC (Asphalt JV), previously a wholly owned subsidiary of NuStar Energy. Asphalt JV owns and operates the asphalt refining assets that were previously wholly owned by NuStar Energy (collectively, the Asphalt Operations). Upon closing, NuStar Energy deconsolidated Asphalt JV and started reporting its remaining investment in Asphalt JV using the equity method of accounting.




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RESULTS OF OPERATIONS
As discussed above, we account for our investment in NuStar Energy using the equity method. As a result, our equity in earnings of NuStar Energy, our only source of income, directly fluctuates with the amount of NuStar Energy’s distributions and results of operations. NuStar Energy’s distributions determine the amount of our incentive distribution earnings, while NuStar Energy’s results of operations determine the amounts of earnings attributable to our general partner and limited partner interests.
Year Ended December 31, 2013 Compared to Year Ended December 31, 2012
Financial Highlights
(Thousands of Dollars, Except Unit and Per Unit Data)
 
 
Year Ended December 31,
 
 
 
2013
 
2012
 
Change
Equity in loss of NuStar Energy
$
(6,741
)
 
$
(4,578
)
 
$
(2,163
)
General and administrative expenses
(3,105
)
 
(3,337
)
 
232

Other income, net
382

 
9,801

 
(9,419
)
Interest expense, net
(778
)
 
(624
)
 
(154
)
(Loss) income before income tax (expense) benefit
(10,242
)
 
1,262

 
(11,504
)
Income tax (expense) benefit
(792
)
 
866

 
(1,658
)
Net (loss) income
$
(11,034
)
 
$
2,128

 
$
(13,162
)
Basic and diluted net (loss) income per unit
$
(0.26
)
 
$
0.05

 
$
(0.31
)

The following table summarizes NuStar Energy’s statement of (loss) income data:
 
Year Ended December 31,
 
 
 
2013
 
2012
 
Change
 
(Thousands of Dollars, Except Per Unit Data)
Revenues
$
3,463,732

 
$
5,945,736

 
$
(2,482,004
)
Cost of product sales
2,453,997

 
4,930,174

 
(2,476,177
)
Operating expenses
454,396

 
526,145

 
(71,749
)
Depreciation and amortization expense
168,766

 
152,348

 
16,418

Asset and goodwill impairment loss
304,453

 
268,483

 
35,970

Segment operating income
82,120

 
68,586

 
13,534

General and administrative expenses
91,086

 
104,756

 
(13,670
)
Other depreciation and amortization expense
10,155

 
7,441

 
2,714

Other asset impairment loss
—

 
3,295

 
(3,295
)
Gain on legal settlement
—

 
(28,738
)
 
28,738

Operating loss
$
(19,121
)
 
$
(18,168
)
 
$
(953
)
 
 
 
 
 
 
Loss from continuing operations
$
(185,509
)
 
$
(166,001
)
 
$
(19,508
)
Loss from discontinued operations, net of tax
(99,162
)
 
(61,236
)
 
(37,926
)
Net loss
$
(284,671
)
 
$
(227,237
)
 
$
(57,434
)
 
 
 
 
 
 
Net loss per unit applicable to limited partners
$
(4.00
)
 
$
(3.61
)
 
$
(0.39
)
 
 
 
 
 
 
Cash distributions per unit applicable to limited partners
$
4.380

 
$
4.380

 
$
—



28

NuStar Energy’s operating loss for both years includes significant impairment charges. In 2013, NuStar Energy recognized a goodwill impairment charge of $304.5 million associated with its St. Eustatius and Point Tupper terminal operations, while 2012 included an impairment charge of $266.4 million related to the goodwill and long-lived assets of its Asphalt Operations. NuStar Energy’s segment operating income, which includes these impairment charges, increased $13.5 million for the year ended December 31, 2013, compared to the year ended December 31, 2012, primarily due to an increase of $49.7 million in the segment operating income of NuStar Energy’s pipeline segment. This increase was mainly due to increased throughputs on pipelines that serve Eagle Ford Shale production in South Texas and higher pipeline tariffs as a result of the annual index adjustment in July 2013.

NuStar Energy’s loss from continuing operations increased $19.5 million for the year ended December 31, 2013, compared to the year ended December 31, 2012, primarily due to an increase of $36.6 million in interest expense, net and an increase of $30.6 million in NuStar Energy’s equity in loss of joint ventures. NuStar Energy’s loss from discontinued operations, net of tax, increased $37.9 million for the year ended December 31, 2013, compared to the year ended December 31, 2012, mainly due to asset impairment charges of $102.5 million in 2013 associated with certain storage assets that were classified as “Assets held for sale” on NuStar Energy’s consolidated balance sheet as of December 31, 2013. NuStar Energy’s discontinued operations also include the results of operations for the San Antonio Refinery and related assets. As a result, NuStar Energy reported a net loss of $284.7 million for the year ended December 31, 2013, compared to a net loss of $227.2 million for the year ended December 31, 2012.

Equity in (loss) earnings of NuStar Energy
The following table summarizes our equity in earnings of NuStar Energy:  
 
Year Ended December 31,
 
 
 
2013
 
2012
 
Change
 
(Thousands of Dollars)
NuStar GP Holdings’ Equity in Loss of NuStar Energy:
 
 
 
 
 
General partner interest
$
(6,338
)
 
$
(5,356
)
 
$
(982
)
General partner incentive distribution
43,220

 
41,242

 
1,978

General partner’s interest in earnings and incentive
distributions of NuStar Energy
36,882

 
35,886

 
996

Limited partner interest in loss of NuStar Energy
(40,739
)
 
(37,580
)
 
(3,159
)
Amortization of step-up in basis related to
NuStar Energy’s assets and liabilities
(2,884
)
 
(2,884
)
 
—

Equity in loss of NuStar Energy
$
(6,741
)
 
$
(4,578
)
 
$
(2,163
)

For the year ended December 31, 2013 , NuStar Energy reported a net loss per unit applicable to limited partners of $4.00, compared to a net loss of $3.61 per unit for the year ended December 31, 2012 . As our results are based on NuStar Energy’s results, we reported equity in loss related to our general and limited partner interests in NuStar Energy for the years ended December 31, 2013 and 2012, respectively.

NuStar Energy increased its units outstanding by issuing units in the third quarter of 2012, resulting in higher total cash distributions. Since our IDR in NuStar Energy entitle us to an increasing amount of NuStar Energy’s cash distributions, our equity in earnings of NuStar Energy related to our IDR increased in 2013 compared to 2012.

Other income, net
Other income, net decreased $9.4 for the year ended December 31, 2013 , compared to the year ended December 31, 2012, mainly due to NuStar Energy’s issuance of 7,130,000 limited partner units in September 2012. This issuance resulted in a gain of $10.7 million for the year ended December 31, 2012 .


29

Year Ended December 31, 2012 Compared to Year Ended December 31, 2011
Financial Highlights
(Thousands of Dollars, Except Unit and Per Unit Data)
 
 
Year Ended December 31,
 
 
 
2012
 
2011
 
Change
Equity in (loss) earnings of NuStar Energy
$
(4,578
)
 
$
65,783

 
$
(70,361
)
General and administrative expenses
(3,337
)
 
(3,298
)
 
(39
)
Other income, net
9,801

 
7,320

 
2,481

Interest expense, net
(624
)
 
(570
)
 
(54
)
Income before income tax benefit
1,262

 
69,235

 
(67,973
)
Income tax benefit
866

 
401

 
465

Net income
$
2,128

 
$
69,636

 
$
(67,508
)
Basic and diluted net income per unit
$
0.05

 
$
1.64

 
$
(1.59
)

The following table summarizes NuStar Energy’s statement of income data:
 
Year Ended December 31,
 
 
 
2012
 
2011
 
Change
 
(Thousands of Dollars, Except Per Unit Data)
Revenues
$
5,945,736

 
$
6,257,629

 
$
(311,893
)
Cost of product sales
4,930,174

 
5,175,710

 
(245,536
)
Operating expenses
526,145

 
506,213

 
19,932

Depreciation and amortization expense
152,348

 
155,035

 
(2,687
)
Asset impairment loss
268,483

 
—

 
268,483

Segment operating income
68,586

 
420,671

 
(352,085
)
General and administrative expenses
104,756

 
103,050

 
1,706

Other depreciation and amortization expense
7,441

 
6,738

 
703

Other asset impairment loss
3,295

 
—

 
3,295

Gain on legal settlement
(28,738
)
 
—

 
(28,738
)
Operating (loss) income
$
(18,168
)
 
$
310,883

 
$
(329,051
)
 
 
 
 
 
 
(Loss) income from continuing operations
$
(166,001
)
 
$
218,674

 
$
(384,675
)
(Loss) income from discontinued operations, net of tax
(61,236
)
 
2,927

 
(64,163
)
Net (loss) income
$
(227,237
)
 
$
221,601

 
$
(448,838
)
 
 
 
 
 
 
Net (loss) income per unit applicable to limited partners
$
(3.61
)
 
$
2.78

 
$
(6.39
)
 
 
 
 
 
 
Cash distributions per unit applicable to limited partners
$
4.380

 
$
4.360

 
$
0.020


For the year ended December 31, 2012, NuStar Energy reported a net loss of $227.2 million, compared to net income of $221.6 million for the year ended December 31, 2011, primarily due to an operating loss of $296.8 million in NuStar Energy’s fuels marketing segment. The operating loss of NuStar Energy’s fuels marketing segment mainly resulted from an asset impairment charge of $266.4 million in the second quarter of 2012 related to the goodwill and long-lived assets of its Asphalt Operations. In addition, NuStar Energy’s equity in loss of joint ventures of $9.4 million and other expense of $24.7 million for the year ended December 31, 2012 were primarily related to Asphalt JV and associated loss upon deconsolidation. The loss from NuStar

30

Energy’s discontinued operations of $61.2 million also contributed to the decrease in net income, which is mainly attributable to the San Antonio Refinery. NuStar Energy’s discontinued operations also include the results of operations for certain storage assets that were classified as “Assets held for sale” on NuStar Energy’s consolidated balance sheet as of December 31, 2013.

Equity in (loss) earnings of NuStar Energy
The following table summarizes our equity in earnings of NuStar Energy:
 
 
Year Ended December 31,
 
 
 
2012
 
2011
 
Change
 
(Thousands of Dollars)
NuStar GP Holdings’ Equity in (Loss) Earnings of NuStar Energy:
 
 
 
 
 
General partner interest
$
(5,356
)
 
$
3,703

 
$
(9,059
)
General partner incentive distribution (a)
41,242

 
36,319

 
4,923

General partner’s interest in earnings and incentive
distributions of NuStar Energy
35,886

 
40,022

 
(4,136
)
Limited partner interest in (loss) earnings of NuStar Energy
(37,580
)
 
28,645

 
(66,225
)
Amortization of step-up in basis related to
NuStar Energy’s assets and liabilities
(2,884
)
 
(2,884
)
 
—

Equity in (loss) earnings of NuStar Energy
$
(4,578
)
 
$
65,783

 
$
(70,361
)

(a)
Our equity in earnings of NuStar Energy allocated to the general partner incentive distribution is less than the actual distribution made with respect to 2011, due to NuStar Energy’s issuance of common units after the end of the third quarter, but before the record date.

Our equity in (loss) earnings related to our general partner interest and our limited partner interest in NuStar Energy decreased for the year ended December 31, 2012, compared to the year ended December 31, 2011, due to a decrease in NuStar Energy’s net income per unit.

NuStar Energy’s per unit distributions for the year ended December 31, 2012 increased, compared to the year ended December 31, 2011, from $4.36 to $4.38. That increase, coupled with an increase in the number of NuStar Energy units outstanding resulting from the issuance of units in the fourth quarter of 2011 and the third quarter of 2012, resulted in NuStar Energy increasing its total cash distributions. Since our IDR in NuStar Energy entitle us to an increasing amount of NuStar Energy’s cash distributions, our equity in earnings of NuStar Energy related to our IDR increased for the period.

Other income, net
Other income, net increased $2.5 million, mainly due to a $10.7 million gain related to NuStar Energy’s issuance of limited partner units for the year ended December 31, 2012, as compared to a $8.1 million gain for the year ended December 31, 2011.

31

TRENDS AND OUTLOOK
We expect our equity in earnings of NuStar Energy to increase or decrease consistent with NuStar Energy’s earnings.

NuStar Energy’s Strategic Redirection and Its Impact
In 2012, NuStar Energy embarked on a strategic redirection. The first goal of the strategic redirection was to focus on NuStar Energy’s core, fee-based businesses, storage and pipelines. The second goal was to reduce NuStar Energy’s earnings volatility and working capital requirements stemming from its fuels marketing segment. Since then, NuStar Energy has made significant progress on its first goal through the development of a number of internal growth projects, as well as the TexStar Asset Acquisition in December 2012. NuStar Energy has achieved its second goal by selling a 50% ownership interest in its asphalt business in September 2012, which allowed NuStar Energy to deconsolidate the results of its remaining interest in those operations, selling the San Antonio Refinery in January 2013 and divesting of NuStar Energy’s remaining 50% ownership interest in Asphalt JV in February 2014.

These changes have moved NuStar Energy in the right direction, and, in 2014, NuStar Energy is working to execute and build on its strategy, through focusing on its in-progress and planned pipeline and storage capital projects and also identifying additional opportunities for internal growth or synergistic acquisitions.

NuStar Energy’s Storage Segment
NuStar Energy expects its storage segment to benefit from the completion of a second rail-car offloading facility at NuStar Energy’s St. James, Louisiana terminal in the fourth quarter of 2013 and from additional storage throughputs associated with the completion of Eagle Ford Shale projects.

However, continued backwardation of the forward pricing curve has resulted in reduced demand for storage at certain of NuStar Energy’s terminal locations. The reduced demand is putting downward pressure on storage rates in certain markets as some of NuStar Energy’s storage contracts come up for renewal, thus negatively affecting its earnings. In addition, NuStar Energy expects the segment to be impacted by lower profit sharing on NuStar Energy’s unit train at its St. James, Louisiana terminal resulting from the narrowing of the LLS to WTI spread. Although NuStar Energy expects earnings for the first quarter of 2014 to be lower than the same period of 2013, the full-year earnings for 2014 are expected to be comparable to 2013, excluding the non-cash charges in 2013.

NuStar Energy’s Pipeline Segment
NuStar Energy expects that its pipeline segment earnings for the first quarter and full year of 2014 will exceed comparable periods in 2013, mainly due to higher throughputs resulting from its Eagle Ford Shale project completed in August 2013. Recently, NuStar Energy expanded its private dock at its Corpus Christi crude storage tank facility, and the increased efficiency and capacity at that dock will, in turn, expand the system’s capability to ship additional barrels into Corpus Christi.

For the remainder of the year, NuStar Energy also expects to benefit from a pipeline expansion project that should be completed in the second quarter of 2014, as well as the July 1, 2013 tariff increase on pipelines regulated by the Federal Energy Regulatory Commission.

NuStar Energy’s Fuels Marketing Segment
NuStar Energy expects that first quarter 2014 results for its remaining fuels marketing business will improve over the same period in 2013, primarily due to higher projected earnings from NuStar Energy’s bunker fuel operations.  Last year, during the third quarter, NuStar Energy entered into a new bunker fuel supply agreement, which reduced its working capital requirements and allowed NuStar Energy to reduce operating costs. NuStar Energy expects to continue to reduce both working capital and costs for this segment during first quarter of 2014.  Overall, NuStar Energy expects the full year 2014 results in this segment to exceed 2013 results. However, NuStar Energy’s earnings in this segment, as in any margin-based business, are subject to many factors that can raise or lower margins, which may cause the segment’s actual results to vary significantly from NuStar Energy’s forecast. For the full year 2014, NuStar Energy expects its fuels marketing segment to constitute approximately 5% of total segment operating income.

NuStar Energy’s outlook for the partnership may change as it is based on its continuing evaluation of a number of factors, including factors outside NuStar Energy’s control, such as the price of crude oil, the state of the economy and changes to refinery maintenance schedules, that affect demand for crude oil, refined products and ammonia, as well as demand for NuStar Energy’s storage and transportation services. Please see Item 1A. “Risk Factors” for further description of important risks affecting NuStar Energy’s operations.



32

LIQUIDITY AND CAPITAL RESOURCES

General
Our cash flows consist of distributions from NuStar Energy on our partnership interests, including the IDR that we own. Due to our ownership of NuStar Energy’s IDR, our portion of NuStar Energy’s total distributions may exceed our ownership interest in NuStar Energy. Our primary cash requirements are for distributions to members, capital contributions to maintain our 2% general partner interest in NuStar Energy in the event that NuStar Energy issues additional units, debt service requirements, if any, benefit plan funding and general and administrative expenses. In addition, because NuStar GP, LLC, a wholly owned subsidiary of NuStar GP Holdings, elected to be treated as a taxable entity in August 2006, we may be required to pay income taxes, which may exceed the amount of tax expense recorded in the consolidated financial statements. We expect to fund our cash requirements primarily with the quarterly cash distributions we receive from NuStar Energy and borrowings under our 364-day revolving credit facility dated June 28, 2013 (the 2013 Credit Facility), if necessary. Additionally, NuStar Energy reimburses us for all costs incurred on their behalf, which are primarily employee-related costs.

Cash Distributions from NuStar Energy
NuStar Energy distributes all of its available cash within 45 days following the end of each quarter based on the partnership interests outstanding as of a record date that is set after the end of each quarter. The following table reflects the cash distributions earned for the periods shown with respect to our ownership interests in NuStar Energy and IDR:
 
 
Year Ended December 31,
 
2013
 
2012
 
2011
 
(Thousands of Dollars, Except Per Unit Data)
Cash distributions per unit
$
4.380

 
$
4.380

 
$
4.360

Total cash distributions by NuStar Energy to all partners
$
392,204

 
$
374,254

 
$
331,506

Cash distributions we received from NuStar Energy:
 
 
 
 
 
General partner interest
$
7,844

 
$
7,486

 
$
6,630

General partner incentive distribution
43,220

 
41,242

 
36,326

Limited partner interest – common units
44,975

 
45,152

 
44,812

Total cash distributions to us
$
96,039

 
$
93,880

 
$
87,768

Distributions to us as a percentage of total cash distributions
24.5
%
 
25.1
%
 
26.5
%

Cash Flows for the Years Ended December 31, 2013 , 2012 and 2011
Cash distributions received from NuStar Energy were $96.1 million for the year ended December 31, 2013 , which we used primarily to fund distributions to our unitholders totaling $92.9 million . We borrowed $26.0 million from the 2013 Credit Facility for the year ended December 31, 2013 , mainly to repay $18.5 million on our previous revolving credit facility and to repay $7.5 million to NuStar Energy for employee benefits and related costs.

Cash distributions received from NuStar Energy were $92.6 million for the year ended December 31, 2012, which we used primarily to fund distributions to our unitholders totaling $88.3 million. We borrowed $21.0 million from our revolving credit facility for the year ended December 31, 2012, mainly to fund our $7.1 million in contributions to NuStar Energy in order to maintain our 2% general partner interest following its issuance of common units in September 2012. Additionally, we repaid $17.5 million under the revolving credit facility.
 
Cash distributions received from NuStar Energy were $86.1 million for the year ended December 31, 2011, which we used primarily to fund distributions to our unitholders totaling $83.0 million. We borrowed $6.0 million from our revolving credit facility for the year ended December 31, 2011, mainly to fund our $6.7 million in contributions to NuStar Energy in order to maintain our 2% general partner interest following its issuances of common units during 2011. Additionally, we repaid $5.5 million under the revolving credit facility.

Credit Facility
Borrowings under the 2013 Credit Facility are used to fund capital contributions to NuStar Energy to maintain our 2% general partner interest when NuStar Energy issues additional common units and to meet other liquidity and capital resource requirements. The 2013 Credit Facility matures on June 27, 2014 and has a borrowing capacity of up to $40.0 million , of which, up to $10.0 million may be available for letters of credit. Our obligations under the 2013 Credit Facility are guaranteed

33

by Riverwalk Holdings, LLC (Riverwalk), a wholly owned subsidiary. Riverwalk pledged 1,792,918 NuStar Energy units that it owns to secure its guarantee.

As of December 31, 2013 , we had outstanding borrowings of $26.0 million and availability of $14.0 million for borrowings under the 2013 Credit Facility. Interest on the 2013 Credit Facility is based upon, at our option, either an alternative base rate, plus 1.00% or a LIBOR-based rate, plus 2.00% . As of December 31, 2013 , the interest rate was 2.2% .

The terms of the 2013 Credit Facility require NuStar Energy to maintain, as of the end of each rolling period, which consists of any period of four consecutive fiscal quarters, a consolidated debt coverage ratio not to exceed 5.0-to-1.0. If NuStar Energy consummates an acquisition for an aggregate net consideration of at least $50.0 million, the maximum consolidated debt coverage ratio will increase to 5.5-to-1.0 for two rolling periods. As of December 31, 2013 , NuStar Energy’s consolidated debt coverage ratio was 4.4 x. We are also required to receive cash distributions of at least $12.5 million in respect of our ownership interests in NuStar Energy each fiscal quarter . Our management believes that we are in compliance with the covenants of the 2013 Credit Facility as of December 31, 2013 .

We borrowed $26.0 million under the 2013 Credit Facility during the year ended December 31, 2013 , mainly to repay $18.5 million on our previous revolving credit facility and to repay $7.5 million to NuStar Energy for employee benefits and related costs. During the year ended December 31, 2013 , our repayments totaled $20.0 million under the 2013 Credit Facility. The weighted-average interest rate related to borrowings under the 2013 Credit Facility for the year ended December 31, 2013 was 2.1% . We are in discussions with the lenders to renew or replace our 2013 Credit Facility.

Investment in NuStar Energy
On September 10, 2012, NuStar Energy issued 7,130,000 common units representing limited partner interests at a price of $48.94 per unit. NuStar Energy received proceeds of $336.8 million, net of issuance costs. In conjunction with NuStar Energy’s issuance of common units, we contributed $7.1 million to NuStar Energy in order to maintain our 2% general partner interest.

On December 9, 2011, NuStar Energy issued 6,037,500 common units representing limited partner interests at a price of $53.45 per unit. NuStar Energy received proceeds of $311.4 million, net of issuance costs. In September and October 2011, NuStar Energy issued 108,029 common units for proceeds of $5.9 million, net of issuance costs. In conjunction with NuStar Energy’s issuances of common units during 2011, we contributed $6.7 million to NuStar Energy in order to maintain our 2% general partner interest.

Cash Distributions to Unitholders
Our limited liability company agreement requires that, within 50 days after the end of each quarter, we distribute all of our available cash to the holders of record of our units on the applicable record date. Available cash is defined as all cash on hand at the end of any calendar quarter, less the amount of cash reserves necessary or appropriate, as determined in good faith by our board of directors, to fund debt we may incur, if any, general and administrative expenses, future distributions and other miscellaneous uses of cash. The following table shows our cash distributions applicable to the period in which the distributions were earned:
 
Year Ended December 31,
 
2013
 
2012
 
2011
 
(Thousands of Dollars, Except Per Unit Data)
Cash distributions per unit
$
2.18

 
$
2.11

 
$
1.98

Total cash distributions
$
92,938

 
$
89,860

 
$
84,252


Pension and Other Postretirement Benefit Funded Status
During 2013 , we contributed $1.9 million to our pension and postretirement benefit plans. We expect to contribute approximately $4.5 million to our pension and postretirement benefit plans in 2014 , which principally represents contributions either required by regulations or laws or, with respect to unfunded plans, necessary to fund current benefits. We have not disclosed pension and postretirement funding beyond 2014 as the funding can vary from year to year based upon changes in the fair value of the plan assets and actuarial assumptions. Since costs incurred by us related to our pension and other postretirement benefit plans are reimbursed by NuStar Energy, funding for these plans will primarily be provided by NuStar Energy.


34

Related Party Agreements
Agreements with NuStar Energy
NuStar GP, LLC and NuStar Energy entered into a services agreement effective January 1, 2008 (the GP Services Agreement). The GP Services Agreement states that NuStar Energy will reimburse NuStar GP, LLC for furnishing administrative and certain operating services necessary to conduct the business of NuStar Energy. On July 19, 2006, we entered into a non-compete agreement with NuStar Energy related to business opportunities. Please refer to Note 5 of the Notes to Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary Data” for a more detailed discussion of agreements with NuStar Energy.

Employee Benefit Plans and Unit-Based Compensation
As of December 31, 2013 , we sponsored the following employee benefit plans:

•
The NuStar Thrift Plan (the Thrift Plan), a qualified employee profit-sharing plan;
•
The NuStar Pension Plan, a qualified non-contributory defined benefit pension plan;
•
The NuStar GP, LLC Excess Thrift Plan, a benefit plan to those employees whose compensation and/or annual contributions under the Thrift Plan are subject to the limitations applicable to qualified retirement plans;
•
The NuStar GP, LLC Excess Pension Plan and the NuStar GP, LLC Supplemental Executive Retirement Plan, benefit plans to a select group of management or other highly compensated employees; and
•
The NuStar GP, LLC Retiree Benefits Plan, a medical benefits plan for retired employees.

As of December 31, 2013 , we had the following long-term incentive plans:

•
The Fourth Amended and Restated 2000 Long-Term Incentive Plan, under which NuStar GP, LLC may award up to 3,250,000 NuStar Energy (NS) common units;
•
The 2006 Long-Term Incentive Plan, under which NuStar GP Holdings may award up to 2,000,000 NuStar GP Holdings (NSH) units.

Please refer to Notes 14 and 15 of the Notes to Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary Data” for a more detailed discussion of Employee Benefit Plans and Unit-Based Compensation.

NuStar Energy reimburses NuStar GP, LLC for expenses incurred related to employee benefit plans at cost, and for long-term incentive plan compensation expenses resulting from NS and NSH awards to employees and directors of NuStar GP, LLC. Expenses resulting from NuStar GP Holdings awards to our non-employee directors are included in “General and administrative expenses” on our consolidated statements of comprehensive income (loss). Our current liabilities related to the long-term incentive plans and employee benefits are included in “Accrued compensation expense” and our noncurrent liabilities for employee benefits are included in “Long-term liabilities” on our consolidated balance sheets.

Asphalt JV Services Agreement
In conjunction with NuStar Energy’s Asphalt Sale, we entered into a services agreement with Asphalt JV, effective September 28, 2012 (the Asphalt JV Services Agreement). The Asphalt JV Services Agreement provides that NuStar GP, LLC furnish certain administrative and other operating services necessary to conduct the business of Asphalt JV. Asphalt JV compensates us for these services through an annual fee totaling $10.0 million, subject to adjustment based on the annual merit increase percentage applicable to our employees for the most recently completed contract year. The Asphalt JV Services Agreement will terminate on December 31, 2017 and will automatically renew for successive two-year terms. Asphalt JV may terminate the Asphalt JV Services Agreement at any time, with 180 days prior written notice or reduce the level of service with 45 days prior written notice. During the year ended December 31, 2013, Asphalt JV provided written notice to reduce the level of services that we provide to Asphalt JV to 63% of the original service level.

Asphalt JV Employee Services Agreement
In conjunction with NuStar Energy’s Asphalt Sale, NuStar GP, LLC entered into an employee services agreement with Asphalt JV, effective September 28, 2012 (the Asphalt JV Employee Services Agreement). The Asphalt JV Employee Services Agreement provided that certain of NuStar GP, LLC employees would provide employee-services to Asphalt JV. In exchange, Asphalt JV would reimburse us for the compensation expense of those employees at the same rates that were in effect at the effective date of the Asphalt JV Employee Services Agreement, including an annual bonus amount that does not exceed our target bonus plan. The employees covered under the Asphalt JV Employee Services Agreement were not entitled to any new unit-based compensation grants from us, and Asphalt JV was not responsible for unit-based compensation costs prior to the

35

effective date. The Asphalt JV Employee Services Agreement terminated on December 31, 2012, and effective January 1, 2013, those employees became employees of Asphalt JV.

The following table summarizes information pertaining to related party transactions:
 
Year Ended December 31,
 
2013
 
2012
 
2011
 
(Thousands of Dollars)
Expenses for payroll, employee benefit plans and unit-based compensation
$
190,643

 
$
225,135

 
$
216,380

Other expenses
$
434

 
$
437

 
$
402


Long-term Contractual Obligations
As of December 31, 2013 , we had no future minimum payments applicable to non-cancellable operating leases and purchase obligations.

Contingencies
We are not currently a party to any material legal proceedings and have not recorded any accruals for loss contingencies. NuStar Energy is a party to claims and legal proceedings arising in the ordinary course of its business, which it believes are not material to its financial position or results of operations. However, due to the inherent uncertainty of litigation, there can be no assurance that the resolution of any particular claim or proceeding would not have a material adverse effect on NuStar Energy’s results of operations and ability to pay distributions, which would impact our results of operations and ability to pay distributions.

CRITICAL ACCOUNTING POLICIES
The preparation of financial statements in accordance with U.S. generally accepted accounting principles requires management to select accounting policies and to make estimates and assumptions related thereto that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. The accounting policies below are considered critical due to judgments made by management and the sensitivity of these estimates to deviations of actual results from management’s assumptions. The critical accounting policies should be read in conjunction with Note 2 of the Notes to Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary Data” which summarizes our significant accounting policies.

Investment in NuStar Energy
We evaluate our investment in NuStar Energy for impairment if and when there is evidence that we may not be able to recover the carrying amount of our investment or that NuStar Energy is unable to sustain an earnings capacity that justifies the carrying amount. A loss in the value of our investment that is other than a temporary decline is recognized currently in earnings based on the difference between the estimated current fair value of the investment and our carrying amount. In order to determine fair value, our management must make certain estimates and assumptions regarding NuStar Energy’s operations, including, among other things, an assessment of market conditions, projected cash flows, interest rates and growth rates that could significantly impact the fair value of our investment. Due to the significant subjectivity of the assumptions used to determine fair value, changes in market conditions and/or changes in assumptions could result in significant impairment charges in the future, thus affecting our earnings. We believe that the carrying amount of our investment in NuStar Energy, as of December 31, 2013 , is recoverable.

Unit-Based Compensation
We account for awards of NS unit options, performance awards and restricted units to employees and directors of NuStar GP, LLC at fair value, whereby a liability for the award is initially recorded and subsequent changes in the fair value are included in the determination of net income. The fair value of NS unit options is determined using the Black-Scholes model at each reporting date. The fair value of NS restricted units and performance awards equals the market price of NS common units at each reporting date. However, NS performance awards are earned only upon NuStar Energy’s achievement of an objective performance measure. We record compensation expense each reporting period such that the cumulative compensation expense equals the portion of the award’s current fair value that has vested. We record compensation expense related to NS unit options until such options are exercised, and we record compensation expense for NS restricted units and performance awards until the date of vesting.

We account for awards of NSH restricted units and unit options granted to employees of NuStar GP, LLC and our directors based on the fair value of the awards at the grant date. The fair value of NSH unit options is determined using the Black-Scholes model at the grant date, and the fair value of the NSH restricted units equals the market price of NSH common units at

36

the grant date. Compensation expense for NSH restricted units and unit options is recognized ratably over the vesting period based on the initial fair value determination.

We make certain assumptions to determine the fair value of NS and NSH unit options related to the expected life of the option, volatility of the related units, expected distribution yield and risk-free interest rate. Changes in these assumptions impact the amount of expense associated with the award and the amount of our liability.

Pension and Other Postretirement Benefit Obligations
We have significant pension and postretirement benefit liabilities and costs that are developed from actuarial valuations. Inherent in these valuations are key assumptions including discount rates, expected return on plan assets, future compensation increases and health care cost trend rates. Changes in these assumptions are primarily influenced by factors outside our control. For example, the discount rate assumption is based on a hypothetical yield curve represented by a series of annualized individual discount rates. Each bond issue underlying the hypothetical yield curve required an average rating of double-A, when averaging all available ratings by Moody’s Investor Service Inc., Standard & Poor’s Ratings Services and Fitch, Inc. The resulting discount rates were 5.04% and 5.28% for pension and other postretirement benefit plans, respectively, as of December 31, 2013 . These assumptions can have an effect on the amounts reported in our consolidated financial statements. For example, a 0.25% decrease in the discount rate or expected return on plan assets or a 0.25% increase in the rate of compensation increase would have the following effects (in thousands):
 
 
Pension 
Benefits
 
Other
Postretirement
Benefits
Increase in benefit obligation as of December 31, 2013 from:
 
 
 
Discount rate decrease
$
4,451

 
$
303

Compensation rate increase
1,784

 
n/a

Increase in net periodic benefit cost for the year ending
December 31, 2014 resulting from:
 
 
 
Discount rate decrease
$
397

 
$
35

Expected return on plan assets decrease
170

 
n/a

Compensation rate increase
393

 
n/a



37

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

None.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining effective internal control over financial reporting as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934. Our management assessed the effectiveness of NuStar GP Holdings, LLC’s internal control over financial reporting as of December 31, 2013 . In its evaluation, management used the criteria set forth by the Committee of Sponsoring Organization of the Treadway Commission (COSO) in Internal Control-Integrated Framework (1992) . Based on this assessment, management believes that, as of December 31, 2013 , our internal control over financial reporting was effective based on those criteria.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

The effectiveness of internal control over financial reporting as of December 31, 2013 has been audited by KPMG LLP, the independent registered public accounting firm who audited our consolidated financial statements included in this Form 10-K. KPMG LLP’s attestation on the effectiveness of our internal control over financial reporting appears on page 40.


38
Table of Contents

Report of Independent Registered Public Accounting Firm
The Board of Directors and Members
of NuStar GP Holdings, LLC:
We have audited the accompanying consolidated balance sheets of NuStar GP Holdings, LLC and subsidiaries (the Company) as of December 31, 2013 and 2012, and the related consolidated statements of comprehensive income (loss), members’ equity, and cash flows for each of the years in the three-year period ended December 31, 2013. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of NuStar GP Holdings, LLC and subsidiaries as of December 31, 2013 and 2012, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2013, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), NuStar GP Holdings, LLC and subsidiaries’ internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control – Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 3, 2014 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
/s/    KPMG LLP
San Antonio, Texas
March 3, 2014


39
Table of Contents

Report of Independent Registered Public Accounting Firm
The Board of Directors and Members
of NuStar GP Holdings, LLC:
We have audited NuStar GP Holdings, LLC and subsidiaries’ (the Company’s) internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control – Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, NuStar GP Holdings, LLC and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control – Integrated Framework (1992) issued by COSO.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of NuStar GP Holdings, LLC and subsidiaries as of December 31, 2013 and 2012, and the related consolidated statements of comprehensive income (loss), members’ equity, and cash flows for each of the years in the three-year period ended December 31, 2013, and our report dated March 3, 2014 expressed an unqualified opinion on those consolidated financial statements.
 
/s/    KPMG LLP
San Antonio, Texas
March 3, 2014




40
Table of Contents

NUSTAR GP HOLDINGS, LLC
CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars)
 
 
December 31,
 
2013
 
2012
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
1,603

 
$
2,597

Receivable from related parties
9,617

 
7,870

Income tax receivable
1,198

 
2,450

Other receivables
77

 
147

Deferred income tax assets, net
1,047


928

Other current assets
245

 
248

Total current assets
13,787

 
14,240

Investment in NuStar Energy L.P.
357,456

 
464,981

Long-term receivable from related party
41,139

 
18,071

Deferred income tax assets, net
—

 
20,424

Total assets
$
412,382

 
$
517,716

Liabilities and Members’ Equity
 
 
 
Current liabilities:
 
 
 
Short-term debt
$
26,000

 
$
20,000

Accounts payable
324

 
1,002

Accrued compensation expense
12,318

 
14,968

Accrued liabilities
536

 
429

Taxes other than income tax
1,240

 
1,399

Total current liabilities
40,418

 
37,798

Deferred income tax liabilities, net
3,671

 
—

Long-term liabilities
18,307

 
67,096

Commitments and contingencies ( Note 11 )

 

Members’ equity
341,045

 
444,844

Accumulated other comprehensive income (loss)
8,941

 
(32,022
)
Total members’ equity
349,986

 
412,822

Total liabilities and members’ equity
$
412,382

 
$
517,716

See Notes to Consolidated Financial Statements.


41
Table of Contents

NUSTAR GP HOLDINGS, LLC
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Thousands of Dollars, Except Unit and Per Unit Data)
 
 
Year Ended December 31,
 
2013
 
2012
 
2011
Equity in (loss) earnings of NuStar Energy L.P.
$
(6,741
)
 
$
(4,578
)
 
$
65,783

General and administrative expenses
(3,105
)
 
(3,337
)
 
(3,298
)
Other income, net
382

 
9,801

 
7,320

Interest expense, net
(778
)
 
(624
)
 
(570
)
(Loss) income before income tax (expense) benefit
(10,242
)
 
1,262

 
69,235

Income tax (expense) benefit
(792
)
 
866

 
401

Net (loss) income
(11,034
)
 
2,128

 
69,636

Other comprehensive income (loss):
 
 
 
 
 
Share of NuStar Energy L.P.’s other comprehensive loss
(674
)
 
(4,297
)
 
(12,580
)
Pension and other postretirement benefit plan adjustments:
 
 
 
 
 
Net unrecognized gain (loss) arising during the year, net of income tax
(expense) benefit of ($23,552), $3,879 and $6,599
39,596

 
(6,574
)
 
(11,094
)
Net loss reclassified into income
2,041

 
1,514

 
538

Pension and other postretirement benefit plan adjustments
41,637

 
(5,060
)
 
(10,556
)
Total other comprehensive income (loss)
40,963

 
(9,357
)
 
(23,136
)
Comprehensive income (loss)
$
29,929

 
$
(7,229
)
 
$
46,500

Basic and diluted net (loss) income per unit
$
(0.26
)
 
$
0.05

 
$
1.64

Weighted-average number of basic units outstanding
42,619,722

 
42,576,858

 
42,546,096

Weighted-average number of diluted units outstanding
42,619,722

 
42,584,667

 
42,572,617

See Notes to Consolidated Financial Statements.


42
Table of Contents

NUSTAR GP HOLDINGS, LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
 
 
Year Ended December 31,
 
2013
 
2012
 
2011
Cash Flows from Operating Activities:
 
 
 
 
 
Net (loss) income
$
(11,034
)
 
$
2,128

 
$
69,636

Adjustments to reconcile net (loss) income to net cash (used in)
provided by operating activities:
 
 
 
 
 
Equity in loss (earnings) of NuStar Energy L.P.
6,741

 
4,578

 
(65,783
)
Distributions of equity in earnings from NuStar Energy L.P.
—

 
—

 
65,783

Gain related to NuStar Energy L.P.’s issuance of limited partner units
—

 
(10,689
)
 
(8,074
)
(Gain) loss on sale of NuStar Energy L.P. limited partner units in
connection with unit-based compensation
(382
)
 
888

 
754

Expense (benefit) for deferred income tax
424

 
(443
)
 
(264
)
Changes in current assets and liabilities ( Note 9 )
(4,000
)
 
(3,638
)
 
(584
)
Decrease in other assets
—

 
—

 
1,189

Increase in long-term receivable from related party
(22,984
)
 
(3,278
)
 
(4,414
)
Increase in long-term liabilities
16,452

 
12,528

 
5,621

Other, net
209

 
471

 
466

Net cash (used in) provided by operating activities
(14,574
)
 
2,545

 
64,330

Cash Flows from Investing Activities:
 
 
 
 
 
Distributions in excess of equity in earnings from NuStar Energy L.P.
96,134

 
92,628

 
20,323

Investment in NuStar Energy L.P.
(3,913
)
 
(18,005
)
 
(17,031
)
Proceeds from sale of NuStar Energy L.P. units in connection with
unit-based compensation
8,271

 
8,552

 
10,894

Net cash provided by investing activities
100,492

 
83,175

 
14,186

Cash Flows from Financing Activities:
 
 
 
 
 
Proceeds from short-term debt borrowings
26,000

 
21,000

 
6,000

Repayment of short-term debt
(20,000
)
 
(17,500
)
 
(5,500
)
Distributions to unitholders
(92,912
)
 
(88,345
)
 
(82,966
)
Other, net
—

 
368

 
—

Net cash used in financing activities
(86,912
)
 
(84,477
)
 
(82,466
)
Net (decrease) increase in cash and cash equivalents
(994
)
 
1,243

 
(3,950
)
Cash and cash equivalents as of the beginning of the period
2,597

 
1,354

 
5,304

Cash and cash equivalents as of the end of the period
$
1,603

 
$
2,597

 
$
1,354

See Notes to Consolidated Financial Statements.

43
Table of Contents

NUSTAR GP HOLDINGS, LLC
CONSOLIDATED STATEMENTS OF MEMBERS’ EQUITY
(Thousands of Dollars, Except Unit Data)
 
 
Units
 
Members’
Equity
 
Accumulated
Other
Comprehensive
(Loss) Income
 
Total
Balance as of January 1, 2011
42,544,659

 
$
540,992

 
$
471

 
$
541,463

Net income
—

 
69,636

 
—

 
69,636

Other comprehensive loss
—

 
—

 
(23,136
)
 
(23,136
)
Distributions to unitholders
—

 
(82,966
)
 
—

 
(82,966
)
Unit-based compensation
13,841

 
1,886

 
—

 
1,886

Balance as of December 31, 2011
42,558,500

 
529,548

 
(22,665
)
 
506,883

Net income
—

 
2,128

 
—

 
2,128

Other comprehensive loss
—

 
—

 
(9,357
)
 
(9,357
)
Distributions to unitholders
—

 
(88,345
)
 
—

 
(88,345
)
Unit-based compensation
41,691

 
1,513

 
—

 
1,513

Balance as of December 31, 2012
42,600,191

 
444,844

 
(32,022
)
 
412,822

Net loss
—

 
(11,034
)
 
—

 
(11,034
)
Other comprehensive income
—

 
—

 
40,963

 
40,963

Distributions to unitholders
—

 
(92,912
)
 
—

 
(92,912
)
Unit-based compensation
56,090

 
147

 
—

 
147

Balance as of December 31, 2013
42,656,281

 
$
341,045

 
$
8,941

 
$
349,986

See Notes to Consolidated Financial Statements.


44

NUSTAR GP HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2013, 2012, and 2011

1. ORGANIZATION

NuStar GP Holdings, LLC (NuStar GP Holdings) (NYSE: NSH), a publicly held Delaware limited liability company, was formed in June 2000. Unless otherwise indicated, the terms “NuStar GP Holdings,” “we,” “our” and “us” are used in this report to refer to NuStar GP Holdings, LLC, to one or more of our consolidated subsidiaries or to all of them taken as a whole.

