Document Entity Information - USD ($) $ in Billions	12 Months Ended
Document Entity Information - USD ($) $ in Billions	Dec. 31, 2018	Feb. 15, 2019	Jun. 30, 2018
Document And Entity Information [Abstract]
Entity Registrant Name	HOLLY ENERGY PARTNERS LP
Entity Central Index Key	0001283140
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Document Type	10-K
Document Period End Date	Dec. 31, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	FY
Amendment Flag	false
Entity Smaller Reporting Company	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		105,440,201
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Public Float			$ 1.3

Consolidated Balance Sheets - USD ($)	Dec. 31, 2018	Dec. 31, 2017
Current assets:
Cash and cash equivalents	$ 3,045,000	$ 7,776,000
Accounts receivable:
Trade	12,332,000	12,803,000
Affiliates	46,786,000	51,501,000
Total accounts receivable	59,118,000	64,304,000
Prepaid and other current assets	4,311,000	2,311,000
Total current assets	66,474,000	74,391,000
Properties and equipment, net	1,538,655,000	1,569,471,000
Intangible assets, net	115,329,000	129,463,000
Goodwill	270,336,000	266,716,000
Equity Method Investments	83,840,000.00	85,279,000
Other assets	27,906,000	28,794,000
Total assets	2,102,540,000	2,154,114,000
Accounts payable:
Trade	16,435,000	14,547,000
Affiliates	14,222,000	7,725,000
Total accounts payable	30,657,000	22,272,000
Accrued interest	13,302,000	13,256,000
Deferred revenue	8,697,000	9,598,000
Accrued property taxes	1,779,000	4,652,000
Other current liabilities	3,462,000	5,707,000
Total current liabilities	57,897,000	55,485,000
Long-term debt	1,418,900,000	1,507,308,000
Other long-term liabilities	15,307,000	15,843,000
Deferred revenue	48,714,000	47,272,000
Class B unit	46,161,000	43,141,000
Partners’ equity:
Common unitholders (105,440,201 and 101,568,955 units issued and outstanding at December 31, 2018 and 2017, respectively)	427,435,000	393,959,000
Total partners’ equity	427,435,000	393,959,000
Noncontrolling interest	88,126,000	91,106,000
Total Equity	515,561,000	485,065,000
Total liabilities and equity	$ 2,102,540,000	$ 2,154,114,000

Consolidated Balance Sheets (Parenthetical) - shares	12 Months Ended
Consolidated Balance Sheets (Parenthetical) - shares	Dec. 31, 2018	Dec. 31, 2017
Partners' Equity:
Common units issued	105,440,201	101,568,955
Common units outstanding	105,440,201	101,568,955
General partner interest	2.00%	2.00%

Consolidated Statements of Income - USD ($) shares in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Revenues:
Revenues	$ 506,220	$ 454,362	$ 402,043
Operating costs and expenses:
Operations (exclusive of depreciation and amortization)	146,430	137,605	123,986
Depreciation and amortization	98,492	79,278	70,428
General and administrative	11,040	14,323	12,532
Total operating costs and expenses	255,962	231,206	206,946
Operating income	250,258	223,156	195,097
Other income (expense):
Equity in earnings of equity method investments	5,825	12,510	14,213
Interest expense	(71,899)	(58,448)	(52,552)
Interest Income	2,108	491	440
Loss on early extinguishment of debt	0	(12,225)	0
Remeasurement gain on preexisting equity interests	0	36,254	0
Gain on sale of assets and other	121	422	677
Total other income (expense)	(63,845)	(20,996)	(37,222)
Income before Income Taxes	186,413	202,160	157,875
State income tax expense	(26)	(249)	(285)
Net Income	186,387	201,911	157,590
Allocation of net loss attributable to Predecessor	0	0	10,657
Allocation of net income attributable to noncontrolling interest	(7,540)	(6,871)	(10,006)
Net income attributable to the partners	178,847	195,040	158,241
General partner interest in net income attributable to the Partnership, including incentive distributions	0	(35,047)	(57,173)
Limited partners’ interest in net income	$ 178,847	$ 159,993	$ 101,068
Limited partners’ per unit interest in earnings—basic and diluted:	$ 1.70	$ 2.28	$ 1.69
Weighted average limited partners’ units outstanding	105,042	70,291	59,872
Affiliated Entity [Member]
Revenues:
Revenues	$ 397,808	$ 377,136	$ 333,116
Third-Party Customer [Member]
Revenues:
Revenues	$ 108,412	$ 77,226	$ 68,927

Consolidated Statement of Comprehensive Income - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Statement of Comprehensive Income [Abstract]
Net income	$ 186,387	$ 201,911	$ 157,590
Change in fair value of cash flow hedging instruments	0	88	(607)
Reclassification adjustment to net income on partial settlement of cash flow hedge	0	(179)	508
Other comprehensive loss	0	(91)	(99)
Comprehensive income before noncontrolling interest	186,387	201,820	157,491
Allocation of net loss attributable to Predecessor	0	0	10,657
Allocation of comprehensive income to noncontrolling interests	(7,540)	(6,871)	(10,006)
Comprehensive income attributable to the partners	$ 178,847	$ 194,949	$ 158,142

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Cash flows from operating activities
Net income	$ 186,387	$ 201,911	$ 157,590
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	98,492	79,278	70,428
Gain on sale of assets	(196)	(319)	(150)
Remeasurement gain on preexisting equity interests	0	(36,254)	0
Amortization of deferred charges	3,041	3,063	3,247
Equity-based compensation expense	3,203	2,520	3,519
Equity in earnings of equity investments, net of distributions	(149)	1,450	(2,032)
Loss on early extinguishment of debt	0	12,225	0
(Increase) decrease in operating assets:
Accounts receivable – trade	471	(38)	279
Accounts receivable – affiliates	4,715	(8,939)	(10,080)
Prepaid and other current assets	(2,000)	830	1,598
Increase (decrease) in operating liabilities:
Accounts payable – trade	(329)	(1,975)	(365)
Accounts payable – affiliates	6,497	(8,699)	(16)
Accrued interest	46	(4,813)	11,317
Deferred revenue	1,862	(1,267)	7,058
Accrued property taxes	(2,873)	(2,179)	1,633
Other current liabilities	(2,081)	2,091	(553)
Other, net	(1,873)	(398)	75
Net cash provided by operating activities	295,213	238,487	243,548
Cash flows from investing activities
Additions to properties, and equipment	(47,300)	(44,810)	(59,704)
Acquisition of tanks and refinery processing units	(5,051)	0	(44,119)
Purchase of investment in Cheyenne Pipeline	0	0	(42,627)
Purchase of investment in Frontier Pipeline			(42,627)
Purchase of controlling interests in SLC Pipeline and Frontier Aspen	(1,790)	(245,446)	0
Proceeds from sale of assets	210	849	427
Distributions in Excess of Equity in Earnings of Equity Investments	1,588	3,134	2,993
Net cash used for investing activities	(52,343)	(286,273)	(143,030)
Cash flows from financing activities
Borrowings under credit agreement	337,000	969,000	554,000
Repayments of credit agreement borrowings	(426,000)	(510,000)	(713,000)
Redemption of 6.5% Senior Notes	0	(309,750)	0
Proceeds from issuance of 6% Senior Notes	0	101,750	394,000
Proceeds from issuance of common units	114,771	52,110	125,870
Contributions from general partner	882	1,072	2,577
Distributions to HEP unitholders	(264,979)	(234,575)	(192,037)
Distributions to noncontrolling interest	(7,500)	(6,500)	(5,750)
Distribution to HFC for acquisitions		0	(317,500)
Contributions from HFC for acquisitions			51,262
Contributions to HFC for El Dorado Operating Tanks	0	(103)	0
Distributions to HFC for Osage acquisition	0	0	(1,245)
Purchase of units for incentive grants	0	0	(3,521)
Units withheld for tax withholding obligations	(568)	(605)	(800)
Deferred financing costs	(6)	(9,382)	(3,995)
Other	(1,213)	(1,112)	(1,735)
Net cash provided by (used) by financing activities	(247,601)	51,905	(111,874)
Cash and cash equivalents
Increase (decrease) for the year	(4,731)	4,119	(11,356)
Beginning of period	7,776	3,657	15,013
End of period	3,045	7,776	3,657
Woods Cross [Member]
Cash flows from financing activities
Contributions from HFC for acquisitions	$ 0	$ 0	$ 51,262

Consolidated Statement of Partners' Equity - USD ($) $ in Thousands	Total	Common Units	General Partner Interest	Accumulated Other Comprehensive Income (Loss)	Noncontrolling Interest
Beginning balance at Dec. 31, 2015	$ 626,222	$ 428,019	$ 103,584	$ 190	$ 94,429
Increase (Decrease) in Partners' Equity [Roll Forward]
Issuance of common units	125,870	125,870	0
Capital contribution	2,577		2,577		0
Distributions to HEP unitholders	(192,037)	(138,779)	(53,258)
Distributions to noncontrolling interests	(5,750)				(5,750)
Contribution from HFC for acquisitions	82,549		82,549
Distribution To HFC for acquisition	(317,500)		(317,500)
Purchase of Units for Incentive Grants	(3,521)	(3,521)
Amortization of restricted and performance units	3,519	3,519
Class B unit accretion	(6,378)	(6,250)	(128)
Net income	157,590	102,917	49,795
Net Income (Loss) Attributable to Noncontrolling Interest	10,006				4,878
Other	(1,251)	(800)	(451)
Other comprehensive income (loss)	(99)			(99)
Ending balance at Dec. 31, 2016	471,791	510,975	(132,832)	91	93,557
Increase (Decrease) in Partners' Equity [Roll Forward]
Issuance of common units	52,100	52,100	0
Capital contribution	1,072		1,072
Distributions to HEP unitholders	(234,575)	(181,439)	(53,136)
Distributions to noncontrolling interests	(6,500)				(6,500)
Distribution To HFC for acquisition	(103)		(103)
Amortization of restricted and performance units	2,520	2,520
Class B unit accretion	(2,822)	(2,780)	(42)
Net income	201,911	162,815	35,047
Equity restructuring transaction		(149,994)	149,994
Net Income (Loss) Attributable to Noncontrolling Interest	6,871				4,049
Other	(238)	(238)	0
Other comprehensive income (loss)	(91)			(91)
Ending balance at Dec. 31, 2017	485,065	393,959	0	0	91,106
Increase (Decrease) in Partners' Equity [Roll Forward]
Issuance of common units	114,771	114,771
Distributions to HEP unitholders	(264,979)	(264,979)	0
Distributions to noncontrolling interests	(7,500)				(7,500)
Amortization of restricted and performance units	3,203	3,203
Class B unit accretion	(3,020)	(3,020)	0
Net income	186,387	181,867	0
Net Income (Loss) Attributable to Noncontrolling Interest	7,540				4,520
Other	1,634	1,634	0
Other comprehensive income (loss)	0
Ending balance at Dec. 31, 2018	$ 515,561	$ 427,435	$ 0	$ 0	$ 88,126

Description of Business and Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2018

Accounting Policies [Abstract]

Description of Business and Summary of Significant Accounting Policies

Holly Energy Partners, L.P. (“HEP”) together with its consolidated subsidiaries, is a publicly held master limited partnership. As of December 31, 2018, HollyFrontier Corporation (“HFC”) and its subsidiaries own a 57% limited partner interest and the non-economic general partner interest in HEP. We commenced operations on July 13, 2004, upon the completion of our initial public offering. In these consolidated financial statements, the words “we,” “our,” “ours” and “us” refer to HEP unless the context otherwise indicates.

On October 31, 2017, we closed on an equity restructuring transaction with HEP Logistics Holdings, L.P. (“HEP Logistics”), a wholly-owned subsidiary of HFC and the general partner of HEP, pursuant to which the incentive distribution rights ("IDRs") held by HEP Logistics were canceled, and HEP Logistics' 2% general partner interest in HEP was converted into a non-economic general partner interest in HEP. In consideration, we issued 37,250,000 of our common units to HEP Logistics. In addition, HEP Logistics agreed to waive $2.5 million of limited partner cash distributions for each of twelve consecutive quarters beginning with the first quarter the units issued as consideration were eligible to receive distributions. As a result of this transaction, no distributions were made on the general partner interest after October 31, 2017.

On January 25, 2018, we entered into a common unit purchase agreement in which certain purchasers agreed to purchase in a private placement 3,700,000 common units representing limited partner interests, at a price of $29.73 per common unit. The private placement closed on February 6, 2018, and we received proceeds of approximately $110 million, which were used to repay indebtedness under our revolving credit facility.

We own and operate petroleum product and crude oil pipelines, terminal, tankage and loading rack facilities and refinery processing units that support HFC’s refining and marketing operations in the Mid-Continent, Southwest and Northwest regions of the United States and Delek US Holdings, Inc.’s (“Delek”) refinery in Big Spring, Texas. Additionally, we own a 75% interest in the UNEV Pipeline, LLC (“UNEV”), a 50% interest in Osage Pipe Line Company, LLC (“Osage”), and a 50% interest in Cheyenne Pipeline LLC.

We operate in two reportable segments, a Pipelines and Terminals segment and a Refinery Processing Unit segment. Disclosures around these segments are discussed in Note 15.

