Genesis Energy, L.P. Stock

Genesis Energy, L.P. provides an integrated suite of midstream services primarily transportation, storage, sulfur removal, blending, terminalling and processing for a large area of the Gulf of Mexico and the Gulf Coast region of the crude oil and natural gas industry. The company produces natural soda ash.

The company provides an integrated suite of services to refiners, crude oil and natural gas producers, and industrial and commercial enterprises and have a diverse portfolio of assets, including pipelines, offshore hub and junction platforms, refinery-related plants, storage tanks and terminals, railcars, barges and other vessels, and trucks. The other core focus of the company’s business is its trona and trona-based exploring, mining, processing, producing, marketing and selling business based in Wyoming (Alkali Business). The company’s Alkali Business mines and processes trona from which it produces natural soda ash, also known as sodium carbonate (Na2CO3), a basic building block for a number of ubiquitous products, including flat glass, container glass, dry detergent and a variety of chemicals and other industrial products, including lithium batteries.

The company manages its businesses through four divisions that constitute its segments: Offshore Pipeline Transportation, Sodium Minerals and Sulfur Services, Onshore Facilities and Transportation and Marine Transportation.

one of the largest pipeline networks (based on throughput capacity) in the Deepwater area of the Gulf of Mexico, an area that produced approximately 15% of the oil produced in the U.S. during 2022;

one of the leading producers (based on tons produced) of natural soda ash in the world;

one of the largest producers and marketers (based on tons produced) of sodium hydrosulfide (or NaHS, pronounced nash) in North and South America; and

one of the leading providers of crude oil and petroleum transportation, storage, and other handling services for two of the largest refinery complexes in the U.S., one located in Baton Rouge, Louisiana and one in Baytown, Texas, both of which have been operational for over 100 years;

The company conducts its operations and own its operating assets through its subsidiaries and joint ventures. The company’s general partner, Genesis Energy, LLC, a wholly-owned subsidiary that owns a non-economic general partner interest in it, has sole responsibility for conducting its business and managing its operations.

Offshore Pipeline Transportation

This segment conducts its offshore crude oil and natural gas pipeline transportation and handling operations in the Gulf of Mexico through the company’s offshore pipeline transportation segment, which focuses on providing a suite of services to integrated and large independent energy companies who make intensive capital investments (often in excess of a billion dollars) to develop large-reservoir, long-lived crude oil and natural gas properties in the Gulf of Mexico, primarily offshore Texas, Louisiana, and Mississippi. This segment provides services to one of the most active drilling and development regions in the U.S. (the Gulf of Mexico) a producing region representing approximately 15% of the crude oil production in the U.S. during 2022. Due to the size and scope of these activities, the company’s customers are predominantly large integrated oil and gas companies and large independent crude oil and natural gas producers.

The company owns interests in various offshore crude oil and natural gas pipeline systems, platforms and related infrastructure. The company owns interests in approximately 1,396 miles of crude oil pipelines with an aggregate design capacity of approximately 1,944 MBbls/day (Thousand Bbls per day), a number of which pipeline systems are substantial and/or strategically located. For example, the company owns a 64% interest in the Poseidon oil pipeline system, or Poseidon pipeline, and a 64% interest in the Cameron Highway oil pipeline system, or CHOPS pipeline, which are two of the largest crude oil pipelines (in terms of both length and design capacity) located in the Gulf of Mexico. The company also owns 100% of the Southeast Keathley Canyon pipeline system, or SEKCO pipeline, which is a deepwater pipeline servicing the Lucius, Buckskin and Hadrian North fields in the southern Keathley Canyon area of the Gulf of Mexico.

The company’s interests in operating offshore natural gas pipeline systems and related infrastructure include approximately 764 miles of pipe with an aggregate design capacity of approximately 2,308 MMcf/day. The company also owns an interest in three offshore hub platforms, two of which are operational, with an aggregate processing capacity of approximately 495 MMcf/day of natural gas and 123 MBbls/day of crude oil. Additionally, the company owns an interest in a number of junction and service platforms in the Gulf of Mexico, which are used to interconnect the offshore pipeline network; provide an efficient means to perform pipeline maintenance; and contain equipment, such as pumps and measurement equipment, which can increase and direct flow on its pipelines.