Our unitholders have no liability under our limited liability company agreement, or for any of our debts, obligations or liabilities, in their capacity as a unitholder.

We have no operations or sources of income or cash flows other than our investment in NuStar Energy L.P. (NuStar Energy) (NYSE: NS). On December 31, 2013 , we owned approximately 14.9% of NuStar Energy, consisting of the following:
•
the 2% general partner interest;
•
100% of the incentive distribution rights (IDR) issued by NuStar Energy, which entitle us to receive increasing percentages of the cash distributed by NuStar Energy, currently at the maximum percentage of 23% ; and
•
10,228,945 common units of NuStar Energy representing a 12.9% limited partner interest.

NuStar Energy is a publicly held Delaware limited partnership engaged in the terminalling and storage of petroleum products, the transportation of petroleum products and anhydrous ammonia, and the marketing of petroleum products. NuStar Energy has terminal and storage facilities in the United States, Canada, Mexico, the Netherlands, including St. Eustatius in the Caribbean, the United Kingdom and Turkey.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Consolidation
The accompanying consolidated financial statements include the accounts of NuStar GP Holdings and subsidiaries in which it has a controlling interest. Intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. On an ongoing basis, management reviews their estimates based on currently available information. Management may revise estimates due to changes in facts and circumstances.

Cash and Cash Equivalents
Cash equivalents are all highly liquid investments with an original maturity of three months or less when acquired.
 
Investment in NuStar Energy
We account for our 14.9% investment in NuStar Energy using the equity method. As the general partner, we exercise significant influence over NuStar Energy, even though our ownership did not exceed 20% as of December 31, 2013 . We evaluate our investment in NuStar Energy for impairment when there is evidence that we may not be able to recover the carrying amount of our investment or that the investee is unable to sustain an earnings capacity that justifies the carrying amount. We recognize a loss in the value of our investment that is other than a temporary decline currently in earnings based on the difference between the estimated current fair value of the investment and our carrying amount. We believe that the carrying amount of our investment in NuStar Energy as of December 31, 2013 is recoverable.

Accounting for Sales of Units by NuStar Energy
We account for issuances of common units by NuStar Energy as if we had sold a proportionate share of our investment, such that we record any gain or loss in earnings. Please refer to Note 4 for a description of the issuances of common units by NuStar Energy.


45
NUSTAR GP HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)


Income Taxes
We are a limited liability company taxed as a partnership and generally are not subject to federal or state income taxes. Accordingly, our taxable income or loss, which may vary substantially from income or loss reported for financial reporting purposes, is generally included in the federal and state income tax returns of our unitholders. For transfers of publicly held units subsequent to our initial public offering, we have made an election permitted by Section 754 of the Internal Revenue Code (the Code) to adjust the common unit purchaser’s tax basis in our underlying assets to reflect the purchase price of the units. This results in an allocation of taxable income and expenses to the purchaser of the common units, including depreciation deductions and gains and losses on sales of assets, based upon the new unitholder’s purchase price for the common units.

On August 14, 2006, NuStar GP, LLC, our wholly owned subsidiary, elected to be treated as a corporation for federal income tax purposes under Treasury Regulation §301.7701-3(a). We account for income taxes under the asset and liability method. Under this method, we recognize deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. We measure deferred taxes using enacted tax rates expected to apply to taxable income in the year those temporary differences are expected to be recovered or settled.

Income tax expense includes federal and state income and withholding taxes currently payable and deferred federal and state income taxes resulting from temporary differences between financial statement and tax bases of assets and liabilities when such differences exist. We, or certain of our subsidiaries, file income tax returns in the U.S. federal jurisdiction and various state jurisdictions. For U.S. federal and state purposes, tax years subject to examination are 2009 through 2012 .

We recognize a tax position if it is more likely than not that the tax position will be sustained, based on the technical merits of the position, upon examination. We record uncertain tax positions in the financial statements at the largest amount of benefit that is more likely than not to be realized. We had no unrecognized tax benefits as of December 31, 2013 and 2012 .

Unit-Based Compensation
We account for awards of NS unit options, performance awards and restricted units to employees and directors of NuStar GP, LLC at fair value, whereby a liability for the award is initially recorded and subsequent changes in the fair value are included in the determination of net income. The fair value of NS unit options is determined using the Black-Scholes model at each reporting date. The fair value of NS restricted units and performance awards equals the market price of NS common units at each reporting date. However, performance awards are earned only upon NuStar Energy’s achievement of an objective performance measure. We record compensation expense each reporting period such that the cumulative compensation expense equals the portion of the award’s current fair value that has vested. We record compensation expense related to NS unit options until such options are exercised, and we record compensation expense for NS restricted units and performance awards until the date of vesting.

We account for awards of NSH restricted units and unit options granted to employees of NuStar GP, LLC and our directors based on the fair value of the awards at the grant date. The fair value of NSH unit options is determined using the Black-Scholes model at the grant date, and the fair value of the NSH restricted units equals the market price of NSH common units at the grant date. Compensation expense for NSH restricted units and unit options is recognized ratably over the vesting period based on the initial fair value determination.

The liability for awards of NS unit options, performance awards and restricted units is included in “Accrued compensation expense” on our consolidated balance sheets. NuStar Energy reimburses us for the expenses resulting from NS awards and NSH awards to employees providing services to NuStar Energy. Expenses resulting from NSH awards to our non-employee directors are included in “General and administrative expenses” on our consolidated statements of comprehensive income (loss).

Under these long-term incentive plans, certain awards provide that the grantee’s award vests immediately upon retirement. Compensation expense is recognized immediately if these awards are granted to retirement-eligible employees. In addition, if, during a vesting period of a grant, the grantee will become retirement-eligible, then compensation expense associated with the grant is recognized from the grant date through the grantee’s retirement eligibility date. Currently, employees are typically retirement eligible at age 55.

Pension and Other Postretirement Benefits
We recognize the overfunded or underfunded status of our defined benefit pension or postretirement plans as an asset or a liability as of the balance sheet dates. We record changes in the funded status of our plans as a component of comprehensive income (loss) in the year the changes occur.

46
NUSTAR GP HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)


3. NEW ACCOUNTING PRONOUNCEMENTS

Other Comprehensive Income
In February 2013, the Financial Accounting Standards Board further amended the disclosure requirements for the presentation of comprehensive income. The amended guidance requires that entities present, either in a single note or parenthetically on the face of the financial statements, the effect of significant amounts reclassified from each component of accumulated other comprehensive income and the income statement line items affected by the reclassification. The amended guidance is effective prospectively for annual and interim reporting periods beginning after December 15, 2012. Accordingly, we adopted the amended guidance January 1, 2013, and it did not have a material impact on our disclosures.

4. INVESTMENT IN NUSTAR ENERGY

NuStar Energy’s Equity Offerings
On September 10, 2012, NuStar Energy issued 7,130,000 common units representing limited partner interests at a price of $48.94 per unit. NuStar Energy received proceeds of $336.8 million , net of issuance costs. In conjunction with NuStar Energy’s issuance of common units, we contributed $7.1 million to NuStar Energy in order to maintain our 2% general partner interest and our ownership in NuStar Energy was reduced from 16.3% at December 31, 2011 to 15.0% at December 31, 2012. This issuance resulted in a gain of $10.7 million for the year ended December 31, 2012, which is included in “Other income, net” on our consolidated statements of comprehensive income (loss), and represents the increase in the value of our proportionate share of NuStar Energy’s capital.

On December 9, 2011, NuStar Energy issued 6,037,500 common units representing limited partner interests at a price of $53.45 per unit. NuStar Energy received proceeds of $311.4 million , net of issuance costs. In September and October 2011, NuStar Energy issued 108,029 common units for proceeds of $5.9 million , net of issuance costs. In conjunction with NuStar Energy’s issuances of common units in 2011, we contributed $6.7 million to NuStar Energy in order to maintain our 2% general partner interest. Additionally, these issuances resulted in a gain of $8.1 million for the year ended December 31, 2011, which is included in “Other income, net” on our consolidated statements of comprehensive income and represents the increase in the value of our proportionate share of NuStar Energy’s capital. Following these issuances, our ownership in NuStar Energy was reduced from 17.6% at December 31, 2010 to 16.3% at December 31, 2011.

NuStar Energy’s Acquisitions and Dispositions
On January 1, 2013 , NuStar Energy sold its fuels refinery in San Antonio, Texas (the San Antonio Refinery) and related assets, which included inventory, a terminal in Elmendorf, Texas and a pipeline connecting the terminal and refinery for approximately $117.0 million (the San Antonio Refinery Sale). NuStar Energy presented the results of operations for the San Antonio Refinery and related assets as discontinued operations for all periods presented.

On December 13, 2012 , NuStar Energy completed its acquisition of the TexStar Crude Oil Assets (as defined below), including 100% of the partnership interest in TexStar Crude Oil Pipeline, LP, from TexStar Midstream Services, LP and certain of its affiliates (collectively, TexStar) for $325.4 million (the TexStar Asset Acquisition). The TexStar Crude Oil Assets consist of approximately 140 miles of crude oil pipelines and gathering lines, as well as five terminals and storage facilities providing 0.6 million barrels of storage capacity.

On September 28, 2012 , NuStar Energy sold a 50% ownership interest (the Asphalt Sale) in NuStar Asphalt LLC (Asphalt JV), previously a wholly owned subsidiary of NuStar Energy. Asphalt JV owns and operates the asphalt refining assets that were previously wholly owned by NuStar Energy (collectively, the Asphalt Operations). Upon closing, NuStar Energy deconsolidated Asphalt JV and started reporting its remaining investment in Asphalt JV using the equity method of accounting.


47
NUSTAR GP HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)


Summary Financial Information
Condensed consolidated financial information reported by NuStar Energy is presented below:
 
December 31,
 
2013
 
2012
 
(Thousands of Dollars)
Balance Sheet Information:
 
 
 
Current assets
$
633,549

 
$
939,443

Property, plant and equipment, net
3,310,653

 
3,238,460

Goodwill
617,429

 
951,024

Other non-current assets
470,555

 
484,162

Total assets
$
5,032,186

 
$
5,613,089

Current liabilities
$
392,572

 
$
845,971

Long-term debt, less current portion
2,655,553

 
2,124,582

Other non-current liabilities
80,267

 
57,541

Total liabilities
3,128,392

 
3,028,094

NuStar Energy partners’ equity
1,902,136

 
2,572,384

Noncontrolling interest
1,658

 
12,611

Total liabilities and partners’ equity
$
5,032,186

 
$
5,613,089

 
 
Year Ended December 31,
 
2013
 
2012
 
2011
 
(Thousands of Dollars)
Statement of Income (Loss) Information:
 
 
 
 
 
Revenues
$
3,463,732

 
$
5,945,736

 
$
6,257,629

Operating (loss) income
$
(19,121
)
 
$
(18,168
)
 
$
310,883

 
 
 
 
 
 
(Loss) income from continuing operations
$
(185,509
)
 
$
(166,001
)
 
$
218,674

(Loss) income from discontinued operations, net of tax
(99,162
)
 
(61,236
)
 
2,927

Net (loss) income
$
(284,671
)
 
$
(227,237
)
 
$
221,601



48
NUSTAR GP HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)


Other
Our investment in NuStar Energy reconciles to NuStar Energy’s total partners’ equity as follows:
 
December 31,
 
2013
 
2012
 
(Thousands of Dollars)
NuStar Energy’s partners’ equity
$
1,902,136

 
$
2,572,384

NuStar GP Holdings’ ownership interest in NuStar Energy
14.9
%
 
15.0
%
NuStar GP Holdings’ share of NuStar Energy’s partners’ equity
283,418

 
385,858

Step-up in basis related to NuStar Energy’s assets and liabilities,
including equity method goodwill, and other
74,038

 
79,123

Investment in NuStar Energy
$
357,456

 
$
464,981

 
Valero Energy Corporation (Valero Energy) acquired us in connection with its December 31, 2001 acquisition of Ultramar Diamond Shamrock Corporation (2001 Acquisition). The step-up in basis related to NuStar Energy’s assets and liabilities, including equity method goodwill, reflected in the table above relates to purchase accounting adjustments resulting from the 2001 Acquisition. The amount represents the unamortized excess of the fair value over carrying amount applicable to Valero Energy’s proportionate 73.6% interest in NuStar Energy’s identifiable assets and liabilities as of December 31, 2001, of which $81.8 million is being amortized as a reduction to equity in earnings of NuStar Energy over approximately 28 years. This amount also includes the portion of goodwill resulting from the 2001 Acquisition that was attributed to our investment in NuStar Energy. Since 26.4% of the equity interest in NuStar Energy was owned by public unitholders as of the date of the 2001 Acquisition, a significant portion of the total ownership interest in NuStar Energy was deemed to be held by the public according to GAAP, thereby preventing the adjustment of the reported financial statements of NuStar Energy.

The following table summarizes our equity in (loss) earnings of NuStar Energy:
 
Year Ended December 31,
 
2013
 
2012
 
2011
 
(Thousands of Dollars)
NuStar GP Holdings’ Equity in (Loss) Earnings of NuStar Energy:
 
 
 
 
 
General partner interest
$
(6,338
)
 
$
(5,356
)
 
$
3,703

General partner incentive distribution (a)
43,220

 
41,242

 
36,319

General partner’s interest in earnings and
incentive distributions of NuStar Energy
36,882

 
35,886

 
40,022

Limited partner interest in (loss) earnings of NuStar Energy
(40,739
)
 
(37,580
)
 
28,645

Amortization of step-up in basis related to
NuStar Energy’s assets and liabilities
(2,884
)
 
(2,884
)
 
(2,884
)
Equity in (loss) earnings of NuStar Energy
$
(6,741
)
 
$
(4,578
)
 
$
65,783

(a)
Our equity in (loss) earnings of NuStar Energy allocated to the general partner incentive distribution is less than the actual distribution made with respect to 2011, due to NuStar Energy’s issuance of common units after the end of the third quarter, but before the record date.

5. RELATED PARTY TRANSACTIONS

General
We manage NuStar Energy through our ownership of NuStar GP, LLC and Riverwalk Holdings, LLC, which own Riverwalk Logistics L.P., the general partner of NuStar Energy. Our officers are also officers of NuStar GP, LLC. The chairman of our board of directors, William E. Greehey, is also the chairman of the board of directors of NuStar GP, LLC. The board of directors of NuStar GP, LLC is responsible for overseeing NuStar GP, LLC’s role as the general partner of the general partner of NuStar Energy, and we, as the sole owner of NuStar GP, LLC, must also approve matters that have or would reasonably be expected to have a material effect on our interests as the sole owner of NuStar GP, LLC.

Asphalt JV is directed by a board of managers, which is comprised of eight members. William E. Greehey is the chairman of the board of managers for Asphalt JV.


49
NUSTAR GP HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)


We had a receivable from related parties of $9.6 million and $7.9 million , as of December 31, 2013 and 2012 , respectively, mainly relating to payroll, employee benefit plans and unit-based compensation for our employees providing services to NuStar Energy and NuStar Energy’s joint ventures. We also had a long-term receivable from related party of $41.1 million and $18.1 million as of December 31, 2013 and 2012 , respectively, related to amounts payable for retiree medical benefits and other post-employment benefits. The following table summarizes information pertaining to related party transactions:
 
Year Ended December 31,
 
2013
 
2012
 
2011
 
(Thousands of Dollars)
Expenses for payroll, employee benefit plans and unit-based compensation
$
190,643

 
$
225,135

 
$
216,380

Other expenses
$
434

 
$
437

 
$
402


GP Services Agreement
NuStar Energy and NuStar GP, LLC, our wholly owned subsidiary, entered into a services agreement, effective January 1, 2008 (the GP Services Agreement). The GP Services Agreement provides that NuStar GP, LLC will furnish administrative and certain operating services necessary to conduct the business of NuStar Energy. All employees providing services to both NuStar GP Holdings and NuStar Energy are employed by NuStar GP, LLC; therefore, NuStar Energy reimburses NuStar GP, LLC for all employee costs, other than the expenses allocated to NuStar GP Holdings (the Holdco Administrative Services Expense). The Holdco Administrative Services Expense is based on $1.1 million, plus 1.0% of NuStar GP, LLC’s domestic bonus and unit-based compensation expense, subject to certain other adjustments. The GP Services Agreement will terminate on December 31, 2014 , renewing automatically every two years unless terminated by either party upon six months’ prior written notice. For the years ended December 31, 2013 , 2012 and 2011 , the Holdco Administrative Services Expense totaled $1.4 million , $1.3 million and $1.4 million , respectively.

Non-Compete Agreement
On July 19, 2006, in connection with our initial public offering, we entered into a non-compete agreement with NuStar Energy (the Non-Compete Agreement). Under the Non-Compete Agreement, we will have a right of first refusal with respect to the potential acquisition of general partner and other equity interests in publicly traded partnerships under common ownership with the general partner interest. NuStar Energy has a right of first refusal with respect to the potential acquisition of assets that relate to the transportation, storage or terminalling of crude oil, feedstocks or refined petroleum products (including petrochemicals) in the United States and internationally. With respect to any other business opportunities, neither we nor NuStar Energy are prohibited from engaging in any business, even if we and NuStar Energy would have a conflict of interest with respect to such other business opportunity. The Non-Compete Agreement remains in effect for so long as we or any of our affiliates own 20% or more of NuStar GP, LLC or Riverwalk Logistics, L.P.

Asphalt JV Services Agreement
In conjunction with NuStar Energy’s Asphalt Sale, NuStar GP, LLC entered into a services agreement with Asphalt JV, effective September 28, 2012 (the Asphalt JV Services Agreement). The Asphalt JV Services Agreement provides that NuStar GP, LLC furnish certain administrative and other operating services necessary to conduct the business of Asphalt JV. Asphalt JV compensates us for these services through an annual fee totaling $10.0 million, subject to adjustment based on the annual merit increase percentage applicable to our employees for the most recently completed contract year. The Asphalt JV Services Agreement will terminate on December 31, 2017 and will automatically renew for successive two-year terms. Asphalt JV may terminate the Asphalt JV Services Agreement at any time, with 180 days prior written notice or reduce the level of service with 45 days prior written notice . During the year ended December 31, 2013, Asphalt JV provided written notice to reduce the level of services that we provide to Asphalt JV to 63% of the original service level. The aggregate amounts of the Asphalt JV Services Agreement charged was $7.9 million for the year ended December 31, 2013.

Asphalt JV Employee Services Agreement
In conjunction with NuStar Energy’s Asphalt Sale, NuStar GP, LLC entered into an employee services agreement with Asphalt JV, effective September 28, 2012 (the Asphalt JV Employee Services Agreement). The Asphalt JV Employee Services Agreement provided that certain of NuStar GP, LLC employees would provide employee-services to Asphalt JV. In exchange, Asphalt JV would reimburse us for the compensation expense of those employees at the same rates that were in effect at the effective date of the Asphalt JV Employee Services Agreement, including an annual bonus amount that does not exceed our target bonus plan. The employees covered under the Asphalt JV Employee Services Agreement were not entitled to any new unit-based compensation grants from us, and Asphalt JV was not responsible for unit-based compensation costs prior to the effective date. The Asphalt JV Employee Services Agreement terminated on December 31, 2012 , and effective January 1, 2013, those employees became employees of Asphalt JV.

50
NUSTAR GP HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



6. DISTRIBUTIONS FROM NUSTAR ENERGY

NuStar Energy’s partnership agreement, as amended, determines the amount and priority of cash distributions that NuStar Energy’s common unitholders and general partner may receive. We, as NuStar Energy’s general partner, are entitled to incentive distributions if the amount NuStar Energy distributes with respect to any quarter exceeds $0.60 per unit, with the maximum percentage of 23% of the amount of any quarterly distribution in excess of $0.66 per unit. We also receive a 2% distribution with respect to our general partner interest.

The following table reflects the allocation of NuStar Energy’s cash distributions earned for the periods indicated among its general and limited partners:
 
Year Ended December 31,
 
2013
 
2012
 
2011
 
(Thousands of Dollars, Except Per Unit Data)
General partner interest
$
7,844

 
$
7,486

 
$
6,630

General partner incentive distribution
43,220

 
41,242

 
36,326

Total general partner distribution
51,064

 
48,728

 
42,956

Limited partner distribution
44,975

 
45,152

 
44,812

Total distributions to NuStar GP Holdings
96,039

 
93,880

 
87,768

Public unitholders’ distributions
296,165

 
280,374

 
243,738

Total cash distributions
$
392,204

 
$
374,254

 
$
331,506

Cash distributions per unit applicable to limited partners
$
4.380

 
$
4.380

 
$
4.360


The following table summarizes information related to NuStar Energy’s quarterly cash distributions:
Quarter Ended
 
Cash Distributions Per Unit
 
Total Cash Distributions (Thousands of Dollars)
 
Record Date
 
Payment Date
December 31, 2013 (a)
 
$
1.095

 
$
98,051

 
February 10, 2014
 
February 14, 2014
September 30, 2013
 
$
1.095

 
$
98,051

 
November 11, 2013
 
November 14, 2013
June 30, 2013
 
$
1.095

 
$
98,051

 
August 5, 2013
 
August 9, 2013
March 31, 2013
 
$
1.095

 
$
98,051

 
May 6, 2013
 
May 10, 2013
(a)
The distribution was announced on January 30, 2014 .
 
7. ACCRUED COMPENSATION EXPENSE AND LONG-TERM LIABILITIES

Accrued compensation expense and long-term liabilities consisted of the following:
 
Accrued Compensation Expense
 
Long-term Liabilities
 
December 31,
 
December 31,
 
2013
 
2012
 
2013
 
2012
 
(Thousands of Dollars)
NuStar Energy restricted units
$
6,224

 
$
10,376

 
$
—

 
$
—

Pension liabilities ( Note 14 )
2,333

 
137

 
9,726

 
44,640

Other postretirement benefit plan liabilities ( Note 14 )
141

 
243

 
7,013

 
20,719

Other employee-related liabilities
3,620

 
4,212

 
1,568

 
1,737

Total
$
12,318

 
$
14,968

 
$
18,307

 
$
67,096



51
NUSTAR GP HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)


8. FAIR VALUE MEASUREMENTS

We segregate the inputs used in measuring fair value into three levels: Level 1, defined as observable inputs such as quoted prices for identical assets or liabilities in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable, such as quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in markets that are not active; and Level 3, defined as unobservable inputs in which little or no market data exists.

The following liabilities are measured at fair value on a recurring basis:
 
December 31, 2013
 
Level 1
 
Level 2
 
Level 3
 
Total
 
(Thousands of Dollars)
Accrued compensation expense:
 
 
 
 
 
 
 
NuStar Energy restricted units
$
6,224

 
$
—

 
$
—

 
$
6,224

Total
$
6,224

 
$
—

 
$
—

 
$
6,224

 
 
December 31, 2012
 
Level 1
 
Level 2
 
Level 3
 
Total
 
(Thousands of Dollars)
Accrued compensation expense:
 
 
 
 
 
 
 
NuStar Energy restricted units
$
10,376

 
$
—

 
$
—

 
$
10,376

Total
$
10,376

 
$
—

 
$
—

 
$
10,376


Fair Value of Financial Instruments
We recognize cash equivalents, receivables, payables and short-term debt in our consolidated balance sheets at their carrying amount. The fair values of these financial instruments approximate their carrying amounts. The fair value of our short-term debt would fall in Level 2 of the fair value hierarchy.

9. STATEMENTS OF CASH FLOWS

Changes in current assets and current liabilities were as follows:
 
Year Ended December 31,
 
2013
 
2012
 
2011
 
(Thousands of Dollars)
Decrease (increase) in current assets:
 
 
 
 
 
Receivable from related parties
$
338

 
$
1,077

 
$
5,771

Income tax receivable
1,252

 
(780
)
 
(1,339
)
Other receivables
70

 
211

 
550

Other current assets
(187
)
 
(210
)
 
(62
)
Increase (decrease) in current liabilities:
 
 
 
 
 
Accounts payable
(678
)
 
542

 
104

Accrued compensation expense
(4,743
)
 
(4,557
)
 
(5,601
)
Accrued liabilities
107

 
(33
)
 
64

Income tax payable
—

 
—

 
(302
)
Taxes other than income tax
(159
)
 
112

 
231

Changes in current assets and current liabilities
$
(4,000
)
 
$
(3,638
)
 
$
(584
)


52
NUSTAR GP HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)


Cash flows related to interest and income tax were as follows:
 
Year Ended December 31,
 
2013
 
2012
 
2011
 
(Thousands of Dollars)
Cash paid for interest
$
561

 
$
475

 
$
385

Cash (refunded) paid for income tax, net
$
(885
)
 
$
356

 
$
1,504


Non-cash investing and financing activities for the years ended December 31, 2013 , 2012 and 2011 mainly consisted of:

•
Adjustments to our investment in NuStar Energy and accumulated other comprehensive loss through recognition of our proportionate share of NuStar Energy’s accumulated other comprehensive loss; and
•
Pension funding adjustments recognized in accumulated other comprehensive income (loss).

10. CREDIT FACILITY

Borrowings under our revolving credit facility are used to fund capital contributions to NuStar Energy to maintain our 2% general partner interest when NuStar Energy issues additional common units and to meet other liquidity and capital resource requirements. Our 364-day revolving credit agreement dated June 28, 2013 matures on June 27, 2014 and has a borrowing capacity of up to $40.0 million , of which, up to $10.0 million may be available for letters of credit (the 2013 Credit Facility). Our obligations under the 2013 Credit Facility are guaranteed by Riverwalk Holdings, LLC (Riverwalk), a wholly owned subsidiary. Riverwalk pledged 1,792,918 NuStar Energy units that it owns to secure its guarantee.

As of December 31, 2013 , we had outstanding borrowings of $26.0 million and availability of $14.0 million for borrowings under the 2013 Credit Facility. Interest on the 2013 Credit Facility is based upon, at our option, either an alternative base rate, plus 1.00% or a LIBOR-based rate, plus 2.00% . As of December 31, 2013 , the interest rate was 2.2% .

The terms of the 2013 Credit Facility require NuStar Energy to maintain, as of the end of each rolling period, which consists of any period of four consecutive fiscal quarters, a consolidated debt coverage ratio not to exceed 5.0-to-1.0. If NuStar Energy consummates an acquisition for an aggregate net consideration of at least $50.0 million, the maximum consolidated debt coverage ratio will increase to 5.5-to-1.0 for two rolling periods. As of December 31, 2013 , NuStar Energy’s consolidated debt coverage ratio was 4.4 x. We are also required to receive cash distributions of at least $12.5 million in respect of our ownership interests in NuStar Energy each fiscal quarter . Our management believes that we are in compliance with the covenants of the 2013 Credit Facility as of December 31, 2013 .

We borrowed $26.0 million under the 2013 Credit Facility during the year ended December 31, 2013 , mainly to repay $18.5 million on our previous revolving credit facility and to repay $7.5 million to NuStar Energy for employee benefits and related costs. During the year ended December 31, 2013 , our repayments totaled $20.0 million under the 2013 Credit Facility. The weighted-average interest rate related to borrowings under the 2013 Credit Facility for the year ended December 31, 2013 was 2.1% .

11. COMMITMENTS AND CONTINGENCIES

Contingencies
We are not currently a party to any material legal proceedings and have not recorded any accruals for loss contingencies. NuStar Energy is a party to claims and legal proceedings arising in the ordinary course of its business, which it believes are not material to its financial position or results of operations. However, due to the inherent uncertainty of litigation, there can be no assurance that the resolution of any particular claim or proceeding would not have a material adverse effect on NuStar Energy’s results of operations and ability to pay distributions, which would impact our ability to pay distributions.

Commitments
As of December 31, 2013 , we had no future minimum payments applicable to non-cancellable operating leases and purchase obligations.


53
NUSTAR GP HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)


12. NET (LOSS) INCOME PER UNIT

We treat restricted units granted under our long-term incentive plan as participating securities in computing net (loss) income per unit pursuant to the two-class method. The computation of diluted net (loss) income for the year ended December 31, 2013 excludes outstanding options to purchase NuStar GP Holdings units, as the exercise price exceeded the market price and their effect would be anti-dilutive. The outstanding options to purchase NuStar GP Holdings units totaled 289,100 as of December 31, 2013 . Unit amounts used in the computation of basic and diluted net income per unit were as follows:
 
Year Ended December 31,
 
2013
 
2012
 
2011
Basic units outstanding:
 
 
 
 
 
Weighted-average number of basic units outstanding
42,619,722

 
42,576,858

 
42,546,096

Diluted units outstanding:
 
 
 
 
 
Weighted-average number of basic units outstanding
42,619,722

 
42,576,858

 
42,546,096

Effect of dilutive securities
—

 
7,809

 
26,521

Weighted-average number of diluted units outstanding
42,619,722

 
42,584,667

 
42,572,617


13. MEMBERS’ EQUITY

Accumulated Other Comprehensive (Loss) Income
The following table presents changes in accumulated other comprehensive loss by component:
 
Share of
NuStar
Energy’s Other
Comprehensive
Income (Loss)
 
Pension and
Other
Postretirement
Benefit Plan
Adjustments
 
Accumulated
Other
Comprehensive
(Loss) Income
 
(Thousands of Dollars)
Balance as of January 1, 2011
$
8,134

 
$
(7,663
)
 
$
471

Other comprehensive loss before reclassification adjustments
(12,580
)
 
(11,094
)
 
(23,674
)
Amounts reclassified to general and administrative expenses (a)
—

 
538

 
538

Other comprehensive loss
(12,580
)
 
(10,556
)
 
(23,136
)
Balance as of December 31, 2011
(4,446
)
 
(18,219
)
 
(22,665
)
Other comprehensive loss before reclassification adjustments
(4,297
)
 
(6,574
)
 
(10,871
)
Amounts reclassified to general and administrative expenses (a)
—

 
1,514

 
1,514

Other comprehensive loss
(4,297
)
 
(5,060
)
 
(9,357
)
Balance as of December 31, 2012
(8,743
)
 
(23,279
)
 
(32,022
)
Other comprehensive (loss) income before reclassifications
(674
)
 
39,596

 
38,922

Amounts reclassified to general and administrative expenses (a)
—

 
2,041

 
2,041

Other comprehensive (loss) income
(674
)
 
41,637

 
40,963

Balance as of December 31, 2013
$
(9,417
)
 
$
18,358

 
$
8,941

(a)
We recognized the net loss reclassified into income as general and administrative expenses. NuStar Energy reimburses us for these employee costs.


54
NUSTAR GP HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)


Cash Distributions
Our limited liability company agreement requires that, within 50 days after the end of each quarter, we distribute all of our available cash to the holders of record of our units on the applicable record date. Available cash is defined as all cash on hand at the end of any calendar quarter, less the amount of cash reserves necessary or appropriate, as determined in good faith by our board of directors. The following table summarizes our cash distributions applicable to the period in which the distributions were earned:
 
Year Ended December 31,
 
2013
 
2012
 
2011
 
(Thousands of Dollars, Except Per Unit Data)
 
Cash distributions per unit
$
2.18

 
$
2.11

 
$
1.98

Total cash distributions
$
92,938

 
$
89,860

 
$
84,252


The following table summarizes information related to our quarterly cash distributions:
Quarter Ended
 
Cash Distributions Per Unit
 
Total Cash Distributions (Thousands of Dollars)
 
Record Date
 
Payment Date
December 31, 2013 (a)
 
$
0.545

 
$
23,249

 
February 10, 2014
 
February 18, 2014
September 30, 2013
 
$
0.545

 
$
23,231

 
November 11, 2013
 
November 19, 2013
June 30, 2013
 
$
0.545

 
$
23,236

 
August 5, 2013
 
August 14, 2013
March 31, 2013
 
$
0.545

 
$
23,222

 
May 6, 2013
 
May 15, 2013
(a)
The distribution was announced on January 30, 2014 .
 
Rights Agreement
On July 19, 2006, we entered into a rights agreement with Computershare Investor Services, LLC, as amended effective February 28, 2008 and October 23, 2012 (the Rights Agreement), under which one preferred unit purchase right (a Right) is attached to each of our outstanding units. The Rights become exercisable under specified circumstances, including if any person or group (an acquiring person) becomes the beneficial owner of 15% or more of our outstanding units, subject to specified exceptions. Each Right entitles the registered holder to purchase from us one one-hundredth of a unit of junior participating preferred units, series I (Preferred Units) at an exercise price of $100, subject to adjustment under specified circumstances. If events specified in the Rights Agreement occur, each holder of Rights other than the acquiring person can exercise their Rights. When a holder exercises a Right, the holder will be entitled to receive units valued at a multiple of the exercise price of the Right specified in the Rights Agreement. In some cases, the holder will receive cash, property or other securities instead of units. We may redeem the Rights for $0.001 per Right at any time prior to the tenth day after a person or group becomes an acquiring person.

The Rights will expire on June 30, 2016, unless extended or earlier redeemed or exchanged, and are protected by customary anti-dilution provisions. Preferred Units purchasable upon exercise of the Rights will not be redeemable. Each Preferred Unit will be entitled to share in our distributions of available cash pro rata with the units. In the event of liquidation, the holders of the Preferred Units will be entitled to a minimum preferential liquidation payment of $100 per unit. Each Preferred Unit will have 100 votes, voting together with the units. Finally, in the event of any merger, consolidation or other transaction in which units are exchanged, each Preferred Unit will be entitled to receive 100 times the amount received per unit.

14. EMPLOYEE BENEFIT PLANS

The NuStar Thrift Plan
The NuStar Thrift Plan (the Thrift Plan) is a qualified employee profit-sharing plan that became effective June 26, 2006. Participation in the Thrift Plan is voluntary and is open to substantially all NuStar GP, LLC employees upon their date of hire, except for part-time employees (as defined in the Thrift Plan), who become eligible upon completing one year of service (as defined in the Thrift Plan). Thrift Plan participants can contribute from 1% up to 30% of their total annual compensation to the Thrift Plan in the form of pre-tax and/or after tax employee contributions. NuStar GP, LLC makes matching contributions in an amount equal to 100% of each participant’s employee contributions up to a maximum of 6% of the participant’s total annual compensation. Our matching contributions to the Thrift Plan for the years ended December 31, 2013 , 2012 and 2011 totaled $5.9 million , $6.9 million and $6.5 million , respectively.


55
NUSTAR GP HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)


NuStar GP, LLC also maintains an excess thrift plan (the Excess Thrift Plan) that became effective July 1, 2006. The Excess Thrift Plan is a nonqualified deferred compensation plan that provides benefits to those employees of NuStar GP, LLC whose compensation and/or annual contributions under the Thrift Plan are subject to the limitations applicable to qualified retirement plans under the Code.

Pension and Other Postretirement Benefits
The NuStar Pension Plan (the Pension Plan) is a qualified non-contributory defined benefit pension plan that became effective July 1, 2006. The Pension Plan covers substantially all of NuStar GP, LLC’s employees and generally provides eligible employees with retirement income calculated under a final average pay formula (FAP) or a cash balance formula. Employees hired before January 1, 2011 are covered under FAP, which is based on years of service and compensation during their period of service, and employees become fully vested in their benefits upon attaining five years of vesting service. Employees hired on January 1, 2011 and after are covered under the cash balance formula, which is based on age, service and interest credits, and employees become fully vested in their benefits upon attaining three years of vesting service. Effective January 1, 2014, the Pension Plan was amended to freeze the FAP benefit as of December 31, 2013, and going forward, employees will be covered under the cash balance formula.

NuStar GP, LLC also maintains an excess pension plan (the Excess Pension Plan) which is a nonqualified deferred compensation plan that provides benefits to a select group of management or other highly compensated employees of NuStar GP, LLC. The supplemental executive retirement plan (the SERP) has no participants, and it will terminate in 2014 upon a final payment to the former participants.

None of the Excess Thrift Plan, the Excess Pension Plan or the SERP is intended to constitute either a qualified plan under the provisions of Section 401 of the Code or a funded plan subject to the Employee Retirement Income Security Act.

NuStar GP, LLC also provides a medical benefits plan for retired employees. In 2013, the plan was amended for employees that retire on or after April 1, 2014 to provide a defined subsidy for eligible third-party health care premiums.

NuStar Energy reimbursed and will continue to reimburse all costs incurred by us related to these employee benefit plans at cost. We charged NuStar Energy $18.2 million , $23.6 million , and $13.7 million for the years ended December 31, 2013 , 2012 and 2011 , respectively, for these employee benefit plans, including disposition charges. Our current and noncurrent liabilities for these employee benefits are included in “Accrued compensation expense” and “Long-term liabilities,” respectively, on our consolidated balance sheets.

The Pension Plan, Excess Pension Plan and SERP are collectively referred to as the Pension Plans in the tables and discussion below. We use December 31 as the measurement date for our pension and other postretirement plans.

Effective January 1, 2013, Asphalt JV employees became employees of Asphalt JV and were 100% vested in the Pension Plan, as a result of the disposition.



56
NUSTAR GP HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)


The changes in the benefit obligation, the changes in fair value of plan assets, the funded status and the amounts recognized in our consolidated balance sheet for our Pension Plans and other postretirement benefit plans as of and for the years ended December 31, 2013 and 2012 were as follows:
 
Pension Plans
 
Other Postretirement
Benefit Plans
 
2013
 
2012
 
2013
 
2012
 
(Thousands of Dollars)
Change in benefit obligation:
 
 
 
 
 
 
 
Benefit obligation, January 1
$
114,046

 
$
78,017

 
$
20,962

 
$
18,672

Service cost
16,321

 
15,614

 
1,171

 
1,258

Interest cost
5,036

 
4,012

 
940

 
976

Transfer to joint venture
—

 
—

 
(1,284
)
 
(90
)
Disposition charges (a)
180

 
4,397

 
—

 
1,284

Plan amendments
(24,560
)
 
(295
)
 
(11,822
)
 
(2,420
)
Benefits paid
(7,353
)
 
(1,647
)
 
(248
)
 
(149
)
Participants contributions
—

 
—

 
125

 
62

Actuarial (gain) loss
(15,708
)
 
18,359

 
(2,690
)
 
2,622

Curtailment (a)
(330
)
 
(4,411
)
 
—

 
(1,253
)
Benefit obligation, December 31
$
87,632

 
$
114,046

 
$
7,154

 
$
20,962

Change in plan assets:
 
 
 
 
 
 
 
Plan assets at fair value, January 1
$
69,269

 
$
53,787

 
$
—

 
$
—

Actual return on plan assets
11,905

 
6,063

 
—

 
—

Company contributions
1,752

 
11,066

 
123

 
87

Benefits paid
(7,353
)
 
(1,647
)
 
(248
)
 
(149
)
Participants contributions
—

 
—

 
125

 
62

Plan assets at fair value, December 31
$
75,573

 
$
69,269

 
$
—

 
$
—

Reconciliation of funded status:
 
 
 
 
 
 
 
Fair value of plan assets at December 31
$
75,573

 
$
69,269

 
$
—

 
$
—

Less: Benefit obligation at December 31
87,632

 
114,046

 
7,154

 
20,962

Funded status at December 31
$
(12,059
)
 
$
(44,777
)
 
$
(7,154
)
 
$
(20,962
)
Amounts recognized in the consolidated balance sheets:
 
 
 
 
 
 
 
Accrued compensation expense
$
(2,333
)
 
$
(137
)
 
$
(141
)
 
$
(243
)
Long-term liabilities
(9,726
)
 
(44,640
)
 
(7,013
)
 
(20,719
)
Net pension liability
$
(12,059
)
 
$
(44,777
)
 
$
(7,154
)
 
$
(20,962
)
 
(a)
Disposition charge in 2013 relates to NuStar Energy’s San Antonio Refinery Sale and the curtailment in 2013 relates to the SERP retirement benefits. Disposition charges and curtailment in 2012 relate to the Asphalt Sale.


57
NUSTAR GP HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)


The components of net periodic benefit cost related to our Pension Plans and other postretirement benefit plans, which are reimbursed to us by NuStar Energy, were as follows:
 
Pension Plans
 
Other Postretirement
Benefit Plans
 
Year Ended December 31,
 
Year Ended December 31,
 
2013
 
2012
 
2011
 
2013
 
2012
 
2011
 
(Thousands of Dollars)
Components of net periodic benefit
cost:
 
 
 
 
 
 
 
 
 
 
 
Service cost
$
16,321

 
$
15,614

 
$
12,484

 
$
1,171

 
$
1,258

 
$
1,040

Interest cost
5,036

 
4,012

 
2,881

 
940

 
976

 
888

Expected return on plan assets
(4,535
)
 
(3,917
)
 
(3,617
)
 
—

 
—

 
—

Amortization of prior service credit
(41
)
 
(18
)
 
(18
)
 
(198
)
 
—

 
—

Amortization of net loss
2,071

 
1,393

 
485

 
209

 
139

 
71

Net periodic benefit cost before other charges
18,852


17,084

 
12,215

 
2,122

 
2,373

 
1,999

Other charges (a)
847

 
4,397

 
—

 
—

 
1,284

 
—

Net periodic benefit cost
$
19,699

 
$
21,481

 
$
12,215

 
$
2,122

 
$
3,657

 
$
1,999


(a)
In 2013 other charges for the Pension Plans include an Excess Pension settlement, disposition charges and a curtailment gain associated with the SERP retirement benefits. Other charges in 2012 include disposition charges related to Asphalt JV.

Adjustments recognized in other comprehensive income (loss) related to our Pension Plans and other postretirement benefit plans were as follows:
 
Pension Plans
 
Other Postretirement
Benefit Plans
 
Year Ended December 31,
 
Year Ended December 31,
 
2013
 
2012
 
2011
 
2013
 
2012
 
2011
 
(Thousands of Dollars)
Net unrecognized gain (loss)
arising during the year:
 
 
 
 
 
 
 
 
 
 
 
Net actuarial gain (loss) (a)
$
24,122

 
$
(11,800
)
 
$
(16,260
)
 
$
2,690

 
$
(1,368
)
 
$
(1,433
)
Prior service credit
24,514

 
295

 
—

 
11,822

 
2,420

 
—

Net unrealized gain (loss)
arising during the year
48,636

 
(11,505
)
 
(16,260
)
 
14,512

 
1,052

 
(1,433
)
Net loss reclassified into income:
 
 
 
 
 
 
 
 
 
 
 
Amortization of prior service credit
(41
)
 
(18
)
 
(18
)
 
(198
)
 
—

 
—

Amortization of net loss
2,071

 
1,393

 
485

 
209

 
139

 
71

Net loss reclassified into income
2,030

 
1,375

 
467

 
11

 
139

 
71

 
 
 
 
 
 
 
 
 
 
 
 
Income tax (expense) benefit
(18,053
)
 
4,269

 
6,064

 
(5,499
)
 
(390
)
 
535

Total changes in other
comprehensive income (loss)
$
32,613

 
$
(5,861
)
 
$
(9,729
)
 
$
9,024

 
$
801

 
$
(827
)

(a) In 2013 net actuarial gain (loss) for the Pension Plans includes an Excess Pension settlement and in 2012 includes the Asphalt JV curtailment.

