NuStar GP Holdings, LLC (Form: 10-K, Received: 02/23/2017 17:18:35)

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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, 2016

[ ] 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 Rule 12b-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 $866 million based on the last sales price quoted as of June 30, 2016 , the last business day of the registrant’s most recently completed second quarter.

The number of units outstanding as of January 31, 2017 was 42,951,749 .

DOCUMENTS INCORPORATED BY REFERENCE:

Portions of the proxy statement for the registrant’s 2017 annual meeting of unitholders, expected to be filed within 120 days after the end of the fiscal year covered by this Form 10-K, are incorporated by reference into PART III herein.

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PART I
Items 1., 1A. and 2.	Business, Risk Factors and Properties	3
	Overview	3
	Recent Developments	4
	Organizational Structure	5
	Employees	6
	Environmental and Safety Regulation	6
	Properties	6
	Risk Factors	6

Item 1B.	Unresolved Staff Comments	25

Item 3.	Legal Proceedings	25

Item 4.	Mine Safety Disclosures	25

Item X.	Executive Officers of the Registrant	26

PART II
Item 5.	Market for Registrant’s Common Units, Related Unitholder Matters and Issuer Purchases of Equity Securities	27

Item 6.	Selected Financial Data	29

Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30

Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	39

Item 8.	Financial Statements and Supplementary Data	40

Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	68

Item 9A.	Controls and Procedures	68

Item 9B.	Other Information	68

PART III
Item 10.	Directors, Executive Officers and Corporate Governance	69

Item 11.	Executive Compensation	69

Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Unitholder Matters	69

Item 13.	Certain Relationships and Related Transactions, and Director Independence	69

Item 14.	Principal Accountant Fees and Services	69

PART IV
Item 15.	Exhibits and Financial Statement Schedules	70

Item 16.	Form 10-K Summary	78

Signatures		79

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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.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

In this Form 10-K, we make certain forward-looking statements, including statements regarding our plans, strategies, objectives, expectations, estimates, predictions, projections, assumptions, intentions and resources. 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, uncertainties and assumptions.

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 this Form 10-K. We do not intend to update these statements unless we are 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.

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 transportation of petroleum products and anhydrous ammonia, the terminalling and storage of petroleum products 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, and the United Kingdom. As of December 31, 2016 , we have an approximate 15% ownership in NuStar Energy, consisting of the following:


•	the 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


•	10,214,626 common units of NuStar Energy.

We strive to increase unitholder value 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 distribute all available cash to its common limited partners and general partner each quarter, defined in its partnership agreement generally 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 website, free of charge, as soon as

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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 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 or corporatesecretary@nustarenergy.com.

RECENT DEVELOPMENTS

NuStar Energy’s Martin Terminal Acquisition. On December 21, 2016, NuStar Energy acquired crude oil and refined product storage assets in Corpus Christi, TX for $95.7 million, including $2.1 million of capital expenditure reimbursements, from Martin Operating Partnership L.P. The assets acquired include 900,000 barrels of crude oil storage capacity, 250,000 barrels of refined product storage capacity and exclusive use of the Port of Corpus Christi’s new crude oil dock.

Employee Transfer. On March 1, 2016, NuStar GP, LLC, our wholly owned subsidiary, transferred and assigned to NuStar Services Company LLC (NuStar Services Co), a wholly owned subsidiary of NuStar Energy, all of NuStar GP, LLC’s employees and related benefit plans, programs, contracts and policies (the Employee Transfer). Please refer to Note 5 of the Notes to Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary Data” for a discussion of this transfer and our related party agreements, and Notes 14 and 15 for a discussion of the employee benefit plans and long-term incentive plan obligations transferred.

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ORGANIZATIONAL STRUCTURE

The following chart depicts a summary of our organizational structure and relationship with NuStar Energy as of December 31, 2016 :

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EMPLOYEES

NuStar Energy’s wholly owned subsidiary, NuStar Services Co, provides administrative services to NuStar Energy. Employees of NuStar Services Co also provide services to us pursuant to the Amended GP Services Agreement (defined in Note 5 of the Notes to Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary Data”). Our officers, who are also officers of NuStar GP, LLC, are dual employees of NuStar GP, LLC and NuStar Services Co. We believe that NuStar Services Co and NuStar GP, LLC each has satisfactory relationships with its employees.

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 flows and ability to make distributions at current levels are, 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 flows currently are 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 fluctuates from quarter to quarter based on, among other things:


•	throughput volumes transported in its pipelines;


•	storage contract renewals or throughput volumes in its terminals and storage facilities;


•	tariff rates and fees it charges and the revenue it realizes for its services;


•	demand for and supply of crude oil, refined products and anhydrous ammonia;


•	the effect of worldwide energy conservation measures;


•	its operating costs;


•	its costs to comply with environmental, health, safety and security laws and regulations;


•	weather conditions;


•	domestic and foreign governmental regulations and taxes;


•	prevailing economic conditions; and


•	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.

In addition, the amount of cash that NuStar Energy will have available for distribution depends 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 ability to access the capital markets; and


•	adjustments in cash reserves made by NuStar Energy’s general partner, in its discretion.

It is possible that one or more of the factors listed above may serve to reduce NuStar Energy’s available cash to such an extent that it could be rendered unable to pay distributions at the current level or at all in a given quarter. Furthermore, cash distributions to NuStar Energy unitholders depend primarily upon cash flows, and not solely on profitability, which is affected by non-cash items, and NuStar Energy may make cash distributions during periods in which it records net losses and may not make cash distributions during periods in which it records net income.

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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 flows 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 $1.095 per common 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 general partner interest in NuStar Energy, as required by the partnership agreement of NuStar Energy upon the issuance of certain 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 common 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 common 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 common 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, 2016, we owned 10,214,626 common units representing limited partner interests in NuStar Energy, and the public unitholders owned the remaining 68,401,602 outstanding common units representing limited partner interests. 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 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 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 to common unitholders 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.

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Restrictions in our credit facility limit our ability to make distributions to our unitholders. Our credit facility matures in June 2017.

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, 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.

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 2017. It is possible that our lenders may not agree to renew our credit facility or may only agree to renew it on 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 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 general partner interest and incentive distribution rights, and the market for such interests is illiquid.

The market price of our units may be volatile, which could cause you to lose all or part of your investment.

The market price of our units could be subject to significant fluctuations due to a variety of factors outside of our control, and the equity markets in general are subject to volatility that may be unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the trading price of our units. In addition, potential investors may be deterred from investing in our units for various reasons, including the very limited number of publicly traded entities whose assets consist almost exclusively of partnership interests in a publicly traded partnership. The lack of liquidity may also contribute to significant fluctuations in the market price of our units and limit the number of investors who are able to buy our units.

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. As of December 31, 2016, Mr. Greehey beneficially owned 20.95% 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 cash distributions on common units made by NuStar Energy with respect to any particular quarter only in the event that NuStar Energy distributes more than $0.60 per common 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 common unit for any quarter.

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Our incentive distribution rights entitle us to receive increasing percentages, up to 23%, of all cash distributed by NuStar Energy on its common units. 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 with respect to its common units, 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 common unit per quarter would reduce our percentage of the incremental cash distributions above $0.60 per common unit per quarter from 23% to 8%. As a result, any such reduction in quarterly cash distributions from NuStar Energy on its common units 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 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 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 currently is 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 common unitholders and its general partner 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 historically 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

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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 and 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 market 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 be unable 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


•	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, preferred units and 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 certain issuances by NuStar Energy of additional units in order to maintain our 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, such as the preferred units, 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; however, the NuStar Energy preferred units are cumulative and must be paid in full before distributions on the NuStar Energy common units and incentive distribution rights can be paid. 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 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 the following 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.

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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.

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.

Unitholders may have liability to repay distributions.

Under certain circumstances, our unitholders may have to repay amounts wrongfully returned or distributed to them. Under Section 18-607 of the Delaware Limited Liability Company Act (the Delaware Act), we may not make a distribution to our unitholders if the distribution would cause our liabilities to exceed the fair value of our assets. Liabilities to members on account of their membership interests and liabilities that are nonrecourse to the limited liability company are not counted for purposes of determining whether a distribution is permitted.

Delaware law provides that, for a period of three years from the date of an impermissible distribution, members who received the distribution and who knew at the time of the distribution that it violated Delaware law will be liable to us for the repayment of the distribution amount. Likewise, upon the winding up of our limited liability company, in the event that (a) we do not distribute assets in the following order: (1) to creditors in satisfaction of their liabilities; (2) to members and former members in satisfaction of liabilities for distributions owed under our limited liability company agreement; (3) to members for the return of their contributions; and finally (4) to the members in the proportions in which the members share in distributions and (b) a member knows at the time that the distribution violated the Delaware Act, then such member will be liable to repay the distribution for a period of three years (subject to certain exceptions) from the impermissible distribution under Section 18-804 of the Delaware Act.

A purchaser of common units will be liable for the obligations of the transferor to make contributions to us that are known to such purchaser at the time it became a member and for unknown obligations, if the liabilities could be determined from our limited liability company agreement.

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.

If we fail to maintain an effective system of internal controls, we may not be able to report our financial results accurately or prevent fraud, which could have a material and adverse impact on our financial condition, results of operations, and cash flows and our ability to make distributions to our unitholders.

We are required to disclose material changes made in our internal controls over financial reporting on a quarterly basis and we are required to assess the effectiveness of our controls annually. Effective internal controls are necessary for us to provide reliable and timely financial reports, to prevent fraud, and to operate successfully as a publicly traded limited liability company. We may be unable to maintain effective controls over our financial processes and reporting in the future or to comply with our obligations under Section 404 of the Sarbanes-Oxley Act of 2002. For example, Section 404 requires us, among other things, annually to review and report on the effectiveness of our internal control over financial reporting. Any failure to maintain effective internal controls or to improve our internal controls could harm our operating results or cause us to fail to meet our reporting obligations.

Given the difficulties inherent in the design and operation of internal controls over financial reporting, we can provide no assurance as to our, or our independent registered public accounting firm’s, future conclusions about the effectiveness of our

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internal controls, and we may incur significant costs in our efforts to comply with Section 404. Any failure to maintain effective internal controls over financial reporting will subject us to regulatory scrutiny and a loss of confidence in our reported financial information, which could have a material adverse effect on our financial condition, results of operations and cash flows and our ability to make distributions to our unitholders.

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


•	any decision we make in the future to engage in business activities independent of, or in competition with, NuStar Energy.

Our limited liability company 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:


•	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

•

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. Our executive officers, who are also the executive officers of NuStar GP, LLC, will allocate, in their reasonable and sole discretion, their time 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.

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RISKS RELATED TO NUSTAR ENERGY’S BUSINESS

Continued low crude oil prices could have an adverse impact on NuStar Energy’s results of operations, cash flows and ability to make distributions to its unitholders, including us.

Since late 2015, the price of crude oil has been depressed, which has caused most crude oil producers to reduce their capital spending and drilling activity and narrow their focus to assets in the most cost-advantaged regions. On the other hand, refiners have benefitted from lower crude prices, to the extent that lower feedstock price has been coupled with higher demand for certain refined products in some regional markets. While only a relatively small proportion of NuStar Energy’s total business is directly affected by the price of crude, a further protracted period of low crude oil prices and overall economic downturn could have a negative impact on its results of operations.

An extended period of reduced demand for or supply of crude oil and refined products could affect NuStar Energy’s results of operations and ability to make distributions to its unitholders, including us.

Although NuStar Energy enters into throughput and deficiency agreements to protect against near-term fluctuations, its business is ultimately dependent upon the long-term demand for and supply of the crude oil and refined products it transports in its pipelines and stores in its terminals. Any sustained decrease in demand for refined products in the markets NuStar Energy’s pipelines and terminals serve that extends beyond the expiration of its existing throughput and deficiency agreements could result in a significant reduction in throughputs in its pipelines and storage in its terminals, which would reduce its cash flows and ability to make distributions at current levels to its unitholders, including us. Factors that could lead to a decrease in market demand include:


•	a recession or other adverse economic condition that results in lower spending by consumers on gasoline, diesel and travel;


•	higher fuel taxes or other governmental or regulatory actions that increase, directly or indirectly, the cost of gasoline;


•	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;


•	the increased use of alternative fuel sources;

•

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 transports, stores and markets, including fuel oil; and


•	a decrease in corn acres planted for ethanol, which may reduce demand for anhydrous ammonia.

Similarly, any sustained decrease in the supply of crude oil and refined products in markets NuStar Energy serves could result in a significant reduction in throughputs in its pipelines and storage in its terminals, which would reduce its cash flows and its ability to make distributions at current levels to its unitholders, including us. Factors that could lead to a decrease in supply to its pipelines and terminals include:


•	prolonged periods of low prices for crude oil and refined products, which could lead to a decrease in exploration and development activity and reduced production in markets served by NuStar Energy’s pipelines and storage terminals;


•	changes in the regulatory environment, governmental policies or taxation that directly or indirectly delay production or increase the cost of production of refined products; and


•	actions taken by foreign oil and gas producing nations that impact prices for crude oil and refined products.

NuStar Energy’s inability to develop and execute growth projects and acquire new assets could limit its ability to maintain and grow quarterly distributions to its unitholders, including us.

NuStar Energy’s ability to maintain and grow its distributions to unitholders, including us, depends on the growth of NuStar Energy’s existing businesses and strategic acquisitions. Decisions regarding new growth projects rely on numerous estimates, including, among other factors, predictions of future demand for NuStar Energy’s services, future supply shifts, crude oil production estimates, commodity price environments, economic conditions and potential changes in the financial condition of NuStar Energy’s customers. NuStar Energy’s predictions of such factors could cause it to forego certain investments and to lose opportunities to competitors who make investments based on different predictions. If NuStar Energy is unable to acquire new assets, due either to high prices or a lack of attractive synergistic targets, its future growth will be limited. In addition, NuStar Energy’s future growth will be limited if it is unable to develop additional expansion projects, implement business development opportunities and finance such activities on economically acceptable terms, which could adversely impact its results of operations and cash flows and, accordingly, result in reduced distributions to unitholders, including us, over time.

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Failure to complete capital projects as planned could adversely affect NuStar Energy’s financial condition, results of operations and cash flows.

Delays or cost increases related to capital spending programs involving construction of new facilities (or improvements and repairs to NuStar Energy’s 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:


•	non-performance or delay by, or disputes with, counterparties, vendors, suppliers, contractors or subcontractors involved with a project;


•	denial or delay in issuing requisite regulatory approvals and/or permits;


•	protests and other activist interference with planned or in-process projects;


•	unplanned increases in the cost of construction materials or labor;


•	disruptions in transportation of modular components and/or construction materials;


•	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;


•	shortages of sufficiently skilled labor, or labor disagreements resulting in unplanned work stoppages; or


•	market-related increases in a project’s debt or equity financing costs.

NuStar Energy will incur financing costs during the planning and construction phases of its projects; however, the operating cash flows it expects these projects to generate will not materialize until sometime after the projects are completed, if at all. Additionally, NuStar Energy’s forecasted operating results from capital spending projects are based upon its projections of future market fundamentals that are not within its control, including changes in general economic conditions, the supply and demand of crude oil and refined products, availability to its customers of attractively priced alternative solutions for storage, transportation or supplies of crude oil and refined products and overall customer demand.

If NuStar Energy is unable to retain current customers, renew existing contracts and maintain utilization of its pipeline and storage assets or is unable to attract new customers and enter into new contracts, in either case at current or more favorable rates, NuStar Energy’s revenue and cash flows could be reduced to levels that could adversely affect its ability to make quarterly distributions to its unitholders, including us.

NuStar Energy’s revenue and cash flows are generated primarily from its customers’ payments of fees under throughput contracts and storage agreements. Failure by NuStar Energy to renew or enter into new contracts or its storage customers’ material reduction of their utilization under existing contracts could result from many factors, including:


•	continued low crude oil prices;


•	a material decrease in the supply or price of crude oil;


•	a material decrease in demand for refined products in the markets served by NuStar Energy’s pipelines and terminals;


•	competition for customers from companies with comparable assets and capabilities;


•	scheduled turnarounds or unscheduled maintenance at refineries NuStar Energy serves;


•	operational problems or catastrophic events affecting NuStar Energy’s assets or a refinery it serves;


•	environmental proceedings or other litigation that compel the cessation of all or a portion of the operations at NuStar Energy’s assets or a refinery it serves;


•	increasingly stringent environmental, health, safety and security regulations;


•	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; or


•	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.

Competing midstream service providers, including certain major energy and chemical companies, possess, or have greater financial resources to acquire, assets better suited to meet customer demand, which could undermine NuStar Energy’s ability to obtain and retain customers or reduce utilization of its leased assets, which could reduce NuStar Energy’s revenues and cash flows, thereby reducing its ability to make its quarterly distributions to unitholders, including us.

NuStar Energy’s competitors include major energy and chemical companies, some of which have greater financial resources, more pipelines or storage terminals, greater capacity pipelines or storage terminals and greater access to supply than NuStar Energy does. Certain of its competitors also may have advantages in competing for acquisitions or other new business opportunities because of their financial resources and synergies in operations. As a consequence of increased competition in the industry, some of NuStar Energy’s customers may be reluctant to renew or enter into long-term contracts or contracts that provide for minimum throughput amounts in the future. NuStar Energy’s inability to renew or replace current contracts as they expire, to enter into contracts for newly acquired, constructed or expanded assets and to respond appropriately to changing

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market conditions could have a negative effect on NuStar Energy’s revenue, cash flows and ability to make quarterly distributions to its unitholders, including us.

NuStar Energy ’ s future financial and operating flexibility may be adversely affected by its significant leverage, any future downgrades of its credit ratings, restrictions in its debt agreements and conditions in the financial markets.

As of December 31, 2016, NuStar Energy’s consolidated debt was $3.1 billion. NuStar Energy also may be required to post cash collateral under certain of its hedging arrangements, which it expects to fund with borrowings under its revolving credit agreement. In addition to any potential direct financial impact of NuStar Energy’s debt, it is possible that any material increase to NuStar Energy’s debt or other negative financial factors may be viewed negatively by credit rating agencies, which could result in ratings downgrades and increased costs for NuStar Energy to access the capital markets. Any downgrades in NuStar Energy’s credit ratings in the future could result in increases to the interest rates on borrowings under NuStar Energy’s credit facilities and its 7.65% senior notes due 2018, significantly increase NuStar Energy’s capital costs, reduce its liquidity and adversely affect its ability to raise capital in the future.

NuStar Energy’s revolving credit agreement contains restrictive covenants, such as limitations on indebtedness, liens, mergers, asset transfers and certain investing activities. In addition, the revolving credit agreement requires NuStar Energy to maintain, as of the end of each rolling period (consisting of any period of four consecutive fiscal quarters) a consolidated debt coverage ratio (consolidated debt to consolidated EBITDA, each as defined in the revolving credit agreement) not to exceed 5.00-to-1.00. Failure to comply with any of the revolving credit agreement restrictive covenants or this coverage ratio will result in a default and could result in acceleration of its obligations under this agreement and possibly other indebtedness.

NuStar Energy’s accounts receivable securitization program contains various customary affirmative and negative covenants and default, indemnification and termination provisions. In addition, the related receivables financing agreement pursuant to which NuStar Energy is initial servicer and performance guarantor provides for acceleration of amounts owed upon the occurrence of certain specified events.

NuStar Energy’s debt service obligations, restrictive covenants and maturities resulting from its leverage may adversely affect NuStar Energy’s ability to finance future operations, pursue acquisitions, fund its capital needs and 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 certain of NuStar Energy’s debt agreements, NuStar Energy would be prohibited from making cash distributions to its unitholders, including us. Also, if any of NuStar Energy’s lenders files for bankruptcy or experiences severe financial hardship, they may not honor their pro rata share of NuStar Energy’s borrowing requests under the 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 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, 2016, NuStar Energy had approximately $3.1 billion of consolidated debt, of which $1.8 billion was at fixed interest rates and $1.3 billion was at variable interest rates. In addition, prior ratings downgrades on NuStar Energy’s existing indebtedness caused interest rates under its revolving credit agreement and its senior notes due 2018 to increase effective January 2013, and future downgrades may cause interest rates on NuStar Energy’s variable interest rate debt to increase further. Additionally, at December 31, 2016, NuStar Energy had $600.0 million aggregate notional amount of interest rate swap arrangements, which increase its exposure to variable interest rates. As a result, NuStar Energy’s results of operations, cash flows and financial position could be materially adversely affected by significant changes in interest rates. In addition, NuStar Energy historically has funded its strategic capital expenditures and acquisitions from external sources, primarily borrowings under its revolving credit agreement or funds raised through debt or equity offerings. An increase in interest rates may negatively impact NuStar Energy’s ability to access the capital markets at economically attractive rates.

Furthermore, the market price of master limited partnership units such as NuStar Energy’s, like other yield-oriented securities, may be affected by, among other factors, implied distribution yield. The distribution yield is often used by investors to compare and rank yield-oriented securities for investment decision-making purposes. Therefore, increases or decreases in interest rates may affect whether or not certain investors decide to invest in NuStar Energy’s units, and a rising interest rate environment could have an adverse impact on its unit price and ability to issue additional equity or incur debt to expand or for other purposes or make cash distributions at intended levels.

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Depending on conditions in the credit and capital markets at a given time, NuStar Energy may not be able to obtain funding on acceptable terms or at all, which may hinder or prevent it from meeting its future capital needs.

The domestic and global financial markets and economic conditions are from time to time disrupted and volatile due to a variety of factors, including low consumer confidence, high unemployment, geoeconomic and geopolitical issues, weak economic conditions and uncertainty in the financial services sector. In addition, there are fewer investors and lenders willing to invest in the debt and equity capital markets in issuances by master limited partnerships, such as NuStar Energy, than there are for more traditionally structured corporations. As a result, NuStar Energy’s cost of raising capital in the debt and equity capital markets could increase substantially or the availability of funds from these markets could diminish. The cost of obtaining funds from the credit markets may increase as many lenders and institutional investors increase interest rates, enact tighter lending standards, refuse to refinance existing debt on similar terms or at all and reduce, or in some cases cease to provide, funding to borrowers.

In addition, lending counterparties under NuStar Energy’s existing revolving credit facility and other debt instruments may be unwilling or unable to meet their funding obligations. Due to these factors, NuStar Energy cannot be certain that new debt or equity financing will be available on acceptable terms. If funding is not available when needed, or is available only on unfavorable terms, NuStar Energy may be unable to execute its growth strategy, complete future acquisitions or construction projects or take advantage of other business opportunities, any of which could have a material adverse effect on its revenues and results of operations.

NuStar Energy’s operations are subject to operational hazards and interruptions, and NuStar Energy cannot insure against and/or predict all potential losses and liabilities that might result therefrom.

NuStar Energy’s operations and those of its customers and suppliers 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 life or equipment, injury or extensive property damage, as well as an interruption in NuStar Energy’s operations or those of its customers or suppliers. In the event any of NuStar Energy’s facilities, or those of its customers or suppliers, suffer significant damage or 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.

As a result of market conditions, premiums and deductibles for certain of NuStar Energy’s insurance policies have increased substantially and could escalate further; therefore, NuStar Energy may not be able to maintain or obtain insurance of the type and amount it desires at reasonable rates. Certain insurance coverage could become subject to broad exclusions, become unavailable altogether or become 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.

NuStar Energy could be subject to damages or lose customers due to failure to maintain certain quality specifications or other claims related to the operation of its assets and the services it provides to its customers.

Certain of the products NuStar Energy stores and transports are produced to precise customer specifications. If NuStar Energy fails to maintain the quality and purity of the products it receives and/or a product fails to perform in a manner consistent with the 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. NuStar Energy also could face other claims by its customers if its assets do not operate as expected by its customers or its services otherwise do not meet its customers’ expectations. A successful claim or series of claims against NuStar Energy could result in unforeseen expenditures and a loss of one or more customers.

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 and otherwise have a negative impact on its ability to conduct its business, operating results, cash flows and ability to make distributions to its unitholders, including us.

Weak economic conditions and widespread financial stress could reduce the liquidity of NuStar Energy’s customers, vendors or counterparties, making it more difficult for them to meet their obligations to NuStar Energy. NuStar Energy is therefore 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 critical products or services could raise its costs or interfere with its ability to successfully conduct its business. Furthermore, nonpayment by the counterparties to any of NuStar Energy’s outstanding derivatives could expose NuStar Energy to additional interest rate or commodity price risk. Any substantial increase in the nonpayment and nonperformance by NuStar Energy’s customers, vendors or counterparties could

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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.

Potential future acquisitions and expansions, if any, may increase substantially the level of NuStar Energy’s indebtedness and contingent liabilities or otherwise change its capital structure, and NuStar Energy may be unable to integrate acquisitions and expansions 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 operations. Acquisitions may require NuStar Energy to raise a substantial amount of equity or incur a substantial amount of indebtedness. If NuStar Energy consummates any future material acquisitions, its capitalization and results of operations may change significantly, and unitholders 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 with 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. 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 does not own all of the land on which its pipelines and facilities have been constructed, and NuStar Energy is therefore subject to the possibility of increased costs or the inability to retain necessary land use.

NuStar Energy obtains the rights to construct and operate its pipelines, storage terminals and other facilities on land owned by third parties and governmental agencies. Many of these rights-of-way or other property rights are perpetual in duration while others are for a specific period of time. In addition, some of NuStar Energy’s facilities are located on leased premises. Its loss of property rights, through its inability to renew right-of-way contracts or leases or otherwise, could adversely affect its operations and cash flows available for distribution to unitholders, including us.

In addition, the construction of additions to NuStar Energy’s existing assets may require it to obtain new rights-of-way or property rights prior to construction. NuStar Energy may be unable to obtain such rights-of-way or other property rights to connect new supplies to its existing pipelines, storage terminals or other facilities or to capitalize on other attractive expansion opportunities. Additionally, it may become more expensive for NuStar Energy to obtain new rights-of-way or other property rights or to renew existing rights-of-way or property rights. If the cost of obtaining new or renewing existing rights-of-way or other property rights increases, it may adversely affect NuStar Energy’s operations and cash flows available for distribution to unitholders, including us.

NuStar Energy may be unable to obtain or renew permits necessary for its operations, which could inhibit its ability to do business.

NuStar Energy’s facilities operate under a number of federal, state and local permits, licenses and approvals with terms and conditions containing a significant number of prescriptive limits and performance standards in order to operate. These limits and standards require a significant amount of monitoring, recordkeeping and reporting in order to demonstrate compliance with the underlying permit, license or approval. Noncompliance or incomplete documentation of NuStar Energy’s compliance status may result in the imposition of fines, penalties and injunctive relief. In addition, public protest and responsive government intervention have recently made it more difficult for some energy companies to acquire the permits required to complete planned infrastructure projects. A decision by a government agency to deny or delay issuing a new or renewed permit, license or approval, or to revoke or substantially modify an existing permit, license or approval, could have a material adverse effect on NuStar Energy’s ability to continue operations and on its financial condition, results of operations, cash flows and ability to make distributions to its unitholders, including us.

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NuStar Energy may have liabilities from its assets that preexist 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, and 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. Conversely, if future releases or other liabilities arise from assets NuStar Energy has sold, NuStar Energy could incur costs related to those liabilities if the buyer possesses valid indemnification rights against it with respect to those assets.

Climate change legislation and other regulatory initiatives may decrease demand for the products NuStar Energy stores, transports and sells and increase NuStar Energy’s operating costs.

In response to scientific studies asserting that emissions of certain “greenhouse gases” such as carbon dioxide and methane may be contributing to warming of the Earth’s atmosphere, the U.S. Congress, European Union and other political bodies have considered legislation or regulation to reduce emissions of greenhouse gases. Passage of climate change legislation or other regulatory initiatives 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 NuStar Energy’s 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 or administer and manage a greenhouse gas emissions program. Even though NuStar Energy attempts to mitigate such lost revenues or increased costs through the contracts it signs with its customers, NuStar Energy may be unable to recover those revenues or mitigate the increased costs, and any such recovery may depend on events beyond its control, including the outcome of future rate proceedings before the Federal Energy Regulatory Commission (the FERC), the Surface Transportation Board (STB) or other regulators 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 or other initiatives could have adverse effects on NuStar Energy’s business, financial position, results of operations and prospects.

NuStar Energy operates a global business that exposes it to additional risks.

NuStar Energy operates a global business and a significant portion of its revenues come from its business outside of the United States. 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, as well as import and export regulations. Additionally, the decision by the United Kingdom to exit the European Union could adversely affect NuStar Energy’s operations in the United Kingdom and in Europe; however, the nature and magnitude of any such effects are not yet apparent. NuStar Energy also 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, including the increasing threat of terrorist organizations and drug cartels, in a country or region where NuStar Energy does business as well as difficulties in staffing and managing foreign operations may 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 other countries in which it operates, relating to environmental, health, safety and security that could require NuStar Energy to make substantial expenditures.

NuStar Energy’s operations are subject to increasingly stringent federal, state and local environmental, health, safety and security laws and regulations. Transporting, storing and distributing hazardous materials, including petroleum products, entails the 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 including for damages to natural resources, personal injury or property damages to private parties and significant business interruption. Further, certain of NuStar Energy’s pipeline facilities may be subject to the pipeline integrity and safety regulations of various federal and state regulatory agencies. In recent years, increased regulatory focus on pipeline integrity and safety has resulted in various proposed or adopted regulations. The implementation of these regulations, and the adoption of future regulations, could require NuStar Energy to make additional capital expenditures, including to install new or modified safety measures, or to conduct new or more extensive maintenance programs.

Current and future legislative action and regulatory initiatives could also result in changes to operating permits, material changes in operations, increased capital expenditures and operating costs, increased costs of the goods NuStar Energy transports and decreased demand for products it handles that cannot be assessed with certainty at this time. NuStar Energy may be required to make expenditures to modify operations or install pollution control equipment or release prevention and containment systems that could materially and adversely affect its business, financial condition, results of operations and

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liquidity if these expenditures, as with all costs, are not ultimately reflected in the tariffs and other fees it receives for its services.

NuStar Energy owns or leases a number of properties that were used to transport, store or distribute products for many years before NuStar Energy acquired them; therefore, such properties were operated by third parties whose handling, disposal or release of products and wastes was not under NuStar Energy’s control. Environmental laws and regulations could impose obligations to conduct assessment or remediation efforts at NuStar Energy’s facilities, third-party sites where it takes wastes for disposal, or where wastes have migrated. Environmental laws and regulations also may impose joint and several liability on NuStar Energy for the conduct of third parties or for actions that complied with applicable requirements when taken, regardless of negligence or fault.

If NuStar Energy were to incur a significant liability pursuant to environmental, health, safety or security 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.

NuStar Energy’s interstate common carrier pipelines are subject to regulation by the FERC.

The FERC regulates the tariff rates and terms and conditions of service for interstate oil movements on NuStar Energy’s common carrier pipelines. FERC regulations require that these rates must be just and reasonable and that the pipeline not engage in undue discrimination or undue preference with respect to any shipper. Under the Interstate Commerce Act, the FERC or shippers may challenge NuStar Energy’s pipeline tariff filings, including rates and terms and conditions of service. Further, other than for rates set under market-based rate authority, if a new rate is challenged by protest and investigated by the FERC, the FERC may suspend collection of such new rate for up to seven months. If such new rate is found to be unjust and unreasonable, the FERC may order refunds of amounts collected in excess of amounts generated by the just and reasonable rate determined by the FERC. A successful rate challenge could result in a common carrier paying refunds together with interest for the period that the rate was in effect. In addition, shippers may challenge by complaint tariff rates and terms and conditions of service even after the rates and terms and conditions of service are in effect. If the FERC, in response to such a complaint or on its own initiative, initiates an investigation of rates that are already in effect, the FERC may order a carrier to change its rates prospectively. 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 its rates within prescribed ceiling levels that are tied to an inflation index. For the five-year period beginning July 1, 2011, the index was measured by the year-over-year change in the Bureau of Labor’s producer price index for finished goods, plus 2.65%. For the five-year period beginning July 1, 2016, the current index is measured by the year-over-year change in the Bureau of Labor’s producer price index for finished goods, plus 1.23%. FERC’s determination of the index for the period beginning July 1, 2016 is on appeal at the United States Court of Appeals for the District of Columbia Circuit (D.C. Circuit), and the index for the five-year period beginning July 1, 2016 is therefore subject to change. Further, some of NuStar Energy’s newer projects that involved an open season include negotiated indexation rate caps.

In October 2016, the FERC initiated an Advance Notice of Proposed Rulemaking (ANOPR) to determine whether to require oil pipeline companies to file cost and revenue data for each of the company’s systems, with the definition of such systems also part of the ANOPR. Among other things, the ANOPR also proposed that index rate adjustments be capped or prohibited under certain circumstances and that ceiling rates be capped under certain circumstances.

These methodologies and the rulings of the D.C. Circuit could result in changes in NuStar Energy’s revenue that do not fully reflect changes in costs it incurs to operate and maintain its pipelines. For example, NuStar Energy’s costs could increase more quickly or by a greater amount than the negotiated or, if adopted, FERC-mandated indexation rate cap.

The reporting of system-based cost and revenue data, if adopted, could lead to an increase in rate litigation at the FERC. Generally, 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 change in costs from the previous year. However, if the index results in a negative adjustment, NuStar Energy is 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

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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 their costs 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 D.C. Circuit, and, on May 29, 2007, the D.C. Circuit issued an opinion upholding the FERC’s tax allowance policy.

In two proceedings involving SFPP, L.P., a refined products pipeline system, shippers again challenged the FERC’s income tax allowance policy, alleging that it is unlawful for a pipeline organized as a tax-pass-through entity to be afforded an income tax allowance and that the income tax allowance is unnecessary because an allowance for income taxes for such pipelines is recovered indirectly through the rate of return on equity. The FERC rejected these shipper arguments in multiple orders. Petitions for review of the FERC’s rulings on the income tax allowance were filed with the D.C. Circuit.

On July 1, 2016, the D.C. Circuit issued an opinion granting the shippers’ petition for review of the FERC’s rulings on the income tax allowance, finding that the FERC had failed to demonstrate that there was no double recovery of taxes for partnerships that receive an income tax allowance in addition to the return they receive through the rate of return on equity. On this basis, the D.C. Circuit has remanded the issue back to the FERC and the FERC has established an industrywide Notice of Inquiry regarding this issue. Because the extent to which an interstate oil pipeline organized as a partnership is entitled to an income tax allowance is subject to a case-by-case review at the FERC and is a matter that remains under litigation and FERC review, the level of income tax allowance to which NuStar Energy would ultimately be entitled in a cost-of-service rate review is not certain. How the FERC’s income tax allowance policy 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 its cost of service.