The company’s offshore pipelines generate cash flows from fees charged to customers or substantially similar arrangements that otherwise limit its direct exposure to changes in commodity prices.

Sodium Minerals and Sulfur Services

This segment includes the company’s Alkali Business and the company’s sulfur removal business.

The company’s Alkali Business owns the largest leasehold position of accessible trona ore reserves in the Green River, Wyoming trona patch, a geological formation holding the vast majority of the world’s accessible trona ore reserves which it mines to ultimately produce, market, and sell soda ash. Soda ash is utilized by the company’s customers as a basic building block for a number of ubiquitous products, including flat glass, container glass, dry detergent, lithium batteries, solar panels and a variety of chemicals and other industrial products.

The company’s Alkali Business holds leases covering approximately 86,000 acres of land, containing an estimated 872 million short tons of proved and probable reserves of trona ore, representing an estimated remaining reserve life of over 100 years related to the seam being mined. The company’s Alkali Business also owns and operates soda ash production facilities, underground trona ore mines and brine (solution) mining operations and related equipment, logistics and other assets.

All of the company’s Alkali Business’ mining and processing activities are conducted at its Westvaco and Granger facilities in Wyoming. Utilizing its two facilities near Green River, the company’s Alkali Business involves the mining of trona ore, the processing of the trona ore into soda ash, also known as sodium carbonate (Na2CO3), and the marketing, selling and distribution of the soda ash and specialty products.

The company sells its soda ash and specialty products to a diverse customer base directly in the U.S., Canada, the European Community, the European Free Trade Area and the South African Customs Union. The company’s Alkali Business also sells through the American Natural Soda Ash Corporation, or ANSAC, exclusively in all other markets. During 2022, ANSAC operated as a nonprofit foreign sales association to promote export sales of U.S. produced soda ash. On January 1, 2023, ANSAC became a wholly owned subsidiary of Genesis Alkali Wyoming, L.P. and the company will continue utilizing its logistical assets and marketing function as an export vehicle for its Alkali Business.

As part of its sulfur services business, the company provides sulfur removal services by processing refineries high sulfur (or sour) gas streams to remove the sulfur at eleven refining and petrochemical processing facilities located mostly in Texas, Louisiana, Arkansas, Oklahoma, Montana and Utah; operate significant storage and transportation assets in relation to those services; and sell NaHS and NaOH (also known as caustic soda) to large industrial and commercial companies. Soda ash can be used to make lithium carbonate and lithium hydroxide, which are some of the building blocks for lithium batteries as well as solar panels. The company’s sulfur removal services footprint also includes NaHS and caustic soda terminals, and it utilizes railcars, ships, barges and trucks to transport product. The company’s sulfur removal services contracts are typically long-term in nature and have an average remaining term of approximately four years. NaHS is a by-product derived from the company’s refinery sulfur removal services process, and it constitutes the sole consideration it receives for these services. A majority of the NaHS the company produces is sourced from refineries owned and operated by large companies, including Phillips 66, CITGO, HollyFrontier, Calumet and Ergon. The company sells its NaHS to customers in a variety of industries, with the largest customers involved in the mining of base metals, primarily copper and molybdenum, and the production of pulp and paper. The company produces and markets NaHS in North and South America.

The company’s Alkali Business and sulfur services business are well positioned to participate in the energy transition and lower carbon world. Natural soda ash has a lower Greenhouse Gas footprint than synthetic soda ash as it is less energy intensive. In addition, synthetic soda ash creates by-products, such as calcium chloride and ammonia chloride, which need further handling, or are disposed of as waste, and ultimately increase synthetic soda ash’s carbon footprint. The company’s sulfur services business helps its host refineries lower their emissions by processing their sour gas streams using its proprietary, closed-loop, non-combustion technology to remove sulfur from the sour gas, whereas the traditional combustion technology releases certain levels of harmful gases and incremental carbon dioxide emissions into the atmosphere. Additionally, certain of the company’s customers also utilize the NaHS it sells them to further reduce air emissions from various chemical and industrial activities.