58
NUSTAR GP HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)


The amounts recorded as a component of accumulated other comprehensive loss related to our Pension Plans and other postretirement benefit plans were as follows:
 
Pension Plans
 
Other Postretirement
Benefit Plans
 
December 31,
 
December 31,
 
2013
 
2012
 
2011
 
2013
 
2012
 
2011
 
(Thousands of Dollars)
Unrecognized actuarial loss (a)
$
(10,283
)
 
$
(36,476
)
 
$
(26,069
)
 
$
(2,289
)
 
$
(5,188
)
 
$
(3,959
)
Prior service credit (a)
24,853

 
380

 
103

 
14,044

 
2,420

 
—

Deferred tax (liability) asset
(3,639
)
 
14,414

 
10,145

 
(4,328
)
 
1,171

 
1,561

Accumulated other comprehensive
income (loss), net of tax
$
10,931

 
$
(21,682
)
 
$
(15,821
)
 
$
7,427

 
$
(1,597
)
 
$
(2,398
)
 
(a)
Represents the balance of accumulated other comprehensive income (loss) that has not been recognized as a component of net periodic benefit cost.

In 2014, we expect to recognize $0.2 million and $0.1 million of the unrecognized actuarial loss for Pension Plans and other postretirement benefit plans, respectively. The aggregate accumulated benefit obligation for our Pension Plans as of December 31, 2013 and 2012 was $86.9 million and $84.6 million , respectively. As of December 31, 2013 and 2012 , the aggregate accumulated benefit obligation for the Pension Plans exceeded plan assets.

The investment policies and strategies for the assets of our qualified Pension Plan incorporate a well-diversified approach that is expected to earn long-term returns from capital appreciation and a growing stream of current income. This approach recognizes that assets are exposed to risk, and the market value of the Pension Plan’s assets may fluctuate from year to year. Risk tolerance is determined based on NuStar Energy’s financial ability to withstand risk within the investment program and the willingness to accept return volatility. In line with the investment return objective and risk parameters, the Pension Plan’s mix of assets includes a diversified portfolio of equity and fixed-income instruments. The aggregate asset allocation is reviewed on an annual basis. As of December 31, 2013 , the target allocations for plan assets are 65% equity securities and 35% fixed income investments.

The overall expected long-term rate of return on plan assets for the Pension Plan is estimated using models of asset returns. Model assumptions are derived using historical data with the assumption that capital markets are informationally efficient. Three models are used to derive the long-term expected returns for each asset class. Since each method has distinct advantages and disadvantages and differing results, an equal weighted average of the methods’ results is used.

We disclose the fair value for each major class of plan assets in the Pension Plan into three levels: Level 1, defined as observable inputs such as quoted prices for identical assets or liabilities in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable, such as quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in markets that are not active; and Level 3, defined as unobservable inputs in which little or no market data exists.

59
NUSTAR GP HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)


The major classes of plan assets measured at fair value for the Pension Plan, were as follows:
 
December 31, 2013
 
Level 1
 
Level 2
 
Level 3
 
Total
 
(Thousands of Dollars)
Asset class:
 
 
 
 
 
 
 
Cash equivalent securities
$
1,552

 
$
—

 
$
—

 
$
1,552

Equity securities:
 
 
 
 
 
 
 
U.S. large cap equity fund (a)
—

 
45,756

 
—

 
45,756

International stock index fund (b)
7,652

 
—

 
—

 
7,652

Fixed income securities:
 
 
 
 
 
 
 
Bond market index fund (c)
20,613

 
—

 
—

 
20,613

Total
$
29,817

 
$
45,756

 
$
—

 
$
75,573

 
 
December 31, 2012
 
Level 1
 
Level 2
 
Level 3
 
Total
 
(Thousands of Dollars)
Asset class:
 
 
 
 
 
 
 
Cash equivalent securities
$
1,294

 
$
—

 
$
—

 
$
1,294

Equity securities:
 
 
 
 
 
 
 
U.S. large cap equity fund (a)
—

 
39,676

 
—

 
39,676

International stock index fund (b)
6,652

 
—

 
—

 
6,652

Fixed income securities:
 
 
 
 
 
 
 
Bond market index fund (c)
21,647

 
—

 
—

 
21,647

Total
$
29,593

 
$
39,676

 
$
—

 
$
69,269


(a)
This fund is a low-cost equity index fund not actively managed that tracks the S&P 500. Fair values were estimated using pricing models, quoted prices of securities with similar characteristics or discounted cash flows.
(b)
This fund tracks the performance of the Total International Composite Index.
(c)
This fund tracks the performance of the Barclays Capital U.S. Aggregate Bond Index.

For the year ended December 31, 2013 , we contributed $1.8 million to the Pension Plans. We expect to contribute approximately $4.3 million to the Pension Plans during 2014, which principally represents contributions either required by regulations or laws, or with respect to unfunded plans, necessary to fund current benefits. Since costs incurred by us related to the Pension Plan and our other postretirement benefit plan are reimbursed by NuStar Energy, funding for these plans will primarily be provided by NuStar Energy.

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid for the years ending December 31:  
 
Pension Plans
 
Other
Postretirement
Benefit Plans
 
(Thousands of Dollars)
2014
$
7,129

 
$
141

2015
$
5,337

 
$
168

2016
$
5,833

 
$
196

2017
$
6,971

 
$
220

2018
$
7,392

 
$
252

Years 2019-2023
$
49,601

 
$
1,992



60
NUSTAR GP HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)


The weighted-average assumptions used to determine the benefit obligations were as follows:
 
Pension Plans
 
Other
Postretirement
Benefit Plans
 
December 31,
 
December 31,
 
2013
 
2012
 
2013
 
2012
Discount rate
5.04
%
 
4.48
%
 
5.28
%
 
4.51
%
Rate of compensation increase
3.51
%
 
3.69
%
 
n/a  

 
n/a  


The weighted-average assumptions used to determine the net periodic benefit cost were as follows:
 
Pension Plans
 
Other Postretirement
Benefit Plans
 
Year Ended December 31,
 
Year Ended December 31,
 
2013
 
2012
 
2011
 
2013
 
2012
 
2011
Discount rate
4.48
%
 
5.21
%
 
5.82
%
 
4.51
%
 
5.25
%
 
5.80
%
Expected long-term rate of
return on plan assets
6.75
%
 
7.00
%
 
7.50
%
 
n/a  

 
n/a  

 
n/a  

Rate of compensation increase
3.69
%
 
4.05
%
 
4.07
%
 
n/a  

 
n/a  

 
n/a  


The assumed health care cost trend rates were as follows:  
 
December 31,
 
2013
 
2012
Health care cost trend rate assumed for next year
7.45
%
 
7.64
%
Rate to which the cost trend rate was assumed to decline (the ultimate trend rate)
5.00
%
 
5.00
%
Year that the rate reached the ultimate trend rate
2020

 
2020


Assumed health care cost trend rates have a significant effect on the amounts reported for health care plans. We sponsor a contributory postretirement health care plan. The plan has an annual limitation (a cap) on the increase of the employer’s share of the cost of covered benefits. The cap on the increase in employer’s cost is 2.5% per year. The assumed increase in total health care cost exceeds the 2.5% indexed cap, so increasing or decreasing the health care cost trend rate by 1% does not materially change our obligation or expense for the postretirement health care plan.



61
NUSTAR GP HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)


15. UNIT-BASED COMPENSATION

As of December 31, 2013 , we sponsored the following long-term incentive plans:
•
The Fourth Amended and Restated 2000 Long-Term Incentive Plan (the 2000 LTIP), under which NuStar GP, LLC may award up to 3,250,000 NuStar Energy (NS) common units. Awards under the 2000 LTIP can include NS unit options, restricted units, performance awards, distribution equivalent rights (DER) and contractual rights to receive common units. As of December 31, 2013 , NS common units that remained available to be awarded totaled 1,517,027 under the 2000 LTIP.
•
The 2006 Long-Term Incentive Plan (the 2006 LTIP) under which NuStar GP Holdings may award up to 2,000,000 NuStar GP Holdings (NSH) units to our employees, consultants and directors who perform services for us or our affiliates. Awards under the 2006 LTIP can include NSH unit options, performance awards, DER, restricted units, phantom units, unit grants and unit appreciation rights. As of December 31, 2013, a total of 1,494,177 NSH units remained available to be awarded under the 2006 LTIP.

The 2003 Employee Unit Incentive Plan (the UIP), under which NuStar GP, LLC awarded NS common units to employees of NuStar GP, LLC or its affiliates, terminated on June 16, 2013. The 2002 Unit Option Plan (the UOP), under which NuStar GP, LLC awarded NS unit options to officers and directors of NuStar GP, LLC or its affiliates, terminated on March 22, 2012.

We purchase NS common units as needed to satisfy awards granted under the 2000 LTIP, the UOP and the UIP.

The number of awards granted under the above-noted plans were as follows:  
 
Year Ended December 31,
 
2013
 
2012
 
2011
 
Granted
 
Vesting
 
Granted
 
Vesting
 
Granted
 
Vesting
2000 LTIP:
 
 
 
 
 
 
 
 
 
 
 
Performance awards
38,786

 
(a)
 
33,445

 
(a)
 
27,111

 
(a)
Restricted units (b)
269,182

 
1/5 per year
 
231,855

 
1/5 per year
 
208,195

 
1/5 per year
Restricted units (grants to non-employee directors of NuStar GP, LLC)
8,904

 
1/3 per year
 
8,170

 
1/3 per year
 
6,760

 
1/3 per year
UIP:
 
 
 
 
 
 
 
 
 
 
 
Restricted units (c)
—

 
—

 
15,382

 
1/5 per year
 
14,005

 
1/5 per year
2006 LTIP:
 
 
 
 
 
 
 
 
 
 
 
Restricted units
18,620

 
1/5 per year
 
25,640

 
1/5 per year
 
24,970

 
1/5 per year
Restricted units (grants to non-employee directors of NuStar GP Holdings) (d)
13,183

 
1/3 per year
 
10,601

 
1/3 per year
 
9,987

 
1/3 per year
 
(a)
Performance awards vest 1/3 per year if certain performance measures are met, as defined in the award agreements.
(b)
The 2000 LTIP restricted unit grants include 3,882 restricted unit awards granted to certain international employees for the year ended December 31, 2013 , that vest 1/3 per year, as defined in the award agreements.
(c)
The UIP restricted unit grants include 3,392 and 2,880 restricted unit awards granted to certain international employees for the years ended December 31, 2012 and 2011 , respectively, that vest 1/3 per year, as defined in the award agreements.
(d)
Expenses resulting from our awards to non-employee directors are not reimbursed by NuStar Energy and are included in “General and administrative expenses” on our consolidated statements of comprehensive income (loss).


62
NUSTAR GP HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)


As of December 31, 2013 and 2012 , we had accrued $6.2 million and $10.4 million , respectively, for the outstanding awards of NS unit options, performance awards and restricted units in “Accrued compensation expense” on our consolidated balance sheets.

The following table summarizes information pertaining to long-term incentive plan compensation expenses:
 
Year Ended December 31,
 
2013
 
2012
 
2011
 
(Thousands of Dollars)
Long-term incentive plan compensation expense
charged to NuStar Energy
$
7,369

 
$
7,745

 
$
8,521

Expenses resulting from NuStar GP Holdings awards
to non-employee directors
19

 
305

 
305


Unit Options
Under the terms of our unit option plan, the exercise price of options granted is not less than the fair market value of our common units on the date of grant. Options become exercisable pursuant to the individual written agreements between the participants and us, usually in five equal annual installments beginning at the date of grant, with unexercised options expiring seven to ten years from the date of grant.

The fair value of each NSH unit option grant was estimated using the Black-Scholes option-pricing model on the grant date. The expected life of NSH unit options granted is the period of time from the grant date to the date of expected exercise or other expected settlement. Expected volatility for NSH unit options is based on closing prices of NSH common units for periods corresponding to the life of options granted. Expected distribution yield is based on annualized distributions at the grant date for NSH unit options. The risk-free interest rate used is the implied yield currently available from the U.S. Treasury zero-coupon issues with a remaining term equal to the expected life of the options at the grant date for NSH unit options.

On November 16, 2007, we granted 324,100 NSH unit options at $31.55, which was our only grant of options under the 2006 LTIP. These options expire seven years from the grant date and vest in annual one-third increments beginning on November 16, 2010. The total intrinsic value of unit options exercised during each of the years ended December 31, 2013 and December 31, 2012 was $0.1 million . As of December 31, 2013 , the aggregate intrinsic value of NSH unit options outstanding and exercisable was zero as their market value at December 31, 2013 was less than their exercise price. The number of NSH unit options exercised during each of the years ended December 31, 2013 and 2012 was 11,666 and 11,667 , respectively. No NSH unit options were exercised during the year ended December 31, 2011. The balance of NSH unit options outstanding was 289,100 and 300,766 as of December 31, 2013 and 2012 , respectively.

The following table summarizes the status of vested NSH unit options granted under the 2006 LTIP:  
 
Number of
Unit Options
 
Weighted-
Average
Exercise
Price
Per Unit
 
Weighted-
Average
Remaining
Contractual
Term
 
 
 
 
 
(in years)
Outstanding and exercisable as of December 31, 2013
289,100

 
$
31.55

 
0.9



63
NUSTAR GP HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)


Restricted Units
The following table summarizes information related to outstanding NSH restricted units awarded under the 2006 LTIP:
 
 
Restricted
Unit Grants
to Employees
 
Restricted
Unit Grants
to Non-
Employee
Directors
 
Total
 
Weighted-
Average
Grant-Date
Fair Value
Per Unit
Balance as of January 1, 2013
65,418

 
19,311

 
84,729

 
$
29.74

Granted
18,620

 
13,183

 
31,803

 
$
27.87

Vested
(44,834
)
 
(11,300
)
 
(56,134
)
 
$
29.66

Balance as of December 31, 2013
39,204

 
21,194

 
60,398

 
$
28.83


The weighted-average grant-date fair value of NSH restricted units granted during the years ended December 31, 2013 , 2012 and 2011 was $27.87 , $28.77 and $30.53 per unit, respectively. The total fair value of NSH restricted units that vested during the years ended December 31, 2013 , 2012 and 2011 was $1.5 million , $1.0 million and $0.7 million , respectively.

16. INCOME TAXES

Components of income tax (expense) benefit were as follows:  
 
Year Ended December 31,
 
2013
 
2012
 
2011
 
(Thousands of Dollars)
Current:
 
 
 
 
 
U.S. federal
$
—

 
$
465

 
$
129

U.S. state
(368
)
 
(42
)
 
8

Total current
(368
)
 
423

 
137

Deferred:
 
 
 
 
 
U.S. federal
(599
)
 
433

 
251

U.S. state
175

 
10

 
13

Total deferred
(424
)
 
443

 
264

Total income tax (expense) benefit
$
(792
)
 
$
866

 
$
401

 
The difference between income tax expense recorded in our consolidated statements of income and income taxes computed by applying the statutory federal income tax rate ( 35% for all years presented) to income before income tax expense is due to the fact that the majority of our income is not subject to federal income tax based on our status as a limited liability company.


64
NUSTAR GP HOLDINGS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)


The tax effects of significant temporary differences representing deferred income tax assets and liabilities were as follows:
 
 
December 31,
 
2013
 
2012
 
(Thousands of Dollars)
Deferred income tax assets:
 
 
 
Share/option compensation
$
2,976

 
$
4,444

Pension
4,318

 
15,815

Capital loss
474

 
270

Other state
—

 
1,263

Net operating loss
3,519

 
1,104

Foreign tax credits
44

 
20

Deferred income tax assets
11,331

 
22,916

Deferred income tax liabilities:
 
 
 
Investment in Riverwalk Logistics, L.P. and NuStar Energy
(233
)
 
(213
)
Other state
(191
)
 
—

Other employee benefits
(13,531
)
 
(1,351
)
Total net deferred income tax (liabilities) assets
$
(2,624
)
 
$
21,352


At December 31, 2013 , our U.S. corporate operations had capital loss carryforwards for tax purposes, which were subject to a five-year carryforward limitation and were set to expire in 2017. The realization of deferred income tax assets recorded as of December 31, 2013 is dependent upon our ability to generate future taxable income in the United States. We believe that it is more-likely-than-not that the deferred tax assets as of December 31, 2013 will be realized, based upon expected future taxable income and potential tax planning strategies.

17. QUARTERLY FINANCIAL DATA (UNAUDITED)
 
 
First
Quarter
 
Second
Quarter
 
Third
Quarter
 
Fourth
Quarter
 
Total
 
(Thousands of Dollars, Except Per Unit Data)
2013:
 
Net income (loss)
$
11,075

 
$
12,559

 
$
12,035

 
$
(46,703
)
 
$
(11,034
)
Basic and diluted net income (loss) per unit
0.26

 
0.29

 
0.29

 
(1.10
)
 
(0.26
)
Cash distributions per unit applicable to
limited partners
0.545

 
0.545

 
0.545

 
0.545

 
2.180

2012:
 
 
 
 
 
 
 
 
 
Net income (loss)
$
11,046

 
$
(33,208
)
 
$
19,165

 
$
5,125

 
$
2,128

Basic and diluted net income (loss) per unit
0.26

 
(0.78
)
 
0.45

 
0.12

 
0.05

Cash distributions per unit applicable to
limited partners
0.510

 
0.510

 
0.545

 
0.545

 
2.110



65

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.


ITEM 9A. CONTROLS AND PROCEDURES
DISCLOSURE CONTROLS AND PROCEDURES
Our management has evaluated, with the participation of our principal executive officer and principal financial officer, the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the Exchange Act)) as of the end of the period covered by this report, and has concluded that our disclosure controls and procedures were operating effectively as of December 31, 2013 .
INTERNAL CONTROL OVER FINANCIAL REPORTING
(a)
Management’s Report on Internal Control over Financial Reporting.
Management’s report on NuStar GP Holdings, LLC’s internal control over financial reporting required by Item 9A. appears in Item 8. of this report, and is incorporated herein by reference.
(b)    Attestation Report of the Registered Public Accounting Firm.
The report of KPMG LLP on NuStar GP Holdings, LLC’s internal control over financial reporting appears in Item 8. of this Form 10-K, and is incorporated herein by reference.
(c)    Changes in Internal Controls over Financial Reporting.
There has been no change in our internal control over financial reporting that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM  9B. OTHER INFORMATION
None.


66
Table of Contents

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS AND EXECUTIVE OFFICERS OF NUSTAR GP HOLDINGS, LLC
Information required to be disclosed under this Item 10 appears under the following headings in the Company’s Proxy Statement for the 2014 annual meeting of unitholders and is hereby incorporated by reference: “Information Regarding the Board of Directors,” “Independent Directors,” “Audit Committee,” “Code of Ethics of Senior Financial Officers,” “Proposal No. 1 Election of Directors,” “Information Concerning Nominees and Other Directors” and “Certain Relationships and Related Transactions.”
Information regarding executive officers is included in Part I of this Form 10-K as permitted by General Instruction G(3).

ITEM 11. EXECUTIVE COMPENSATION
Information required to be disclosed under this Item 11 appears under the following headings in the Company’s Proxy Statement for the 2014 annual meeting of unitholders and is hereby incorporated by reference: “Compensation Committee,” “Compensation Discussion and Analysis,” “Compensation of Directors,” “Executive Compensation” and “Certain Relationships and Related Transactions.”

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED UNITHOLDER MATTERS
Information required to be disclosed under this Item 12 appears under the following headings in the Company’s Proxy Statement for the 2014 annual meeting of unitholders and is hereby incorporated by reference: “Beneficial Ownership” and “Equity Compensation Plan Information.”

ITEM  13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Information required to be disclosed under this Item 13 appears under the following headings in the Company’s Proxy Statement for the 2014 annual meeting of unitholders and is hereby incorporated by reference: “Certain Relationships and Related Transactions” and “Independent Directors.”

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Information required to be disclosed under this Item 14 appears under the following headings in the Company’s Proxy Statement for the 2014 annual meeting of unitholders and is hereby incorporated by reference: “KPMG LLP Fees for Fiscal Years 2013, 2012 and 2011” and “Audit Committee Pre-Approval Policy.”


67
Table of Contents

PART IV
 
ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

 
(a)
(1
)
 
Financial Statements.  The following consolidated financial statements of NuStar GP Holdings, LLC and its subsidiaries are included in Part II, Item 8 of this Form 10-K:
 
 
 
NUSTAR GP HOLDINGS, LLC:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(2
)
 
Financial Statement Schedules and Other Financial Information. No financial statement schedules are submitted because either they are inapplicable or because the required information is included in the consolidated financial statements or notes thereto.
 
(3
)
 
Exhibits.
 
 
 
Filed as part of this Form 10-K are the following:
 
Exhibit
Number
  
Description
  
Incorporated by Reference
to the Following Document
 
 
 
 
 
2.01

  
Agreement and Plan of Merger, dated as of October 31, 2004, by and among Valero L.P., Riverwalk Logistics, L.P., Valero GP, LLC, VLI Sub A LLC and Kaneb Services LLC
  
NuStar Energy L.P.’s Current Report on Form 8-K filed November 4, 2004 (File No. 001-16417), Exhibit 99.1
 
 
 
 
 
2.02

  
Agreement and Plan of Merger, dated as of October 31, 2004, by and among Valero L.P., Riverwalk Logistics, L.P., Valero GP, LLC, VLI Sub B LLC and Kaneb Pipe Line Partners, L.P. and Kaneb Pipe Line Company LLC
  
NuStar Energy L.P.’s Current Report on Form 8-K filed November 4, 2004 (File No. 001-16417), Exhibit 99.2
 
 
 
 
 
3.01

  
Certificate of Formation of UDS Logistics, LLC, dated June 5, 2000
  
NuStar GP Holdings, LLC’s Amendment No. 2 to Registration Statement on Form S-1 filed June 15, 2006 (File No. 333-132917), Exhibit 3.01
 
 
 
 
 
3.02

  
Certificate of Amendment of Certificate of Formation of UDS Logistics, LLC, dated January 19, 2006
  
NuStar GP Holdings, LLC’s Amendment No. 2 to Registration Statement on Form S-1 filed June 15, 2006 (File No. 333-132917), Exhibit 3.03
 
 
 
 
 
3.03

  
Amendment to Certificate of Formation of Valero GP Holdings, LLC, dated March 21, 2007 and effective April 1, 2007
  
NuStar GP Holdings, LLC’s Current Report on Form 8-K, filed March 27, 2007 (File No. 001-32940), Exhibit 3.01
 
 
 
 
 
3.04

  
Second Amended and Restated Limited Liability Company Agreement of Valero GP Holdings, LLC
  
NuStar GP Holdings, LLC’s Current Report on Form 8-K, filed July 25, 2006 (File No. 001-32940), Exhibit 3.01
 
 
 
 
 
4.01

  
Amended and Restated Certificate of Limited Partnership of Shamrock Logistics, L.P., effective January 1, 2002
  
NuStar Energy L.P.’s Annual Report on Form 10-K for year ended December 31, 2001 (File No. 001-16417), Exhibit 3.3
 
 
 
 
 
4.02

  
Amendment to Certificate of Limited Partnership of Valero L.P., dated March 21, 2007 and effective April 1, 2007
  
NuStar Energy L.P.’s Current Report on Form 8-K, filed March 27, 2007 (File No. 001-16417), Exhibit 3.01
 
 
 
 
 
4.03

  
Third Amended and Restated Agreement of Limited Partnership of Valero L.P., dated as of March 18, 2003
  
NuStar Energy L.P.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2003 (File No. 001-16417), Exhibit 3.1

68
Table of Contents

Exhibit
Number
  
Description
  
Incorporated by Reference
to the Following Document
 
 
 
 
 
4.04

  
Amendment No. 1 to Third Amended and Restated Agreement of Limited Partnership of Valero L.P., dated as of March 11, 2004
  
NuStar Energy L.P.’s Annual Report on Form 10-K for year ended December 31, 2003 (File No. 001-16417), Exhibit 4.3
 
 
 
 
 
4.05

  
Amendment No. 2 to Third Amended and Restated Agreement of Limited Partnership of Valero L.P., dated as of July 1, 2005
  
NuStar Energy L.P.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005 (File No. 001-16417), Exhibit 4.01
 
 
 
 
 
4.06

  
Amendment No. 3 to Third Amended and Restated Agreement of Limited Partnership of NuStar Energy L.P., dated as of April 10, 2008
  
NuStar Energy L.P.’s Annual Report on Form 10-K for year ended December 31, 2001 (File No. 001-16417), Exhibit 3.8
 
 
 
 
 
4.07

  
Amended and Restated Certificate of Limited Partnership of Shamrock Logistics Operations, L.P., dated as of January 7, 2002
  
NuStar Energy L.P.’s Annual Report on Form 10-K for year ended December 31, 2001 (File No. 001-16417), Exhibit 3.8
 
 
 
 
 
4.08

  
Certificate of Amendment to Certificate of Limited Partnership of Valero Logistics Operations, L.P., dated March 21, 2007 and effective April 1, 2007
  
NuStar GP Holdings, LLC’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2007 (File No. 001-32940), Exhibit 3.04
 
 
 
 
 
4.09

  
Second Amended and Restated Agreement of Limited Partnership of Shamrock Logistics Operations, L.P., dated as of April 16, 2001
  
NuStar Energy L.P.’s Annual Report on Form 10-K for year ended December 31, 2001 (File No. 001-16417), Exhibit 3.9
 
 
 
 
 
4.10

  
First Amendment to Second Amended and Restated Agreement of Limited Partnership of Shamrock Logistics Operations, L.P., effective as of April 16, 2001
  
NuStar Energy L.P.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2001 (File No. 001-16417), Exhibit 4.1
 
 
 
 
 
4.11

  
Second Amendment to Second Amended and Restated Agreement of Limited Partnership of Shamrock Logistics Operations, L.P., dated as of January 7, 2002
  
NuStar Energy L.P.’s Annual Report on Form 10-K for year ended December 31, 2001 (File No. 001-16417), Exhibit 3.10
 
 
 
 
 
4.12

  
Certificate of Limited Partnership of Riverwalk Logistics, L.P., dated as of June 5, 2000
  
NuStar Energy L.P.’s Registration Statement on Form S-1 filed August 14, 2000 (File No. 333-43668), Exhibit 3.7
 
 
 
 
 
4.13

  
First Amended and Restated Limited Partnership Agreement of Riverwalk Logistics, L.P., dated as of April 16, 2001
  
NuStar Energy L.P.’s Annual Report on Form 10-K for year ended December 31, 2001 (File No. 001-16417), Exhibit 3.16
 
 
 
 
 
4.14

  
Certificate of Formation of Shamrock Logistics GP, LLC, dated as of December 7, 1999
  
NuStar Energy L.P.’s Registration Statement on Form S-1 filed August 14, 2000 (File No. 333-43668), Exhibit 3.9
 
 
 
 
 
4.15

  
Certificate of Amendment to Certificate of Formation of Shamrock Logistics GP, LLC, dated as of December 31, 2001
  
NuStar Energy L.P.’s Annual Report on Form 10-K for year ended December 31, 2001 (File No. 001-16417), Exhibit 3.14
 
 
 
 
 
4.16

  
Certificate of Amendment to Certificate of Formation of Valero GP, LLC, dated March 21, 2007 and effective April 1, 2007
  
NuStar GP Holdings, LLC’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2007 (File No. 001-32940), Exhibit 3.03
 
 
 
 
 
4.17

  
First Amended and Restated Limited Liability Company Agreement of Shamrock Logistics GP, LLC, dated as of June 5, 2000
  
NuStar Energy L.P.’s Amendment No. 5 to Registration Statement on Form S-1 filed March 29, 2001 (File No. 333-43668), Exhibit 3.10
 
 
 
 
 
4.18

  
First Amendment to First Amended and Restated Limited Liability Company Agreement of Shamrock Logistics GP, LLC, effective as of December 31, 2001
  
NuStar Energy L.P.’s Annual Report on Form 10-K for year ended December 31, 2001 (File No. 001-16417), Exhibit 3.15
 
 
 
 
 

69
Table of Contents

Exhibit
Number
  
Description
  
Incorporated by Reference
to the Following Document
 
 
 
 
 
4.19

  
Indenture, dated as of July 15, 2002, among Valero Logistics Operations, L.P., as Issuer, Valero L.P., as Guarantor, and The Bank of New York, as Trustee, relating to Senior Debt Securities
  
NuStar Energy L.P.’s Current Report on Form 8-K filed July 15, 2002 (File No. 001-16417), Exhibit 4.1
 
 
 
 
 
4.20

  
First Supplemental Indenture, dated as of July 15, 2002, to Indenture dated as of July 15, 2002, in each case among Valero Logistics Operations, L.P., as Issuer, Valero L.P., as Guarantor, and The Bank of New York, as Trustee, relating to 6  7 / 8 % Senior Notes due 2012
  
NuStar Energy L.P.’s Current Report on Form 8-K filed July 15, 2002 (File No. 001-16417), Exhibit 4.2
 
 
 
 
 
4.21

  
Second Supplemental Indenture, dated as of March 18, 2003, to Indenture dated as of July 15, 2002, as amended and supplemented by a First Supplemental Indenture thereto dated as of July 15, 2002, in each case among Valero Logistics Operations, L.P., as Issuer, Valero L.P., as Guarantor, and The Bank of New York, as Trustee (including form of global note representing $250,000,000 6.05% Senior Notes due 2013)
  
NuStar Energy L.P.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2003 (File No. 001-16417), Exhibit 4.1
 
 
 
 
 
4.22

  
Third Supplemental Indenture, dated as of July 1, 2005, to Indenture dated as of July 15, 2002, as amended and supplemented, among Valero Logistics Operations, L.P., Valero L.P., Kaneb Pipe Line Operating Partnership, L.P., and The Bank of New York Trust Company , N.A.
  
NuStar Energy L.P.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005 (File No. 001-16417), Exhibit 4.02
 
 
 
 
 
4.23

  
Fourth Supplemental Indenture, dated as of April 4, 2008, to Indenture dated as of July 15, 2002, among NuStar Logistics L.P., as issuer, NuStar Energy L.P., as guarantor, NuStar Pipeline Operating Partnership L.P., as affiliate guarantor, and Wells Fargo Bank, National Association, as Successor Trustee
  
NuStar Energy L.P.’s Current Report on Form 8-K filed April 4, 2008 (File No. 001-16417), Exhibit 4.2
 
 
 
 
 
4.24

  
Fifth Supplemental Indenture, dated as of August 12, 2010, to Indenture dated as of July 15, 2002, among NuStar Logistics, L.P., as Issuer, NuStar Energy L.P., as Guarantor, NuStar Pipeline Operating Partnership L.P., as Affiliate Guarantor and Wells Fargo Bank, National Association, as Successor Trustee
  
NuStar Energy L.P.’s Current Report on Form 8-K filed August 16, 2010 (File No. 001-16417), Exhibit 4.3
 
 
 
 
 
4.25

 
Sixth Supplemental Indenture, dated as of February 2, 2012, to Indenture dated as of July 15, 2002, among NuStar Logistics, L.P., as Issuer, NuStar Energy L.P., as Guarantor, NuStar Pipeline Operating Partnership L.P., as Affiliate Guarantor and Wells Fargo Bank, National Association, as Successor Trustee
 
NuStar Energy L.P.’s Current Report on Form 8-K filed February 7, 2012 (File No. 001-16417), Exhibit 4.3
 
 
 
 
 
4.26

 
Seventh Supplemental Indenture, dated as of August 19, 2013, among NuStar Logistics, L.P., as Issuer, NuStar Energy L.P., as Guarantor, NuStar Pipeline Operating Partnership L.P., as Affiliate Guarantor, and Wells Fargo Bank, National Association, as Successor Trustee
 
NuStar Energy L.P.’s Current Report on Form 8-K filed August 23, 2013 (File No. 001-16417), Exhibit 4.3
 
 
 
 
 

70
Table of Contents

Exhibit
Number
  
Description
  
Incorporated by Reference
to the Following Document
 
 
 
 
 
4.27

  
Instrument of Resignation, Appointment and Acceptance, dated March 31, 2008, among NuStar Logistics, L.P., NuStar Energy L.P., Kaneb Pipeline Operating Partnership, L.P., The Bank of New York Trust Company N.A., and Wells Fargo Bank, National Association
  
NuStar GP Holdings, LLC’s Annual Report on Form 10-K for year ended December 31, 2008 (File No. 001-32940), Exhibit 4.23
 
 
 
 
 
4.28

  
Indenture, dated as of February 21, 2002, between Kaneb Pipe Line Operating Partnership, L.P. and JPMorgan Chase Bank (Senior Debt Securities)
  
NuStar Energy L.P.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005 (File No. 001-16417), Exhibit 4.03
 
 
 
 
 
4.29

  
First Supplemental Indenture, dated as of February 21, 2002, to Indenture dated as of February 21, 2002, between Kaneb Pipe Line Operating Partnership, L.P. and JPMorgan Chase Bank (including form of 7.750% Senior Unsecured Notes due 2012)
  
NuStar Energy L.P.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005 (File No. 001-16417), Exhibit 4.04
 
 
 
 
 
4.30

  
Second Supplemental Indenture, dated as of August 9, 2002 and effective as of April 4, 2002, to Indenture dated as of February 21, 2002, as amended and supplemented, between Kaneb Pipe Line Operating Partnership, L.P., Statia Terminals Canada Partnership, and JPMorgan Chase Bank
  
NuStar Energy L.P.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005 (File No. 001-16417), Exhibit 4.05
 
 
 
 
 
4.31

  
Third Supplemental Indenture, dated and effective as of May 16, 2003, to Indenture dated as of February 21, 2002, as amended and supplemented, between Kaneb Pipe Line Operating Partnership, L.P., Statia Terminals Canada Partnership, and JPMorgan Chase Bank
  
NuStar Energy L.P.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005 (File No. 001-16417), Exhibit 4.06
 
 
 
 
 
4.32

  
Fourth Supplemental Indenture, dated and effective as of May 27, 2003, to Indenture dated as of February 21, 2002, as amended and supplemented, between Kaneb Pipe Line Operating Partnership, L.P. and JPMorgan Chase Bank (including form of 5.875% Senior Unsecured Notes due 2013)
  
NuStar Energy L.P.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005 (File No. 001-16417), Exhibit 4.07
 
 
 
 
 
4.33

  
Fifth Supplemental Indenture, dated and effective as of July 1, 2005, to Indenture dated as of February 21, 2002, as amended and supplemented, among Kaneb Pipe Line Operating Partnership, L.P., Valero L.P., Valero Logistics Operations, L.P., and JPMorgan Chase Bank
  
NuStar Energy L.P.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005 (File No. 001-16417), Exhibit 4.08
4.34

  
Instrument of Resignation, Appointment and Acceptance, dated June 30, 2008, among NuStar Pipeline Operating Partnership L.P., NuStar Energy L.P., NuStar Logistics, L.P., The Bank of New York Trust Company N.A., and Wells Fargo Bank, National Association
  
NuStar GP Holdings, LLC’s Annual Report on Form 10-K for year ended December 31, 2008 (File No. 001-32940), Exhibit 4.30
 
 
 
 
 
4.35

 
Indenture, dated as of January 22, 2013, among NuStar Logistics, L.P., as Issuer, NuStar Energy L.P., as Guarantor, and Wells Fargo Bank, National Association, as Trustee, relating to Subordinated Debt Securities
 
NuStar Energy L.P.’s Current Report on Form 8-K filed January 22, 2013 (File No. 001-16417), Exhibit 4.1
 
 
 
 
 

71
Table of Contents

Exhibit
Number
  
Description
  
Incorporated by Reference
to the Following Document
 
 
 
 
 
4.36

 
First Supplemental Indenture, dated as of January 22, 2013, among NuStar Logistics, L.P., as Issuer, NuStar Energy L.P., as Parent Guarantor, NuStar Pipeline Operating Partnership L.P., as Affiliate Guarantor, and Wells Fargo Bank, National Association, as Trustee
 
NuStar Energy L.P.’s Current Report on Form 8-K filed January 22, 2013 (File No. 001-16417), Exhibit 4.2
 
 
 
 
 
4.37

  
Form of certificate evidencing units representing interests in Valero GP Holdings, LLC
  
NuStar GP Holdings, LLC’s Amendment to the Registration Statement on Form 8-A/A filed September 6, 2006 (File No. 001-32940, Exhibit 4.01
 
 
 
 
 
4.38

  
Rights Agreement between Valero GP Holdings, LLC and Computershare Investor Services, LLC, dated as of July 19, 2006
  
NuStar GP Holdings, LLC’s Current Report on Form 8-K filed July 25, 2006 (File No. 001-32940), Exhibit 4.01
 
 
 
 
 
4.39

  
Amendment No. 1, effective as of February 28, 2008, to Rights Agreement between NuStar GP Holdings, LLC (f/k/a Valero GP Holdings, LLC) and Computershare Investor Services, LLC
  
NuStar GP Holdings, LLC’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2008 (File No. 001-32940), Exhibit 4.01
 
 
 
 
 
4.40

 
Amendment No. 2 to Rights Agreement of NuStar GP Holdings, LLC
 
NuStar GP Holdings, LLC’s Current Report on Form 8-K filed October 29, 2012 (File No. 001-32940), Exhibit 4.03
 
 
 
 
 
10.01

  
364-Day Revolving Credit Agreement dated as of June 28, 2013, among NuStar GP Holdings, LLC, as Borrower, The Lenders Party Hereto, JPMorgan Chase Bank, N.A., as Administrative Agent, SunTrust Bank, as Syndication Agent
  
NuStar GP Holdings, LLC’s Current Report on Form 8-K filed July 3, 2013 (File No. 001-32940), Exhibit 10.1
 
 
 
 
 
10.02

  
5-Year Revolving Credit Agreement, dated as of May 2, 2012, among NuStar Logistics, L.P., NuStar Energy L.P., the Lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent, Suntrust Bank, Mizuho Corporate Bank, Ltd., as Co-Syndication Agents, and Wells Fargo Bank, National Association, Barclays Bank PLC, as Co-Documentation Agents, and J.P. Morgan Securities Inc., Suntrust Robinson Humphrey, Inc., Mizuho Corporate Bank, Ltd., Wells Fargo Securities, LLC and Barclays Bank PLC as Joint Bookrunners and Joint Lead Arrangers

  
NuStar Energy L.P.’s Current Report on Form 8-K filed May 8, 2012 (File No. 001-16417), Exhibit 10.01

 
 
 
 
 
10.03

  
First Amendment to 5-Year Revolving Credit Agreement, dated as of June 29, 2012, among NuStar Logistics, L.P., NuStar Energy L.P., JPMorgan Chase Bank, N.A., as Administrative Agent, and the Lenders party thereto
  
NuStar Energy L.P.’s Current Report on Form 8-K filed July 6, 2012 (File No. 001-16417), Exhibit 10.01

 
 
 
 
 
10.04

 
Second Amendment to 5-Year Revolving Credit Agreement, dated as of November 30, 2012, among NuStar Logistics, L.P., NuStar Energy L.P., JPMorgan Chase Bank, N.A., as Administrative Agent, and the Lenders party thereto
 
NuStar Energy L.P.’s Annual Report on Form 10-K for year ended December 31, 2012 (File No. 001-16417), Exhibit 10.03
 
 
 
 
 
10.05

 
Third Amendment to 5-Year Revolving Credit Agreement, dated as of January 11, 2013, among NuStar Logistics, L.P., NuStar Energy L.P., JPMorgan Chase Bank, N.A., as Administrative Agent, and the Lenders party thereto
 
NuStar Energy L.P.’s Annual Report on Form 10-K for year ended December 31, 2012 (File No. 001-16417), Exhibit 10.04
 
 
 
 
 

72
Table of Contents

Exhibit
Number
  
Description
  
Incorporated by Reference
to the Following Document
 
 
 
 
 
10.06

 
Fourth Amendment to 5-Year Revolving Credit Agreement, dated as of December 4, 2013, among NuStar Logistics, L.P., NuStar Energy L.P., JPMorgan Chase Bank, N.A., as Administrative Agent, and the Lenders Party Hereto
 
NuStar Energy L.P.’s Annual Report on Form 10-K for year ended December 31, 2013 (File No. 001-16417), Exhibit 10.05
 
 
 
 
 
+10.07

  
NuStar GP, LLC Amended and Restated 2003 Employee Unit Incentive Plan, amended and restated as of April 1, 2007
  
NuStar GP Holdings, LLC’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007 (File No. 001-32940), Exhibit 10.03
 
 
 
 
 
+10.08

  
Form of Unit Option Agreement under the Valero GP, LLC Amended and Restated 2003 Employee Unit Incentive Plan, as amended
  
NuStar GP Holdings, LLC’s Annual Report on Form 10-K for year ended December 31, 2006 (File No. 001-32940), Exhibit 10.58
 
 
 
 
 
+10.09

  
NuStar GP, LLC Amended and Restated 2002 Unit Option Plan, amended and restated as of April 1, 2007
  
NuStar GP Holdings, LLC’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007 (File No. 001-32940), Exhibit 10.02
 
 
 
 
 
+10.10

  
NuStar GP, LLC Third Amended and Restated 2000 Long-Term Incentive Plan, amended and restated as of May 11, 2011
  
NuStar Energy L.P.’s Current Report on Form 8-K filed May 10, 2011 (File No. 001-16417), Exhibit 10.01
 
 
 
 
 
+10.11

  
NuStar GP, LLC Fourth Amended and Restated 2000 Long-Term Incentive Plan, amended and restated as of January 1, 2014
  
NuStar Energy L.P.’s Annual Report on Form 10-K for year ended December 31, 2013 (File No. 001-16417), Exhibit 10.10
 
 
 
 
 
+10.12

  
Form of Restricted Unit Agreement under the NuStar GP, LLC Second Amended and Restated 2000 Long-Term Incentive Plan
  
NuStar Energy L.P.’s Current Report on Form 8-K filed November 10, 2008 (File No. 001-16417), Exhibit 10.03
 
 
 
 
 