Our Pipelines and Terminals segment consists of:


•	26 main pipeline segments


•	Crude gathering networks in Texas and New Mexico


•	10 refined product terminals


•	1 crude terminal


•	31,800 track feet of rail storage located at two facilities


•	7 locations with truck and/or rail racks


•	Tankage at all six of HFC's refining facility locations

Our Refinery Processing Unit segment consists of five refinery processing units at two of HFC's refining facility locations.

We generate revenues by charging tariffs for transporting petroleum products and crude oil through our pipelines, by charging fees for terminalling and storing refined products and other hydrocarbons, providing other services at our storage tanks and terminals and by charging fees for processing hydrocarbon feedstocks through our refinery processing units. We do not take ownership of products that we transport, terminal, store or process, and therefore, we are not exposed directly to changes in commodity prices.

Principles of Consolidation and Common Control Transactions

The consolidated financial statements include our accounts, our Predecessor's (defined below) and those of subsidiaries and joint ventures that we control. All significant intercompany transactions and balances have been eliminated. Certain prior period balances have been reclassified for consistency with current year presentation.

Most of our acquisitions from HFC occurred while we were a consolidated variable interest entity of HFC. Therefore, as an entity under common control with HFC, we recorded these acquisitions on our balance sheets at HFC's historical basis instead of our purchase price or fair value. U.S. generally accepted accounting principles ("GAAP") require transfers of a business between entities under common control to be accounted for as though the transfer occurred as of the beginning of the period of transfer, and prior period financial statements and financial information are retrospectively adjusted to include the historical results and assets of the acquisitions from HFC for all periods presented prior to the effective dates of each acquisition. We refer to the historical results of the acquisitions prior to their respective acquisition dates as those of our "Predecessor." Many of these transactions are cash purchases and do not involve the issuance of equity; however, GAAP requires the retrospective adjustment of financial statements. Therefore, in such transactions, the prior year balance sheet includes as equity the amount of cost incurred by HFC to that date.

Use of Estimates

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Cash and Cash Equivalents

For purposes of the statements of cash flows, we consider all highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents. The carrying amounts reported on the balance sheets approximate fair value due to the short-term maturity of these instruments.

Accounts Receivable

The majority of the accounts receivable are due from affiliates of HFC, Delek or independent companies in the petroleum industry. Credit is extended based on evaluation of the customer's financial condition and, in certain circumstances, collateral such as letters of credit or guarantees, may be required. Credit losses are charged to income when accounts are deemed uncollectible and historically have been minimal.

Properties and Equipment

Properties and equipment are stated at cost. Properties and equipment acquired from HFC while under common control of HFC are stated at HFC's historical basis. Depreciation is provided by the straight-line method over the estimated useful lives of the assets, primarily 15 to 25 years for terminal facilities and tankage, 25 to 32 years for pipelines, 25 years for refinery processing units and 5 to 10 years for corporate and other assets. We depreciate assets acquired under capital leases over the lesser of the lease term or the economic life of the assets. Maintenance, repairs and minor replacements are expensed as incurred. Costs of replacements constituting improvements are capitalized.

Intangible Assets

Intangible assets include transportation agreements and acquired customer relationship intangible assets. Intangible assets are stated at acquisition date fair value and are being amortized over their useful lives using the straight-line method.

Goodwill and Long-Lived Assets

Goodwill represents the excess of our cost of an acquired business over the fair value of the assets acquired, less liabilities assumed. Goodwill is not amortized. We test goodwill at the reporting unit level for impairment annually and between annual tests if events or changes in circumstances indicate the carrying amount may exceed fair value. Our goodwill impairment testing first entails a comparison of our reporting unit fair values relative to their respective carrying values, including goodwill. If carrying value exceeds fair value for a reporting unit, we measure goodwill impairment as the excess of the carrying amount of reporting unit goodwill over the implied fair value of that goodwill based on estimates of the fair value of all assets and liabilities in the reporting unit.

In 2018, we used the present value of the expected future net cash flows and market multiple analyses to determine the estimated fair values of the reporting units. The impairment test requires the use of projections, estimates and assumptions as to the future performance of our operations. Actual results could differ from projections resulting in revisions to our assumptions, and if required, could result in the recognition of an impairment loss. In 2017, we assessed qualitative factors such as macroeconomic conditions, industry considerations, cost factors, and reporting unit financial performance and determined it was not more likely than not that the fair value of our reporting units were less than the respective carrying value. Therefore, in accordance with GAAP, further testing was not required.

We evaluate long-lived assets, including finite intangible assets, for potential impairment by identifying whether indicators of impairment exist and, if so, assessing whether the long-lived assets are recoverable from estimated future undiscounted cash flows. The actual amount of impairment loss, if any, to be recorded is equal to the amount by which a long-lived asset's carrying value exceeds its fair value.

There have been no impairments to goodwill or our long-lived assets through December 31, 2018.

Investment in Equity Method Investments

We account for our interests in noncontrolling joint venture interests using the equity method of accounting, whereby we record our pro-rata share of earnings of these companies, and contributions to and distributions from the joint ventures as adjustments to our investment balances. The difference between the cost of an investment and our proportionate share of the underlying equity in net assets recorded on the investee's books is allocated to the various assets and liabilities of the equity method investment.

The following table summarizes our recorded investments compared to our share of underlying equity for each investee. We are amortizing the differences as adjustments to our pro-rata share of earnings over the useful lives of the underlying assets of these joint ventures.



	Balance at December 31, 2018
	Underlying Equity		Recorded Investment Balance		Difference
	(in thousands)
Equity Method Investments
Osage Pipe Line Company, LLC	$	9,964	$	40,483	$	(30,519	)
Cheyenne Pipeline LLC	29,358		43,357		(13,999		)
Total	$	39,322	$	83,840	$	(44,518	)



	Balance at December 31, 2017
	Underlying Equity		Recorded Investment Balance		Difference
	(in thousands)
Equity Method Investments
Osage Pipe Line Company, LLC	$	10,631	$	42,071	$	(31,440	)
Cheyenne Pipeline LLC	28,706		43,208		(14,502		)
Total	$	39,337	$	85,279	$	(45,942	)

Asset Retirement Obligations

We record legal obligations associated with the retirement of certain of our long-lived assets that result from the acquisition, construction, development and/or the normal operation of our long-lived assets. The fair value of the estimated cost to retire a tangible long-lived asset is recorded in the period in which the liability is incurred and when a reasonable estimate of the fair value of the liability can be made. For our pipeline assets, the right-of-way agreements typically do not require the dismantling, removal and reclamation of the right-of-way upon cessation of the pipeline service. Additionally, management is unable to predict when, or if, our pipelines and related facilities would become obsolete and require decommissioning. Accordingly, we have recorded no liability or corresponding asset related to an asset retirement obligation for the majority of our pipelines as both the amounts and timing of such potential future costs are indeterminable. For our remaining assets, at December 31, 2018 and 2017, we have asset retirement obligations of $8.9 million and $8.6 million, respectively, that are recorded under “Other long-term liabilities” in our consolidated balance sheets.

Class B Unit

Under the terms of the transaction to acquire HFC's 75% interest in UNEV, we issued HFC a Class B unit comprising a noncontrolling equity interest in a wholly-owned subsidiary subject to redemption to the extent that HFC is entitled to a 50% interest in our share of annual UNEV earnings before interest, income taxes, depreciation, and amortization above $30 million beginning July 1, 2016, and ending in June 2032, subject to certain limitations. Such contingent redemption payments are limited to the unredeemed value of the Class B Unit. However, to the extent earnings thresholds are not achieved, no redemption payments are required. No redemption payments have been required to date.

Contemporaneously with this transaction, HFC (our general partner) agreed to forego its right to incentive distributions of up to $1.25 million per quarter over twelve consecutive quarterly periods following the closing of the transaction and up to an additional four quarters if HFC's Woods Cross refinery expansion did not attain certain thresholds. HEP Logistics' waiver of its right to incentive distributions of $1.25 million per quarter ended with the distribution paid in the third quarter of 2016.

Pursuant to the terms of the transaction agreements, the Class B unit increases by the amount of each foregone incentive distribution and by a 7% factor compounded annually on the outstanding unredeemed balance through its expiration date. At our option, we may redeem, in whole or in part, the Class B unit at the current unredeemed value based on the calculation described. The Class B unit had a carrying value of $46.2 million at December 31, 2018, and $43.1 million at December 31, 2017.

Revenue Recognition

Revenues are generally recognized as products are shipped through our pipelines and terminals, feedstocks are processed through our refinery processing units or other services are rendered. The majority of our contracts with customers meet the definition of a lease since (1) performance of the contracts is dependent on specified property, plant, or equipment and (2) it is remote that one or more parties other than the customer will take more than a minor amount of the output associated with the specified property, plant, or equipment. As a result, we bifurcate the consideration received between lease and service revenue. The service component is within the scope of Accounting Standards Codification (“ASC”) 606, which largely codified ASU 2014-09.

Several of our contracts include incentive or reduced tariffs once a certain quarterly volume is met. Revenue from the variable element of these transactions is recognized based on the actual volumes shipped as it relates specifically to rendering the services during the applicable quarter.

The majority of our long-term transportation contracts specify minimum volume requirements, whereby, we bill a customer for a minimum level of shipments in the event a customer ships below their contractual requirements. If there are no future performance obligations, we will recognize these deficiency payments in revenue.

In certain of these throughput agreements, a customer may later utilize such shortfall billings as credit towards future volume shipments in excess of its minimum levels within its respective contractual shortfall make-up period. Such amounts represent an obligation to perform future services, which may be initially deferred and later recognized as revenue based on estimated future shipping levels, including the likelihood of a customer’s ability to utilize such amounts prior to the end of the contractual shortfall make-up period. We recognize the service portion of these deficiency payments in revenue when we do not expect we will be required to satisfy these performance obligations in the future based on the pattern of rights exercised by the customer.

Prior to the adoption of ASC 606 on January 1, 2018, billings to customers for their obligations under their quarterly minimum revenue commitments were recorded as deferred revenue liabilities if the customer had the right to receive future services for these billings. The revenue was recognized at the earlier of:


•	the customer receiving the future services provided by these billings,


•	the period in which the customer was contractually allowed to receive the services expired, or


•	our determination that we would not be required to provide services within the allowed period.

We determined that we would not be required to provide services within the allowed period when, based on current and projected shipping levels, our pipeline systems would not have the necessary capacity to enable a customer to exceed its minimum volume levels to such a degree as to utilize the shortfall credit within its respective contractual shortfall make-up period.

We have additional revenues under an operating lease to a third party of an interest in the capacity of one of our pipelines.

As of December 31, 2018, customers' minimum revenue commitments per the terms of long-term throughput agreements expiring in 2019 through 2036 and the third party operating lease require minimum annualized payments to us in the aggregate of $2.3 billion including $356 million for the year ending December 31, 2019, $308 million for the year ending December 31, 2020, $298 million for the year ending December 31, 2021, $271 million for the year ending December 31, 2022 and $236 million for the year ending December 31, 2023. These agreements provide for changes in the minimum revenue guarantees annually for increases or decreases in the PPI or the FERC index, with certain contracts having provisions that limit the level of the rate increases or decreases.

We have other cost reimbursement provisions in our throughput / storage agreements providing that customers (including HFC) reimburse us for certain costs. Such reimbursements are recorded as revenue or deferred revenue depending on the nature of the cost. Deferred revenue is recognized over the remaining contractual term of the related throughput agreement.

Taxes billed and collected from our pipeline and terminal customers are recorded on a net basis with no effect on net income.

Environmental Costs

Environmental costs are expensed if they relate to an existing condition caused by past operations and do not contribute to current or future revenue generation. Liabilities are recorded when site restoration and environmental remediation, cleanup and other obligations are either known or considered probable and can be reasonably estimated. Such estimates require judgment with respect to costs, time frame and extent of required remedial and clean-up activities and are subject to periodic adjustments based on currently available information.

Under the Omnibus Agreement and certain transportation agreements and purchase agreements with HFC, HFC has agreed to indemnify us, subject to certain monetary and time limitations, for environmental noncompliance and remediation liabilities associated with certain assets transferred to us from HFC occurring or existing prior to the date of such transfers. We have an environmental agreement with Delek with respect to pre-closing environmental costs and liabilities relating to the pipelines and terminals acquired from Delek in 2005, under which Delek will indemnify us subject to certain monetary and time limitations. Environmental costs recoverable through insurance, indemnification agreements or other sources are included in other assets to the extent such recoveries are considered probable.

Income Tax

We are subject to the Texas margin tax that is based on our Texas sourced taxable margin. The tax is calculated by applying a tax rate to a base that considers both revenues and expenses and therefore has the characteristics of an income tax.

We are organized as a pass-through entity for federal income tax purposes. As a result, our partners are responsible for federal income taxes based on their respective share of taxable income.

Net income for financial statement purposes may differ significantly from taxable income reportable to unitholders as a result of differences between the tax basis and financial reporting basis of assets and liabilities and the taxable income allocation requirements under the partnership agreement.

Net Income per Limited Partners' Unit

We use the two-class method when calculating the net income per unit applicable to limited partners since we had more than one class of participating securities prior to the October 31, 2017 equity restructuring transaction discussed above. Under the two-class method, net income per unit applicable to limited partners is computed by dividing limited partners' interest in net income, after adjusting for the allocation of net income or loss attributable to the Predecessor, the allocation of net income or loss attributable to noncontrolling interests and the general partner's 2% interest and incentive distributions, both of which were applicable prior to the October 31, 2017 equity restructuring transaction discussed above, and other participating securities, by the weighted-average number of common units outstanding during the year and other dilutive securities. Other participating securities and dilutive securities are not significant.