Onshore Facilities and Transportation

This segment owns and/or leases its increasingly integrated suite of onshore crude oil and refined products infrastructure, including pipelines, trucks, terminals and rail unloading facilities. The company’s onshore facilities and transportation segment uses those assets, together with other modes of transportation owned by third parties and it, to service its customers and for its own account. The increasingly integrated nature of the company’s onshore facilities and transportation assets is particularly evident in certain of its infrastructure assets and complexes in areas, such as Louisiana and Texas.

The company owns four onshore crude oil pipeline systems, with approximately 450 miles of pipe located primarily in Alabama, Florida, Louisiana, Mississippi and Texas that are rate regulated by the Federal Energy Regulatory Commission, or FERC. The rates for certain segments of the company’s Texas onshore pipeline are regulated by the Railroad Commission of Texas. The company’s onshore pipelines generate cash flows from fees charged to customers. Each of the company’s onshore pipelines has significant available capacity to accommodate potential future growth in volumes.

The company owns four operational crude oil rail unloading facilities located in Baton Rouge, Louisiana; Raceland, Louisiana; Walnut Hill, Florida; and Natchez, Mississippi, which provide synergies to its existing asset footprint. The company generally earns a fee for unloading railcars at these facilities. Three of these facilities, the company’s Baton Rouge, Louisiana, Raceland, Louisiana, and Walnut Hill, Florida facilities are directly connected to its existing integrated crude oil pipeline and terminal infrastructure.

In addition, the company has access to a suite of trucks, and trailers, as well as terminals and tankage with approximately 4.2 million barrels of storage capacity (excluding capacity associated with its common carrier crude oil pipelines) in multiple locations along the Gulf Coast, which it uses to service customers and for its own account. Usually, the company’s onshore facilities and transportation segment experiences limited direct commodity price risk because it utilizes back-to-back purchases and sales, matching sale and purchase volumes on a monthly basis.

Marine Transportation

This segment is a provider of transportation services by tank barge primarily for intermediate refined petroleum products, including heavy fuel oil and asphalt, as well as crude oil. The company owns a fleet of 91 barges (82 inland and 9 offshore) with a combined transportation capacity of 3.2 million barrels and 42 push/tow boats (33 inland and 9 offshore). Refiners contracted for approximately 90% of the revenues from the company’s marine inland barges during 2022.

The company also owns the M/T American Phoenix, an ocean going tanker with 330,000 barrels of cargo capacity. The M/T American Phoenix is transporting crude oil.

The company is a provider of transportation services for its customers and, in almost all cases, do not assume ownership of the products that it transports. The company’s marine transportation services are conducted under term contracts, some of which have renewal options for customers with whom it has traditionally had long-standing relationships, and spot contracts. All of the company’s vessels operate under the U.S. flag and are qualified for domestic trade under the Jones Act.

Business Strategy

The company’s primary business strategy is to provide an integrated suite of services to crude oil and natural gas producers, refiners, and industrial and commercial enterprises that use natural soda ash, NaHS and caustic soda.

The company’s offshore Gulf of Mexico crude oil and natural gas pipeline transportation and handling operations focus on providing a suite of services primarily to integrated and large independent energy companies who make intensive capital investments (often in excess of a billion dollars) to develop large-reservoir, long-lived crude oil and natural gas properties. The company’s offshore oil pipelines transport oil produced from integrated and large independent energy companies that are ideally suited for the vast majority of refineries along the Gulf Coast. The company’s onshore-based refinery-centric operations, located primarily in the Gulf Coast region of the U.S., focus on providing a suite of services primarily to refiners, which also includes its sulfur removal services, transportation, storage, and other handling services. In 2022, refiners were the shippers of approximately 98% of the volumes transported on the company’s onshore crude pipelines, and refiners contracted for approximately 90% of the revenues from its marine inland barges during 2022, which are used primarily to transport intermediate refined products (not crude oil) between refining complexes. The company’s Alkali Business is one of the world’s leading producers of natural soda ash.