+10.13

  
Form of 2010 Restricted Unit Award Agreement under the NuStar GP, LLC Second Amended and Restated 2000 Long-Term Incentive Plan
  
NuStar Energy L.P.’s Current Report on Form 8-K filed January 5, 2011 (File No. 001-16417), Exhibit 10.03
 
 
 
 
 
+10.14

 
Form of 2011 Restricted Unit Award Agreement under the NuStar GP, LLC Third Amended and Restated 2000 Long-Term Incentive Plan
 
NuStar Energy L.P.’s Current Report on Form 8-K filed January 31, 2012 (File No. 001-16417), Exhibit 10.2
 
 
 
 
 
+10.15

 
Form of 2013 Restricted Unit Award Agreement under the NuStar GP, LLC Third Amended and Restated 2000 Long-Term Incentive Plan
 
NuStar Energy L.P.’s Annual Report on Form 10-K for year ended December 31, 2013 (File No. 001-16417), Exhibit 10.15
 
 
 
 
 
+10.16

  
Form of Non-employee Director Restricted Unit Agreement under the NuStar GP, LLC Second Amended and Restated 2000 Long-Term Incentive Plan
  
NuStar Energy L.P.’s Current Report on Form 8-K filed January 5, 2011 (File No. 001-16417), Exhibit 10.02
 
 
 
 
 
+10.17

 
Form of Non-employee Director Restricted Unit Agreement under the NuStar GP, LLC Third Amended and Restated 2000 Long-Term Incentive Plan
 
NuStar Energy L.P.’s Annual Report on Form 10-K for year ended December 31, 2013 (File No. 001-16417), Exhibit 10.10
 
 
 
 
 
+10.18

  
Form of Amended and Restated Performance Unit Agreement under the NuStar GP, LLC Second Amended and Restated 2000 Long-Term Incentive Plan
  
NuStar Energy L.P.’s Current Report on Form 8-K filed December 8, 2009 (File No. 001-16417), Exhibit 10.02
 
 
 
 
 
+10.19

  
Omnibus Amendment to Form of Amended and Restated Performance Unit Agreements under the NuStar GP, LLC Second Amended and Restated 2000 Long-Term Incentive Plan
  
NuStar Energy L.P.’s Current Report on Form 8-K filed February 2, 2010 (File No. 001-16417), Exhibit 10.03
 
 
 
 
 
+10.20

  
Form of Performance Unit Agreement under the Second Amended and Restated 2000 Long-Term Incentive Plan
  
NuStar GP Holdings, LLC’s Annual Report on Form 10-K for year ended December 31, 2009 (File No. 001-32940), Exhibit 10.12
 
 
 
 
 

73
Table of Contents

Exhibit
Number
  
Description
  
Incorporated by Reference
to the Following Document
 
 
 
 
 
+10.21

 
Form of Waiver Related to Certain Performance Units under the NuStar GP, LLC Third Amended and Restated 2000 Long-Term Incentive Plan
 
NuStar Energy L.P.’s Current Report on Form 8-K filed January 31, 2012 (File No. 001-16417), Exhibit 10.3
 
 
 
 
 
+10.22

  
Shamrock Logistics GP, LLC Year 2001 Annual Incentive Plan
  
NuStar Energy L.P.’s Amendment No. 5 to Registration Statement on Form S-1 filed March 29, 2001 (File No. 333-43668), Exhibit 10.4
 
 
 
 
 
+10.23

  
Shamrock Logistics GP, LLC Intermediate Incentive Compensation Plan
  
NuStar Energy L.P.’s Amendment No. 5 to Registration Statement on Form S-1 filed March 29, 2001 (File No. 333-43668), Exhibit 10.9
 
 
 
 
 
+10.24

  
NuStar GP Holdings, LLC Long-Term Incentive Plan, amended and restated as of April 1, 2007
  
NuStar GP Holdings, LLC’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007 (File No. 001-32940), Exhibit 10.04
 
 
 
 
 
+10.25

  
Form of Non-employee Director Award Agreement under the NuStar GP Holdings, LLC Long-Term Incentive Plan, as amended
  
NuStar GP Holdings, LLC’s Current Report on Form 8-K filed November 10, 2008 (File No. 001-32940), Exhibit 10.02
 
 
 
 
 
+10.26

  
Form of 2010 Non-employee Director Restricted Unit Agreement under the NuStar GP Holdings, LLC 2006 Amended and Restated Long-Term Incentive Plan
  
NuStar GP Holdings, LLC’s Current Report on Form 8-K filed January 5, 2011 (File No. 001-32940), Exhibit 10.02
 
 
 
 
 
+10.27

 
Form of 2013 Non-employee Director Restricted Unit Agreement under the NuStar GP Holdings, LLC 2006 Amended and Restated Long-Term Incentive Plan
 
*
 
 
 
 
 
+10.28

  
Form of Restricted Unit Award Agreement under the NuStar GP Holdings, LLC Long-Term Incentive Plan
  
NuStar GP Holdings, LLC’s Current Report on Form 8-K filed November 10, 2008 (File No. 001-32940), Exhibit 10.03
 
 
 
 
 
+10.29

  
Form of 2010 Restricted Unit Award Agreement under the NuStar GP Holdings, LLC 2006 Amended and Restated Long-Term Incentive Plan
  
NuStar GP Holdings, LLC’s Current Report on Form 8-K filed January 5, 2011 (File No. 001-32940), Exhibit 10.03
 
 
 
 
 
+10.30

 
Form of 2013 Restricted Unit Award Agreement under the NuStar GP Holdings, LLC 2006 Amended and Restated Long-Term Incentive Plan
 
*
 
 
 
 
 
+10.31

  
Form of Unit Option Award Agreement under the NuStar GP Holdings, LLC Amended and Restated Long-Term Incentive Plan
  
NuStar GP Holdings, LLC’s Current Report on Form 8-K filed October 29, 2007 (File No. 001-32940), Exhibit 10.03
 
 
 
 
 
+10.32

  
NuStar Excess Pension Plan, amended and restated effective as of January 1, 2008
  
NuStar GP Holdings, LLC’s Annual Report on Form 10-K for year ended December 31, 2008 (File No. 001-32940), Exhibit 10.15
 
 
 
 
 
+10.33

  
NuStar Excess Thrift Plan, amended and restated effective as of January 1, 2008
  
NuStar GP Holdings, LLC’s Annual Report on Form 10-K for year ended December 31, 2008 (File No. 001-32940), Exhibit 10.16
 
 
 
 
 
+10.34

  
NuStar Supplemental Executive Retirement Plan, amended and restated effective as of January 1, 2008
  
NuStar GP Holdings, LLC’s Annual Report on Form 10-K for year ended December 31, 2008 (File No. 001-32940), Exhibit 10.17
 
 
 
 
 
+10.35

  
Change of Control Severance Agreement by and among Valero L.P., Valero GP, LLC and Curtis V. Anastasio, dated as of November 6, 2006
  
NuStar Energy L.P.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2006 (File No. 001-16417), Exhibit 10.05
 
 
 
 
 
+10.36

  
Form of Change of Control Severance Agreement by and among Valero L.P., Valero GP, LLC and each of the executive officers of NuStar GP, LLC, dated as of November 6, 2006
  
NuStar Energy L.P.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2006 (File No. 001-16417), Exhibit 10.06
 
 
 
 
 

74
Table of Contents

Exhibit
Number
  
Description
  
Incorporated by Reference
to the Following Document
 
 
 
 
 
+10.37

  
Form of Waiver to Non-Employee Director Award Agreement
  
NuStar GP Holdings, LLC’s Current Report on Form 8-K filed May 28, 2008 (File No. 001-16417), Exhibit 10.01
 
 
 
 
 
10.38

  
Amended and Restated Omnibus Agreement among Valero Energy Corporation, Valero GP, LLC, Riverwalk Logistics, L.P., Valero L.P. and Valero Logistics Operations, L.P., dated March 31, 2006
  
NuStar GP Holdings, LLC’s Registration Statement on Form S-1 filed March 31, 2006 (File No. 333-132917), Exhibit 10.14
 
 
 
 
 
10.39

  
Contribution Agreement by and among Diamond Shamrock Refining and Marketing Company and Valero GP Holdings, LLC, dated effective as of June 1, 2006
  
NuStar GP Holdings, LLC’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006 (File No. 001-32940), Exhibit 10.09
 
 
 
 
 
10.40

  
Services Agreement, effective as of January 1, 2008, between NuStar GP, LLC and NuStar Energy L.P.
  
NuStar GP Holdings, LLC’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2008 (File No. 001-32940), Exhibit 10.01
 
 
 
 
 
10.41

  
Non-Compete Agreement, dated July 19, 2006, between Valero GP Holdings, LLC, Valero L.P., Riverwalk Logistics, L.P. and Valero GP, LLC
  
NuStar GP Holdings, LLC’s Current Report on Form 8-K filed July 25, 2006 (File No. 001-32940), Exhibit 10.03
 
 
 
 
 
+10.42

  
Amended and Restated Employee Benefits Transition Agreement by and between Valero Energy Corporation, Valero GP Holdings, LLC and Valero GP, LLC, effective as of December 22, 2006
  
NuStar GP Holdings, LLC’s Current Report on Form 8-K filed December 22, 2006 (File No. 001-32940), Exhibit 10.03
 
 
 
 
 
+10.43

  
Valero L.P. Annual Bonus Plan
  
NuStar GP Holdings, LLC’s Annual Report on Form 10-K for year ended December 31, 2006 (File No. 001-32940), Exhibit 10.57
 
 
 
 
 
10.44

 
Amendment to Crude Oil Sales Agreement between PDVSA-Petróleo S.A., NuStar Logistics, L.P. and NuStar Marketing, effective as of October 1, 2012
 
NuStar Energy L.P.’s Quarterly Report on Form 10-Q for quarter ended June 30, 2013 (File No. 001-16417), Exhibit 10.01
 
 
 
 
 
10.45

  
Amended and Restated Aircraft Time Sharing Agreement, dated as of September 4, 2009, between NuStar Logistics, L.P. and William E. Greehey
  
NuStar Energy L.P.’s Annual Report on Form 10-K for year ended December 31, 2009 (File No. 001-16417), Exhibit 10.24
 
 
 
 
 
10.46

  
Lease Agreement Between Parish of St. James, State of Louisiana and NuStar Logistics, L.P. Dated as of July 1, 2010
  
NuStar Energy L.P.’s Current Report on Form 8-K filed July 21, 2010 (File No. 001-16417), Exhibit 10.01
 
 
 
 
 
10.47

  
Letter of Credit Agreement dated June 5, 2012 among NuStar Logistics, L.P., NuStar Energy L.P., the Lenders party thereto and Mizuho Corporate Bank, Ltd., as Issuing Bank and Administrative Agent
  
NuStar Energy L.P.’s Current Report on Form 8-K filed June 12, 2012 (File No. 001-16417), Exhibit 10.01
 
 
 
 
 
10.48

 
First Amendment to Letter of Credit Agreement, dated as of June 29, 2012, among NuStar Logistics, L.P., NuStar Energy L.P., the Lenders party thereto and Mizuho Corporate Bank, Ltd., as Issuing Bank and Administrative Agent
 
NuStar Energy L.P.’s Current Report on Form 8-K filed July 6, 2012 (File No. 001-16417), Exhibit 10.02
 
 
 
 
 
10.49

  
Lease Agreement between Parish of St. James, State of Louisiana and NuStar Logistics, L.P. dated as of December 1, 2010
  
NuStar Energy L.P.’s Current Report on Form 8-K filed December 30, 2010 (File No. 001-16417), Exhibit 10.01
 
 
 
 
 
10.50

  
Application for Letter of Credit and Reimbursement Agreement between JPMorgan Chase Bank, N.A. and NuStar Logistics, L.P. dated as of December 29, 2010
  
NuStar Energy L.P.’s Current Report on Form 8-K filed December 30, 2010 (File No. 001-16417), Exhibit 10.02
 
 
 
 
 

75
Table of Contents

Exhibit
Number
  
Description
  
Incorporated by Reference
to the Following Document
 
 
 
 
 
10.51

 
Lease Agreement between Parish of St. James, State of Louisiana and NuStar Logistics, L.P. dated as of August 1, 2011
 
NuStar Energy L.P.’s Current Report on Form 8-K filed August 10, 2011 (File No. 001-16417), Exhibit 10.01
 
 
 
 
 
10.52

 
Application for Letter of Credit and Reimbursement Agreement between JPMorgan Chase Bank, N.A. and NuStar Logistics, L.P. dated as of August 9, 2011
 
NuStar Energy L.P.’s Current Report on Form 8-K filed August 10, 2011 (File No. 001-16417), Exhibit 10.02
 
 
 
 
 
10.53

 
Letter of Credit Agreement dated as of June 5, 2013 among NuStar Logistics, L.P., NuStar Energy L.P., the Lenders party thereto and The Bank of Nova Scotia, as Issuing Bank and Administrative Agent.

 
NuStar Energy L.P.’s Current Report on Form 8-K filed June 11, 2013 (File No. 001-16417), Exhibit 10.01
 
 
 
 
 
10.54

 
Equity Distribution Agreement, dated May 23, 2011 by and among NuStar Energy L.P., Riverwalk Logistics, L.P., NuStar GP, LLC, and Citigroup Global Markets Inc.
 
NuStar Energy L.P.’s Current Report on Form 8-K filed May 23, 2011 (File No. 001-16417), Exhibit 1.1
 
 
 
 
 
10.55

 
Purchase and Sale Agreement by and among NuStar Energy L.P., NuStar Logistics, L.P., NuStar Asphalt Refining, LLC, NuStar Marketing LLC, NuStar Asphalt LLC and Asphalt Acquisition LLC dated as of July 3, 2012
 
NuStar Energy L.P.’s Current Report on Form 8-K filed July 6, 2012 (File No. 001-16417), Exhibit 10.01
 
 
 
 
 
10.56

 
Letter Agreement by and among Asphalt Acquisition LLC, NuStar Energy L.P., NuStar Logistics, L.P., NuStar Asphalt Refining, LLC, NuStar Marketing LLC and NuStar Asphalt LLC dated August 2, 2012
 
NuStar Energy L.P.’s Quarterly Report on Form 10-Q for quarter ended September 30, 2012 (File No. 001-16417), Exhibit 10.02
 
 
 
 
 
10.57

 
Amendment No. 1 to Purchase and Sale Agreement dated as of September 28, 2012 by and among NuStar Energy L.P., NuStar Logistics, L.P., NuStar Asphalt Refining, LLC, NuStar Marketing LLC, NuStar GP, LLC, NuStar Asphalt LLC and Asphalt Acquisition LLC
 
NuStar Energy L.P.’s Quarterly Report on Form 10-Q for quarter ended September 30, 2012 (File No. 001-16417), Exhibit 10.03
 
 
 
 
 
10.58

 
Amended and Restated Transaction Agreement by and between LG Asphalt L.P. and NuStar Logistics, L.P. dated as of December 20, 2013
 
NuStar Energy L.P.’s Annual Report on Form 10-K for year ended December 31, 2013 (File No. 001-16417), Exhibit 10.47
 
 
 
 
 
10.59

 
Amendment No. 1 to Amended and Restated Transaction Agreement dated as of January 29, 2014
 
NuStar Energy L.P.’s Annual Report on Form 10-K for year ended December 31, 2013 (File No. 001-16417), Exhibit 10.48
 
 
 
 
 
10.60

 
Amendment No. 2 to Amended and Restated Transaction Agreement dated as of February 26, 2014
 
NuStar Energy L.P.’s Annual Report on Form 10-K for year ended December 31, 2013 (File No. 001-16417), Exhibit 10.49
 
 
 
 
 
14.01

  
Code of Ethics for Senior Financial Officers
  
NuStar GP Holdings, LLC’s Annual Report on Form 10-K for year ended December 31, 2006 (File No. 001-32940), Exhibit 14.1
 
 
 
 
 
21.01

  
List of Subsidiaries of NuStar GP Holdings, LLC
  
*
 
 
 
 
 
23.01

  
Consent of KPMG LLP dated March 3, 2014 (NuStar GP Holdings, LLC)
  
*
23.02

 
Consent of KPMG LLP dated March 3, 2014 (NuStar Energy L.P)
 
*
 
 
 
 
 
24.01

  
Powers of Attorney (included in signature page of this Form 10-K)
  
*
 
 
 
 
 
 
 
 
 
 

76
Table of Contents

Exhibit
Number
  
Description
  
Incorporated by Reference
to the Following Document
 
 
 
 
 
31.01

 
Rule 13a-14(a) Certification (under Section 302 of the Sarbanes-Oxley Act of 2002) of principal executive officer
 
*
 
 
 
 
 
31.02

  
Rule 13a-14(a) Certification (under Section 302 of the Sarbanes-Oxley Act of 2002) of principal financial officer
  
*
 
 
 
 
 
32.01

  
Section 1350 Certification (under Section 906 of the Sarbanes-Oxley Act of 2002) of principal executive officer
  
*
 
 
 
 
 
32.02

  
Section 1350 Certification (under Section 906 of the Sarbanes-Oxley Act of 2002) of principal financial officer
  
*
 
 
 
 
 
99.01

  
Audit Committee Pre-Approval Policy
  
*
 
 
 
 
 
99.02

  
Consolidated Financial Statements of NuStar Energy L.P. for the Year Ended December 31, 2013
  
*
 
 
 
 
 
101.INS

  
XBRL Instance Document
  
*
 
 
 
 
 
101.SCH

 
XBRL Taxonomy Extension Schema Document
 
*
 
 
 
 
 
101.CAL

 
XBRL Taxonomy Extension Calculation Linkbase Document
 
*
 
 
 
 
 
101.DEF

 
XBRL Taxonomy Extension Definition Linkbase Document
 
*
 
 
 
 
 
101.LAB

 
XBRL Taxonomy Extension Label Linkbase Document
 
*
 
 
 
 
 
101.PRE

 
XBRL Taxonomy Extension Presentation Linkbase Document
 
*
 
 
 
 
 

+
Identifies management contracts or compensatory plans or arrangements required to be filed as an exhibit hereto.
 
 
*
Filed herewith.

Copies of exhibits filed as a part of this Form 10-K may be obtained by unitholders of record at a charge of $0.15 per page, minimum $5.00 each request. Direct inquiries to Corporate Secretary, NuStar GP Holdings, LLC, 19003 IH-10 West, San Antonio, Texas 78257.

77
Table of Contents

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
NuStar GP Holdings, LLC
(Registrant)
 
 
By:
/s/ Bradley C. Barron     
 
 
 
Bradley C. Barron
 
 
President and Chief Executive Officer
 
March 3, 2014
 
 
By:
/s/ Thomas R. Shoaf
 
 
 
Thomas R. Shoaf
 
Executive Vice President and Chief Financial Officer
 
March 3, 2014
 
 
By:
/s/ Jorge A. del Alamo
 
 
 
Jorge A. del Alamo
 
Vice President and Controller
 
March 3, 2014


78
Table of Contents

POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Bradley C. Barron, Thomas R. Shoaf and Amy L. Perry, or any of them, each with power to act without the other, his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any or all subsequent amendments and supplements to this Annual Report on Form 10-K, and to file the same, or cause to be filed the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto each said attorney-in-fact and agent full power to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby qualifying and confirming all that said attorney-in-fact and agent or his or her substitute or substitutes may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
 
Signature
  
Title
 
Date
 
 
 
 
 
/s/ William E. Greehey
  
Chairman of the Board
 
March 3, 2014
William E. Greehey
 
 
 
 
 
 
 
 
 
/s/ Bradley C. Barron
  
President, Chief Executive
 
March 3, 2014
Bradley C. Barron
 
Officer and Director
(Principal Executive Officer)
 
 
 
 
 
 
 
/s/ Thomas R. Shoaf
  
Executive Vice President and
 
March 3, 2014
Thomas R. Shoaf
 
Chief Financial Officer
(Principal Financial Officer)
 
 
 
 
 
 
 
/s/ Jorge A. del Alamo
  
Vice President and Controller
 
March 3, 2014
Jorge A. del Alamo
 
(Principal Accounting Officer)
 
 
 
 
 
 
 
/s/ William B. Burnett
  
Director
 
March 3, 2014
William B. Burnett
 
 
 
 
 
 
 
 
 
/s/ James F. Clingman
  
Director
 
March 3, 2014
James F. Clingman
 
 
 
 
 
 
 
 
 
/s/ Jelynne LeBlanc-Burley
  
Director
 
March 3, 2014
Jelynne LeBlanc-Burley
 
 
 
 



79


Exhibit 10.27
RESTRICTED UNIT AWARD AGREEMENT
[NSH Non-Employee Director]


This Restricted Unit award agreement (the “ Agreement ”), effective for all purposes as of [insert grant date] , is between NuStar GP Holdings, LLC (the “ Company ”) and [insert name] (“ Participant ”).
The parties hereto agree as follows:
1.
Participant is granted «Shares_Granted» Restricted Units under the NuStar GP Holdings, LLC Long-Term Incentive Plan (as amended, the “ Plan ”), and, except as otherwise provided herein, this Agreement and the grant hereunder is subject to and in accordance with the terms, provisions, conditions and limitations of the Plan, as it may be amended. The Plan is hereby incorporated into this Agreement by reference; provided, however, that, in the event of a conflict between the Plan and this Agreement, this Agreement shall control. All capitalized terms contained in this Agreement that are not defined herein shall have the definition set forth in the Plan.

2.
The Restricted Units granted hereunder are subject to the following Restricted Periods, and will vest and accrue to Participant in the following increments: [insert 1/3 #] Units on [insert grant date plus 1yr] ; [insert 1/3 #] Units on [insert grant date plus 2yrs] ; and [insert 1/3 #] Units on [insert grant date plus 3yrs] . The Restricted Units may vest prior to the expiration of such period as set forth in the Plan or herein. Upon the vesting of each Restricted Unit awarded under this Agreement, the Participant will be entitled to receive an unrestricted common Unit.

3.
Participant agrees that the unrestricted common Units to which Participant will be entitled in connection with the vesting of each Restricted Unit may be uncertificated and recorded with the Company’s service provider.

4.
For each quarter ended after the date hereof and then for each subsequent quarter during the term of this Agreement, the Company agrees to pay the Participant an amount equal to the product of (x) the number of Restricted Units granted hereunder that remain outstanding and unvested as of the record date for such quarter; and (y) the quarterly distribution declared by the Company’s board of directors for such quarter (such product, the “ UDRs ”). UDRs are also otherwise subject to the same restrictions as the Restricted Units.

5.
In compliance with Section 409A of the Internal Revenue Code, the issuance of Units hereunder shall be made on or as soon as reasonably practical following the applicable date of vesting, but in any event no later than the 15 th day of the third month following the end of the year in which the applicable date of vesting occurs. Any cash payment made in accordance therewith shall be made by the last day of the fiscal quarter during which cash distributions are made by NuStar GP Holdings, LLC but in any event by no later than the 15 th day of the third month following the end of the year in which the applicable cash distributions are made. This Agreement and the grant evidenced hereby are intended to comply, and shall be administered consistently, in all respects with Section 409A of the Internal Revenue Code and the regulations promulgated thereunder. If necessary in order to ensure such compliance, this Agreement may be reformed consistent with guidance issued by the Internal Revenue Service. The Company may withhold any taxes due in connection with Participant’s grant as required by law, which, in the sole discretion of the Company, may include withholding a number of Restricted Units otherwise payable to Participant.

6.
If, for any reason, Participant ceases serving as a director of the Company, any Restricted Units held by such Participant that remain unvested and outstanding as of the date of his or her last day of service shall automatically lapse and be forfeited as of the close of business for such date.

7.
This Award shall be binding upon the parties hereto and their respective heirs, legal representatives and successors.

8.
The issuance of Units under this Award shall be made on or as soon as reasonably practical following the applicable date of vesting, but in any event no later than the 15 th day of the third month following the end of the year in which the applicable date of vesting occurs. With respect to the receipt of distributions, the payment of distributions shall be made by the last day of the fiscal quarter during which distributions on the Company’s Units are paid, but in any event by no later than the 15 th day of the month following the end of the year in which the applicable distributions on the Company’s Units are paid. This Agreement and the Award evidenced hereby are intended to comply, and shall be administered consistently in all respects with Section 409A of the Internal Revenue Code and the regulations promulgated thereunder. If necessary in order to ensure such compliance, this Agreement may be reformed consistent with guidance issued by the Internal Revenue Service.





9.
The validity, construction and effect of this Agreement shall be determined by the laws of the State of Texas.
10.
Neither Participant, nor any person claiming by, through or under Participant, with respect to the Restricted Units shall have any rights as a unitholder of NuStar GP Holdings, LLC (including, without limitation, voting rights).
11.
Any interest that Participant may have under this Agreement or the Plan, with respect to the Restricted Unit, UDR or otherwise, are of a personal nature, and may not be sold, mortgaged, pledged, assigned, transferred, conveyed or disposed of in any manner by Participant. Any such attempted sale, mortgage, pledge, assignment, transfer, conveyance or disposition shall be void, and the Company shall be neither bound nor obligated thereby.


NUSTAR GP HOLDINGS, LLC


By:         
Curtis V Anastasio
President & Chief Executive Officer

Accepted:


    
[insert name]






Exhibit 10.30
RESTRICTED UNIT AWARD AGREEMENT
[NSH Grants to Exec Officers]

This Restricted Unit award agreement (" Agreement "), effective for all purposes as of [Grant date], is between NuStar GP Holdings, LLC (the “Company”) and «First_Name» «Middle_Name» «Last_Name» ("Participant").
The parties hereto agree as follows:
1.
Participant is granted «Shares_Granted» Restricted Units under the Plan. Restricted Units under the NuStar GP Holdings, LLC Long-Term Incentive Plan (the “ Plan ”), and, except as otherwise provided herein, this Agreement and the grant hereunder is subject to and in accordance with the terms, provisions, conditions and limitations of the Plan, as it may be amended. The Plan is hereby incorporated into this Agreement by reference; provided, however, that, in the event of a conflict between the Plan and this Agreement, this Agreement shall control. All capitalized terms contained in this Agreement that are not defined herein shall have the definition set forth in the Plan.

2.
The Restricted Units granted hereunder are subject to the following Restricted Periods, and will vest and accrue to Participant in the following increments: «Shares_Period_1» Units on «Vest_Date_Period_1» ; «Shares_Period_2» Units on «Vest_Date_Period_2» ; «Shares_Period_3» Units on «Vest_Date_Period_3»; «Shares_Period_4» Units on «Vest_Date_Period_4»; and «Shares_Period_5» Units on «Vest_Date_Period_5» . The Restricted Units may vest prior to the expiration of such period as set forth in the Plan or herein. Upon the vesting of each Restricted Unit awarded under this Agreement, Participant will be entitled to receive an unrestricted common Unit of the Company.
 
3.
Participant agrees that the unrestricted common Units to which Participant will be entitled in connection with the vesting of each Restricted Unit may be uncertificated and recorded with the Company’s service provider.

4.
Beginning with the quarter ended March 31, 2015 and then for each subsequent quarter during the term of this Agreement, the Company agrees to pay the Participant an amount equal to the product of (x) the number of Restricted Units granted hereunder that remain outstanding and unvested as of the record date for such quarter; and (y) the quarterly distribution declared by the Company’s board of directors for such quarter (such product, the “ UDRs ”). UDRs are also otherwise subject to the same restrictions as the Restricted Units.

5.
In compliance with Section 409A of the Internal Revenue Code, the issuance of Units hereunder shall be made on or as soon as reasonably practical following the applicable date of vesting, but in any event no later than the 15 th day of the third month following the end of the year in which the applicable date of vesting occurs. With respect to the DERs described herein, any cash payment made in accordance therewith shall be made by the last day of the fiscal quarter during which cash distributions are made by the Company, but in any event by no later than the 15 th day of the third month following the end of the year in which the applicable cash distributions are made. This Agreement and the grant evidenced hereby are intended to comply, and shall be administered consistently, in all respects with Section 409A of the Internal Revenue Code and the regulations promulgated thereunder. If necessary in order to ensure such compliance, this Agreement may be reformed consistent with guidance issued by the Internal Revenue Service.
6.
The Company will withhold any taxes due from Participant’s grant as required by law, which, in the sole discretion of the Company, may include withholding a number of Restricted Units otherwise payable to Participant.
7.
If Participant's employment is terminated for any reason, any Restricted Units held by such Participant that remain unvested and outstanding as of the date of such termination shall automatically lapse and be forfeited as of the close of business for such date.
8.
This Award shall be binding upon the parties hereto and their respective heirs, legal representatives, and successors.
9.
The validity, construction and effect of this Agreement shall be determined by the laws of the State of Texas.
10.
Neither Participant nor any person claiming by, through or under Participant with respect to the Restricted Units shall have any rights as a unitholder of the Company (including, without limitation, voting rights).





11.
The Agreement and Participant’s interest in the Restricted Units granted by this Agreement or the Plan, with respect to any Restricted Unit, UDR or otherwise are of a personal nature and Participant’s rights with respect thereto may not be sold, mortgaged, pledged, assigned, transferred, conveyed or disposed of or any manner by Participant. Any such attempted sale, mortgage, pledge, assignment, transfer, conveyance or disposition shall be void, and the Company shall be neither bound nor obligated thereby.

NUSTAR GP HOLDINGS, LLC



By:         
Curtis V Anastasio
President & Chief Executive Officer
Accepted:

    
«First_Name» «Middle_Name» «Last_Name»
«Option_Date»




Exhibit 21.01

NuStar GP Holdings, LLC

and its Subsidiaries



The following are wholly owned subsidiaries of NuStar GP Holdings, LLC

Name of Entity
State of Incorporation
Riverwalk Logistics, L.P.
Delaware
Riverwalk Holdings, LLC
Delaware
NuStar GP, LLC
Delaware




NuStar GP Holdings, LLC indirectly owns approximately 14.9% of NuStar Energy L.P., a publicly traded master limited partnership. NuStar Energy L.P.’s subsidiaries are listed below:


Name of Entity
State of Incorporation
Aves Depoculuk VE Antrepoculuk Hizmetleri A.S. (joint venture; 75% ownership interest)
Turkey
Bicen Development Corporation N.V.
Sint Eustatius
Cooperatie NuStar Holdings U.A.
Netherlands
Diamond K Limited
Bermuda
Kaneb Management, LLC
Delaware
Kaneb Management Company LLC
Delaware
LegacyStar, Inc.
Delaware
LegacyStar Investment, LLC
Delaware
LegacyStar, LLC
Delaware
LegacyStar Services, LLC
Delaware





Name of Entity
State of Incorporation
NS Security Services, LLC
Delaware
NuStar Asphalt Chickasaw, LLC
Texas
NuStar Asphalt Holdings, Inc.
Delaware
NuStar Asphalt Holdings, LLC
Delaware
NuStar Asphalt LLC (joint venture; 50% ownership interest)
Delaware
NuStar Asphalt Refining, LLC (wholly owned by NuStar Asphalt LLC)
Delaware
NuStar Burgos, LLC
Delaware
NuStar Caribe Terminals, Inc.
Delaware
NuStar Crude Oil Pipeline L.P.
Texas
NuStar Eastham Limited
England
NuStar Energy Services, Inc.
Delaware
NuStar GP, Inc.
Delaware
NuStar Grangemouth Limited
England
NuStar Holdings B.V.
Netherlands
NuStar Internacional, S de R.L. de C.V.
Mexico
NuStar Logistics, L.P.
Delaware
NuStar Marketing LLC (wholly owned by NuStar Asphalt LLC)
Delaware
NuStar Pipeline Company, LLC
Delaware
NuStar Pipeline Holding Company, LLC
Delaware
NuStar Pipeline Operating Partnership L.P.
Delaware
NuStar Pipeline Partners L.P.
Delaware
NuStar Refining, LLC
Delaware




Name of Entity
State of Incorporation
NuStar Supply & Trading LLC
Delaware
NuStar Technology, Inc.
Delaware
NuStar Terminals B.V.
Netherlands
NuStar Terminals Antilles N.V.
Curacao
NuStar Terminals Canada Co.
Nova Scotia
NuStar Terminals Canada Holdings Co.
Nova Scotia
NuStar Terminals Canada Partnership
Nova Scotia
NuStar Terminals Corporation N.V.
Curacao
NuStar Terminals Delaware, Inc.
Delaware
NuStar Terminals International N.V.
Curacao
NuStar Terminals Limited
England
NuStar Terminals Marine Services N.V.
Sint Eustatius
NuStar Terminals New Jersey, Inc.
Delaware
NuStar Terminals N.V.
Sint Eustatius
NuStar Terminals Operations Partnership L.P.
Delaware
NuStar Terminals Partners TX L.P.
Delaware
NuStar Terminals Services, Inc.
Delaware
NuStar Terminals Texas, Inc.
Delaware
NuStar Texas Holdings, Inc.
Delaware
NuTex GP, LLC
Delaware
Petroburgos, S. de R.L. de C.V.
Mexico
Point Tupper Marine Services Co.
Nova Scotia
Saba Company N.V.
Sint Eustatius



Name of Entity
State of Incorporation

Seven Seas Steamship Company (Sint
Eustatius) N.V.
Sint Eustatius
Shore Terminals LLC
Delaware
ST Linden Terminal, LLC (joint venture; 50% ownership interest)
Delaware
Texas Energy Services LLC
Delaware



Exhibit 23.01
Consent of Independent Registered Public Accounting Firm
The Board of Directors
NuStar GP Holdings, LLC:

We consent to the incorporation by reference in the registration statement on Form S‑8 (No. 333‑137150) of NuStar GP Holdings, LLC and subsidiaries of our reports dated March 3, 2014, with respect to the consolidated balance sheets of NuStar GP Holdings, LLC and subsidiaries as of December 31, 2013 and 2012, and the related consolidated statements of comprehensive income (loss), cash flows, and members’ equity for each of the years in the three‑year period ended December 31, 2013 and the effectiveness of internal control over financial reporting as of December 31, 2013, which reports appear in the December 31, 2013 annual report on Form 10‑K of NuStar GP Holdings, LLC.

/s/ KPMG LLP
San Antonio, Texas
March 3, 2014




Exhibit 23.02




Consent of Independent Registered Public Accounting Firm
The Board of Directors
NuStar GP Holdings, LLC:

We consent to the incorporation by reference in the registration statement on Form S‑8 (No. 333‑137150) of NuStar GP Holdings, LLC and subsidiaries of our reports dated March 3, 2014, with respect to the consolidated balance sheets of NuStar Energy L.P. and subsidiaries as of December 31, 2013 and 2012, and the related consolidated statements of income (loss), comprehensive income (loss), partners’ equity, and cash flows for each of the years in the three‑year period ended December 31, 2013 and the effectiveness of internal control over financial reporting as of December 31, 2013, which reports appear in the December 31, 2013 annual report on Form 10‑K of NuStar GP Holdings, LLC.
/s/ KPMG LLP
San Antonio, Texas
March 3, 2014





Exhibit 31.01
CERTIFICATION PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, Bradley C. Barron, certify that:
1. I have reviewed this annual report on Form 10-K of NuStar GP Holdings, LLC (the “registrant”);
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: March 3, 2014
 
 
/s/ Bradley C. Barron
 
Bradley C. Barron
 
President and Chief Executive Officer






Exhibit 31.02
CERTIFICATION PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, Thomas R. Shoaf, certify that:
1. I have reviewed this annual report on Form 10-K of NuStar GP Holdings, LLC (the “registrant”);
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: March 3, 2014
 
 
/s/ Thoams R. Shoaf
 
Thomas R. Shoaf
 
Executive Vice President and Chief Financial Officer





Exhibit 32.01
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of NuStar GP Holdings, LLC (the Company) on Form 10-K for the year ended December 31, 2013, as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Bradley C. Barron, President and Chief Executive Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
 
/s/ Bradley C. Barron
Bradley C. Barron
President and Chief Executive Officer
March 3, 2014
A signed original of the written statement required by Section 906 has been provided to NuStar GP Holdings, LLC and will be retained by NuStar GP Holdings, LLC and furnished to the Securities and Exchange Commission or its staff upon request.





Exhibit 32.02
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of NuStar GP Holdings, LLC (the Company) on Form 10-K for the year ended December 31, 2013, as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Thomas R. Shoaf, Executive Vice President and Chief Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
 
/s/ Thomas R. Shoaf
Thomas R. Shoaf
Executive Vice President and Chief Financial Officer
March 3, 2014
A signed original of the written statement required by Section 906 has been provided to NuStar GP Holdings, LLC and will be retained by NuStar GP Holdings, LLC and furnished to the Securities and Exchange Commission or its staff upon request.




Exhibit 99.01
Audit Committee Preapproval Policy
I.      Statement of Principles

The Audit Committee of the board of directors (the “ Audit Committee ”) of NuStar GP Holdings, LLC (the “ Company ”) must pre-approve the audit and non-audit services performed by the Company’s independent auditor and ensure that the provision of such non-audit services does not impair the auditor’s independence. Before the Company or any of its wholly owned subsidiaries engages the independent auditor to render a service, the engagement must be either:

•
specifically approved by the Audit Committee, or
•
entered into pursuant to this Preapproval Policy.

The Audit Committee shall review and discuss with the independent auditor any documentation supplied by the independent auditor as to the nature and scope of any services to be approved, as well as the potential effects of the provision of such services on the auditor’s independence.

The appendices to this Preapproval Policy describe in detail the particular audit, audit-related, tax and other services that have the preapproval of the Audit Committee pursuant to this Preapproval Policy. The term of any preapproval is twelve (12) months from the date of the preapproval, unless the Audit Committee specifically provides for a different period. The Audit Committee shall periodically revise the list of pre-approved services.
 
II.      Delegation

The Audit Committee may delegate preapproval authority to one or more of its members. The member or members to whom such authority is delegated shall report any preapproval decisions to the Audit Committee at its next scheduled meeting. The Audit Committee may not delegate to management the Audit Committee’s responsibilities to pre-approve services performed by the independent auditor.

III.      Audit Services

The Audit Committee must specifically pre-approve the terms of the annual audit services engagement. The Audit Committee shall approve, if necessary, any changes in terms resulting from changes in audit scope, company structure or other matters. In addition to the annual audit services engagement approved by the Audit Committee, the Audit Committee may grant preapproval for other audit services, which are those services only the independent auditor reasonably can provide. The Audit Committee has pre-approved the audit services listed in Appendix A . All other audit services not listed in Appendix A must be specifically pre-approved by the Audit Committee.


Page 1

IV.      Audit-Related Services

Audit-related services, including internal control-related services, are assurance and related services that are reasonably related to the performance of the audit or review of the Company’s financial statements and/or the Company’s internal control over financial reporting and that are traditionally performed by the independent auditor. The Audit Committee believes that the provision of the audit-related services does not impair the independence of the auditor, and has pre-approved the audit-related services listed in Appendix B . All other audit-related services not listed in Appendix B must be specifically pre-approved by the Audit Committee.

V.      Tax Services

The Audit Committee believes that the independent auditor can provide Tax Services to the Company, such as tax compliance, tax planning and tax advice without impairing the auditor’s independence. However, the Audit Committee shall scrutinize carefully the retention of the independent auditor in connection with any tax-related transaction initially recommended by the independent auditor. The Audit Committee has pre-approved the Tax Services listed in Appendix C . All tax services not listed on Appendix C must be specifically pre-approved by the Audit Committee.

VI.      Other Services

The Audit Committee may grant preapproval for those permissible non-audit services classified as other services that it believes would not impair the independence of the auditor, including those that are routine and nonrecurring services. The Audit Committee has given policy-based preapproval for the other services listed in Appendix D . Permissible other services not listed in Appendix D must be specifically pre-approved by the Audit Committee.

A list of the Securities and Exchange Commission’s (“ SEC ”) prohibited non-audit services is attached to this Preapproval Policy as Exhibit 1 . The rules of the SEC and the Public Company Accounting Oversight Board (“ PCAOB ”) and relevant guidance should be consulted to determine the precise definitions of these services and the applicability of exceptions to certain of the prohibitions.

VII.      Preapproval Fee Levels

The Audit Committee may consider the amount or range of estimated fees as a factor in determining whether a proposed service would impair the auditor’s independence. Where the Audit Committee has approved an estimated fee for a service, the preapproval applies to all services described in the approval. However, in the event that the invoice in respect of any such service is materially in excess of the estimated amount or range, the Audit Committee must approve such excess amount prior to payment of the invoice. The Audit Committee expects that any requests to pay invoices in excess of the estimated amounts will include an explanation as to the reason to the overage It is understood that estimated amounts that are denominated in dollars but are ordinarily paid in another currency are subject to foreign exchange rate fluctuations. Thus, variances from estimated amounts arising as a result of changes in foreign currency exchange rates from the time of preparation of the relevant approval request will not be considered to be variances from the budgeted amount and payment of the related invoices will not require subsequent approval.. The Company’s independent auditor will be informed of this policy.

___________________
1
It is understood that estimated amounts that are denominated in dollars but are ordinarily paid in another currency are subject to foreign exchange rate fluctuations. Thus, variances from estimated amounts arising as a result of changes in foreign currency exchange rates from the time of preparation of the relevant approval request will not be considered to be variances from the budgeted amount and payment of the related invoices will not require subsequent approval.

Page 2

VIII.      Supporting Documentation

With respect to each proposed pre-approved service, the independent auditor must provide the Audit Committee with detailed back-up documentation regarding the specific services to be provided.

IX.      Procedures

Requests or applications to provide services that require separate approval by the Audit Committee must be submitted to the Audit Committee by both the independent auditor and the Company’s Chief Financial Officer (or his or her designee), and must include a joint statement as to whether, in their view, the request or application is consistent with the SEC’s and the PCAOB’s rules on auditor independence. In connection with the Audit Committee’s consideration of any proposed service, the independent auditor, at the Committee’s request, will provide to the Audit Committee detailed documentation regarding the specific services to be provided so that the committee can make a well-reasoned assessment of the impact of the service on the auditor’s independence.

The Audit Committee hereby designates the Company’s Controller (the “ Monitor ”) to monitor the performance of all services provided by the independent auditor and to determine whether such services are in compliance with this policy. The Monitor shall periodically inform the Audit Committee of each service performed by the independent auditor pursuant to this Preapproval Policy.