The rates that NuStar Energy may charge on its interstate ammonia pipeline are subject to regulation by the STB.

NuStar Energy’s ammonia pipeline is subject to regulation under the Interstate Commerce Act by the STB. Under that regulation NuStar Energy’s ammonia pipeline’s rates, classifications, rules and practices related to the interstate transportation of anhydrous ammonia must be reasonable and, in providing interstate transportation, NuStar Energy’s ammonia pipeline may not subject a person, place, port or type of traffic to unreasonable discrimination.

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, 2016, NuStar Energy’s power costs equaled approximately $43.1 million, or 9.6% of NuStar Energy’s operating expenses for the year. NuStar Energy uses mainly electric power at its pipeline pump stations and terminals, 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, and 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 to its unitholders, including us.

Terrorist attacks (and cyberattacks) and the threat of future attacks worldwide, as well as 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 and cyberattacks 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, instability in the financial markets that could restrict NuStar Energy’s ability to raise capital and the possibility that infrastructure facilities could be direct targets of, or indirect casualties of, an attack.

The United States Department of Homeland Security has identified pipelines and other energy infrastructure assets as ones that might be specific targets of terrorist organizations or breaches of cybersecurity. These potential targets might include NuStar Energy’s pipeline systems, storage facilities or operating systems and may affect its ability to operate or control its pipeline and storage assets. NuStar Energy’s systems and networks, as well as those of its customers, suppliers, vendors and counterparties, may become the target of cyberattacks or information security breaches, which in turn could result in the unauthorized release and misuse of confidential and proprietary information as well as disrupt its operations, damage its facilities or those of third

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parties or harm its reputation. Any failure or disruption of NuStar Energy’s systems could cause a substantial decrease in revenues, increased costs to respond or other financial loss, damage to reputation, increased regulation or litigation and/or inaccurate information reported from its operations. These developments may subject NuStar Energy’s operations to increased risks, as well as increased costs, and, depending on their ultimate magnitude, could have a material adverse effect on its business, results of operations and financial condition.

Hedging transactions may limit NuStar Energy’s potential gains or result in significant financial losses.

While intended to reduce the effects of volatile commodity prices, hedging transactions, depending on the hedging instrument used, may limit NuStar Energy’s potential gains if petroleum 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:


•	the counterparties to NuStar Energy’s hedging contracts fail to perform under the contracts; or


•	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. It is not possible for NuStar Energy to engage in a hedging transaction that completely mitigates its exposure to commodity prices, and 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’s purchase and sale of crude oil and petroleum 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.

Although NuStar Energy’s marketing and trading of crude oil and petroleum products represents a small percentage of its overall business, these activities expose NuStar Energy to some commodity 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 and may be required to post cash collateral under its hedging arrangements. NuStar Energy also may 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, and 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 make its quarterly distributions to its unitholders, including us.

TAX RISKS TO OUR UNITHOLDERS

If we or NuStar Energy were treated as a corporation for federal or state income tax purposes or we or NuStar Energy were otherwise subject to a material amount of entity-level taxation, 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.

Despite the fact that we are a limited liability company and NuStar Energy is a limited partnership under Delaware law, we would each be treated as a corporation for federal income tax purposes unless each of us satisfies a “qualifying income” requirement. Based upon our current operations, we believe we and NuStar Energy each satisfy the qualifying income

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requirement. Failing to meet the qualifying income requirement or a change in current law could cause us or NuStar Energy to be treated as a corporation for federal income tax purposes or otherwise subject us or NuStar Energy to taxation as an entity.

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%, and would likely pay state and local income tax at varying rates. Distributions to unitholders who are treated as holders of corporate stock would generally be taxed again as corporate dividends (to the extent of our current and accumulated earnings and profits), and no income, gains, losses, deductions or credits would flow through to unitholders. 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. Because a tax would be imposed upon us or NuStar Energy as a corporation, our distributable cash flow would be substantially reduced.

Moreover, changes in current state law may subject us or NuStar Energy to entity-level taxation by individual states. Because of widespread state budget deficits and other reasons, several states are evaluating ways to subject entities treated as partnerships to entity-level taxation through the imposition of state income, franchise and other forms of taxation. Imposition of any such taxes or an increase in the existing tax rates would substantially reduce the cash available for distribution to unitholders. Therefore, if we or NuStar Energy were treated as a corporation for federal income tax purposes or otherwise subjected to a material amount of entity-level taxation, there would be a material reduction in the anticipated cash flow and after-tax return to our unitholders, likely causing a substantial reduction in the value of our common units.

The tax treatment of publicly traded entities treated as partnerships for federal income tax purposes, or an investment in our or NuStar Energy units, could be subject to potential legislative, judicial or administrative changes or differing interpretations, possibly applied on a retroactive basis.

The present U.S. federal income tax treatment of publicly traded entities treated as partnerships for federal income tax purposes, including us or NuStar Energy, or an investment in our or NuStar Energy’s units may be modified by administrative, legislative or judicial changes or differing interpretations at any time. From time to time, members of Congress propose and consider such substantive changes to the existing federal income tax laws that affect such entities. Further, final Treasury regulations under Section 7704(d)(1)(E) of the Code recently published in the Federal Register interpret the scope of qualifying income requirements for publicly traded partnerships by providing industry-specific guidance.

Any modification to the federal income tax laws may be applied retroactively and could make it more difficult or impossible for us or NuStar Energy to meet the exception for certain publicly traded entities to be treated as partnerships for federal income tax purposes. We are unable to predict whether any of these changes or other proposals will ultimately be enacted, including as a result of fundamental tax reform. Any such changes could negatively impact the value of an investment in our common units.

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 affect adversely the taxable income reported to our unitholders and the income taxes they are required to pay. As a result, any such 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 other unitholders of NuStar Energy.

Legislation applicable to partnership tax years beginning after 2017 alters the procedures for auditing large partnerships and for assessing and collecting taxes due (including penalties and interest) as a result of a partnership-level federal income tax audit. Under these rules, unless we are eligible to, and do, elect to issue revised Schedules K-1 to our partnership with respect to an audited and adjusted partnership tax return, the IRS may assess and collect taxes (including any applicable penalties and interest) directly from us in the year in which the audit is completed. If we or NuStar Energy are required to pay taxes, penalties and interest as a result of audit adjustments, cash available for distribution to our unitholders may be substantially reduced. In addition, because payment would be due for the taxable year in which the audit is completed, unitholders during that taxable year would bear the expense of the adjustment even if they were not unitholders during the audited tax year. Also, 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.

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Even if unitholders do not receive any cash distributions from us, they 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 capital and profits interests, within a twelve-month period, will result in our termination for federal income tax purposes.

We will be considered to have terminated for federal income tax purposes if there is a sale or exchange of 50% or more of the total interests in our capital and profits within a twelve-month period. For purposes of determining whether the 50% threshold has been met, multiple sales of the same interest will be counted only once. Our termination for federal income tax purposes would, among other things, result in the closing of our taxable year for all unitholders, which would result in us filing two tax returns for one calendar year and could result in a significant deferral of depreciation deductions allowable in computing our taxable income. In the case of a unitholder reporting on a taxable year other than a calendar year, the closing of our taxable year may also result in more than twelve months of our taxable income or loss being includable in taxable income for the unitholder’s taxable year that includes our termination. Our termination would not affect our classification as a partnership for federal income tax purposes, but it would result in our being treated as a new partnership for U.S. federal income tax purposes following the termination. If we were treated as a new partnership, we would be required to make new tax elections and could be subject to penalties if we were unable to determine that a termination occurred. The IRS has announced a relief procedure whereby if a publicly traded entity treated as a partnership for federal income tax purposes that has technically terminated requests, and the IRS grants, special relief, among other things, the entity may be permitted to provide only a single Schedule K-1 to unitholders for the two short tax periods included in the year in which the termination occurs.

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 IRAs 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 Treasury regulations. A successful IRS challenge to those positions could adversely affect the amount of tax benefits available to unitholders. 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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We prorate our items of income, gain, loss and deduction between transferors and transferees of our units each month based upon the ownership of our units on the first day of each month, instead of on the basis of the date a particular unit is transferred. The U.S. Treasury Department and the IRS recently issued final regulations pursuant to which a publicly traded entity treated as a partnership for federal income tax purposes may use a similar monthly simplifying convention to allocate tax items among transferor and transferee unitholders although such tax items must be prorated on a daily basis and the regulations do not specifically authorize all aspects of the proration method we have currently adopted. If the IRS were to challenge our proration method, we may be required to change the allocation of items of income, gain, loss and deduction among our unitholders.

We and NuStar Energy have adopted certain valuation methodologies in determining a unitholder’s allocations of income, gain, loss and deduction. The IRS may challenge these methods or the resulting allocations and such a challenge could adversely affect the value of our investment in NuStar Energy.

In determining the items of income, gain, loss and deduction allocable to our and NuStar Energy’s common unitholders, we and NuStar Energy must routinely determine the fair market value of our respective assets. Although we or NuStar Energy may from time to time consult with professional appraisers regarding valuation matters, we and NuStar Energy make valuation estimates using a methodology based on the fair market value of our respective common units as a means to measure the fair market value of our respective assets. The IRS may challenge these valuation methods and the resulting allocations of income, gain, loss and deduction.

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 common unitholders. It also could affect the amount of gain on the sale of common units by NuStar Energy’s common unitholders and our unitholders and could have a negative impact on our investment in NuStar Energy or result in audit adjustments to the tax returns of our or NuStar Energy’s common unitholders 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.

A unitholder whose units are the subject of a securities loan (e.g., a loan to a “short seller” to cover a short sale of units) may be considered as having disposed of those units. If so, the unitholder would no longer be treated for tax purposes as a partner with respect to those units during the period of the loan and may recognize gain or loss from the disposition.

Because there are no specific rules governing the federal income tax consequences of loaning an interest in an entity treated as a partnership for federal income tax purposes, a unitholder whose units are the subject of a securities loan may be considered as having disposed of the loaned units. In that case, the unitholder may no longer be treated for tax purposes as a partner with respect to those units during the period of the loan to the short seller and the unitholder may recognize gain or loss from such disposition. Moreover, during the period of the loan, any of our income, gain, loss or deduction with respect to those units may

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not be reportable by the unitholder and any cash distributions received by the unitholder as to those units could be fully taxable as ordinary income. Unitholders desiring to assure their status as partners for tax purposes and avoid the risk of gain recognition from a loan to a short seller are urged to consult a tax advisor to discuss whether it is advisable to modify any applicable brokerage account agreements to prohibit their brokers from borrowing their units.

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, we cannot assure you 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 and is a party to other claims and legal proceedings relating to NuStar Energy’s normal business operations, including regulatory and environmental matters. 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. NuStar Energy is 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

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 Environmental Protection Agency has classified portions of the Portland Harbor, including the portion adjacent to its terminal, as a federal “Superfund” site due to sediment contamination (the Site). As previously disclosed, Shore and more than 90 other parties have been identified as potentially responsible parties (PRPs) in connection with the Site. Shore has been working with the other PRPs to attempt to negotiate an agreed allocation of clean-up costs and settlement of natural resource damage claims. Although the PRP group as a whole is likely to incur significant costs in connection with the Site, NuStar Energy has determined that: (1) this matter will not likely be material to its business or financial condition or have a material effect on its consolidated financial position; (2) Shore’s allocation among the PRP group is likely to be de minimus and NuStar Energy believes it has sufficient insurance coverage to respond to this potential liability; and (3) NuStar Energy does not believe that this matter will result in an assessment of monetary sanctions against Shore.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

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ITEM X. EXECUTIVE OFFICERS OF THE REGISTRANT

Set forth below is certain information concerning our executive officers, effective as of February 20, 2017.



Name	Age	Position Held with NuStar GP Holdings, LLC
Bradley C. Barron	51	President, Chief Executive Officer and Director
Mary Rose Brown	60	Executive Vice President and Chief Administrative Officer
Thomas R. Shoaf	58	Executive Vice President and Chief Financial Officer
Jorge A. del Alamo	47	Senior Vice President and Controller
Amy L. Perry	48	Senior Vice President, General Counsel - Corporate & Commercial Law and Corporate Secretary
Karen M. Thompson	49	Senior Vice President, General Counsel - Litigation, Regulatory & Environmental

Mr. Barron became President, Chief Executive Officer 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 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 2006 until April 2007. He has been with NuStar GP, LLC since July 2003 and, prior to that, was with Valero Energy Corporation (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. 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 for Valero Corporate Services Company, a subsidiary of Valero Energy, from 2001 until joining NuStar GP, LLC.

Mr. del Alamo became Senior Vice President and Controller of NuStar GP Holdings and NuStar GP, LLC in July 2014. Prior thereto, he served as Vice President and Controller of NuStar GP Holdings and NuStar GP, LLC since January 2014. He served as Vice President and Assistant Controller of NuStar GP, LLC from July 2010 until his promotion in January 2014. From April 2008 to July 2010 he served as Assistant Controller of NuStar GP, LLC. Prior to his service at NuStar GP, LLC, Mr. del Alamo served as Director - Sarbanes Oxley Compliance for Valero Energy.

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 May 2007 to February 2010 she served as Assistant General Counsel and Assistant Secretary of NuStar GP, LLC. Prior to her service at NuStar GP, LLC, Ms. Thompson served as Managing Counsel to Valero Energy.

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PART II

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

Our common units are listed and traded on the New York Stock Exchange under the symbol “NSH.” At the close of business on February 8, 2017, we had 11 holders of record of our units. The following table presents the high and low sales prices for our units during the periods presented (composite transactions as reported by the New York Stock Exchange) and the amount, record date and payment date of the quarterly cash distributions on our units with respect to such periods:



	Price Range per Unit				Cash Distributions
	High		Low		Amount per Common Unit		Record Date	Payment Date
Year 2016
4th Quarter	$	29.30	$	22.30	$	0.545	February 8, 2017	February 15, 2017
3rd Quarter	$	26.45	$	22.40	$	0.545	November 8, 2016	November 16, 2016
2nd Quarter	$	27.07	$	19.82	$	0.545	August 9, 2016	August 16, 2016
1st Quarter	$	23.18	$	12.86	$	0.545	May 9, 2016	May 17, 2016
Year 2015
4th Quarter	$	31.55	$	15.06	$	0.545	February 8, 2016	February 16, 2016
3rd Quarter	$	38.40	$	24.46	$	0.545	November 9, 2015	November 17, 2015
2nd Quarter	$	39.94	$	34.03	$	0.545	August 7, 2015	August 17, 2015
1st Quarter	$	39.53	$	30.77	$	0.545	May 8, 2015	May 18, 2015

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 is our only class of security outstanding. See Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for further information regarding our distributions.

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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 or unit price performance included in this graph is not necessarily indicative of future stock or unit price performance.

The following graph compares the cumulative 5-year total return provided to holders of NuStar GP Holdings, LLC’s units 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 units and in each of the indexes on December 31, 2011, and its relative performance is tracked through December 31, 2016.



	12/11	12/12	12/13	12/14	12/15	12/16
NuStar GP Holdings, LLC	100.00	88.97	97.76	127.30	83.58	126.36
NYSE Composite	100.00	115.99	146.47	156.36	149.97	167.87
Alerian MLP	100.00	109.12	146.52	164.94	117.53	142.52

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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,
	2016		2015		2014		2013			2012
	(Thousands of Dollars, Except Per Unit Data)
Statement of Comprehensive Income (Loss) Data:
Equity in earnings (loss) of NuStar Energy L.P.	$	56,096	$	79,673	$	65,380	$	(6,741	)	$	(4,578	)
Net income (loss)	55,068		72,208		61,427		(11,034		)	2,128
Basic and diluted net income (loss) per unit	1.28		1.68		1.44		(0.26		)	0.05
Cash distributions per unit	2.18		2.18		2.18		2.18			2.11
Other Financial Data:
Distributions received from NuStar Energy L.P.	$	95,905	$	96,030	$	96,012	$	96,134		$	92,628

	December 31,
	2016		2015		2014		2013			2012
	(Thousands of Dollars)
Balance Sheet Data:
Total assets	$	274,630	$	360,490	$	385,150	$	412,382		$	517,716
Total short-term debt	30,000		26,000		26,000		26,000			20,000
Members’ equity	243,788		287,070		310,836		349,986			412,822

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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 “Cautionary Statement Regarding Forward-Looking Information,” Items 1., 1A. and 2. “Business, Risk Factors and Properties,” and Item 8. “Financial Statements and Supplementary Data,” included in this report.

OVERVIEW

NuStar GP Holdings, LLC (NuStar GP Holdings) (NYSE: NSH) is a publicly traded Delaware limited liability company. Unless otherwise indicated, the terms “NuStar GP Holdings,” “NSH,” “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 seven sections:


•	Overview


•	Results of Operations


•	Trends and Outlook


•	Liquidity and Capital Resources


•	Related Party Transactions


•	Critical Accounting Policies


•	New Accounting Pronouncements

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, 2016 , we have an approximate 15% ownership in NuStar Energy, consisting of the following:


•	the 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


•	10,214,626 common units of NuStar Energy.

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 transportation of petroleum products and anhydrous ammonia, the terminalling and storage of petroleum products 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, and the United Kingdom.

NuStar Energy’s partnership agreement requires that it distribute all available cash to its common limited partners and general partner each quarter, and this term is defined in its partnership agreement generally 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, generally defined in our limited liability company agreement as cash on hand at the end of the quarter, less reserves established by our board of directors.

Recent Developments

Employee Transfer from NuStar GP, LLC. On March 1, 2016, NuStar GP, LLC, our wholly owned subsidiary, transferred and assigned to NuStar Services Company LLC (NuStar Services Co), a wholly owned subsidiary of NuStar Energy, all of NuStar GP, LLC’s employees and related benefit plans, programs, contracts and policies (the Employee Transfer). Our officers, who are also officers of NuStar GP, LLC, are now dual employees of NuStar GP, LLC and NuStar Services Co. The Employee Transfer did not materially change our results of operations since NuStar Energy previously reimbursed us for nearly all of NuStar GP, LLC’s employee costs. However, as a result of the Employee Transfer, NuStar Services Co pays employee costs directly and sponsors the 2000 Long-Term Incentive Plan and other employee benefit plans. Please refer to Note 5 of the Notes to Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary Data” for further discussion on the Employee Transfer.

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NuStar Energy’s Acquisitions and Dispositions

Martin Terminal Acquisition. On December 21, 2016 , NuStar Energy acquired crude oil and refined product storage assets in Corpus Christi, TX for $95.7 million , including $2.1 million of capital expenditure reimbursements, from Martin Operating Partnership L.P. The assets acquired include 900,000 barrels of crude oil storage capacity, 250,000 barrels of refined product storage capacity and exclusive use of the Port of Corpus Christi’s new crude oil dock.

Linden Acquisition. On January 2, 2015, NuStar Energy acquired full ownership of ST Linden Terminal, LLC, which owns a refined products terminal in Linden, NJ, for $142.5 million (the Linden Acquisition). Prior to the Linden acquisition, the terminal operated as a joint venture between NuStar Energy and Linden Holding Corp., with each party owning 50% .

2014 Asphalt Sale. On February 26, 2014, NuStar Energy sold its remaining 50% ownership interest in NuStar Asphalt LLC (the 2014 Asphalt Sale) to Lindsay Goldberg LLC, a private investment firm. Effective February 27, 2014, NuStar Asphalt LLC changed its name to Axeon Specialty Products LLC (Axeon).

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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 to its common limited partners 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 common limited partner interests.

Year Ended December 31, 2016 Compared to Year Ended December 31, 2015

Financial Highlights

(Thousands of Dollars, Except Per Unit Data)



	Year Ended December 31,
	2016			2015			Change
Equity in earnings of NuStar Energy	$	56,096		$	79,673		$	(23,577	)

General and administrative expenses	(3,046		)	(3,338		)	292
Other income (expense), net	3,021			(2,333		)	5,354
Interest expense, net	(1,069		)	(893		)	(176		)
Income before income tax benefit (expense)	55,002			73,109			(18,107		)
Income tax benefit (expense)	66			(901		)	967
Net income	$	55,068		$	72,208		$	(17,140	)
Basic and diluted net income per unit	$	1.28		$	1.68		$	(0.40	)

The following table summarizes NuStar Energy’s statement of income data:



	Year Ended December 31,
	2016		2015		Change
	(Thousands of Dollars, Except Per Unit Data)
Revenues	$	1,756,682	$	2,084,040	$	(327,358	)
Cost of product sales	633,653		907,574		(273,921		)
Operating expenses	448,367		473,031		(24,664		)
Depreciation and amortization expense	208,217		201,719		6,498
Segment operating income	466,445		501,716		(35,271		)
General and administrative expenses	98,817		102,521		(3,704		)
Other depreciation and amortization expense	8,519		8,491		28
Operating income	$	359,109	$	390,704	$	(31,595	)

Income from continuing operations	$	150,003	$	305,946	$	(155,943	)
Income from discontinued operations, net of tax	—		774		(774		)
Net income	$	150,003	$	306,720	$	(156,717	)

Net income per unit applicable to common limited partners	$	1.27	$	3.30	$	(2.03	)

Cash distributions per unit applicable to common limited partners	$	4.380	$	4.380	$	—

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NuStar Energy’s net income decreased $156.7 million for the year ended December 31, 2016 , compared to the year ended December 31, 2015 , primarily due to a $58.7 million impairment charge in 2016 on NuStar Energy’s term loan to Axeon Specialty Products and a $56.3 million gain associated with NuStar Energy’s Linden Acquisition in 2015. In addition, NuStar Energy’s segment operating income decreased $35.3 million , resulting mainly from reductions in operating income for its pipeline and fuels marketing segments.

Equity in Earnings of NuStar Energy

The following table summarizes our equity in earnings of NuStar Energy:



	Year Ended December 31,
	2016			2015			Change
	(Thousands of Dollars)
NuStar GP Holdings’ Equity in Earnings of NuStar Energy:
General partner interest	$	2,091		$	5,270		$	(3,179	)
General partner incentive distribution rights (IDRs)	43,407			43,220			187
General partner’s interest in earnings and incentive distributions of NuStar Energy	45,498			48,490			(2,992		)
Common limited partner interest in earnings of NuStar Energy	13,482			34,067			(20,585		)
Amortization of step-up in basis related to NuStar Energy’s assets and liabilities	(2,884		)	(2,884		)	—
Equity in earnings of NuStar Energy	$	56,096		$	79,673		$	(23,577	)

Our equity in earnings related to our general and common limited partner interests in NuStar Energy decreased $23.6 million for the year ended December 31, 2016 , compared to the year ended December 31, 2015 , due to a decrease in NuStar Energy’s net income. However, our equity in earnings of NuStar Energy related to our IDRs increased slightly as a result of NuStar Energy’s issuances of common units in 2016. Our IDRs in NuStar Energy entitle us to an increasing amount of NuStar Energy’s cash distributions (please refer to Note 6 of the Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary Data” for a more detailed discussion of how NuStar Energy’s distributions are allocated).

Other Income (Expense), Net

For the year ended December 31, 2016, we recognized other income of $3.0 million, mainly due to gains of $2.4 million as a result of NuStar Energy’s issuances of common units in 2016. The gains represent the increase in the value of our proportionate share of NuStar Energy’s capital. For the year ended December 31, 2015, we recognized other expense of $2.3 million, due to losses of $2.3 million on the sale of NuStar Energy L.P. common limited partner units in connection with unit-based compensation plans we sponsored prior to the Employee Transfer.

Year Ended December 31, 2015 Compared to Year Ended December 31, 2014

Financial Highlights

(Thousands of Dollars, Except Per Unit Data)



	Year Ended December 31,
	2015			2014			Change
Equity in earnings of NuStar Energy	$	79,673		$	65,380		$	14,293

General and administrative expenses	(3,338		)	(3,396		)	58
Other expense, net	(2,333		)	(1,458		)	(875		)
Interest expense, net	(893		)	(885		)	(8		)
Income before income tax (expense) benefit	73,109			59,641			13,468
Income tax (expense) benefit	(901		)	1,786			(2,687		)
Net income	$	72,208		$	61,427		$	10,781
Basic and diluted net income per unit	$	1.68		$	1.44		$	0.24

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The following table summarizes NuStar Energy’s statement of income data:



	Year Ended December 31,
	2015		2014			Change
	(Thousands of Dollars, Except Per Unit Data)
Revenues	$	2,084,040	$	3,075,118		$	(991,078	)
Cost of product sales	907,574		1,967,528			(1,059,954		)
Operating expenses	473,031		472,925			106
Depreciation and amortization expense	201,719		181,555			20,164
Segment operating income	501,716		453,110			48,606
General and administrative expenses	102,521		96,056			6,465
Other depreciation and amortization expense	8,491		10,153			(1,662		)
Operating income	$	390,704	$	346,901		$	43,803

Income from continuing operations	$	305,946	$	214,169		$	91,777
Income (loss) from discontinued operations, net of tax	774		(3,791		)	4,565
Net income	$	306,720	$	210,378		$	96,342

Net income per unit applicable to common limited partners	$	3.30	$	2.10		$	1.20

Cash distributions per unit applicable to common limited partners	$	4.380	$	4.380		$	—

NuStar Energy’s net income increased $96.3 million for the year ended December 31, 2015, compared to the year ended

December 31, 2014, primarily due to an increase of $48.6 million in NuStar Energy’s segment operating income, resulting mainly from improvements in its pipeline and storage segments, and a $56.3 million gain associated with NuStar Energy’s

Linden Acquisition.

Equity in Earnings of NuStar Energy

The following table summarizes our equity in earnings of NuStar Energy:



	Year Ended December 31,
	2015			2014			Change
	(Thousands of Dollars)
NuStar GP Holdings’ Equity in Earnings of NuStar Energy:
General partner interest	$	5,270		$	3,352		$	1,918
General partner incentive distribution rights	43,220			43,220			—
General partner’s interest in earnings and incentive distributions of NuStar Energy	48,490			46,572			1,918
Common limited partner interest in earnings of NuStar Energy	34,067			21,692			12,375
Amortization of step-up in basis related to NuStar Energy’s assets and liabilities	(2,884		)	(2,884		)	—
Equity in earnings of NuStar Energy	$	79,673		$	65,380		$	14,293

Our equity in earnings related to our general and limited partner interests in NuStar Energy increased $14.3 million for the year ended December 31, 2015, compared to the year ended December 31, 2014, due to an increase in NuStar Energy’s net income.

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TRENDS AND OUTLOOK

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

NuStar Energy believes that the fact that it provides both storage and pipeline services, for crude and refined products, to customers in sectors across the energy industry, throughout the country and around the world, offers some insulation from the impact of market fluctuations on its results of operations. Since high crude oil prices have tended to benefit NuStar Energy’s producer customers, high prices have also correlated with increased demand for its crude oil pipeline services. On the other hand, depressed crude oil prices, when coupled with an industry expectation of higher prices in the future, or a contango market, has historically correlated with increased demand from trading companies for NuStar Energy’s storage services.

Because of the geographic diversity of NuStar Energy’s assets, its results of operations are not dependent on the regions or markets that have been hardest hit by depressed crude oil prices, the domestic shale play regions, which was demonstrated by the fact that, in 2016, revenue from NuStar Energy’s Eagle Ford pipeline and storage assets constituted only 12% of its total pipeline and storage segment revenue. Although NuStar Energy’s assets in the Eagle Ford region have experienced lower throughputs as production has slowed, the fact that NuStar Energy has minimum volume throughput contracts with large, creditworthy customers has minimized the negative impact of that slowdown on its results of operations.

In addition to the diversity of NuStar Energy’s customers, its assets, the services it offers and the markets it serves, NuStar Energy believes its contracts, many of which are long-term, take-or-pay arrangements for committed storage or throughput capacity, also help to blunt the impact of volatility of crude oil prices on its results of operations. In the locations at which NuStar Energy’s assets are integrated physically with the refineries the assets serve, NuStar Energy believes the results generated by those assets depend to a greater degree on the refinery’s continuing need to receive, store and transport the crude and refined products than on crude or refined product prices.

For 2017, NuStar Energy expects consistent volumes in its pipeline segment as any declines in crude oil pipelines are expected to be offset by higher volumes on its refined product pipelines. NuStar Energy is forecasting near minimum take-or-pay volumes on its South Texas Crude System, allowing for possible upside if production in the Eagle Ford region ramps up. NuStar Energy expects its storage segment to benefit in 2017 from favorable storage contract renewals and the Martin Terminal Acquisition. Earnings in NuStar Energy’s fuels marketing segment, as in any margin-based business, are subject to many factors that can increase or reduce margins, which may cause the segment’s actual results to vary significantly from NuStar Energy’s forecast.

NuStar Energy’s outlook for the partnership, both overall and for any of its segments, may change, as NuStar Energy bases its expectations on its continuing evaluation of a number of factors, many of which are outside its control. These factors include, but are not limited to, the state of the economy and the capital markets, changes to its customers’ refinery maintenance schedules and unplanned refinery downtime, supply of and demand for crude oil, refined products and anhydrous ammonia, demand for its transportation and storage services and changes in laws or regulations affecting its assets.

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LIQUIDITY AND CAPITAL RESOURCES

General

Our cash flows consist of distributions from NuStar Energy on our partnership interests, including the incentive distribution rights that we own. Due to our ownership of NuStar Energy’s incentive distribution rights, 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 (as defined in NuStar Energy’s partnership agreement) in the event that NuStar Energy issues additional common units, debt service requirements, if any, 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, if necessary, borrowings under our revolving credit facility.

Cash Distributions from NuStar Energy

NuStar Energy distributes all of its available cash to its common limited partners and general partner 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. Available cash is generally defined as cash receipts less cash disbursements (including distributions to holders of NuStar Energy’s Preferred Units, as defined and further discussed under the Investment in NuStar Energy section below) and cash reserves established by us, in our sole discretion. The following table reflects the cash distributions earned for the periods shown with respect to our ownership interests in NuStar Energy and our incentive distribution rights:



	Year Ended December 31,
	2016			2015			2014
	(Thousands of Dollars, Except Per Unit and Percentage Data)
Cash distributions per unit applicable to common limited partners	$	4.380		$	4.380		$	4.380
Total cash distributions by NuStar Energy to its general and common limited partners	$	393,882		$	392,204		$	392,204
Cash distributions we received from NuStar Energy:
General partner interest	$	7,877		$	7,844		$	7,844
General partner incentive distribution rights (IDRs)	43,407			43,220			43,220
Limited partner interest – common units	44,699			45,073			44,974
Total cash distributions to us	$	95,983		$	96,137		$	96,038
Distributions to us as a percentage of total cash distributions to NuStar Energy’s general and common limited partners	24.4		%	24.5		%	24.5		%

Cash Flows for the Years Ended December 31, 2016 , 2015 and 2014

For the years ended December 31, 2016 , 2015 and 2014, cash distributions received from NuStar Energy were used primarily to fund distributions to our unitholders.

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 revolving credit facility dated June 28, 2013, as most recently amended on June 16, 2016, will mature on June 27, 2017 and has a borrowing capacity of up to $50.0 million, of which up to $10.0 million may be available for letters of credit. Our obligations under our revolving credit facility are guaranteed by Riverwalk Holdings, LLC (Riverwalk), our wholly owned subsidiary. Riverwalk pledged 2,107,918 NuStar Energy common units that it owns to secure its guarantee.

As of December 31, 2016 , we had outstanding borrowings of $30.0 million and availability of $20.0 million for borrowings under our revolving credit facility. Interest on our revolving credit facility is based upon, at our option, either an alternative base rate or a LIBOR-based rate. Our management believes that we are in compliance with the covenants of the revolving credit facility as of December 31, 2016 . We are in discussions with the lenders to renew or replace our revolving credit facility. Please refer to Note 10 of the Notes to Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary Data” for a detailed discussion on our revolving credit facility.

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Investment in NuStar Energy

Preferred Unit Offering . In the fourth quarter of 2016, NuStar Energy issued 9,060,000 of its 8.50% Series A Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units (the Preferred Units) representing limited partner interests at a price of $25.00 per unit. NuStar Energy used the net proceeds of $218.4 million from this issuance for general partnership purposes, including the funding of capital expenditures and to repay outstanding borrowings under its revolving credit agreement.

The Preferred Units rank senior to all of NuStar Energy’s other classes of equity securities, including our general partner and common limited partner interests, with respect to distribution rights and rights upon liquidation. Distributions on the Preferred Units are payable out of any legally available funds, accrue and are cumulative from the date of original issuance of the Preferred Units and are payable quarterly. The holders of the Preferred Units are entitled to receive quarterly distributions at an initial distribution rate of 8.50% per annum of the $25.00 liquidation preference per unit (equal to $2.125 per unit per annum). On and after December 15, 2021, distributions on the Preferred Units accumulate at a percentage of the $25.00 liquidation preference equal to an annual floating rate of the three-month LIBOR plus a spread of 6.766%.

Common Unit Offering . In 2016, NuStar Energy issued 595,050 common units representing limited partner interests at an average price of $47.39 per unit. NuStar Energy received net proceeds of $28.3 million , which includes our contribution of $0.6 million in order to maintain our 2.0% general partner interest. This issuance resulted in a gain of $2.1 million for the year ended December 31, 2016, which is included in “Other income (expense), net” on our consolidated statements of comprehensive income, and represents the increase in the value of our proportionate share of NuStar Energy’s capital.

Other Issuances of Common Units . In 2016, we recorded a gain of $0.3 million as a result of NuStar Energy’s issuance of common units in association with its unit-based compensation awards. The gain is included in “Other income (expense), net” on our consolidated statements of comprehensive income, and represents the increase in the value of our proportionate share of NuStar Energy’s capital.

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 generally 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 service debt we may incur, if any, and to fund general and administrative expenses, future distributions and other miscellaneous cash requirements. The following table reflects our cash distributions applicable to the period in which the distributions were earned:



	Year Ended December 31,
	2016		2015		2014
	(Thousands of Dollars, Except Per Unit Data)
Cash distributions per unit	$	2.18	$	2.18	$	2.18
Total cash distributions	$	93,601	$	93,561	$	93,252

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.