The company intends to develop its business by identifying and exploiting incremental profit opportunities, including cost synergies, across an increasingly integrated footprint; economically expanding its pipeline and terminal operations by utilizing capacity available on its existing assets that requires minimal to no additional investment; optimizing its existing assets and creating synergies through additional commercial and operating advancement; leveraging customer relationships across business segments; attracting new customers and expanding its scope of services offered to existing customers; expanding the geographic reach of its businesses; evaluating internal and third party growth opportunities (including asset and business acquisitions) that leverage its core competencies and strengths and further integrate its businesses; and focusing on health, safety and environmental stewardship, and advancement of its ESG program.

Sale of Independence Hub

On April 29, 2022, the company entered into an agreement to sell the Independence Hub platform, the primary asset of Independence Hub, LLC, which it holds an 80% interest in, to a producer group in the Gulf of Mexico.

Segments and Related Assets

The company conducts its businesses through four operating segments: offshore pipeline transportation, sodium minerals and sulfur services, onshore facilities and transportation and marine transportation.

Offshore Pipeline Transportation

Offshore Crude Oil and Natural Gas Pipelines

The company owns interests in several crude oil and natural gas pipelines and related infrastructure located offshore in the Gulf of Mexico.

CHOPS Pipeline: CHOPS pipeline consists of 24- to 30-inch diameter pipelines designed to deliver crude oil from fields in the Gulf of Mexico to refining markets along the Texas Gulf Coast via interconnections with refineries and terminals located in Port Arthur and Texas City, Texas. Cameron Highway Oil Pipeline Company, LLC (CHOPS) also owns three strategically located multi-purpose offshore platforms. A financial party owns the remaining 36% interest in CHOPS.

Poseidon Pipeline: The Poseidon pipeline consists of 16- to 24-inch diameter pipelines to deliver crude oil from developments in the central and western offshore Gulf of Mexico to other pipelines and terminals onshore and offshore Louisiana. An affiliate of Shell owns the remaining 36% interest in Poseidon Oil Pipeline Company, LLC (Poseidon).

Odyssey Pipeline. The Odyssey pipeline consists of 12- to 20-inch diameter pipelines to deliver crude oil from developments in the eastern Gulf of Mexico to other pipelines and terminals onshore Louisiana. An affiliate of Shell owns the remaining 71% interest in Odyssey Pipeline, LLC (Odyssey).

Eugene Island: The Eugene Island system consists of a network of crude oil pipelines, the main pipeline of which is 20 inches in diameter, to deliver crude oil from developments in the central Gulf of Mexico to other pipelines and terminals in onshore Louisiana. Other owners in Eugene Island include affiliates of Exxon Mobil and Shell Oil Company.

SEKCO Pipeline: SEKCO pipeline is a deepwater pipeline serving the Buckskin oil, Hadrian North oil and Lucius oil and natural gas production areas located in the southern Keathley Canyon area of the Gulf of Mexico. Southeast Keathley Canyon Pipeline Company, LLC (SEKCO) has crude oil transportation agreements with various Gulf of Mexico producers who have dedicated their production from the Lucius, Buckskin and Hadrian North production areas to the SEKCO pipeline for the life of their reserves. The SEKCO pipeline will be directly connected to the Salamanca Floating Production System (FPS), which is anticipated for first production in 2025.

Shenzi Crude Oil Pipeline: The Shenzi Crude Oil Pipeline gathers crude oil production from the Shenzi production field located in the Green Canyon area of the Gulf of Mexico offshore Louisiana, as well as from the King’s Quay FPS, which supports the Khaleesi, Mormont and Samurai field developments, for delivery to both the company’s CHOPS pipeline and Poseidon pipeline systems.

Allegheny Crude Oil Pipeline: The Allegheny Crude Oil Pipeline connects the Allegheny and South Timbalier 316 platforms in the Green Canyon area of the Gulf of Mexico with the CHOPS pipeline and Poseidon pipeline.

Marco Polo Crude Oil Pipeline: The Marco Polo Crude Oil Pipeline transports crude oil from the company’s Marco Polo crude oil platform to an interconnect with the Allegheny Crude Oil Pipeline in Green Canyon Block 164.