Page 3

Exhibit 99.01

Appendix A
Pre-Approved AUDIT SERVICES for the period of March 1, 2014 through March 1, 2015
Dated: February 27, 2014
Service
annual audit services for the Company
assistance with and review of documents filed with the SEC including registration statements, reports on Forms 10-K and 10-Q, and other documents
services associated with other documents issued in connection with securities offerings ( e.g. , comfort letters, consents)
assistance in responding to SEC comment letters
statutory audits ( e.g. , FERC audits) and financial audits for subsidiaries of the Company, including statutory audits required for insurance companies for purposes of state law
certificates, letters and opinions issued to regulators, agencies and other third-parties ( e.g. , insurance, banking, environmental) regarding the Company’s assets and/or operations that only the Company’s independent auditors reasonably can provide
Annual Audit Services for the Company
$98,000
Pre-approval fee limit for Audit Services (other than services pertaining to registration statements or prospectuses in connection with securities offerings)
$25,000
Pre-approval fee limit for Audit Services pertaining to registration statements or prospectuses in connection with securities offerings
$25,000



Appendix B
Pre-Approved AUDIT-RELATED SERVICES for the period of March 1, 2014 through March 1, 2015
Dated: February 27, 2014
Service
due diligence services pertaining to potential business acquisitions or dispositions
financial statement audits of employee benefit plans
accounting consultations and audits in connection with acquisitions
consultations concerning principles of accounting and/or financial reporting treatment under standards or interpretations by the SEC, PCAOB, FASB or other regulatory or standard-setting bodies (outside those consultations necessary to perform an audit or review of the Company’s financial statements in accordance with GAAS)
agreed-upon or expanded audit procedures related to accounting and/or billing records required to respond to or comply with financial, accounting or regulatory reporting matters
 
Pre-approval fee limit for Audit-Related Services
$25,000



Appendix C
Pre-Approved TAX SERVICES for the period of March 1, 2014 through March 1, 2015
Dated: February 27, 2014
Service
U.S. federal, state and local tax compliance, including the preparation of original and amended tax returns and claims for refunds
U.S. federal, state and local tax planning and advice, including assistance with tax audits and appeals (but expressly excluding advocacy or litigation services), tax advice related to mergers and acquisitions, tax advice relating to employee benefit plans, and requests for rulings or technical advice from taxing authorities
review of federal, state, local and international income, franchise, and other tax returns
 
Pre-approval fee limit for Tax Services
$10,000




Appendix D
Pre-Approved ALL OTHER SERVICES for the period of March 1, 2014 through March 1, 2015
Dated: February 27, 2014
Service
none
 
Pre-approval fee limit for All Other Services
$ 0




Exhibit 1
Prohibited Non-Audit Services
•
Bookkeeping or other services related to the accounting records or financial statements of the audit client*

•
Financial information systems design and implementation*

•
Appraisal or valuation services, fairness opinions or contribution-in-kind reports*

•
Actuarial services*

•
Internal audit outsourcing services*

•
Management functions

•
Human resources

•
Broker-dealer, investment adviser or investment banking services

•
Legal services

•
Expert services unrelated to the audit

•
Any services entailing a contingent fee or commission (not including fees awarded by a bankruptcy court when the audit client is in bankruptcy)

•
Tax services to an officer of the audit client whose role is in a financial reporting oversight capacity (regardless of whether the audit client or the officer pays the fee for the services)

•
Planning or opining on the tax consequences of a “listed,” i.e. tax avoidance, transaction

•
Planning or opining on the tax consequences of a “confidential” transaction, i.e., where tax advice is given under restriction of confidentiality (regardless of the fee to be paid)

•
Planning or opining on a transaction that is based on an “aggressive interpretation” of tax laws and regulations, if the transaction was recommended by the audit firm and a significant purpose of which is tax avoidance unless the proposed tax treatment is at least more likely than not to be allowed under current tax laws








____________________
*
Provision of these non-audit services may be permitted if it is reasonable to conclude that the results of these services will not be subject to audit procedures. Materiality is not an appropriate basis upon which to overcome the rebuttable presumption that prohibited services will be subject to audit procedures because determining materiality is itself a matter of audit judgment.



Exhibit 99.02
Report of Independent Registered Public Accounting Firm
The Board of Directors of NuStar GP, LLC
and Unitholders of NuStar Energy L.P.:
We have audited the accompanying consolidated balance sheets of NuStar Energy L.P. (a Delaware limited partnership) and subsidiaries (the Partnership) as of December 31, 2013 and 2012 , and the related consolidated statements of income (loss), comprehensive income (loss), partners’ equity, and cash flows for each of the years in the three-year period ended December 31, 2013 . These consolidated financial statements are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of NuStar Energy L.P. and subsidiaries as of December 31, 2013 and 2012 , and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2013 , in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), NuStar Energy L.P. and subsidiaries’ internal control over financial reporting as of December 31, 2013 , based on criteria established in Internal Control—Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 3, 2014 expressed an unqualified opinion on the effectiveness of the Partnership’s internal control over financial reporting.
/s/ KPMG LLP
San Antonio, Texas
March 3, 2014


1


Report of Independent Registered Public Accounting Firm
The Board of Directors of NuStar GP, LLC
and Unitholders of NuStar Energy L.P.:
We have audited NuStar Energy L.P. (a Delaware limited partnership) and subsidiaries’ (the Partnership’s) internal control over financial reporting as of December 31, 2013 , based on criteria established in Internal Control – Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Partnership’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Partnership’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate .
In our opinion, NuStar Energy L.P. and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 31, 2013 , based on criteria established in Internal Control – Integrated Framework (1992) issued by COSO.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of NuStar Energy L.P. and subsidiaries as of December 31, 2013 and 2012 , and the related consolidated statements of income (loss), comprehensive income (loss), partners’ equity, and cash flows for each of the years in the three-year period ended December 31, 2013 , and our report dated March 3, 2014 expressed an unqualified opinion on those consolidated financial statements.
/s/ KPMG LLP
San Antonio, Texas
March 3, 2014


2


NUSTAR ENERGY L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars, Except Unit Data)
 
 
December 31,
 
2013
 
2012
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
100,743

 
$
83,602

Accounts receivable, net of allowance for doubtful accounts of $1,224 and $808
as of December 31, 2013 and 2012, respectively
281,310

 
387,943

Receivable from related parties
51,084

 
109,833

Inventories
138,147

 
173,228

Income tax receivable
826

 
1,265

Other current assets
39,452

 
65,238

Assets held for sale
21,987

 
118,334

Total current assets
633,549

 
939,443

Property, plant and equipment, at cost
4,500,837

 
4,287,859

Accumulated depreciation and amortization
(1,190,184
)
 
(1,049,399
)
Property, plant and equipment, net
3,310,653

 
3,238,460

Intangible assets, net
71,249

 
92,435

Goodwill
617,429

 
951,024

Investment in joint ventures
68,735

 
102,945

Deferred income tax asset
5,769

 
3,108

Note receivable from related party, net
165,440

 
95,711

Other long-term assets, net
159,362

 
189,963

Total assets
$
5,032,186

 
$
5,613,089

Liabilities and Partners’ Equity
 
 
 
Current liabilities:
 
 
 
Current portion of long-term debt
$
—

 
$
286,422

Accounts payable
298,751

 
397,633

Payable to related party
8,325

 
1,408

Accrued interest payable
33,113

 
23,741

Accrued liabilities
38,632

 
124,203

Taxes other than income tax
9,745

 
9,893

Income tax payable
4,006

 
2,671

Total current liabilities
392,572

 
845,971

Long-term debt, less current portion
2,655,553

 
2,124,582

Long-term payable to related party
41,139

 
18,071

Deferred income tax liability
27,350

 
32,114

Other long-term liabilities
11,778

 
7,356

Commitments and contingencies (Note 16)

 

Partners’ equity:
 
 
 
Limited partners (77,886,078 common units outstanding
as of December 31, 2013 and 2012)
1,921,726

 
2,573,263

General partner
43,804

 
57,986

Accumulated other comprehensive loss
(63,394
)
 
(58,865
)
Total NuStar Energy L.P. partners’ equity
1,902,136

 
2,572,384

Noncontrolling interest
1,658

 
12,611

Total partners’ equity
1,903,794

 
2,584,995

Total liabilities and partners’ equity
$
5,032,186

 
$
5,613,089

See Notes to Consolidated Financial Statements.


3


NUSTAR ENERGY L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(Thousands of Dollars, Except Unit and Per Unit Data)

 
Year Ended December 31,
 
2013
 
2012
 
2011
Revenues:
 
 
 
 
 
Service revenues
$
938,138

 
$
870,157

 
$
820,623

Product sales
2,525,594

 
5,075,579

 
5,437,006

Total revenues
3,463,732

 
5,945,736

 
6,257,629

Costs and expenses:
 
 
 
 
 
Cost of product sales
2,453,997

 
4,930,174

 
5,175,710

Operating expenses:
 
 
 
 
 
Third parties
331,719

 
392,491

 
367,889

Related party
122,677

 
133,654

 
138,324

Total operating expenses
454,396

 
526,145

 
506,213

General and administrative expenses:
 
 
 
 
 
Third parties
32,484

 
42,266

 
36,830

Related party
58,602

 
62,490

 
66,220

Total general and administrative expenses
91,086

 
104,756

 
103,050

Depreciation and amortization expense
178,921

 
159,789

 
161,773

Goodwill impairment loss
304,453

 
22,132

 
—

Asset impairment loss
—

 
249,646

 
—

Gain on legal settlement
—

 
(28,738
)
 
—

Total costs and expenses
3,482,853

 
5,963,904

 
5,946,746

Operating (loss) income
(19,121
)
 
(18,168
)
 
310,883

Equity in (loss) earnings of joint ventures
(39,970
)
 
(9,378
)
 
11,458

Interest expense, net
(127,119
)
 
(90,535
)
 
(81,539
)
Interest income from related party
6,113

 
1,219

 
—

Other income (expense), net
7,341

 
(24,689
)
 
(3,573
)
(Loss) income from continuing operations before income tax expense
(172,756
)
 
(141,551
)
 
237,229

Income tax expense
12,753

 
24,450

 
18,555

(Loss) income from continuing operations
(185,509
)
 
(166,001
)
 
218,674

(Loss) income from discontinued operations, net of tax
(99,162
)
 
(61,236
)
 
2,927

Net (loss) income
(284,671
)
 
(227,237
)
 
221,601

Less (loss) income attributable to noncontrolling interest
(10,901
)
 
(621
)
 
140

Net (loss) income attributable to NuStar Energy L.P.
$
(273,770
)
 
$
(226,616
)
 
$
221,461

Net (loss) income per unit applicable to limited partners:
 
 
 
 
 
Continuing operations
$
(2.89
)
 
$
(2.79
)
 
$
2.74

Discontinued operations
(1.11
)
 
(0.82
)
 
$
0.04

Total (Note 23)
$
(4.00
)
 
$
(3.61
)
 
$
2.78

Weighted-average limited partner units outstanding
77,886,078

 
72,957,417

 
65,018,301

See Notes to Consolidated Financial Statements.


4


NUSTAR ENERGY L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Thousands of Dollars)

 
Year Ended December 31,
 
2013
 
2012
 
2011
Net (loss) income
$
(284,671
)
 
$
(227,237
)
 
$
221,601

 
 
 
 
 
 
Other comprehensive (loss) income:
 
 
 
 
 
Foreign currency translation adjustment, net of income tax expense of
$0, $414 and $458
(19,364
)
 
10,677

 
(18,431
)
Net unrealized gain (loss) on cash flow hedges
7,213

 
(94,269
)
 
(53,452
)
Net loss (gain) reclassified into income on cash flow hedges
7,570

 
53,232

 
(5,030
)
Total other comprehensive loss
(4,581
)
 
(30,360
)
 
(76,913
)
 
 
 
 
 
 
Comprehensive (loss) income
(289,252
)
 
(257,597
)
 
144,688

Less comprehensive (loss) income attributable to noncontrolling interest
(10,953
)
 
477

 
(2,866
)
Comprehensive (loss) income attributable to NuStar Energy L.P.
$
(278,299
)
 
$
(258,074
)
 
$
147,554

See Notes to Consolidated Financial Statements.


5


NUSTAR ENERGY L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
 
Year Ended December 31,
 
2013
 
2012
 
2011
Cash Flows from Operating Activities:
 
 
 
 
 
Net (loss) income
$
(284,671
)
 
$
(227,237
)
 
$
221,601

Adjustments to reconcile net (loss) income to net cash provided by
operating activities:
 
 
 
 
 
Depreciation and amortization expense
184,363

 
170,651

 
168,286

Amortization of debt related items
4,329

 
(7,016
)
 
(12,392
)
Loss (gain) on sale or disposition of assets
(7,829
)
 
26,902

 
(262
)
Asset and goodwill impairment loss
406,982

 
271,778

 
—

Gain on legal settlement
—

 
(28,738
)
 
—

Deferred income tax (benefit) expense
(6,739
)
 
1,542

 
4,351

Equity in loss (earnings) of joint ventures
39,970

 
9,378

 
(11,458
)
Distributions of equity in earnings of joint ventures
7,956

 
6,364

 
14,374

Changes in current assets and current liabilities (Note 24)
112,776

 
90,247

 
(265,453
)
Other, net
28,082

 
(14,668
)
 
(24,579
)
Net cash provided by operating activities
485,219

 
299,203

 
94,468

Cash Flows from Investing Activities:
 
 
 
 
 
Capital expenditures
(343,320
)
 
(410,595
)
 
(335,660
)
Change in accounts payable related to capital expenditures
(5,384
)
 
—

 
—

Acquisitions
—

 
(315,810
)
 
(100,690
)
Investment in other long-term assets
—

 
(2,610
)
 
(8,990
)
Proceeds from sale or disposition of assets
119,006

 
478,926

 
2,086

Increase in note receivable from related party
(80,961
)
 
(95,711
)
 
—

Other, net
(302
)
 
—

 
—

Net cash used in investing activities
(310,961
)
 
(345,800
)
 
(443,254
)
Cash Flows from Financing Activities:
 
 
 
 
 
Proceeds from long-term debt borrowings
1,738,451

 
2,549,145

 
915,749

Proceeds from short-term debt borrowings
—

 
71,880

 
33,800

Proceeds from note offering, net of issuance costs
686,863

 
247,398

 
—

Long-term debt repayments
(2,150,743
)
 
(2,648,475
)
 
(768,150
)
Short-term debt repayments
—

 
(71,880
)
 
(33,800
)
Proceeds from issuance of common units, net of issuance costs
—

 
336,415

 
317,285

Contributions from general partner
—

 
7,121

 
6,708

Distributions to unitholders and general partner
(392,204
)
 
(365,279
)
 
(322,046
)
(Payments for) proceeds from termination of interest rate swaps
(33,697
)
 
(5,678
)
 
33,433

Other, net
1,980

 
(9,978
)
 
3,742

Net cash (used in) provided by financing activities
(149,350
)
 
110,669

 
186,721

Effect of foreign exchange rate changes on cash
(7,767
)
 
2,033

 
(1,559
)
Net increase (decrease) in cash and cash equivalents
17,141

 
66,105

 
(163,624
)
Cash and cash equivalents as of the beginning of the period
83,602

 
17,497

 
181,121

Cash and cash equivalents as of the end of the period
$
100,743

 
$
83,602

 
$
17,497

See Notes to Consolidated Financial Statements.

6



NUSTAR ENERGY L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF PARTNERS’ EQUITY
Years Ended December 31, 2013 , 2012 and 2011
(Thousands of Dollars, Except Unit Data)
 
 
Limited Partners
 
General
Partner
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Total NuStar Energy L.P. Partners’ Equity
 
Noncontrolling Interest
 
Total
Partners’
Equity
 
Units
 
Amount
 
Balance as of
January 1, 2011
64,610,549

 
$
2,598,873

 
$
57,327

 
$
46,500

 
$
2,702,700

 
$
—

 
$
2,702,700

Acquisition
—

 
—

 
—

 
—

 
—

 
15,000

 
15,000

Net income
—

 
181,439

 
40,022

 
—

 
221,461

 
140

 
221,601

Other comprehensive
loss
—

 
—

 
—

 
(73,907
)
 
(73,907
)
 
(3,006
)
 
(76,913
)
Cash distributions
to partners
—

 
(280,528
)
 
(41,518
)
 
—

 
(322,046
)
 
—

 
(322,046
)
Issuance of common
units, including
contribution from
general partner
6,145,529

 
317,285

 
6,708

 
—

 
323,993

 
—

 
323,993

Balance as of
December 31, 2011
70,756,078

 
2,817,069

 
62,539

 
(27,407
)
 
2,852,201

 
12,134

 
2,864,335

Net (loss) income
—

 
(262,502
)
 
35,886

 
—

 
(226,616
)
 
(621
)
 
(227,237
)
Other comprehensive
 (loss) income
—

 
—

 
—

 
(31,458
)
 
(31,458
)
 
1,098

 
(30,360
)
Cash distributions
to partners
—

 
(317,719
)
 
(47,560
)
 
—

 
(365,279
)
 
—

 
(365,279
)
Issuance of common
units, including
contribution from
general partner
7,130,000

 
336,739

 
7,121

 
—

 
343,860

 
—

 
343,860

Other
—

 
(324
)
 
—

 
—

 
(324
)
 
—

 
(324
)
Balance as of
December 31, 2012
77,886,078

 
2,573,263

 
57,986

 
(58,865
)
 
2,572,384

 
12,611

 
2,584,995

Net (loss) income
—

 
(310,652
)
 
36,882

 
—

 
(273,770
)
 
(10,901
)
 
(284,671
)
Other comprehensive
 loss
—

 
—

 
—

 
(4,529
)
 
(4,529
)
 
(52
)
 
(4,581
)
Cash distributions
to partners
—

 
(341,140
)
 
(51,064
)
 
—

 
(392,204
)
 
—

 
(392,204
)
Other
—

 
255

 
—

 
—

 
255

 
—

 
255

Balance as of
December 31, 2013
77,886,078

 
$
1,921,726

 
$
43,804

 
$
(63,394
)
 
$
1,902,136

 
$
1,658

 
$
1,903,794

See Notes to Consolidated Financial Statements.


7


NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2013 , 2012 and 2011

1. ORGANIZATION AND OPERATIONS
Organization
NuStar Energy L.P. (NuStar Energy) (NYSE: NS) is engaged in the terminalling and storage of petroleum products, the transportation of petroleum products and anhydrous ammonia, and the marketing of petroleum products. Unless otherwise indicated, the terms “NuStar Energy L.P.,” “the Partnership,” “we,” “our” and “us” are used in this report to refer to NuStar Energy L.P., to one or more of our consolidated subsidiaries or to all of them taken as a whole. NuStar GP Holdings, LLC (NuStar GP Holdings) (NYSE: NSH) owns our general partner, Riverwalk Logistics, L.P., and owns a 14.9% total interest in us as of December 31, 2013 .
Operations
We conduct our operations through our subsidiaries, primarily NuStar Logistics, L.P. (NuStar Logistics) and NuStar Pipeline Operating Partnership L.P. (NuPOP). We have three business segments: storage, pipeline and fuels marketing.
Storage. We own terminal and storage facilities in the United States, Canada, Mexico, the Netherlands, including St. Eustatius in the Caribbean, the United Kingdom and Turkey providing approximately 84.8 million barrels of storage capacity. Our terminals and storage facilities provide storage and handling services on a fee basis for petroleum products, specialty chemicals and other liquids, including crude oil and other feedstocks.
Pipeline. We own common carrier refined product pipelines in Texas, Oklahoma, Colorado, New Mexico, Kansas, Nebraska, Iowa, South Dakota, North Dakota and Minnesota covering approximately 5,463 miles, consisting of the Central West System, the East Pipeline and the North Pipeline. The East and North Pipelines also include 21 terminals providing storage capacity of 4.9 million barrels, and the East Pipeline includes two tank farms providing storage capacity of 1.4 million barrels. In addition, we own a 2,000 mile anhydrous ammonia pipeline located in Louisiana, Arkansas, Missouri, Illinois, Indiana, Iowa and Nebraska. We also own 1,180 miles of crude oil pipelines in Texas, Oklahoma, Kansas, Colorado and Illinois, as well as associated crude oil terminal and storage facilities providing storage capacity of 3.4 million barrels in Texas and Oklahoma that are located along the crude oil pipelines. We charge tariffs on a per barrel basis for transporting refined products, crude oil and other feedstocks in our refined product and crude oil pipelines and on a per ton basis for transporting anhydrous ammonia in our ammonia pipeline.
Fuels Marketing. In 2013, we changed the name of the “Asphalt and Fuels Marketing” segment to the “Fuels Marketing” segment since this name more accurately reflects the operations that remain after our deconsolidation of NuStar Asphalt LLC in 2012 and the sale of our fuels refinery in San Antonio, Texas (the San Antonio Refinery) on January 1, 2013. Within our fuels marketing operations, we purchase crude oil and refined petroleum products for resale.
Our fuels marketing segment includes our fuels marketing operations and, through September 28, 2012 , our asphalt operations. On September 28, 2012, we sold a 50% ownership interest in NuStar Asphalt LLC, previously a wholly owned subsidiary, and started reporting our remaining investment using the equity method of accounting. Therefore, the results of our asphalt operations are reported in “Equity in (loss) earnings of joint ventures” in the consolidated statements of income beginning on September 28, 2012. In addition, we have presented the results of operations for the San Antonio Refinery and related assets, previously reported in the fuels marketing and pipeline segments, as discontinued operations for all periods presented. See Note 5 for additional discussion.
The activities of the fuels marketing segment expose us to the risk of fluctuations in commodity prices, which has a direct impact on the segment’s results of operations. We enter into derivative contracts to attempt to mitigate the effect of commodity price fluctuations.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation
The accompanying consolidated financial statements represent the consolidated operations of the Partnership and our subsidiaries. Noncontrolling interests are separately disclosed on the financial statements. Inter-partnership balances and transactions have been eliminated in consolidation. The operations of certain pipelines and terminals in which we own an undivided interest are proportionately consolidated in the accompanying consolidated financial statements.

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NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. On an ongoing basis, management reviews their estimates based on currently available information. Management may revise estimates due to changes in facts and circumstances.
Cash and Cash Equivalents
Cash equivalents are all highly liquid investments with an original maturity of three months or less when acquired.
Restricted Cash
Restricted cash is cash held in escrow restricted to use under certain contractual obligations. Restricted cash is included in “Other current assets” in the consolidated balance sheets.
Accounts Receivable
Accounts receivable represent valid claims against non-affiliated customers for products sold or services rendered. We extend credit terms to certain customers after review of various credit indicators, including the customer’s credit rating. Outstanding customer receivable balances are regularly reviewed for possible non-payment indicators and allowances for doubtful accounts are recorded based upon management’s estimate of collectability at the time of their review.
Inventories
Inventories consist of crude oil, refined petroleum products, and materials and supplies. Inventories, except those associated with a qualifying fair value hedge, are valued at the lower of cost or market. Cost is determined using the weighted-average cost method. Our inventory, other than materials and supplies, consists of one end-product category, petroleum products, which we include in the fuels marketing segment. Accordingly, we determine lower of cost or market adjustments on an aggregate basis. Inventories associated with qualifying fair value hedges are valued at current market prices. Materials and supplies are valued at the lower of average cost or market.
Property, Plant and Equipment
We record additions to property, plant and equipment, including reliability and strategic capital expenditures, at cost.
Reliability capital expenditures are capital expenditures to replace partially or fully depreciated assets to maintain the existing operating capacity of existing assets and extend their useful lives. Strategic capital expenditures are capital expenditures to expand or upgrade the operating capacity, increase efficiency or increase the earnings potential of existing assets, whether through construction or acquisition, along with certain capital expenditures related to support functions. Repair and maintenance costs associated with existing assets that are minor in nature and do not extend the useful life of existing assets are charged to operating expenses as incurred.
Depreciation of property, plant and equipment is recorded on a straight-line basis over the estimated useful lives of the related assets. Gains or losses on sales or other dispositions of property are recorded in income and are reported in “Other income (expense), net” in the consolidated statements of income. When property or equipment is retired or otherwise disposed of, the difference between the carrying value and the net proceeds is recognized in the year retired.
Goodwill and Intangible Assets
Goodwill acquired in a business combination is not amortized. Instead, we assess goodwill for impairment annually on October 1, or more frequently if events or changes in circumstances indicate it might be impaired. We first assess qualitative factors to determine whether it is necessary to perform a quantitative goodwill impairment test. As of October 1, 2012 and 2011, based on our review of the qualitative factors present, we determined that a quantitative goodwill impairment test was not necessary, and no goodwill impairment had occurred. We performed a quantitative goodwill impairment test as of October 1, 2013.
We calculate the estimated fair value of each of our reporting units using a weighted-average of values calculated using an income approach and a market approach. The income approach involved estimating the fair value of each reporting unit by discounting its estimated future cash flows using a discount rate, consistent with a market participant’s assumption. The market approach bases the fair value measurement on information obtained from observed stock prices of public companies and recent merger and acquisition transaction data of comparable entities.

9
Table of Contents
NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



Our reporting units to which goodwill has been allocated consist of the following:
•
crude oil pipelines;
•
refined product pipelines;
•
refined product terminals, excluding our St. Eustatius and Point Tupper facilities;
•
St. Eustatius and Point Tupper terminal operations (Statia Terminals); and
•
bunkering activity at our St. Eustatius and Point Tupper facilities.

The quantitative impairment test for goodwill consists of a two-step process. Step 1 compares the fair value of the reporting unit to its carrying value including goodwill. The carrying value of each reporting unit equals the total identified assets (including goodwill) less the sum of each reporting unit’s identified current and long term liabilities. We used reasonable and supportable methods to assign the assets and liabilities to the appropriate reporting units in a consistent manner. If the carrying value exceeds fair value, there is a potential impairment and Step 2 must be performed to determine the amount of goodwill impairment. Step 2 compares the carrying value of the reporting unit’s goodwill to its implied fair value using a hypothetical allocation of the reporting unit’s fair value. If the goodwill carrying value exceeds its implied fair value, the excess is reported as impairment. See Note 6 for a discussion of the goodwill impairment recognized in 2013.
Intangible assets are recorded at cost and are assets that lack physical substance (excluding financial assets). Our intangible assets are amortized on a straight-line basis over 10 to 47 years.
Investment in Joint Ventures
We account for our investment in the joint ventures using the equity method of accounting. We report our ownership interest in our equity method investments within “Investment in joint ventures” on the consolidated balance sheet and our portion of the results of operations for our equity method investments in “Equity in (loss) earnings of joint ventures” in the statements of income (loss). See Note 12 for a discussion of our investments in NuStar Asphalt LLC and St Linden Terminals, LLC.
Note Receivable from Related Party
The note receivable from related party consists of the amounts due to us from Asphalt JV under a $250.0 million unsecured revolving credit facility. The note receivable is recorded at the outstanding principal amount, adjusted for equity losses from our investment in Asphalt JV that exceeded the carrying value of our investment in Asphalt JV, and for the fair value of guarantees issued under the NuStar JV Facility. We recognize interest income ratably over the term of the facility in “Interest income from related party” on the consolidated statements of income. See Note 19 for additional information on our agreements with Asphalt JV.
Other Long-Term Assets
“Other long-term assets, net” primarily include the following:
•
funds deposited with a trustee related to revenue bonds issued by the Parish of St. James associated with our St. James terminal expansion (see Note 14 for additional information on the Gulf Opportunity Zone Revenue Bonds);
•
ammonia pipeline linefill and tank heel inventory;
•
deferred financing costs amortized over the life of the related debt obligation using the effective interest method; and
•
long-term derivative assets.
Impairment of Long-Lived Assets
We review long-lived assets, including property, plant and equipment and investment in joint ventures, for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. We evaluate recoverability using undiscounted estimated net cash flows generated by the related asset or asset group. If the results of that evaluation indicate that the undiscounted cash flows are less than the carrying amount of the asset (i.e, the asset is not recoverable) we perform an impairment analysis. If our intent is to hold the asset for continued use, we determine the amount of impairment as the amount by which the net carrying value exceeds its fair value. If our intent is to sell the asset, and the criteria required to classify an asset as held for sale are met, we determine the amount of impairment as the amount by which the net carrying amount exceeds its fair value less costs to sell. We believe that the carrying amounts of our long-lived assets as of December 31, 2013 are recoverable. See Note 5 for a discussion of impairments of long-lived assets.

10
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NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



Taxes Other than Income Taxes
Taxes other than income taxes include liabilities for ad valorem taxes, franchise taxes, sales and use taxes, excise fees and taxes and value added taxes.
Income Taxes
We are a limited partnership and generally are not subject to federal or state income taxes. Accordingly, our taxable income or loss, which may vary substantially from income or loss reported for financial reporting purposes, is generally included in the federal and state income tax returns of our partners. For transfers of publicly held units subsequent to our initial public offering, we have made an election permitted by Section 754 of the Internal Revenue Code (the Code) to adjust the common unit purchaser’s tax basis in our underlying assets to reflect the purchase price of the units. This results in an allocation of taxable income and expenses to the purchaser of the common units, including depreciation deductions and gains and losses on sales of assets, based upon the new unitholder’s purchase price for the common units.
We conduct certain of our operations through taxable wholly owned corporate subsidiaries. We account for income taxes related to our taxable subsidiaries using the asset and liability method. Under this method, we recognize deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. We measure deferred taxes using enacted tax rates expected to apply to taxable income in the year those temporary differences are expected to be recovered or settled.
We recognize a tax position if it is more-likely-than-not that the tax position will be sustained, based on the technical merits of the position, upon examination. We record uncertain tax positions in the financial statements at the largest amount of benefit that is more-likely-than-not to be realized. We had no unrecognized tax benefits as of December 31, 2013 and 2012 .
 
NuStar Energy and certain of its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. For U.S. federal and state purposes, tax years subject to examination are 2009 through 2013 and for our major non-U.S. jurisdictions, tax years subject to examination are 2009 through 2013, both according to standard statute of limitations. NuStar has waived the statute of limitations for limited items for the tax years 2006 and 2007 as a result of an income tax audit in Canada that is currently being appealed in the Tax Court of Canada.
Asset Retirement Obligations
We record a liability for asset retirement obligations at the fair value of the estimated costs to retire a tangible long-lived asset at the time we incur that liability, which is generally when the asset is purchased, constructed or leased, when we have a legal obligation to incur costs to retire the asset and when a reasonable estimate of the fair value of the obligation can be made. If a reasonable estimate cannot be made at the time the liability is incurred, we record the liability when sufficient information is available to estimate the fair value.
We have asset retirement obligations with respect to certain of our assets due to various legal obligations to clean and/or dispose of those assets at the time they are retired. However, these assets can be used for an extended and indeterminate period of time as long as they are properly maintained and/or upgraded. It is our practice and current intent to maintain our assets and continue making improvements to those assets based on technological advances. As a result, we believe that our assets have indeterminate lives for purposes of estimating asset retirement obligations because dates or ranges of dates upon which we would retire these assets cannot reasonably be estimated at this time. When a date or range of dates can reasonably be estimated for the retirement of any asset, we estimate the costs of performing the retirement activities and record a liability for the fair value of these costs.
We also have legal obligations in the form of leases and right-of-way agreements, which require us to remove certain of our assets upon termination of the agreement. However, these lease or right-of-way agreements generally contain automatic renewal provisions that extend our rights indefinitely or we have other legal means available to extend our rights. We have recorded a liability of approximately $0.6 million as of December 31, 2013 and 2012 , which is included in “Other long-term liabilities” in the consolidated balance sheets, for conditional asset retirement obligations related to the retirement of terminal assets with lease and right-of-way agreements.
Environmental Remediation Costs
Environmental remediation costs are expensed and an associated accrual established when site restoration and environmental remediation and cleanup obligations are either known or considered probable and can be reasonably estimated. These environmental obligations are based on estimates of probable undiscounted future costs over a 20 -year time period using currently available technology and applying current regulations, as well as our own internal environmental policies. The environmental liabilities have not been reduced by possible recoveries from third parties. Environmental costs include initial

11
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NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



site surveys, costs for remediation and restoration and ongoing monitoring costs, as well as fines, damages and other costs, when estimable. Adjustments to initial estimates are recorded, from time to time, to reflect changing circumstances and estimates based upon additional information developed in subsequent periods.
Product Imbalances
We incur product imbalances as a result of variances in pipeline meter readings and volume fluctuations within the East Pipeline system due to pressure and temperature changes. We use quoted market prices as of the reporting date to value our assets and liabilities related to product imbalances. Product imbalance liabilities are included in “Accrued liabilities” and product imbalance assets are included in “Other current assets” in the consolidated balance sheets.
Revenue Recognition
Revenues for the storage segment include fees for tank storage agreements, whereby a customer agrees to pay for a certain amount of storage in a tank over a period of time (storage lease revenues), and throughput agreements, whereby a customer pays a fee per barrel for volumes moving through our terminals and tanks (throughput revenues). Our terminals also provide blending, handling and filtering services. Our facilities at Point Tupper and St. Eustatius charge fees to provide ancillary services such as pilotage, tug assistance, line handling, launch service, emergency response services and other ship services. Storage lease revenues are recognized when services are provided to the customer. Throughput revenues are recognized as refined products are received in or delivered out of our terminal and as crude oil and certain other refinery feedstocks are received by the related refinery. Revenues for ancillary services are recognized as those services are provided.
Revenues for the pipeline segment are derived from interstate and intrastate pipeline transportation of refined product, crude oil and anhydrous ammonia. Transportation revenues (based on pipeline tariffs) are recognized as the refined product, crude oil or anhydrous ammonia is delivered out of the pipelines.
Revenues from the sale of petroleum products, which are included in our fuels marketing segment, are recognized when product is delivered to the customer and title and risk pass to the customer. Additionally, the revenues of our fuels marketing segment include the mark-to-market impact of certain derivative instruments that are part of our limited trading program.
We collect taxes on certain revenue transactions to be remitted to governmental authorities, which may include sales, use, value added and some excise taxes. These taxes are not included in revenue.
Income Allocation
Our net income for each quarterly reporting period is first allocated to the general partner in an amount equal to the general partner’s incentive distribution calculated based upon the declared distribution for the respective reporting period. We allocate the remaining net income among the limited and general partners in accordance with their respective 98% and 2% interests.
Net Income per Unit Applicable to Limited Partners
We have identified the general partner interest and incentive distribution rights (IDR) as participating securities and use the two-class method when calculating the net income per unit applicable to limited partners, which is based on the weighted-average number of common units outstanding during the period. Basic and diluted net income per unit applicable to limited partners are the same as we have no potentially dilutive securities outstanding.
Comprehensive Income
Comprehensive income consists of net income and other gains and losses affecting partners’ equity that are excluded from net income, such as foreign currency translation adjustments and mark-to-market adjustments on derivative instruments designated and qualifying as cash flow hedges.
Derivative Financial Instruments
We formally document all relationships between hedging instruments and hedged items. This process includes identification of the hedging instrument and the hedged transaction, the nature of the risk being hedged and how the hedging instrument’s effectiveness will be assessed. To qualify for hedge accounting, at inception of the hedge we assess whether the derivative instruments that are used in our hedging transactions are expected to be highly effective in offsetting changes in cash flows or the fair value of the hedged items. Throughout the designated hedge period and at least quarterly, we assess whether the derivative instruments are highly effective and continue to qualify for hedge accounting. To assess the effectiveness of the hedging relationship both prospectively and retrospectively, we use regression analysis to calculate the correlation of the changes in the fair values of the derivative instrument and related hedged item.

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We record commodity derivative instruments in the consolidated balance sheets at fair value. We recognize mark-to-market adjustments for derivative instruments designated and qualifying as fair value hedges (Fair Value Hedges) and the related change in the fair value of the associated hedged physical inventory or firm commitment within “Cost of product sales.” For derivative instruments designated and qualifying as cash flow hedges (Cash Flow Hedges), we record the effective portion of mark-to-market adjustments as a component of “Accumulated other comprehensive income” (AOCI) until the underlying hedged forecasted transactions occur and are recognized in income. Any hedge ineffectiveness is recognized immediately in “Cost of product sales.” Once a hedged transaction occurs, we reclassify the effective portion from AOCI to “Cost of product sales.” If it becomes probable that a hedged transaction will not occur, then the associated gains or losses are reclassified from AOCI to “Cost of product sales” immediately. For derivative instruments that have associated underlying physical inventory but do not qualify for hedge accounting (Economic Hedges and Other Derivatives), we record the mark-to-market adjustments in “Cost of product sales” or “Operating expenses.”
We were a party to forward-starting interest rate swap agreements for the purpose of hedging the interest rate risk associated with forecasted probable debt issuances. Under the terms of these swap agreements, we paid a fixed rate and received a rate based on three month USD LIBOR . We entered into the swaps in order to hedge the risk of changes in the interest payments attributable to changes in the benchmark interest rate during the period from the effective date of the swap to the issuance of the forecasted debt. We accounted for the forward-starting interest rate swaps as Cash Flow Hedges, and we recognized the fair value of each interest rate swap in the consolidated balance sheets. We recorded the effective portion of mark-to-market adjustments as a component of AOCI, and any hedge ineffectiveness was recognized immediately in “Interest expense, net.” The amount accumulated in AOCI is amortized into “Interest expense, net” over the term of the forecasted debt as the interest payments occur or if the interest payments are probable not to occur. We terminated all remaining forward-starting interest rate swaps during the year ended December 31, 2013.
We classify cash flows associated with our derivative instruments as operating cash flows in the consolidated statements of cash flows, except for receipts or payments associated with terminated forward-starting interest rate swap agreements, which are included in cash flows from financing activities.
In addition, we entered into fixed-to-floating interest rate swap agreements associated with a portion of our fixed-rate senior notes. Under the terms of these swap agreements, we received a fixed rate and paid a variable rate that varied with each agreement. We accounted for the fixed-to-floating interest rate swaps as Fair Value Hedges and recognized the fair value of each interest rate swap in the consolidated balance sheets. Except for one interest rate swap agreement we entered into and terminated in 2011, the interest rate swap agreements qualified for the shortcut method of accounting. As a result, changes in the fair value of the swaps completely offset the changes in the fair value of the underlying hedged debt. We terminated all remaining fixed-to-floating interest rate swaps during the year ended December 31, 2012.
From time to time, we also entered into derivative commodity instruments based on our analysis of market conditions in order to attempt to profit from market fluctuations. These derivative instruments were financial positions entered into without underlying physical inventory and are not considered hedges. We recorded these derivatives in the consolidated balance sheets as assets or liabilities at fair value with mark-to-market adjustments recorded in “Product sales.” We no longer enter into commodity derivatives without underlying physical inventory.
See Note 18 for additional information regarding our derivative financial instruments.
Operating Leases
We recognize rent expense on a straight-line basis over the lease term, including the impact of both scheduled rent increases and free or reduced rents (commonly referred to as “rent holidays”).
Unit-based Compensation
NuStar GP, LLC, a wholly owned subsidiary of NuStar GP Holdings, has adopted various long-term incentive plans that provide the Compensation Committee of the Board of Directors of NuStar GP, LLC with the right to grant employees and directors of NuStar GP, LLC providing services to NuStar Energy the right to receive NS common units. NuStar GP, LLC accounts for awards of NS common unit options, restricted units and performance awards at fair value as a derivative, whereby a liability for the award is recorded at inception. Subsequent changes in the fair value of the award are included in the determination of net income. NuStar GP, LLC determines the fair value of NS unit options using the Black-Scholes model at each reporting date. NuStar GP, LLC determines the fair value of NS restricted units and performance awards using the market price of NS common units at each reporting date. However, performance awards are earned only upon NuStar Energy’s achievement of an objective performance measure. NuStar GP, LLC records compensation expense each reporting period such that the cumulative compensation expense recognized equals the current fair value of the percentage of the award that has

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



vested. NuStar GP, LLC records compensation expense related to NS unit options until such options are exercised, and compensation expense related to NS restricted units until the date of vesting.
NuStar GP Holdings has adopted a long-term incentive plan that provides the Compensation Committee of the Board of Directors of NuStar GP Holdings with the right to grant employees, consultants and directors of NuStar GP Holdings and its affiliates, including NuStar GP, LLC, rights to receive NSH common units. NuStar GP Holdings accounts for awards of NSH restricted units and unit options granted to its directors or employees of NuStar GP, LLC at fair value. The fair value of NSH unit options is determined using the Black-Scholes model at the grant date, and the fair value of the NSH restricted unit equals the market price of NSH common units at the grant date. NuStar GP Holdings recognizes compensation expense for NSH restricted units and unit options ratably over the vesting period based on the fair value of the units at the grant date.
Under these long-term incentive plans, certain awards provide that the grantee’s award vests immediately upon retirement or that the grantee’s award will continue to vest on schedule after retirement. Compensation expense is recognized immediately if these awards are granted to retirement-eligible employees.  In addition, if, during a vesting period of a grant, the grantee will become retirement-eligible, then compensation expense associated with the grant is recognized from the grant date through the grantee’s retirement eligibility date.  Currently, employees are typically retirement eligible at age 55.
We reimburse NuStar GP, LLC for the expenses resulting from NS and NSH awards to employees and directors of NuStar GP, LLC. We include such compensation expense in “General and administrative expenses” on the consolidated statements of income. We do not reimburse NuStar GP, LLC for the expense resulting from NSH awards to non-employee directors of NuStar GP Holdings.
Margin Deposits
Margin deposits relate to our exchange-traded derivative contracts and generally vary based on changes in the value of the contracts. Margin deposits are included in “Other current assets” in the consolidated balance sheets.
Foreign Currency Translation
The functional currencies of our foreign subsidiaries are the local currency of the country in which the subsidiary is located, except for our subsidiaries located in St. Eustatius in the Caribbean (formerly the Netherlands Antilles), whose functional currency is the U.S. dollar. The assets and liabilities of our foreign subsidiaries with local functional currencies are translated to U.S. dollars at period-end exchange rates, and income and expense items are translated to U.S. dollars at weighted-average exchange rates in effect during the period. These translation adjustments are included in “Accumulated other comprehensive loss” in the equity section of the consolidated balance sheets. Gains and losses on foreign currency transactions are included in “Other income (expense), net” in the consolidated statements of income.
Reclassifications
Certain previously reported amounts in the 2012 and 2011 consolidated financial statements and notes have been reclassified to conform to the 2013 presentation. As further discussed in Note 5, we reclassified certain storage assets as “Assets held for sale” on the consolidated balance sheet as of December 31, 2013. As a result, we have presented the results of operations for these assets, previously reported in the storage segment, as discontinued operations for all periods presented.