RELATED PARTY TRANSACTIONS

Agreements with NuStar Energy

Prior to the Employee Transfer, pursuant to a services agreement between NuStar GP, LLC and NuStar Energy, NuStar Energy reimbursed NuStar GP, LLC for furnishing administrative and certain operating services necessary to conduct the business of NuStar Energy. In conjunction with the Employee Transfer, NuStar GP, LLC entered into an Amended and Restated Services Agreement with NuStar Services Co, a wholly owned subsidiary of NuStar Energy, effective March 1, 2016 (the Amended GP Services Agreement). The Amended GP Services Agreement provides that NuStar Services Co will furnish administrative services necessary to conduct our business, for an annual fee of $1.0 million, subject to certain adjustments for merit increases and changes in level of service. The Amended GP Services Agreement will terminate on March 1, 2020 and will automatically renew for successive two-year terms, unless terminated by either party. Please refer to Note 5 of the Notes to Consolidated

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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

Prior to the Employee Transfer, we sponsored the following employee benefit and long-term incentive plans, among others:


•	The NuStar Thrift Plan;


•	The NuStar Excess Thrift Plan;


•	The NuStar Pension Plan;


•	The NuStar Excess Pension Plan;


•	The NuStar GP, LLC Retiree Welfare Benefits Plan; and


•	The 2000 Long-Term Incentive Plan.

Prior to the Employee Transfer, NuStar Energy reimbursed 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. Our current liabilities related to the long-term incentive plans and employee benefits were included in “Accrued compensation expense” and our noncurrent liabilities for employee benefits were included in “Long-term liabilities” on our consolidated balance sheet. Subsequent to the Employee Transfer, our consolidated balance sheet no longer reflects employee-related liabilities or the corresponding receivables from NuStar Energy.

We continue to sponsor the 2006 Long-Term Incentive Plan, under which NuStar GP Holdings may award up to 2,000,000 (NSH) units, and retain the compensation expense related to these awards.

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 the employee benefit and long-term incentive plans.

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. If a decline in the value of our investment is determined to be other than temporary, then we would record an impairment loss in the current period 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, 2016 is recoverable.

Unit-Based Compensation

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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.

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

Prior to the Employee Transfer, we had significant pension and postretirement benefit liabilities and costs that were developed from actuarial valuations. Inherent in these valuations were key assumptions including discount rates, expected long-term rates of return on plan assets, future compensation increases and health care cost trend rates. Changes in these assumptions were primarily influenced by factors outside our control. The expected return on plan assets for the pension and other postretirement benefit plans was based on the weighted averages of the expected long-term rates of return for each asset class of investments held in our plans as determined using historical data and the assumption that capital markets are informationally efficient.

NEW ACCOUNTING PRONOUNCEMENTS

Please refer to Note 3 of the Notes to Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary Data” for a detailed discussion of new accounting pronouncements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our only cash generating assets are our ownership interests in NuStar Energy, which we account for using the equity method. We have no material market risk other than those market risks affecting NuStar Energy, which could therefore affect the value of our investment. NuStar Energy is exposed to various market risks, including interest rate risk and commodity price risk. For a description of NuStar Energy’s market risks and how it manages its exposure to those risks, please see Item 7A. “Quantitative and Qualitative Disclosures About Market Risk” contained in NuStar Energy’s Form 10-K for the year ended December 31, 2016.

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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, 2016 . In its evaluation, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework (2013) . Based on this assessment, management believes that, as of December 31, 2016 , 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, 2016 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 42.

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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, 2016 and 2015 , and the related consolidated statements of comprehensive income, members’ equity, and cash flows for each of the years in the three-year period ended December 31, 2016 . 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, 2016 and 2015 , and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2016 , 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, 2016 , based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 23, 2017 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

/s/ KPMG LLP

San Antonio, Texas

February 23, 2017

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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, 2016 , based on criteria established in Internal Control – Integrated Framework (2013) 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, 2016 , based on criteria established in Internal Control – Integrated Framework (2013) 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, 2016 and 2015 , and the related consolidated statements of comprehensive income, members’ equity, and cash flows for each of the years in the three-year period ended December 31, 2016 , and our report dated February 23, 2017 expressed an unqualified opinion on those consolidated financial statements.

/s/ KPMG LLP

San Antonio, Texas

February 23, 2017

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NUSTAR GP HOLDINGS, LLC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Thousands of Dollars, Except Unit Data)



	December 31,
	2016			2015
Assets
Current assets:
Cash and cash equivalents	$	207		$	34
Receivable from related party	—			14,799
Income tax receivable	303			1,212
Other receivables	—			69
Prepaid expenses and other current assets	292			344
Total current assets	802			16,458
Investment in NuStar Energy L.P.	268,742			306,694
Long-term receivable from related party	—			32,080
Deferred income tax assets, net	5,086			5,258
Total assets	$	274,630		$	360,490
Liabilities and Members’ Equity
Current liabilities:
Short-term debt	$	30,000		$	26,000
Payable to related party	317			—
Accounts payable	1			636
Accrued compensation expense	—			8,990
Accrued liabilities	460			340
Deferred income tax liabilities, net	—			2,660
Taxes other than income tax	64			1,935
Total current liabilities	30,842			40,561
Long-term liabilities	—			32,859
Commitments and contingencies (Note 11)
Members’ equity (42,951,749 and 42,930,549 units outstanding as of December 31, 2016 and 2015, respectively)	257,662			295,734
Accumulated other comprehensive loss	(13,874		)	(8,664		)
Total members’ equity	243,788			287,070
Total liabilities and members’ equity	$	274,630		$	360,490

See Notes to Consolidated Financial Statements.

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NUSTAR GP HOLDINGS, LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Thousands of Dollars, Except Unit and Per Unit Data)



	Year Ended December 31,
	2016			2015			2014
Equity in earnings of NuStar Energy L.P.	$	56,096		$	79,673		$	65,380

General and administrative expenses
Third parties	(2,258		)	(3,338		)	(3,396		)
Related party	(788		)	—			—
Total general and administrative expenses	(3,046		)	(3,338		)	(3,396		)
Other income (expense), net	3,021			(2,333		)	(1,458		)
Interest expense, net	(1,069		)	(893		)	(885		)
Income before income tax benefit (expense)	55,002			73,109			59,641
Income tax benefit (expense)	66			(901		)	1,786
Net income	55,068			72,208			61,427
Other comprehensive (loss) income:
Share of NuStar Energy L.P.’s other comprehensive loss	(685		)	(3,107		)	(665		)
Pension and other postretirement benefit plan adjustments	(4,525		)	218			(14,051		)
Total other comprehensive loss	(5,210		)	(2,889		)	(14,716		)
Comprehensive income	$	49,858		$	69,319		$	46,711
Basic and diluted net income per unit	$	1.28		$	1.68		$	1.44
Weighted-average number of basic units outstanding	42,932,320			42,914,297			42,719,217
Weighted-average number of diluted units outstanding	42,932,320			42,914,297			42,742,202

See Notes to Consolidated Financial Statements.

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NUSTAR GP HOLDINGS, LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Thousands of Dollars)



	Year Ended December 31,
	2016			2015			2014
Cash Flows from Operating Activities:
Net income	$	55,068		$	72,208		$	61,427
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in earnings of NuStar Energy L.P.	(56,096		)	(79,673		)	(65,380		)
Distributions of equity in earnings from NuStar Energy L.P.	56,096			79,673			65,380
Gain related to NuStar Energy L.P.’s issuance of common limited partner units	(2,408		)	—			—
(Gain) loss on sale of NuStar Energy L.P. common limited partner units in connection with unit-based compensation	(613		)	2,333			1,458
Unit-based compensation expense	661			239			129
Amortization of deferred debt costs	169			155			161
(Benefit) expense for deferred income tax	(75		)	952			(621		)
Changes in current assets and liabilities (Note 9)	(3,336		)	296			(2,270		)
(Increase) decrease in long-term receivable from related party	(898		)	363			(1,527		)
Increase (decrease) in long-term liabilities	1,183			(647		)	36
Net cash provided by operating activities	49,751			75,899			58,793
Cash Flows from Investing Activities:
Distributions in excess of equity in earnings from NuStar Energy L.P.	39,809			16,357			30,632
Investment in NuStar Energy L.P.	(842		)	(7,444		)	(19,340		)
Proceeds from sale of NuStar Energy L.P. common units in connection with unit-based compensation	1,319			5,935			17,059
Net cash provided by investing activities	40,286			14,848			28,351
Cash Flows from Financing Activities:
Proceeds from short-term debt borrowings	4,000			—			26,000
Repayment of short-term debt	—			—			(26,000		)
Distributions to unitholders	(93,590		)	(93,567		)	(93,098		)
Proceeds from the exercise of unit options	—			—			7,206
Other, net	(274		)	14			(15		)
Net cash used in financing activities	(89,864		)	(93,553		)	(85,907		)
Net increase (decrease) in cash and cash equivalents	173			(2,806		)	1,237
Cash and cash equivalents as of the beginning of the period	34			2,840			1,603
Cash and cash equivalents as of the end of the period	$	207		$	34		$	2,840

See Notes to Consolidated Financial Statements.

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NUSTAR GP HOLDINGS, LLC AND SUBSIDIARIES

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, 2014	42,656,281	$	341,045		$	8,941		$	349,986
Net income	—	61,427			—			61,427
Other comprehensive loss	—	—			(14,716		)	(14,716		)
Distributions to unitholders	—	(93,098		)	—			(93,098		)
Unit-based compensation	256,996	7,251			—			7,251
Other	—	(14		)	—			(14		)
Balance as of December 31, 2014	42,913,277	316,611			(5,775		)	310,836
Net income	—	72,208			—			72,208
Other comprehensive loss	—	—			(2,889		)	(2,889		)
Distributions to unitholders	—	(93,567		)	—			(93,567		)
Unit-based compensation	17,272	468			—			468
Other	—	14			—			14
Balance as of December 31, 2015	42,930,549	295,734			(8,664		)	287,070
Net income	—	55,068			—			55,068
Other comprehensive loss	—	—			(5,210		)	(5,210		)
Distributions to unitholders	—	(93,590		)	—			(93,590		)
Unit-based compensation	21,200	450			—			450
Balance as of December 31, 2016	42,951,749	$	257,662		$	(13,874	)	$	243,788

See Notes to Consolidated Financial Statements.

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NUSTAR GP HOLDINGS, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2016 , 2015 and 2014

1. ORGANIZATION

NuStar GP Holdings, LLC (NuStar GP Holdings) (NYSE: NSH) is a publicly held Delaware limited liability company. Unless otherwise indicated, the terms “NuStar GP Holdings,” “NSH,” “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 unitholders.

We have no operations or sources of income or cash flows other than our investment in NuStar Energy L.P. (NuStar Energy or NS) (NYSE: NS). As of December 31, 2016 , we have an approximate 15% ownership in NuStar Energy, consisting of the following:


•	the 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


•	10,214,626 common units of NuStar Energy.

NuStar Energy is a publicly held Delaware limited partnership engaged in the transportation of petroleum products and anhydrous ammonia, the terminalling and storage of petroleum products 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, and the United Kingdom.

Employee Transfer from NuStar GP, LLC . On March 1, 2016, NuStar GP, LLC, our wholly owned subsidiary, transferred and assigned to NuStar Services Company LLC (NuStar Services Co), a wholly owned subsidiary of NuStar Energy, all of NuStar GP, LLC’s employees and related benefit plans, programs, contracts and policies (the Employee Transfer). As a result of the Employee Transfer, NuStar Energy pays employee costs directly and sponsors the long-term incentive plan and other employee benefit plans. Please refer to Note 5 for a discussion of this transfer and our related party agreements and Notes 14 and 15 for a discussion of the employee benefit plans and long-term incentive plan obligations transferred.

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 investment in NuStar Energy using the equity method. As the general partner, we exercise significant influence over NuStar Energy. 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. If a decline in the value of our investment is determined to be other than temporary, then we would record an impairment loss in the current period 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, 2016 is recoverable.

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NUSTAR GP HOLDINGS, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Accounting for Issuances 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.

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 2012 through 2015, according to standard statutes of limitations .

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, 2016 and 2015 .

Unit-Based Compensation

Prior to the Employee Transfer, we accounted for awards of NS unit options, performance units and restricted units to employees and directors of NuStar GP, LLC and its affiliates at fair value, whereby a liability for the award was initially recorded and subsequent changes in the fair value were included in the determination of net income. The fair value of NS unit options was determined using the Black-Scholes model at each reporting date. The fair value of NS restricted units and performance units equaled the market price of NS common units at each reporting date. However, NS performance units were earned only upon NuStar Energy’s achievement of an objective performance measure. We recorded compensation expense each reporting period such that the cumulative compensation expense equaled the portion of the award’s current fair value that had vested. We recorded compensation expense related to NS unit options until such options were exercised, and we recorded compensation expense for NS restricted units and performance units until the date of vesting. The liability for awards of NS unit options, performance units and restricted units were included in “Accrued compensation expense” on our consolidated balance sheet for the year ended December 31, 2015. Prior to the Employee Transfer, NuStar Energy reimbursed us for the expenses resulting from NS awards and NSH awards to employees providing services to NuStar Energy. Following the Employee Transfer, NuStar Energy retains the expenses resulting from NS awards and we retain the expenses resulting from NSH awards.

Distribution Equivalent Rights (DERs) paid with respect to outstanding, unvested NS units were expensed, whereas DERs with respect to outstanding, unvested NSH restricted units reduce equity, similar to cash distributions to unitholders. Forfeitures of our unit-based awards are recognized as an adjustment to compensation expense when they occur.

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NUSTAR GP HOLDINGS, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

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, as defined in each award. 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.

Reclassifications

Certain previously reported amounts in the 2015 consolidated financial statements and notes have been reclassified to conform to 2016 presentation.

3. NEW ACCOUNTING PRONOUNCEMENTS

Statement of Cash Flows

In August 2016, the Financial Accounting Standards Board (FASB) issued amended guidance that clarifies how entities should present certain cash receipts and cash payments on the statement of cash flows, including but not limited to debt prepayment or debt extinguishment costs; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims and distributions received from equity method investees. The changes are effective for annual and interim periods beginning after December 15, 2017, and amendments should be applied retrospectively. We will adopt these provisions January 1, 2018, and we do not expect the guidance to have a material impact on our statements of cash flows or disclosures.

Unit-Based Payments

In March 2016, the FASB issued amended guidance that simplifies certain aspects of accounting for unit-based payments to employees, including the accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as classification in the statement of cash flows. The changes are effective for annual and interim periods beginning after December 15, 2016, and early adoption is permitted. The new requirements should be applied prospectively, retrospectively or using a modified retrospective transition method depending on the area affected by the amended guidance. We adopted this amended guidance effective January 1, 2016, and none of the provisions had a material impact on our financial position, results of operations or disclosures.

Financial Instruments

In January 2016, the FASB issued new guidance that addresses certain aspects of recognition, measurement, presentation and disclosure of financial instruments. The changes are effective for annual and interim periods beginning after December 15, 2017, and amendments should be applied by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. We will adopt these provisions January 1, 2018, and we do not expect the guidance to have a material impact on our financial position, results of operations or disclosures.

Deferred Taxes

In November 2015, the FASB issued amended guidance that requires deferred tax assets and liabilities to be classified as noncurrent on the balance sheet. The changes are effective for annual and interim periods beginning after December 15, 2016, using either a prospective or retrospective transition method, and early adoption is permitted. We adopted these provisions on a prospective basis on January 1, 2017, and it did not have an impact on our financial position, results of operations or disclosures.

Debt Issuance Costs

In April 2015, the FASB issued amended guidance for the presentation of debt issuance costs. Under the amended guidance, debt issuance costs will be presented on the balance sheet as a deduction from the carrying value of the associated debt liability. In August 2015, the FASB issued amended guidance that would allow debt issuance costs related to line-of-credit agreements to continue to be presented as an asset on the balance sheet. The changes are effective for annual and interim periods beginning after December 15, 2015, and retrospective application is required. Accordingly, we adopted the amended guidance on January 1, 2016, and it did not impact our financial position, results of operations or disclosures.

Consolidation

In February 2015, the FASB issued new consolidation guidance that modifies the criterion involved in a reporting organization’s evaluation of whether certain legal entities are subject to consolidation under the standard. The standard is effective for public companies for annual and interim reporting periods beginning after December 15, 2015, using one of two retrospective transition methods. Accordingly, we adopted the guidance on January 1, 2016, and it did not impact our financial position, results of operations or disclosures.

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4. INVESTMENT IN NUSTAR ENERGY

NuStar Energy’s Equity Issuances

Common Unit Offering . In 2016, NuStar Energy issued 595,050 common units representing limited partner interests at an average price of $47.39 per unit. NuStar Energy received net proceeds of $28.3 million , which includes our contribution of $0.6 million in order to maintain our 2.0% general partner interest (as defined in NuStar Energy’s partnership agreement). This issuance resulted in a gain of $2.1 million for the year ended December 31, 2016, which is included in “Other income (expense), net” on our consolidated statements of comprehensive income, and represents the increase in the value of our proportionate share of NuStar Energy’s capital.

NuStar Energy’s Acquisitions and Dispositions

Martin Terminal Acquisition. On December 21, 2016, NuStar Energy acquired crude oil and refined product storage assets in Corpus Christi, TX for $95.7 million , including $2.1 million of capital expenditure reimbursements, from Martin Operating Partnership L.P. (the Martin Terminal Acquisition). The assets acquired include 900,000 barrels of crude oil storage capacity, 250,000 barrels of refined product storage capacity and exclusive use of the Port of Corpus Christi’s new crude oil dock.

Linden Acquisition . On January 2, 2015, NuStar Energy acquired full ownership of a refined products terminal in Linden, NJ for $142.5 million (the Linden Acquisition). Prior to the Linden Acquisition, the terminal operated as a joint venture between NuStar Energy and Linden Holding Corp, with each party owning 50% .

2014 Asphalt Sale . On February 26, 2014, NuStar Energy sold its remaining 50% ownership interest in NuStar Asphalt LLC (the 2014 Asphalt Sale) to Lindsay Goldberg LLC, a private investment firm. Effective February 27, 2014, NuStar Asphalt LLC changed its name to Axeon Specialty Products LLC (Axeon).

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Summary Financial Information

Condensed consolidated financial information reported by NuStar Energy is presented below:



	December 31,
	2016		2015
	(Thousands of Dollars)
Balance Sheet Information:
Current assets	$	377,183	$	333,851
Property, plant and equipment, net	3,722,283		3,683,571
Goodwill	696,637		696,637
Other non-current assets	234,442		411,466
Total assets	$	5,030,545	$	5,125,525
Current liabilities	$	289,396	$	332,213
Long-term debt	3,014,364		3,055,612
Other non-current liabilities	115,168		127,856
Total liabilities	3,418,928		3,515,681
NuStar Energy partners’ equity	1,611,617		1,609,844
Total liabilities and partners’ equity	$	5,030,545	$	5,125,525



	Year Ended December 31,
	2016		2015		2014
	(Thousands of Dollars)
Statement of Income Information:
Revenues	$	1,756,682	$	2,084,040	$	3,075,118
Operating income	$	359,109	$	390,704	$	346,901

Income from continuing operations	$	150,003	$	305,946	$	214,169
Income (loss) from discontinued operations, net of tax	—		774		(3,791		)
Net income	$	150,003	$	306,720	$	210,378

Other

Our investment in NuStar Energy reconciles to NuStar Energy’s total partners’ equity as follows:



	December 31,
	2016			2015
	(Thousands of Dollars, Except Percentage Data)
NuStar Energy’s partners’ equity	$	1,611,617		$	1,609,844
Less NuStar Energy’s preferred limited partners’ equity	218,400			—
NuStar Energy’s partners’ equity, excluding preferred limited partners’ equity	1,393,217			1,609,844
NuStar GP Holdings’ ownership interest in NuStar Energy	14.7		%	14.9		%
NuStar GP Holdings’ share of NuStar Energy’s partners’ equity	204,803			239,867
Step-up in basis related to NuStar Energy’s assets and liabilities, including equity method goodwill, and other	63,939			66,827
Investment in NuStar Energy	$	268,742		$	306,694

We do not own any NuStar Energy preferred limited partner units. Accordingly, we subtract NuStar Energy’s preferred limited partners’ equity from its total equity and apply our ownership percentage of NuStar Energy’s remaining equity when reconciling to our investment in NuStar Energy above.

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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 earnings of NuStar Energy:



	Year Ended December 31,
	2016			2015			2014
	(Thousands of Dollars)
NuStar GP Holdings’ Equity in Earnings of NuStar Energy:
General partner interest	$	2,091		$	5,270		$	3,352
General partner incentive distribution rights	43,407			43,220			43,220
General partner’s interest in earnings and incentive distributions of NuStar Energy	45,498			48,490			46,572
Common limited partner interest in earnings of NuStar Energy	13,482			34,067			21,692
Amortization of step-up in basis related to NuStar Energy’s assets and liabilities	(2,884		)	(2,884		)	(2,884		)
Equity in earnings of NuStar Energy	$	56,096		$	79,673		$	65,380

5. RELATED PARTY TRANSACTIONS

NuStar Energy

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 and are considered dual employees of ours and of NuStar Energy. 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.

GP Services Agreement. Prior to the Employee Transfer, NuStar GP, LLC managed the operations of NuStar Energy under a services agreement effective January 1, 2008 pursuant to which employees of NuStar GP, LLC performed services for NuStar Energy’s U.S. operations. Employees of NuStar GP, LLC provided services to both NuStar Energy and NuStar GP Holdings; therefore, NuStar Energy reimbursed NuStar GP, LLC for all employee costs incurred prior to the Employee Transfer, other than the expenses allocated specifically to NuStar GP Holdings (the Holdco Administrative Services Expense). For the years ended December 31, 2016, 2015 and 2014, the Holdco Administrative Services Expense totaled $0.2 million , $1.5 million and $1.7 million , respectively. The following table summarizes information pertaining to related party transactions reimbursed by NuStar Energy:



	Year Ended December 31,
	2016		2015		2014
	(Thousands of Dollars)
Expenses for payroll, employee benefit plans and unit-based compensation	$	32,053	$	201,852	$	197,745
Other expenses	$	121	$	484	$	482

In conjunction with the Employee Transfer, NuStar GP, LLC entered into an Amended and Restated Services Agreement with NuStar Services Co, a wholly owned subsidiary of NuStar Energy, effective March 1, 2016 (the Amended GP Services Agreement). The Amended GP Services Agreement provides that NuStar Services Co will furnish administrative services

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necessary to conduct our business. We will compensate NuStar Services Co for these services through an annual fee of $1.0 million, subject to adjustment based on the annual merit increase percentage applicable to NuStar Services Co employees for the most recently completed fiscal year and for changes in level of service. The Amended GP Services Agreement will terminate on March 1, 2020 and will automatically renew for successive two-year terms, unless terminated by either party. We incurred administrative expenses related to the Amended GP Services Agreement of $0.8 million for the year ended December 31, 2016 , which is reported in related party general and administrative expenses on the consolidated statements of comprehensive income.

Assignment and Assumption Agreement . Also on March 1, 2016 and in connection with the Employee Transfer, NuStar Services Co and NuStar GP, LLC entered into an Assignment and Assumption Agreement (the Assignment Agreement). Under the Assignment Agreement, NuStar GP, LLC assigned all of its employee benefit plans, programs, contracts, policies, and various of its other agreements and contracts with certain employees, affiliates and third-party service providers (collectively, the Assigned Programs) to NuStar Services Co. In addition, NuStar Services Co agreed to assume the sponsorship of and all obligations relating to the ongoing maintenance and administration of each of the plans and agreements in the Assigned Programs.

The following table summarizes the related party transactions and changes to amounts reported on our consolidated balance sheet as a result of the Employee Transfer on March 1, 2016 (thousands of dollars):



Decrease in related party receivable:
Current	$	16,014
Long-term	32,656
Decrease in related party receivable	$	48,670

Decreases to our consolidated balance sheet:
Current and long-term assets	$	(506	)
Current liabilities	10,933
Other long-term liabilities	34,042
Accumulated other comprehensive loss	4,201
Decreases to our consolidated balance sheet	$	48,670

Balance Sheet Items . We had a payable to NuStar Energy of $0.3 million as of December 31, 2016, mainly comprised of service fees and expenses paid on behalf of NuStar GP Holdings. As of December 31, 2015, we had a receivable from NuStar Energy of $14.8 million , mainly comprised of payroll, employee benefit plan expenses and unit-based compensation prior to the Employee Transfer, and none as of December 31, 2016. We also had a long-term receivable from NuStar Energy as of December 31, 2015 of $32.1 million , representing long-term employee benefit obligations prior to the Employee Transfer, and none as of December 31, 2016.

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.

Axeon

As a result of the 2014 Asphalt Sale, we ceased reporting transactions between us and Axeon as related party transactions in our consolidated financial statements on February 26, 2014.

Axeon Services Agreement. NuStar GP, LLC and Axeon were a party to a services agreement, which provided that NuStar GP, LLC furnish certain administrative and other operating services necessary to conduct the business of Axeon for an annual fee totaling $10.0 million, subject to adjustment (the Axeon Services Agreement). The Axeon Services Agreement terminated on

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June 30, 2014 . The aggregate amount charged under the Axeon Services Agreement was $3.1 million for the year ended December 31, 2014.

6. DISTRIBUTIONS FROM NUSTAR ENERGY

NuStar Energy’s partnership agreement, as amended, determines the amount and priority of cash distributions that NuStar Energy’s 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 common unit, with the maximum percentage of 23% of the amount of any quarterly distribution in excess of $0.66 per common 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 common limited partners:



	Year Ended December 31,
	2016		2015		2014
	(Thousands of Dollars, Except Per Unit Data)
General partner interest	$	7,877	$	7,844	$	7,844
General partner incentive distribution rights	43,407		43,220		43,220
Total general partner distribution	51,284		51,064		51,064
Common limited partner distribution	44,699		45,073		44,974
Total distributions to NuStar GP Holdings	95,983		96,137		96,038
Public common limited partners’ distribution	297,899		296,067		296,166
Total cash distributions	$	393,882	$	392,204	$	392,204
Cash distributions per unit applicable to common limited partners	$	4.380	$	4.380	$	4.380

The following table summarizes information related to NuStar Energy’s quarterly cash distributions to its general and common limited partners:



Quarter Ended	Cash Distributions Per Common Unit		Total Cash Distributions		Record Date	Payment Date
			(Thousands of Dollars)
December 31, 2016 (a)	$	1.095	$	98,971	February 8, 2017	February 13, 2017
September 30, 2016	$	1.095	$	98,809	November 8, 2016	November 14, 2016
June 30, 2016	$	1.095	$	98,051	August 9, 2016	August 12, 2016
March 31, 2016	$	1.095	$	98,051	May 9, 2016	May 13, 2016


(a)	The distribution was announced on January 27, 2017 .

7. ACCRUED COMPENSATION EXPENSE AND LONG-TERM LIABILITIES

Accrued compensation expense and long-term liabilities consisted of the following prior to the Employee Transfer:



	December 31, 2015
	Accrued Compensation Expense		Long-term Liabilities
	(Thousands of Dollars)
NuStar Energy restricted units and performance units	$	3,794	$	—
Pension liabilities (Note 14)	71		21,425
Other postretirement benefit plan liabilities (Note 14)	304		9,738
Other employee-related liabilities	4,821		1,696
Total	$	8,990	$	32,859

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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.

As of December 31, 2015, NuStar Energy restricted and performance unit liabilities of $3.8 million were measured at fair value on a recurring basis and categorized as a Level 1 in the fair value hierarchy. As a result of the Employee Transfer, our consolidated balance sheet as of December 31, 2016 no longer reflects these liabilities, which were reported in “Accrued compensation expense” on our consolidated balance sheet as of December 31, 2015. Please refer to Note 5 and Note 14 for a discussion of the employee-related obligations transferred.

Fair Value of Financial Instruments

We recognize cash equivalents, receivables, payables and short-term debt in our consolidated balance sheets at their carrying amounts. The fair values of these financial instruments approximate their carrying amounts. The fair value measurement 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,
	2016			2015			2014
	(Thousands of Dollars)
Decrease (increase) in current assets:
Receivable from related party, net	$	(993	)	$	1,134		$	105
Income tax receivable	909			(1		)	(13		)
Other receivables	(32		)	22			(14		)
Other current assets	(117		)	(8		)	(407		)
Increase (decrease) in current liabilities:
Accounts payable	(222		)	16			296
Accrued compensation expense	(1,339		)	(954		)	(2,374		)
Accrued liabilities	120			(97		)	(99		)
Taxes other than income tax	(1,662		)	184			236
Changes in current assets and current liabilities	$	(3,336	)	$	296		$	(2,270	)

Cash flows related to interest and income tax were as follows:



	Year Ended December 31,
	2016			2015			2014
	(Thousands of Dollars)
Cash paid for interest	$	890		$	736		$	684
Cash refunded for income tax, net	$	(900	)	$	(50	)	$	(1,149	)

The above changes in current assets and current liabilities differ from changes between amounts reflected in our consolidated balance sheets due to the non-cash related party transactions associated with the Employee Transfer. Please refer to Note 5 for further details.

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Non-cash investing and financing activities for the years ended December 31, 2016 and 2015 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


•	Prior to the Employee Transfer, pension funding adjustments recognized in accumulated other comprehensive loss.

10. CREDIT FACILITY

Our revolving credit facility dated June 28, 2013 currently has a borrowing capacity of up to $50.0 million , of which up to $10.0 million may be available for letters of credit. We amended this facility on June 16, 2016 to, among other things, extend its maturity to June 27, 2017 . Our obligations under our revolving credit facility are guaranteed by Riverwalk Holdings, LLC (Riverwalk), our wholly owned subsidiary. Riverwalk has pledged a total of 2,107,918 NuStar Energy common units that it owns to secure its guarantee. 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.

As of December 31, 2016 , we had outstanding borrowings of $30.0 million and availability of $20.0 million for borrowings under our revolving credit facility. Interest on our revolving credit facility is based upon, at our option, either an alternative base rate or a LIBOR-based rate . The weighted-average interest rates related to borrowings under our revolving credit facility as of December 31, 2016 and 2015 were 2.8% and 2.4% , respectively. As of December 31, 2016 and 2015, unamortized deferred debt costs associated with our revolving credit agreement totaled $ 0.1 million and $ 0.1 million , respectively, and are included in “Prepaid expenses and other current assets” on our consolidated balance sheets.

The revolving credit facility contains customary restrictive covenants, such as limitations on indebtedness, liens, dispositions of material property, mergers, asset transfers and certain investing activities. In addition, the revolving credit facility requires NuStar Energy to maintain, as of the end of each rolling period of four consecutive fiscal quarters, a consolidated debt coverage ratio (as defined in our revolving credit agreement) not to exceed 5.00-to-1.00. If NuStar Energy consummates an acquisition for an aggregate net consideration of at least $50.0 million, its maximum consolidated debt coverage ratio will increase to 5.50-to-1.00 for two rolling periods. As of December 31, 2016, the maximum allowed amount was 5.50-to-1.00, as a result of the Martin Terminal Acquisition. We are also required to receive cash distributions each fiscal quarter of at least $16.0 million in respect of our ownership interests in NuStar Energy. Our management believes that we are in compliance with the covenants of our revolving credit facility as of December 31, 2016 .

11. COMMITMENTS AND CONTINGENCIES

Contingencies

Commitments

As of December 31, 2016 , we had no future minimum payments applicable to non-cancellable operating leases and purchase obligations.

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12. NET INCOME PER UNIT

We treat restricted units granted under our long-term incentive plan as participating securities in computing net income per unit pursuant to the two-class method. There were no outstanding options to purchase NuStar GP Holdings units for the years ended December 31, 2016 and 2015 . Unit amounts used in the computation of basic and diluted net income per unit were as follows:



	Year Ended December 31,
	2016	2015	2014
Basic units outstanding:
Weighted-average number of basic units outstanding	42,932,320	42,914,297	42,719,217
Diluted units outstanding:
Weighted-average number of basic units outstanding	42,932,320	42,914,297	42,719,217
Effect of dilutive securities	—	—	22,985
Weighted-average number of diluted units outstanding	42,932,320	42,914,297	42,742,202

13. MEMBERS’ EQUITY

Accumulated Other Comprehensive Loss

The following table presents changes in accumulated other comprehensive loss by component:



	Share of NuStar Energy’s Other Comprehensive Loss			Pension and Other Postretirement Benefit Plan Adjustments			Total
	(Thousands of Dollars)
Balance as of January 1, 2014	$	(9,417	)	$	18,358		$	8,941
Other comprehensive loss before reclassification adjustments	(665		)	(11,136		)	(11,801		)
Amounts reclassified to general and administrative expenses (a)	—			(2,915		)	(2,915		)
Other comprehensive loss	(665		)	(14,051		)	(14,716		)
Balance as of December 31, 2014	(10,082		)	4,307			(5,775		)
Other comprehensive (loss) income before reclassification adjustments	(3,107		)	1,312			(1,795		)
Amounts reclassified to general and administrative expenses (a)	—			(1,094		)	(1,094		)
Other comprehensive (loss) income	(3,107		)	218			(2,889		)
Balance as of December 31, 2015	(13,189		)	4,525			(8,664		)
Other comprehensive loss before reclassification adjustments	(685		)	—			(685		)
Amounts reclassified to general and administrative expenses (a)	—			(324		)	(324		)
Employee Transfer (b)	—			(4,201		)	(4,201		)
Other comprehensive loss	(685		)	(4,525		)	(5,210		)
Balance as of December 31, 2016	$	(13,874	)	$	—		$	(13,874	)


(a)	These amounts are components of net periodic pension cost (income), and prior to the Employee Transfer on March 1, 2016, NuStar Energy reimbursed us for these employee costs.


(b)	Represents the balance of accumulated other comprehensive loss related to the unrecognized components of net periodic benefit cost (income), net of income taxes of $2.4 million, that was transferred to NuStar Services Co in connection with the Employee Transfer as described in Notes 5 and 14.

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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 generally 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,
	2016		2015		2014
	(Thousands of Dollars, Except Per Unit Data)
Cash distributions per unit	$	2.18	$	2.18	$	2.18
Total cash distributions	$	93,601	$	93,561	$	93,252

The following table summarizes information related to our quarterly cash distributions:



Quarter Ended	Cash Distributions Per Unit		Total Cash Distributions		Record Date	Payment Date
			(Thousands of Dollars)
December 31, 2016 (a)	$	0.545	$	23,408	February 8, 2017	February 15, 2017
September 30, 2016	$	0.545	$	23,398	November 8, 2016	November 16, 2016
June 30, 2016	$	0.545	$	23,398	August 9, 2016	August 16, 2016
March 31, 2016	$	0.545	$	23,397	May 9, 2016	May 17, 2016


(a)	The distribution was announced on January 27, 2017 .

Rights Agreement

On July 19, 2006, we entered into a rights agreement, as amended (the Rights Agreement), under which one preferred unit purchase right (a Right) was attached to each of our outstanding units. The Rights became exercisable under specified circumstances, including if any person or group (an acquiring person) became the beneficial owner of 15% or more of our outstanding units, subject to specified exceptions. The Rights Agreement and the Rights expired on June 30, 2016.