Accounting Pronouncement Adopted During the Periods Presented

Revenue Recognition

In May 2014, an accounting standard update was issued requiring revenue to be recognized when promised goods or services are transferred to customers in an amount that reflects the expected consideration for these goods or services. This standard had an effective date of January 1, 2018, and we accounted for the new guidance using the modified retrospective implementation method, whereby a cumulative effect adjustment was recorded to retained earnings as of the date of initial application. In preparing for adoption, we evaluated the terms, conditions and performance obligations under our existing contracts with customers. Furthermore, we implemented policies to comply with this new standard. See above and Note 3 for additional information on our revenue recognition policies.

Business Combinations

In December 2014, an accounting standard update was issued to provide new guidance on the definition of a business in relation to accounting for identifiable intangible assets in business combinations. This standard had an effective date of January 1, 2018, and had no effect on our financial condition, results of operations or cash flows.

Financial Assets and Liabilities

In January 2016, an accounting standard update was issued requiring changes in the accounting and disclosures for financial instruments. This standard was effective beginning with our 2018 reporting year and had no effect on our financial condition, results of operations or cash flows.

Accounting Pronouncements Not Yet Adopted

Leases

In February 2016, an accounting standard update was issued requiring leases to be measured and recognized as a lease liability, with a corresponding right-of-use asset on the balance sheet. This standard has an effective date of January 1, 2019, and we plan to apply practical expedients provided in the standards update that allow us, among other things, not to reassess contracts that commenced prior to the adoption. The primary effect of adopting the new standard will be to record assets and obligations for current operating leases on our consolidated balance sheet. Adoption of the standard is not expected to have a material impact on our results of operations or cash flows.

In preparing for adoption, we have identified, reviewed and evaluated contracts containing lease and embedded lease arrangements. Additionally, we have acquired and implemented software and systems to facilitate lease capture and related accounting treatment.

Acquisitions

12 Months Ended

Dec. 31, 2018

Business Combinations [Abstract]

Acquisitions

Osage

On February 22, 2016, HFC obtained a 50% membership interest in Osage in a non-monetary exchange for a 20-year terminalling services agreement, whereby a subsidiary of Magellan Midstream Partners (“Magellan”) will provide terminalling services for all HFC products originating in Artesia, New Mexico requiring terminalling in or through El Paso, Texas. Osage is the owner of the Osage Pipeline, a 135-mile pipeline that transports crude oil from Cushing, Oklahoma to HFC’s El Dorado Refinery in Kansas and also connects to the Jayhawk pipeline serving the CHS Inc. refinery in McPherson, Kansas. The Osage Pipeline is the primary pipeline supplying HFC’s El Dorado refinery with crude oil.

Concurrent with this transaction, we entered into a non-monetary exchange with HFC, whereby we received HFC’s interest in Osage in exchange for our El Paso terminal. Under this exchange, we agreed to build two connections on our south products pipeline system that permit HFC access to Magellan’s El Paso terminal. These connections were in service in the fourth quarter of 2017. Effective upon the closing of this exchange, we are the named operator of the Osage Pipeline and transitioned into that role on September 1, 2016. Since we are a consolidated variable interest entity ("VIE") of HFC, this transaction was recorded as a transfer between entities under common control and reflects HFC’s carrying basis of its 50% membership interest in Osage of $44.5 million offset by our net carrying basis in the El Paso terminal of $12.1 million with the difference recorded as a contribution from HFC. However, since these transactions were concurrent, there was no impact on periods prior to February 22, 2016.

Tulsa Tanks

On March 31, 2016, we acquired crude oil tanks (the "Tulsa Tanks") located at HFC’s Tulsa refinery from an affiliate of Plains All American pipeline, L. P. ("Plains") for cash consideration of $39.5 million. In 2009, HFC sold these tanks to Plains and leased them back, and due to HFC’s continuing interest in the tanks, HFC accounted for the transaction as a financing arrangement. Accordingly, the tanks remained on HFC’s balance sheet and were depreciated for accounting purposes. As we are a consolidated VIE of HFC, this transaction was recorded as a transfer between entities under common control and reflects HFC’s carrying basis in the net assets acquired.

Cheyenne Pipeline

On June 3, 2016, we acquired a 50% interest in Cheyenne Pipeline LLC, owner of the Cheyenne pipeline, in exchange for a contribution of $42.6 million in cash to Cheyenne Pipeline LLC. Cheyenne Pipeline LLC is operated by an affiliate of Plains, which owns the remaining 50% interest. The 87-mile crude oil pipeline runs from Fort Laramie to Cheyenne, Wyoming and has an 80,000 barrel per day (“bpd”) capacity.

Woods Cross Operating

Effective October 1, 2016, we acquired all the membership interests of Woods Cross Operating LLC (“Woods Cross Operating”), a wholly owned subsidiary of HFC, which owns the newly constructed atmospheric distillation tower, fluid catalytic cracking unit, and polymerization unit located at HFC’s Woods Cross refinery, for cash consideration of $278 million. The consideration was funded with $103 million in proceeds from a private placement of 3,420,000 common units with the balance funded with borrowings under our credit facility. In connection with this transaction, we entered into 15-year tolling agreements containing minimum quarterly throughput commitments from HFC that provide minimum annualized revenues of $57 million as of the acquisition date. As we are a consolidated VIE of HFC, this transaction was recorded as a transfer between entities under common control and reflect HFC’s carrying basis in the net assets acquired.

SLC Pipeline and Frontier Aspen

On October 31, 2017, we acquired the remaining 75% interest in SLC Pipeline LLC ("SLC Pipeline") and the remaining 50% interest in Frontier Aspen LLC ("Frontier Aspen") from subsidiaries of Plains, for cash consideration of $250 million. Prior to this acquisition, we held noncontrolling interests of 25% of SLC Pipeline and 50% of Frontier Aspen. As a result of the acquisitions, SLC Pipeline and Frontier Aspen are wholly-owned subsidiaries of HEP.

These acquisitions were accounted for as a business combination achieved in stages. Our preexisting equity method investments in SLC Pipeline and Frontier Aspen were remeasured at an acquisition date fair value of $112 million since we now have a controlling interest, and we recognized a gain on the remeasurement in the fourth quarter of 2017 of $36.3 million. The fair value of our preexisting equity method investments in SLC Pipeline and Frontier Aspen was estimated using Level 3 Inputs under the income method for these entities, adjusted for lack of control and marketability.

The total consideration of $363.8 million, consisting of cash consideration of $250 million, working capital adjustments of $1.8 million and the fair value of our preexisting equity method investments in SLC Pipeline and Frontier Aspen of $112 million, was allocated to the acquisition date fair value of assets and liabilities acquired as of the October 31, 2017 acquisition date, with the excess purchase price recorded as goodwill.

The following summarizes the final estimated value of assets and liabilities acquired:



	(in thousands)
Cash and cash equivalents	$	4,609
Accounts receivable	5,164
Prepaid and other current assets	8
Properties and equipment	275,061
Intangible assets	70,182
Goodwill	13,845
Accounts payable	(3,598		)
Accrued property taxes	(1,438		)
Net assets acquired	$	363,833

During 2018, goodwill was increased by $3.6 million in connection with our finalization of preliminary estimates recorded in 2017 for the purchase price allocation.

Our consolidated financial and operating results reflect the SLC Pipeline and Frontier Aspen operations beginning November 1, 2017. Our results of operations for the year ended December 31, 2017 included revenues of $7.9 million and net income of $4.1 million, excluding the $36.3 million remeasurement gain as of the acquisition date discussed above, for the period from November 1, 2017 through December 31, 2017.

SLC Pipeline is the owner of a 95-mile crude pipeline that transports crude oil into the Salt Lake City area from the Utah terminal of the Frontier Pipeline (defined below) and from Wahsatch Station. Frontier Aspen is the owner of a 289-mile crude pipeline from Casper, Wyoming to Frontier Station, Utah (the "Frontier Pipeline") that supplies Canadian and Rocky Mountain crudes to Salt Lake City area refiners through a connection to the SLC Pipeline.

The following unaudited pro forma financial information combines the historical operations of HEP, SLC Pipeline and Frontier Aspen as if the acquisition had occurred on January 1, 2016:



	Years Ended December 31,
	2017		2016
	(in thousands)
Revenues	$	489,382	$	445,017
Net income attributable to the partners	$	161,900	$	162,862

The unaudited pro forma net income attributable to the partners reflects the following adjustments:


(1)	To retrospectively reflect depreciation and amortization of intangible assets based on the preliminary fair value of the assets as if that fair value had been reflected January 1, 2016;


(2)	To eliminate HEP's equity income previously recorded on its equity method investments in SLC Pipeline and Frontier Aspen; and


(3)	To eliminate the remeasurement gain on preexisting equity interests in SLC Pipeline and Frontier Aspen.

Revenues

12 Months Ended

Dec. 31, 2018

Revenue from Contract with Customer [Abstract]

Revenues

Effective January 1, 2018, as described in Note 1, we adopted ASC 606, using the modified retrospective method, whereby the cumulative effect of applying the new standard was recorded as an adjustment to the opening balance of retained earnings as well as the carrying amounts of assets and liabilities as of January 1, 2018, which had no impact on our cash flows. The following table reflects the cumulative effect of adoption as of January 1, 2018:



	Prior to Adoption		Increase (Decrease)			As Adjusted
	(In thousands)
Deferred revenue	$	9,598	$	(1,320	)	$	8,278
Partners’ equity: Common unitholders	$	393,959	$	1,320		$	395,279

Revenues are generally recognized as products are shipped through our pipelines and terminals, feedstocks are processed through our refinery processing units or other services are rendered. The majority of our contracts with customers meet the definition of a lease since (1) performance of the contracts is dependent on specified property, plant, or equipment and (2) it is remote that one or more parties other than the customer will take more than a minor amount of the output associated with the specified property, plant, or equipment. Therefore, we bifurcate the consideration received between lease and service revenue. The service component is within the scope of ASC 606, which largely codified ASU 2014-09.

Several of our contracts include incentive or reduced tariffs once a certain quarterly volume is met. Revenue from the variable element of these transactions is recognized based on the actual volumes shipped as it relates specifically to rendering the services during the applicable quarter.

The majority of our long-term transportation contracts specify minimum volume requirements, whereby, we bill a customer for a minimum level of shipments in the event a customer ships below their contractual requirements. If there are no future performance obligations, we will recognize these deficiency payments in revenue.

In certain of these throughput agreements, a customer may later utilize such shortfall billings as credit towards future volume shipments in excess of its minimum levels within its respective contractual shortfall make-up period. Such amounts represent an obligation to perform future services, which may be initially deferred and later recognized as revenue based on estimated future shipping levels, including the likelihood of a customer’s ability to utilize such amounts prior to the end of the contractual shortfall make-up period. We recognize the service portion of these deficiency payments in revenue when we do not expect we will be required to satisfy these performance obligations in the future based on the pattern of rights exercised by the customer. During the twelve months ended December 31, 2018, 2017 and 2016, we recognized $17.6 million, $11.9 million and $10.5 million, respectively, of these deficiency payments in revenue, of which $3.3 million, $5.6 million and $7.8 million, respectively, related to deficiency payments billed in prior periods. As of December 31, 2018, deferred revenue reflected in our consolidated balance sheet related to shortfalls billed was $1.8 million.

A contract liability exists when an entity is obligated to perform future services to a customer for which the entity has received consideration. Since HEP may be required to perform future services for these deficiency payments received, the deferred revenues on our balance sheet as of December 31, 2018 were considered contract liabilities. A contract asset exists when an entity has a right to consideration in exchange for goods or services transferred to a customer. Our consolidated balance sheet as of December 31, 2018, included the contract assets and liabilities in the table below.



	December 31, 2018			January 1, 2018
	(In thousands)
Contract assets	$	1,818		$	—
Contract liabilities	$	(1,821	)	$	(2,713	)

The contract assets and liabilities include both lease and service components. We recognized $2.7 million of revenue that was previously included in contract liability as of January 1, 2018, during the twelve months ended December 31, 2018.

As of December 31, 2018, we expect to recognize $2.3 billion in revenue related to our unfulfilled performance obligations under the terms of our long-term throughput agreements and operating leases expiring in 2019 through 2036. These agreements provide for changes in the minimum revenue guarantees annually for increases or decreases in the Producer Price Index (“PPI”) or Federal Energy Regulatory Commission (“FERC”) index, with certain contracts having provisions that limit the level of the rate increases or decreases. We expect to recognize revenue for these unfulfilled performance obligations as shown in the table below (amounts shown in table include both service and lease revenues):



Years Ending December 31,	(In millions)
2019	$	356
2020	308
2021	298
2022	271
2023	236
Thereafter	838
Total	$	2,307

Payment terms under our contracts with customers are consistent with industry norms and are typically payable within 10 to 30 days of the date of invoice.