3. NEW ACCOUNTING PRONOUNCEMENTS
Balance Sheet Offsetting
In December 2011, the Financial Accounting Standards Board (FASB) amended the disclosure requirements with respect to offsetting assets and liabilities. The amended guidance requires new disclosures to enable users of financial statements to reconcile differences in the offsetting requirements under U.S. GAAP and International Financial Reporting Standards. The new disclosure requirements mandate that entities disclose both gross and net information about instruments and transactions eligible for offset in the balance sheet as well as instruments and transactions subject to an agreement similar to a master netting arrangement. In January 2013, the FASB further amended and clarified the scope of balance sheet offsetting disclosure requirements. The amended guidance limits the scope of the new balance sheet offsetting disclosures to derivatives, repurchase agreements, and securities lending transactions to the extent that they are offset in the financial statements or subject to an enforceable master netting arrangement or similar agreement. The disclosures are required irrespective of whether the transactions are offset in the consolidated balance sheets. The amended guidance is effective for annual and interim reporting periods beginning on or after January 1, 2013, and retrospective application is required. Accordingly, we adopted the amended guidance January 1, 2013, and it did not have a material impact on our disclosures.

14


Other Comprehensive Income
In February 2013, the FASB further amended the disclosure requirements for the presentation of comprehensive income.
The amended guidance requires that entities present either in a single note or parenthetically on the face of the financial statements, the effect of significant amounts reclassified from each component of accumulated other comprehensive income and the income statement line items affected by the reclassification. The amended guidance is effective prospectively for annual and interim reporting periods beginning after December 15, 2012. Accordingly, we adopted the amended guidance January 1, 2013, and it did not have a material impact on our disclosures.

4. ACQUISITIONS

Completed During 2012
TexStar Asset Acquisition. On December 13, 2012 , NuStar Logistics acquired the TexStar Crude Oil Assets (as defined below), including 100% of the partnership interest in TexStar Crude Oil Pipeline, LP, from TexStar Midstream Services, LP and certain of its affiliates (collectively, TexStar) for $325.4 million (the TexStar Asset Acquisition), pursuant to an Asset Purchase Agreement (the Purchase Agreement). The TexStar Crude Oil Assets consist of approximately 140 miles of crude oil pipelines and gathering lines, as well as five terminals and storage facilities providing 0.6 million barrels of storage capacity. The consolidated statements of income include the results of operations for the TexStar Asset Acquisition in the pipeline segment commencing on December 13, 2012.
We accounted for the TexStar Asset Acquisition using the acquisition method. The fair value of the consideration transferred was allocated based on the estimated fair values of the individual assets acquired and liabilities assumed at the date of acquisition. The purchase price and purchase price allocation was as follows (in thousands of dollars):
Cash paid for the TexStar Asset Acquisition
$
315,810

Fair value of liabilities assumed
9,600

Purchase price
$
325,410

 
 
Accounts receivable
$
537

Property, plant and equipment
125,614

Goodwill
131,359

Intangible assets
67,900

Purchase price allocation
$
325,410


Completed During 2011
San Antonio Refinery. On April 19, 2011 , we purchased certain refining and storage assets, inventory and other working capital items from AGE Refining, Inc. for $62.0 million , including the assumption of certain environmental liabilities. The assets consisted of a 14,500 barrel per day refinery in San Antonio, Texas and 0.4 million barrels of aggregate storage capacity (the San Antonio Refinery Acquisition). The final purchase price was allocated based on the estimated fair values of the individual assets acquired and liabilities assumed at the date of acquisition. On January 1, 2013, we sold the refinery and related assets; see Note 5 for additional discussion of the sale.
Turkey Acquisition. On February 9, 2011 , we acquired 75% of the outstanding capital of a Turkish company, which owns two terminals in Mersin, Turkey, with an aggregate 1.4 million barrels of storage capacity, for approximately $57.0 million (the Turkey Acquisition). Both terminals are connected via pipelines to an offshore platform located approximately three miles off the Mediterranean Sea coast. The Turkey Acquisition was accounted for using the acquisition method. The purchase price was allocated based on the estimated fair values of the individual assets acquired, liabilities assumed and noncontrolling interest at the date of acquisition.

5. DISPOSITIONS AND ASSETS HELD FOR SALE

Terminals Held for Sale
As of December 31, 2013, we identified several non-strategic, underperforming terminal facilities and decided to divest those facilities. As a result, we reclassified the associated assets as “Assets held for sale” on the consolidated balance sheet. We presented the results of operations for those facilities, which were previously reported in the storage segment, as discontinued operations for all periods presented. We allocated interest expense of $1.4 million , $0.8 million and $0.6 million for the years ended December 31, 2013 , 2012 and 2011, respectively, to discontinued operations based on the ratio of net assets discontinued to consolidated net assets.

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In connection with the plan for disposal, we determined that the estimated fair value, less cost to sell, was less than the carrying amount of each disposal group, resulting in an impairment loss of $102.5 million . Since these terminal facilities met the required criteria to be classified as assets held for sale on the consolidated balance sheet, we recorded the impairment loss in “(Loss) income from discontinued operations, net of tax” on the consolidated statement of income for the year ended December 31, 2013 .

The impairment loss consisted of the following:
 
Year Ended
December 31, 2013
 
(Thousands of Dollars)
Property, plant and equipment, net
$
68,213

Intangible assets, net (customer relationships)
6,856

Goodwill
27,460

Asset impairment loss
$
102,529


San Antonio Refinery Sale
On January 1, 2013 , we sold the San Antonio Refinery and related assets, which included inventory, a terminal in Elmendorf, Texas and a pipeline connecting the terminal and refinery for approximately $117.0 million (the San Antonio Refinery Sale). As of December 31, 2012, we reclassified the assets related to the San Antonio Refinery as “Assets held for sale” on the consolidated balance sheet. The liabilities held for sale related to the San Antonio Refinery are included within “Accrued liabilities” on the consolidated balance sheet. We have presented the results of operations for the San Antonio Refinery and related assets, previously reported in the fuels marketing and pipeline segments, as discontinued operations for all periods presented. We allocated interest expense of $3.9 million and $2.0 million for the years ended December 31, 2012 and 2011, respectively, to discontinued operations based on the ratio of net assets discontinued to consolidated net assets. We recognized a gain of $9.3 million on the sale, which is included in discontinued operations for the year ended December 31, 2013.

The following table summarizes the results from discontinued operations for the terminal facilities held for sale and the San Antonio Refinery:
 
Year Ended December 31,
 
2013
 
2012
 
2011
 
(Thousands of Dollars)
Revenues
$
7,758

 
$
571,071

 
$
317,626

 
 
 
 
 
 
Income (loss) before income tax expense
$
(106,033
)
 
$
(63,165
)
 
$
1,251


The total assets and liabilities held for sale consisted of the following:
 
December 31,
 
2013
 
2012
 
(Thousands of Dollars)
Inventories
$
—

 
$
15,939

Property, plant and equipment, net
21,987

 
96,745

Other long-term assets, net
—

 
5,650

Assets held for sale
$
21,987

 
$
118,334

 
 
 
 
Accrued liabilities (environmental reserve)
$
—

 
$
289

Other long-term liabilities (environmental reserve)
—

 
7,621

Liabilities held for sale
$
—

 
$
7,910


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NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



Asphalt Sale
On September 28, 2012 , we sold a 50% ownership interest (the Asphalt Sale) in NuStar Asphalt LLC (Asphalt JV), previously a wholly owned subsidiary, to an affiliate of Lindsay Goldberg LLC (Lindsay Goldberg), a private investment firm. Asphalt JV owns and operates the asphalt refining assets that were previously wholly owned by NuStar Energy, including an asphalt refinery located in Paulsboro, New Jersey and a terminal in Savannah, Georgia (collectively, the Asphalt Operations). Lindsay Goldberg paid $175.0 million for the Class A equity interests (Class A Interests) of Asphalt JV, while we retained the Class B equity interests with a fair value of $52.0 million (Class B Interests). The Class A Interests have a distribution preference over the Class B Interests, as well as a liquidation preference. We also received $263.8 million from Asphalt JV for inventory related to the Asphalt Operations.

Deconsolidation . We determined the equity of Asphalt JV is not sufficient to finance its activities without additional subordinated support, including support provided by us as described in Note 19. Therefore, we determined Asphalt JV is a variable interest entity (VIE). An entity is required to consolidate a VIE if the entity is considered the primary beneficiary of the VIE. We analyzed our relationship with Asphalt JV, including our representation on the board of managers, our equity interests and our rights under the various agreements with Asphalt JV and determined that we do not have the power to direct the activities most significant to the economic performance of Asphalt JV. As a result, we are not the primary beneficiary of Asphalt JV. Upon closing, we deconsolidated Asphalt JV and started reporting our remaining investment in Asphalt JV using the equity method of accounting. At closing, the fair value of the consideration we received was less than the carrying amount of the net assets of the Asphalt Operations upon deconsolidation, and we recognized a loss of $23.8 million in “Other income (expense), net” in the consolidated statements of income for the year ended December 31, 2012. Because of our continued involvement with Asphalt JV, we have not presented the results of operations for the Asphalt Operations prior to closing as discontinued operations. Beginning on September 28, 2012, we have presented transactions between us and Asphalt JV as related party transactions in the consolidated financial statements.

Impairments. In anticipation of the Asphalt Sale, we evaluated the goodwill and other long-lived assets associated with the Asphalt Operations for potential impairment. As of June 30, 2012, we estimated the fair value of the Asphalt Operations reporting unit as the sum of (i) the purchase price to be paid by Lindsay Goldberg for the Class A Interests of Asphalt JV, (ii) the fair value of the Class B Interests of Asphalt JV that we would retain and (iii) the fair value of the working capital, primarily inventory. We determined the fair value of the Class B Interests using a combination of estimated discounted future cash flows and a pricing model. The fair value of the working capital was based on estimated current market prices. The estimated fair value of the Asphalt Operations reporting unit was less than its carrying value, which resulted in the recognition of a goodwill impairment loss of $22.1 million in the second quarter of 2012. In addition, in the second quarter of 2012, we recorded an asset impairment loss of $244.3 million in order to write-down the carrying value of long-lived assets related to the Asphalt Operations, including fixed assets, intangible assets and other long-term assets, to their estimated fair value. The goodwill impairment loss and the asset impairment loss related to the Asphalt Operations were reported in the fuels marketing segment.

The Asphalt Operations asset impairment loss consisted of the following:
 
Year Ended
December 31, 2012
 
(Thousands of Dollars)
Property, plant and equipment, net
$
232,759

Intangible assets, net
6,564

Other long-term assets, net
4,902

Asset impairment loss
$
244,225


In February 2014, we divested of our remaining 50% ownership interest in Asphalt JV. See Note 29 for additional discussion.

Terminal Sales
On April 16, 2012 , we sold five terminals in Georgia and Alabama with an aggregate storage capacity of 1.8 million barrels for total proceeds of $30.8 million .


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



6. GOODWILL

2013 Goodwill Impairment
The estimated fair value was less than the carrying value of the Statia Terminals reporting unit. To determine the amount of goodwill impairment loss, we first considered whether any other assets assigned to the Statia Terminals reporting unit were impaired. The only significant assets of this reporting unit, other than goodwill, consist of property, plant and equipment, which we determined were fully recoverable. The hypothetical fair value allocation for the Statia Terminals reporting unit indicated the estimated fair value of goodwill was $0 . As a result, we recognized a $304.5 million goodwill impairment charge in the fourth quarter of 2013, which represents all of the goodwill allocated to the Statia Terminals reporting unit.

The goodwill impairment charge resulted from changes in demand for storage at our St. Eustatius and Point Tupper terminal locations. Increased supply from various shale formations within the U.S. has reduced the need for storage at these locations, which historically functioned as break bulk facilities for light crude moving from foreign sources into the U.S. These changes in crude flow patterns, as well as the backwardation of the forward pricing curve, reduced demand at these terminals. Primarily resulting from those factors, a customer at our St. Eustatius terminal vacated a significant portion of its storage in the fourth quarter of 2013.

Changes in the carrying amount of goodwill by segment were as follows:
 
Storage
 
Pipeline
 
Fuels
Marketing
 
Total
 
(Thousands of Dollars)
Balances as of January 1, 2012
 
 
 
 
 
 
 
Goodwill
$
618,614

 
$
174,848

 
$
53,255

 
$
846,717

Accumulated impairment losses
—

 
—

 
—

 
—

Net goodwill
618,614

 
174,848

 
53,255

 
846,717

TexStar Asset Acquisition preliminary purchase
price allocation
—

 
127,896

 
—

 
127,896

Asphalt Operations impairment
—

 
—

 
(22,132
)
 
(22,132
)
Terminal sales (a)
(3,764
)
 
—

 
—

 
(3,764
)
Other (b)
2,307

 
—

 
—

 
2,307

Balances as of December 31, 2012
 
 
 
 
 
 
 
Goodwill
617,157

 
302,744

 
53,255

 
973,156

Accumulated impairment losses
—

 
—

 
(22,132
)
 
(22,132
)
Net goodwill
617,157

 
302,744

 
31,123

 
951,024

TexStar Asset Acquisition final purchase price allocation
—

 
3,463

 
—

 
3,463

Impairments
(331,913
)
 
—

 
—

 
(331,913
)
Other (b)
(5,145
)
 
—

 
—

 
(5,145
)
Balances as of December 31, 2013
 
 
 
 
 
 
 
Goodwill
612,012

 
306,207

 
53,255

 
971,474

Accumulated impairment losses
(331,913
)
 
—

 
(22,132
)
 
(354,045
)
Net goodwill
$
280,099

 
$
306,207

 
$
31,123

 
$
617,429

(a)
Goodwill associated with five terminals in Georgia and Alabama sold on April 16, 2012.
(b)
Includes purchase price adjustments related to acquisitions still subject to the measurement period that ends at the earlier of 12 months from the acquisition date or when information becomes available. Also includes foreign currency translation adjustments.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



7. ALLOWANCE FOR DOUBTFUL ACCOUNTS
The changes in the allowance for doubtful accounts consisted of the following:
 
Year Ended December 31,
 
2013
 
2012
 
2011
 
(Thousands of Dollars)
Balance as of beginning of year
$
808

 
$
2,147

 
$
1,457

Increase in allowance
1,039

 
27

 
934

Accounts charged against the allowance, net of recoveries
(625
)
 
(1,367
)
 
(243
)
Foreign currency translation
2

 
1

 
(1
)
Balance as of end of year
$
1,224

 
$
808

 
$
2,147

 
8. INVENTORIES
Inventories consisted of the following:
 
December 31,
 
2013
 
2012
 
(Thousands of Dollars)
Crude oil
$
6,485

 
$
447

Finished products
123,656

 
164,894

Materials and supplies
8,006

 
7,887

Total
$
138,147

 
$
173,228

Our finished products consist of intermediates, gasoline, distillates and other petroleum products. Materials and supplies mainly con sist of blending and additive chemicals and maintenance materials used in our pipeline and storage segments.

9. OTHER CURRENT ASSETS
Other current assets consisted of the following:
 
December 31,
 
2013
 
2012
 
(Thousands of Dollars)
Prepaid expenses
$
16,487

 
$
18,008

Restricted cash
9,316

 
15,227

Derivative assets
4,948

 
9,358

Margin deposits
3,285

 
6,192

Product advances
3,076

 
14,764

Product imbalances
1,980

 
1,232

Other
360

 
457

Other current assets
$
39,452

 
$
65,238



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



10. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, at cost, consisted of the following:
 
Estimated Useful Lives
 
December 31,
 
 
2013
 
2012
 
(Years)
 
(Thousands of Dollars)
Land
 
—
 
 
$
129,731

 
$
133,341

Land and leasehold improvements
10
-
35
 
142,122

 
110,575

Buildings
15
-
40
 
133,531

 
120,499

Pipelines, storage and terminals
20
-
35
 
3,787,499

 
3,531,925

Rights-of-way
20
-
40
 
155,833

 
148,021

Construction in progress
 
—
 
 
152,121

 
243,498

Total
 
 
 
 
4,500,837

 
4,287,859

Less accumulated depreciation and amortization
 
 
 
 
(1,190,184
)
 
(1,049,399
)
Property, plant and equipment, net
 
 
 
 
$
3,310,653

 
$
3,238,460

Capitalized interest costs added to property, plant and equipment totaled $4.5 million , $7.7 million and $5.4 million for the years ended December 31, 2013 , 2012 and 2011 , respectively. Depreciation and amortization expense for property, plant and equipment totaled $168.8 million , $157.8 million and $157.2 million for the years ended December 31, 2013 , 2012 and 2011 , respectively, including depreciation expense included in “(Loss) income from discontinued operations, net of tax” on the consolidated statements of income.

11. INTANGIBLE ASSETS
Intangible assets consisted of the following:
 
December 31, 2013
 
December 31, 2012
 
Cost
 
Accumulated
Amortization
 
Cost
 
Accumulated
Amortization
 
(Thousands of Dollars)
Customer relationships
$
127,614

 
$
(58,230
)
 
$
137,470

 
$
(46,951
)
Other
2,359

 
(494
)
 
2,359

 
(443
)
Total
$
129,973

 
$
(58,724
)
 
$
139,829

 
$
(47,394
)
All of our intangible assets are subject to amortization. Amortization expense for intangible assets was $13.8 million , $7.8 million and $8.3 million for the years ended December 31, 2013 , 2012 and 2011 , respectively. The estimated aggregate amortization expense for the next five years is as follows:
 
Amortization Expense
 
(Thousands of Dollars)
2014
$
12,579

2015
$
9,709

2016
$
6,840

2017
$
6,840

2018
$
6,840



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



12. INVESTMENT IN JOINT VENTURES
Summary Financial Information
Condensed combined financial information related to our joint ventures is presented below:
 
December 31,
 
2013
 
2012
 
(Thousands of Dollars)
Balance Sheet Information:
 
 
 
Current assets
$
263,683

 
$
375,686

Long-term assets
300,484

 
289,584

Total assets
$
564,167

 
$
665,270

Current liabilities
$
118,720

 
$
185,525

Long-term liabilities
273,220

 
231,559

Total liabilities
391,940

 
417,084

Total equity
172,227

 
248,186

Total liabilities and equity
$
564,167

 
$
665,270


 
Year Ended December 31,
 
2013
 
2012
 
2011
 
(Thousands of Dollars)
Statement of (Loss) Income Information:
 
 
 
 
 
Revenues
$
1,623,155

 
$
458,816

 
$
36,419

Operating (loss) income
$
(45,373
)
 
$
(4,801
)
 
$
23,062

Net (loss) income
$
(59,963
)
 
$
(12,418
)
 
$
23,066


NuStar Asphalt LLC. Asphalt JV is owned 50% by the Partnership and 50% by Lindsay Goldberg. Asphalt JV owns and operates the asphalt refining assets that were previously wholly owned by NuStar Energy, including an asphalt refinery located in Paulsboro, New Jersey and a terminal in Savannah, Georgia.

During the year ended December 31, 2013, our equity in loss of joint ventures included a $49.6 million loss from our investment in Asphalt JV, which exceeded our investment in Asphalt JV. From the point our investment in Asphalt JV reached $0 , we recorded additional losses of $13.1 million , as a reduction of the carrying value of the note receivable from Asphalt JV. See Note 19 for a discussion of our agreements with Asphalt JV. In February 2014, we divested of our remaining 50% ownership interest in Asphalt JV. See Note 29 for additional discussion.
ST Linden Terminals, LLC. The 44 -acre facility provides deep-water terminalling capabilities at New York Harbor and primarily stores petroleum products, including gasoline, jet fuel and fuel oils. As part of our acquisition of Kaneb Pipeline Partners, L.P. and Kaneb Services LLC in July 2005 (the Kaneb Acquisition), we acquired an investment in ST Linden Terminals, LLC (Linden). Linden is owned 50% by the Partnership and 50% by NIC Holding Corp. In connection with the Kaneb Acquisition, we recorded our investment in Linden at fair value, which exceeded our 50% share of its members’ equity. This excess totaled $42.6 million and $43.0 million as of December 31, 2013 and 2012 , respectively, a portion of which is being amortized into expense over the average life of the assets held by Linden, or 25 years. The remaining balance not amortized represents goodwill of Linden.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



13. ACCRUED LIABILITIES
Accrued liabilities consisted of the following:
 
December 31,
 
2013
 
2012
 
(Thousands of Dollars)
Derivative liabilities
$
2,233

 
$
60,121

Employee wages and benefit costs
16,698

 
15,381

Unearned income
8,225

 
10,476

TexStar Asset Acquisition contingent consideration
1,318

 
9,600

Liabilities held for sale
—

 
7,910

Other
10,158

 
20,715

Accrued liabilities
$
38,632

 
$
124,203


14. DEBT
Long-term debt consisted of the following:
 
 
 
 
 
December 31,
 
Maturity
 
2013
 
2012
 
 
 
 
 
(Thousands of Dollars)
$1.5 billion revolving credit agreement
 
2017
 
 
$
503,036

 
$
440,330

4.75% senior notes
 
2022
 
 
250,000

 
250,000

6.75% senior notes
 
2021
 
 
300,000

 
—

4.80% senior notes
 
2020
 
 
450,000

 
450,000

7.65% senior notes
 
2018
 
 
350,000

 
350,000

6.05% senior notes
 
2013
 
 
—

 
229,932

5.875% senior notes
 
2013
 
 
—

 
250,000

7.625% subordinated notes
 
2043
 
 
402,500

 
—

Gulf Opportunity Zone revenue bonds
2038
thru
2041
 
365,440

 
365,440

UK term loan
 
2013
 
 
—

 
34,142

Port Authority of Corpus Christi note payable
 
2015
 
 
—

 
577

Net fair value adjustments and unamortized discounts
 
N/A
 
 
34,577

 
40,583

Total debt
 
 
 
 
2,655,553

 
2,411,004

Less current portion
 
 
 
 
—

 
286,422

Long-term debt, less current portion
 
 
 
 
$
2,655,553

 
$
2,124,582

The long-term debt repayments are due as follows (in thousands):
2014
$
—

2015
—

2016
—

2017
503,036

2018
350,000

Thereafter
1,767,940

Total repayments
2,620,976

Net fair value adjustments and unamortized discounts
34,577

Total debt
$
2,655,553

Interest payments totaled $118.3 million , $118.4 million and $115.1 million for the years ended December 31, 2013 , 2012 and 2011 , respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



Revolving Credit Agreements
NuStar Logistics is a party to a $1.5 billion five -year revolving credit agreement, as amended (the 2012 Revolving Credit Agreement), which includes the ability to borrow up to the equivalent of $250.0 million in Euros. On December 4, 2013, we amended the 2012 Revolving Credit Agreement to add the ability to borrow up to the equivalent of $250.0 million in British Pounds Sterling. The 2012 Revolving Credit Agreement matures on May 2, 2017 . Obligations under the 2012 Revolving Credit Agreement are guaranteed by NuStar Energy and NuPOP. NuPOP will be released from its guarantee of the 2012 Revolving Credit Agreement when it no longer guarantees NuStar Logistics public debt instruments.
The 2012 Revolving Credit Agreement bears interest, at our option, based on either an alternative base rate or a LIBOR-based rate. The interest rate on the 2012 Revolving Credit Agreement is subject to adjustment if our debt rating is downgraded (or subsequently upgraded) by certain credit rating agencies. In July 2012, Standard & Poor’s Ratings Services (S&P) lowered our credit rating to BB+ from BBB-, and in January 2013, Moody’s Investor Service Inc. (Moody’s) lowered our credit rating to Ba1 from Baa3. The interest rates applicable to the 2012 Revolving Credit Agreement do not adjust unless both S&P and Moody’s change their ratings; therefore, the interest rate on the 2012 Revolving Credit Agreement increased by 0.375% effective January 2013. As of December 31, 2013 , our weighted-average interest rate was 2.2% . During the year ended December 31, 2013 , the weighted-average interest rate related to borrowings under the 2012 Revolving Credit Agreement was 2.2% .
The 2012 Revolving Credit Agreement contains customary restrictive covenants, including requiring us to maintain, as of the end of each rolling period, which consists of any period of four consecutive fiscal quarters, a consolidated debt coverage ratio (consolidated indebtedness to consolidated EBITDA, as defined in the 2012 Revolving Credit Agreement) not to exceed 5.00-to-1.00. If we consummate an acquisition for an aggregate net consideration of at least $50.0 million, the maximum consolidated debt coverage ratio will increase to 5.50-to-1.00 for two rolling periods. The 2012 Revolving Credit Agreement permits unlimited investments in joint ventures and unconsolidated subsidiaries, provided that no default exists, but limits the amount of cash distributions for such joint ventures and unconsolidated subsidiaries included in the calculation of the consolidated debt coverage ratio to 20% of consolidated EBITDA. The requirement not to exceed a maximum consolidated debt coverage ratio may limit the amount we can borrow under the 2012 Revolving Credit Agreement to an amount less than the total amount available for borrowing. As of December 31, 2013 , our consolidated debt coverage ratio was 4.4 x, and we had $829.3 million available for borrowing.
Letters of credit issued under our 2012 Revolving Credit Agreement totaled $167.6 million as of December 31, 2013 . Letters of credit are limited to $750.0 million and also may restrict the amount we can borrow under the 2012 Revolving Credit Agreement.
Notes
NuStar Logistics’ Senior Notes. On August 19, 2013 , NuStar Logistics issued $300.0 million of 6.75% senior notes due February 1, 2021 (the 6.75% Senior Notes). We received proceeds of approximately $296.0 million , net of the underwriters’ discount and deferred issuance costs of $4.0 million , which we used for general partnership purposes, including repayment of outstanding borrowings under our 2012 Revolving Credit Agreement. The interest on the 6.75% Senior Notes is payable semi-annually in arrears on February 1 and August 1 of each year beginning on February 1, 2014 .

In March 2013, we repaid NuStar Logistics’ $229.9 million of 6.05% senior notes due March 15, 2013 with borrowings under our 2012 Revolving Credit Agreement.
Interest is payable semi-annually in arrears for the $250.0 million of 4.75% senior notes, $300.0 million of 6.75% senior notes, $450.0 million of 4.80% senior notes and $350.0 million of 7.65% senior notes (collectively, the NuStar Logistics Senior Notes). The interest rate payable on the 7.65% senior notes is subject to adjustment if our debt rating is downgraded (or subsequently upgraded) by certain credit rating agencies. The interest rate on NuStar Logistics’ $350.0 million of 7.65% senior notes increased by another 0.25% in January 2013 as a result of the Moody’s downgrade. The NuStar Logistics Senior Notes do not have sinking fund requirements. These notes rank equally with existing senior unsecured indebtedness of NuStar Logistics and contain restrictions on NuStar Logistics’ ability to incur secured indebtedness unless the same security is also provided for the benefit of holders of the NuStar Logistics Senior Notes. In addition, the NuStar Logistics Senior Notes limit NuStar Logistics’ ability to incur indebtedness secured by certain liens and to engage in certain sale-leaseback transactions. At the option of NuStar Logistics, the NuStar Logistics Senior Notes may be redeemed in whole or in part at any time at a redemption price, which includes a make-whole premium, plus accrued and unpaid interest to the redemption date.
The NuStar Logistics Senior Notes are fully and unconditionally guaranteed by NuStar Energy and NuPOP. NuPOP will be released from its guarantee of senior notes issued by NuStar Logistics when it no longer guarantees any obligations of NuStar Energy, or any of its subsidiaries, including NuStar Logistics, under any bank facility or public debt instrument.

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NuStar Logistics’ 7.625% Fixed-to-Floating Rate Subordinated Notes. On January 22, 2013 , NuStar Logistics issued $402.5 million of 7.625% fixed-to-floating rate subordinated notes due January 15, 2043 (the Subordinated Notes), including the underwriters’ option to purchase up to an additional $52.5 million principal amount of the notes, which was exercised in full. We received proceeds of approximately $390.9 million , net of $11.6 million of deferred issuance costs, which we used for general partnership purposes, including repayment of outstanding borrowings under our 2012 Revolving Credit Agreement. The Subordinated Notes are fully and unconditionally guaranteed on an unsecured and subordinated basis by NuStar Energy and NuPOP.
The Subordinated Notes bear interest at a fixed annual rate of 7.625%, payable quarterly in arrears on January 15, April 15, July 15 and October 15 of each year beginning on April 15, 2013 and ending on January 15, 2018. Thereafter, the Subordinated Notes will bear interest at an annual rate equal to the sum of the three-month LIBOR rate for the related quarterly interest period, plus 6.734% payable quarterly on January 15, April 15, July 15 and October 15 of each year, commencing April 15, 2018, unless payment is deferred in accordance with the terms of the notes. NuStar Logistics may elect to defer interest payments on the Subordinated Notes on one or more occasions for up to five consecutive years. Deferred interest will accumulate additional interest at a rate equal to the interest rate then applicable to the Subordinated Notes until paid. If NuStar Logistics elects to defer interest payments, NuStar Energy cannot declare or make cash distributions to its unitholders during the period interest is deferred.
The Subordinated Notes do not have sinking fund requirements and are subordinated to existing senior unsecured indebtedness of NuStar Logistics and NuPOP. The Subordinated Notes do not contain restrictions on NuStar Logistics’ ability to incur additional indebtedness, including debt that ranks senior in priority of payment to the notes. In addition, the Subordinated Notes do not limit NuStar Logistics’ ability to incur indebtedness secured by certain liens or to engage in certain sale-leaseback transactions. At the option of NuStar Logistics, the Subordinated Notes may be redeemed in whole or in part at any time at a redemption price, which may include a make-whole premium, plus accrued and unpaid interest to the redemption date.
NuPOP’s Senior Notes. As a result of the Kaneb Acquisition, we assumed the outstanding senior notes issued by NuPOP, having an aggregate face value of $500.0 million , and an aggregate fair value of $555.0 million at the acquisition date (the NuPOP Senior Notes). We used the effective interest method to amortize the difference between the fair value and the face value of the senior notes as a reduction of interest expense over the lives of the senior notes. The senior notes were issued in two series, the first of which bore interest at 7.75% annually and matured in 2012 , and the second series which bore interest 5.875%  annually and matured in 2013 . We repaid NuPOP’s $250.0 million of 5.875% senior notes due June 1, 2013 with borrowings under our 2012 Revolving Credit Agreement.
Gulf Opportunity Zone Revenue Bonds
In 2008, 2010 and 2011, the Parish of St. James, where our St. James, Louisiana, terminal is located, issued Revenue Bonds (NuStar Logistics, L.P. Project) Series 2008, Series 2010, Series 2010A, Series 2010B and Series 2011 associated with our St. James terminal expansion pursuant to the Gulf Opportunity Zone Act of 2005 (collectively, the Gulf Opportunity Zone Revenue Bonds). The interest rates on these bonds are based on a weekly tax-exempt bond market interest rate, and interest is paid monthly. Following the issuance, the proceeds were deposited with a trustee and are disbursed to us upon our request for reimbursement of expenditures related to our St. James terminal expansion. We include the amount remaining in trust in “Other long-term assets, net,” and we include the amount of bonds issued in “Long-term debt, less current portion” in our consolidated balance sheets. For the year ended December 31, 2013 , we received $43.1 million from the trustee.
NuStar Logistics is solely obligated to service the principal and interest payments associated with the Gulf Opportunity Zone Revenue Bonds. Letters of credit were issued on our behalf to guarantee the payment of interest and principal on the bonds. All letters of credit rank equally with existing senior unsecured indebtedness of NuStar Logistics. The letters of credit issued by individual banks do not restrict the amount we can borrow under the 2012 Revolving Credit Agreement.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



The following table summarizes the Gulf Opportunity Zone Revenue Bonds outstanding as of December 31, 2013 :
Date Issued
 
Maturity Date
 
Amount
Outstanding
 
Amount of
Letter of
Credit
 
Amount Received from
Trustee
 
Amount Remaining in
Trust
 
Average Annual
Interest Rate
 
 
 
 
(Thousands of Dollars)
 
 
June 26, 2008
 
June 1, 2038
 
$
55,440

 
$
56,169

 
$
55,440

 
$
—

 
0.10
%
July 15, 2010
 
July 1, 2040
 
100,000

 
101,315

 
100,000

 
—

 
0.10
%
October 7, 2010
 
October 1, 2040
 
50,000

 
50,658

(a)
24,580

 
25,420

 
0.11
%
December 29, 2010
 
December 1, 2040
 
85,000

 
86,118

(a)
26,924

 
58,076

 
0.11
%
August 29, 2011
 
August 1, 2041
 
75,000

 
75,986

 
75,000

 
—

 
0.10
%
 
 
Total
 
$
365,440

 
$
370,246

 
$
281,944

 
$
83,496

 
 
(a)
Letters of credit issued under the 2012 Revolving Credit Agreement.
UK Term Loan
In December 2013, we repaid our UK subsidiary, NuStar Terminals Limited’s, £21 million amended and restated term loan, which matured on December 10, 2013, with borrowings under our 2012 Revolving Credit Agreement.
Our other long-term debt obligations do not contain any financial covenants. However, a default under any of our debt instruments would be considered an event of default under all of our debt instruments.
Port Authority of Corpus Christi Note Payable
The proceeds from the original $12.0 million note payable due to the Port of Corpus Christi Authority of Nueces County, Texas (Port Authority of Corpus Christi) were used for the construction of a crude oil storage facility in Corpus Christi, Texas. The note payable was due in annual installments of $1.2 million through December 31, 2015 and was collateralized by the crude oil storage facility. The wharfage and dockage fees paid to the Port Authority of Corpus Christi in connection with the use of the crude oil storage facility exceeded certain limits per the terms of the note, which have accelerated the repayment of the unpaid principal balance. On February 6, 2013, we repaid the remaining principle balance of $0.6 million .

15. HEALTH, SAFETY AND ENVIRONMENTAL MATTERS
Our operations are subject to extensive federal, state and local environmental laws and regulations, including those relating to the discharge of materials into the environment, waste management, pollution prevention measures, pipeline integrity and operator qualifications, among others. Our operations are also subject to extensive federal and state health and safety laws and regulations, including those relating to pipeline safety. The principal environmental and safety risks associated with our operations relate to unauthorized emissions into the air, unauthorized releases into soil, surface water or groundwater, and personal injury and property damage. Compliance with these environmental and safety laws, regulations and permits increases our capital expenditures and our overall cost of business, and violations of these laws, regulations and/or permits can result in significant civil and criminal liabilities, injunctions or other penalties.
Most of our pipelines are subject to federal regulation by one or more of the following governmental agencies or laws: the Federal Energy Regulatory Commission (the FERC), the Surface Transportation Board (the STB), the Department of Transportation (DOT), the Environmental Protection Agency (EPA) and the Homeland Security Act. Additionally, the operations and integrity of the pipelines are subject to the respective state jurisdictions along the route of the systems.
We have adopted policies, practices and procedures in the areas of pollution control, pipeline integrity, operator qualifications, public relations and education, product safety, process safety management, occupational health and the handling, storage, use and disposal of hazardous materials that are designed to prevent material environmental or other damage, to ensure the safety of our pipelines, our employees, the public and the environment and to limit the financial liability that could result from such events. Future governmental action and regulatory initiatives could result in changes to expected operating permits and procedures, additional remedial actions or increased capital expenditures and operating costs that cannot be assessed with certainty at this time. In addition, contamination resulting from spills of petroleum products occurs within the industry. Risks of additional costs and liabilities are inherent within the industry, and there can be no assurances that significant costs and liabilities will not be incurred in the future.
Environmental and safety exposures and liabilities are difficult to assess and estimate due to unknown factors such as the timing and extent of remediation, the determination of our liability in proportion to other parties, improvements in cleanup

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



technologies and the extent to which environmental and safety laws and regulations may change in the future. Although environmental and safety costs may have a significant impact on the results of operations for any single period, we believe that such costs will not have a material adverse effect on our financial position.
The balance of and changes in the accruals for environmental matters were as follows:
 
Year Ended December 31,
 
2013
 
2012
 
(Thousands of Dollars)
Balance as of the beginning of year
$
13,451

 
$
23,113

Additions to accrual
3,623

 
4,766

San Antonio Refinery Acquisition purchase price adjustment
—

 
(5,957
)
Payments
(2,940
)
 
(5,242
)
San Antonio Refinery Sale
(7,910
)
 
—

Asphalt Sale
—

 
(3,300
)
Foreign currency translation
9

 
71

Balance as of the end of year
$
6,233

 
$
13,451

 
Accruals for environmental matters are included in the consolidated balance sheets as follows:
 
December 31,
 
2013
 
2012
 
(Thousands of Dollars)
 
 
 
 
Accrued liabilities
$
3,299

 
$
10,627

Other long-term liabilities
2,934

 
2,824

Accruals for environmental matters
$
6,233

 
$
13,451


16. COMMITMENTS AND CONTINGENCIES
Contingencies
We have contingent liabilities resulting from various litigation, claims and commitments. We record accruals for loss contingencies when losses are considered probable and can be reasonably estimated. Legal fees associated with defending the Partnership in legal matters are expensed as incurred. As of December 31, 2013 , we have accrued $0.7 million for contingent losses. The amount that will ultimately be paid related to these matters may differ from the recorded accruals, and the timing of such payments is uncertain. In addition, due to the inherent uncertainty of litigation, there can be no assurance that the resolution of any particular claim or proceeding would not have a material adverse effect on our results of operations, financial position or liquidity.
Commitments
Future minimum rental payments applicable to all noncancellable operating leases and purchase obligations as of December 31, 2013 are as follows:
 
Payments Due by Period
 
2014
 
2015
 
2016
 
2017
 
2018
 
There-
after
 
Total
 
(Thousands of Dollars)
Operating leases
$
30,300

 
$
24,886

 
$
21,274

 
$
18,954

 
$
16,980

 
$
80,090

 
$
192,484

Purchase obligations:
8,571

 
5,108

 
3,841

 
694

 
216

 
—

 
18,430


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



Rental expense for all operating leases totaled $52.9 million , $73.9 million and $70.0 million for the years ended December 31, 2013 , 2012 and 2011 , respectively, including rental expense included in “(Loss) income from discontinued operations, net of tax” on the consolidated statements of income. Our operating leases consist primarily of the following:
•
a ten-year lease for tugs and barges utilized at our St. Eustatius facility for bunker fuel sales, with two five-year renewal options ;
•
leases for tugs and barges utilized at our Point Tupper facility for bunker fuel sales, with lease terms ranging from five to ten years ; and
•
land leases at various terminal facilities .

On November 6, 2013, we came to a mutual agreement with PDVSA-Petróleo S.A. (PDVSA) effective January 1, 2014 to terminate that certain Crude Oil Sales Agreement dated effective as of March 1, 2008 (the CSA). We previously amended the CSA on July 5, 2013 to reduce the crude oil purchase obligations from 75,000 barrels per day to 30,000 barrels per day, which remained in effect through the end of 2013. Effective January 1, 2014, our crude oil supply agreement with Asphalt JV will also terminate. See Note 19 for a discussion of our crude oil supply agreement with Asphalt JV.

17. FAIR VALUE MEASUREMENTS
We segregate the inputs used in measuring fair value into three levels: Level 1, defined as observable inputs such as quoted prices for identical assets or liabilities in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable, such as quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in markets that are not active; and Level 3, defined as unobservable inputs in which little or no market data exists. We consider counterparty credit risk and our own credit risk in the determination of all estimated fair values.
Recurring Fair Value Measurements
The following assets and liabilities are measured at fair value on a recurring basis:
 
December 31, 2013
 
Level 1
 
Level 2
 
Level 3
 
Total
 
(Thousands of Dollars)
Other current assets:
 
 
 
 
 
 
 
Product imbalances
$
1,980

 
$
—

 
$
—

 
$
1,980

Commodity derivatives
—

 
4,948

 
—

 
4,948

Other long-term assets, net:
 
 
 
 
 
 
 
Commodity derivatives
—

 
6,977

 
—

 
6,977

Accrued liabilities:
 
 
 
 
 
 
 
Product imbalances
(2,190
)
 
—

 
—

 
(2,190
)
Commodity derivatives
(1,433
)
 
(800
)
 
—

 
(2,233
)
Contingent consideration
—

 
—

 
(1,318
)
 
(1,318
)
Other long-term liabilities:
 
 
 
 
 
 
 
Commodity derivatives
—

 
(1,575
)
 
—

 
(1,575
)
Guarantee liability
—

 
—

 
(1,880
)
 
(1,880
)
Total
$
(1,643
)
 
$
9,550

 
$
(3,198
)
 
$
4,709



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



 
December 31, 2012
 
Level 1
 
Level 2
 
Level 3
 
Total
 
(Thousands of Dollars)
Other current assets:
 
 
 
 
 
 
 
Product imbalances
$
1,232

 
$
—

 
$
—

 
$
1,232

Commodity derivatives
1,001

 
8,357

 
—

 
9,358

Other long-term assets, net:
 
 
 
 
 
 
 
Commodity derivatives
—

 
9,206

 
—

 
9,206

Accrued liabilities:
 
 
 
 
 
 
 
Product imbalances
(1,686
)
 
—

 
—

 
(1,686
)
Commodity derivatives
—

 
(19,210
)
 
—

 
(19,210
)
Interest rate swaps
—

 
(40,911
)
 
—

 
(40,911
)
Contingent consideration
—

 
—

 
(9,600
)
 
(9,600
)
Total
$
547

 
$
(42,558
)
 
$
(9,600
)
 
$
(51,611
)

Product Imbalances. We value our assets and liabilities related to product imbalances using quoted market prices in active markets as of the reporting date.
Interest Rate Swaps. We estimate the fair value of both our fixed-to-floating and forward-starting interest rate swaps using discounted cash flows, which use observable inputs such as time to maturity and market interest rates.
Commodity Derivatives. We base the fair value of certain of our commodity derivative instruments on quoted prices on an exchange; accordingly, we include these in Level 1 of the fair value hierarchy. We also have derivative instruments for which we determine fair value using industry pricing services and other observable inputs, such as quoted prices on an exchange for similar derivative instruments. Therefore, we include these derivative instruments in Level 2 of the fair value hierarchy. See Note 18 for a discussion of our derivative instruments.

Contingent Consideration. In connection with the TexStar Asset Acquisition, we could be obligated to pay additional consideration to TexStar. Such obligations are dependent upon the cost of work required to complete certain assets and obtain outstanding real estate rights (collectively, the Contingent Consideration). We estimated the fair value of the Contingent Consideration using a probability-weighted discounted cash flow model, which reflects possible outcomes and our estimates of the probabilities of those outcomes. Our estimate of the fair value is based on significant inputs not observable in the market and thus falls within Level 3 of the fair value hierarchy. The probability-weighted cash flows were discounted using a discount rate of 11% .

Based on our assessment of the costs necessary to complete the assets in accordance with our agreement with TexStar, and considering the probability of possible outcomes, we determined that it is unlikely we would be obligated to pay a portion of the Contingent Consideration. The undiscounted amount of potential future payments that we could be required to make under the applicable agreements is between $0 and $1.3 million .