14. EMPLOYEE BENEFIT PLANS

Pension and Other Postretirement Benefits

On March 1, 2016 and in conjunction with the Employee Transfer, we transferred to NuStar Services Co $32.7 million in benefit obligations associated with pension and other postretirement benefit plans. As a result of the Employee Transfer, our consolidated balance sheet as of December 31, 2016 no longer reflects these liabilities, which were primarily reported in “Long-term liabilities” on our consolidated balance sheet as of December 31, 2015. Additionally, we transferred an accumulated other comprehensive income balance related to the unrecognized components of net periodic benefit cost (income) of $4.2 million .

Prior to the Employee Transfer, NuStar Energy reimbursed NuStar GP, LLC for expenses incurred under these plans. Effective March 1, 2016, NuStar Services Co pays employee costs directly and assumed sponsorship and responsibility for the employee related benefit plans discussed below. As such, the information in the tables and discussion below is for the years ended December 31, 2015 and 2014, as applicable.

Thrift Plans

The NuStar Thrift Plan (the Thrift Plan) is a qualified defined contribution plan that became effective June 26, 2006. Participation in the Thrift Plan is voluntary and is open to eligible employees upon their date of hire. 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 made 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, 2015 and 2014 totaled $6.3 million and $5.9 million , respectively.

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NuStar GP, LLC also maintained 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 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 provides eligible employees with retirement income as calculated under a cash balance formula. Under the cash balance formula, benefits are determined based on age, service and interest credits, and employees become fully vested in their benefits upon attaining three years of vesting service. Prior to January 1, 2014, eligible employees were covered under either a cash balance formula or a final average pay formula (FAP). Effective January 1, 2014, the Pension Plan was amended to freeze the FAP benefits as of December 31, 2013, and going forward, all eligible employees are covered under the cash balance formula discussed above.

NuStar GP, LLC also maintained 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. Neither the Excess Thrift Plan nor the Excess Pension Plan 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.

The Pension Plan, Excess Pension Plan and the supplemental executive retirement plan (the SERP), which has no participants following final payouts in 2014, are collectively referred to as the Pension Plans in the tables and discussion below. Our other postretirement benefit plans included a contributory medical benefits plan for employees that retired prior to April 1, 2014. For employees that retire on or after April 1, 2014, we provided partial reimbursement for eligible third-party health care premiums. We use December 31 as the measurement date for pension and other postretirement plans.

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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 year ended December 31, 2015 were as follows:



	Pension Plans			Other Postretirement Benefit Plans
	(Thousands of Dollars)
Change in benefit obligation:
Benefit obligation, January 1	$	106,848		$	10,484
Service cost	7,676			470
Interest cost	4,389			448
Benefits paid	(4,338		)	(507		)
Participant contributions	—			203
Actuarial gain	(5,373		)	(1,056		)
Benefit obligation, December 31	$	109,202		$	10,042
Change in plan assets:
Plan assets at fair value, January 1	$	83,365		$	—
Actual return on plan assets	645			—
Company contributions	8,034			304
Benefits paid	(4,338		)	(507		)
Participant contributions	—			203
Plan assets at fair value, December 31	$	87,706		$	—
Reconciliation of funded status:
Fair value of plan assets at December 31	$	87,706		$	—
Less: Benefit obligation at December 31	109,202			10,042
Funded status at December 31	$	(21,496	)	$	(10,042	)
Amounts recognized in the consolidated balance sheet: (a)
Accrued compensation expense	$	(71	)	$	(304	)
Long-term liabilities	(21,425		)	(9,738		)
Net pension liability	$	(21,496	)	$	(10,042	)


(a)	For the Pension Plan, since assets exceeded the present value of expected benefit payments for the following 12 months, all of the liability was noncurrent. For the Excess Pension Plan and the other postretirement benefit plans, since there were no assets, the current liability was the present value of expected benefit payments for the following 12 months; the remainder was noncurrent.

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NUSTAR GP HOLDINGS, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The components of net periodic benefit cost (income) related to our Pension Plans and other postretirement benefit plans, which were reimbursed to us by NuStar Energy, were as follows:



	Pension Plans						Other Postretirement Benefit Plans
	Year Ended December 31,						Year Ended December 31,
	2015			2014			2015			2014
	(Thousands of Dollars)
Service cost	$	7,676		$	8,049		$	470		$	374
Interest cost	4,389			4,225			448			373
Expected return on plan assets	(5,018		)	(4,574		)	—			—
Amortization of prior service credit	(2,063		)	(2,063		)	(1,145		)	(1,145		)
Amortization of net actuarial loss	1,845			179			269			114
Other	—			(39		)	—			—
Net periodic benefit cost (income)	$	6,829		$	5,777		$	42		$	(284	)

We amortized the prior service credit shown in the table above on a straight-line basis of the credit over the average remaining service period of employees expected to receive benefits under our Pension Plans and other postretirement benefit plans. We amortized the net actuarial loss shown in the table above on a straight-line basis of the excess of the unrecognized loss over 10 percent of the greater of the projected benefit obligation or market-related value of plan assets (smoothed asset value) over the average remaining service period of active employees expected to receive benefits under our Pension Plans and other postretirement benefit plans.

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,
	2015			2014			2015			2014
	(Thousands of Dollars)
Net unrecognized gain (loss) arising during the year:
Net actuarial gain (loss)	$	1,000		$	(14,716	)	$	1,056		$	(2,718	)
Net (gain) loss reclassified into income:
Amortization of prior service credit	(2,063		)	(2,063		)	(1,145		)	(1,145		)
Amortization of net actuarial loss	1,845			179			269			114
Net (gain) loss reclassified into income	(218		)	(1,884		)	(876		)	(1,031		)

Income tax (expense) benefit	(362		)	5,314			(382		)	984
Total changes in other comprehensive income (loss)	$	420		$	(11,286	)	$	(202	)	$	(2,765	)

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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:



	December 31, 2015
	Pension Plans			Other Postretirement Benefit plans
	(Thousands of Dollars)
Unrecognized actuarial loss (a)	$	(21,975	)	$	(3,568	)
Prior service credit (a)	20,727			11,754
Deferred tax asset (liability)	1,313			(3,726		)
Accumulated other comprehensive income, net of tax	$	65		$	4,460


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

Investment Policies and Strategies

The investment policies and strategies for the assets of our qualified Pension Plan incorporated a well-diversified approach that was expected to earn long-term returns from capital appreciation and a growing stream of current income. This approach recognized that assets are exposed to risk, and the market value of the Pension Plan’s assets may fluctuate from year to year. Risk tolerance was 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 included a diversified portfolio of equity and fixed-income instruments. The aggregate asset allocation was reviewed on an annual basis.

The overall expected long-term rate of return on plan assets for the Pension Plan was estimated using various models of asset returns. Model assumptions were derived using historical data with the assumption that capital markets are informationally efficient. Three models were 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 was used.

Fair Value of Plan Assets

We disclosed 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.

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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, 2015
	Level 1		Level 2		Level 3		Total
	(Thousands of Dollars)
Cash equivalent securities	$	739	$	—	$	—	$	739
Equity securities:
U.S. large cap equity fund (a)	—		52,086		—		52,086
International stock index fund (b)	8,522		—		—		8,522
Fixed income securities:
Bond market index fund (c)	26,359		—		—		26,359
Total	$	35,620	$	52,086	$	—	$	87,706


(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.

Assumptions

The weighted-average assumptions used to determine the benefit obligations were as follows:



	December 31, 2015
	Pension Plans		Other Postretirement Benefit Plans
Discount rate	4.61	%	4.75	%
Rate of compensation increase	3.51	%	n/a

The weighted-average assumptions used to determine the net periodic benefit cost (income) were as follows:



	Pension Plans				Other Postretirement Benefit Plans
	Year Ended December 31,				Year Ended December 31,
	2015		2014		2015		2014
Discount rate	4.22	%	5.04	%	4.34	%	5.28	%
Expected long-term rate of return on plan assets	6.50	%	6.75	%	n/a		n/a
Rate of compensation increase	3.51	%	3.51	%	n/a		n/a

The assumed health care cost trend rates were as follows:



	December 31, 2015
Health care cost trend rate assumed for 2016	6.81	%
Rate to which the cost trend rate was assumed to decrease to (the ultimate trend rate)	5.00	%
Year that the rate reached the ultimate trend rate	2026

Assumed health care cost trend rates have a significant effect on the amounts reported for health care plans. Prior to the Employee Transfer, we sponsored a contributory postretirement health care plan for employees that retired prior to April 1, 2014. The plan had 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 was 2.5% per year. The assumed increase in total health care cost exceeded the 2.5% indexed cap, so increasing or decreasing the health care cost trend rate by 1% did not materially change our obligation or expense for the postretirement health care plan.

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NUSTAR GP HOLDINGS, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

15. UNIT-BASED COMPENSATION

2006 LTIP

We sponsor the 2006 Long-Term Incentive Plan (the 2006 LTIP) under which NuStar GP Holdings may award up to 2,000,000 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 units, distribution equivalent rights (DERs), restricted units, phantom units, unit grants and unit appreciation rights. As of December 31, 2016 , a total of 1,453,477 NSH units remained available to be awarded under the 2006 LTIP. Effective on the date of the Employee Transfer and the Assignment Agreement, we retain the expense associated with awards granted under the 2006 LTIP to our employees, whereas these expenses were previously reimbursed by NuStar Energy.

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 expired seven years after the grant date and vested in annual one-third increments beginning on November 16, 2010. The number of NSH unit options exercised during the year ended December 31, 2014 was 289,100 . The total intrinsic value of the unit options exercised during the year ended December 31, 2014 was $2.8 million . There were no NSH unit options outstanding and exercisable as of December 31, 2016 and 2015 .

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 was the period of time from the grant date to the date of expected exercise or other expected settlement. Expected volatility for NSH unit options was based on closing prices of NSH common units for periods corresponding to the life of options granted. Expected distribution yield was based on annualized distributions at the grant date for NSH unit options. The risk-free interest rate used was 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.

Restricted Units. What we refer to as “restricted units” are considered phantom units as they represent the right to receive our common units upon vesting. 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, 2014	39,204		21,194		60,398		$	28.83
Granted	16,895		8,911		25,806		$	34.22
Vested	(12,264	)	(9,680	)	(21,944	)	$	29.22
Forfeited	(4,745	)	—		(4,745	)	$	27.46
Balance as of December 31, 2014	39,090		20,425		59,515		$	31.13
Granted	26,240		12,814		39,054		$	23.80
Vested	(11,403	)	(10,086	)	(21,489	)	$	30.80
Balance as of December 31, 2015	53,927		23,153		77,080		$	27.51
Granted	32,456		12,126		44,582		$	25.42
Vested	(15,251	)	(11,637	)	(26,888	)	$	28.23
Balance as of December 31, 2016	71,132		23,642		94,774		$	26.32

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NUSTAR GP HOLDINGS, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The outstanding restricted units granted to domestic employees are equity-classified awards and generally vest over 5 years , beginning one year after the grant date. The outstanding restricted units granted to non-employee directors (NEDs) are equity-classified awards that vest over 3 years , beginning one year after the grant date. The fair value of these awards is measured at the grant date.

The following table presents supplemental information regarding our restricted unit awards:



	Year Ended December 31,
	2016			2015			2014
	(Thousands of Dollars, Except Unit Data)
DERs paid to restricted unitholders	$	(167	)	$	(129	)	$	(118	)
Fair value of restricted units that vested during the period	$	700		$	379		$	742
Units issued for settlement of awards vested, net of employee tax withholding requirements	21,200			17,272			256,996

Unrecognized compensation cost related to our equity-classified awards totaled $2.4 million as of December 31, 2016, which we expect to recognize over a weighted-average period of 3.6 years .

2000 LTIP

Prior to the Employee Transfer, we sponsored the Long-Term Incentive Plan (the 2000 LTIP), under which NuStar GP, LLC could award up to 3,250,000 NS common units, and NuStar Energy reimbursed NuStar GP, LLC for all employee costs, including unit-based compensation costs. Awards under the 2000 LTIP could include NS unit options, restricted units, performance units, DERs and contractual rights to receive common units.

On March 1, 2016, in conjunction with the Employee Transfer, we transferred to NuStar Services Co all outstanding awards under the 2000 LTIP, which represented 730,288 units, and removed the obligation related to these unit-based awards from our consolidated balance sheet. Included in this number are 77,014 performance units. However, of the performance units transferred, only 35,373 were considered granted for accounting purposes, as the performance measure for the remaining tranches had not yet been set.

The following table summarizes information about awards we granted under the 2000 LTIP, prior to the Employee Transfer:



		Awards Granted
		Year Ended December 31,
	Vesting	2016	2015	2014
2000 LTIP:
Performance units	(a)	47,646	29,633	28,841
Restricted units	1/5 per year	—	250,563	208,714
Restricted units (grants to non-employee directors of NuStar GP, LLC)	1/3 per year	—	7,553	7,009


(a)	Performance units vest 1/3 per year if certain performance measures are met, as defined in the award agreements.

As of December 31, 2015 , we had accrued $3.8 million for the outstanding awards of NS performance units and restricted units in “Accrued compensation expense” on our consolidated balance sheet.

The following table summarizes information pertaining to long-term incentive plan compensation expenses:



	Year Ended December 31,
	2016		2015		2014
	(Thousands of Dollars)
Long-term incentive plan compensation expense charged to NuStar Energy	$	490	$	6,397	$	10,934
Expenses resulting from NuStar GP Holdings awards	$	661	$	239	$	129

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NUSTAR GP HOLDINGS, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

16. INCOME TAXES

Components of income tax benefit (expense) were as follows:



	Year Ended December 31,
	2016			2015			2014
	(Thousands of Dollars)
Current:
U.S. federal	$	—		$	—		$	1,123
U.S. state	(9		)	51			42
Total current	(9		)	51			1,165
Deferred:
U.S. federal	76			(940		)	415
U.S. state	(1		)	(12		)	206
Total deferred	75			(952		)	621
Total income tax benefit (expense)	$	66		$	(901	)	$	1,786

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.

The tax effects of significant temporary differences representing deferred income tax assets and liabilities were as follows:



	December 31,
	2016			2015
	(Thousands of Dollars)
Deferred income tax assets:
Unit-based compensation	$	—		$	2,115
Pension	—			7,561
Capital loss	1,344			1,290
Net operating loss	5,239			4,346
Foreign tax credits	74			69
Other	80			14
Total deferred income tax assets	6,737			15,395
Less: Valuation allowance	(1,418		)	(1,359		)
Net deferred income tax assets	5,319			14,036

Deferred income tax liabilities:
Investment in Riverwalk Logistics, L.P. and NuStar Energy	(233		)	(249		)
Other employee benefits	—			(11,189		)
Deferred income tax liabilities	(233		)	(11,438		)

Total net deferred income tax assets	$	5,086		$	2,598

Reported on the consolidated balance sheets as:
Deferred income tax assets, net (long-term)	$	5,086		$	5,258
Deferred income tax liabilities, net (current)	—			(2,660		)
Total net deferred income tax assets	$	5,086		$	2,598

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NUSTAR GP HOLDINGS, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

As of December 31, 2016 , our U.S. corporate operations have net operating loss carryforwards and capital loss carryforwards for tax purposes totaling approximately $15.0 million and $3.8 million , respectively, which are subject to a twenty-year and a five-year carryforward limitation , respectively, and expire in 2031 and 2017 , respectively.

As of December 31, 2016 and 2015 , we have a valuation allowance of $1.4 million related to our deferred tax assets. We estimate the amount of valuation allowance based upon our expectations of taxable income and the period over which we can utilize those future deductions. The valuation allowance reflects uncertainties related to our ability to utilize certain capital loss carryforwards and foreign tax credits before they expire.

The realization of deferred income tax assets recorded as of December 31, 2016 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, 2016 will be realized, based upon expected future taxable income and potential tax planning strategies.

17. QUARTERLY FINANCIAL DATA (UNAUDITED)

The following table summarizes quarterly financial data for the years ended December 31, 2016 and 2015 :



	First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Total
	(Thousands of Dollars, Except Per Unit Data)
2016:
Net income	$	16,676	$	15,073	$	17,320	$	5,999	$	55,068
Basic and diluted net income per unit	0.39		0.35		0.40		0.14		1.28
Cash distributions per unit	0.545		0.545		0.545		0.545		2.180
2015:
Net income	$	26,805	$	15,527	$	16,917	$	12,959	$	72,208
Basic and diluted net income per unit	0.62		0.37		0.39		0.30		1.68
Cash distributions per unit	0.545		0.545		0.545		0.545		2.180

In the fourth quarter of 2016, NuStar Energy recognized a $58.7 million impairment charge on its term loan to Axeon Specialty Products LLC. In the first quarter of 2015, NuStar Energy recognized a $56.3 million gain in association with the Linden Acquisition. Please refer to Note 4 for a discussion of this acquisition.

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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 effective as of December 31, 2016 .

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 Form 10-K, 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.

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.

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PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Information required to be disclosed under this Item 10 appears under the following headings in our Proxy Statement for the 2017 annual meeting of unitholders and is hereby incorporated by reference: “Information Regarding the Board of Directors;” “Proposal No. 1 Election of Directors;” “Section 16(a) Beneficial Ownership Reporting Compliance;” and “Miscellaneous.”

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 our Proxy Statement for the 2017 annual meeting of unitholders and is hereby incorporated by reference: “Compensation Discussion and Analysis;” “Executive Compensation;” “Compensation of Directors;” “Risk Oversight;” “Information Regarding the Board of Directors;” and “Compensation Committee Report.”

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 our Proxy Statement for the 2017 annual meeting of unitholders and is hereby incorporated by reference: “Beneficial Ownership of NuStar Securities;” 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 our Proxy Statement for the 2017 annual meeting of unitholders and is hereby incorporated by reference: “Certain Relationships and Related Party Transactions;” and “Information Regarding the Board of Directors.”

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Information required to be disclosed under this Item 14 appears under the following headings in our Proxy Statement for the 2017 annual meeting of unitholders and is hereby incorporated by reference: “KPMG Fees;” and “Audit Committee Pre-Approval Policy.”

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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:
			Management’s Report on Internal Control over Financial Reporting
			Report of Independent Registered Public Accounting Firm (KPMG LLP)
			Consolidated Balance Sheets as of December 31, 2016 and 2015
			Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2016, 2015 and 2014
			Consolidated Statements of Cash Flows for the Years Ended December 31, 2016, 2015 and 2014
			Consolidated Statements of Members’ Equity for the Years Ended December 31, 2016, 2015 and 2014
			Notes to Consolidated Financial Statements
	(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.
			The following are filed or furnished, as applicable, as part of this Form 10-K:



Exhibit Number	Description	Incorporated by Reference to the Following Document

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	Fourth Amended and Restated Agreement of Limited Partnership of NuStar Energy L.P., dated as of November 25, 2016	NuStar Energy L.P.’s Current Report on Form 8-K filed November 25, 2016 (File No. 001-16417), Exhibit 3.1

4.04	Amended and Restated Certificate of Limited Partnership of Shamrock Logistics Operations, L.P., dated as of January 7, 2002 and effective January 8, 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

4.05	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 quarter ended March 31, 2007 (File No. 001-32940), Exhibit 3.04

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4.06	Certificate of Amendment to Certificate of Limited Partnership of NuStar Logistics, L.P., dated and effective as of March 18, 2014	NuStar Energy L.P.’s Annual Report on Form 10-K for year ended December 31, 2014 (File No. 001-16417), Exhibit 3.09

4.07	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

4.08	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 quarter ended June 30, 2001 (File No. 001-16417), Exhibit 4.1

4.09	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

4.10	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

4.11	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

4.12	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

4.13	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

4.14	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 quarter ended March 31, 2007 (File No. 001-32940), Exhibit 3.03

4.15	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

4.16	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

4.17	Second Amendment to First Amended and Restated Limited Liability Company Agreement of Valero GP, LLC, effective as of June 1, 2006	NuStar Energy L.P.’s Annual Report on Form 10-K for year ended December 31, 2014 (File No. 001-16417), Exhibit 3.20

4.18	Third Amendment to First Amended and Restated Limited Liability Company Agreement of NuStar GP, LLC, dated as of July 29, 2016 and effective as of March 21, 2007	NuStar Energy L.P.’s Quarterly Report on Form 10-Q for quarter ended June 30, 2016 (File No. 001-16417), Exhibit 3.01

4.19	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

10.01	364-Day Revolving Credit Agreement dated as of June 28, 2013, among NuStar GP Holdings, LLC, as Borrower, the Lenders party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, and 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

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10.02	First Amendment to 364-Day Revolving Credit Agreement dated as of June 17, 2014, among NuStar GP Holdings, LLC, Riverwalk Holdings, LLC, JPMorgan Chase Bank, N.A., as Administrative Agent, and the Lenders party thereto	NuStar GP Holdings, LLC’s Current Report on Form 8-K filed June 23, 2014 (File No. 001-32940), Exhibit 10.01

10.03	Second Amendment to Revolving Credit Agreement, dated as of June 17, 2015, among NuStar GP Holdings, LLC, Riverwalk Holdings, LLC, JPMorgan Chase Bank, N.A., as Administrative Agent, and the Lenders party thereto	NuStar GP Holdings, LLC’s Current Report on Form 8-K filed June 19, 2015 (File No. 001-32940), Exhibit 10.01

10.04	Third Amendment to Revolving Credit Agreement, dated as of June 16, 2016, among NuStar GP Holdings, LLC, Riverwalk Holdings, LLC, JPMorgan Chase Bank, N.A., as Administrative Agent, and the Lenders party thereto	NuStar GP Holdings, LLC’s Current Report on Form 8-K filed June 16, 2016 (File No. 001-32940), Exhibit 10.01

10.05	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

10.06	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 quarter ended June 30, 2005 (File No. 001-16417), Exhibit 4.02

10.07	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

10.08	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

10.09	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

10.10	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

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10.11	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

10.12	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

10.13	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

10.14	Amended and Restated 5-Year Revolving Credit Agreement, dated as of October 29, 2014, among NuStar Logistics, L.P., NuStar Energy L.P., the Lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent, SunTrust Bank and Mizuho Bank, Ltd., as Co-Syndication Agents, Wells Fargo Bank, National Association and PNC Bank, National Association, as Co-Documentation Agents, and J.P. Morgan Securities LLC, SunTrust Robinson Humphrey, Inc., Mizuho Bank, Ltd., Wells Fargo Securities, LLC and PNC Capital Markets LLC, as Joint Bookrunners and Joint Lead Arrangers	NuStar Energy L.P.’s Current Report on Form 8-K filed October 31, 2014 (File No. 001-16417), Exhibit 10.1

10.15	First Amendment to Amended and Restated 5-Year Revolving Credit Agreement, dated as of March 19, 2015, 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 Quarterly Report on Form 10-Q for quarter ended June 30, 2015 (File No. 001-16417), Exhibit 10.01

10.16	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

10.17	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

10.18	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

10.19	Second Amendment to Letter of Credit Agreement, dated as of January 17, 2013, 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 Annual Report on Form 10-K for year ended December 31, 2014 (File No. 001-16417), Exhibit 10.10

10.20	Third Amendment to Letter of Credit Agreement, dated as of March 8, 2013, 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 Annual Report on Form 10-K for year ended December 31, 2014 (File No. 001-16417), Exhibit 10.11

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10.21	Fourth Amendment to Letter of Credit Agreement, dated as of April 19, 2013, 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 Annual Report on Form 10-K for year ended December 31, 2014 (File No. 001-16417), Exhibit 10.12

10.22	Fifth Amendment to Letter of Credit Agreement, dated as of April 23, 2014, among NuStar Logistics, L.P., NuStar Energy L.P., the Lenders party thereto and Mizuho Bank, Ltd., as Issuing Bank and Administrative Agent	NuStar Energy L.P.’s Annual Report on Form 10-K for year ended December 31, 2014 (File No. 001-16417), Exhibit 10.13

10.23	Sixth Amendment to Letter of Credit Agreement, dated as of November 3, 2014, among NuStar Logistics, L.P., NuStar Energy L.P., the Lenders party thereto and Mizuho Bank, Ltd., as Issuing Bank and Administrative Agent	NuStar Energy L.P.’s Current Report on Form 8-K filed November 6, 2014 (File No. 001-16417), Exhibit 10.1

10.24	Seventh Amendment to Letter of Credit Agreement, dated as of April 30, 2015, among NuStar Logistics, L.P., NuStar Energy L.P., the Lenders party thereto and Mizuho Bank, Ltd., as Issuing Bank and Administrative Agent	NuStar Energy L.P.’s Quarterly Report on Form 10-Q for quarter ended June 30, 2015 (File No. 001-16417), Exhibit 10.02

10.25	Eighth Amendment to Letter of Credit Agreement, dated as of May 6, 2016, among NuStar Logistics, L.P., NuStar Energy L.P., the Lenders party thereto and Mizuho Bank, Ltd., as Issuing Bank and Administrative Agent	NuStar Energy L.P.’s Quarterly Report on Form 10-Q for quarter ended June 30, 2016 (File No. 001-16417), Exhibit 10.01

10.26	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

10.27	Letter of Credit Agreement dated as of September 3, 2014 among NuStar Logistics, L.P., NuStar Energy L.P., the Lenders party thereto and The Bank of Tokyo-Mitsubishi UFJ, Ltd., as Issuing Bank and Administrative Agent	NuStar Energy L.P.’s Current Report on Form 8-K filed September 9, 2014 (File No. 001-16417), Exhibit 10.01

10.28	Amendment No. 1 to Letter of Credit Agreement and Subsidiary Guaranty Agreement dated as of November 3, 2014 among NuStar Logistics, L.P., NuStar Energy L.P., the Lenders party thereto and The Bank of Tokyo-Mitsubishi UFJ, Ltd., as Issuing Bank and Administrative Agent	NuStar Energy L.P.’s Current Report on Form 8-K filed November 6, 2014 (File No. 001-16417), Exhibit 10.3

10.29	Maturity Extension Letter (Amendment No. 2) to Letter of Credit Agreement and Subsidiary Guaranty Agreement dated as of August 19, 2015 among NuStar Logistics, L.P., NuStar Energy L.P., the Lenders party thereto and The Bank of Tokyo-Mitsubishi UFJ, Ltd., as Issuing Bank and Administrative Agent	NuStar Energy L.P.’s Quarterly Report on Form 10-Q for quarter ended September 30, 2015 (File No. 001-16417), Exhibit 10.01

10.30	Maturity Extension Letter (Amendment No. 3) to Letter of Credit Agreement and Subsidiary Guaranty Agreement dated as of July 15, 2016 among NuStar Logistics, L.P., NuStar Energy L.P., the Lenders party thereto and The Bank of Tokyo-Mitsubishi UFJ, Ltd., as Issuing Bank and Administrative Agent	NuStar Energy L.P.’s Quarterly Report on Form 10-Q for quarter ended June 30, 2016 (File No. 001-16417), Exhibit 10.02

10.31	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

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10.32	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

10.33	Amendment No. 1 to Letter of Credit Agreement and Subsidiary Guaranty Agreement dated as of November 3, 2014 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 November 6, 2014 (File No. 001-16417), Exhibit 10.2

10.34	Purchase and Sale Agreement, dated as of June 15, 2015, among NuStar Energy Services, Inc., NuStar Logistics, L.P., NuStar Pipeline Operating Partnership L.P. and NuStar Supply & Trading LLC, as Originators, NuStar Energy L.P., as Servicer, and NuStar Finance LLC, as Buyer	NuStar Energy L.P.'s Current Report on Form 8-K filed June 19, 2015 (File No. 001-16417), Exhibit 10.1

10.35	Receivables Financing Agreement, dated as of June 15, 2015, by and among NuStar Finance LLC, as Borrower, the persons from time to time party thereto as Lenders and Group Agents, PNC Bank, National Association, as Administrative Agent, and NuStar Energy L.P., as initial Servicer	NuStar Energy L.P.'s Current Report on Form 8-K filed June 19, 2015 (File No. 001-16417), Exhibit 10.2

10.36	Omnibus Amendment, dated as of January 15, 2016, which is the First Amendment to the Purchase and Sale Agreement referenced above and the First Amendment to the Receivables Financing Agreement referenced above among the respective parties thereto	NuStar Energy L.P.’s Annual Report on Form 10-K for year ended December 31, 2015 (File No. 001-16417), Exhibit 10.26

+10.37	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 quarter ended June 30, 2007 (File No. 001-32940), Exhibit 10.04

+10.38	Form of Restricted Unit Award Agreement under the NuStar GP Holdings, LLC Amended and Restated Long-Term Incentive Plan (substantially the same for 2011 and 2012 awards)	NuStar GP Holdings, LLC’s Current Report on Form 8-K filed January 5, 2011 (File No. 001-32940), Exhibit 10.03

+10.39	Form of 2013 Restricted Unit Award Agreement under the NuStar GP Holdings, LLC Amended and Restated Long-Term Incentive Plan	NuStar GP Holdings, LLC’s Annual Report on Form 10-K for year ended December 31, 2013 (File No. 001-32940), Exhibit 10.30

+10.40	Form of Phantom Unit Award Agreement under the NuStar GP Holdings, LLC Amended and Restated Long-Term Incentive Plan	*

+10.41	Form of 2013 Non-employee Director Restricted Unit Agreement under the NuStar GP Holdings, LLC Amended and Restated Long-Term Incentive Plan	NuStar GP Holdings, LLC’s Annual Report on Form 10-K for year ended December 31, 2013 (File No. 001-32940), Exhibit 10.27

+10.42	Form of Non-employee Director Phantom Unit Award Agreement under the NuStar GP Holdings, LLC Amended and Restated Long-Term Incentive Plan	*

+10.43	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 quarter ended June 30, 2007 (File No. 001-32940), Exhibit 10.03

+10.44	NuStar GP, LLC Fifth Amended and Restated 2000 Long-Term Incentive Plan, amended and restated as of January 28, 2016	NuStar Energy L.P.’s Proxy Statement on Schedule 14A filed December 17, 2015 (File No. 001-16417), Appendix A

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+10.45	Form of 2011 and 2012 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

+10.46	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

+10.47	Form of Restricted Unit Award Agreement under the NuStar GP, LLC Fifth Amended and Restated 2000 Long-Term Incentive Plan	NuStar Energy L.P.’s Annual Report on Form 10-K for year ended December 31, 2016 (File No. 001-16417), Exhibit 10.28

+10.48	Form of Performance Unit Agreement under the NuStar GP, LLC Second Amended and Restated 2000 Long-Term Incentive Plan (substantially the same for 2012 and 2013 awards with appropriate adjustments based on award dates)	NuStar GP Holdings, LLC’s Annual Report on Form 10-K for year ended December 31, 2009 (File No. 001-32940), Exhibit 10.12

+10.49	Form of 2013 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 10.21

+10.50	Form of Non-employee Director Restricted Unit Award Agreement under the NuStar GP, LLC Fifth Amended and Restated 2000 Long-Term Incentive Plan	NuStar Energy L.P.’s Annual Report on Form 10-K for year ended December 31, 2016 (File No. 001-16417), Exhibit 10.31

+10.51	NuStar Energy 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

+10.52	Form of NuStar Energy L.P. Amended and Restated Change of Control Severance Agreement	NuStar Energy L.P.’s Current Report on Form 8-K filed August 4, 2016 (File No. 001-16417), Exhibit 10.1

+10.53	NuStar Excess Pension Plan, amended and restated effective as of January 1, 2014	NuStar Energy L.P.’s Annual Report on Form 10-K for year ended December 31, 2015 (File No. 001-16417), Exhibit 10.45

+10.54	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

10.55	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

10.56	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

10.57	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 quarter ended March 31, 2008 (File No. 001-32940), Exhibit 10.01

10.58	Amended and Restated Services Agreement dated March 1, 2016 between NuStar Energy L.P., NuStar GP Holdings, LLC, NuStar GP, LLC and NuStar Services Company LLC	NuStar Energy L.P.’s Current Report on Form 8-K filed March 1, 2016 (File No. 001-16417), Exhibit 10.2

10.59	Assignment and Assumption Agreement dated March 1, 2016 between NuStar GP, LLC and NuStar Services Company LLC	NuStar Energy L.P.’s Current Report on Form 8-K filed March 1, 2016 (File No. 001-16417), Exhibit 10.1

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10.60	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

10.61	Purchase and Sale Agreement 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 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

10.62	Letter Agreement by and among Asphalt Acquisition LLC, NuStar Energy L.P., NuStar Logistics, L.P., NuStar Asphalt Refining, LLC, NuStar Marketing LLC, NuStar GP, 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

10.63	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

10.64	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

10.65	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

10.66	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

21.01	List of subsidiaries of NuStar GP Holdings, LLC	*

23.01	Consent of KPMG LLP dated February 23, 2017 (NuStar GP Holdings, LLC)	*
23.02	Consent of KPMG LLP dated February 23, 2017 (NuStar Energy L.P.)	*

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

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	Consolidated Financial Statements of NuStar Energy L.P. for December 31, 2016 and 2015	*

101.INS	XBRL Instance Document	*

101.SCH	XBRL Taxonomy Extension Schema Document	*

101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document	*

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101.DEF	XBRL Taxonomy Extension Definition Linkbase Document	*

101.LAB	XBRL Taxonomy Extension Label Linkbase Document	*

101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document	*



*	Filed herewith.

**	Furnished herewith.

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

An electronic copy of this Form 10-K is available on our website, free of charge, at http://www.nustargpholdings.com (select the “Investors” link, then the “SEC Filings” link). A paper copy of the Form 10-K also is available without charge to unitholders upon written request at the address below. 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 or corporatesecretary@nustarenergy.com.

ITEM 16. FORM 10-K SUMMARY

Not applicable.

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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
	February 23, 2017

By:	/s/ Thomas R. Shoaf

	Thomas R. Shoaf
	Executive Vice President and Chief Financial Officer
	February 23, 2017

By:	/s/ Jorge A. del Alamo

	Jorge A. del Alamo
	Senior Vice President and Controller
	February 23, 2017

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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	February 23, 2017
William E. Greehey

/s/ Bradley C. Barron	President, Chief Executive	February 23, 2017
Bradley C. Barron	Officer and Director (Principal Executive Officer)

/s/ Thomas R. Shoaf	Executive Vice President and	February 23, 2017
Thomas R. Shoaf	Chief Financial Officer (Principal Financial Officer)

/s/ Jorge A. del Alamo	Senior Vice President and Controller	February 23, 2017
Jorge A. del Alamo	(Principal Accounting Officer)

/s/ William B. Burnett	Director	February 23, 2017
William B. Burnett

/s/ James F. Clingman	Director	February 23, 2017
James F. Clingman

/s/ Jelynne LeBlanc-Burley	Director	February 23, 2017
Jelynne LeBlanc-Burley

Exhibit 10.40

PHANTOM UNIT AWARD AGREEMENT

[U.S.]