Disaggregated revenues are as follows:



	Years Ended December 31,
	2018		2017		2016
	(In thousands)
Pipelines	$	283,507	$	235,040	$	232,634
Terminals, tanks and loading racks	147,534		142,418		136,365
Refinery processing units	75,179		76,904		33,044
	$	506,220	$	454,362	$	402,043

During the year ended December 31, 2018, lease revenues amounted to $278.6 million, and service revenues amounted to $227.6 million. Both of these revenues were recorded within affiliates and third parties revenues on our consolidated statement of income.

Financial Instruments

12 Months Ended

Dec. 31, 2018

Fair Value Disclosures [Abstract]

Financial Instruments

Our financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable and debt. The carrying amounts of cash equivalents, accounts receivable and accounts payable approximate fair value due to the short-term maturity of these instruments. Debt consists of outstanding principal under our revolving credit agreement (which approximates fair value as interest rates are reset frequently at current interest rates) and our fixed interest rate senior notes.

Fair value measurements are derived using inputs (assumptions that market participants would use in pricing an asset or liability) including assumptions about risk. GAAP categorizes inputs used in fair value measurements into three broad levels as follows:


•	(Level 1) Quoted prices in active markets for identical assets or liabilities.


•	(Level 2) Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, similar assets and liabilities in markets that are not active or can be corroborated by observable market data.


•	(Level 3) Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes valuation techniques that involve significant unobservable inputs.

The carrying amounts and estimated fair values of our senior notes were as follows:



		December 31, 2018				December 31, 2017
Financial Instrument	Fair Value Input Level	Carrying Value		Fair Value		Carrying Value		Fair Value
		(In thousands)
Liabilities:
6.0% Senior Notes	Level 2	$	495,900	$	488,310	$	495,308	$	525,120

Level 2 Financial Instruments

Our senior notes are measured at fair value using Level 2 inputs. The fair value of the senior notes is based on market values provided by a third-party bank, which were derived using market quotes for similar type debt instruments.

See Note 8 for additional information on these instruments.

Properties and Equipment

12 Months Ended

Dec. 31, 2018

Property, Plant and Equipment [Abstract]

Properties and Equipment

The carrying amounts of our properties and equipment are as follows:



	December 31, 2018		December 31, 2017
	(In thousands)
Pipelines, terminals and tankage	$	1,571,338	$	1,541,722
Refinery assets	347,338		347,338
Land and right of way	86,298		86,484
Construction in progress	23,482		12,029
Other	41,250		35,659
	2,069,706		2,023,232
Less accumulated depreciation	531,051		453,761
	$	1,538,655	$	1,569,471

We capitalized $0.3 million and $1.0 million in interest related to construction projects during the years ended December 31, 2018 and 2017, respectively.

Depreciation expense was $83.3 million, $71.1 million, and $62.9 million for the years ended December 31, 2018, 2017 and 2016, respectively, and includes depreciation of assets acquired under capital leases. Asset abandonment charges of $1.0 million, $0.3 million and $0.6 million for assets permanently removed from service were included in depreciation expense for the years ended December 31, 2018, 2017 and 2016, respectively.

Intangible Assets

12 Months Ended

Dec. 31, 2018

Finite-Lived Intangible Assets, Gross [Abstract]

Intangible Assets

Intangible assets include transportation agreements and customer relationships that represent a portion of the total purchase price of certain assets acquired from Delek in 2005, from HFC in 2008 prior to HEP becoming a consolidated VIE of HFC, from Plains in 2017, and from other minor acquisitions in 2018.

The carrying amounts of our intangible assets are as follows:



	Useful Life	December 31, 2018		December 31, 2017
		(In thousands)
Delek transportation agreement	30 years	$	59,933	$	59,933
HFC transportation agreements	10-15 years	75,131		75,131
Customer relationships	10 years	69,683		69,282
Other		50		50
		204,797		204,396
Less accumulated amortization		89,468		74,933
		$	115,329	$	129,463

Amortization expense was $14.5 million, $7.6 million and $6.9 million for the years ending December 31, 2018, 2017 and 2016, respectively. We estimate amortization expense to be $14 million for each of the next four years and $9.9 million in 2023.

We have additional transportation agreements with HFC resulting from historical transactions consisting of pipeline, terminal and tankage assets contributed to us or acquired from HFC. These transactions occurred while we were a consolidated variable interest entity of HFC; therefore, our basis in these agreements is zero and does not reflect a step-up in basis to fair value.

Employees, Retirement and Incentive Plans

12 Months Ended

Dec. 31, 2018

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Employees, Retirement and Incentive Plans

Direct support for our operations is provided by Holly Logistic Services, L.L.C., ("HLS"), an HFC subsidiary, which utilizes personnel employed by HFC who are dedicated to performing services for us. Their costs, including salaries, bonuses, payroll taxes, benefits and other direct costs, are charged to us monthly in accordance with an omnibus agreement that we have with HFC. These employees participate in the retirement and benefit plans of HFC. Our share of retirement and benefit plan costs was $6.9 million, $5.9 million and $5.7 million for the years ended December 31, 2018, 2017 and 2016, respectively. These costs include retirement costs of $3.1 million, $2.7 million and $2.6 million for the years ended December 31, 2018, 2017 and 2016, respectively.

Under HLS’s secondment agreement with HFC (the “Secondment Agreement”), certain employees of HFC are seconded to HLS to provide operational and maintenance services for certain of our processing, refining, pipeline and tankage assets, and HLS reimburses HFC for its prorated portion of the wages, benefits, and other costs related to these employees.

We have a Long-Term Incentive Plan for employees and non-employee directors who perform services for us. The Long-Term Incentive Plan consists of four components: restricted or phantom units, performance units, unit options and unit appreciation rights. Our accounting policy for the recognition of compensation expense for awards with pro-rata vesting (a significant proportion of our awards) is to expense the costs ratably over the vesting periods.

As of December 31, 2018, we have two types of incentive-based awards outstanding, which are described below. The compensation cost charged against income was $3.0 million, $2.7 million and $2.7 million for the years ended December 31, 2018, 2017 and 2016, respectively. We currently purchase units in the open market instead of issuing new units for settlement of all unit awards under our Long-Term Incentive Plan. As of December 31, 2018, 2,500,000 units were authorized to be granted under our Long-Term Incentive Plan, of which 1,210,341 have not yet been granted, assuming no forfeitures of the unvested units and full achievement of goals for the unvested performance units.

Restricted and Phantom Units

Under our Long-Term Incentive Plan, we grant restricted units to non-employee directors and phantom units to selected employees who perform services for us, with awards vesting over a period of one to three years. In the years ending December 31, 2017 and 2016, we granted restricted units to selected employees who performed services for us, which vest over a period of three years. Although full ownership of the units does not transfer to the recipients until the units vest, the recipients have distribution rights on these units from the date of grant, and the recipients of the restricted units have voting rights on the restricted units from the date of grant.

The grant date fair value of each restricted or phantom unit award is measured at the market price as of the date of grant and is amortized on a straight-line basis over the requisite service period for each separately vesting portion of the award.

A summary of restricted and phantom unit activity and changes during the year ended December 31, 2018, is presented below:



Restricted and Phantom Units	Units		Weighted- Average Grant-Date Fair Value
Outstanding at January 1, 2018 (nonvested)	119,009		$	34.77
Granted	93,955		29.30
Vesting and transfer of common units to recipients	(72,537	)	34.20
Forfeited	(2,411	)	34.63
Outstanding at December 31, 2018 (nonvested)	138,016		$	31.35

The grant date fair values of restricted units that were vested and transferred to recipients during the years ended December 31, 2018, 2017 and 2016 were $2.5 million, $2.0 million and $2.0 million, respectively. As of December 31, 2018, there was $2.8 million of total unrecognized compensation expense related to unvested restricted and phantom unit grants, which is expected to be recognized over a weighted-average period of 1.6 years. For the years ended December 31, 2017 and 2016, the grant date price applied to the number of restricted units awarded was $35.59 and $32.16 respectively.

Performance Units

Under our Long-Term Incentive Plan, we grant performance units to selected executives who perform services for us. Performance units granted are payable in common units at the end of a three-year performance period based upon meeting certain criteria over the performance period. Under the terms of our performance unit grants, some awards are subject to the growth in our distributable cash flow per common unit over the performance period while other awards are subject to "financial performance" and "market performance." Financial performance is based on meeting certain earnings before interest, taxes, depreciation and amortization ("EBITDA") targets, while market performance is based on the relative standing of total unitholder return achieved by HEP compared to peer group companies. The number of units ultimately issued under these awards can range from 50% to 150% or 0% to 200%. As of December 31, 2018, estimated unit payouts for outstanding nonvested performance unit awards ranged between 100% and 150% of the target number of performance units granted.

Although common units are not transferred to the recipients until the performance units vest, the recipients have distribution rights with respect to the common units from the date of grant.

A summary of performance unit activity and changes for the year ended December 31, 2018, is presented below:



Performance Units	Units
Outstanding at January 1, 2018 (nonvested)	36,911
Granted	19,120
Vesting and transfer of common units to recipients	(4,283	)
Outstanding at December 31, 2018 (nonvested)	51,748

The grant date fair values of performance units vested and transferred to recipients were $0.1 million, $0.1 million and $1.1 million for the years ended December 31, 2018, 2017 and 2016, respectively. Based on the weighted average fair value of performance units outstanding at December 31, 2018, of $1.7 million, there was $0.9 million of total unrecognized compensation expense related to nonvested performance units, which is expected to be recognized over a weighted-average period of 1.7 years.

During the year ended December 31, 2018, we did not purchase any common units in the open market for the issuance and settlement of unit awards under our Long-Term Incentive Plan.

Debt

12 Months Ended

Dec. 31, 2018

Debt Instruments [Abstract]

Debt

Credit Agreement

We have a $1.4 billion senior secured revolving credit facility (the “Credit Agreement”) expiring in July 2022. The Credit Agreement is available to fund capital expenditures, investments, acquisitions, distribution payments and working capital and for general partnership purposes. The Credit Agreement is also available to fund letters of credit up to a $50 million sub-limit, and it contains an accordion feature giving us the ability to increase the size of the facility by up to $300 million with additional lender commitments.

Our obligations under the Credit Agreement are collateralized by substantially all of our assets, and indebtedness under the Credit Agreement is guaranteed by our material, wholly-owned subsidiaries. The Credit Agreement requires us to maintain compliance

with certain financial covenants consisting of total leverage, senior secured leverage, and interest coverage. It also limits or restricts our ability to engage in certain activities. If, at any time prior to the expiration of the Credit Agreement, HEP obtains two investment grade credit ratings, the Credit Agreement will become unsecured and many of the covenants, limitations, and restrictions will be eliminated.

Indebtedness under the Credit Agreement bears interest, at our option, at either (a) the reference rate as announced by the administrative agent plus an applicable margin (ranging from 0.50% to 1.50%) or (b) at a rate equal to LIBOR plus an applicable margin (ranging from 1.50% to 2.50%). In each case, the applicable margin is based upon the ratio of our funded debt (as defined in the Credit Agreement) to EBITDA (earnings before interest, taxes, depreciation and amortization, as defined in the Credit Agreement). The weighted-average interest rates on our Credit Agreement borrowings for the years ending December 31, 2018 and 2017, were 4.238% and 3.734%, respectively. We incur a commitment fee on the unused portion of the Credit Agreement at an annual rate ranging from 0.25% to 0.50% based upon the ratio of our funded debt to EBITDA for the four most recently completed fiscal quarters.

We may prepay all loans at any time without penalty, except for tranche breakage costs. If an event of default exists under the Credit Agreement, the lenders will be able to accelerate the maturity of all loans outstanding and exercising other rights and remedies. We were in compliance with the covenants as of December 31, 2018.

Senior Notes

On July 19, 2016, we closed a private placement of $400 million in aggregate principal amount of 6% senior unsecured notes due in 2024 (the “6% Senior Notes”). On September 22, 2017, we closed a private placement of an additional $100 million in aggregate principal amount of the 6% Senior Notes for a combined aggregate principal amount outstanding of $500 million maturing in 2024.

The 6% Senior Notes are unsecured and impose certain restrictive covenants, including limitations on our ability to incur additional indebtedness, make investments, sell assets, incur certain liens, pay distributions, enter into transactions with affiliates, and enter into mergers. We were in compliance with the restrictive covenants for the 6% Senior Notes as of December 31, 2018. At any time when the 6% Senior Notes are rated investment grade by both Moody’s and Standard & Poor’s and no default or event of default exists, we will not be subject to many of the foregoing covenants. Additionally, we have certain redemption rights at varying premiums over face value under the 6% Senior Notes.

Indebtedness under the 6% Senior Notes is guaranteed by our wholly-owned subsidiaries.

On January 4, 2017, we redeemed the $300 million aggregate principal amount of 6.5% senior notes due in 2020 (the "6.5% Senior Notes") at a redemption cost of $309.8 million, at which time we recognized a $12.2 million early extinguishment loss consisting of a $9.8 million debt redemption premium and unamortized discount and financing costs of $2.4 million. We funded the redemption with borrowings under our Credit Agreement.

Our purchase and contribution agreements with HFC with respect to the intermediate pipelines acquired in 2005 and the crude pipelines and tankage assets acquired in 2008, restrict us from selling these pipelines and terminals acquired from HFC. Under these agreements, we were restricted from prepaying borrowings and long-term debt to below $171 million prior to 2018, subject to certain limited exceptions.