Guarantees. As of December 31, 2013, we recorded a liability of $1.9 million representing the fair value of guarantees we have issued on behalf of Asphalt JV. We estimated the fair value considering the probability of default by Asphalt JV and an estimate of the amount we would be obligated to pay under the guarantees at the time of default. We calculated the fair value based on the guarantees outstanding as of December 31, 2013, totaling $79.7 million , plus two guarantees that do not specify a maximum amount. Our estimate of the fair value is based on significant inputs not observable in the market and thus falls within Level 3 of the fair value hierarchy. See Note 19 for a discussion of our agreements with Asphalt JV.

In the event we are obligated to perform under these guarantees, that amount paid by us will be added to borrowings under the NuStar JV Facility. As a result, we increased the carrying value of the note receivable from Asphalt JV by the same amount as the liability for the fair value of the guarantees outstanding as of December 31, 2013.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



The following table summarizes the activity in our Level 3 liabilities:
 
Year Ended 
December 31, 2013
 
(Thousands of Dollars)
Beginning balance
$
9,600

Amounts settled
(1,114
)
Adjustment to guarantee liability
1,880

Changes in fair value recorded in earnings:
 
Operating expenses
(8,000
)
Interest expense, net
832

Ending balance
$
3,198


Non-recurring Fair Value Measurements
As of December 31, 2013, we reclassified the property, plant and equipment associated with certain terminals as “Assets held for sale” on the consolidated balance sheet and recorded those assets at fair value, less costs to sell. We estimated the fair value of $22.0 million using a weighted-average of values calculated using an income approach and a market approach. The income approach calculates fair value by discounting the estimated net cash flows generated by the related terminal. The market approach involves estimating the fair value measurement on an earnings multiple based on public company transaction data. Our estimate of the fair value is based on significant inputs not observable in the market and thus falls within Level 3 of the fair value hierarchy.

Fair Value of Financial Instruments
We recognize cash equivalents, receivables, the note receivable from Asphalt JV, payables and debt in our consolidated balance sheets at their carrying amount. The fair values of these financial instruments, except for the note receivable from related party and debt, approximate their carrying amounts.

The estimated fair values and carrying amounts of our debt and note receivable from Asphalt JV were as follows:
 
December 31,
 
2013

2012
 
(Thousands of Dollars)
Debt:
 
 
 
Fair value
$
2,636,734

 
$
2,377,120

Carrying amount
$
2,655,553

 
$
2,411,004

 
 
 
 
Note Receivable from Related Party:
 
 
 
Fair value
$
133,416

 
$
91,705

Carrying amount
$
165,440

 
$
95,711


We estimated the fair value of our publicly traded senior notes based upon quoted prices in active markets; therefore, we determined the fair value of our publicly traded senior notes falls in Level 1 of the fair value hierarchy. For our other debt, for which a quoted market price is not available, we estimated the fair value using a discounted cash flow analysis using current incremental borrowing rates for similar types of borrowing arrangements and determined the fair value falls in Level 2 of the fair value hierarchy.
The note receivable related to the NuStar JV Facility is recorded at the outstanding principal amount, adjusted for equity losses from our investment in Asphalt JV after the carrying value of our investment in Asphalt JV was reduced to zero and for the fair value of guarantees issued under the NuStar JV Facility. We estimated the fair value of the note receivable using discounted cash flows, which use observable inputs such as time to maturity and market interest rates, and determined the fair value falls in Level 2 of the fair value hierarchy.


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18. DERIVATIVES AND RISK MANAGEMENT ACTIVITIES
We utilize various derivative instruments to manage our exposure to commodity price risk and manage our exposure to interest rate risk. Our risk management policies and procedures are designed to monitor interest rates, futures and swap positions and over-the-counter positions, as well as physical volumes, grades, locations and delivery schedules to help ensure that our hedging activities address our market risks. Our risk management committee oversees our trading policies and procedures and certain aspects of commodity and trading risk management. Our risk management committee also reviews all new commodity and trading risk management strategies in accordance with our risk management policy, as approved by our board of directors.

Interest Rate Risk
We were a party to certain interest rate swap agreements to manage our exposure to changes in interest rates. We entered into fixed-to-floating interest rate swap agreements associated with a portion of our fixed-rate senior notes. We accounted for our fixed-to-floating interest rate swaps as fair value hedges. In 2012, we entered into and terminated fixed-to-floating interest rate swap agreements with an aggregate notional amount of $200.0 million related to NuStar Logistics’ 4.75% senior notes issued on February 2, 2012. Under the terms of these interest rate swap agreements, we received a fixed rate of 4.75% and paid a variable rate based on one month USD LIBOR plus a percentage that varied with each agreement . We also terminated fixed-to-floating interest rate swap agreements with an aggregate notional amount of $270.0 million associated with NuStar Logistics’ 4.80% senior notes . Under the terms of these interest rate swap agreements, we received a fixed rate of 4.8% and paid a variable rate based on one month USD LIBOR, plus a percentage that varies with each agreement . We received $19.7 million in connection with the terminations, which we are amortizing into “Interest expense, net” over the remaining lives of the 4.80% and 4.75% senior notes. The termination payments are included in cash flows from financing activities on the consolidated statements of cash flows. We had no fixed-to-floating interest rate swaps as of December 31, 2013 and 2012.
We were also a party to forward-starting interest rate swap agreements related to the interest payments associated with forecasted probable debt issuances in 2013. Under the terms of the swaps, we paid a fixed rate and received a rate based on three month USD LIBOR. We entered into these swaps in order to hedge the risk of changes in the interest payments attributable to changes in the benchmark interest rate during the period from the effective date of the swap to the issuance of the forecasted debt. These swaps qualified, and we designated them, as cash flow hedges of future interest payments associated with forecasted debt issuances. In connection with the issuance of the 4.75% senior notes on February 2, 2012, we terminated forward-starting interest rate swap agreements with an aggregate notional amount of $225.0 million . We paid $25.4 million in connection with the terminations, which is being reclassified out of “Accumulated other comprehensive loss” and into “Interest expense, net” as the interest payments occur over the life of the 4.75% senior notes.
In 2013, in connection with the maturity of the 6.05% senior notes due March 15, 2013 and 5.875% senior notes due June 1, 2013 , we terminated forward-starting interest rate swap agreements with an aggregate notional amount of $275.0 million . We paid $33.7 million in connection with the terminations, which we reclassify out of “Accumulated other comprehensive loss” and into “Interest expense, net” as the interest payments occur or if the interest payments are probable not to occur. During the second quarter of 2013, we determined that one forecasted interest payment was probable not to occur, and we reclassified $2.0 million out of “Accumulated other comprehensive loss” to “Interest expense, net.”
The termination payments are included in cash flows from financing activities on the consolidated statements of cash flows. We had no forward-starting interest rate swaps as of December 31, 2013 , and the total aggregate notional amount of the forward-starting interest rate swaps was $275.0 million as of December 31, 2012.

Commodity Price Risk
We are exposed to market risks related to the volatility of crude oil and refined product prices. In order to reduce the risk of commodity price fluctuations with respect to our crude oil and finished product inventories and related firm commitments to purchase and/or sell such inventories, we utilize commodity futures and swap contracts, which qualify, and we designate as, fair value hedges. Derivatives that are intended to hedge our commodity price risk, but fail to qualify as fair value or cash flow hedges, are considered economic hedges, and we record associated gains and losses in net income.
We entered into commodity swap contracts to hedge the price risk associated with the San Antonio Refinery. These contracts fixed the purchase price of crude oil and sales prices of refined products for a portion of the expected production of the San Antonio Refinery, thereby attempting to mitigate the risk of volatility of future cash flows associated with hedged volumes. These contracts qualified, and we designated them, as cash flow hedges. During the fourth quarter of 2011, we decided to adjust the refinery’s operations, which caused a shift in the future production yields of the San Antonio Refinery. This change caused certain forecasted sales of gasoline products to be replaced with distillate sales; therefore, we concluded that these forecasted gasoline sales were probable not to occur, and we discontinued cash flow hedging treatment for the related commodity contracts. We recorded gains of $16.4 million related to these contracts for the year ended December 31, 2011,

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including $15.1 million which we reclassified from accumulated other comprehensive loss. In anticipation of the San Antonio Refinery Sale, we concluded that all of the forecasted sales were probable not to occur. Therefore, we discontinued cash flow hedging treatment for the related commodity contracts in December 2012 and incurred a loss of $21.7 million , which we reclassified from accumulated other comprehensive loss to “(Loss) income from discontinued operations, net of tax.”
The volume of commodity contracts is based on open derivative positions and represents the combined volume of our long and short positions on an absolute basis, which totaled 15.2 million barrels and 22.7 million barrels as of December 31, 2013 and 2012 , respectively.
As of December 31, 2013 and 2012 , we had $3.3 million and $6.2 million , respectively, of margin deposits related to our derivative instruments.
The fair values of our derivative instruments included in our consolidated balance sheets were as follows:
 
 
 
Asset Derivatives
 
Liability Derivatives
 
Balance Sheet Location
 
December 31,
 
 
2013
 
2012
 
2013
 
2012
 
 
 
(Thousands of Dollars)
Derivatives Designated as
Hedging Instruments:
 
 
 
 
 
 
 
 
 
Commodity contracts
Other current assets
 
$
—

 
$
1,471

 
$
—

 
$
(811
)
Commodity contracts
Accrued liabilities
 
—

 
—

 
(130
)
 
—

Interest rate swaps
Accrued liabilities
 
—

 
—

 
—

 
(40,911
)
Total
 
 
—

 
1,471

 
(130
)
 
(41,722
)
 
 
 
 
 
 
 
 
 
 
Derivatives Not Designated
as Hedging Instruments:
 
 
 
 
 
 
 
 
 
Commodity contracts
Other current assets
 
16,168

 
22,269

 
(11,220
)
 
(13,571
)
Commodity contracts
Other long-term assets, net
 
15,883

 
39,322

 
(8,906
)
 
(30,116
)
Commodity contracts
Accrued liabilities
 
4,523

 
17,406

 
(6,626
)
 
(36,616
)
Commodity contracts
Other long-term liabilities
 
5,448

 
—

 
(7,023
)
 
—

Total
 
 
42,022

 
78,997

 
(33,775
)
 
(80,303
)
 
 
 
 
 
 
 
 
 
 
Total Derivatives
 
 
$
42,022

 
$
80,468

 
$
(33,905
)
 
$
(122,025
)
 
Certain of our derivative instruments are eligible for offset in the consolidated balance sheets and subject to master netting arrangements. Under our master netting arrangements, there is a legally enforceable right to offset amounts, and we intend to settle such amounts on a net basis. The following are the net amounts presented on the consolidated balance sheets:
 
 
December 31,
Commodity Contracts
 
2013
 
2012
 
 
(Thousands of Dollars)
Net amounts of assets presented in the consolidated balance sheets
 
$
11,925

 
$
18,564

Net amounts of liabilities presented in the consolidated balance sheets
 
$
(3,808
)
 
$
(19,210
)

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The earnings impact of our derivative activity was as follows:
Derivatives Designated as Fair
Value Hedging Instruments
 
Income Statement
Location
 
Amount of Gain (Loss) Recognized
in Income on Derivative (Effective Portion)
 
Amount of Gain (Loss) Recognized in Income
on Hedged Item
 
Amount of Gain (Loss) Recognized in Income on Derivative
(Ineffective Portion)
 
 
 
 
(Thousands of Dollars)
Year ended December 31, 2013:
 
 
 
 
 
 
Commodity contracts
 
Cost of product sales
 
$
3,964

 
$
(6,327
)
 
$
(2,363
)
 
 
 
 
 
 
 
 
 
Year ended December 31, 2012:
 
 
 
 
 
 
Interest rate swaps
 
Interest expense, net
 
$
17,345

 
$
(17,345
)
 
$
—

Commodity contracts
 
Cost of product sales
 
(10,505
)
 
12,139

 
1,634

Total
 
 
 
$
6,840

 
$
(5,206
)
 
$
1,634

 
 
 
 
 
 
 
 
 
Year ended December 31, 2011:
 
 
 
 
 
 
Interest rate swaps
 
Interest expense, net
 
$
(55,183
)
 
$
54,588

 
$
(595
)
Commodity contracts
 
Cost of product sales
 
(10,228
)
 
9,004

 
(1,224
)
Total
 
 
 
$
(65,411
)
 
$
63,592

 
$
(1,819
)
 
Derivatives Designated as Cash
Flow Hedging Instruments
 
Amount of Gain
(Loss) Recognized
in OCI on Derivative
(Effective Portion)
 
Income Statement
Location (a)
 
Amount of Gain
(Loss) Reclassified from
Accumulated OCI
into Income
(Effective Portion) (b)
 
Amount of Gain (Loss) 
Recognized in Income on
Derivative
(Ineffective Portion)
 
 
(Thousands of Dollars)
 
 
 
(Thousands of Dollars)
Year ended December 31, 2013:
 
 
 
 
 
 
Interest rate swaps
 
$
7,213

 
Interest expense, net
 
$
(7,570
)
 
$
—

 
 
 
 
 
 
 
 
 
Year ended December 31, 2012:
 
 
 
 
 
 
Interest rate swaps
 
$
(17,069
)
 
Interest expense, net
 
$
(1,749
)
 
$
—

Commodity contracts
 
(77,200
)
 
(Loss) income from discontinued operations
 
(51,483
)
 
4,010

Total
 
$
(94,269
)
 
 
 
$
(53,232
)
 
$
4,010

 
 
 
 
 
 
 
 
 
Year ended December 31, 2011:
 
 
 
 
 
 
Interest rate swaps
 
$
(84,199
)
 
Interest expense, net
 
$
—

 
$
—

Commodity contracts
 
30,747

 
(Loss) income from discontinued operations
 
5,030

 
(4,010
)
Total
 
$
(53,452
)
 
 
 
$
5,030

 
$
(4,010
)
(a)
Amounts are included in specified location for both the gain (loss) reclassified from accumulated OCI into income (effective portion) and the gain (loss) recognized in income on derivative (ineffective portion).
 

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Derivatives Not Designated as Hedging Instruments
 
Income Statement Location
 
Amount of Gain (Loss)
Recognized in Income
 
 
 
 
(Thousands of Dollars)
Year ended December 31, 2013:
 
 
 
 
Commodity contracts
 
Cost of product sales
 
$
(5,323
)
Commodity contracts
 
(Loss) income from discontinued operations
 
(218
)
Total
 
 
 
$
(5,541
)
 
 
 
 
 
Year ended December 31, 2012:
 
 
 
 
Commodity contracts
 
Revenues
 
$
(7,654
)
Commodity contracts
 
Cost of product sales
 
20,138

Commodity contracts
 
(Loss) income from discontinued operations
 
6,176

Total
 
 
 
$
18,660

 
 
 
 
 
Year ended December 31, 2011:
 
 
 
 
Commodity contracts
 
Revenues
 
$
235

Commodity contracts
 
Cost of product sales
 
(11,661
)
Commodity contracts
 
Operating expenses
 
46

Commodity contracts
 
(Loss) income from discontinued operations
 
7,207

Total
 
 
 
$
(4,173
)
For derivatives designated as cash flow hedging instruments, once a hedged transaction occurs, we reclassify the effective portion from AOCI to “Interest expense, net” for our forward-starting interest rate swaps or to “Income (loss) from discontinued operations, net of tax” for our commodity contracts associated with the San Antonio Refinery. As of December 31, 2013 , we expect to reclassify a loss of $10.7 million to “Interest expense, net” within the next twelve months.

19. RELATED PARTY TRANSACTIONS
The following table summarizes information pertaining to related party transactions:
 
Year Ended December 31,
 
2013
 
2012
 
2011
 
(Thousands of Dollars)
Revenues
$
14,897

 
$
1,990

 
$
—

Operating expenses
$
122,677

 
$
133,654

 
$
138,324

General and administrative expenses
$
58,602

 
$
62,490

 
$
66,220

Interest income
$
6,113

 
$
1,219

 
$
—

Revenues included in discontinued operations, net of tax
$
3,720

 
$
3,390

 
$
1,039

Expenses included in discontinued operations, net of tax
$
6,051

 
$
14,328

 
$
12,238

NuStar GP, LLC
Our operations are managed by NuStar GP, LLC, the general partner of our general partner. Under a services agreement between NuStar Energy and NuStar GP, LLC, employees of NuStar GP, LLC perform services for our U.S. operations. Certain of our wholly owned subsidiaries employ persons who perform services for our international operations.
GP Services Agreement. NuStar Energy and NuStar GP, LLC entered into a services agreement effective January 1, 2008 (the GP Services Agreement). The GP Services Agreement provides that NuStar GP, LLC will furnish administrative and certain operating services necessary to conduct the business of NuStar Energy. All employees providing services to both NuStar GP Holdings and NuStar Energy are employed by NuStar GP, LLC; therefore, NuStar Energy reimburses NuStar GP, LLC for all employee costs, other than the expenses allocated to NuStar GP Holdings (the Holdco Administrative Services Expense). The GP Services Agreement has an original termination date of December 31, 2012, but will automatically renew every two-year unless terminated by either party upon six months’ prior written notice.

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We had a payable to NuStar GP, LLC of $8.3 million and $1.4 million as of December 31, 2013 and 2012 , respectively, with both amounts representing payroll, employee benefit plan expenses and unit-based compensation. We also had a long-term payable to NuStar GP, LLC as of December 31, 2013 and 2012 of $41.1 million and $18.1 million , respectively, for amounts payable for retiree medical benefits and other post-employment benefits.
Non-Compete Agreement . On July 19, 2006, we entered into a non-compete agreement with NuStar GP Holdings, Riverwalk Logistics, L.P. and NuStar GP, LLC (the Non-Compete Agreement). The Non-Compete Agreement became effective on December 22, 2006 when NuStar GP Holdings ceased to be subject to the Amended and Restated Omnibus Agreement, dated March 31, 2006. Under the Non-Compete Agreement, we will have a right of first refusal with respect to the potential acquisition of assets that relate to the transportation, storage or terminalling of crude oil, feedstocks or refined petroleum products (including petrochemicals) in the United States and internationally. NuStar GP Holdings will have a right of first refusal with respect to the potential acquisition of general partner and other equity interests in publicly traded partnerships under common ownership with the general partner interest. With respect to any other business opportunities, neither the Partnership nor NuStar GP Holdings are prohibited from engaging in any business, even if the Partnership and NuStar GP Holdings would have a conflict of interest with respect to such other business opportunity.
Asphalt JV
Financing Agreements and Credit Support. The NuStar JV Facility is an unsecured revolving credit facility provided by NuStar Energy that will be available to fund working capital needs and for general purposes of Asphalt JV in an aggregate principal amount not to exceed $250.0 million for a term of seven years. The NuStar JV Facility matures on September 28, 2019 and bears interest based on either an alternative base rate or a LIBOR-based rate. As of December 31, 2013 , the interest rate was 3.2% . In the event NuStar Energy no longer owns an equity interest in Asphalt JV, the interest rate increases and the availability under the NuStar JV Facility is reduced to a maximum of $167.0 million after two years and $83.0 million after three years. As of December 31, 2013 , the face amount of our note receivable from Asphalt JV totaled $176.7 million .
In addition, during the term of the NuStar JV Facility, we will provide credit support, such as guarantees, letters of credit and cash collateral, as applicable, of up to $150.0 million . As of December 31, 2013 , we provided guarantees for commodity purchases, lease obligations and certain utilities for Asphalt JV with a maximum potential exposure of $79.7 million , plus two guarantees to suppliers that do not specify a maximum amount. A majority of the guarantees were in existence prior to the Asphalt Sale and have no expiration date. As of December 31, 2013 , NuStar Energy has also provided $9.7 million in letters of credit on behalf of Asphalt JV. In the event we are obligated to perform under these guarantees, that amount paid by us will be added to borrowings under the NuStar JV Facility, but it will not reduce the availability under the NuStar Facility.

Variable Interest Entity. We determined the equity of Asphalt JV is not sufficient to finance its activities without additional subordinated support, including support provided by us as described above. Therefore, we determined the Asphalt JV is a VIE. As of December 31, 2013, our maximum exposure to loss as a result of our involvement with Asphalt JV is approximately $450.7 million , which consists of the following (in thousands of dollars):
 
 
Maximum
Exposure to Loss
 
Carrying Value
 
 
 
 
asset/(liability)
Receivable from Asphalt JV
 
$
50,717

 
$
50,717

Note receivable under the NuStar JV Facility
 
250,000

 
165,440

Credit support, including guarantees
 
150,000

 
(1,880
)
Total
 
$
450,717

 
$
214,277


Terminal Service Agreements. Simultaneously with the Asphalt Sale, we entered into four terminal service agreements with Asphalt JV for our terminals in Wilmington, NC, Rosario, NM, Catoosa, OK and Houston, TX. Pursuant to the terms of the agreements, we provide aggregate storage capacity of 0.8 million barrels and blending services to Asphalt JV for a service charge of $1.5 million per year. The storage charge will be adjusted annually based on the percentage increase in the consumer price index. The terminal service agreements each have a term of ten years, with Asphalt JV’s option to extend for an additional five years. Asphalt JV also has the option to terminate any terminal service agreement with 90 days written notice. If any of the terminal service agreements are extended, the storage charge will be based on the then-current fair market storage rates for comparable storage services charged by us to third parties.
In addition, we have terminal service agreements with Asphalt JV for our terminals in Jacksonville, FL, Dumfries, VA, and Baltimore, MD. These terminal service agreements have lease terms ranging from one to five years, with annual renewal

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options. Asphalt JV has the option to terminate any of these agreements at the end of a lease term with 90 days written notice. Pursuant to the terms of the agreements, we provide aggregate storage capacity of approximately 0.6 million barrels to Asphalt JV for a storage charge of approximately $6.3 million per year, plus applicable throughput and handling fees.
In February 2014, we divested of our remaining 50% ownership interest in Asphalt JV. See Note 29 of the Notes to Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary Data”for additional discussion.
Crude Oil Supply Agreement. We entered into a crude oil supply agreement with Asphalt JV (the Asphalt JV Crude Oil Supply Agreement) that commits Asphalt JV to purchase from us in a given year the lesser of (i) the number of barrels of crude oil required to be purchased by us from PDVSA under the CSA for such year or (ii) 35,000 barrels per day of crude oil multiplied by the number of days in such year. As a result of the termination of the CSA, the Asphalt JV Crude Oil Supply Agreement will also terminate effective January 1, 2014. See Note 16 for additional discussion of the CSA. As of December 31, 2013 and December 31, 2012, we had a receivable from Asphalt JV of $50.7 million and $109.4 million , respectively, mainly associated with crude oil sales under the Asphalt JV Crude Oil Supply Agreement.
Services Agreements Between Asphalt JV and NuStar GP,LLC. In conjunction with the Asphalt Sale, NuStar GP, LLC entered into a services agreement with Asphalt JV, effective September 28, 2012 (the Asphalt JV Services Agreement). The Asphalt JV Services Agreement provides that NuStar GP, LLC furnish certain administrative and other operating services necessary to conduct the business of Asphalt JV. Asphalt JV compensates NuStar GP, LLC for these services through an annual fee totaling $10.0 million, subject to adjustment based on the annual merit increase percentage applicable to NuStar GP, LLC employees for the most recently completed contract year. The Asphalt JV Services Agreement will terminate on December 31, 2017 and will automatically renew for successive two-year terms. Asphalt JV may terminate the Asphalt JV Services Agreement at any time, with 180 days prior written notice or reduce the level of service with 45 days prior written notice. During the year ended December 31, 2013 , Asphalt JV provided written notice to reduce the level of services that NuStar GP, LLC provides to Asphalt JV to 63% of the original service level.
In addition, NuStar GP, LLC entered into an employee services agreement with Asphalt JV, effective September 28, 2012 (the Asphalt JV Employee Services Agreement). The Asphalt JV Employee Services Agreement provided that certain of NuStar GP, LLC employees would provide employee-services to Asphalt JV. In exchange, Asphalt JV would reimburse NuStar GP, LLC for the compensation expense of those employees at the same rates that were in effect at the effective date of the Asphalt JV Employee Services Agreement, including an annual bonus amount that does not exceed NuStar GP, LLC’s target bonus plan. The employees covered under the Asphalt JV Employee Services Agreement were not entitled to any new unit-based compensation grants from NuStar GP, LLC, and Asphalt JV was not responsible for unit-based compensation costs prior to the effective date. The Asphalt JV Employee Services Agreement terminated on December 31, 2012 , and effective January 1, 2013, those employees became employees of Asphalt JV.

20. EMPLOYEE BENEFIT PLANS AND LONG-TERM INCENTIVE PLANS
Employee Benefit Plans
We rely on employees of NuStar GP, LLC to provide the necessary services to conduct our U.S. operations. NuStar GP, LLC sponsors various employee benefit plans.
The NuStar Pension Plan (the Pension Plan) is a qualified non-contributory defined benefit pension plan that became effective July 1, 2006. The Pension Plan covers substantially all of NuStar GP, LLC’s employees and generally provides eligible employees with retirement income calculated under a final average pay formula (FAP) or a cash balance formula. Employees hired before January 1, 2011 are covered under FAP, which is based on years of service and compensation during their period of service, and employees become fully vested in their benefits upon attaining five years of vesting service. Employees hired on January 1, 2011 or after are covered under the cash balance formula, which is based on age and service and interest credits, and employees become fully vested in their benefits upon attaining three years of vesting service. Effective January 1, 2014, the Pension Plan was amended to freeze the FAP benefit as of December 31, 2013 and all employees will be covered under the cash balance formula.
NuStar GP, LLC also maintains an excess pension plan (the Excess Pension Plan) which is a nonqualified deferred compensation plan that provides benefits to a select group of management or other highly compensated employees of NuStar GP, LLC. The supplemental executive retirement plan (the SERP) has no participants, and it will terminate in 2014 upon a final payment to the former participants.
The NuStar Thrift Plan (the Thrift Plan) is a qualified employee profit-sharing plan that became effective June 26, 2006. Participation in the Thrift Plan is voluntary and is open to substantially all NuStar GP, LLC employees upon their date of hire, except for part-time employees (as defined in the Thrift Plan), who become eligible upon completing one year of service (as

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defined in the Thrift Plan). Thrift Plan participants can contribute from 1% up to 30% of their total annual compensation to the Thrift Plan in the form of pre-tax and/or after tax employee contributions. NuStar GP, LLC makes matching contributions in an amount equal to 100% of each participant’s employee contributions up to a maximum of 6% of the participant’s total annual compensation.
 
NuStar GP, LLC also maintains an excess thrift plan (the Excess Thrift Plan) that became effective July 1, 2006. The Excess Thrift Plan is a nonqualified deferred compensation plan that provides benefits to those employees of NuStar GP, LLC whose compensation and/or annual contributions under the Thrift Plan are subject to the limitations applicable to qualified retirement plans under the Code. Benefits under the Excess Thrift Plan are generally payable in a single lump sum payment upon the employee’s separation from service.
None of the Excess Thrift Plan, the Excess Pension Plan or the SERP is intended to constitute either a qualified plan under the provisions of Section 401 of the Code or a funded plan subject to the Employee Retirement Income Security Act.
NuStar GP, LLC also provides a medical benefits plan for retired employees. In 2013, the plan was amended for employees that retire on or after April 1, 2014 to provide a defined subsidy for eligible third-party health care premiums.
We also maintain several other defined contribution plans for certain international employees located in Canada, the Netherlands and the United Kingdom. For the years ended December 31, 2013 , 2012 and 2011 , our costs for these plans totaled $2.5 million , $2.6 million and $2.6 million , respectively.
Long-Term Incentive Plans
NuStar GP, LLC sponsors the following:
•
The Third Amended and Restated 2000 Long-Term Incentive Plan (the 2000 LTIP), under which NuStar GP, LLC may award up to 3,250,000 NS common units. Awards under the 2000 LTIP can include NS unit options, restricted units, performance awards, distribution equivalent rights (DER) and contractual rights to receive common units. As of December 31, 2013 , a total of 1,517,027 NS common units remained available to be awarded under the 2000 LTIP.
•
The 2006 Long-Term Incentive Plan (the 2006 LTIP) under which NuStar GP Holdings may award up to 2,000,000 NSH units to employees, consultants and directors of NuStar GP Holdings and its affiliates, including us. Awards under the 2006 LTIP can include NSH unit options, performance awards, DER, restricted units, phantom units, unit grants and unit appreciation rights. As of December 31, 2013 , a total of 1,494,177 NSH units remained available to be awarded under the 2006 LTIP.

The 2003 Employee Unit Incentive Plan (the UIP), under which NuStar GP, LLC awarded NS common units to employees of NuStar GP, LLC or its affiliates, terminated on June 16, 2013. The 2002 Unit Option Plan (the UOP), under which NuStar GP, LLC awarded NS unit options to officers and directors of NuStar GP, LLC or its affiliates, terminated on March 22, 2012.


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The number of awards granted under the above-described plans were as follows:
 
Year Ended December 31,
 
2013
 
2012
 
2011
 
Granted
 
Vesting
 
Granted
 
Vesting
 
Granted
 
Vesting
2000 LTIP:
 
 
 
 
 
 
 
 
 
 
 
Performance awards
38,786

 
(a)

 
33,445

 
(a)
 
27,111

 
(a)
Restricted units (b)
269,182

 
1/5 per year

 
231,855

 
1/5 per year
 
208,195

 
1/5 per year
Restricted units (grants to non-employee directors of NuStar GP, LLC)
8,904

 
1/3 per year

 
8,170

 
1/3 per year
 
6,760

 
1/3 per year
UIP:
 
 
 
 
 
 
 
 
 
 
 
Restricted units (c)
—

 
—

 
15,382

 
1/5 per year
 
14,005

 
1/5 per year
2006 LTIP:
 
 
 
 
 
 
 
 
 
 
 
Restricted units
18,620

 
1/5 per year

 
25,640

 
1/5 per year
 
24,970

 
1/5 per year
Restricted units (grants to non-employee directors of NuStar GP Holdings) (d)
13,183

 
1/3 per year

 
10,601

 
1/3 per year
 
9,987

 
1/3 per year
 
(a)
Performance awards vest 1/3 per year if certain performance measures are met .
(b)
The 2000 LTIP restricted unit grants include 3,882 restricted unit awards granted to certain international employees for the year ended December 31, 2013 , that vest 1/3 per year , as defined in the award agreements.
(c)
The UIP restricted unit grants include 3,392 and 2,880 restricted unit awards granted to certain international employees for the years ended December 31, 2012 and 2011 , respectively, that vest 1/3 per year  , as defined in the award agreements.
(d)
We do not reimburse NuStar GP, LLC for compensation expense relating to these awards.
Our share of compensation expense related to the various long-term incentive plans and benefit plans described above is as follows:  
 
Year Ended December 31,
 
2013
 
2012
 
2011
 
(Thousands of Dollars)
Long-term incentive plans
$
9,818

 
$
7,745

 
$
8,521

Benefit plans
$
18,204

 
$
23,602

 
$
13,684


21. OTHER INCOME (EXPENSE)
Other income (expense) consisted of the following:
 
Year Ended December 31,
 
2013
 
2012
 
2011
 
(Thousands of Dollars)
Foreign exchange gains (losses)
$
7,707

 
$
(1,429
)
 
$
1,902

(Loss) gain from sale or disposition of assets
(524
)
 
(1,522
)
 
155

Loss on deconsolidation of Asphalt JV
—

 
(23,800
)
 
—

Storage agreement early termination costs
—

 
—

 
(5,000
)
Contingent loss adjustment
—

 
—

 
(3,250
)
Other, net
158

 
2,062

 
2,620

Other income (expense), net
$
7,341

 
$
(24,689
)
 
$
(3,573
)
For the year ended December 31, 2011, “Other income (expense), net” included $5.0 million in costs associated with the early termination of a third-party storage agreement at the Paulsboro, New Jersey asphalt refinery and a contingent loss adjustment of $3.3 million related to a legal settlement.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



22. PARTNERS’ EQUITY
Issuance of Common Units
On September 10, 2012 , we issued 7,130,000 common units representing limited partner interests at a price of $48.94 per unit. We used the net proceeds from this offering of $343.9 million , including a contribution of $7.1 million from our general partner to maintain its 2% general partner interest, for general partnership purposes, including repayments of outstanding borrowings under our 2012 Revolving Credit Agreement and working capital purposes.
On December 9, 2011 , we issued 6,037,500 common units representing limited partner interests at a price of $53.45 per unit. We used the net proceeds from this offering of $318.0 million , including a contribution of $6.6 million from our general partner to maintain its 2% general partner interest, mainly to reduce outstanding borrowings under our 2007 revolving credit agreement.
On May 23, 2011, we entered into an Equity Distribution Agreement (the Equity Distribution Agreement) with Citigroup Global Markets Inc. (Citigroup). Under the Equity Distribution Agreement, we may from time to time sell an aggregate of up to $200.0 million NuStar Energy common units representing limited partner interests, using Citigroup as our sales agent. In September and October 2011, we issued 108,029 NuStar Energy common units under the Equity Distribution Agreement for net proceeds of $6.0 million , including a contribution of $0.1 million from our general partner to maintain its 2% general partner interest.
Accumulated Other Comprehensive Income (Loss)
The balance of and changes in the components included in “Accumulated other comprehensive income (loss)” were as follows:
 
Foreign
Currency
Translation
 
Cash Flow Hedges
 
Total
 
(Thousands of Dollars)
Balance as of January 1, 2011
$
11,500

 
$
35,000

 
$
46,500

Other comprehensive loss before reclassifications
(15,425
)
 
(53,452
)
 
(68,877
)
Net loss reclassified into (loss) income from discontinued operations
—

 
(5,030
)
 
$
(5,030
)
Other comprehensive loss
(15,425
)
 
(58,482
)
 
(73,907
)
Balance as of December 31, 2011
(3,925
)
 
(23,482
)
 
(27,407
)
Other comprehensive income (loss) before reclassifications
9,579

 
(94,269
)
 
(84,690
)
Net loss reclassified into interest expense, net
—

 
1,749

 
1,749

Net loss reclassified into (loss) income from discontinued operations
—

 
51,483

 
51,483

Other comprehensive income (loss)
9,579

 
(41,037
)
 
(31,458
)
Balance as of December 31, 2012
5,654

 
(64,519
)
 
(58,865
)
Other comprehensive (loss) income before reclassifications
(19,312
)
 
7,213

 
(12,099
)
Net loss reclassified into interest expense, net
—

 
7,570

 
7,570

Other comprehensive (loss) income
(19,312
)
 
14,783

 
(4,529
)
Balance as of December 31, 2013
$
(13,658
)
 
$
(49,736
)
 
$
(63,394
)
Other comprehensive income (loss) attributable to the noncontrolling interest consisted of foreign currency translation adjustment losses of $0.1 million , gains of $1.1 million and losses of $3.0 million , for the years ended December 31, 2013, 2012 and 2011, respectively.
Allocations of Net Income
General Partner. Our partnership agreement, as amended, sets forth the calculation to be used to determine the amount and priority of cash distributions that the common unitholders and general partner will receive. The partnership agreement also contains provisions for the allocation of net income and loss to the unitholders and the general partner. For purposes of maintaining partner capital accounts, the partnership agreement specifies that items of income and loss shall be allocated among the partners in accordance with their respective percentage interests. Normal allocations according to percentage interests are made after giving effect to priority income allocations, if any, in an amount equal to incentive cash distributions

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allocated 100% to the general partner. The following table details the calculation of net income applicable to the general partner:
 
Year Ended December 31,
 
2013
 
2012
 
2011
 
(Thousands of Dollars)
Net income (loss) attributable to NuStar Energy L.P.
$
(273,770
)
 
$
(226,616
)
 
$
221,461

Less general partner incentive distribution (a)
43,220

 
41,242

 
36,319

Net income (loss) after general partner incentive distribution
(316,990
)
 
(267,858
)
 
185,142

General partner interest
2
%
 
2
%
 
2
%
General partner allocation of net income (loss) after general partner
incentive distribution
(6,338
)
 
(5,356
)
 
3,703

General partner incentive distribution
43,220

 
41,242

 
36,319

Net income applicable to general partner
$
36,882

 
$
35,886

 
$
40,022

 
(a)
The net income allocation to the general partner’s incentive distribution is less than the actual distribution made with respect to 2011, which is shown in the distribution table below, due to the issuance of common units after the end of the third quarter but before the record date.
Cash Distributions
We make quarterly distributions of 100% of our available cash, generally defined as cash receipts less cash disbursements and cash reserves established by the general partner, in its sole discretion. These quarterly distributions are declared and paid within 45 days subsequent to each quarter-end. The limited partner unitholders are entitled to receive a minimum quarterly distribution of $0.60 per unit each quarter ( $2.40 annualized). Our cash is first distributed 98% to the limited partners and 2% to the general partner until the amount distributed to our unitholders is equal to the minimum quarterly distribution and arrearages in the payment of the minimum quarterly distribution for any prior quarter. Cash in excess of the minimum quarterly distributions is distributed to our unitholders and our general partner based on the percentages shown below.
Our general partner is entitled to incentive distributions if the amount we distribute with respect to any quarter exceeds specified target levels shown below:
 
 
Percentage of Distribution
Quarterly Distribution Amount per Unit
 
Unitholders
 
General Partner
Up to $0.60
 
98%
 
2%
Above $0.60 up to $0.66
 
90%
 
10%
Above $0.66
 
75%
 
25%
 

The following table reflects the allocation of total cash distributions to our general and limited partners applicable to the period in which the distributions were earned:
 
Year Ended December 31,
 
2013
 
2012
 
2011
 
(Thousands of Dollars, Except Per Unit Data)
General partner interest
$
7,844

 
$
7,486

 
$
6,630

General partner incentive distribution
43,220

 
41,242

 
36,326

Total general partner distribution
51,064

 
48,728

 
42,956

Limited partners’ distribution
341,140

 
325,526

 
288,550

Total cash distributions
$
392,204

 
$
374,254

 
$
331,506

 
 
 
 
 
 
Cash distributions per unit applicable to limited partners
$
4.380

 
$
4.380

 
$
4.360



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



The following table summarizes information related to our quarterly cash distributions:
Quarter Ended
 
Cash Distributions Per Unit
 
Total Cash Distributions (Thousands of Dollars)
 
Record Date
 
Payment Date
December 31, 2013 (a)
 
$
1.095

 
$
98,051

 
February 10, 2014
 
February 14, 2014
September 30, 2013
 
$
1.095

 
$
98,051

 
November 11, 2013
 
November 14, 2013
June 30, 2013
 
$
1.095

 
$
98,051

 
August 5, 2013
 
August 9, 2013
March 31, 2013
 
$
1.095

 
$
98,051

 
May 6, 2013
 
May 10, 2013
(a)
The distribution was announced on January 30, 2014 .