This Phantom Unit agreement (“ Agreement ”), effective as of [GRANT DATE] (“ Grant Date ”), is between NuStar GP Holdings, LLC (the “ Company ”) and the recipient of this Agreement (“ Participant ”), a participant in the NuStar GP Holdings, LLC Long-Term Incentive Plan , as the same may be amended (the “ Plan ”), pursuant to and subject to the provisions of the Plan. All capitalized terms contained in this Agreement shall have the same definitions as are set forth in the Plan unless otherwise defined herein. The terms governing this Award are set forth below. Certain provisions applicable to this Agreement are set forth on Appendix A .


1.	Grant of Phantom Units . The Compensation Committee of the Board of Directors of the Company (the “ Committee ”) hereby grants to Participant the number of Phantom Units under the Plan communicated to the Participant by the Participant’s manager. A “ Phantom Unit ” is an unfunded, unsecured contractual right which, upon vesting, entitles Participant to receive a Unit of the Company.


2.	Vesting . The Phantom Units granted hereunder are subject to the following Restricted Periods and will vest in the following increments:

20% of the Award shall vest on the first anniversary of Grant Date;

20% of the Award shall vest on the second anniversary of Grant Date;

20% of the Award shall vest on the third anniversary of Grant Date;

20% of the Award shall vest on the fourth anniversary of Grant Date; and

20% of the Award shall vest on the fifth anniversary of Grant Date.

The Phantom Units may vest prior to the expiration of such period, as set forth in the Plan or herein. Upon the vesting of each Phantom Unit awarded under this Agreement, Participant will be entitled to receive an unrestricted Unit of the Company.

Distribution Equivalent Rights . Phantom Units are granted hereunder in tandem with an equal number of distribution equivalent rights (“ DERs ”). A DER is a right to receive an amount in cash from the Company or its designee equal to the distributions made by the Company with respect to a Unit during the period that begins on the Grant Date and ends upon vesting of the tandem Phantom Unit or its forfeiture pursuant to this Agreement or the Plan.

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are paid with respect to Units. Upon vesting or forfeiture of a Phantom Unit, the related DER shall automatically and immediately terminate for no consideration, except that unpaid distributions with respect to DERs relating to distributions paid on Units prior to the date of such settlement shall be paid no later than the 60th day following the date such pre-vesting/forfeiture distributions are paid with respect to Units. This Agreement and the Award evidenced hereby are intended to comply with or otherwise be exempt from, and shall be administered consistently in all respects with, Section 409A of the Code and the regulations promulgated thereunder. If necessary in order to attempt to ensure such compliance, this Agreement may be reformed, to the extent possible, unilaterally by the Company consistent with guidance issued by the Internal Revenue Service. Participant agrees that the unrestricted Units to which Participant will be entitled in connection with the vesting of Phantom Units may be issued in uncertificated form and recorded with the Company’s or its Affiliates’ service provider.

Termination of Employment . Except as otherwise provided in Section 6 or in the Plan, in the event Participant’s employment with the Company or its Affiliates terminates prior to the vesting of all Phantom Units granted hereunder, all Phantom Units that are unvested (and all associated DERs) as of such date shall automatically and immediately be forfeited for no consideration, except that unpaid distributions with respect to DERs relating to distributions paid on Units prior to the date of such termination shall be paid no later than the 60th day following the date such pre-termination distributions are paid with respect to Units.


6.	Acceleration Events .


a.	Notwithstanding the foregoing or anything in Section 6(e)(ix) of the Plan to the contrary, if Participant becomes Disabled (as defined below) while employed by the Company or its Affiliates or Participant’s employment is terminated because of Participant’s death (such Disability or death, an “ Acceleration Event ”), then:

i. if the Acceleration Event occurs within one year after the Grant Date (the “ Grant Year ”), then all then-outstanding Phantom Units and DERs shall automatically be forfeited for no consideration as of the close of business on the date of the Acceleration Event; and

ii. if the Acceleration Event occurs after the last day of the Grant Year (any such later year, a “ Post-Grant Year ”), then

(A) a portion of the Phantom Units that remain unvested and outstanding on the date of the Acceleration Event shall automatically become vested, where such portion shall be equal to the product of:

Page 2

(x) the percentage equal to the number of months of the Post-Grant Year elapsed prior to the date of the Acceleration Event; divided by the product of the number of Post-Grant Years remaining, inclusive of the Post-Grant Year in which the Acceleration Event occurs, multiplied by 12 months;

multiplied by:

(y) the number of unvested Phantom Units that would have vested had Participant remained continuously employed with the Company or an Affiliate thereof through the latest date on the vesting schedule in Section 2, and

(B) the remaining Phantom Units (and all DERs) shall automatically and immediately be forfeited for no consideration.

For illustration purposes only: In Year 1, 100 Phantom Units are granted to a participant in November to vest in equal annual installments over a five year period beginning on the first anniversary of the date of grant. In Year 2, the participant dies with a last day of service of June 9. In this scenario, seven months of Year 2 have elapsed, so (x) is 15%, which is multiplied by (y), which is 80. The product of (x) and (y) is twelve, and twelve of the 80 Phantom Units will vest with respect to the participant. The remaining 68 Phantom Units shall automatically be forfeited.



Award Date	Phantom Units Awarded	Phantom Units Vesting					(x) Percent of Phantom Units Vesting	(y) Unvested Phantom Units	Pro-ration Formula	Pro-Rated Vesting
Award Date	Phantom Units Awarded	2017	2018	2019	2020	2021	(x) Percent of Phantom Units Vesting	(y) Unvested Phantom Units	Pro-ration Formula	Pro-Rated Vesting
11/16/2016	100	20	20	20	20	20	7/48 = .15	80	.15 x 80	12

For purposes of this Agreement, “ Disabled ” or “ Disability ” means (i) the inability of Participant to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months or (ii) the receipt of income replacements by Participant, by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, for a period of not less than three (3) months under the accident and health plan of the Company or an applicable Affiliate thereof.

Page 3

The Award shall vest in full upon a Change of Control in accordance with Section 6(e)(vii) of the Plan, provided that in any circumstance or transaction in which compensation payable pursuant to this Agreement would be subject to the income tax under Section 409A of the Code if the definition of “Change of Control” as set forth in the Plan were to apply, but would not be so subject if the term “Change of Control” were defined therein to mean a “change in control event” within the meaning of Treasury Regulation §1.409A-3(i)(5), then “Change of Control” means, but only to the extent necessary to prevent such compensation from becoming subject to the income tax under Section 409A of the Code, a transaction or circumstance that satisfies the requirements of both (1) a Change of Control as defined in the Plan, and (2) a “change in control event” within the meaning of Treasury Regulation §1.409A-3(i)(5).


c.	With respect to Section 6(e)(ix) of the Plan, the vesting of Phantom Units shall accelerate only upon Participant’s death or Disability and only to the extent as determined in accordance with Section 6(a) of this Agreement.


7.	Withholding . The Company or one of its Affiliates will withhold any taxes due from Participant’s grant as the Company or an applicable Affiliate determines is required by law, which, in the sole discretion of the Committee, may include withholding a number of Phantom Units or the Units issuable thereunder otherwise payable to Participant.

Acceptance and Acknowledgement . Participant hereby accepts and agrees to be bound by all of the terms, provisions, conditions and limitations of the Plan and any subsequent amendment or amendments thereto, as if it had been set forth verbatim in this Award. Participant shall be deemed to have timely accepted this Agreement and the terms hereof if Participant has not explicitly rejected this Agreement in writing to the Company within sixty (60) days after the Grant Date. Participant hereby acknowledges receipt of a copy of the Plan, this Agreement and Appendix A. Participant has read and understands the terms and provisions thereof, and accepts the Phantom Units and DERs subject to all of the terms and conditions of the Plan and this Agreement. Participant acknowledges that there may be adverse tax consequences upon payment of DERs and/or the vesting or settlement of the Phantom Units or disposition of the underlying Units and that Participant has been advised to consult a tax advisor prior to such vesting, settlement or disposition.


9.	Plan and Appendix Incorporated by Reference . The Plan and Appendix A are incorporated into this Agreement by this reference and are made a part hereof for all purposes.

Page 4

10.

Restrictions . This Agreement and Participant’s interest in the Phantom Units and the DERs granted by this Agreement are of a personal nature and, except as expressly provided in this Agreement or the Plan, Participant’s rights with respect thereto may not be sold, mortgaged, pledged, assigned, alienated, transferred, conveyed or otherwise disposed of or encumbered in any manner by Participant. Any such attempted sale, mortgage, pledge, assignment, alienation, transfer, conveyance, disposition or encumbrance shall be void, and the Company and its Affiliates shall not be bound thereby.

NUSTAR GP HOLDINGS, LLC

By: /s/ Bradley C. Barron____________

Bradley C. Barron

President & Chief Executive Officer

Page 5

APPENDIX A

No Guarantee of Tax Consequences . None of the Board, the Company or any Affiliate of any of the foregoing makes any commitment or guarantee that any federal, state, local or other tax treatment will (or will not) apply or be available to Participant (or to any person claiming through or on behalf of Participant) or assumes any liability or responsibility with respect to taxes and penalties and interest thereon arising hereunder with respect to Participant (or to any person claiming through or on behalf of Participant).

Section 409A of the Code . This Agreement is intended to either comply with or be exempt from Section 409A of the Code, and ambiguous provisions hereof, if any, shall be construed and interpreted in a manner consistent with such intent. For purposes of Section 409A of the Code, each payment or amount due under this Agreement shall be considered a separate payment, and Participant’s entitlement to a series of payments under this Agreement shall be treated as an entitlement to a series of separate payments. Notwithstanding any other provision of the Plan or this Agreement to the contrary, if Participant is a “specified employee” under Section 409A of the Code, except to the extent permitted thereunder, no benefit or payment that is not otherwise exempt from Section 409A of the Code (after taking into account all applicable exceptions thereunder, including to the exceptions for short-term deferrals and for “separation pay only upon an involuntary separation from service”) shall be made to Participant under this Agreement on account of Participant’s “separation from service,” as defined in Section 409A of the Code, until the later of the date prescribed for payment in this Agreement and the first (1st) day of the seventh (7th) calendar month that begins after the date of Participant’s separation from service (or, if earlier, the date of death of Participant). Any amount that is otherwise payable within the delay period described in the immediately preceding sentence will be aggregated and paid in a lump sum without interest.

Successors and Assigns . The Company may assign any of its rights under this Agreement. This Agreement shall be binding and inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer set forth herein, this Agreement will be binding upon Participant and Participant’s beneficiaries, executors, administrators and the person(s) to whom the Phantom Units and/or DERs may be transferred by will or the laws of descent or distribution.


4.	Governing Law . The validity, construction and effect of this Agreement shall be determined by the laws of the State of Texas without regard to conflict of laws principles.


5.	No Rights as Unitholder . Neither Participant nor any person claiming by, through or under Participant with respect to the Phantom Units or DERs shall have any rights

Page 6

as a unitholder of the Company (including, without limitation, voting rights) unless and until the Phantom Units vest and are settled by the issuance of Units.


6.	Amendment . The Committee has the right to amend, alter, suspend, discontinue or cancel this Agreement, the Phantom Units and/or DERs; provided, that no such amendment shall adversely affect Participant’s material rights under this Agreement without Participant’s consent.

No Right to Continued Service . Neither the Plan nor this Agreement shall confer upon Participant any right to be retained in any position, as an Employee or Director of the Company or any Affiliate thereof. Further, nothing in the Plan or this Agreement shall be construed to limit the discretion of the Company or any Affiliate thereof to terminate Participant’s service at any time, with or without Cause.

Notices . Any notice required to be delivered to the Company under this Agreement shall be in writing and addressed to the Secretary of the Company at the Company’s principal offices. Any notice required to be delivered to Participant under this Agreement shall be in writing and addressed to Participant at Participant’s address as then shown in the records of the Company. Any party hereto may designate another address in writing (or by such other method approved by the Company) from time to time.


9.	Interpretation . Any dispute regarding the interpretation of this Agreement shall be submitted by such party to the Committee for review. The resolution of such dispute by the Committee shall be final and binding on the parties hereto.


10.	Severability . The invalidity or unenforceability of any provision of the Plan or this Agreement shall not affect the validity or enforceability of any other provision of the Plan or this Agreement, and each provision of the Plan and this Agreement shall be severable and enforceable to the extent permitted by law.

11.

Claw-back Policy . This Award (including any proceeds, gains or other economic benefit actually or constructively received by the Participant upon any receipt or exercise of any Award or upon the receipt or resale of any Units underlying the Award) shall be subject to the provisions of any claw-back policy implemented by, as applicable, the Company or any Affiliate thereof, including, without limitation, any claw-back policy adopted to comply with the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act and any rules or regulations promulgated thereunder, to the extent set forth in such claw-back policy.

Page 7

Exhibit 10.42

NON-EMPLOYEE DIRECTOR

PHANTOM UNIT AWARD AGREEMENT

This Phantom Unit agreement (“ Agreement ”), effective as of [GRANT DATE] (“ Grant Date ”), is between NuStar GP Holdings, LLC (the “ Company ”) and [NAME] (“ Participant ”), a participant in the NuStar GP Holdings, LLC Long-Term Incentive Plan , as the same may be amended (the “ Plan ”), pursuant to and subject to the provisions of the Plan. All capitalized terms contained in this Agreement shall have the same definitions as are set forth in the Plan unless otherwise defined herein. The terms governing this Award are set forth below. Certain provisions applicable to this Agreement are set forth on Appendix A .


1.	Grant of Phantom Units . The Compensation Committee of the Board of Directors of the Company (the “ Committee ”) hereby grants to Participant [INSERT #] Phantom Units under the Plan. A “ Phantom Unit ” is an unfunded, unsecured contractual right which, upon vesting, entitles Participant to receive a Unit of the Company.


2.	Vesting . The Phantom Units granted hereunder are subject to the following Restricted Periods and will vest in the following increments:

33-1/3% of the Award shall vest on the first anniversary of Grant Date;

33-1/3% of the Award shall vest on the second anniversary of Grant Date; and

33-1/3% of the Award shall vest on the third anniversary of Grant Date.

Settlement . 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 60th day following the applicable date of vesting. Distributions with respect to DERs will be paid to Participant in cash as soon as reasonably practical following the date distributions are paid with respect to Units during the period such DERs are outstanding, but in all events no later than 60 days following the date related amounts are paid with respect to Units. Upon vesting or forfeiture of a Phantom Unit, the related DER shall automatically and immediately terminate for no consideration, except that unpaid distributions with respect to DERs relating to distributions paid on Units prior to the date of such settlement shall be paid no later than the 60th day following the date such pre-vesting/forfeiture distributions are paid with respect to Units. This Agreement and the Award evidenced hereby are intended to comply with or otherwise be exempt from, and

Page 1

shall be administered consistently in all respects with, Section 409A of the Code and the regulations promulgated thereunder. If necessary in order to attempt to ensure such compliance, this Agreement may be reformed, to the extent possible, unilaterally by the Company consistent with guidance issued by the Internal Revenue Service. Participant agrees that the unrestricted Units to which Participant will be entitled in connection with the vesting of Phantom Units may be issued in uncertificated form and recorded with the Company’s or its Affiliates’ service provider.

Termination of Service . Except as otherwise provided in Section 6 or in the Plan, in the event Participant’s service with the Company or its Affiliates terminates prior to the vesting of all Phantom Units granted hereunder, all Phantom Units that are unvested (and all associated DERs) as of such date shall automatically and immediately be forfeited for no consideration, except that unpaid distributions with respect to DERs relating to distributions paid on Units prior to the date of such termination shall be paid no later than the 60th day following the date such pre-termination distributions are paid with respect to Units.


6.	Acceleration Events .


a.	Notwithstanding the foregoing or anything in Section 6(e)(ix) of the Plan to the contrary, if Participant becomes Disabled (as defined below) while providing services to the Company or its Affiliates or Participant’s service is terminated because of Participant’s death (such Disability or death, an “ Acceleration Event ”), then:

ii. if the Acceleration Event occurs after the last day of the Grant Year (any such later year, a “ Post-Grant Year ”), then

(A) a portion of the Phantom Units that remain unvested and outstanding on the date of the Acceleration Event shall automatically become vested, where such portion shall be equal to the product of:

multiplied by:

(y) the number of unvested Phantom Units that would have vested had Participant remained continuously providing services to the Company or an Affiliate thereof through the latest date on the vesting schedule in Section 2, and

Page 2

(B) the remaining Phantom Units (and all DERs) shall automatically and immediately be forfeited for no consideration.



Award Date	Phantom Units Awarded	Phantom Units Vesting					(x) Percent of Phantom Units Vesting	(y) Unvested Phantom Units	Pro-ration Formula	Pro-Rated Vesting
Award Date	Phantom Units Awarded	2017	2018	2019	2020	2021	(x) Percent of Phantom Units Vesting	(y) Unvested Phantom Units	Pro-ration Formula	Pro-Rated Vesting
11/16/2016	100	20	20	20	20	20	7/48 = .15	80	.15 x 80	12

For purposes of this Agreement, “ Disabled ” or “ Disability ” means the inability of Participant to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months.

b. The Award shall vest in full upon a Change of Control in accordance with Section 6(e)(vii) of the Plan, provided that in any circumstance or transaction in which compensation payable pursuant to this Agreement would be subject to the income tax under Section 409A of the Code if the definition of “Change of Control” as set forth in the Plan were to apply, but would not be so subject if the term “Change of Control” were defined therein to mean a “change in control event” within the meaning of Treasury Regulation §1.409A-3(i)(5), then “Change of Control” means, but only to the extent necessary to prevent such compensation from becoming subject to the income tax under Section 409A of the Code, a transaction or circumstance that satisfies the requirements of both (1) a Change of Control as defined in the Plan, and (2) a “change in control event” within the meaning of Treasury Regulation §1.409A-3(i)(5).


c.	With respect to Section 6(e)(ix) of the Plan, the vesting of Phantom Units shall accelerate only upon Participant’s death or Disability and only to the extent as determined in accordance with Section 6(a) of this Agreement.


7.	Withholding . The Company or one of its Affiliates will withhold any taxes due from Participant’s grant as the Company or an applicable Affiliate determines is required by law, which, in the sole discretion of the Committee, may include withholding a number of Phantom Units or the Units issuable thereunder otherwise payable to Participant.

Page 3


9.	Plan and Appendix Incorporated by Reference . The Plan and Appendix A are incorporated into this Agreement by this reference and are made a part hereof for all purposes.

10.

NUSTAR GP HOLDINGS, LLC

By: /s/ Bradley C. Barron

Bradley C. Barron

President & Chief Executive Officer

Page 4

APPENDIX A


4.	Governing Law . The validity, construction and effect of this Agreement shall be determined by the laws of the State of Texas without regard to conflict of laws principles.


5.	No Rights as Unitholder . Neither Participant nor any person claiming by, through or under Participant with respect to the Phantom Units or DERs shall have any rights as a unitholder of the Company (including, without limitation, voting rights) unless and until the Phantom Units vest and are settled by the issuance of Units.

Page 5


6.	Amendment . The Committee has the right to amend, alter, suspend, discontinue or cancel this Agreement, the Phantom Units and/or DERs; provided, that no such amendment shall adversely affect Participant’s material rights under this Agreement without Participant’s consent.


9.	Interpretation . Any dispute regarding the interpretation of this Agreement shall be submitted by such party to the Committee for review. The resolution of such dispute by the Committee shall be final and binding on the parties hereto.


10.	Severability . The invalidity or unenforceability of any provision of the Plan or this Agreement shall not affect the validity or enforceability of any other provision of the Plan or this Agreement, and each provision of the Plan and this Agreement shall be severable and enforceable to the extent permitted by law.

11.

Page 6

Exhibit 21.01

Subsidiaries of NuStar GP Holdings, LLC

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



Name of Entity	Jurisdiction of Organization
NuStar GP, LLC	Delaware
Riverwalk Holdings, LLC	Delaware
Riverwalk Logistics, L.P.	Delaware

As of December 31, 2016, NuStar GP Holdings, LLC indirectly owns the general partner interest, a 13.0% common limited partner interest and the incentive distribution rights in NuStar Energy L.P., a publicly traded master limited partnership that was formed in Delaware. NuStar Energy L.P.’s subsidiaries are listed below:



Name of Entity	Jurisdiction of Organization
Bicen Development Corporation N.V.	Netherlands
Cooperatie NuStar Holdings U.A.	Netherlands
LegacyStar Services, LLC	Delaware
NS Security Services, LLC	Delaware
NuStar Burgos, LLC	Delaware
NuStar Caribe Terminals, Inc.	Delaware
NuStar Eastham Limited	England
NuStar Energy Services, Inc.	Delaware
NuStar Finance LLC	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 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
NuStar Services Company LLC	Delaware
NuStar Supply & Trading LLC	Delaware
NuStar Terminals Antilles N.V.	Curacao
NuStar Terminals B.V.	Netherlands
NuStar Terminals Canada Co.	Canada
NuStar Terminals Canada Holdings Co.	Canada
NuStar Terminals Canada Partnership	Canada




Name of Entity	Jurisdiction of Organization
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.	Netherlands
NuStar Terminals New Jersey, Inc.	Delaware
NuStar Terminals N.V.	Netherlands
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
Petroburgos, S. de R.L. de C.V.	Mexico
Point Tupper Marine Services Co.	Canada
Saba Company N.V.	Netherlands
Seven Seas Steamship Company (Sint Eustatius) N.V.	Netherlands
Shore Terminals LLC	Delaware
ST Linden Terminal, LLC	Delaware
Star Creek Ranch, 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 of our reports dated February 23, 2017, with respect to the consolidated balance sheets of NuStar GP Holdings, LLC and subsidiaries as of December 31, 2016 and 2015, and the related consolidated statements of comprehensive income, members’ equity and cash flows for each of the years in the three‑year period ended December 31, 2016 and the effectiveness of internal control over financial reporting as of December 31, 2016, which reports appear in the December 31, 2016 annual report on Form 10‑K of NuStar GP Holdings, LLC.

/s/ KPMG LLP

San Antonio, Texas

February 23, 2017

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 of our reports dated February 23, 2017, with respect to the consolidated balance sheets of NuStar Energy L.P. and subsidiaries as of December 31, 2016 and 2015, and the related consolidated statements of income, comprehensive income, cash flows and partners' equity for each of the years in the three‑year period ended December 31, 2016 and the effectiveness of internal control over financial reporting as of December 31, 2016, which reports appear in the December 31, 2016 annual report on Form 10‑K of NuStar GP Holdings, LLC.

/s/ KPMG LLP

San Antonio, Texas

February 23, 2017

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: February 23, 2017



	/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”);

(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: February 23, 2017



	/s/ Thomas 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, 2016 , 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

February 23, 2017

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, 2016 , 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

February 23, 2017

Exhibit 99.01

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, 2016 and 2015 , and the related consolidated statements of income, comprehensive income, partners’ equity, and cash flows for each of the years in the three-year period ended December 31, 2016 . 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.

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, 2016 and 2015 , and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2016 , 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, 2016 , based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 23, 2017 expressed an unqualified opinion on the effectiveness of the Partnership’s internal control over financial reporting.

/s/ KPMG LLP

San Antonio, Texas

February 23, 2017

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, 2016 , based on criteria established in Internal Control – Integrated Framework (2013) 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.

In our opinion, NuStar Energy L.P. and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 31, 2016 , based on criteria established in Internal Control – Integrated Framework (2013) 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, 2016 and 2015 , and the related consolidated statements of income, comprehensive income, partners’ equity, and cash flows for each of the years in the three-year period ended December 31, 2016 , and our report dated February 23, 2017 expressed an unqualified opinion on those consolidated financial statements.

/s/ KPMG LLP

San Antonio, Texas

February 23, 2017

NUSTAR ENERGY L.P. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Thousands of Dollars, Except Unit Data)



	December 31,
	2016			2015
Assets
Current assets:
Cash and cash equivalents	$	35,942		$	118,862
Accounts receivable, net of allowance for doubtful accounts of $7,756 and $8,473 as of December 31, 2016 and 2015, respectively	170,293			145,064
Receivable from related party	317			—
Inventories	37,945			38,749
Other current assets	132,686			31,176
Total current assets	377,183			333,851
Property, plant and equipment, at cost	5,435,278			5,209,160
Accumulated depreciation and amortization	(1,712,995		)	(1,525,589		)
Property, plant and equipment, net	3,722,283			3,683,571
Intangible assets, net	127,083			112,011
Goodwill	696,637			696,637
Deferred income tax asset	2,051			2,858
Other long-term assets, net	105,308			296,597
Total assets	$	5,030,545		$	5,125,525
Liabilities and Partners’ Equity
Current liabilities:
Accounts payable	$	118,686		$	125,147
Payable to related party	—			14,799
Short-term debt	54,000			84,000
Accrued interest payable	34,030			34,286
Accrued liabilities	60,485			55,194
Taxes other than income tax	15,685			12,810
Income tax payable	6,510			5,977
Total current liabilities	289,396			332,213
Long-term debt	3,014,364			3,055,612
Long-term payable to related party	—			32,080
Deferred income tax liability	22,204			24,810
Other long-term liabilities	92,964			70,966
Commitments and contingencies (Note 15)
Partners’ equity:
Series A preferred limited partners (9,060,000 preferred units outstanding as of December 31, 2016)	218,400			—
Common limited partners (78,616,228 and 77,886,078 common units outstanding as of December 31, 2016 and 2015, respectively)	1,455,642			1,661,900
General partner	31,752			36,738
Accumulated other comprehensive loss	(94,177		)	(88,794		)
Total partners’ equity	1,611,617			1,609,844
Total liabilities and partners’ equity	$	5,030,545		$	5,125,525

See Notes to Consolidated Financial Statements.

NUSTAR ENERGY L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Thousands of Dollars, Except Unit and Per Unit Data)



	Year Ended December 31,
	2016			2015			2014
Revenues:
Service revenues	$	1,083,165		$	1,114,153		$	1,026,446
Product sales	673,517			969,887			2,048,672
Total revenues	1,756,682			2,084,040			3,075,118
Costs and expenses:
Cost of product sales	633,653			907,574			1,967,528
Operating expenses:
Third parties	426,686			337,466			347,189
Related party	21,681			135,565			125,736
Total operating expenses	448,367			473,031			472,925
General and administrative expenses:
Third parties	88,324			35,752			29,146
Related party	10,493			66,769			66,910
Total general and administrative expenses	98,817			102,521			96,056
Depreciation and amortization expense	216,736			210,210			191,708
Total costs and expenses	1,397,573			1,693,336			2,728,217
Operating income	359,109			390,704			346,901
Equity in earnings of joint ventures	—			—			4,796
Interest expense, net	(138,350		)	(131,868		)	(132,281		)
Interest income from related party	—			—			1,055
Other (expense) income, net	(58,783		)	61,822			4,499
Income from continuing operations before income tax expense	161,976			320,658			224,970
Income tax expense	11,973			14,712			10,801
Income from continuing operations	150,003			305,946			214,169
Income (loss) from discontinued operations, net of tax	—			774			(3,791		)
Net income	150,003			306,720			210,378
Less loss attributable to noncontrolling interest	—			—			(395		)
Net income attributable to NuStar Energy L.P.	$	150,003		$	306,720		$	210,773
Basic and diluted net income (loss) per common unit:
Continuing operations	$	1.27		$	3.29		$	2.14
Discontinued operations	—			0.01			(0.04		)
Total (Note 21)	$	1.27		$	3.30		$	2.10
Basic weighted-average common units outstanding	78,080,484			77,886,078			77,886,078

Diluted weighted-average common units outstanding	78,113,002			77,886,078			77,886,078

See Notes to Consolidated Financial Statements.

NUSTAR ENERGY L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Thousands of Dollars)



	Year Ended December 31,
	2016			2015			2014
Net income	$	150,003		$	306,720		$	210,378

Other comprehensive loss:
Foreign currency translation adjustment	(8,243		)	(31,987		)	(15,614		)
Net loss on pension and other postretirement benefit adjustments, net of income tax benefit of $60	(2,850		)	—			—
Net gain on cash flow hedges	5,710			11,105			10,663
Total other comprehensive loss	(5,383		)	(20,882		)	(4,951		)

Comprehensive income	144,620			285,838			205,427
Less comprehensive loss attributable to noncontrolling interest	—			—			(828		)
Comprehensive income attributable to NuStar Energy L.P.	$	144,620		$	285,838		$	206,255

See Notes to Consolidated Financial Statements.

NUSTAR ENERGY L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Thousands of Dollars)



	Year Ended December 31,
	2016			2015			2014
Cash Flows from Operating Activities:
Net income	$	150,003		$	306,720		$	210,378
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense	216,736			210,210			191,708
Unit-based compensation expense	7,579			—			—
Amortization of debt related items	7,477			8,840			8,969
Loss (gain) on sale or disposition of assets	64			(1,617		)	(3,853		)
Gain associated with the Linden Acquisition	—			(56,277		)	—
Impairment loss	58,655			—			4,201
Deferred income tax (benefit) expense	(469		)	2,058			3,467
Equity in earnings of joint ventures	—			—			(4,796		)
Distributions of equity in earnings of joint ventures	—			2,500			7,587
Changes in current assets and current liabilities (Note 22)	3,716			50,559			82,418
Other, net	(7,000		)	1,944			18,444
Net cash provided by operating activities	436,761			524,937			518,523
Cash Flows from Investing Activities:
Capital expenditures	(204,358		)	(324,808		)	(356,965		)
Change in accounts payable related to capital expenditures	(11,063		)	(3,156		)	4,903
Acquisitions	(95,657		)	(142,500		)	—
Investment in other long-term assets	—			(3,564		)	—
Proceeds from sale or disposition of assets	—			17,132			26,012
Proceeds from insurance recoveries	—			4,867			—
Increase in note receivable from Axeon	—			—			(13,328		)
Other, net	—			—			(853		)
Net cash used in investing activities	(311,078		)	(452,029		)	(340,231		)
Cash Flows from Financing Activities:
Proceeds from long-term debt borrowings	752,729			860,131			743,719
Proceeds from short-term debt borrowings	654,000			823,500			574,900
Long-term debt repayments	(772,152		)	(500,410		)	(623,770		)
Short-term debt repayments	(684,000		)	(816,500		)	(497,900		)
Proceeds from issuance of preferred units, net of issuance costs	218,400			—			—
Proceeds from issuance of common units, net of issuance costs	27,710			—			—
Contributions from general partner	680			—			—
Distributions to common unitholders and general partner	(392,962		)	(392,204		)	(392,204		)
(Decrease) increase in cash book overdrafts	(11,237		)	(2,954		)	12,851
Other, net	(4,492		)	(792		)	(5,781		)
Net cash used in financing activities	(211,324		)	(29,229		)	(188,185		)
Effect of foreign exchange rate changes on cash	2,721			(12,729		)	(2,938		)
Net (decrease) increase in cash and cash equivalents	(82,920		)	30,950			(12,831		)
Cash and cash equivalents as of the beginning of the period	118,862			87,912			100,743
Cash and cash equivalents as of the end of the period	$	35,942		$	118,862		$	87,912

See Notes to Consolidated Financial Statements.

NUSTAR ENERGY L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF PARTNERS’ EQUITY

Years Ended December 31, 2016 , 2015 and 2014

(Thousands of Dollars, Except Unit Data)



	Limited Partners
	Series A Preferred				Common				General Partner			Accumulated Other Comprehensive Loss			Total NuStar Energy L.P. Partners’ Equity			Noncontrolling Interest			Total Partners’ Equity
	Units	Amount			Units	Amount			General Partner			Accumulated Other Comprehensive Loss			Total NuStar Energy L.P. Partners’ Equity			Noncontrolling Interest			Total Partners’ Equity
Balance as of January 1, 2014	—	$	—		77,886,078	$	1,921,726		$	43,804		$	(63,394	)	$	1,902,136		$	1,658		$	1,903,794
Net income (loss)	—	—			—	164,201			46,572			—			210,773			(395		)	210,378
Other comprehensive loss	—	—			—	—			—			(4,518		)	(4,518		)	(433		)	(4,951		)
Distributions to partners	—	—			—	(341,140		)	(51,064		)	—			(392,204		)	—			(392,204		)
Other	—	—			—	23			—			—			23			(830		)	(807		)
Balance as of December 31, 2014	—	—			77,886,078	1,744,810			39,312			(67,912		)	1,716,210			—			1,716,210
Net income	—	—			—	258,230			48,490			—			306,720			—			306,720
Other comprehensive loss	—	—			—	—			—			(20,882		)	(20,882		)	—			(20,882		)
Distributions to partners	—	—			—	(341,140		)	(51,064		)	—			(392,204		)	—			(392,204		)
Balance as of December 31, 2015	—	—			77,886,078	1,661,900			36,738			(88,794		)	1,609,844			—			1,609,844
Net income	—	1,925			—	102,580			45,498			—			150,003			—			150,003
Other comprehensive loss	—	—			—	—			—			(5,383		)	(5,383		)	—			(5,383		)
Distributions to partners	—	(1,925		)	—	(341,798		)	(51,164		)	—			(394,887		)	—			(394,887		)
Issuance of units, including contribution from general partner	9,060,000	218,400			595,050	27,710			575			—			246,685			—			246,685
Unit-based compensation	—	—			135,100	5,250			105			—			5,355			—			5,355
Balance as of December 31, 2016	9,060,000	$	218,400		78,616,228	$	1,455,642		$	31,752		$	(94,177	)	$	1,611,617		$	—		$	1,611,617

See Notes to Consolidated Financial Statements.

NUSTAR ENERGY L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2016 , 2015 and 2014

1. ORGANIZATION AND OPERATIONS

Organization

NuStar Energy L.P. (NYSE: NS) is engaged in the transportation of petroleum products and anhydrous ammonia, the terminalling and storage of petroleum products and the marketing of petroleum products. Unless otherwise indicated, the terms “NuStar Energy,” “NS,” “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 or NSH) (NYSE: NSH) owns our general partner, Riverwalk Logistics, L.P., and owns an approximate 13% common limited partner interest in us as of December 31, 2016 .