Long-term Debt

The carrying amounts of our long-term debt are as follows:



	December 31, 2018			December 31, 2017
	(In thousands)
Credit Agreement
Amount outstanding	$	923,000		$	1,012,000

6% Senior Notes
Principal	500,000			500,000
Unamortized debt issuance costs	(4,100		)	(4,692		)
	495,900			495,308

Total long-term debt	$	1,418,900		$	1,507,308

Maturities of our long-term debt are as follows:



Years Ending December 31,	(In thousands)
2019	$	—
2020	—
2021	—
2022	923,000
2023	—
Thereafter	500,000
Total	$	1,423,000

Interest Rate Risk Management

The two interest rate swaps that hedged our exposure to the cash flow risk caused by the effects of LIBOR changes on $150 million of Credit Agreement advances matured on July 31, 2017. The swaps effectively converted $150 million of our LIBOR based debt to fixed rate debt.

Interest Expense and Other Debt Information

Interest expense consists of the following components:



	Years Ended December 31,
	2018		2017		2016
	(In thousands)
Interest on outstanding debt:
Credit Agreement, net of interest on interest rate swaps	$	37,266	$	28,928	$	17,621
6% Senior Notes	30,000		25,813		10,811
6.5% Senior Notes	—		—		19,507
Amortization of discount and deferred debt issuance costs	3,041		3,063		3,246
Commitment fees and other	1,904		1,648		2,069
Total interest incurred	72,211		59,452		53,254
Less capitalized interest	312		1,004		702
Net interest expense	$	71,899	$	58,448	$	52,552
Cash paid for interest	$	69,112	$	62,395	$	38,530

Capital Lease Obligations

Our capital lease obligations relate to vehicle leases with initial terms of 33 to 48 months. The total cost of assets under capital leases was $5.8 million and $5.1 million as of December 31, 2018 and 2017, respectively, with accumulated depreciation of $4.3 million and $3.3 million as of December 31, 2018 and 2017, respectively. We include depreciation of capital leases in depreciation and amortization in our consolidated statements of income.

At December 31, 2018, future minimum annual lease payments, including interest, for the capital leases are as follows:



Years Ending December 31,	(in thousands)
2019	$	1,069
2020	589
2021	140
Total minimum lease payments	1,798
Less amount representing interest	(109		)
Capital lease obligations	$	1,689

Commitments and Contingencies

12 Months Ended

Dec. 31, 2018

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

We lease certain facilities and pipelines under operating leases, most of which contain renewal options. These operating leases have various termination dates through 2035.

As of December 31, 2018, the minimum future rental commitments under operating leases having non-cancelable lease terms in excess of one year are as follows:



Years Ending December 31,	(In thousands)
2019	$	7,252
2020	7,196
2021	7,147
2022	7,127
2023	7,045
Thereafter	24,619
Total	$	60,386

Rental expense charged to operations was $9.8 million, $9.1 million and $8.5 million for the years ended December 31, 2018, 2017 and 2016, respectively. As of December 31, 2018, we expect to receive aggregate payments totaling $1.5 million over the life of our noncancelable sublease of office space, expiring in 2026.

We also have other long-term contractual obligations consisting of long-term site service agreements with HFC, expiring in 2058 through 2066, for the provision of certain facility services and utility costs that relate to our assets located at HFC’s refinery facilities. We are presenting obligations for the full term of these agreements; however, the agreements can be terminated with 180 day notice if we cease to operate the applicable assets.

In addition, we have long-term contractual obligations associated with rights-of-way agreements, which have various termination dates through 2061. The related payments below include only obligations under the remaining non-cancelable terms of these agreements at December 31, 2018.

At December 31, 2018, these minimum future contractual obligations and other miscellaneous obligations having terms in excess of one year are as follows:



Years Ending December 31,	(In thousands)
2019	$	9,360
2020	7,683
2021	7,689
2022	7,069
2023	5,536
Thereafter	223,567
Total	$	260,904

We are a party to various legal and regulatory proceedings, none of which we believe will have a material adverse impact on our financial condition, results of operations or cash flows.

Significant Customers

12 Months Ended

Dec. 31, 2018

Risks and Uncertainties [Abstract]

Significant Customers

All revenues are domestic revenues, of which 86% are currently generated from our two largest customers: HFC and Delek.

The following table presents the percentage of total revenues generated by each of these customers:



	Years Ended December 31,
	2018		2017		2016
HFC	79	%	83	%	83	%
Delek	7	%	8	%	8	%

Related Party Transactions

12 Months Ended

Dec. 31, 2018

Related Party Transactions

We serve HFC’s refineries under long-term pipeline, terminal and tankage throughput agreements, and refinery processing unit tolling agreements expiring from 2019 to 2036. Under these agreements, HFC agrees to transport, store, and process throughput volumes of refined product, crude oil and feedstocks on our pipelines, terminals, tankage, loading rack facilities and refinery processing units that result in minimum annual payments to us. These minimum annual payments or revenues are subject to annual rate adjustments on July 1st each year based on the Producer Price Index (“PPI”) or Federal Energy Regulatory Commission (“FERC”) index. As of December 31, 2018, these agreements with HFC require minimum annualized payments to us of $314 million.

If HFC fails to meet its minimum volume commitments under the agreements in any quarter, it will be required to pay us the amount of any shortfall in cash by the last day of the month following the end of the quarter. Under certain of these agreements, a shortfall payment may be applied as a credit in the following four quarters after its minimum obligations are met.

Under certain provisions of an omnibus agreement we have with HFC (the “Omnibus Agreement”), we pay HFC an annual administrative fee ($2.5 million in 2018) for the provision by HFC or its affiliates of various general and administrative services to us. This fee does not include the salaries of personnel employed by HFC who perform services for us on behalf of HLS or the cost of their employee benefits, which are charged to us separately by HFC. Also, we reimburse HFC and its affiliates for direct expenses they incur on our behalf.

Related party transactions with HFC are as follows:


•	Revenues received from HFC were $397.8 million, $377.1 million and $333.1 million for the years ended December 31, 2018, 2017 and 2016, respectively.


•	HFC charged us general and administrative services under the Omnibus Agreement of $2.5 million for each of the years ended December 31, 2018, 2017 and 2016.


•	We reimbursed HFC for costs of employees supporting our operations of $51.7 million, $46.6 million and $40.9 million for the years ended December 31, 2018, 2017 and 2016, respectively.


•	HFC reimbursed us $10.0 million, $7.2 million and $14.0 million for the years ended December 31, 2018, 2017 and 2016, respectively, for expense and capital projects.


•	We distributed $146.8 million, in the year ended December 31, 2018 to HFC as regular distributions on its common units and $130.7 million and $105.2 million in the years ended December 31, 2017 and 2016, respectively, to HFC as regular distributions on its common units and general partner interest, including general partner incentive distributions.


•	Accounts receivable from HFC were $46.8 million and $51.5 million at December 31, 2018 and 2017, respectively.


•	Accounts payable to HFC were $14.2 million and $7.7 million at December 31, 2018 and 2017, respectively.


•	Revenues for the years ended December 31, 2018, 2017 and 2016 include $3.1 million, $4.8 million and $6.1 million, respectively, of shortfall payments billed to HFC in 2017, 2016 and 2015, respectively. Deferred revenue in the consolidated balance sheets at December 31, 2018 and 2017, includes $1.7 million and $4.4 million, respectively, relating to certain shortfall billings to HFC.


•	We received lease payments from HFC for use of our Artesia and Tulsa railyards of $2.0 million, $0.5 million and $0.5 million for the years ended December 31, 2018, 2017 and 2016, respectively.

•

On February 22, 2016, HFC obtained a 50% membership interest in Osage in a non-monetary exchange, whereby a subsidiary of Magellan will provide terminalling services for all HFC products originating in Artesia, New Mexico that require terminalling in or through El Paso, Texas. Concurrent with this transaction, we entered into a non-monetary exchange with HFC, whereby we received HFC’s interest in Osage in exchange for our El Paso terminal. See Note 2 for a description of this transaction.


•	On March 31, 2016, we acquired crude oil tanks located at HFC’s Tulsa refinery from an affiliate of Plains for $39.5 million. See Note 2 for a description of this transaction.


•	Effective October 1, 2016, we acquired all the membership interests of Woods Cross Operating, a wholly owned subsidiary of HFC, which owns the newly constructed atmospheric distillation tower, fluid catalytic cracking unit, and polymerization unit located at HFC’s Woods Cross refinery, for cash consideration of $278 million. See Note 2 for a description of this transaction.

•

On October 31, 2017, we closed on an equity restructuring transaction with HEP Logistics, a wholly-owned subsidiary of HFC and the general partner of HEP, pursuant to which the incentive distribution rights held by HEP Logistics were canceled, and HEP Logistics' 2% general partner interest in HEP was converted into a non-economic general partner interest in HEP. In consideration, we issued 37,250,000 of our common units to HEP Logistics. In addition, HEP Logistics agreed to waive $2.5 million of limited partner cash distributions for each of twelve consecutive quarters beginning with the first quarter the units issued as consideration were eligible to receive distributions.

Partners' Equity, Income Allocations and Cash Distributions

12 Months Ended

Dec. 31, 2018

Partners' Capital [Abstract]

Partners' Equity, Income Allocations and Cash Distributions

Partners’ Equity, Income Allocations and Cash Distributions

At December 31, 2018, HFC held 59,630,030 of our common units, constituting a 57% limited partner interest in us and held the non-economic general partner interest. Additionally, HFC owned all incentive distribution rights through October 31, 2017, when an agreement was reached with HEP Logistics, our general partner, impacting its equity interest in HEP including canceling these incentive distribution rights. See Note 1 for a description of this equity restructuring transaction.

Common Unit Private Placements

On September 16, 2016, we entered into a common unit purchase agreement in which certain purchasers agreed to purchase in a private placement 3,420,000 common units representing limited partnership interests, at a price of $30.18 per common unit. The private placement closed on October 3, 2016, and we received proceeds of approximately $103 million, which were used to finance a portion of the Woods Cross acquisition discussed in Note 2.

On January 25, 2018, we entered into a common unit purchase agreement in which certain purchasers agreed to purchase in a private placement 3,700,000 common units representing limited partnership interests, at a price of $29.73 per common unit. The private placement closed on February 6, 2018, and we received proceeds of approximately $110 million, which were used to repay indebtedness under our Credit Agreement. After this common unit issuance, HFC owns a 57% limited partner interest in us.

Continuous Offering Program

We have a continuous offering program under which we may issue and sell common units from time to time, representing limited partner interests, up to an aggregate gross sales amount of $200 million. As of December 31, 2018, HEP has issued 2,413,153 units under this program, providing $82.3 million in gross proceeds.

We intend to use our net proceeds for general partnership purposes, which may include funding working capital, repayment of debt, acquisitions and capital expenditures. Amounts repaid under our credit facility may be reborrowed from time to time.

Allocations of Net Income

Net income attributable to the partners is allocated to the partners based on their weighted-average ownership percentage during the period.

Prior to the equity restructuring of the general partner interest owned by HEP Logistics described in Note 1 that occurred on October 31, 2017, net income attributable to the partners was allocated between limited partners and the general partner interest in accordance with the provisions of the partnership agreement. HEP net income allocated to the general partner included incentive distributions that were declared subsequent to quarter end. After incentive distributions and other priority allocations are allocated to the general partner, the remaining net income attributable to HEP was allocated to the partners based on their weighted-average ownership percentage during the period.

The following table presents the allocation of the general partner interest in net income for the periods presented below:



	Years Ended December 31,
	2018		2017		2016
	(In thousands)
General partner interest in net income	$	—	$	919	$	3,165
General partner incentive distribution	—		34,128		54,008
Net loss attributable to Predecessor	—		—		(10,657		)
Total general partner interest in net income	$	—	$	35,047	$	46,516

Cash Distributions

We consider regular cash distributions to unitholders on a quarterly basis, although there is no assurance as to the future cash distributions since they are dependent upon future earnings, cash flows, capital requirements, financial condition and other factors.

Within 45 days after the end of each quarter, we distribute all of our available cash (as defined in our partnership agreement) to unitholders of record on the applicable record date. The amount of available cash generally is all cash on hand at the end of the quarter; less the amount of cash reserves established by our general partner to provide for the proper conduct of our business, comply with applicable laws, any of our debt instruments, or other agreements; or provide funds for distributions to our unitholders and to our general partner for any one or more of the next four quarters; plus all cash on hand on the date of determination of available cash for the quarter resulting from working capital borrowings made after the end of the quarter.

Prior to the equity restructuring transaction discussed in Note 1, we made distributions in the manner displayed in the table below. Subsequent to the financial restructuring, distributions are made equally to all common unit holders regardless of the amount of the distribution per unit.



	Total Quarterly Distribution	Marginal Percentage Interest in Distributions
	Target Amount	Unitholders	General Partner
Minimum quarterly distribution	$0.25	98%	2%
First target distribution	Up to $0.275	98%	2%
Second target distribution	above $0.275 up to $0.3125	85%	15%
Third target distribution	above $0.3125 up to $0.375	75%	25%
Thereafter	Above $0.375	50%	50%

On January 24, 2019, we announced our cash distribution for the fourth quarter of 2018 of $0.6675 per unit. The distribution is payable on all common units and was paid February 14, 2019, to all unitholders of record on February 4, 2019. However, HEP Logistics waived $2.5 million in limited partner cash distributions due to them as discussed in Note 1.