23. NET (LOSS) INCOME PER UNIT
The following table details the calculation of earnings per unit:
 
Year Ended December 31,
 
2013
 
2012
 
2011
 
(Thousands of Dollars, Except Per Unit Data)
Net (loss) income attributable to NuStar Energy L.P.
$
(273,770
)
 
$
(226,616
)
 
$
221,461

Less general partner distribution (including IDR)
51,064

 
48,728

 
42,948

Less limited partner distribution
341,140

 
325,526

 
288,497

Distributions greater than earnings
$
(665,974
)
 
$
(600,870
)
 
$
(109,984
)
 
 
 
 
 
 
General partner earnings:
 
 
 
 
 
Distributions
$
51,064

 
$
48,728

 
$
42,948

Allocation of distributions greater than earnings (2%)
(13,318
)
 
(12,019
)
 
(2,201
)
Total
$
37,746

 
$
36,709

 
$
40,747

 
 
 
 
 
 
Limited partner earnings:
 
 
 
 
 
Distributions
$
341,140

 
$
325,526

 
$
288,497

Allocation of distributions greater than earnings (98%)
(652,656
)
 
(588,851
)
 
(107,783
)
Total
$
(311,516
)
 
$
(263,325
)
 
$
180,714

 
 
 
 
 
 
Weighted-average limited partner units outstanding
77,886,078

 
72,957,417

 
65,018,301

 
 
 
 
 
 
Net (loss) income per unit applicable to limited partners
$
(4.00
)
 
$
(3.61
)
 
$
2.78



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24. STATEMENTS OF CASH FLOWS
Changes in current assets and current liabilities were as follows:
 
Year Ended December 31,
 
2013
 
2012
 
2011
 
(Thousands of Dollars)
Decrease (increase) in current assets:
 
 
 
 
 
Accounts receivable
$
107,209

 
$
160,435

 
$
(230,980
)
Receivable from related parties
58,692

 
(113,018
)
 
—

Inventories
31,975

 
112,589

 
(160,139
)
Income tax receivable
414

 
2,921

 
(4,265
)
Other current assets
25,725

 
(26,050
)
 
(1,825
)
Increase (decrease) in current liabilities:
 
 
 
 
 
Accounts payable
(96,330
)
 
(43,451
)
 
140,898

Payable to related party
6,922

 
(5,339
)
 
(3,603
)
Accrued interest payable
9,370

 
(6,092
)
 
126

Accrued liabilities
(32,452
)
 
11,259

 
(10,087
)
Taxes other than income tax
(87
)
 
(2,444
)
 
2,574

Income tax payable
1,338

 
(563
)
 
1,848

Changes in current assets and current liabilities
$
112,776

 
$
90,247

 
$
(265,453
)
The above changes in current assets and current liabilities differ from changes between amounts reflected in the applicable consolidated balance sheets due to:
•
the changes in assets held for sale being reflected in the line items to which the changes relate in the table above;
•
current assets and current liabilities acquired and disposed during the period;
•
the change in the amount accrued for capital expenditures; and
•
the effect of foreign currency translation.
Non-cash investing and financing activities for the years ended December 31, 2013 , 2012 and 2011 mainly consist of changes in the fair values of our fixed-to-floating and forward-starting interest rate swaps.
Cash flows related to interest and income taxes were as follows:
 
Year Ended December 31,
 
2013
 
2012
 
2011
 
(Thousands of Dollars)
Cash paid for interest, net of amount capitalized
$
113,805

 
$
110,679

 
$
109,027

Cash paid for income taxes, net of tax refunds received
$
11,386

 
$
21,032

 
$
14,920



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25. INCOME TAXES
Components of income tax expense related to certain of our continuing operations conducted through separate taxable wholly owned corporate subsidiaries were as follows:
 
Year Ended December 31,
 
2013
 
2012
 
2011
 
(Thousands of Dollars)
Current:
 
 
 
 
 
U.S.
$
3,098

 
$
4,416

 
$
3,769

Foreign
9,273

 
16,480

 
8,596

Total current
12,371

 
20,896

 
12,365

 
 
 
 
 
 
Deferred:
 
 
 
 
 
U.S.
1,687

 
7,494

 
2,962

Foreign
(1,305
)
 
(3,940
)
 
3,228

Total deferred
382

 
3,554

 
6,190

 
 
 
 
 
 
Total income tax expense
$
12,753

 
$
24,450

 
$
18,555

The difference between income tax expense recorded in our consolidated statements of income and income taxes computed by applying the statutory federal income tax rate ( 35% for all years presented) to income before income tax expense is due to the fact that the majority of our income is not subject to federal income tax due to our status as a limited partnership.
The tax effects of significant temporary differences representing deferred income tax assets and liabilities were as follows:
 
December 31,
 
2013
 
2012
 
(Thousands of Dollars)
Deferred income tax assets:
 
 
 
Net operating losses
$
28,945

 
$
25,567

Environmental and legal reserves
433

 
291

Valuation allowance
(12,237
)
 
(78
)
Other
1,772

 
—

Total deferred income tax assets
18,913

 
25,780

 
 
 
 
Deferred income tax liabilities:
 
 
 
Property, plant and equipment
(40,494
)
 
(54,155
)
Other
—

 
(631
)
Total deferred income tax liabilities
(40,494
)
 
(54,786
)
 
 
 
 
Net deferred income tax liability
$
(21,581
)
 
$
(29,006
)
 
 
 
 
Reported on the consolidated balance sheets as:
 
 
 
Deferred income tax asset
$
5,769

 
$
3,108

Deferred income tax liability
(27,350
)
 
(32,114
)
Net deferred income tax liability
$
(21,581
)
 
$
(29,006
)
 
As of December 31, 2013 , our U.S. and foreign corporate operations have net operating loss carryforwards for tax purposes totaling approximately $80.0 million and $4.7 million , respectively, which are subject to various limitations on use and expire in years 2021 through 2033 for U.S. losses and in years 2017 and 2018 for foreign losses.
As of December 31, 2013 and 2012 , we recorded a valuation allowance of $12.2 million and $0.1 million , respectively, related to our deferred tax assets. We estimate the amount of valuation allowance based upon our expectations of taxable income in the

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



various jurisdictions in which we operate and the period over which we can utilize those future deductions. The valuation allowance reflects uncertainties related to our ability to utilize certain net operating loss carryforwards before they expire. In 2013, we increased the valuation allowance for the U.S. and foreign net operating loss by $10.3 million and $1.8 million , respectively, due to changes in our estimates of the amount of those loss carryforwards that will be realized, based upon future taxable income.
The realization of net deferred income tax assets recorded as of December 31, 2013 is dependent upon our ability to generate future taxable income in the United States. We believe it is more likely than not that the deferred income tax assets as of December 31, 2013 will be realized, based on expected future taxable income.
Grace Energy Corporation Matter
In connection with the settlement of a legal matter, we recognized a pre-tax gain of $28.7 million in 2012 within one of our taxable subsidiaries. As a result, we recorded related income tax expense of $10.1 million , resulting from the reduction of the related deferred income tax asset.
Canadian Income Tax Audit
During the second quarter of 2012, we recorded $1.0 million of additional income tax liability and $2.2 million of interest and penalties associated with an ongoing Canadian income tax audit for the years 2006 through 2011. We also recorded $1.3 million of Canadian withholding tax and $0.7 million of interest and penalties associated with the withholding tax liability
related to interest payments made from our Canadian subsidiaries to a United States entity from 2003 to 2009. We believe that
adequate provisions for uncertainties related to the Canadian audits have been reflected in the financial statements.
St. Eustatius Tax Agreement
On June 1, 1989, the governments of the Netherlands Antilles and St. Eustatius approved a Free Zone and Profit Tax Agreement retroactive to January 1, 1989, which expired on December 31, 2000. This agreement required a subsidiary of Kaneb, which we acquired on July 1, 2005, to pay the greater of 2% of taxable income, as defined therein, or 500,000 Netherlands Antilles guilders (approximately $0.3 million) per year. The agreement further provided that any amounts paid in order to meet the minimum annual payment were available to offset future tax liabilities under the agreement to the extent that the minimum annual payment is greater than 2% of taxable income. On February 22, 2006, we entered into a revised agreement (the 2005 Tax and Maritime Agreement) with the governments of St. Eustatius and the Netherlands Antilles. The 2005 Tax and Maritime Agreement was effective beginning January 1, 2005 and expires on December 31, 2014. Under the terms of the 2005 Tax and Maritime Agreement, we agreed to make a one-time payment of 5.0 million Netherlands Antilles guilders (approximately $2.8 million) in full and final settlement of all of our liabilities, taxes, fees, levies, charges, or otherwise (including settlement of audits) due or potentially due to St. Eustatius. We further agreed to pay an annual minimum profit tax to St. Eustatius of 1.0 million Netherlands Antilles guilders (approximately $0.6 million), beginning as of January 1, 2005. We agreed to pay the minimum annual profit tax in twelve equal monthly installments. To the extent the minimum annual profit tax exceeds 2% of taxable profit (as defined in the 2005 Tax and Maritime Agreement), we can carry forward that excess to offset future tax liabilities. If the minimum annual profit tax is less than 2% of taxable profit, we agreed to pay that difference.
Effective January 1, 2011, the Netherlands Antilles ceased to exist, and St. Eustatius became part of the Netherlands. The Netherlands Tax Ministry contends that as of January 2011, we are subject to real estate tax rather than profit tax as expressed in our tax agreement.  In 2013, the Ministry issued a property tax assessment for years 2011 through 2012. We objected to and appealed the assessment.  In 2013, we filed a lawsuit in the Netherlands civil court seeking to enforce the terms of our existing St. Eustatius tax agreement.  We believe it is likely that we will prevail in the lawsuit.

26. SEGMENT INFORMATION

Our reportable business segments consist of storage, pipeline (formerly known as the transportation segment), and fuels marketing. In 2013, we changed the name of the “Asphalt and Fuels Marketing” segment to the “Fuels Marketing” segment since this name more accurately reflects the operations that remain after the Asphalt Sale and the San Antonio Refinery Sale.

Our segments represent strategic business units that offer different services and products. We evaluate the performance of each segment based on its respective operating income, before general and administrative expenses and certain non-segmental depreciation and amortization expense. General and administrative expenses are not allocated to the operating segments since those expenses relate primarily to the overall management at the entity level. Our principal operations include terminalling and storage of petroleum products, the transportation of petroleum products and anhydrous ammonia, and fuels marketing. Intersegment revenues result from storage and throughput agreements with wholly owned subsidiaries of NuStar Energy at lease rates consistent with rates charged to third parties for storage and at pipeline tariff rates based upon the applicable

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published tariff. Related party revenues mainly result from storage agreements with our joint ventures and the noncontrolling shareholder of our Turkey subsidiary.
Results of operations for the reportable segments were as follows:
 
Year Ended December 31,
 
2013
 
2012
 
2011
 
(Thousands of Dollars)
Revenues:
 
 
 
 
 
Storage:
 
 
 
 
 
Third parties
$
518,253

 
$
517,699

 
$
500,303

Intersegment
32,044

 
59,168

 
46,324

Related party
6,252

 
1,199

 
—

Total storage
556,549

 
578,066

 
546,627

Pipeline:
 
 
 
 
 
Third parties
411,529

 
340,455

 
311,449

Intersegment
—

 
—

 
65

Total pipeline
411,529

 
340,455

 
311,514

Fuels marketing:
 
 
 
 
 
Third parties
2,519,053

 
5,085,592

 
5,445,877

Intersegment
—

 
—

 
9,782

Related party
8,645

 
791

 
—

Total fuels marketing
2,527,698

 
5,086,383

 
5,455,659

Consolidation and intersegment eliminations
(32,044
)
 
(59,168
)
 
(56,171
)
Total revenues
$
3,463,732

 
$
5,945,736

 
$
6,257,629

 
 
 
 
 
 
Depreciation and amortization expense:
 
 
 
 
 
Storage
$
99,868

 
$
88,217

 
$
82,921

Pipeline
68,871

 
52,878

 
51,165

Fuels marketing
27

 
11,253

 
20,949

Total segment depreciation and amortization expense
168,766

 
152,348

 
155,035

Other depreciation and amortization expense
10,155

 
7,441

 
6,738

Total depreciation and amortization expense
$
178,921

 
$
159,789

 
$
161,773

 
 
 
 
 
 
Operating (loss) income:
 
 
 
 
 
Storage
$
(127,484
)
 
$
198,842

 
$
196,508

Pipeline
208,293

 
158,590

 
146,403

Fuels marketing
(126
)
 
(296,785
)
 
71,854

Consolidation and intersegment eliminations
1,437

 
7,939

 
5,906

Total segment operating income
82,120

 
68,586

 
420,671

Less general and administrative expenses
91,086

 
104,756

 
103,050

Less other depreciation and amortization expense
10,155

 
7,441

 
6,738

Other asset impairment loss
—

 
3,295

 
—

Gain on legal settlement
—

 
(28,738
)
 
—

Total operating (loss) income
$
(19,121
)
 
$
(18,168
)
 
$
310,883

 

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Revenues by geographic area are shown in the table below.
 
Year Ended December 31,
 
2013
 
2012
 
2011
 
(Thousands of Dollars)
United States
$
2,340,694

 
$
4,230,607

 
$
4,521,553

Netherlands
1,027,260

 
1,438,297

 
1,564,062

Other
95,778

 
276,832

 
172,014

Consolidated revenues
$
3,463,732

 
$
5,945,736

 
$
6,257,629


For the years ended December 31, 2013 , 2012 and 2011 , Valero Energy Corporation accounted for approximately 15% , or $534.2 million , 11% , or $668.1 million , and 11% , or $684.1 million , of our consolidated revenues, respectively. These revenues were included in all of our reportable business segments. No other single customer accounted for 10% or more of our consolidated revenues.

Total amounts of property, plant and equipment, net by geographic area were as follows:
 
December 31,
 
2013
 
2012
 
(Thousands of Dollars)
United States
$
2,635,792

 
$
2,560,608

Netherlands
467,660

 
454,560

Other
207,201

 
223,292

Consolidated long-lived assets
$
3,310,653

 
$
3,238,460


Total assets by reportable segment were as follows:
 
December 31,
 
2013
 
2012
 
(Thousands of Dollars)
Storage
$
2,275,183

 
$
2,627,946

Pipeline
1,797,698

 
1,720,711

Fuels marketing
445,882

 
885,661

Total segment assets
4,518,763

 
5,234,318

Other partnership assets
513,423

 
378,771

Total consolidated assets
$
5,032,186

 
$
5,613,089


Capital expenditures, including acquisitions and investments in other noncurrent assets, by reportable segment were as follows:
 
Year Ended December 31,
 
2013
 
2012
 
2011
 
(Thousands of Dollars)
Storage
$
170,637

 
$
161,672

 
$
263,918

Pipeline
165,096

 
493,028

 
45,170

Fuels marketing
69

 
20,333

 
90,683

Other partnership assets
7,518

 
53,982

 
45,569

Total capital expenditures
$
343,320

 
$
729,015

 
$
445,340

 

45
Table of Contents
NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



27. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
NuStar Energy has no operations, and its assets consist mainly of its investments in NuStar Logistics and NuPOP, both wholly owned subsidiaries. The senior and subordinated notes issued by NuStar Logistics are fully and unconditionally guaranteed by NuStar Energy and NuPOP. As a result, the following condensed consolidating financial statements are presented as an alternative to providing separate financial statements for NuStar Logistics and NuPOP.
 
Condensed Consolidating Balance Sheets
December 31, 2013
(Thousands of Dollars)
 
NuStar
Energy
 
NuStar
Logistics
 
NuPOP
 
Non-Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Assets
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
904

 
$
22,307

 
$
—

 
$
77,532

 
$
—

 
$
100,743

Receivables, net
—

 
87,899

 
13,281

 
231,220

 
(6
)
 
332,394

Inventories
—

 
2,083

 
2,879

 
133,195

 
(10
)
 
138,147

Income tax receivable
—

 
—

 
—

 
826

 
—

 
826

Other current assets
—

 
18,109

 
2,334

 
19,009

 
—

 
39,452

Assets held for sale
—

 
—

 
—

 
21,987

 
—

 
21,987

Intercompany receivable
—

 
1,521,552

 
—

 
—

 
(1,521,552
)
 
—

Total current assets
904

 
1,651,950

 
18,494

 
483,769

 
(1,521,568
)
 
633,549

Property, plant and equipment, net
—

 
1,556,893

 
573,694

 
1,180,066

 
—

 
3,310,653

Intangible assets, net
—

 
16,993

 
—

 
54,256

 
—

 
71,249

Goodwill
—

 
149,453

 
170,652

 
297,324

 
—

 
617,429

Investment in wholly owned
subsidiaries
2,469,331

 
177,961

 
860,787

 
918,339

 
(4,426,418
)
 
—

Investment in joint ventures
—

 
—

 
—

 
68,735

 
—

 
68,735

Deferred income tax asset
—

 
—

 
—

 
5,769

 
—

 
5,769

Note receivable from related
    party, net
—

 
165,440

 
—

 
—

 
—

 
165,440

Other long-term assets, net
611

 
118,254

 
26,331

 
14,166

 
—

 
159,362

Total assets
$
2,470,846

 
$
3,836,944

 
1,649,958

 
$
3,022,424

 
$
(5,947,986
)
 
$
5,032,186

Liabilities and Partners’ Equity
 
 
 
 
 
 
 
 
 
 
 
Payables
$
123

 
$
84,533

 
$
7,517

 
$
214,909

 
$
(6
)
 
$
307,076

Accrued interest payable
—

 
33,066

 
—

 
47

 
—

 
33,113

Accrued liabilities
585

 
18,850

 
6,133

 
13,064

 
—

 
38,632

Taxes other than income tax
125

 
6,272

 
2,873

 
475

 
—

 
9,745

Income tax payable
—

 
618

 
6

 
3,382

 
—

 
4,006

Intercompany payable
504,483

 
—

 
714,847

 
302,222

 
(1,521,552
)
 
—

Total current liabilities
505,316

 
143,339

 
731,376

 
534,099

 
(1,521,558
)
 
392,572

Long-term debt, less current portion
—

 
2,655,553

 
—

 
—

 
—

 
2,655,553

Long-term payable to related party
—

 
35,696

 
—

 
5,443

 
—

 
41,139

Deferred income tax liability
—

 
—

 
—

 
27,350

 
—

 
27,350

Other long-term liabilities
—

 
4,961

 
306

 
6,511

 
—

 
11,778

Total partners’ equity
1,965,530

 
997,395

 
918,276

 
2,449,021

 
(4,426,428
)
 
1,903,794

Total liabilities and
partners’ equity
$
2,470,846

 
$
3,836,944

 
$
1,649,958

 
$
3,022,424

 
$
(5,947,986
)
 
$
5,032,186



46
Table of Contents
NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



Condensed Consolidating Balance Sheets
December 31, 2012
(Thousands of Dollars)
 
NuStar
Energy
 
NuStar
Logistics
 
NuPOP
 
Non-Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Assets
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
7,033

 
$
1,112

 
$
—

 
$
75,457

 
$
—

 
$
83,602

Receivables, net
—

 
157,452

 
10,561

 
340,144

 
(10,381
)
 
497,776

Inventories
—

 
2,320

 
5,590

 
165,349

 
(31
)
 
173,228

Income tax receivable
—

 
—

 
—

 
1,265

 
—

 
1,265

Other current assets
—

 
26,353

 
1,468

 
37,417

 
—

 
65,238

Assets held for sale
—

 
35,337

 
—

 
82,997

 
—

 
118,334

Intercompany receivable
—

 
353,384

 
599,599

 
—

 
(952,983
)
 
—

Total current assets
7,033

 
575,958

 
617,218

 
702,629

 
(963,395
)
 
939,443

Property, plant and equipment, net
—

 
1,423,991

 
582,299

 
1,232,170

 
—

 
3,238,460

Intangible assets, net
—

 
18,733

 
—

 
73,702

 
—

 
92,435

Goodwill
—

 
145,990

 
170,652

 
634,382

 
—

 
951,024

Investment in wholly owned
subsidiaries
3,133,097

 
161,957

 
1,208,595

 
2,329,595

 
(6,833,244
)
 
—

Investment in joint ventures
—

 
35,883

 
—

 
67,062

 
—

 
102,945

Deferred income tax asset
—

 
—

 
—

 
3,108

 
—

 
3,108

Note receivable from related
    party, net
—

 
95,711

 
—

 
—

 
—

 
95,711

Other long-term assets, net
490

 
148,384

 
26,330

 
14,759

 
—

 
189,963

Total assets
$
3,140,620

 
$
2,606,607

 
$
2,605,094

 
$
5,057,407

 
$
(7,796,639
)
 
$
5,613,089

Liabilities and Partners’ Equity
 
 
 
 
 
 
 
 
 
 
 
Current portion of long-term debt
$
—

 
$
1,313

 
$
250,967

 
$
34,142

 
$
—

 
$
286,422

Payables
15

 
122,706

 
12,657

 
274,044

 
(10,381
)
 
399,041

Accrued interest payable
—

 
22,512

 
1,224

 
5

 
—

 
23,741

Accrued liabilities
862

 
76,322

 
7,542

 
39,477

 
—

 
124,203

Taxes other than income tax
129

 
5,671

 
2,830

 
1,263

 
—

 
9,893

Income tax payable
—

 
247

 
—

 
2,424

 
—

 
2,671

Intercompany payable
508,365

 
—

 
—

 
444,618

 
(952,983
)
 
—

Total current liabilities
509,371

 
228,771

 
275,220

 
795,973

 
(963,364
)
 
845,971

Long-term debt, less current portion
—

 
2,124,582

 
—

 
—

 
—

 
2,124,582

Long-term payable to related party
—

 
12,629

 
—

 
5,442

 
—

 
18,071

Deferred income tax liability
—

 
—

 
—

 
32,114

 
—

 
32,114

Other long-term liabilities
—

 
2,701

 
279

 
4,376

 
—

 
7,356

Total partners’ equity
2,631,249

 
237,924

 
2,329,595

 
4,219,502

 
(6,833,275
)
 
2,584,995

Total liabilities and
partners’ equity
$
3,140,620

 
$
2,606,607

 
$
2,605,094

 
$
5,057,407

 
$
(7,796,639
)
 
$
5,613,089

 

47
Table of Contents
NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



Condensed Consolidating Statements of Income (Loss)
For the Year Ended December 31, 2013
(Thousands of Dollars)
 
NuStar
Energy
 
NuStar
Logistics
 
NuPOP
 
Non-Guarantor
Subsidiaries (a)
 
Eliminations
 
Consolidated
Revenues
$
—

 
$
415,128

 
$
218,591

 
$
2,864,160

 
$
(34,147
)
 
$
3,463,732

Costs and expenses
1,908

 
242,743

 
147,117

 
3,125,253

 
(34,168
)
 
3,482,853

Operating (loss) income
(1,908
)
 
172,385

 
71,474

 
(261,093
)
 
21

 
(19,121
)
Equity in (loss) earnings
of subsidiaries
(271,862
)
 
16,531

 
(347,808
)
 
(281,327
)
 
884,466

 
—

Equity in (loss) earnings of
joint ventures
—

 
(49,599
)
 
—

 
9,629

 
—

 
(39,970
)
Interest expense (income), net
—

 
(116,624
)
 
(4,851
)
 
469

 
—

 
(121,006
)
Other (expense) income, net
—

 
(115
)
 
(127
)
 
7,583

 
—

 
7,341

(Loss) income from continuing
operations before income
tax expense
(273,770
)
 
22,578

 
(281,312
)
 
(524,739
)
 
884,487

 
(172,756
)
Income tax expense
—

 
579

 
8

 
12,166

 
—

 
12,753

(Loss) income from continuing
operations
(273,770
)
 
21,999

 
(281,320
)
 
(536,905
)
 
884,487

 
(185,509
)
Income (loss) from discontinued
operations, net of tax
—

 
(12,317
)
 
—

 
(86,845
)
 
—

 
(99,162
)
Net (loss) income
(273,770
)
 
9,682

 
(281,320
)
 
(623,750
)
 
884,487

 
(284,671
)
Less net loss attributable to
noncontrolling interest
—

 
—

 
—

 
(10,901
)
 
—

 
(10,901
)
Net (loss) income attributable to
NuStar Energy L.P.
$
(273,770
)
 
$
9,682

 
$
(281,320
)
 
$
(612,849
)
 
$
884,487

 
$
(273,770
)

 

48
Table of Contents
NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



Condensed Consolidating Statements of Income (Loss)
For the Year Ended December 31, 2012
(Thousands of Dollars)
 
NuStar
Energy
 
NuStar
Logistics
 
NuPOP
 
Non-Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Revenues
$
—

 
$
362,451

 
$
210,712

 
$
5,397,626

 
$
(25,053
)
 
$
5,945,736

Costs and expenses
1,699

 
216,159

 
151,185

 
5,620,326

 
(25,465
)
 
5,963,904

Operating (loss) income
(1,699
)
 
146,292

 
59,527

 
(222,700
)
 
412

 
(18,168
)
Equity in (loss) earnings
of subsidiaries
(224,917
)
 
(361,830
)
 
65,505

 
112,818

 
408,424

 
—

Equity in (loss) earnings of
joint ventures
—

 
(16,117
)
 
—

 
6,739

 
—

 
(9,378
)
Interest expense, net
—

 
(76,311
)
 
(12,546
)
 
(459
)
 
—

 
(89,316
)
Other (expense) income, net
—

 
(26,596
)
 
1,679

 
228

 
—

 
(24,689
)
(Loss) income from continuing
operations before income
tax expense
(226,616
)
 
(334,562
)
 
114,165

 
(103,374
)
 
408,836

 
(141,551
)
Income tax expense
—

 
255

 
1,329

 
22,866

 
—

 
24,450

(Loss) income from continuing
operations
(226,616
)
 
(334,817
)
 
112,836

 
(126,240
)
 
408,836

 
(166,001
)
Loss from discontinued
operations, net of tax
—

 
(2,085
)
 
—

 
(58,765
)
 
(386
)
 
(61,236
)
Net (loss) income
(226,616
)
 
(336,902
)
 
112,836

 
(185,005
)
 
408,450

 
(227,237
)
Less net loss attributable to
noncontrolling interest
—

 
—

 
—

 
(621
)
 
—

 
(621
)
Net (loss) income attributable to
NuStar Energy L.P.
$
(226,616
)
 
$
(336,902
)
 
$
112,836

 
$
(184,384
)
 
$
408,450

 
$
(226,616
)


49
Table of Contents
NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



Condensed Consolidating Statements of Income (Loss)
For the Year Ended December 31, 2011
(Thousands of Dollars)
 
NuStar
Energy
 
NuStar
Logistics
 
NuPOP
 
Non-Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Revenues
$
—

 
$
296,142

 
$
199,569

 
$
5,794,433

 
$
(32,515
)
 
$
6,257,629

Costs and expenses
1,663

 
174,360

 
142,077

 
5,661,577

 
(32,931
)
 
5,946,746

Operating (loss) income
(1,663
)
 
121,782

 
57,492

 
132,856

 
416

 
310,883

Equity in earnings of subsidiaries
223,125

 
12,883

 
108,644

 
145,218

 
(489,870
)
 
—

Equity in earnings of joint venture
—

 
—

 
—

 
11,458

 
—

 
11,458

Interest expense, net
—

 
(56,389
)
 
(22,840
)
 
(2,310
)
 
—

 
(81,539
)
Other income (expense), net
—

 
1,309

 
1,936

 
(6,818
)
 
—

 
(3,573
)
Income from continuing
operations before income
tax expense
221,462

 
79,585

 
145,232

 
280,404

 
(489,454
)
 
237,229

Income tax expense (benefit)
1

 
(575
)
 
13

 
19,116

 
—

 
18,555

Income from continuing
operations
221,461

 
80,160

 
145,219

 
261,288

 
(489,454
)
 
218,674

(Loss) income from discontinued
operations, net of tax
—

 
(2,334
)
 
—

 
5,261

 
—

 
2,927

Net income
221,461

 
77,826

 
145,219

 
266,549

 
(489,454
)
 
221,601

Less net income attributable to
noncontrolling interest
—

 
—

 
—

 
140

 
—

 
140

Net income attributable to
NuStar Energy L.P.
$
221,461

 
$
77,826

 
$
145,219

 
$
266,409

 
$
(489,454
)
 
$
221,461




50
Table of Contents
NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



Condensed Consolidating Statements of Comprehensive Income (Loss)
For the Year Ended December 31, 2013
(Thousands of Dollars)
 
NuStar
Energy
 
NuStar
Logistics
 
NuPOP
 
Non-Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Net (loss) income
$
(273,770
)
 
$
9,682

 
$
(281,320
)
 
$
(623,750
)
 
$
884,487

 
$
(284,671
)
 
 
 
 
 
 
 
 
 
 
 
 
Other comprehensive (loss) income:
 
 
 
 
 
 
 
 
 
 
 
Foreign currency translation
adjustment
—

 
(3,090
)
 
—

 
(16,274
)
 
—

 
(19,364
)
Net unrealized loss on cash
flow hedges
—

 
7,213

 
—

 
—

 
—

 
7,213

Net loss reclassified into
income on cash flow hedges
—

 
7,570

 
—

 
—

 
—

 
7,570

Total other comprehensive loss
—

 
11,693

 
—

 
(16,274
)
 
—

 
(4,581
)
 
 
 
 
 
 
 
 
 
 
 
 
Comprehensive (loss) income
(273,770
)
 
21,375

 
(281,320
)
 
(640,024
)
 
884,487

 
(289,252
)
Less comprehensive gain
attributable to noncontrolling interest
—

 
—

 
—

 
(10,953
)
 
—

 
(10,953
)
Comprehensive (loss) income attributable to NuStar Energy L.P.
$
(273,770
)
 
$
21,375

 
$
(281,320
)
 
$
(629,071
)
 
$
884,487

 
$
(278,299
)


51
Table of Contents
NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



Condensed Consolidating Statements of Comprehensive Income
For the Year Ended December 31, 2012
(Thousands of Dollars)
 
NuStar
Energy
 
NuStar
Logistics
 
NuPOP
 
Non-Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Net (loss) income
$
(226,616
)
 
$
(336,902
)
 
$
112,836

 
$
(185,005
)
 
$
408,450

 
$
(227,237
)
 
 
 
 
 
 
 
 
 
 
 
 
Other comprehensive (loss) income:
 
 
 
 
 
 
 
 
 
 
 
Foreign currency translation
adjustment
—

 
—

 
—

 
10,677

 
—

 
10,677

Net unrealized loss on cash
flow hedges
—

 
(17,069
)
 
—

 
(77,200
)
 
—

 
(94,269
)
Net loss reclassified into
income on cash flow hedges
—

 
1,749

 
—

 
51,483

 
—

 
53,232

Total other comprehensive loss
—

 
(15,320
)
 
—

 
(15,040
)
 
—

 
(30,360
)
 
 
 
 
 
 
 
 
 
 
 
 
Comprehensive (loss) income
(226,616
)
 
(352,222
)
 
112,836

 
(200,045
)
 
408,450

 
(257,597
)
Less comprehensive gain
attributable to noncontrolling interest
—

 
—

 
—

 
477

 
—

 
477

Comprehensive (loss) income
attributable to NuStar Energy L.P.
$
(226,616
)
 
$
(352,222
)
 
$
112,836

 
$
(200,522
)
 
$
408,450

 
$
(258,074
)


52
Table of Contents
NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



Condensed Consolidating Statements of Comprehensive Income
For the Year Ended December 31, 2011
(Thousands of Dollars)
 
NuStar
Energy
 
NuStar
Logistics
 
NuPOP
 
Non-Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Net income
$
221,461

 
$
77,826

 
$
145,219

 
$
266,549

 
$
(489,454
)
 
$
221,601

 
 
 
 
 
 
 
 
 
 
 
 
Other comprehensive (loss) income:
 
 
 
 
 
 
 
 
 
 
 
Foreign currency translation
adjustment
—

 
—

 
—

 
(18,431
)
 
—

 
(18,431
)
Net unrealized (loss) gain on cash
flow hedges
—

 
(84,199
)
 
—

 
30,747

 
—

 
(53,452
)
Net gain reclassified into
income on cash flow hedges
—

 
—

 
—

 
(5,030
)
 
—

 
(5,030
)
Total other comprehensive
(loss) income
—

 
(84,199
)
 
—

 
7,286

 
—

 
(76,913
)
 
 
 
 
 
 
 
 
 
 
 
 
Comprehensive income (loss)
221,461

 
(6,373
)
 
145,219

 
273,835

 
(489,454
)
 
144,688

Less comprehensive loss
attributable to noncontrolling interest
—

 
—

 
—

 
(2,866
)
 
—

 
(2,866
)
Comprehensive income (loss)
attributable to NuStar Energy L.P.
$
221,461

 
$
(6,373
)
 
$
145,219

 
$
276,701

 
$
(489,454
)
 
$
147,554



53
Table of Contents
NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



Condensed Consolidating Statements of Cash Flows
For the Year Ended December 31, 2013
(Thousands of Dollars)
 
NuStar
Energy
 
NuStar
Logistics
 
NuPOP
 
Non-Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Net cash provided by operating
activities
$
390,002

 
$
210,742

 
$
84,490

 
$
192,228

 
$
(392,243
)
 
$
485,219

Cash flows from investing activities:
 
 
 
 
 
 
 
 
 
 
 
Capital expenditures
—

 
(224,798
)
 
(19,049
)
 
(99,473
)
 
—

 
(343,320
)
Change in accounts payable
related to capital expenditures
—

 
(9,700
)
 
824

 
3,492

 
—

 
(5,384
)
Proceeds from sale or disposition
of assets
—

 
118,806

 
35

 
165

 
—

 
119,006

Increase in note receivable from
related party
—

 
(80,961
)
 
—

 
—

 
—

 
(80,961
)
Investment in subsidiaries
(302
)
 
527

 
—

 
3

 
(228
)
 
—

Other
302

 
(604
)
 
—

 
—

 
—

 
(302
)
Net cash used in investing activities
—

 
(196,730
)
 
(18,190
)
 
(95,813
)
 
(228
)
 
(310,961
)
Cash flows from financing activities:
 
 
 
 
 
 
 
 
 
 
 
Debt borrowings
—

 
1,738,451

 
—

 
—

 
—

 
1,738,451

Debt repayments
—

 
(1,866,282
)
 
(250,000
)
 
(34,461
)
 
—

 
(2,150,743
)
Proceeds from note offering,
net of issuance costs
—

 
686,863

 
—

 
—

 
—

 
686,863

Distributions to unitholders and
general partner
(392,204
)
 
(392,204
)
 
—

 
(39
)
 
392,243

 
(392,204
)
Payments for termination of
interest rate swaps
—

 
(33,697
)
 
—

 
—

 
—

 
(33,697
)
Contributions from
(distributions to) affiliates
—

 
302

 
—

 
(530
)
 
228

 
—

Net intercompany borrowings
(repayments)
(3,880
)
 
(128,277
)
 
183,700

 
(51,543
)
 
—

 
—

Other, net
(47
)
 
2,027

 
—

 
—

 
—

 
1,980

Net cash (used in) provided by
financing activities
(396,131
)
 
7,183

 
(66,300
)
 
(86,573
)
 
392,471

 
(149,350
)
Effect of foreign exchange rate
changes on cash
—

 
—

 
—

 
(7,767
)
 
—

 
(7,767
)
Net increase in cash and cash
equivalents
(6,129
)
 
21,195

 
—

 
2,075

 
—

 
17,141

Cash and cash equivalents as of the
beginning of the period
7,033

 
1,112

 
—

 
75,457

 
—

 
83,602

Cash and cash equivalents as of the
end of the period
$
904

 
$
22,307

 
$
—

 
$
77,532

 
$
—

 
$
100,743



54
Table of Contents
NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



Condensed Consolidating Statements of Cash Flows
For the Year Ended December 31, 2012
(Thousands of Dollars)
 
NuStar
Energy
 
NuStar
Logistics
 
NuPOP
 
Non-Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Net cash provided by operating
activities
$
363,639

 
$
86,333

 
$
81,700

 
$
149,369

 
$
(381,838
)
 
$
299,203

Cash flows from investing activities:
 
 
 
 
 
 
 
 
 
 
 
Capital expenditures
—

 
(292,873
)
 
(16,114
)
 
(101,608
)
 
—

 
(410,595
)
Acquisitions
—

 
(201,610
)
 
—

 
(114,200
)
 
—

 
(315,810
)
Investment in other long-term assets
—

 
—

 
—

 
(2,610
)
 
—

 
(2,610
)
Proceeds from sale or disposition
of assets
—

 
441,442

 
4,537

 
32,947

 
—

 
478,926

Increase in note receivable from
related party
—

 
(95,711
)
 
—

 
—

 
—

 
(95,711
)
Investment in subsidiaries
(337,123
)
 
(114,200
)
 
—

 
(34
)
 
451,357

 
—

Net cash used in investing activities
(337,123
)
 
(262,952
)
 
(11,577
)
 
(185,505
)
 
451,357

 
(345,800
)
Cash flows from financing activities:
 
 
 
 
 
 
 
 
 
 
 
Debt borrowings
—

 
2,621,025

 
—

 
—

 
—

 
2,621,025

Debt repayments
—

 
(2,470,355
)
 
(250,000
)
 
—

 
—

 
(2,720,355
)
Proceeds from senior note offering,
net of issuance costs
—

 
247,398

 
—

 
—

 
—

 
247,398

Issuance of common units, net of
issuance costs
336,415

 
—

 
—

 
—

 
—

 
336,415

General partner contribution
7,121

 
—

 
—

 
—

 
—

 
7,121

Distributions to unitholders and
general partner
(365,279
)
 
(365,279
)
 
—

 
(16,567
)
 
381,846

 
(365,279
)
Payments for termination of
interest rate swaps
—

 
(5,678
)
 
—

 
—

 
—

 
(5,678
)
Contributions from
(distributions to) affiliates
—

 
337,123

 
—

 
114,234

 
(451,357
)
 
—

Net intercompany borrowings
(repayments)
2,254

 
(177,851
)
 
179,877

 
(4,272
)
 
(8
)
 
—

Other, net
(133
)
 
(9,845
)
 
—

 
—

 
—

 
(9,978
)
Net cash (used in) provided by
financing activities
(19,622
)
 
176,538

 
(70,123
)
 
93,395

 
(69,519
)
 
110,669

Effect of foreign exchange rate
changes on cash
—

 
1,179

 
—

 
854

 
—

 
2,033

Net increase cash and
cash equivalents
6,894

 
1,098

 
—

 
58,113

 
—

 
66,105

Cash and cash equivalents as of the
beginning of the period
139

 
14

 
—

 
17,344

 
—

 
17,497

Cash and cash equivalents as of the
end of the period
$
7,033

 
$
1,112

 
$
—

 
$
75,457

 
$
—

 
$
83,602



55
Table of Contents
NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



Condensed Consolidating Statements of Cash Flows
For the Year Ended December 31, 2011
(Thousands of Dollars)
 
NuStar
Energy
 
NuStar
Logistics
 
NuPOP
 
Non-Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Net cash provided by (used in)
operating activities
$
377,469

 
$
121,416

 
$
59,109

 
$
(84,135
)
 
$
(379,391
)
 
$
94,468

Cash flows from investing activities:
 
 
 
 
 
 
 
 
 
 
 
Capital expenditures
—

 
(197,845
)
 
(8,093
)
 
(129,722
)
 
—

 
(335,660
)
Acquisitions
—

 
(47,817
)
 
—

 
(52,873
)
 
—

 
(100,690
)
Investment in other long-term assets
—

 
—

 
—

 
(8,990
)
 
—

 
(8,990
)
Proceeds from sale or disposition
of assets
—

 
63

 
86

 
1,937

 
—

 
2,086

Investment in subsidiaries
(374,628
)
 
—

 
(56,727
)
 
(56,759
)
 
488,114

 
—

Net cash used in investing activities
(374,628
)
 
(245,599
)
 
(64,734
)
 
(246,407
)
 
488,114

 
(443,254
)
Cash flows from financing activities:
 
 
 
 
 
 
 
 
 
 
 
Debt borrowings
—

 
949,549

 
—

 
—

 
—

 
949,549

Debt repayments
—

 
(801,950
)
 
—

 
—

 
—

 
(801,950
)
Issuance of common units, net of
issuance costs
317,285

 
—

 
—

 
—

 
—

 
317,285

General partner contribution
6,708

 
—

 
—

 
—

 
—

 
6,708

Distributions to unitholders and
general partner
(322,046
)
 
(322,046
)
 
—

 
(32
)
 
322,078

 
(322,046
)
Proceeds from termination of
interest rate swaps
—

 
33,433

 
—

 
—

 
—

 
33,433

Contributions from
(distributions to) affiliates
—

 
260,028

 
56,727

 
114,053

 
(430,808
)
 
—

Net intercompany borrowings
(repayments)
(4,702
)
 
(105,944
)
 
(51,102
)
 
161,741

 
7

 
—

Other, net
—

 
4,705

 
—

 
(963
)
 
—

 
3,742

Net cash (used in) provided by
financing activities
(2,755
)
 
17,775

 
5,625

 
274,799

 
(108,723
)
 
186,721

Effect of foreign exchange rate
changes on cash
—

 
(1,233
)
 
—

 
(326
)
 
—

 
(1,559
)
Net increase (decrease) in cash and
cash equivalents
86

 
(107,641
)
 
—

 
(56,069
)
 
—

 
(163,624
)
Cash and cash equivalents as of the
beginning of the period
53

 
107,655

 
—

 
73,413

 
—

 
181,121

Cash and cash equivalents as of the
end of the period
$
139

 
$
14

 
$
—

 
$
17,344

 
$
—

 
$
17,497



56
Table of Contents
NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



28. QUARTERLY FINANCIAL DATA (UNAUDITED)

As further discussed in Note 5, we reclassified certain storage assets as “Assets held for sale” on the consolidated balance sheet as of December 31, 2013. We presented the results of operations for those facilities as discontinued operations for all periods presented. As a result, the amounts shown below differ from those previously reported in our quarterly reports on Form 10-Q and in our annual report for the year ended December 31, 2012.

 
First
Quarter
 
Second
Quarter
 
Third
Quarter
 
Fourth
Quarter
 
Total
 
(Thousands of Dollars, Except Per Unit Data)
2013:
 
 
 
 
 
 
 
 
 
Revenues
$
998,186

 
$
902,014

 
$
778,145

 
$
785,387

 
$
3,463,732

Operating income (loss)
$
63,358

 
$
76,972

 
$
68,751

 
$
(228,202
)
 
$
(19,121
)
Income (loss) from continuing operations
$
19,599

 
$
34,712

 
$
35,682

 
$
(275,502
)
 
$
(185,509
)
Income (loss) from discontinued
operations, net of tax
4,805

 
(1,743
)
 
(2,446
)
 
(99,778
)
 
(99,162
)
Net income (loss)
$
24,404

 
$
32,969

 
$
33,236

 
$
(375,280
)
 
$
(284,671
)
Net income (loss) per unit applicable to limited
partners:
 
 
 
 
 
 
 
 
 
Continuing operations
$
0.10

 
$
0.30

 
$
0.31

 
$
(3.60
)
 
$
(2.89
)
Discontinued operations
0.07

 
(0.02
)
 
(0.03
)
 
(1.13
)
 
(1.11
)
Total
$
0.17

 
$
0.28

 
$
0.28

 
$
(4.73
)
 
$
(4.00
)
Cash distributions per unit applicable to limited
partners
$
1.095

 
$
1.095

 
$
1.095

 
$
1.095

 
$
4.380

 
 
 
 
 
 
 
 
 
 
2012:
 
 
 
 
 
 
 
 
 
Revenues
$
1,606,449

 
$
1,764,667

 
$
1,591,730

 
$
982,890

 
$
5,945,736

Operating income (loss)
$
60,882

 
$
(201,925
)
 
$
62,750

 
$
60,125

 
$
(18,168
)
Income (loss) from continuing operations
$
39,978

 
$
(241,871
)
 
$
17,000

 
$
18,892

 
$
(166,001
)
Loss from discontinued operations, net of tax
(13,724
)
 
(4,939
)
 
(12,658
)
 
(29,915
)
 
(61,236
)
Net income (loss)
$
26,254

 
$
(246,810
)
 
$
4,342

 
$
(11,023
)
 
$
(227,237
)
Net income (loss) per unit applicable to limited
partners:
 
 
 
 
 
 
 
 
 
Continuing operations
$
0.41

 
$
(3.48
)
 
$
0.08

 
$
0.10

 
$
(2.79
)
Discontinued operations
(0.18
)
 
(0.08
)
 
(0.17
)
 
(0.37
)
 
(0.82
)
Total
$
0.23

 
$
(3.56
)
 
$
(0.09
)
 
$
(0.27
)
 
$
(3.61
)
Cash distributions per unit applicable to limited
partners
$
1.095

 
$
1.095

 
$
1.095

 
$
1.095

 
$
4.380



57
Table of Contents
NUSTAR ENERGY L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



29. SUBSEQUENT EVENTS

On February 26, 2014, we sold our remaining 50% ownership interest in Asphalt JV to  Lindsay Goldberg, and Lindsay Goldberg now owns 100% of Asphalt JV.  Since we no longer own any part of Asphalt JV,  we ceased applying the equity method of accounting.  Upon the sale, the NuStar JV Facility was converted from a revolving credit agreement into a term loan (the Term Loan) with a reduced principal, and the Term Loan will continue to step down from $190.0 million over time: first, to $175.0 million on December 31, 2014 and then to $150.0 million on September 30, 2015 . While the Term Loan does not provide for any scheduled amortization payments,  Asphalt JV is required to use all of its excess cash, as defined in the agreement, to repay the Term Loan.   Like the NuStar JV Facility, the Term Loan must be repaid in full on September 28, 2019. NuStar Logistics’ obligation to provide credit support will be reduced in two years .  This entire support obligation will terminate no later than September 28, 2019.   Also at the time of the sale, the parties agreed to: terminate the service agreements for our terminals in Rosario, NM, Catoosa, OK and Houston, TX, amend the terminal services agreements for the Baltimore, MD and Jacksonville, FL terminals, and transfer the title to both the Wilmington, NC and Dumfries, VA terminals to Asphalt JV.



58