Employee Transfer from NuStar GP, LLC. On March 1, 2016, NuStar GP, LLC, the general partner of our general partner and a wholly owned subsidiary of NuStar GP Holdings, transferred and assigned to NuStar Services Company LLC (NuStar Services Co), a wholly owned subsidiary of NuStar Energy, all of NuStar GP, LLC’s employees and related benefit plans, programs, contracts and policies (the Employee Transfer). As a result of the Employee Transfer, we pay employee costs directly and sponsor the long-term incentive plan and other employee benefit plans. Please refer to Note 18 for further discussion of the Employee Transfer and our related party agreements, Note 23 for a discussion of our employee benefit plans and Note 24 for a discussion of our long-term incentive plan.

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: pipeline, storage and fuels marketing.

Pipeline. We own 3,140 miles of refined product pipelines and 1,230 miles of crude oil pipelines, as well as approximately 4.0 million barrels of storage capacity, which comprise our Central West System. In addition, we own 2,370 miles of refined product pipelines, consisting of the East and North Pipelines, and a 2,000 mile ammonia pipeline, which comprise our Central East System. The East and North Pipelines have storage capacity of approximately 6.7 million barrels. 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 the Ammonia Pipeline.

Storage. We own terminal and storage facilities in the United States, Canada, Mexico, the Netherlands, including St. Eustatius in the Caribbean, and the United Kingdom, with approximately 84.9 million barrels of storage capacity. Our terminal and storage facilities provide storage, handling and other services on a fee basis for petroleum products, crude oil, specialty chemicals and other liquids.

Fuels Marketing. Within our fuels marketing operations, we purchase crude oil and refined petroleum products for resale. 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.

Use of Estimates

Cash and Cash Equivalents

Cash equivalents are all highly liquid investments with an original maturity of three months or less when acquired.

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NUSTAR ENERGY L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

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. 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. When property or equipment is retired, sold or otherwise disposed of, the difference between the carrying value and the net proceeds is recognized in “Other (expense) income, net” in the consolidated statements of income in the year of disposition.

We capitalize overhead costs and interest costs incurred on funds used to construct property, plant and equipment while the asset is under construction. The overhead costs and capitalized interest are recorded as part of the asset to which they relate and are amortized over the asset’s estimated useful life as a component of depreciation expense.

Goodwill

We assess goodwill for impairment annually on October 1, or more frequently if events or changes in circumstances indicate it might be impaired. We have the option to first assess qualitative factors to determine whether it is necessary to perform a quantitative goodwill impairment test. We performed a quantitative goodwill impairment test as of October 1, 2016 and 2015, and we determined that no impairment charges occurred.

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 involves estimating the fair value of each reporting unit by discounting its estimated future cash flows using a discount rate that would be 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.

Our reporting units to which goodwill has been allocated consist of the following:


•	crude oil pipelines;


•	refined product pipelines;


•	terminals, excluding our St. Eustatius and Point Tupper facilities; 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 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.

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NUSTAR ENERGY L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Investment in Joint Ventures

We account for investment in joint ventures using the equity method of accounting. We reported our portion of the results of operations for our equity method investments in “Equity in earnings of joint ventures” in the consolidated statements of income. On January 2, 2015, we acquired full ownership of ST Linden Terminal, LLC (Linden), which owns a refined products terminal in Linden, NJ with 4.3 million barrels of storage capacity (the Linden Acquisition). See Note 4 for additional information on the Linden Acquisition. On February 26, 2014, we sold our remaining 50% ownership interest in Axeon Specialty Products LLC. See Note 5 for additional discussion.

Impairment of Long-Lived Assets

We review long-lived assets, including property, plant and equipment, 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, 2016 are recoverable.

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, 2016 and 2015 .

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, as well as for our major non-U.S. jurisdictions, tax years subject to examination are 2012 through 2015, according to standard statute of limitations.

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.

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NUSTAR ENERGY L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

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, 2016 and 2015 , 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 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 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 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 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 terminal revenues), and throughput agreements, whereby a customer pays a fee per barrel for volumes moving through our terminals (throughput terminal revenues). Our terminals also provide blending, additive injections, handling and filtering services for which we charge additional fees. Certain of our facilities charge fees to provide marine services such as pilotage, tug assistance, line handling, launch service, emergency response services and other ship services. Storage terminal revenues are recognized when services are provided to the customer. Throughput revenues are recognized as refined products or crude oil 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 marine services are recognized as those services are provided.

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.

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 partnership agreement, as amended, sets forth the calculation to be used to determine the amount and priority of cash distributions that the unitholders and general partner will receive. The partnership agreement also contains provisions for the allocation of net income to the unitholders and the general partner; however, losses are only allocated to the common unitholders and the general partner. Our net income for each quarterly reporting period is first allocated to the preferred limited partner unitholders in an amount equal to the earned distributions for the respective reporting period and then 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 or loss among the common unitholders ( 98% ) and general partner ( 2% ), as set forth in our partnership agreement.

Basic and Diluted Net Income Per Common Unit

Basic and diluted net income per common unit is determined pursuant to the two-class method. Under this method, all earnings are allocated to our common limited partners and participating securities based on their respective rights to receive distributions

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NUSTAR ENERGY L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

earned during the period. Participating securities include our general partner interest and restricted units awarded under our long-term incentive plan.

We compute basic net income per common unit by dividing net income attributable to our common limited partners by the weighted-average number of common units outstanding during the period. We compute diluted net income per common unit by dividing net income attributable to our common limited partners by the sum of (i) the weighted-average number of common units outstanding during the period and (ii) the effect of dilutive potential common units outstanding during the period. Dilutive potential common units include contingently issuable performance units awarded under our long-term incentive plan. See Note 24 for additional information on our performance units.

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.

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 (loss) (AOCI) until the underlying hedged forecasted transactions occur. 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.”

Under the terms of our forward-starting interest rate swap agreements, we pay a fixed rate and receive a variable rate. We entered into the forward-starting 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 account for the forward-starting interest rate swaps as Cash Flow Hedges, and we recognize the fair value of each interest rate swap in the consolidated balance sheets. We record the effective portion of mark-to-market adjustments as a component of AOCI, and any hedge ineffectiveness is recognized immediately in “Interest expense, net.” The amount accumulated in AOCI is amortized into “Interest expense, net” as the forecasted interest payments occur or if the interest payments are probable not to occur.

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. See Note 17 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

Unit-based compensation for our long-term incentive plan is recorded in our consolidated balance sheets based on the fair value of the awards granted and recognized as compensation expense primarily on a straight-line basis over the requisite service period. Certain awards issued under our long-term incentive plan provide that the grantee’s award vests immediately upon retirement. Compensation expense is recognized immediately if these awards are granted to retirement-eligible employees, as defined in each award. 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.

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Forfeitures of our unit-based compensation awards are recognized as an adjustment to compensation expense when they occur. Unit-based compensation expense is included in “General and administrative expenses” on our consolidated statements of income. See Note 24 for additional information regarding our unit-based compensation.

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 (expense) income, net” in the consolidated statements of income.

Reclassifications

Certain previously reported amounts in the 2015 consolidated financial statements and notes have been reclassified to conform to 2016 presentation.

3. NEW ACCOUNTING PRONOUNCEMENTS

Goodwill

In January 2017, the Financial Accounting Standards Board (FASB) issued amended guidance that simplifies the accounting for goodwill impairment by eliminating step 2 of the goodwill impairment test. Under the amended guidance, goodwill impairment will be measured as the excess of the reporting unit’s carrying value over its fair value, not to exceed the carrying amount of goodwill for that reporting unit. The changes are effective for annual and interim periods beginning after December 15, 2019, and amendments should be applied prospectively. Early adoption is permitted for any impairment tests performed after January 1, 2017. We are currently evaluating whether we will early adopt these provisions. However, we do not expect the guidance to have a material impact on our financial position, results of operations or disclosures.

Definition of a Business

In January 2017, the FASB issued amended guidance that clarifies the definition of a business used in evaluating whether a set of transferred assets and activities constitutes a business. Under the amended guidance, if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets, the set of transferred assets and activities would not represent a business. To be considered a business, the set of assets transferred is required to include at least one substantive process that together significantly contribute to the ability to create outputs. In addition, the amended guidance narrows the definition of outputs to be consistent with how outputs are described in the new revenue recognition standard. The changes are effective for annual and interim periods beginning after December 15, 2017, and amendments should be applied prospectively. We are currently evaluating whether we will early adopt these provisions. However, we do not expect the guidance to have a material impact on our financial position, results of operations or disclosures.

Statement of Cash Flows

In August 2016, the FASB issued amended guidance that clarifies how entities should present certain cash receipts and cash payments on the statement of cash flows, including but not limited to debt prepayment or debt extinguishment costs; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims and distributions received from equity method investees. The changes are effective for annual and interim periods beginning after December 15, 2017, and amendments should be applied retrospectively. We will adopt these provisions January 1, 2018, and we do not expect the guidance to have a material impact on our statements of cash flows or disclosures.

Credit Losses

In June 2016, the FASB issued amended guidance that requires the use of a “current expected loss” model for financial assets measured at amortized cost and certain off-balance sheet credit exposures. Under this model, entities will be required to estimate the lifetime expected credit losses on such instruments based on historical experience, current conditions, and reasonable and supportable forecasts. This amended guidance also expands the disclosure requirements to enable users of

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financial statements to understand an entity’s assumptions, models and methods for estimating expected credit losses. The changes are effective for annual and interim periods beginning after December 15, 2019, and amendments should be applied using a modified retrospective approach. We are currently assessing the impact of this amended guidance on our financial position, results of operations and disclosures.

Unit-Based Payments

In March 2016, the FASB issued amended guidance that simplifies certain aspects of accounting for unit-based payments to employees, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. The changes are effective for annual and interim periods beginning after December 15, 2016, and early adoption is permitted. Prior to the Employee Transfer discussed in Note 18, we did not sponsor a unit-based compensation plan. Upon completion of the Employee Transfer, we adopted this amended guidance effective January 1, 2016 on a prospective basis, which did not have a material impact on our financial position, results of operations or disclosures. Please refer to Note 24 for a discussion of our long-term incentive plan.

Leases

In February 2016, the FASB issued amended guidance that requires lessees to recognize the assets and liabilities that arise from most leases on the balance sheet. For lessors, this amended guidance modifies the classification criteria and the accounting for sales-type and direct financing leases. The changes are effective for annual and interim periods beginning after December 15, 2018, and amendments should be applied using a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements, with the option to use certain expedients. We currently expect to adopt these provisions on January 1, 2019. We are currently assessing the impact of this amended guidance on our financial position, results of operations and disclosures and plan to provide additional information about the expected financial impact at a future date. See Note 15 for commitments under our current operating lease arrangements.

Financial Instruments

Inventory

In July 2015, the FASB issued amended guidance that requires inventory to be measured at the lower of cost or net realizable value. The changes are effective for annual and interim periods beginning after December 15, 2016, and must be applied prospectively after the date of adoption. We adopted these provisions prospectively on January 1, 2017, and such adoption did not have an impact on our financial position, results of operations or disclosures.

Debt Issuance Costs

In April 2015, the FASB issued amended guidance for the presentation of debt issuance costs. Under the amended guidance, debt issuance costs will be presented on the balance sheet as a deduction from the carrying value of the associated debt liability. In August 2015, the FASB issued amended guidance that would allow debt issuance costs related to line-of-credit agreements to continue to be presented as an asset on the balance sheet. The changes are effective for annual and interim periods beginning after December 15, 2015, and retrospective application is required. On January 1, 2016, we retrospectively adopted this guidance. As a result, we reclassified $23.7 million of deferred debt issuance costs from “Other long-term assets, net” to “Long-term debt” on the consolidated balance sheet as of December 31, 2015. Unamortized debt issuance costs of $21.2 million are recorded as a reduction to “Long-term debt” on the consolidated balance sheet as of December 31, 2016.

Revenue Recognition

In May 2014, the FASB and the International Accounting Standards Board jointly issued a comprehensive new revenue recognition standard. In August 2015, the FASB deferred the effective date by one year. The standard is now effective for public entities for annual and interim periods beginning after December 15, 2017, using one of two retrospective transition methods. Early adoption is permitted, but not before the original effective date. The FASB has subsequently issued several updates that amend and/or clarify the new revenue recognition standard. Full implementation of the new revenue recognition standard will be completed by the end of 2017. Based on our analysis completed to date, we do not believe the standard will significantly impact the amount or timing of revenues recognized under the vast majority of our revenue contracts. We currently expect to adopt the new guidance using the modified retrospective approach, under which the cumulative effect of initially applying the

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new guidance is recognized as an adjustment to the opening balance of retained earnings, in the first quarter of 2018. We are continuing to evaluate the impact of this new guidance on our financial position, results of operations and disclosures.

4. ACQUISITIONS

Martin Terminal Acquisition. On December 21, 2016 , we acquired crude oil and refined product storage assets in Corpus Christi, TX for $95.7 million , including $2.1 million of capital expenditure reimbursements, from Martin Operating Partnership L.P. (the Martin Terminal Acquisition). The assets acquired are in our storage segment and include 900,000 barrels of crude oil storage capacity, 250,000 barrels of refined product storage capacity and exclusive use of the Port of Corpus Christi’s new crude oil dock.

Linden Acquisition. On January 2, 2015, we acquired full ownership of Linden, which owns a refined products terminal in Linden, NJ with 4.3 million barrels of storage capacity. Linden is located on a 44-acre facility that provides deep-water terminalling capabilities in the New York Harbor and primarily stores petroleum products, including gasoline, jet fuel and fuel oils. Prior to the Linden Acquisition, Linden operated as a joint venture between us and Linden Holding Corp., with each party owning 50% .

In connection with the Linden Acquisition, we ceased applying the equity method of accounting and consolidated Linden, which is included in our storage segment. The consolidated statements of income include the results of operations for Linden commencing on January 2, 2015. On the acquisition date, we remeasured our existing 50% equity investment in Linden to its fair value of $128.0 million and we recognized a gain of $56.3 million in “Other (expense) income, net” in the consolidated statements of income for the year ended December 31, 2015. We estimated the fair value using a market approach and an income approach. The market approach estimates the enterprise value based on an earnings multiple. The income approach calculates fair value by discounting the estimated net cash flows. We funded the acquisition with borrowings under our revolving credit agreement. The acquisition complements our existing storage operations, and having sole ownership of Linden strengthens our presence in the New York Harbor and the East Coast market.

We accounted for the Linden Acquisition using the acquisition method. The purchase price has been allocated based on the estimated fair values of the individual assets acquired and liabilities assumed at the date of the acquisition.

The final purchase price allocation was as follows (in thousands of dollars):



Cash paid for the Linden Acquisition	$	142,500
Fair value of liabilities assumed	22,865
Consideration	165,365
Acquisition date fair value of previously held equity interest	128,000
Total	$	293,365

Current assets (a)	$	9,513
Property, plant and equipment	134,484
Goodwill	79,208
Intangible assets (b)	70,050
Other long-term assets	110
Purchase price allocation	$	293,365

(a) Current assets include a receivable of $7.8 million related to a pre-acquisition insurance claim, for which proceeds were received in 2015.

(b) Intangible assets primarily consist of customer contracts and relationships and are being amortized over 10 years .

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5. DISPOSITIONS

Terminal Dispositions

In January 2015, we sold our terminal in Alamogordo, NM with storage capacity of 0.1 million barrels for proceeds of $1.1 million . In 2014, we divested our terminals in Mobile, AL, Wilmington, NC and Dumfries, VA and our 75% interest in our facility in Mersin, Turkey (the Turkey Sale). We recognized a gain of $3.7 million on the Turkey Sale for the year ended December 31, 2014. We presented the results of operations for these facilities as discontinued operations.

2014 Asphalt Sale

On February 26, 2014, we sold our remaining 50% ownership interest in NuStar Asphalt LLC to Lindsay Goldberg LLC, a private investment firm (the 2014 Asphalt Sale). Effective February 27, 2014, NuStar Asphalt LLC changed its name to Axeon Specialty Products LLC (Axeon). As a result of the 2014 Asphalt Sale, we ceased applying the equity method of accounting. Therefore, the results of our investment in Axeon were reported in “Equity in earnings of joint ventures” in the consolidated statements of income through February 25, 2014. Upon completion of the 2014 Asphalt Sale, the parties agreed to: (i) convert the $250.0 million unsecured revolving credit facility provided by us to Axeon into a $190.0 million term loan (the Axeon Term Loan); (ii) terminate the terminal services agreements with respect to our terminals in Rosario, NM, Catoosa, OK and Houston, TX; (iii) amend the terminal services agreements for our terminals in Baltimore, MD and Jacksonville, FL; and (iv) transfer ownership of both the Wilmington, NC and Dumfries, VA terminals to Axeon. We ceased reporting transactions between us and Axeon as related party transactions in our consolidated financial statements on February 26, 2014. See Note 8 for additional information on the Axeon Term Loan.

6. ALLOWANCE FOR DOUBTFUL ACCOUNTS

The changes in the allowance for doubtful accounts consisted of the following:



	Year Ended December 31,
	2016			2015			2014
	(Thousands of Dollars)
Balance as of beginning of year	$	8,473		$	7,808		$	1,224
Increase in allowance, net	24			965			7,649
Accounts charged against the allowance	(741		)	(300		)	(1,065		)
Balance as of end of year	$	7,756		$	8,473		$	7,808

7. INVENTORIES

Inventories consisted of the following:



	December 31,
	2016		2015
	(Thousands of Dollars)
Crude oil and refined petroleum products	$	28,044	$	30,154
Materials and supplies	9,901		8,595
Total	$	37,945	$	38,749

We purchase crude oil and refined petroleum products for resale. Our refined petroleum 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.

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8. OTHER CURRENT ASSETS

Other current assets consisted of the following:



	December 31,
	2016		2015
	(Thousands of Dollars)
Axeon Term Loan	$	110,000	$	—
Prepaid expenses	14,894		16,331
Derivative assets	155		11,402
Other	7,637		3,443
Other current assets	$	132,686	$	31,176

Axeon Term Loan. In December 2016, Lindsay Goldberg LLC informed us that they entered into an agreement to sell Axeon’s retail asphalt sales and distribution business (the Axeon Sale), and we entered into an agreement with Axeon (the Axeon Letter Agreement) to settle and terminate the Axeon Term Loan with a $110.0 million payment to us upon closing of the Axeon Sale. As a result of the Axeon Letter Agreement and our review of Axeon’s financial statements, we determined it was probable that we would not receive all contractual amounts due under the Axeon Term Loan. Therefore, we recorded a charge of $58.7 million , included in “Other (expense) income, net” in the consolidated statements of income, to reduce the carrying amount of the Axeon Term Loan to $110.0 million and reclassified the Axeon Term Loan from “Other long-term assets, net” to “Other current assets” on the consolidated balance sheet as of December 31, 2016. The Axeon Sale closed on February 22, 2017. In conjunction with the closing, we received the $110.0 million payment in accordance with the Axeon Letter Agreement, the Axeon Term Loan terminated and we are no longer required to provide ongoing credit support to Axeon. We were not obligated to perform under any of the guarantees or letters of credit provided prior to the closing of the Axeon Sale. We are in the process of terminating certain guarantees that we previously issued on Axeon’s behalf that remain outstanding after the Axeon Sale, but these guarantees are supported by a letter of credit provided to us in an amount equal to those remaining guarantees, thereby reducing our exposure to zero. In addition, in connection with the closing of the Axeon Sale, the terminal storage agreements that Axeon has with our Jacksonville, Florida and Baltimore, Maryland terminal facilities were amended to increase the storage fees.

The recently terminated Axeon Term Loan included scheduled repayments in 2014 and 2015, which were subject to Axeon meeting certain restrictive requirements contained in its third-party asset-based revolving credit facility. In 2015 and 2014, those requirements prohibited Axeon from making the two scheduled principal payments, which, under the provisions of the Axeon Term Loan, increased the interest rate payable by Axeon. The Axeon Term Loan was scheduled to be repaid no later than September 28, 2019. Prior to the closing of the Axeon Sale, we reviewed the financial information of Axeon monthly for possible credit loss indicators. We recognized interest income associated with the Axeon Term Loan ratably over the term of the loan in “Interest expense, net” on the consolidated statements of income.

Under our agreements with Axeon, we also provided credit support, such as guarantees, letters of credit and cash collateral, as applicable, of up to $125.0 million to Axeon. As of December 31, 2016, we had provided guarantees for Axeon with an aggregate maximum potential exposure of $54.1 million , plus one guarantee to suppliers that did not specify a maximum amount. As of December 31, 2016, we had also provided $16.7 million in letters of credit on behalf of Axeon. Please refer to Note 16 for a discussion of the guarantees.

As of December 31, 2015, the carrying amount of the Axeon Term Loan was $170.4 million , consisting of the following: (i) the outstanding principal amount from the Axeon Term Loan of $190.0 million ; (ii) plus the fair value of guarantees of $1.7 million ; (iii) less equity losses from our investment in Axeon of $21.3 million incurred prior to the 2014 sale of our remaining ownership interest in Axeon and after the carrying value of our equity investment in Axeon was reduced to zero . The carrying value of the Axeon Term Loan as of December 31, 2015 was included in “Other long-term assets, net” on the consolidated balance sheet.

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9. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment, at cost, consisted of the following:



	Estimated Useful Lives			December 31,
	Estimated Useful Lives			2016			2015
	(Years)			(Thousands of Dollars)
Land		-		$	138,224		$	140,292
Land and leasehold improvements	5	-	40	187,930			186,848
Buildings	15	-	40	144,773			137,269
Pipelines, storage and terminals	20	-	40	4,647,718			4,399,378
Rights-of-way	20	-	40	202,311			194,055
Construction in progress		-		114,322			151,318
Total				5,435,278			5,209,160
Less accumulated depreciation and amortization				(1,712,995		)	(1,525,589		)
Property, plant and equipment, net				$	3,722,283		$	3,683,571

Capitalized interest costs added to property, plant and equipment totaled $3.4 million , $5.5 million and $5.7 million for the years ended December 31, 2016 , 2015 and 2014 , respectively. Depreciation and amortization expense for property, plant and equipment totaled $200.7 million , $192.3 million and $177.3 million for the years ended December 31, 2016 , 2015 and 2014 , respectively, which includes depreciation expense included in “Income (loss) from discontinued operations, net of tax” on the consolidated statements of income.

10. INTANGIBLE ASSETS AND OTHER LONG-TERM ASSETS

Intangible Assets

Intangible assets are recorded at cost and are amortized on a straight-line basis over 10 to 47 years. Intangible assets consisted of the following:



	December 31, 2016					December 31, 2015
	Cost		Accumulated Amortization			Cost		Accumulated Amortization
	(Thousands of Dollars)
Customer relationships	$	166,950	$	(41,582	)	$	196,616	$	(86,370	)
Other	2,359		(644		)	2,359		(594		)
Total	$	169,309	$	(42,226	)	$	198,975	$	(86,964	)

All of our intangible assets are subject to amortization. Amortization expense for intangible assets was $13.9 million , $16.7 million and $12.6 million for the years ended December 31, 2016 , 2015 and 2014 , respectively. The estimated aggregate amortization expense is $16.7 million for each of the years 2017 through 2021 .

Other Long-Term Assets, Net

Other long-term assets, net consisted of the following:



	December 31,
	2016		2015
	(Thousands of Dollars)
Axeon Term Loan (a)	$	—	$	170,352
Amount remaining in trust for the GoZone Bonds (a)	42,359		54,822
Ammonia pipeline linefill and tank heel inventory	34,377		35,178
Other	28,572		36,245
Other long-term assets, net	$	105,308	$	296,597


(a)	See Note 8 for discussion on the Axeon Term Loan and Note 13 for discussion of the GoZone Bonds.

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11. GOODWILL

Changes in the carrying amount of goodwill by segment were as follows:



	Pipeline		Storage			Fuels Marketing			Total
	(Thousands of Dollars)
Balances as of January 1, 2015:
Goodwill	$	306,207	$	612,012		$	53,255		$	971,474
Accumulated impairment losses	—		(331,913		)	(22,132		)	(354,045		)
Net goodwill	306,207		280,099			31,123			617,429

Activity for the year ended December 31, 2015:
Linden Acquisition final purchase price allocation	—		79,208			—			79,208

Balances as of December 31, 2015 and 2016:
Goodwill	306,207		691,220			53,255			1,050,682
Accumulated impairment losses	—		(331,913		)	(22,132		)	(354,045		)
Net goodwill	$	306,207	$	359,307		$	31,123		$	696,637

12. ACCRUED LIABILITIES

Accrued liabilities consisted of the following:



	December 31,
	2016		2015
	(Thousands of Dollars)
Derivative liabilities	$	5,052	$	121
Employee wages and benefit costs	30,807		31,143
Unearned income	14,355		14,290
Other	10,271		9,640
Accrued liabilities	$	60,485	$	55,194

13. DEBT

Long-term debt consisted of the following:



				December 31,
	Maturity			2016			2015
				(Thousands of Dollars)
Revolving Credit Agreement		2019		$	838,992		$	882,664
4.75% senior notes		2022		250,000			250,000
6.75% senior notes		2021		300,000			300,000
4.80% senior notes		2020		450,000			450,000
7.65% senior notes		2018		350,000			350,000
7.625% subordinated notes		2043		402,500			402,500
GoZone Bonds	2038	thru	2041	365,440			365,440
Receivables Financing Agreement		2018		58,400			53,500
Net fair value adjustments, unamortized discounts and unamortized debt issuance costs		N/A		(968		)	1,508
Total long-term debt				$	3,014,364		$	3,055,612

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



2017	$	—
2018	408,400
2019	838,992
2020	450,000
2021	300,000
Thereafter	1,017,940
Total repayments	3,015,332
Net fair value adjustments, unamortized discounts and unamortized debt issuance costs	(968		)
Total long-term debt	$	3,014,364

Interest payments totaled $146.1 million , $138.9 million and $135.0 million for the years ended December 31, 2016 , 2015 and 2014 , respectively.

Revolving Credit Agreement

NuStar Logistics is party to a $1.5 billion five -year revolving credit agreement (the Revolving Credit Agreement), which matures on October 29, 2019 . The Revolving Credit Agreement includes an option allowing NuStar Logistics to request an aggregate increase in the commitments from the lenders of up to $250.0 million (after which increase the aggregate commitment from all lenders shall not exceed $1.75 billion) . The Revolving Credit Agreement also includes the ability to borrow up to the equivalent of $250.0 million in Euros and up to the equivalent of $250.0 million in British Pounds Sterling. Obligations under the Revolving Credit Agreement are guaranteed by NuStar Energy and NuPOP.

The Revolving Credit Agreement bears interest, at our option, based on an alternative base rate, a LIBOR-based rate or a EURIBOR-based rate. The interest rate on the Revolving Credit Agreement is subject to adjustment if our debt rating is downgraded (or upgraded) by certain credit rating agencies. As of December 31, 2016 , our weighted-average interest rate was 2.5% . During the year ended December 31, 2016 , the weighted-average interest rate related to borrowings under the Revolving Credit Agreement was 2.3% .

The Revolving Credit Agreement contains customary restrictive covenants, such as limitations on indebtedness, liens, mergers, asset transfers and certain investing activities. In addition, the Revolving Credit Agreement requires us to maintain, as of the end of each rolling period of four consecutive fiscal quarters, a consolidated debt coverage ratio (consolidated debt to consolidated EBITDA, each as defined in the 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. As of December 31, 2016, our consolidated debt coverage ratio could not exceed 5.50-to-1.00, as a result of the Martin Terminal Acquisition in December 2016. The requirement not to exceed a maximum consolidated debt coverage ratio may limit the amount we can borrow under the Revolving Credit Agreement to an amount less than the total amount available for borrowing. As of December 31, 2016 , we had $645.2 million available for borrowing.

Letters of credit issued under the Revolving Credit Agreement totaled $15.8 million as of December 31, 2016 . Letters of credit are limited to $750.0 million (including up to the equivalent of $25.0 million in Euros and up to the equivalent of $25.0 million in British Pounds Sterling) and also may restrict the amount we can borrow under the Revolving Credit Agreement.

Notes

NuStar Logistics Senior Notes. 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 upgraded) by certain credit rating agencies and is at 8.2% as of December 31, 2016 . 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 additional 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.

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NuStar Logistics 7.625% Fixed-to-Floating Rate Subordinated Notes. NuStar Logistics’ $402.5 million of 7.625% fixed-to-floating rate subordinated notes are due January 15, 2043 (the Subordinated Notes). 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 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, 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 that interest payments are 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 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.

Gulf Opportunity Zone Revenue Bonds

In 2008, 2010 and 2011, the Parish of St. James, Louisiana issued Revenue Bonds Series 2008, Series 2010, Series 2010A, Series 2010B and Series 2011 associated with our St. James terminal expansions pursuant to the Gulf Opportunity Zone Act of 2005 for an aggregate $365.4 million (collectively, the GoZone 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 issuances, 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 expansions. We include the amount remaining in the trust in “Other long-term assets, net,” and we include the amount of bonds issued in “Long-term debt” in our consolidated balance sheets. For the years ended December 31, 2016 and 2015 , the amount received from the trustee totaled $12.5 million and $17.5 million , respectively.

NuStar Logistics is solely obligated to service the principal and interest payments associated with the GoZone Bonds. Letters of credit were issued by various individual banks 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. Obligations under the letters of credit issued are guaranteed by NuStar Energy and NuPOP. The letters of credit issued by individual banks do not restrict the amount we can borrow under the Revolving Credit Agreement.

The following table summarizes the GoZone Bonds outstanding as of December 31, 2016 :



Date Issued	Maturity Date	Amount Outstanding		Amount of Letter of Credit		Amount Received from Trustee		Amount Remaining in Trust (a)		Weighted-Average Interest Rate (b)
		(Thousands of Dollars)
June 26, 2008	June 1, 2038	$	55,440	$	56,169	$	55,440	$	—	0.7	%
July 15, 2010	July 1, 2040	100,000		101,315		100,000		—		0.7	%
October 7, 2010	October 1, 2040	50,000		50,658		43,741		6,518		0.7	%
December 29, 2010	December 1, 2040	85,000		86,118		49,782		35,841		0.7	%
August 29, 2011	August 1, 2041	75,000		75,986		75,000		—		0.7	%
	Total	$	365,440	$	370,246	$	323,963	$	42,359


(a)	Amount remaining in trust includes accrued interest.


(b)	For the year ended December 31, 2016, our weighted-average interest rate on borrowings was 0.4% .

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Receivables Financing Agreement

NuStar Energy and NuStar Finance LLC (NuStar Finance), a special purpose entity and wholly owned subsidiary of NuStar Logistics, are parties to a $125.0 million receivables financing agreement with third-party lenders (the Receivables Financing Agreement) and agreements with certain of NuStar Energy’s wholly owned subsidiaries (collectively with the Receivables Financing Agreement, the Securitization Program). Under the Securitization Program, certain of NuStar Energy’s wholly owned subsidiaries, NuStar Logistics, NuPOP, NuStar Energy Services, Inc. and NuStar Supply & Trading LLC (collectively, the Originators), sell their accounts receivable to NuStar Finance on an ongoing basis, and NuStar Finance provides the newly acquired accounts receivable as collateral for its revolving borrowings under the Receivables Financing Agreement. NuStar Energy provides a performance guarantee in connection with the Securitization Program. The maximum amount available for borrowing by NuStar Finance under the Receivables Financing Agreement is $125.0 million, with an option for NuStar Finance to request an increase of up to $75.0 million from the lenders (for aggregate total borrowings not to exceed $200.0 million). The amount available for borrowing is based on the availability of eligible receivables and other customary factors and conditions. The Securitization Program contains various customary affirmative and negative covenants and default, indemnification and termination provisions, and the Receivables Financing Agreement provides for acceleration of amounts owed upon the occurrence of certain specified events.

Borrowings by NuStar Finance under the Receivables Financing Agreement bear interest at either the applicable commercial paper rate or the applicable bank rate, each as defined under the Receivables Financing Agreement. The Securitization Program has an initial termination date of June 15, 2018, with the option to renew for additional 364-day periods thereafter. As of December 31, 2016 and 2015 , $104.5 million and $97.9 million of our accounts receivable were included in the Securitization Program, respectively. The weighted average interest rate related to outstanding borrowings under the Securitization Program during the year ended December 31, 2016 was 1.4% .

NuStar Finance’s sole activity consists of purchasing such receivables and providing them as collateral under the Securitization Program. NuStar Finance is a separate legal entity and the assets of NuStar Finance, including these accounts receivable, are not available to satisfy the claims of creditors of NuStar Energy, the Originators or their affiliates.

Short-Term Lines of Credit

NuStar Logistics is party to two short-term line of credit agreements with an aggregate uncommitted borrowing capacity of up to $75.0 million , which allow us to better manage fluctuations in our daily cash requirements and minimize our excess cash balances. The interest rate and maturity vary and are determined at the time of borrowing. We had $54.0 million outstanding under these lines of credit as of December 31, 2016 . Obligations under these short-term line of credit agreements are guaranteed by NuStar Energy. The weighted-average interest rate related to outstanding borrowings under our short-term lines of credit during the year ended December 31, 2016 was 2.0% .

14. HEALTH, SAFETY AND ENVIRONMENTAL MATTERS

Our operations are subject to extensive federal, state and local environmental laws and regulations, in the U.S. and in the other countries in which we operate, including those relating to the discharge of materials into the environment, waste management, remediation, the characteristics and composition of fuels and pollution prevention measures, among others. Our operations are also subject to extensive federal, state and local health and safety laws and regulations, including those relating to worker and pipeline safety, pipeline integrity and operator qualifications. The principal environmental and safety risks associated with our operations relate to unauthorized or unpermitted emissions into the air, unauthorized releases into soil, surface water or groundwater, personal injury and property damage. Compliance with these environmental, health and safety laws, regulations and related permits increases our capital expenditures and operating expenses, and violation of these laws, regulations or permits could 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: 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 Department of Homeland Security. Additionally, the operations and integrity of the pipelines are subject to the respective state jurisdictions along the routes of the systems.