The following table presents the allocation of our regular quarterly cash distributions to the general and limited partners for the periods in which they apply. Our distributions are declared subsequent to quarter end; therefore, the amounts presented do not reflect distributions paid during the periods presented below.



	Years Ended December 31,
	2018		2017		2016
	(In thousands, except per unit data)
General partner interest in distribution	$	—	$	2,335	$	4,088
General partner incentive distribution	—		34,128		54,008
Total general partner distribution	—		36,463		58,096
Limited partner distribution	269,284		206,846		143,796
Total regular quarterly cash distribution	$	269,284	$	243,309	$	201,892
Cash distribution per unit applicable to limited partners	$	2.6475	$	2.5475	$	2.3625

As a master limited partnership, we distribute our available cash, which historically has exceeded our net income attributable to HEP because depreciation and amortization expense represents a non-cash charge against income. The result is a decline in our partners’ equity since our regular quarterly distributions have exceeded our quarterly net income attributable to HEP. Additionally, if the asset contributions and acquisitions from HFC had occurred while we were not a consolidated variable interest entity of HFC, our acquisition cost, in excess of HFC’s historical basis in the transferred assets, would have been recorded in our financial statements at the time of acquisition as increases to our properties and equipment and intangible assets instead of decreases to our partners’ equity.

Net Income Per Limited Partner Unit

12 Months Ended

Dec. 31, 2018

Net Income per Limited Partner Unit [Abstract]

Earnings Per Share [Text Block]

Net Income Per Limited Partner Unit

Net income per unit applicable to the limited partners was computed using the two-class method since we had more than one class of participating securities during the period from January 1, 2016 through October 31, 2017. The classes of participating securities during this period included common units, general partner units and IDRs. Due to the equity restructuring transaction described in Note 1, as of December 31, 2017, we had one class of security outstanding, common units. To the extent net income attributable to the partners exceeds or is less than cash distributions, this difference is allocated to the partners based on their weighted-average ownership percentage during the period, after consideration of any priority allocations of earnings. The dilutive securities are immaterial for all periods presented.

See Note 1 for a description of the equity restructuring of the general partner interest owned by HEP Logistics, our general partner, and its IDRs that occurred on October 31, 2017. After this equity restructuring, the general partner interest is no longer entitled to any distributions and none were made on the general partner interest after October 31, 2017. In connection with this equity restructuring, HEP issued 37,250,000 of its common units to HEP Logistics on October 31, 2017.

When our financial statements are retrospectively adjusted after a dropdown transaction, the earnings of the acquired business, prior to the closing of the transaction, are allocated entirely to our general partner and presented as net income (loss) attributable to Predecessors. The earnings per unit of our limited partners prior to the close of the transaction do not change as a result of the dropdown. After the closing of a dropdown transaction, the earnings of the acquired business are allocated in accordance with our partnership agreement as previously described.

For purposes of applying the two-class method including the allocation of cash distributions in excess of earnings, net income per limited partner unit is computed as follows:



	Years Ended December 31,
	2018			2017			2016
	(in thousands)
Net income attributable to the partners	$	178,847		$	195,040		$	158,241
Less: General partner’s distribution declared (including IDRs)	—			(36,463		)	(58,096		)
Limited partner’s distribution declared on common units	(269,284		)	(206,846		)	(143,796		)
Distributions in excess of net income attributable to the partners	$	(90,437	)	$	(48,269	)	$	(43,651	)



	General Partner (including IDRs)			Limited Partners’ Common Units			Total
	(In thousands, except per unit data)
Year Ended December 31, 2018
Net income attributable to the partners:
Distributions declared	$	—		$	269,284		$	269,284
Distributions in excess of net income attributable to partnership	—			(90,437		)	(90,437		)
Net income attributable to the partners	$	—		$	178,847		$	178,847
Weighted average limited partners' units outstanding				105,042
Limited partners' per unit interest in earnings - basic and diluted				$	1.70

Year Ended December 31, 2017
Net income attributable to the partners:
Distributions declared	$	36,463		$	206,846		$	243,309
Distributions in excess of net income attributable to partnership	(1,416		)	(46,853		)	(48,269		)
Net income attributable to the partners	$	35,047		$	159,993		$	195,040
Weighted average limited partners' units outstanding				70,291
Limited partners' per unit interest in earnings - basic and diluted				$	2.28

Year Ended December 31, 2016
Net income attributable to the partners:
Distributions declared	$	58,096		$	143,796		$	201,892
Distributions in excess of net income attributable to partnership	(873		)	(42,778		)	(43,651		)
Net income attributable to the partners	$	57,223		$	101,018		$	158,241
Weighted average limited partners' units outstanding				59,872
Limited partners' per unit interest in earnings - basic and diluted				$	1.69

Environmental	12 Months Ended
Environmental	Dec. 31, 2018
Environmental Remediation Obligations [Abstract]
Environmental	Environmental We expensed $0.8 million, $0.5 million and $0.7 million for the years ended December 31, 2018, 2017 and 2016, respectively, for environmental remediation obligations. The accrued environmental liability related to environmental clean-up projects for which we have assumed liability or for which indemnity provided by HFC has expired reflected in our consolidated balance sheets was $6.3 million and $6.5 million as of the years ended December 31, 2018 and 2017, respectively, of which $4.3 million and $5.0 million, respectively, were classified as other long-term liabilities. These accruals include remediation and monitoring costs expected to be incurred over an extended period of time. Under the Omnibus Agreement and certain transportation agreements and purchase agreements with HFC, HFC has agreed to indemnify us, subject to certain monetary and time limitations, for environmental noncompliance and remediation liabilities associated with certain assets transferred to us from HFC and occurring or existing prior to the date of such transfers. As of December 31, 2018 and 2017, our consolidated balance sheets include additional accrued environmental liabilities of $0.5 million and $0.8 million, respectively, for HFC indemnified liabilities, and other assets included equal and offsetting balances representing amounts due from HFC related to indemnifications for environmental remediation liabilities.

Operating Segments

12 Months Ended

Dec. 31, 2018

Segment Reporting [Abstract]

Operating Segments

Although financial information is reviewed by our chief operating decision makers from a variety of perspectives, they view the business as two reportable operating segments: pipelines and terminals, and refinery processing units. These segments adhere to the accounting polices used for our consolidated financial statements. For a discussion of these accounting policies and a summary of our reportable operating segments' assets and derivation of revenue, see Note 1.

Pipelines and terminals have been aggregated as one reportable segment as both pipelines and terminals (1) have similar economic characteristics, (2) similarly provide logistics services of transportation and storage of petroleum products, (3) similarly support the petroleum refining business, including distribution of its products, (4) have principally the same customers and (5) are subject to similar regulatory requirements.

We evaluate the performance of each segment based on its respective operating income. Certain general and administrative expenses and interest and financing costs are excluded from segment operating income as they are not directly attributable to a specific reportable segment. Identifiable assets are those used by the segment, whereas other assets are principally equity method investments, cash, deposits and other assets that are not associated with a specific reportable segment.



	Years Ended December 31,
	2018			2017			2016
	(in thousands)
Revenues:
Pipelines and terminals - affiliate	$	322,629		$	300,232		$	300,072
Pipelines and terminals - third-party	108,412			77,226			68,927
Refinery processing units - affiliate	75,179			76,904			33,044
Total segment revenues	$	506,220		$	454,362		$	402,043

Segment operating income:
Pipelines and terminals	$	230,116		$	204,970		$	204,923
Refinery processing units	31,182			32,509			2,706
Total segment operating income	261,298			237,479			207,629
Unallocated general and administrative expenses	(11,040		)	(14,323		)	(12,532		)
Interest and financing costs, net	(69,791		)	(57,957		)	(52,112		)
Loss on early extinguishment of debt	—			(12,225		)	—
Equity in earnings of unconsolidated affiliates	5,825			12,510			14,213
Gain on sale of assets and other	121			36,676			677
Income before income taxes	$	186,413		$	202,160		$	157,875

Capital Expenditures:⁽²⁾
Pipelines and terminals	$	53,957		$	289,993		$	59,704
Refinery processing units	184			263			44,119
Total capital expenditures	$	54,141		$	290,256		$	103,823



	December 31, 2018		December 31, 2017
	(in thousands)
Identifiable assets:
Pipelines and terminals⁽¹⁾	$	1,692,282	$	1,728,074
Refinery processing units	312,888		328,585
Other	97,370		97,455
Total identifiable assets	$	2,102,540	$	2,154,114

(1) Includes goodwill of $270.3 million and $266.7 million as of the years ending December 31, 2018 and 2017, respectively.

(2) Includes maintenance, expansion and acquisition capital expenditures, which includes business and asset acquisitions of $5.1 million and $44.1 million in the years ended December 31, 2018 and 2016, respectively, and amounts paid and allocated to properties and equipment as part of our purchase of controlling interests in SLC Pipeline and Frontier Aspen, including $1.8 million and $245.4 million in the years ended December 31, 2018 and 2017, respectively.

Quarterly Financial Data (Unaudited)

12 Months Ended

Dec. 31, 2018

Quarterly Financial Data [Abstract]

Quarterly Financial Data (Unaudited)

Summarized quarterly financial data is as follows:



	First		Second		Third		Fourth		Total
	(In thousands, except per unit data)
Year Ended December 31, 2018
Revenues	$	128,884	$	118,760	$	125,784	$	132,792	$	506,220
Operating income	64,418		56,946		62,923		65,971		250,258
Income before income taxes	48,717		41,527		46,573		49,596		186,413
Net income	48,635		41,499		46,534		49,719		186,387
Net income attributable to the partners	46,168		40,143		45,003		47,533		178,847
Limited partners’ per unit interest in earnings – basic and diluted	$	0.44	$	0.38	$	0.43	$	0.45	$	1.70
Distributions per limited partner unit	$	0.6550	$	0.6600	$	0.6650	$	0.6675	$	2.6475

Year Ended December 31, 2017
Revenues	$	105,634	$	109,143	$	110,364	$	129,221	$	454,362
Operating income	51,734		52,486		51,736		67,200		223,156
Income before income taxes	27,985		42,983		42,992		88,200		202,160
Net income	27,879		42,856		43,061		88,115		201,911
Net income attributable to the partners	25,563		41,335		42,071		86,071		195,040
Limited partners’ per unit interest in earnings – basic and diluted	$	0.13	$	0.36	$	0.66	$	0.96	$	2.28
Distributions per limited partner unit	$	0.6200	$	0.6325	$	0.6450	$	0.6500	$	2.5475

Supplemental Guarantor / Non-Guarantor Financial Information

12 Months Ended

Dec. 31, 2018

Supplemental Guarantor / Non-Guarantor Financial Information [Abstract]

Supplemental Guarantor / Non-Guarantor Financial Information

Supplemental Guarantor/Non-Guarantor Financial Information

Obligations of HEP (“Parent”) under the 6% Senior Notes have been jointly and severally guaranteed by each of its direct and indirect 100% owned subsidiaries (“Guarantor Subsidiaries”). These guarantees are full and unconditional, subject to certain customary release provisions. These circumstances include (i) when a Guarantor Subsidiary is sold or sells all or substantially all of its assets, (ii) when a Guarantor Subsidiary is declared “unrestricted” for covenant purposes, (iii) when a Guarantor Subsidiary's guarantee of other indebtedness is terminated or released and (iv) when the requirements for legal defeasance or covenant defeasance or to discharge the senior notes have been satisfied.

The following financial information presents condensed consolidating balance sheets, statements of comprehensive income, and statements of cash flows of the Parent, the Guarantor Subsidiaries and the Non-Guarantor subsidiaries. The information has been presented as if the Parent accounted for its ownership in the Guarantor Subsidiaries and the Guarantor Restricted Subsidiaries accounted for the ownership of the Non-Guarantor Non-Restricted Subsidiaries, using the equity method of accounting.