We have adopted policies, practices and procedures to address pollution control, pipeline integrity, operator qualifications, public relations and education, process safety management, risk management planning, hazard communication, emergency response planning, community right-to-know, occupational health and the handling, storage, use and disposal of hazardous materials. Our policies are designed to comply with applicable federal, state and local regulations and 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

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necessitate changes to expected operating permits and procedures, additional remedial actions or increased capital expenditures and operating costs. 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 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,
	2016			2015
	(Thousands of Dollars)
Balance as of the beginning of year	$	7,667		$	6,598
Additions to accrual	870			3,685
Payments	(3,302		)	(2,574		)
Foreign currency translation	(115		)	(42		)
Balance as of the end of year	$	5,120		$	7,667

Accruals for environmental matters are included in the consolidated balance sheets as follows:



	December 31,
	2016		2015
	(Thousands of Dollars)
Accrued liabilities	$	3,281	$	4,350
Other long-term liabilities	1,839		3,317
Accruals for environmental matters	$	5,120	$	7,667

15. 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. We have no amount accrued for contingent losses as of December 31, 2016 , and $4.8 million accrued for contingent losses as of December 31, 2015 . The amount that will ultimately be paid related to such 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

Lessee Commitments. Future minimum rental payments applicable to all noncancellable operating leases and purchase obligations as of December 31, 2016 are as follows:



	Payments Due by Period
	2017		2018		2019		2020		2021		There- after		Total
	(Thousands of Dollars)
Operating leases	$	31,041	$	29,316	$	22,718	$	10,861	$	5,314	$	56,461	$	155,711
Purchase obligations	4,088		2,630		1,449		42		—		—		8,209

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Rental expense for all operating leases totaled $37.0 million , $39.7 million and $46.1 million for the years ended December 31, 2016 , 2015 and 2014 , respectively. 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 ; and


•	land leases at various terminal facilities, with original terms ranging from 10 to 100 years.

Lessor Commitments. We have entered into certain revenue arrangements where we are considered to be the lessor in accordance with GAAP. Under these arrangements we lease certain of our storage tanks in exchange for a fixed fee subject to an annual consumer price index adjustment. The arrangements commenced on January 1, 2017, and have initial terms of ten years with successive ten -year automatic renewal terms. Future minimum revenues we expect to receive under these lease arrangements as of December 31, 2016 total $391.3 million , which we will recognize ratably over the ten -year term.

16. FAIR VALUE MEASUREMENTS

Recurring Fair Value Measurements

The following assets and liabilities are measured at fair value on a recurring basis:



	December 31, 2016
	Level 1			Level 2			Level 3			Total
	(Thousands of Dollars)
Assets:
Other current assets:
Product imbalances	$	1,551		$	—		$	—		$	1,551
Commodity derivatives	—			155			—			155
Other long-term assets, net:
Interest rate swaps	—			1,314			—			1,314
Total	$	1,551		$	1,469		$	—		$	3,020
Liabilities:
Accrued liabilities:
Product imbalances	$	(1,577	)	$	—		$	—		$	(1,577	)
Commodity derivatives	(4,887		)	(165		)	—			(5,052		)
Other long-term liabilities:
Guarantee liability	—			—			(1,230		)	(1,230		)
Interest rate swaps	—			(2,632		)	—			(2,632		)
Total	$	(6,464	)	$	(2,797	)	$	(1,230	)	$	(10,491	)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



	December 31, 2015
	Level 1			Level 2			Level 3			Total
	(Thousands of Dollars)
Assets:
Other current assets:
Product imbalances	$	179		$	—		$	—		$	179
Commodity derivatives	11,325			77			—			11,402
Other long-term assets, net:
Interest rate swaps	—			2,755			—			2,755
Total	$	11,504		$	2,832		$	—		$	14,336
Liabilities:
Accrued liabilities:
Product imbalances	$	(419	)	$	—		$	—		$	(419	)
Commodity derivatives	—			(120		)	—			(120		)
Other long-term liabilities:
Guarantee liability	—			—			(1,697		)	(1,697		)
Interest rate swaps	—			(1,452		)	—			(1,452		)
Total	$	(419	)	$	(1,572	)	$	(1,697	)	$	(3,688	)

Product Imbalances. Since we value our assets and liabilities related to product imbalances using quoted market prices in active markets as of the reporting date, we include these product imbalances in Level 1 of the fair value hierarchy.

Commodity Derivatives. We base the fair value of certain of our commodity derivative instruments on quoted prices on an exchange; accordingly, we include these items 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, and we include these derivative instruments in Level 2 of the fair value hierarchy. See Note 17 for a discussion of our derivative instruments.

Interest Rate Swaps. Because we estimate the fair value of our forward-starting interest rate swaps using discounted cash flows, which use observable inputs such as time to maturity and market interest rates, we include these interest rate swaps in Level 2 of the fair value hierarchy.

Guarantees. As of December 31, 2016 and 2015 , we recorded a liability of $1.2 million and $1.7 million , respectively, representing the fair value of guarantees we have issued on behalf of Axeon. We estimated the fair value considering the probability of default by Axeon 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, 2016 and 2015 , totaling $54.1 million and $71.9 million , respectively, and one guarantee that did not specify a maximum amount as of December 31, 2016 . As of December 31, 2015 , we provided two guarantees that did not specify a maximum amount. We provided guarantees for commodity purchases, lease obligations and certain utilities for Axeon. Our estimate of the fair value was based on significant inputs not observable in the market and thus fell within Level 3 of the fair value hierarchy. After the Axeon Sale closed on February 22, 2017, we are no longer obligated to provide ongoing credit support, including guarantees, on behalf of Axeon. We are in the process of terminating certain guarantees that we previously issued on Axeon’s behalf that remain outstanding after the Axeon Sale, but these guarantees are supported by a letter of credit provided to us in an amount equal to those remaining guarantees, thereby reducing our exposure to zero. See Note 8 for additional information on the Axeon Term Loan.

The following table summarizes the activity in our Level 3 liabilities:



	Year Ended December 31, 2016
	(Thousands of Dollars)
Beginning balance	$	1,697
Adjustment to guarantee liability	(467		)
Ending balance	$	1,230

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Fair Value of Financial Instruments

We recognize cash equivalents, receivables, payables and debt in our consolidated balance sheets at their carrying amounts. The fair values of these financial instruments, except for the Axeon Term Loan and long-term debt, approximate their carrying amounts.

The estimated fair values and carrying amounts of the long-term debt and the Axeon Term Loan were as follows:



	December 31, 2016				December 31, 2015
	Fair Value		Carrying Amount		Fair Value		Carrying Amount
	(Thousands of Dollars)
Long-term debt	$	3,084,762	$	3,014,364	$	2,929,438	$	3,055,612
Axeon Term Loan	$	110,000	$	110,000	$	172,123	$	170,352

We estimated the fair value of our publicly traded senior notes based upon quoted prices in active markets; therefore, we determined that 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 that the fair value falls in Level 2 of the fair value hierarchy.

Since we expected to settle and terminate the Axeon Term Loan upon closing of the Axeon Sale in 2017, we reclassified the Axeon Term Loan into “Other current assets” on the consolidated balance sheet as of December 31, 2016. We also determined that the fair value of the Axeon Term Loan approximated its carrying value as of December 31, 2016. See Note 8 for additional information on the Axeon Term Loan.

As of December 31, 2015, we estimated the fair value of the Axeon Term Loan using discounted cash flows, which used observable inputs such as time to maturity and market interest rates, and determined that the fair value fell in Level 2 of the fair value hierarchy. The carrying value of the Axeon Term Loan as of December 31, 2015 was included in “Other long-term assets, net” on the consolidated balance sheet.

17. DERIVATIVES AND RISK MANAGEMENT ACTIVITIES

We utilize various derivative instruments to manage our exposure to interest rate risk and commodity price 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.

Interest Rate Risk

We are a party to certain interest rate swap agreements to manage our exposure to changes in interest rates, which include forward-starting interest rate swap agreements related to forecasted debt issuances in 2018 and 2020. We entered into these swaps during the year ended December 31, 2015, 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. Under the terms of the swaps, we pay a fixed rate and receive a rate based on three month USD LIBOR . These swaps qualified, and we designated them, as cash flow hedges. We record the effective portion of mark-to-market adjustments as a component of AOCI, and the amount in AOCI will be recognized in “Interest expense, net” as the forecasted interest payments occur or if the interest payments are probable not to occur. As of December 31, 2016 and 2015 , the aggregate notional amount of forward-starting interest rate swaps totaled $600.0 million .

The remaining fair value amount associated with unwound fixed-to-floating interest rate swap agreements totaled a $21.1 million and $26.3 million gain as of December 31, 2016 and 2015 , respectively, and is included in “Long-term debt” on the consolidated balance sheets. The remaining fair value amount associated with unwound forward-starting interest rate swap agreements totaled a $20.9 million and a $29.3 million loss as of December 31, 2016 and 2015 , respectively, and is included in AOCI on the consolidated balance sheets. These amounts are amortized ratably over the remaining life of the related debt instrument into “Interest expense, net” on the consolidated statements of income.

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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 refined 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. Our risk management committee oversees our trading controls 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.

The volume of commodity contracts is based on open derivative positions and represents the combined volume of our long and short open positions on an absolute basis, which totaled 4.7 million barrels and 8.0 million barrels as of December 31, 2016 and 2015 , respectively. As of December 31, 2016 , we had $1.8 million of margin deposits; we had no margin deposits as of December 31, 2015 .

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,
	Balance Sheet Location	2016		2015		2016			2015
		(Thousands of Dollars)
Derivatives Designated as Hedging Instruments:
Commodity contracts	Other current assets	$	—	$	1,937	$	—		$	(23	)
Interest rate swaps	Other long-term assets, net	1,314		2,755		—			—
Commodity contracts	Accrued liabilities	144		—		(3,566		)	—
Interest rate swaps	Other long-term liabilities	—		—		(2,632		)	(1,452		)
Total		1,458		4,692		(6,198		)	(1,475		)

Derivatives Not Designated as Hedging Instruments:
Commodity contracts	Other current assets	265		34,016		(110		)	(24,528		)
Commodity contracts	Accrued liabilities	9,128		117		(10,758		)	(237		)
Total		9,393		34,133		(10,868		)	(24,765		)

Total Derivatives		$	10,851	$	38,825	$	(17,066	)	$	(26,240	)

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	2016			2015
	(Thousands of Dollars)
Net amounts of assets presented in the consolidated balance sheets	$	155		$	11,402
Net amounts of liabilities presented in the consolidated balance sheets	$	(5,052	)	$	(120	)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

We recognize the impact of our commodity contracts on earnings in “Cost of product sales” on the consolidated income statements, and that impact was as follows:



	Year Ended December 31,
	2016			2015			2014
	(Thousands of Dollars)
Derivatives Designated as Fair Value Hedging Instruments:
(Loss) gain recognized in income on derivative	$	(11,254	)	$	21,589		$	21,951
Gain (loss) recognized in income on hedged item	15,295			(18,047		)	(21,587		)
Gain recognized in income for ineffective portion	4,041			3,542			364

Derivatives Not Designated as Hedging Instruments:
Gain recognized in income on derivative	$	225		$	2,208		$	18,407

Our interest rate swaps also had the following impact on earnings:



	Year Ended December 31,
	2016			2015			2014
	(Thousands of Dollars)
Derivatives Designated as Cash Flow Hedging Instruments:
(Loss) gain recognized in other comprehensive (loss) income on derivative (effective portion)	$	(2,621	)	$	1,303		$	—
Loss reclassified from AOCI into interest expense, net (effective portion)	(8,331		)	(9,802		)	(10,663		)

As of December 31, 2016, we expect to reclassify a loss of $6.6 million to “Interest expense, net” within the next twelve months associated with unwound forward-starting interest rate swaps.

18. RELATED PARTY TRANSACTIONS

NuStar GP, LLC

GP Services Agreement. Prior to the Employee Transfer discussed in Note 1, our operations were managed by NuStar GP, LLC under a services agreement effective January 1, 2008 pursuant to which employees of NuStar GP, LLC performed services for our U.S. operations. Employees of NuStar GP, LLC provided services to us and NuStar GP Holdings; therefore, we reimbursed NuStar GP, LLC for all employee costs incurred prior to the Employee Transfer, other than the expenses allocated to NuStar GP Holdings. The following table summarizes information pertaining to our related party transactions:



	Year Ended December 31,
	2016		2015		2014
	(Thousands of Dollars)
Revenues	$	—	$	—	$	929
Operating expenses	$	21,681	$	135,565	$	125,736
General and administrative expenses	$	10,493	$	66,769	$	66,910
Interest income	$	—	$	—	$	1,055
Revenues included in discontinued operations, net of tax	$	—	$	—	$	528
Expenses included in discontinued operations, net of tax	$	—	$	2	$	1,680

In conjunction with the Employee Transfer, we entered into an Amended and Restated Services Agreement with NuStar GP, LLC, effective March 1, 2016 (the Amended GP Services Agreement). The Amended GP Services Agreement provides that we will furnish administrative services necessary to conduct the business of NuStar GP Holdings. NuStar GP Holdings will compensate us for these services through an annual fee of $1.0 million, subject to adjustment based on the annual merit increase percentage applicable to our employees for the most recently completed fiscal year and for changes in level of service. The Amended GP Services Agreement will terminate on March 1, 2020 and will automatically renew for successive two-year terms, unless terminated by either party.

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Assignment and Assumption Agreement. Also on March 1, 2016 and in connection with the Employee Transfer, we entered into an Assignment and Assumption Agreement with NuStar GP, LLC (the Assignment Agreement). Under the Assignment Agreement, NuStar GP, LLC assigned all of its employee benefit plans, programs, contracts, policies, and various of its other agreements and contracts with certain employees, affiliates and third-party service providers (collectively, the Assigned Programs) to NuStar Services Co. In addition, NuStar Services Co agreed to assume the sponsorship of and all obligations relating to the ongoing maintenance and administration of each of the plans and agreements in the Assigned Programs. Certain of our officers are also officers of NuStar GP Holdings and are considered dual employees of ours and NuStar GP Holdings.



Decrease in related party payable:
Current	$	16,014
Long-term	32,656
Decrease in related party payable	$	48,670

Changes to our consolidated balance sheet:
Current and long-term assets	$	2,154
Current liabilities	5,609
Other long-term liabilities	34,042
Limited partner’s equity	2,664
Accumulated other comprehensive loss	4,201
Changes to our consolidated balance sheet	$	48,670

Balance Sheet Items. We had a receivable from related party of $0.3 million as of December 31, 2016 , mainly comprised of service fees and expenses paid on behalf of NuStar GP Holdings. As of December 31, 2015 , we had a payable to related party of $14.8 million , mainly comprised of payroll, employee benefit plan expenses and unit-based compensation prior to the Employee Transfer, and none as of December 31, 2016 . We also had a long-term payable to related party as of December 31, 2015 of $32.1 million , representing long-term employee benefits prior to the Employee Transfer, and none as of December 31, 2016 .

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.

Axeon

As a result of the 2014 Asphalt Sale, we ceased reporting transactions between us and Axeon as related party transactions in our consolidated financial statements on February 26, 2014.

Terminal Service Agreements. We were a party to terminal service agreements with Axeon for our terminals in Wilmington, NC, Rosario, NM, Catoosa, OK, Houston, TX, Jacksonville, FL, Dumfries, VA, and Baltimore, MD. As a result of the 2014 Asphalt Sale, these terminal service agreements were either amended or terminated.

Services Agreement. NuStar GP, LLC and Axeon were a party to a services agreement, which provided that NuStar GP, LLC would furnish certain administrative and other operating services necessary to conduct the business of Axeon for an annual fee totaling $10.0 million, subject to adjustment (the Axeon Services Agreement). The Axeon Services Agreement terminated on June 30, 2014 .

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NUSTAR ENERGY L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

19. OTHER (EXPENSE) INCOME

Other (expense) income consisted of the following:



	Year Ended December 31,
	2016			2015		2014
	(Thousands of Dollars)

Impairment loss on Axeon Term Loan	$	(58,655	)	$	—	$	—
Gain associated with Linden Acquisition	—			56,277		—
Foreign exchange (losses) gains	(660		)	3,891		2,057
(Loss) gain from sale or disposition of assets	(64		)	1,617		642
Other, net	596			37		1,800
Other (expense) income, net	$	(58,783	)	$	61,822	$	4,499

20. PARTNERS’ EQUITY

Issuance of Preferred Units

In the fourth quarter of 2016 , we issued 9,060,000 of our 8.50% Series A Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units (the Preferred Units) representing limited partner interests at a price of $25.00 per unit. We used the net proceeds of $218.4 million from this issuance for general partnership purposes, including the funding of capital expenditures and repayments of outstanding borrowings under the Revolving Credit Agreement.

Distributions on the Preferred Units are payable out of any legally available funds, accrue and are cumulative from the date of original issuance of the Preferred Units and are payable on the 15 ^th day of each of March, June, September and December of each year (beginning on March 15, 2017) to holders of record on the first day of each payment month. The initial distribution rate on the Preferred Units to, but not including, December 15, 2021 is 8.50% per annum of the $25.00 liquidation preference per unit (equal to $2.125 per unit per annum). On and after December 15, 2021, distributions on the Preferred Units accumulate at a percentage of the $25.00 liquidation preference equal to an annual floating rate of the three-month LIBOR plus a spread of 6.766% . On January 27, 2017 , we announced a Preferred Unit distribution of $0.64930556 per unit to be paid on March 15, 2017 to holders of record as of March 1, 2017 for distributions accumulated from the issuance date up to the payment date. The Preferred Units rank senior to all of our other classes of equity securities with respect to distribution rights and rights upon liquidation.

At any time on or after December 15, 2021, we may redeem our Preferred Units, in whole or in part, at a redemption price of $25.00 per unit plus an amount equal to all accumulated and unpaid distributions to, but not including, the date of redemption, whether or not declared. We may also redeem the Preferred Units upon the occurrence of certain rating events or a change of control as defined in our partnership agreement. In the case of the latter instance, if we choose not to redeem the Preferred Units, the preferred unitholders may have the ability to convert the Preferred Units to common units at the then applicable conversion rate. Preferred unitholders have no voting rights except for certain exceptions set forth in our partnership agreement.

Issuance of Common Units

During the year ended December 31, 2016 , we issued 595,050 common units representing limited partner interests at an average price of $47.39 per unit for proceeds of $28.3 million , net of $0.5 million of issuance costs. We used these proceeds, which includes a contribution of $0.6 million from our general partner to maintain its 2% general partner interest, for general partnership purposes, including repayments of outstanding borrowings under the Revolving Credit Agreement.

For the year ended December 31, 2016 , we issued 135,100 common units representing limited partner interests in connection with vesting of awards issued under our long-term incentive plan.

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NUSTAR ENERGY L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

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			Pension and Other Postretirement Benefits			Total
	(Thousands of Dollars)
Balance as of January 1, 2014	$	(13,658	)	$	(49,736	)	$	—		$	(63,394	)
Other comprehensive loss before reclassification adjustments	(15,181		)	—			—			(15,181		)
Net loss on cash flow hedges reclassified into interest expense, net	—			10,663			—			10,663
Other comprehensive (loss) income	(15,181		)	10,663			—			(4,518		)
Balance as of December 31, 2014	(28,839		)	(39,073		)	—			(67,912		)
Other comprehensive (loss) income before reclassification adjustments	(31,987		)	1,303			—			(30,684		)
Net loss on cash flow hedges reclassified into interest expense, net	—			9,802			—			9,802
Other comprehensive (loss) income	(31,987		)	11,105			—			(20,882		)
Balance as of December 31, 2015	(60,826		)	(27,968		)	—			(88,794		)
Employee Transfer	—			—			4,201			4,201
Deferred income tax adjustments	—			—			2,414			2,414
Other comprehensive loss before reclassification adjustments	(8,243		)	(2,621		)	(7,852		)	(18,716		)
Net gain on pension costs reclassified into operating expense	—			—			(1,200		)	(1,200		)
Net gain on pension costs reclassified into general and administrative expense	—			—			(413		)	(413		)
Net loss on cash flow hedges reclassified into interest expense, net	—			8,331			—			8,331
Other comprehensive (loss) income	(8,243		)	5,710			(2,850		)	(5,383		)
Balance as of December 31, 2016	$	(69,069	)	$	(22,258	)	$	(2,850	)	$	(94,177	)

The following table details the calculation of net income applicable to the general partner:



	Year Ended December 31,
	2016			2015			2014
	(Thousands of Dollars)
Net income attributable to NuStar Energy L.P.	$	150,003		$	306,720		$	210,773
Less preferred limited partner interest	1,925			—			—
Less general partner incentive distribution	43,407			43,220			43,220
Net income after general partner incentive distribution and preferred limited partner interest	104,671			263,500			167,553
General partner interest allocation	2		%	2		%	2		%
General partner interest allocation of net income	2,091			5,270			3,352
General partner incentive distribution	43,407			43,220			43,220
Net income applicable to general partner	$	45,498		$	48,490		$	46,572

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NUSTAR ENERGY L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Common Unit and General Partner Distributions

We make quarterly distributions to common unitholders and the general partner of 100% of our available cash, generally defined as cash receipts less cash disbursements (including Preferred Unit distributions) 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 common unitholders receive a minimum quarterly distribution of $0.60 per unit each quarter ( $2.40 annualized), subject to limitation by the Preferred Unit distributions in arrears, if any. Our available cash is first distributed 98% to the common unitholders and 2% to the general partner until the amount distributed to our common unitholders and general partner 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 common unitholders and our general partner based on the percentages shown below.

Our general partner is entitled to incentive distributions if the amount we distribute to holders of our common units with respect to any quarter exceeds specified target levels shown below:



	Percentage of Distribution
Quarterly Distribution Amount per Common Unit	Common 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 the general and common limited partners applicable to the period in which the distributions were earned:



	Year Ended December 31,
	2016		2015		2014
	(Thousands of Dollars, Except Per Unit Data)
General partner interest	$	7,877	$	7,844	$	7,844
General partner incentive distribution	43,407		43,220		43,220
Total general partner distribution	51,284		51,064		51,064
Common limited partners’ distribution	342,598		341,140		341,140
Total cash distributions	$	393,882	$	392,204	$	392,204

Cash distributions per unit applicable to common limited partners	$	4.380	$	4.380	$	4.380

The following table summarizes information related to our quarterly cash distributions to our general and common limited partners:



Quarter Ended	Cash Distributions Per Unit		Total Cash Distributions		Record Date	Payment Date
			(Thousands of Dollars)
December 31, 2016 (a)	$	1.095	$	98,971	February 8, 2017	February 13, 2017
September 30, 2016	$	1.095	$	98,809	November 8, 2016	November 14, 2016
June 30, 2016	$	1.095	$	98,051	August 9, 2016	August 12, 2016
March 31, 2016	$	1.095	$	98,051	May 9, 2016	May 13, 2016


(a)	The distribution was announced on January 27, 2017 .

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NUSTAR ENERGY L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

21. NET INCOME PER UNIT

The following table details the calculation of net income per unit:



	Year Ended December 31,
	2016			2015			2014
	(Thousands of Dollars, Except Per Unit Data)
Net income attributable to NuStar Energy L.P.	$	150,003		$	306,720		$	210,773
Less: Distributions to general partner (including incentive distribution rights)	51,284			51,064			51,064
Less: Distributions to common limited partners	342,598			341,140			341,140
Less: Distributions for preferred limited partners	1,925			—			—
Less: Distribution equivalent rights to restricted units	2,697			—			—
Distributions in excess of earnings	$	(248,501	)	$	(85,484	)	$	(181,431	)

Net income attributable to common units:
Distributions to common limited partners	$	342,598		$	341,140		$	341,140
Allocation of distributions in excess of earnings	(243,530		)	(83,774		)	(177,801		)
Total	$	99,068		$	257,366		$	163,339

Basic weighted-average common units outstanding	78,080,484			77,886,078			77,886,078

Diluted common units outstanding:
Basic weighted-average common units outstanding	78,080,484			77,886,078			77,886,078
Effect of dilutive potential common units	32,518			—			—
Diluted weighted-average common units outstanding	78,113,002			77,886,078			77,886,078

Basic and diluted net income per common unit	$	1.27		$	3.30		$	2.10

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NUSTAR ENERGY L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

22. STATEMENTS OF CASH FLOWS

Changes in current assets and current liabilities were as follows:



	Year Ended December 31,
	2016			2015			2014
	(Thousands of Dollars)
Decrease (increase) in current assets:
Accounts receivable	$	(23,234	)	$	67,257		$	72,298
Receivable from related parties	(317		)	—			50,918
Inventories	940			16,776			82,075
Other current assets	8,128			4,414			3,785
Increase (decrease) in current liabilities:
Accounts payable	14,071			(32,152		)	(153,671		)
Payable to related party	894			(872		)	837
Accrued interest payable	(256		)	941			303
Accrued liabilities	161			(7,834		)	22,980
Taxes other than income tax	2,690			(1,522		)	4,341
Income tax payable	639			3,551			(1,448		)
Changes in current assets and current liabilities	$	3,716		$	50,559		$	82,418

The above changes in current assets and current liabilities differ from changes between amounts reflected in the applicable consolidated balance sheets due to:


•	current assets and current liabilities acquired and disposed during the period;


•	the change in the amount accrued for capital expenditures;


•	the effect of foreign currency translation;


•	reclassification of the Axeon Term Loan to other current assets from other long-term assets, net; and


•	non-cash related party transactions associated with the Employee Transfer (see Note 18 for further information).

Non-cash financing activities for the years ended December 31, 2016 and 2015 mainly consist of changes in the fair values of our interest rate swap agreements.

Cash flows related to interest and income taxes were as follows:



	Year Ended December 31,
	2016		2015		2014
	(Thousands of Dollars)
Cash paid for interest, net of amount capitalized	$	142,663	$	133,388	$	129,377
Cash paid for income taxes, net of tax refunds received	$	11,847	$	9,971	$	6,699

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NUSTAR ENERGY L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

23. EMPLOYEE BENEFIT PLANS

Employee Transfer

On March 1, 2016, and in conjunction with the Employee Transfer, we assumed $22.5 million and $10.2 million in benefit obligations associated with the pension plans and other postretirement benefit plans, respectively. Prior to the Employee Transfer, we reimbursed all costs incurred by NuStar GP, LLC related to these employee benefit plans at cost. For comparability purposes this footnote presents information related to these benefit plans on a combined basis for periods prior to the Employee Transfer and after the Employee Transfer, including changes in the benefit obligation and fair value of plan assets, components of net periodic benefit cost (income), and adjustments to other comprehensive income (loss). Consequently, certain amounts presented below will differ from amounts reflected in our consolidated financial statements. See Note 18 for additional discussion on the Employee Transfer.

Thrift Plans

The NuStar Thrift Plan (the Thrift Plan) is a qualified defined contribution plan that became effective June 26, 2006. Participation in the Thrift Plan is voluntary and open to substantially all our domestic employees upon their date of hire. 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. We make 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. The matching contributions to the Thrift Plan for the years ended December 31, 2016 , 2015 and 2014 totaled $6.6 million , $6.3 million and $5.9 million , respectively.

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

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, 2016, 2015 and 2014, our costs for these plans totaled $2.4 million , $2.6 million and $2.7 million , respectively.

Pension and Other Postretirement Benefits

The NuStar Pension Plan (the Pension Plan) is a qualified non-contributory defined benefit pension plan that provides eligible U.S. employees with retirement income as calculated under a cash balance formula. Under the cash balance formula, benefits are determined based on age, service and interest credits, and employees become fully vested in their benefits upon attaining three years of vesting service. Prior to January 1, 2014, eligible employees were covered under either a cash balance formula or a final average pay formula (FAP). Effective January 1, 2014, the Pension Plan was amended to freeze the FAP benefits as of December 31, 2013, and going forward, all eligible employees are covered under the cash balance formula discussed above.

We also maintain 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. Neither the Excess Thrift Plan nor the Excess Pension Plan 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.

The Pension Plan, Excess Pension Plan and the supplemental executive retirement plan (the SERP), which has no participants following final payouts in 2014, are collectively referred to as the Pension Plans in the tables and discussion below. Our other postretirement benefit plans include a contributory medical benefits plan for U.S. employees that retired prior to April 1, 2014 and for employees that retire on or after April 1, 2014, a partial reimbursement for eligible third-party health care premiums.

We use December 31 as the measurement date for our pension and other postretirement plans.

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NUSTAR ENERGY L.P. AND SUBSIDIARIES

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 the consolidated balance sheets for our Pension Plans and other postretirement benefit plans as of and for the years ended December 31, 2016 and 2015 were as follows:



	Pension Plans (a)						Other Postretirement Benefit Plans (a)
	2016			2015			2016			2015
	(Thousands of Dollars)
Change in benefit obligation:
Benefit obligation, January 1	$	109,202		$	106,848		$	10,042		$	10,484
Service cost	7,703			7,676			419			470
Interest cost	4,023			4,389			401			448
Benefits paid	(2,554		)	(4,338		)	(422		)	(507		)
Participant contributions	—			—			253			203
Actuarial loss (gain)	9,028			(5,373		)	368			(1,056		)
Benefit obligation, December 31	$	127,402		$	109,202		$	11,061		$	10,042
Change in plan assets:
Plan assets at fair value, January 1	$	87,706		$	83,365		$	—		$	—
Actual return on plan assets	6,891			645			—			—
Employer contributions	15,601			8,034			169			304
Benefits paid	(2,554		)	(4,338		)	(422		)	(507		)
Participant contributions	—			—			253			203
Plan assets at fair value, December 31	$	107,644		$	87,706		$	—		$	—
Reconciliation of funded status:
Fair value of plan assets at December 31	$	107,644		$	87,706		$	—		$	—
Less: Benefit obligation at December 31	127,402			109,202			11,061			10,042
Funded status at December 31	$	(19,758	)	$	(21,496	)	$	(11,061	)	$	(10,042	)
Amounts recognized in the consolidated balance sheets (b):
Accrued liabilities	$	(162	)	$	(71	)	$	(321	)	$	(304	)
Other long-term liabilities	(19,596		)	(21,425		)	(10,740		)	(9,738		)
Net pension liability	$	(19,758	)	$	(21,496	)	$	(11,061	)	$	(10,042	)


(a)	Certain amounts shown will differ from amounts reflected in our consolidated financial statements due to the Employee Transfer on March 1, 2016.


(b)	For the Pension Plan, since assets exceed the present value of expected benefit payments for the next 12 months, all of the liability is noncurrent. For the Excess Pension Plan and the other postretirement benefit plans, since there are no assets, the current liability is the present value of expected benefit payments for the next 12 months; the remainder is noncurrent.

The accumulated benefit obligation is the present value of benefits earned to date, assuming no future salary increases. The aggregate accumulated benefit obligation for our Pension Plans as of December 31, 2016 and 2015 was $125.0 million and $108.2 million , respectively. As of December 31, 2016 and 2015 , the aggregate accumulated benefit obligation for the Pension Plans exceeded plan assets.

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NUSTAR ENERGY L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The components of net periodic benefit cost (income) related to our Pension Plans and other postretirement benefit plans were as follows:



	Pension Plans (a)									Other Postretirement Benefit Plans (a)
	Year Ended December 31,									Year Ended December 31,
	2016			2015			2014			2016			2015			2014
	(Thousands of Dollars)
Service cost	$	7,703		$	7,676		$	8,049		$	419		$	470		$	374
Interest cost	4,023			4,389			4,225			401			448			373
Expected return on plan assets	(5,407		)	(5,018		)	(4,574		)	—			—			—
Amortization of prior service credit	(2,063		)	(2,063		)	(2,063		)	(1,145		)	(1,145		)	(1,145		)
Amortization of net actuarial loss	1,091			1,845			179			181			269			114
Other	—			—			(39		)	—			—			—
Net periodic benefit cost (income)	$	5,347		$	6,829		$	5,777		$	(144	)	$	42		$	(284	)


(a)	Certain amounts shown will differ from amounts reflected in our consolidated financial statements due to the Employee Transfer on March 1, 2016.

We amortize the prior service credit shown in the table above on a straight-line basis of the credit over the average remaining service period of employees expected to receive benefits under our Pension Plans and other postretirement benefit plans. We amortize the net actuarial loss shown in the table above on a straight-line basis of the excess of the unrecognized loss over 10 percent of the greater of the projected benefit obligation or market-related value of plan assets (smoothed asset value) over the average remaining service period of active employees expected to receive benefits under our Pension Plans and other postretirement benefit plans.

Adjustments to other comprehensive (loss) income related to our Pension Plans and other postretirement benefit plans were as follows:



	Pension Plans (a)									Other Postretirement Benefit Plans (a)
	Year Ended December 31,									Year Ended December 31,
	2016			2015			2014			2016			2015			2014
	(Thousands of Dollars)
Net unrecognized (loss) gain arising during the year:
Net actuarial (loss) gain	$	(7,544	)	$	1,000		$	(14,716	)	$	(368	)	$	1,056		$	(2,718	)
Net (gain) loss reclassified into income:
Amortization of prior service credit	(2,063		)	(2,063		)	(2,063		)	(1,145		)	(1,145		)	(1,145		)
Amortization of net actuarial loss	1,091			1,845			179			181			269			114
Net (gain) loss reclassified into income	(972		)	(218		)	(1,884		)	(964		)	(876		)	(1,031		)

Income tax benefit (expense)	57			(362		)	5,314			3			(382		)	984
Total changes to other comprehensive (loss) income	$	(8,459	)	$	420		$	(11,286	)	$	(1,329	)	$	(202	)	$	(2,765	)


(a)	Certain amounts shown will differ from amounts reflected in our consolidated financial statements due to the Employee Transfer on March 1, 2016.

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NUSTAR ENERGY L.P. AND SUBSIDIARIES

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 (a)						Other Postretirement Benefit Plans (a)
	December 31,						December 31,
	2016			2015			2016			2015
	(Thousands of Dollars)
Unrecognized actuarial loss (b)	$	(28,427	)	$	(21,975	)	$	(3,755	)	$	(3,568	)
Prior service credit (b)	18,663			20,727			10,609			11,754
Deferred tax asset (liability)	57			1,313			3			(3,726		)
Accumulated other comprehensive (loss) income, net of tax	$	(9,707	)	$	65		$	6,857		$	4,460


(a)	Certain amounts shown will differ from amounts reflected in our consolidated financial statements due to the Employee Transfer on March 1, 2016.


(b)	Represents the balance of accumulated other comprehensive income (loss) that has not been recognized as a component of net periodic benefit cost (income).

The following pre-tax amounts in accumulated other comprehensive loss as of December 31, 2016 are expected to be recognized as components of net periodic benefit cost (income) in 2017 :



	Pension Plans			Other Postretirement Benefit Plans
	(Thousands of Dollars)
Actuarial loss	$	1,484		$	191
Prior service credit	$	(2,059	)	$	(1,145	)

Investment Policies and Strategies

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 our 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, 2016 , the target allocations for plan assets are 65% equity securities and 35% fixed income investments, with certain fluctuations permitted.

The overall expected long-term rate of return on plan assets for the Pension Plan is estimated using various 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.

Fair Value of Plan Assets

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 for which little or no market data exists.

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NUSTAR ENERGY L.P. AND SUBSIDIARIES

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, 2016
	Level 1		Level 2		Level 3		Total
	(Thousands of Dollars)
Cash equivalent securities	$	738	$	—	$	—	$	738
Equity securities:
U.S. large cap equity fund (a)	—		64,813		—		64,813
International stock index fund (b)	10,459		—		—		10,459
Fixed income securities:
Bond market index fund (c)	31,634		—		—		31,634
Total	$	42,831	$	64,813	$	—	$	107,644



	December 31, 2015
	Level 1		Level 2		Level 3		Total
	(Thousands of Dollars)
Cash equivalent securities	$	739	$	—	$	—	$	739
Equity securities:
U.S. large cap equity fund (a)	—		52,086		—		52,086
International stock index fund (b)	8,522		—		—		8,522
Fixed income securities:
Bond market index fund (c)	26,359		—		—		26,359
Total	$	35,620	$	52,086	$	—	$	87,706


(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.

Contributions to the Pension Plans

For the year ended December 31, 2016 , we contributed $15.6 million and $0.2 million to the Pension Plans and other postretirement benefit plans, respectively. During 2017 , we expect to contribute approximately $11.2 million and $0.3 million to the Pension Plans and other postretirement benefit plans, respectively, which principally represents contributions either required by regulations or laws, or with respect to unfunded plans, necessary to fund current benefits.

Estimated Future Benefit Payments

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)
2017	$	7,747	$	321
2018	$	8,418	$	359
2019	$	9,190	$	399
2020	$	9,656	$	429
2021	$	10,048	$	460
Years 2022-2026	$	59,168	$	2,949

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NUSTAR ENERGY L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Assumptions

The weighted-average assumptions used to determine the benefit obligations were as follows:



	Pension Plans				Other Postretirement Benefit Plans
	December 31,				December 31,
	2016		2015		2016		2015
Discount rate	4.33	%	4.61	%	4.49	%	4.75	%
Rate of compensation increase	3.51	%	3.51	%	n/a		n/a

The weighted-average assumptions used to determine the net periodic benefit cost (income) were as follows:



	Pension Plans						Other Postretirement Benefit Plans
	Year Ended December 31,						Year Ended December 31,
	2016		2015		2014		2016		2015		2014
Discount rate	4.61	%	4.22	%	5.04	%	4.75	%	4.34	%	5.28	%
Expected long-term rate of return on plan assets	6.25	%	6.50	%	6.75	%	n/a		n/a		n/a
Rate of compensation increase	3.51	%	3.51	%	3.51	%	n/a		n/a		n/a

The assumed health care cost trend rates were as follows:



	December 31,
	2016		2015
Health care cost trend rate assumed for next year	6.84	%	6.81	%
Rate to which the cost trend rate was assumed to decrease to (the ultimate trend rate)	5.00	%	5.00	%
Year that the rate reached the ultimate trend rate	2028		2026

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 for employees that retired prior to April 1, 2014. 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.

24. UNIT-BASED COMPENSATION

Overview

On January 28, 2016, our unitholders approved the Fifth Amended and Restated 2000 Long-Term Incentive Plan (the Amended 2000 LTIP) which, among other items, provides that we may use newly issued common units from NuStar Energy to satisfy unit awards and extends the term of the Amended 2000 LTIP to January 28, 2026. Prior to the Employee Transfer, NuStar GP, LLC sponsored the Amended 2000 LTIP, and we reimbursed NuStar GP, LLC for awards under this plan. Upon the approval of the Amended 2000 LTIP, along with the Employee Transfer, most of our currently outstanding awards are now classified as equity-classified awards as we intend to settle these awards through the issuance of our common units.

Effective March 1, 2016, we assumed sponsorship of the Amended 2000 LTIP, which provides the Compensation Committee of the Board of Directors of NuStar GP, LLC (the Compensation Committee) with the right to issue and award up to 3,250,000 of our common units to employees and non-employee directors. Awards available under the Amended 2000 LTIP include restricted units, performance units, unit options, unit awards and distribution equivalent rights (DERs). The Compensation Committee may also include a tandem grant of a DER that will entitle the participant to receive cash equal to cash distributions made on any award prior to its vesting. As of December 31, 2016 , common units that remained available to be awarded under the Amended 2000 LTIP totaled 990,018 .

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

On March 1, 2016, we assumed all outstanding awards under the Amended 2000 LTIP. The transfer of the outstanding awards qualifies as a plan modification. Therefore, we measured the fair value of the outstanding awards based on the common unit price on the transfer date.

The following table summarizes information pertaining to our long-term incentive plan compensation expense:



	Transferred Units March 1, 2016	Units Outstanding December 31, 2016	Compensation Expense Year Ended December 31, 2016
			(Thousands of Dollars)
Restricted Units:
Domestic employees	586,524	647,340	$	5,980
Non-employee directors (NEDs)	17,629	18,134	388
International employees	49,121	50,609	715
Performance Units	77,014	77,014	1,211
Total	730,288	793,097	$	8,294

Prior to the Employee Transfer, we reimbursed NuStar GP, LLC for our long-term incentive plan compensation expense which totaled $6.4 million and $10.9 million for the years ended December 31, 2015 and 2014, respectively.

Restricted Units

Our restricted unit awards are considered phantom units as they represent the right to receive our common units upon vesting.

We account for restricted units as either equity-classified awards or liability-classified awards depending on expected method of settlement. Awards we settle with the issuance of common units upon vesting are equity-classified. Awards we settle in cash upon vesting are liability-classified. We record compensation expense ratably over the vesting period based on the fair value of the common units at the grant date (for domestic employees) or the fair value of the common units measured at each reporting period (for NEDs and international employees). DERs paid with respect to outstanding equity-classified unvested restricted units reduce equity, similar to cash distributions to unitholders, whereas DERs paid with respect to outstanding liability-classified unvested restricted units are expensed. Cash payments made or to be made in connection with DERs were $2.7 million for the year ended December 31, 2016.

The total fair value of our equity-classified awards vested from the Employee Transfer date to December, 31, 2016 was $9.0 million . We issued 135,100 common units in connection with these award vestings, net of employee tax withholding requirements, for the year ended December 31, 2016 . Unrecognized compensation cost related to our equity-classified employee awards totaled $24.6 million as of December 31, 2016, which we expect to recognize over a weighted-average period of 3.9 years . A summary of our restricted unit activity is as follows:



	Domestic Employees
	Number of Restricted Units		Weighted- Average Grant-Date Fair Value Per Unit		Number of Restricted Units to NEDs		Number of Restricted Units to International Employees
Nonvested units as of January 1, 2016	—		$	—	—		—
Transferred	586,524		35.03		17,629		49,121
Granted	246,070		47.70		8,730		20,107
Vested	(180,724	)	35.50		(8,225	)	(14,812	)
Forfeited	(4,530	)	35.03		—		(3,807	)
Nonvested units as of December 31, 2016	647,340		$	39.72	18,134		50,609

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Domestic Employees. The outstanding restricted units granted to domestic employees are equity-classified awards and generally vest over five years beginning one year after the grant date. The fair value of these awards is measured at the transfer date (or grant date for issuances subsequent to the Employee Transfer).

Non-Employee Directors. The outstanding restricted units granted to NEDs are equity-classified awards that vest over three years . The fair value of these awards is equal to the market price of our common units at each reporting period.

International Employees. The outstanding restricted units granted to international employees are cash-settled and accounted for as liability-classified awards. These awards vest over three to five years and the fair value is equal to the market price of our common units at each reporting period. We accrued $0.4 million for these awards as of December 31, 2016 , which is included in “Accrued liabilities” on our consolidated balance sheet. We paid or expect to pay $0.7 million in cash to settle the 2016 restricted unit vestings.

Performance Units

Performance units are issued to certain of our key employees and represent rights to receive our common units upon achieving an objective performance measure for the performance period. The objective performance measure is determined each year by the NuStar GP, LLC Compensation Committee for the following year. Achievement of the performance measure determines the rate at which the performance units convert into our common units, which can range from zero to 200%.

Performance units vest in three annual increments (tranches), based upon our achievement of the performance measure set by the Compensation Committee during the one-year performance periods that end on December 31 of each year following the date of grant. Therefore, the performance units are not considered granted until the Compensation Committee has set the performance measure for each tranche of awards. Performance units are equity-classified awards measured at the grant date fair value. In addition, since the performance units granted do not receive DERs, the grant date fair value of these awards is adjusted for the per unit distributions expected to be paid to common unitholders during the vesting period. We record compensation expense ratably for each vesting tranche over its requisite service period (one year) if it is probable that the specified performance measure will be achieved. Additionally, changes in the actual or estimated outcomes that affect the quantity of performance units expected to be converted are recognized as a cumulative adjustment.

NuStar GP, LLC transferred 77,014 performance units on the Employee Transfer date. However, of the units transferred only 35,373 are considered granted for accounting purposes as the performance measure for the remaining tranches have not yet been set. For the period from the Employee Transfer date to December 31, 2016 , no performance units were granted or forfeited. The fair value of awards subject to vesting for the year ended December 31, 2016 was recognized based on an expected conversion to common unit rate of 150% (or 53,063 performance units) at a weighted-average grant-date fair value of $31.75 .

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

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,
	2016			2015			2014
	(Thousands of Dollars)
Current:
U.S.	$	2,280		$	908		$	(182	)
Foreign	6,329			9,820			7,516
Foreign withholding tax	3,833			1,926			—
Total current	12,442			12,654			7,334

Deferred:
U.S.	2,680			1,022			1,889
Foreign	(1,122		)	(1,464		)	1,578
Foreign withholding tax	(2,027		)	2,500			—
Total deferred	(469		)	2,058			3,467

Total income tax expense	$	11,973		$	14,712		$	10,801

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. We record a tax provision related to the amount of undistributed earnings of our foreign subsidiaries expected to be repatriated.

The tax effects of significant temporary differences representing deferred income tax assets and liabilities were as follows:



	December 31,
	2016			2015
	(Thousands of Dollars)
Deferred income tax assets:
Net operating losses	$	31,539		$	33,043
Employee benefits	697			—
Environmental and legal reserves	148			894
Allowance for bad debt	2,697			2,698
Other	1,697			1,758
Total deferred income tax assets	36,778			38,393
Less: Valuation allowance	(12,759		)	(13,151		)
Net deferred income tax assets	24,019			25,242

Deferred income tax liabilities:
Property, plant and equipment	(43,788		)	(44,880		)
Foreign withholding tax	(384		)	(2,314		)
Total deferred income tax liabilities	(44,172		)	(47,194		)

Net deferred income tax liability	$	(20,153	)	$	(21,952	)

Reported on the consolidated balance sheets as:
Deferred income tax asset	$	2,051		$	2,858
Deferred income tax liability	(22,204		)	(24,810		)
Net deferred income tax liability	$	(20,153	)	$	(21,952	)

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NUSTAR ENERGY L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

As of December 31, 2016 , our U.S. and foreign corporate operations have net operating loss carryforwards for tax purposes totaling approximately $80.0 million and $11.9 million , respectively, which are subject to various limitations on use and expire in years 2025 through 2036 for U.S. losses and in years 2017 through 2024 for foreign losses.

As of December 31, 2016 and 2015 , we recorded a valuation allowance of $12.8 million and $13.2 million , respectively, related to our deferred tax assets. We estimate the amount of valuation allowance based upon our expectations of taxable income in the 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 2016, there was no change in the valuation allowance for the U.S. net operating loss and a $0.4 million decrease in the foreign net operating loss valuation allowance 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, 2016 is dependent upon our ability to generate future taxable income in the United States. We believe it is more likely than not that the net deferred income tax assets as of December 31, 2016 will be realized, based on expected future taxable income.

St. Eustatius Tax Agreement

On February 22, 2006, we entered into a Tax and Maritime Agreement with the governments of St. Eustatius and the Netherlands Antilles (the 2005 Tax Agreement). The 2005 Tax Agreement was effective beginning January 1, 2005 and expired on December 31, 2014. The 2005 Tax Agreement provided for an annual minimum profit tax of approximately $0.6 million, beginning as of January 1, 2005.

Effective January 1, 2011, the Netherlands Antilles ceased to exist, and St. Eustatius became part of the Netherlands. The Netherlands Tax Ministry (the Ministry) contends that as of January 2011, we are subject to real estate tax rather than profit tax as expressed in our 2005 Tax Agreement. In 2013, the Ministry issued a property tax assessment for years 2011 through 2012. We objected to and appealed the assessment. The Ministry later issued property tax assessments for the years 2013 and 2014, to which we have or will file similar objections. In 2013, we filed a lawsuit in the Netherlands civil court seeking to enforce the terms of our existing 2005 Tax Agreement. In 2016, we settled this dispute by agreement and are current with our property tax obligations in St. Eustatius.

26. SEGMENT INFORMATION

Our reportable business segments consist of pipeline, storage and fuels marketing. 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 the transportation of petroleum products and anhydrous ammonia, the terminalling and storage of petroleum products and the marketing of petroleum products. Intersegment revenues result from storage agreements with wholly owned subsidiaries of NuStar Energy at rates consistent with the rates charged to third parties for storage. Related party revenues in 2014 mainly resulted from storage agreements with our joint ventures.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Results of operations for the reportable segments were as follows:



	Year Ended December 31,
	2016			2015			2014
	(Thousands of Dollars)
Revenues:
Pipeline	$	485,650		$	508,522		$	477,030
Storage:
Third parties	589,098			599,302			537,142
Intersegment	20,944			25,606			26,435
Related party	—			—			929
Total storage	610,042			624,908			564,506
Fuels marketing	681,934			976,216			2,060,017
Consolidation and intersegment eliminations	(20,944		)	(25,606		)	(26,435		)
Total revenues	$	1,756,682		$	2,084,040		$	3,075,118

Depreciation and amortization expense:
Pipeline	$	89,554		$	84,951		$	77,691
Storage	118,663			116,768			103,848
Fuels marketing	—			—			16
Total segment depreciation and amortization expense	208,217			201,719			181,555
Other depreciation and amortization expense	8,519			8,491			10,153
Total depreciation and amortization expense	$	216,736		$	210,210		$	191,708

Operating income:
Pipeline	$	248,238		$	270,349		$	245,233
Storage	214,801			217,818			183,104
Fuels marketing	3,406			13,507			24,805
Consolidation and intersegment eliminations	—			42			(32		)
Total segment operating income	466,445			501,716			453,110
General and administrative expenses	98,817			102,521			96,056
Other depreciation and amortization expense	8,519			8,491			10,153
Total operating income	$	359,109		$	390,704		$	346,901

Revenues by geographic area are shown in the table below.



	Year Ended December 31,
	2016		2015		2014
	(Thousands of Dollars)
United States	$	1,352,936	$	1,599,088	$	2,276,609
Netherlands	313,395		386,282		705,207
Other	90,351		98,670		93,302
Consolidated revenues	$	1,756,682	$	2,084,040	$	3,075,118

For the years ended December 31, 2016 , 2015 and 2014 , Valero Energy Corporation accounted for approximately 18% , or $310.0 million , 16% , or $331.7 million , and 9% , or $282.9 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.

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NUSTAR ENERGY L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Total amounts of property, plant and equipment, net by geographic area were as follows:



	December 31,
	2016		2015
	(Thousands of Dollars)
United States	$	3,086,337	$	3,049,334
Netherlands	469,061		449,406
Other	166,885		184,831
Consolidated long-lived assets	$	3,722,283	$	3,683,571

Total assets by reportable segment were as follows:



	December 31,
	2016		2015
	(Thousands of Dollars)
Pipeline	$	2,024,633	$	2,014,098
Storage	2,522,586		2,476,389
Fuels marketing	168,347		156,866
Total segment assets	4,715,566		4,647,353
Other partnership assets	314,979		478,172
Total consolidated assets	$	5,030,545	$	5,125,525

Capital expenditures, including acquisitions and investments in other noncurrent assets, by reportable segment were as follows:



	Year Ended December 31,
	2016		2015		2014
	(Thousands of Dollars)
Pipeline	$	88,373	$	175,657	$	244,713
Storage	206,641		285,258		108,457
Other partnership assets	5,001		9,957		3,795
Total capital expenditures	$	300,015	$	470,872	$	356,965

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

27. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

NuStar Energy has no operations, and its assets consist mainly of its 100% indirectly owned subsidiaries, NuStar Logistics and NuPOP. 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, 2016

(Thousands of Dollars)



	NuStar Energy		NuStar Logistics		NuPOP		Non-Guarantor Subsidiaries		Eliminations			Consolidated
Assets
Cash and cash equivalents	$	870	$	5	$	—	$	35,067	$	—		$	35,942
Receivables, net	—		3,040		—		167,570		—			170,610
Inventories	—		2,216		2,005		33,724		—			37,945
Other current assets	61		120,350		1,829		10,446		—			132,686
Intercompany receivable	—		1,308,415		—		57,785		(1,366,200		)	—
Total current assets	931		1,434,026		3,834		304,592		(1,366,200		)	377,183
Property, plant and equipment, net	—		1,935,172		589,139		1,197,972		—			3,722,283
Intangible assets, net	—		71,033		—		56,050		—			127,083
Goodwill	—		149,453		170,652		376,532		—			696,637
Investment in wholly owned subsidiaries	1,964,736		34,778		1,221,717		874,649		(4,095,880		)	—
Deferred income tax asset	—		—		—		2,051		—			2,051
Other long-term assets, net	1,255		63,586		28,587		11,880		—			105,308
Total assets	$	1,966,922	$	3,688,048	$	2,013,929	$	2,823,726	$	(5,462,080	)	$	5,030,545
Liabilities and Partners’ Equity
Payables	$	2,436	$	24,272	$	7,124	$	84,854	$	—		$	118,686
Short-term debt	—		54,000		—		—		—			54,000
Accrued interest payable	—		34,008		—		22		—			34,030
Accrued liabilities	1,070		7,118		10,766		41,531		—			60,485
Taxes other than income tax	125		6,854		3,253		5,453		—			15,685
Income tax payable	—		1,326		5		5,179		—			6,510
Intercompany payable	257,497		—		1,108,703		—		(1,366,200		)	—
Total current liabilities	261,128		127,578		1,129,851		137,039		(1,366,200		)	289,396
Long-term debt	—		2,956,338		—		58,026		—			3,014,364
Deferred income tax liability	—		1,862		13		20,329		—			22,204
Other long-term liabilities	—		34,358		9,436		49,170		—			92,964
Total partners’ equity	1,705,794		567,912		874,629		2,559,162		(4,095,880		)	1,611,617
Total liabilities and partners’ equity	$	1,966,922	$	3,688,048	$	2,013,929	$	2,823,726	$	(5,462,080	)	$	5,030,545

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Condensed Consolidating Balance Sheets

December 31, 2015

(Thousands of Dollars)



	NuStar Energy		NuStar Logistics		NuPOP		Non-Guarantor Subsidiaries		Eliminations			Consolidated
Assets
Cash and cash equivalents	$	885	$	4	$	—	$	117,973	$	—		$	118,862
Receivables, net	—		419		—		144,645		—			145,064
Inventories	—		1,776		3,648		33,325		—			38,749
Other current assets	140		11,026		497		19,513		—			31,176
Intercompany receivable	—		1,610,370		—		—		(1,610,370		)	—
Total current assets	1,025		1,623,595		4,145		315,456		(1,610,370		)	333,851
Property, plant and equipment, net	—		1,915,370		570,415		1,197,786		—			3,683,571
Intangible assets, net	—		48,961		—		63,050		—			112,011
Goodwill	—		149,453		170,652		376,532		—			696,637
Investment in wholly owned subsidiaries	2,205,904		48,547		1,031,162		915,115		(4,200,728		)	—
Deferred income tax asset	—		—		—		4,037		(1,179		)	2,858
Other long-term assets, net	933		255,957		26,329		13,378		—			296,597
Total assets	$	2,207,862	$	4,041,883	$	1,802,703	$	2,885,354	$	(5,812,277	)	$	5,125,525
Liabilities and Partners’ Equity
Payables	$	12	$	52,650	$	11,193	$	76,091	$	—		$	139,946
Short-term debt	—		84,000		—		—		—			84,000
Accrued interest payable	—		34,271		—		15		—			34,286
Accrued liabilities	723		32,816		5,753		15,902		—			55,194
Taxes other than income tax	126		6,452		3,325		2,907		—			12,810
Income tax payable	—		1,362		9		4,606		—			5,977
Intercompany payable	508,363		—		858,018		243,989		(1,610,370		)	—
Total current liabilities	509,224		211,551		878,298		343,510		(1,610,370		)	332,213
Long-term debt	—		3,002,743		—		52,869		—			3,055,612
Long-term payable to related party	—		26,638		—		5,442		—			32,080
Deferred income tax liability	—		1,143		36		24,810		(1,179		)	24,810
Other long-term liabilities	—		37,209		9,294		24,463		—			70,966
Total partners’ equity	1,698,638		762,599		915,075		2,434,260		(4,200,728		)	1,609,844
Total liabilities and partners’ equity	$	2,207,862	$	4,041,883	$	1,802,703	$	2,885,354	$	(5,812,277	)	$	5,125,525

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NUSTAR ENERGY L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Condensed Consolidating Statements of Income (Loss)

For the Year Ended December 31, 2016

(Thousands of Dollars)



	NuStar Energy			NuStar Logistics			NuPOP			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenues	$	—		$	511,650		$	224,966		$	1,021,804		$	(1,738	)	$	1,756,682
Costs and expenses	1,806			302,099			150,384			945,022			(1,738		)	1,397,573
Operating (loss) income	(1,806		)	209,551			74,582			76,782			—			359,109
Equity in earnings (loss) of subsidiaries	151,794			(13,769		)	82,202			156,036			(376,263		)	—
Interest (expense) income, net	—			(139,827		)	(744		)	2,221			—			(138,350		)
Other income (expense), net	18			(58,264		)	(26		)	(511		)	—			(58,783		)
Income (loss) before income tax expense (benefit)	150,006			(2,309		)	156,014			234,528			(376,263		)	161,976
Income tax expense (benefit)	3			1,607			(23		)	10,386			—			11,973
Net income (loss)	$	150,003		$	(3,916	)	$	156,037		$	224,142		$	(376,263	)	$	150,003

Condensed Consolidating Statements of Income

For the Year Ended December 31, 2015

(Thousands of Dollars)



	NuStar Energy			NuStar Logistics			NuPOP		Non-Guarantor Subsidiaries		Eliminations			Consolidated
Revenues	$	—		$	547,959		$	215,469	$	1,322,675	$	(2,063	)	$	2,084,040
Costs and expenses	1,717			293,708			140,081		1,259,935		(2,105		)	1,693,336
Operating (loss) income	(1,717		)	254,251			75,388		62,740		42			390,704
Equity in earnings (loss) of subsidiaries	308,437			(7,257		)	120,768		197,760		(619,708		)	—
Interest (expense) income, net	—			(137,847		)	1,611		4,368		—			(131,868		)
Other income, net	—			1,179			5		60,638		—			61,822
Income from continuing operations before income tax (benefit) expense	306,720			110,326			197,772		325,506		(619,666		)	320,658
Income tax (benefit) expense	—			(392		)	23		15,081		—			14,712
Income from continuing operations	306,720			110,718			197,749		310,425		(619,666		)	305,946
Income from discontinued operations, net of tax	—			—			—		774		—			774
Net income	$	306,720		$	110,718		$	197,749	$	311,199	$	(619,666	)	$	306,720

Table of Contents

NUSTAR ENERGY L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Condensed Consolidating Statements of Income

For the Year Ended December 31, 2014

(Thousands of Dollars)



	NuStar Energy			NuStar Logistics			NuPOP			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenues	$	—		$	510,833		$	229,211		$	2,344,750		$	(9,676	)	$	3,075,118
Costs and expenses	1,753			287,614			149,955			2,298,540			(9,645		)	2,728,217
Operating (loss) income	(1,753		)	223,219			79,256			46,210			(31		)	346,901
Equity in earnings (loss) of subsidiaries	212,527			(12,798		)	62,946			142,238			(404,913		)	—
Equity in (loss) earnings of joint ventures	—			(8,278		)	—			13,074			—			4,796
Interest (expense) income, net	—			(132,274		)	89			959			—			(131,226		)
Other income (expense), net	—			511			(37		)	4,025			—			4,499
Income from continuing operations before income tax expense	210,774			70,380			142,254			206,506			(404,944		)	224,970
Income tax expense	1			5			23			10,772			—			10,801
Income from continuing operations	210,773			70,375			142,231			195,734			(404,944		)	214,169
Loss from discontinued operations, net of tax	—			(169		)	—			(3,622		)	—			(3,791		)
Net income	210,773			70,206			142,231			192,112			(404,944		)	210,378
Less net loss attributable to noncontrolling interest	—			—			—			(395		)	—			(395		)
Net income attributable to NuStar Energy L.P.	$	210,773		$	70,206		$	142,231		$	192,507		$	(404,944	)	$	210,773

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, 2016

(Thousands of Dollars)



	NuStar Energy		NuStar Logistics			NuPOP		Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net income (loss)	$	150,003	$	(3,916	)	$	156,037	$	224,142		$	(376,263	)	$	150,003

Other comprehensive income (loss):
Foreign currency translation adjustment	—		—			—		(8,243		)	—			(8,243		)
Net loss on pension and other postretirement benefit adjustments, net of tax benefit	—		—			—		(2,850		)	—			(2,850		)
Net gain on cash flow hedges	—		5,710			—		—			—			5,710
Total other comprehensive income (loss)	—		5,710			—		(11,093		)	—			(5,383		)
Comprehensive income	$	150,003	$	1,794		$	156,037	$	213,049		$	(376,263	)	$	144,620

Condensed Consolidating Statements of Comprehensive Income

For the Year Ended December 31, 2015

(Thousands of Dollars)



	NuStar Energy		NuStar Logistics		NuPOP		Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net income	$	306,720	$	110,718	$	197,749	$	311,199		$	(619,666	)	$	306,720

Other comprehensive income (loss):
Foreign currency translation adjustment	—		—		—		(31,987		)	—			(31,987		)
Net gain on cash flow hedges	—		11,105		—		—			—			11,105
Total other comprehensive income (loss)	—		11,105		—		(31,987		)	—			(20,882		)
Comprehensive income	$	306,720	$	121,823	$	197,749	$	279,212		$	(619,666	)	$	285,838

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, 2014

(Thousands of Dollars)



	NuStar Energy		NuStar Logistics		NuPOP		Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net income	$	210,773	$	70,206	$	142,231	$	192,112		$	(404,944	)	$	210,378

Other comprehensive income (loss):
Foreign currency translation adjustment	—		3,723		—		(19,337		)	—			(15,614		)
Net gain on cash flow hedges	—		10,663		—		—			—			10,663
Total other comprehensive income (loss)	—		14,386		—		(19,337		)	—			(4,951		)

Comprehensive income	210,773		84,592		142,231		172,775			(404,944		)	205,427
Less comprehensive loss attributable to noncontrolling interest	—		—		—		(828		)	—			(828		)
Comprehensive income attributable to NuStar Energy L.P.	$	210,773	$	84,592	$	142,231	$	173,603		$	(404,944	)	$	206,255

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, 2016

(Thousands of Dollars)



	NuStar Energy			NuStar Logistics			NuPOP			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by operating activities	$	391,773		$	167,900		$	211,816		$	359,283		$	(694,011	)	$	436,761
Cash flows from investing activities:
Capital expenditures	—			(64,334		)	(52,637		)	(87,387		)	—			(204,358		)
Change in accounts payable related to capital expenditures	—			(10,076		)	(285		)	(702		)	—			(11,063		)
Acquisitions	—			(95,657		)	—			—			—			(95,657		)
Investment in subsidiaries	—			—			(212,900		)	—			212,900			—
Net cash used in investing activities	—			(170,067		)	(265,822		)	(88,089		)	212,900			(311,078		)
Cash flows from financing activities:
Debt borrowings	—			1,365,529			—			41,200			—			1,406,729
Debt repayments	—			(1,419,852		)	—			(36,300		)	—			(1,456,152		)
Issuance of units, net of issuance costs	246,110			—			—			—			—			246,110
General partner contribution	680			—			—			—			—			680
Distributions to common unitholders and general partner	(392,962		)	(196,481		)	(196,481		)	(196,501		)	589,463			(392,962		)
Contributions from (distributions to) affiliates	—			—			—			108,352			(108,352		)	—
Net intercompany activity	(241,131		)	255,326			250,487			(264,682		)	—			—
Other, net	(4,485		)	(2,354		)	—			(8,890		)	—			(15,729		)
Net cash (used in) provided by financing activities	(391,788		)	2,168			54,006			(356,821		)	481,111			(211,324		)
Effect of foreign exchange rate changes on cash	—			—			—			2,721			—			2,721
Net (decrease) increase in cash and cash equivalents	(15		)	1			—			(82,906		)	—			(82,920		)
Cash and cash equivalents as of the beginning of the period	885			4			—			117,973			—			118,862
Cash and cash equivalents as of the end of the period	$	870		$	5		$	—		$	35,067		$	—		$	35,942

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, 2015

(Thousands of Dollars)



	NuStar Energy			NuStar Logistics			NuPOP			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by operating activities	$	389,967		$	237,780		$	119,928		$	365,588		$	(588,326	)	$	524,937
Cash flows from investing activities:
Capital expenditures	—			(201,388		)	(39,533		)	(83,887		)	—			(324,808		)
Change in accounts payable related to capital expenditures	—			(4,950		)	33			1,761			—			(3,156		)
Acquisitions	—			—			—			(142,500		)	—			(142,500		)
Investment in other long-term assets	—			—			—			(3,564		)	—			(3,564		)
Proceeds from sale or disposition of assets	—			10,320			22			6,790			—			17,132
Proceeds from insurance recoveries	—			—			—			4,867			—			4,867
Net cash used in investing activities	—			(196,018		)	(39,478		)	(216,533		)	—			(452,029		)
Cash flows from financing activities:
Debt borrowings	—			1,589,131			—			94,500			—			1,683,631
Debt repayments	—			(1,275,910		)	—			(41,000		)	—			(1,316,910		)
Distributions to common unitholders and general partner	(392,204		)	(196,102		)	(196,102		)	(196,122		)	588,326			(392,204		)
Net intercompany activity	2,199			(155,278		)	115,652			37,427			—			—
Other, net	—			(3,605		)	—			(141		)	—			(3,746		)
Net cash used in financing activities	(390,005		)	(41,764		)	(80,450		)	(105,336		)	588,326			(29,229		)
Effect of foreign exchange rate changes on cash	—			—			—			(12,729		)	—			(12,729		)
Net (decrease) increase in cash and cash equivalents	(38		)	(2		)	—			30,990			—			30,950
Cash and cash equivalents as of the beginning of the period	923			6			—			86,983			—			87,912
Cash and cash equivalents as of the end of the period	$	885		$	4		$	—		$	117,973		$	—		$	118,862

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, 2014

(Thousands of Dollars)



	NuStar Energy			NuStar Logistics			NuPOP			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by operating activities	$	390,543		$	221,422		$	111,931		$	333,936		$	(539,309	)	$	518,523
Cash flows from investing activities:
Capital expenditures	—			(273,785		)	(14,625		)	(68,555		)	—			(356,965		)
Change in accounts payable related to capital expenditures	—			8,741			789			(4,627		)	—			4,903
Proceeds from sale or disposition of assets	—			651			22			25,339			—			26,012
Increase in note receivable from Axeon	—			(13,328		)	—			—			—			(13,328		)
Investment in subsidiaries	(23		)	—			13,340			—			(13,317		)	—
Other, net	23			(45		)	—			(831		)	—			(853		)
Net cash used in investing activities	—			(277,766		)	(474		)	(48,674		)	(13,317		)	(340,231		)
Cash flows from financing activities:
Debt borrowings	—			1,318,619			—			—			—			1,318,619
Debt repayments	—			(1,121,670		)	—			—			—			(1,121,670		)
Distributions to common unitholders and general partner	(392,204		)	(245,127		)	(147,077		)	(147,105		)	539,309			(392,204		)
Contributions from (distributions to) affiliates	—			—			—			(13,340		)	13,340			—
Net intercompany activity	1,680			83,387			35,620			(120,687		)	—			—
Other, net	—			(1,166		)	—			8,259			(23		)	7,070
Net cash (used in) provided by financing activities	(390,524		)	34,043			(111,457		)	(272,873		)	552,626			(188,185		)
Effect of foreign exchange rate changes on cash	—			—			—			(2,938		)	—			(2,938		)
Net increase (decrease) in cash and cash equivalents	19			(22,301		)	—			9,451			—			(12,831		)
Cash and cash equivalents as of the beginning of the period	904			22,307			—			77,532			—			100,743
Cash and cash equivalents as of the end of the period	$	923		$	6		$	—		$	86,983		$	—		$	87,912

Table of Contents

NUSTAR ENERGY L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

28. QUARTERLY FINANCIAL DATA (UNAUDITED)

The following table summarizes quarterly financial data for the years ended December 31, 2016 and 2015 :



	First Quarter		Second Quarter		Third Quarter		Fourth Quarter			Total
	(Thousands of Dollars, Except Per Unit Data)
2016:
Revenues	$	405,703	$	437,804	$	441,418	$	471,757		$	1,756,682
Operating income	$	94,565	$	91,217	$	87,954	$	85,373		$	359,109
Net income (loss)	$	57,401	$	52,517	$	51,141	$	(11,056	)	$	150,003
Basic and diluted net income (loss) per common unit	$	0.57	$	0.52	$	0.49	$	(0.31	)	$	1.27
Cash distributions per unit applicable to common limited partners	$	1.095	$	1.095	$	1.095	$	1.095		$	4.380

2015:
Revenues	$	554,944	$	570,611	$	493,566	$	464,919		$	2,084,040
Operating income	$	99,281	$	92,405	$	100,994	$	98,024		$	390,704
Income from continuing operations	$	127,125	$	54,325	$	65,016	$	59,480		$	305,946
Income from discontinued operations, net of tax	774		—		—		—			774
Net income	$	127,899	$	54,325	$	65,016	$	59,480		$	306,720
Basic and diluted net income per common unit:
Continuing operations	$	1.46	$	0.54	$	0.68	$	0.61		$	3.29
Discontinued operations	0.01		—		—		—			0.01
Total	$	1.47	$	0.54	$	0.68	$	0.61		$	3.30
Cash distributions per unit applicable to common limited partners	$	1.095	$	1.095	$	1.095	$	1.095		$	4.380

The quarterly financial data in the table above includes the impact of a $58.7 million non-cash impairment charge on the Axeon Term Loan in the fourth quarter of 2016 and a $56.3 million non-cash gain associated with the Linden Acquisition in the first quarter of 2015.