Condensed Consolidating Balance Sheet



December 31, 2018	Parent		Guarantor Restricted Subsidiaries		Non-Guarantor Non-Restricted Subsidiaries		Eliminations			Consolidated
	(In thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	2	$	—	$	3,043	$	—		$	3,045
Accounts receivable	—		53,376		5,994		(252		)	59,118
Prepaid and other current assets	217		3,542		552		—			4,311
Total current assets	219		56,918		9,589		(252		)	66,474

Properties and equipment, net	—		1,193,181		345,474		—			1,538,655
Investment in subsidiaries	1,850,416		264,378		—		(2,114,794		)	—
Intangible assets, net	—		115,329		—		—			115,329
Goodwill	—		270,336		—		—			270,336
Equity method investments	—		83,840		—		—			83,840
Other assets	9,291		18,615		—		—			27,906
Total assets	$	1,859,926	$	2,002,597	$	355,063	$	(2,115,046	)	$	2,102,540

LIABILITIES AND PARTNERS’ EQUITY
Current liabilities:
Accounts payable	$	—	$	30,325	$	584	$	(252	)	$	30,657
Accrued interest	13,302		—		—		—			13,302
Deferred revenue	—		8,065		632		—			8,697
Accrued property taxes	—		744		1,035		—			1,779
Other current liabilities	29		3,429		4		—			3,462
Total current liabilities	13,331		42,563		2,255		(252		)	57,897

Long-term debt	1,418,900		—		—		—			1,418,900
Other long-term liabilities	260		14,743		304		—			15,307
Deferred revenue	—		48,714		—		—			48,714
Class B unit	—		46,161		—		—			46,161
Equity - partners	427,435		1,850,416		264,378		(2,114,794		)	427,435
Equity - noncontrolling interest	—		—		88,126		—			88,126
Total liabilities and partners’ equity	$	1,859,926	$	2,002,597	$	355,063	$	(2,115,046	)	$	2,102,540

Condensed Consolidating Balance Sheet



December 31, 2017	Parent		Guarantor Restricted Subsidiaries		Non-Guarantor Non-Restricted Subsidiaries		Eliminations			Consolidated
	(In thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	2	$	511	$	7,263	$	—		$	7,776
Accounts receivable	—		59,448		5,038		(182		)	64,304
Prepaid and other current assets	13		2,016		282		—			2,311
Total current assets	15		61,975		12,583		(182		)	74,391

Properties and equipment, net	—		1,213,626		355,845		—			1,569,471
Investment in subsidiaries	1,902,285		273,319		—		(2,175,604		)	—
Intangible assets, net	—		129,463		—		—			129,463
Goodwill	—		266,716		—		—			266,716
Equity method investments	—		85,279		—		—			85,279
Other assets	11,753		17,041		—		—			28,794
Total assets	$	1,914,053	$	2,047,419	$	368,428	$	(2,175,786	)	$	2,154,114

LIABILITIES AND PARTNERS’ EQUITY
Current liabilities:
Accounts payable	$	—	$	20,928	$	1,526	$	(182	)	$	22,272
Accrued interest	12,500		756		—		—			13,256
Deferred revenue	—		8,540		1,058		—			9,598
Accrued property taxes	—		3,431		1,221		—			4,652
Other current liabilities	—		5,707		—		—			5,707
Total current liabilities	12,500		39,362		3,805		(182		)	55,485

Long-term debt	1,507,308		—		—		—			1,507,308
Other long-term liabilities	286		15,359		198		—			15,843
Deferred revenue	—		47,272		—		—			47,272
Class B unit	—		43,141		—		—			43,141
Equity - partners	393,959		1,902,285		273,319		(2,175,604		)	393,959
Equity - noncontrolling interest	—		—		91,106		—			91,106
Total liabilities and partners’ equity	$	1,914,053	$	2,047,419	$	368,428	$	(2,175,786	)	$	2,154,114

Condensed Consolidating Statement of Comprehensive Income



Year Ended December 31, 2018	Parent			Guarantor Restricted Subsidiaries			Non-Guarantor Non-Restricted Subsidiaries			Eliminations			Consolidated
	(In thousands)
Revenues:
Affiliates	$	—		$	373,576		$	24,232		$	—		$	397,808
Third parties	—			84,679			23,733			—			108,412
	—			458,255			47,965			—			506,220
Operating costs and expenses:
Operations (exclusive of depreciation and amortization)	—			133,156			13,274			—			146,430
Depreciation and amortization	—			81,799			16,693			—			98,492
General and administrative	3,535			7,505			—			—			11,040
	3,535			222,460			29,967			—			255,962
Operating income (loss)	(3,535		)	235,795			17,998			—			250,258
Equity in earnings of subsidiaries	254,398			13,559			—			(267,957		)	—
Equity in earnings of equity method investments	—			5,825			—			—			5,825
Interest income	—			2,032			76			—			2,108
Interest expense	(72,061		)	162			—			—			(71,899		)
Gain on sale of assets and other	45			71			5			—			121
	182,382			21,649			81			(267,957		)	(63,845		)
Income (loss) before income taxes	178,847			257,444			18,079			(267,957		)	186,413
State income tax expense	—			(26		)	—			—			(26		)
Net income (loss)	178,847			257,418			18,079			(267,957		)	186,387
Allocation of net income attributable to noncontrolling interests	—			(3,020		)	(4,520		)	—			(7,540		)
Net income (loss) attributable to the Partnership	178,847			254,398			13,559			(267,957		)	178,847
Other comprehensive income (loss)	—			—			—			—			—
Comprehensive income (loss) attributable to the Partnership	$	178,847		$	254,398		$	13,559		$	(267,957	)	$	178,847

Condensed Consolidating Statement of Comprehensive Income



Year Ended December 31, 2017	Parent			Guarantor Restricted Subsidiaries			Non-Guarantor Non-Restricted Subsidiaries			Eliminations			Consolidated
	(In thousands)
Revenues:
Affiliates	$	—		$	351,395		$	25,741		$	—		$	377,136
Third parties	—			55,400			21,826			—			77,226
	—			406,795			47,567			—			454,362
Operating costs and expenses:
Operations (exclusive of depreciation and amortization)	—			122,619			14,986			—			137,605
Depreciation and amortization	—			62,889			16,389			—			79,278
General and administrative	4,170			10,153			—			—			14,323
	4,170			195,661			31,375			—			231,206
Operating income (loss)	(4,170		)	211,134			16,192			—			223,156
Equity in earnings of subsidiaries	254,695			12,148			—			(266,843		)	—
Equity in earnings of equity method investments	—			12,510			—			—			12,510
Interest income	—			491			—			—			491
Interest expense	(43,260		)	(15,188		)	—			—			(58,448		)
Loss on early extinguishment of debt	(12,225		)	—			—			—			(12,225		)
Remeasurement gain on preexisting equity interests	—			36,254			—			—			36,254
Gain on sale of assets and other	—			417			5			—			422
	199,210			46,632			5			(266,843		)	(20,996		)
Income (loss) before income taxes	195,040			257,766			16,197			(266,843		)	202,160
State income tax expense	—			(249		)	—			—			(249		)
Net income (loss)	195,040			257,517			16,197			(266,843		)	201,911
Allocation of net income attributable to noncontrolling interests	—			(2,822		)	(4,049		)	—			(6,871		)
Net income (loss) attributable to the Partnership	195,040			254,695			12,148			(266,843		)	195,040
Other comprehensive income (loss)	(91		)	(91		)	—			91			(91		)
Comprehensive income (loss) attributable to the Partnership	$	194,949		$	254,604		$	12,148		$	(266,752	)	$	194,949

Condensed Consolidating Statement of Comprehensive Income



Year Ended December 31, 2016	Parent			Guarantor Restricted Subsidiaries			Non-Guarantor Non-Restricted Subsidiaries			Eliminations			Consolidated
	(In thousands)
Revenues:
Affiliates	$	—		$	307,049		$	26,067		$	—		$	333,116
Third parties	—			47,326			21,601			—			68,927
	—			354,375			47,668			—			402,043
Operating costs and expenses:
Operations (exclusive of depreciation and amortization)	—			111,181			12,805			—			123,986
Depreciation and amortization	—			55,083			15,345			—			70,428
General and administrative	3,804			8,728			—			—			12,532
	3,804			174,992			28,150			—			206,946
Operating income (loss)	(3,804		)	179,383			19,518			—			195,097
Equity in earnings (loss) of subsidiaries	193,432			14,634			—			(208,066		)	—
Equity in earnings of equity method investments	—			14,213			—			—			14,213
Interest income	—			421			19			—			440
Interest expense	(31,387		)	(21,165		)	—			—			(52,552		)
Gain on sale of assets and other	—			702			(25		)	—			677
	162,045			8,805			(6		)	(208,066		)	(37,222		)
Income (loss) before income taxes	158,241			188,188			19,512			(208,066		)	157,875
State income tax expense	—			(285		)	—			—			(285		)
Net income (loss)	158,241			187,903			19,512			(208,066		)	157,590
Allocation of net loss applicable to Predecessors	—			10,657			—			—			10,657
Allocation of net income attributable to noncontrolling interests	—			(5,128		)	(4,878		)	—			(10,006		)
Net income (loss) attributable to the Partnership	158,241			193,432			14,634			(208,066		)	158,241
Other comprehensive income (loss)	(99		)	(99		)	—			99			(99		)
Comprehensive income (loss) attributable to the Partnership	$	158,142		$	193,333		$	14,634		$	(207,967	)	$	158,142

Condensed Consolidating Statement of Cash Flows



Year Ended December 31, 2018	Parent			Guarantor Restricted Subsidiaries			Non-Guarantor Non-Restricted Subsidiaries			Eliminations			Consolidated
	(In thousands)
Cash flows from operating activities	$	(68,693	)	$	345,378		$	32,087		$	(13,559	)	$	295,213

Cash flows from investing activities
Additions to properties and equipment	—			(41,031		)	(6,269		)	—			(47,300		)
Business and asset acquisitions	—			(5,013		)	(38		)	—			(5,051		)
Purchase of controlling interests in SLC Pipeline and Frontier Aspen	—			(1,790		)	—			—			(1,790		)
Proceeds from the sale of assets	—			210			—			—			210
Distributions in excess of equity in earnings of equity method investments	—			1,588			—			—			1,588
Distributions from UNEV in excess of earnings	—			8,941			—			(8,941		)	—
	—			(37,095		)	(6,307		)	(8,941		)	(52,343		)
Cash flows from financing activities
Net repayments under credit agreement	(89,000		)	—			—			—			(89,000		)
Net intercompany financing activities	307,587			(307,587		)	—			—			—
Proceeds from issuance of common units	114,771			—			—			—			114,771
Contributions from general partner	882						—			—			882
Distributions to HEP unitholders	(264,979		)	—			—			—			(264,979		)
Distributions to noncontrolling interest	—			—			(30,000		)	22,500			(7,500		)
Deferred financing costs	—			6			—			—			6
Units withheld for tax withholding obligations	(568		)	—			—			—			(568		)
Other	—			(1,213		)	—			—			(1,213		)
	68,693			(308,794		)	(30,000		)	22,500			(247,601		)
Cash and cash equivalents
Increase for the period	—			(511		)	(4,220		)	—			(4,731		)
Beginning of period	2			511			7,263			—			7,776
End of period	$	2		$	—		$	3,043		$	—		$	3,045

Condensed Consolidating Statement of Cash Flows



Year Ended December 31, 2017	Parent			Guarantor Restricted Subsidiaries			Non-Guarantor Non-Restricted Subsidiaries			Eliminations			Consolidated
	(In thousands)
Cash flows from operating activities	$	(51,235	)	$	268,978		$	32,892		$	(12,148	)	$	238,487

Cash flows from investing activities
Additions to properties and equipment	—			(41,827		)	(2,983		)	—			(44,810		)
Purchase of interest in Cheyenne Pipeline	—			(245,446		)	—			—			(245,446		)
Proceeds from sale of assets	—			849			—			—			849
Distributions from UNEV in excess of earnings	—			3,134			—			—			3,134
Distribution in excess of equity in earnings in equity investments	—			7,352			—			(7,352		)	—
	—			(275,938		)	(2,983		)	(7,352		)	(286,273		)

Cash flows from financing activities
Net borrowings under credit agreement	1,012,000			(553,000		)	—			—			459,000
Net intercompany financing activities	(561,675		)	561,675			—			—			—
Redemption of notes	(309,750		)	—			—			—			(309,750		)
Proceeds from issuance of 6% Senior Notes	101,750			—			—			—			101,750
Proceeds from issuance of common units	52,100			10			—			—			52,110
Contributions from General partner	1,440			(368		)	—			—			1,072
Distributions to noncontrolling interests	—			—			(26,000		)	19,500			(6,500		)
Distributions to HEP unitholders	(234,575		)	—			—			—			(234,575		)
Contributions to HFC for El Dorado acquisition	(103		)	—			—			—			(103		)
Deferred financing costs	(9,347		)	(35		)	—			—			(9,382		)
Units withheld for tax withholding obligations	(605		)	—			—			—			(605		)
Other	—			(1,112		)	—			—			(1,112		)
	51,235			7,170			(26,000		)	19,500			51,905
Cash and cash equivalents
Increase (decrease) for the period	—			210			3,909			—			4,119
Beginning of period	2			301			3,354			—			3,657
End of period	$	2		$	511		$	7,263		$	—		$	7,776

Condensed Consolidating Statement of Cash Flows



Year Ended December 31, 2016	Parent			Guarantor Restricted Subsidiaries			Non-Guarantor Non-Restricted Subsidiaries			Eliminations			Consolidated
	(In thousands)
Cash flows from operating activities	$	(19,641	)	$	245,771		$	32,052		$	(14,634	)	$	243,548

Cash flows from investing activities
Additions to properties and equipment	—			(44,447		)	(15,257		)	—			(59,704		)
Business and asset acquisitions	—			(44,119		)	—			—			(44,119		)
Purchase of investment in Frontier Pipeline	—			(42,627		)	—			—			(42,627		)
Proceeds from sale of assets	—			427			—			—			427
Distributions from UNEV in excess of earnings	—			2,616			—			(2,616		)	—
Distributions in excess of equity in earnings in equity investments	—			2,993			—			—			2,993
	—			(125,157		)	(15,257		)	(2,616		)	(143,030		)

Cash flows from financing activities
Net borrowings under credit agreement	—			(159,000		)	—			—			(159,000		)
Net intercompany financing activities	(302,600		)	302,600			—			—			—
Proceeds from issuance of 6% Senior Notes	394,000			—			—			—			394,000
Proceeds from issuance of common units	125,870			—			—			—			125,870
Contributions from General Partner	2,577			—			—			—			2,577
Distributions to noncontrolling interests	—			—			(23,000		)	17,250			(5,750		)
Distributions to HEP unitholders	(192,037		)	—			—			—			(192,037		)
Distributions to HFC for acquisitions	(30,378		)	(287,122		)	—			—			(317,500		)
Contributions from HFC for acquisitions	(3,397		)	54,659			—			—			51,262
Distributions to HFC for acquisitions	31,287			(31,287		)	—			—			—
Distributions to HFC for Osage acquisition	—			(1,245		)	—			—			(1,245		)
Purchase of units for incentive grants	(3,521		)	—			—			—			(3,521		)
Deferred financing costs	(910		)	(3,085		)	—			—			(3,995		)
Units withheld for tax withholding obligations	(800		)	—			—			—			(800		)
Other	(450		)	(1,285		)	—			—			(1,735		)
	19,641			(125,765		)	(23,000		)	17,250			(111,874		)
Cash and cash equivalents
Increase for the period	—			(5,151		)	(6,205		)	—			(11,356		)
Beginning of period	2			5,452			9,559			—			15,013
End of period	$	2		$	301		$	3,354		$	—		$	3,657

Description of Business and Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2018

Accounting Policies [Abstract]

Business Description and Basis of Presentation

Holly Energy Partners, L.P. (“HEP”) together with its consolidated subsidiaries, is a publicly held master limited partnership. As of December 31, 2018, HollyFrontier Corporation (“HFC”) and its subsidiaries own a 57% limited partner interest and the non-economic general partner interest in HEP. We commenced operations on July 13, 2004, upon the completion of our initial public offering. In these consolidated financial statements, the words “we,” “our,” “ours” and “us” refer to HEP unless the context otherwise indicates.

On October 31, 2017, we closed on an equity restructuring transaction with HEP Logistics Holdings, L.P. (“HEP Logistics”), a wholly-owned subsidiary of HFC and the general partner of HEP, pursuant to which the incentive distribution rights ("IDRs") held by HEP Logistics were canceled, and HEP Logistics' 2% general partner interest in HEP was converted into a non-economic general partner interest in HEP. In consideration, we issued 37,250,000 of our common units to HEP Logistics. In addition, HEP Logistics agreed to waive $2.5 million of limited partner cash distributions for each of twelve consecutive quarters beginning with the first quarter the units issued as consideration were eligible to receive distributions. As a result of this transaction, no distributions were made on the general partner interest after October 31, 2017.

On January 25, 2018, we entered into a common unit purchase agreement in which certain purchasers agreed to purchase in a private placement 3,700,000 common units representing limited partner interests, at a price of $29.73 per common unit. The private placement closed on February 6, 2018, and we received proceeds of approximately $110 million, which were used to repay indebtedness under our revolving credit facility.

We own and operate petroleum product and crude oil pipelines, terminal, tankage and loading rack facilities and refinery processing units that support HFC’s refining and marketing operations in the Mid-Continent, Southwest and Northwest regions of the United States and Delek US Holdings, Inc.’s (“Delek”) refinery in Big Spring, Texas. Additionally, we own a 75% interest in the UNEV Pipeline, LLC (“UNEV”), a 50% interest in Osage Pipe Line Company, LLC (“Osage”), and a 50% interest in Cheyenne Pipeline LLC.

We operate in two reportable segments, a Pipelines and Terminals segment and a Refinery Processing Unit segment. Disclosures around these segments are discussed in Note 15.

Our Pipelines and Terminals segment consists of:


•	26 main pipeline segments


•	Crude gathering networks in Texas and New Mexico


•	10 refined product terminals


•	1 crude terminal


•	31,800 track feet of rail storage located at two facilities


•	7 locations with truck and/or rail racks


•	Tankage at all six of HFC's refining facility locations

Our Refinery Processing Unit segment consists of five refinery processing units at two of HFC's refining facility locations.

We generate revenues by charging tariffs for transporting petroleum products and crude oil through our pipelines, by charging fees for terminalling and storing refined products and other hydrocarbons, providing other services at our storage tanks and terminals and by charging fees for processing hydrocarbon feedstocks through our refinery processing units. We do not take ownership of products that we transport, terminal, store or process, and therefore, we are not exposed directly to changes in commodity prices.

Consolidation and Common Control Transactions, Policy

Principles of Consolidation and Common Control Transactions

The consolidated financial statements include our accounts, our Predecessor's (defined below) and those of subsidiaries and joint ventures that we control. All significant intercompany transactions and balances have been eliminated. Certain prior period balances have been reclassified for consistency with current year presentation.

Most of our acquisitions from HFC occurred while we were a consolidated variable interest entity of HFC. Therefore, as an entity under common control with HFC, we recorded these acquisitions on our balance sheets at HFC's historical basis instead of our purchase price or fair value. U.S. generally accepted accounting principles ("GAAP") require transfers of a business between entities under common control to be accounted for as though the transfer occurred as of the beginning of the period of transfer, and prior period financial statements and financial information are retrospectively adjusted to include the historical results and assets of the acquisitions from HFC for all periods presented prior to the effective dates of each acquisition. We refer to the historical results of the acquisitions prior to their respective acquisition dates as those of our "Predecessor." Many of these transactions are cash purchases and do not involve the issuance of equity; however, GAAP requires the retrospective adjustment of financial statements. Therefore, in such transactions, the prior year balance sheet includes as equity the amount of cost incurred by HFC to that date.

Use of Estimates, Policy

Use of Estimates

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Cash and Cash Equivalents, Policy

Cash and Cash Equivalents

For purposes of the statements of cash flows, we consider all highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents. The carrying amounts reported on the balance sheets approximate fair value due to the short-term maturity of these instruments.

Accounts Receivable, Policy

Accounts Receivable

The majority of the accounts receivable are due from affiliates of HFC, Delek or independent companies in the petroleum industry. Credit is extended based on evaluation of the customer's financial condition and, in certain circumstances, collateral such as letters of credit or guarantees, may be required. Credit losses are charged to income when accounts are deemed uncollectible and historically have been minimal.

Properties and Equipment, Policy

Properties and Equipment

Properties and equipment are stated at cost. Properties and equipment acquired from HFC while under common control of HFC are stated at HFC's historical basis. Depreciation is provided by the straight-line method over the estimated useful lives of the assets, primarily 15 to 25 years for terminal facilities and tankage, 25 to 32 years for pipelines, 25 years for refinery processing units and 5 to 10 years for corporate and other assets. We depreciate assets acquired under capital leases over the lesser of the lease term or the economic life of the assets. Maintenance, repairs and minor replacements are expensed as incurred. Costs of replacements constituting improvements are capitalized.

Transportation Agreements, Policy

Intangible assets include transportation agreements and acquired customer relationship intangible assets. Intangible assets are stated at acquisition date fair value and are being amortized over their useful lives using the straight-line method.

Goodwill and Long-Lived Assets, Policy

Goodwill and Long-Lived Assets

Goodwill represents the excess of our cost of an acquired business over the fair value of the assets acquired, less liabilities assumed. Goodwill is not amortized. We test goodwill at the reporting unit level for impairment annually and between annual tests if events or changes in circumstances indicate the carrying amount may exceed fair value. Our goodwill impairment testing first entails a comparison of our reporting unit fair values relative to their respective carrying values, including goodwill. If carrying value exceeds fair value for a reporting unit, we measure goodwill impairment as the excess of the carrying amount of reporting unit goodwill over the implied fair value of that goodwill based on estimates of the fair value of all assets and liabilities in the reporting unit.

In 2018, we used the present value of the expected future net cash flows and market multiple analyses to determine the estimated fair values of the reporting units. The impairment test requires the use of projections, estimates and assumptions as to the future performance of our operations. Actual results could differ from projections resulting in revisions to our assumptions, and if required, could result in the recognition of an impairment loss. In 2017, we assessed qualitative factors such as macroeconomic conditions, industry considerations, cost factors, and reporting unit financial performance and determined it was not more likely than not that the fair value of our reporting units were less than the respective carrying value. Therefore, in accordance with GAAP, further testing was not required.

We evaluate long-lived assets, including finite intangible assets, for potential impairment by identifying whether indicators of impairment exist and, if so, assessing whether the long-lived assets are recoverable from estimated future undiscounted cash flows. The actual amount of impairment loss, if any, to be recorded is equal to the amount by which a long-lived asset's carrying value exceeds its fair value.

There have been no impairments to goodwill or our long-lived assets through December 31, 2018.

Investment in Equity Method Investments, Policy

Investment in Equity Method Investments

We account for our interests in noncontrolling joint venture interests using the equity method of accounting, whereby we record our pro-rata share of earnings of these companies, and contributions to and distributions from the joint ventures as adjustments to our investment balances. The difference between the cost of an investment and our proportionate share of the underlying equity in net assets recorded on the investee's books is allocated to the various assets and liabilities of the equity method investment.

The following table summarizes our recorded investments compared to our share of underlying equity for each investee. We are amortizing the differences as adjustments to our pro-rata share of earnings over the useful lives of the underlying assets of these joint ventures.

Asset Retirement Obligations, Policy

Asset Retirement Obligations

We record legal obligations associated with the retirement of certain of our long-lived assets that result from the acquisition, construction, development and/or the normal operation of our long-lived assets. The fair value of the estimated cost to retire a tangible long-lived asset is recorded in the period in which the liability is incurred and when a reasonable estimate of the fair value of the liability can be made. For our pipeline assets, the right-of-way agreements typically do not require the dismantling, removal and reclamation of the right-of-way upon cessation of the pipeline service. Additionally, management is unable to predict when, or if, our pipelines and related facilities would become obsolete and require decommissioning. Accordingly, we have recorded no liability or corresponding asset related to an asset retirement obligation for the majority of our pipelines as both the amounts and timing of such potential future costs are indeterminable. For our remaining assets, at December 31, 2018 and 2017, we have asset retirement obligations of $8.9 million and $8.6 million, respectively, that are recorded under “Other long-term liabilities” in our consolidated balance sheets.

Class B Unit, Policy

Class B Unit

Under the terms of the transaction to acquire HFC's 75% interest in UNEV, we issued HFC a Class B unit comprising a noncontrolling equity interest in a wholly-owned subsidiary subject to redemption to the extent that HFC is entitled to a 50% interest in our share of annual UNEV earnings before interest, income taxes, depreciation, and amortization above $30 million beginning July 1, 2016, and ending in June 2032, subject to certain limitations. Such contingent redemption payments are limited to the unredeemed value of the Class B Unit. However, to the extent earnings thresholds are not achieved, no redemption payments are required. No redemption payments have been required to date.

Contemporaneously with this transaction, HFC (our general partner) agreed to forego its right to incentive distributions of up to $1.25 million per quarter over twelve consecutive quarterly periods following the closing of the transaction and up to an additional four quarters if HFC's Woods Cross refinery expansion did not attain certain thresholds. HEP Logistics' waiver of its right to incentive distributions of $1.25 million per quarter ended with the distribution paid in the third quarter of 2016.

Pursuant to the terms of the transaction agreements, the Class B unit increases by the amount of each foregone incentive distribution and by a 7% factor compounded annually on the outstanding unredeemed balance through its expiration date. At our option, we may redeem, in whole or in part, the Class B unit at the current unredeemed value based on the calculation described. The Class B unit had a carrying value of $46.2 million at December 31, 2018, and $43.1 million at December 31, 2017.

Revenue Recognition, Policy

Revenue Recognition

Revenues are generally recognized as products are shipped through our pipelines and terminals, feedstocks are processed through our refinery processing units or other services are rendered. The majority of our contracts with customers meet the definition of a lease since (1) performance of the contracts is dependent on specified property, plant, or equipment and (2) it is remote that one or more parties other than the customer will take more than a minor amount of the output associated with the specified property, plant, or equipment. As a result, we bifurcate the consideration received between lease and service revenue. The service component is within the scope of Accounting Standards Codification (“ASC”) 606, which largely codified ASU 2014-09.

Several of our contracts include incentive or reduced tariffs once a certain quarterly volume is met. Revenue from the variable element of these transactions is recognized based on the actual volumes shipped as it relates specifically to rendering the services during the applicable quarter.

The majority of our long-term transportation contracts specify minimum volume requirements, whereby, we bill a customer for a minimum level of shipments in the event a customer ships below their contractual requirements. If there are no future performance obligations, we will recognize these deficiency payments in revenue.

In certain of these throughput agreements, a customer may later utilize such shortfall billings as credit towards future volume shipments in excess of its minimum levels within its respective contractual shortfall make-up period. Such amounts represent an obligation to perform future services, which may be initially deferred and later recognized as revenue based on estimated future shipping levels, including the likelihood of a customer’s ability to utilize such amounts prior to the end of the contractual shortfall make-up period. We recognize the service portion of these deficiency payments in revenue when we do not expect we will be required to satisfy these performance obligations in the future based on the pattern of rights exercised by the customer.

Prior to the adoption of ASC 606 on January 1, 2018, billings to customers for their obligations under their quarterly minimum revenue commitments were recorded as deferred revenue liabilities if the customer had the right to receive future services for these billings. The revenue was recognized at the earlier of:


•	the customer receiving the future services provided by these billings,


•	the period in which the customer was contractually allowed to receive the services expired, or


•	our determination that we would not be required to provide services within the allowed period.