Constitution Crude Oil Pipeline: The Constitution Crude Oil Pipeline gathers crude oil from the Constitution, Constellation, Caesar Tonga and Ticonderoga production fields located in the Green Canyon area of the Gulf of Mexico for delivery to either the CHOPS pipeline or Poseidon pipeline.

None of the company’s offshore crude oil pipelines are rate regulated with the exception of Eugene Island, which is regulated by the FERC.

High Island: The High Island Offshore System (HIOS) transports natural gas from producing fields located in the Galveston, Garden Banks, West Cameron, High Island and East Breaks areas of the Gulf of Mexico to interconnects with the Kinetica Energy Express. HIOS includes 152 miles of pipeline and eight pipeline junction and service platforms that are regulated by the FERC. In addition, this system included the 86-mile East Breaks Gathering System, which connects HIOS to the Hoover-Diana deepwater platform located in Alaminos Canyon Block 25.

Anaconda: The Anaconda Gathering System gathers natural gas from producing fields located in the Green Canyon area in the Gulf of Mexico, including the King’s Quay FPS, which supports the Khaleesi, Mormont and Samurai field developments, for delivery to the Nautilus System.

Green Canyon: The Green Canyon Laterals represent a collection of small diameter pipelines that gather natural gas for delivery to HIOS and various other downstream pipelines.

Manta Ray: The Manta Ray Offshore Gathering System gathers natural gas from producing fields located in the Green Canyon, Southern Green Canyon, Ship Shoal, South Timbalier and Ewing Bank areas of the Gulf of Mexico for delivery to numerous downstream pipelines, including the Nautilus System. This system includes three pipeline junction platforms.

Nautilus: The Nautilus System connects the Anaconda Gathering system and Manta Ray Offshore Gathering System to the Neptune natural gas processing plant located in south Louisiana.

Offshore Hub Platforms

Offshore Hub platforms are typically used to interconnect the offshore pipeline network; provide an efficient means to perform pipeline maintenance; locate compression, separation and production handling equipment and similar assets; and conduct drilling operations during the initial development phase of a crude oil and natural gas property. The results of operations from offshore platform services are primarily dependent upon the level of commodity charges and/or demand-type fees billable to customers. Revenue from commodity charges is based on a fee per unit of volume delivered to the platform (typically per MMcf of natural gas or per barrel of crude oil) multiplied by the total volume of each product delivered. Demand-type fees are similar to firm capacity reservation agreements for a pipeline in that they are charged to a customer regardless of the volume the customer actually delivers to the platform. Contracts for platform services often include both demand-type fees and commodity charges, but demand-type fees generally expire after a contractually fixed period of time and in some instances may be subject to cancellation by customers.

Marco Polo: The Marco Polo platform, which is located in Green Canyon Block 608, processes crude oil and natural gas from production fields located in the South Green Canyon area of the Gulf of Mexico.

East Cameron: The East Cameron 373 platform has the ability to process production from the Garden Banks and East Cameron areas of the Gulf of Mexico.

Customers

Usually, the company’s offshore crude oil pipeline customers enter into buy-sell or other transportation arrangements, pursuant to which the pipeline acquires possession (and, sometimes, title) from its customer of the relevant production at a specified location (often a producer’s platform or at another interconnection) and redelivers possession (and title, if applicable) to such customer of an equivalent volume at one or more specified downstream locations (such as a refinery or an interconnection with another pipeline). Most of the production handled by the company’s offshore pipelines is pursuant to life-of-lease commitments that include both firm and interruptible capacity arrangements.

Sodium Minerals and Sulfur Services

Sodium Minerals and Sulfur Services segment consists of the company’s Alkali Business and its sulfur removal business as discussed in further detail below.

Alkali Business

The company’s Alkali Business is one of the leading producers of natural soda ash worldwide. The company provides its soda ash to a variety of industries such as flat glass, container glass, detergent, solar panel and lithium producers and chemical manufacturing. Soda ash, also known by its chemical name sodium carbonate (Na2CO3), is a highly valued raw material in the manufacture of glass due to its properties of lowering the melting point of silica in the batch. Soda ash is also valued by detergent manufacturers for its absorptive and water softening properties. The company produces its products from trona, which it mines at two sites in the Green River Basin in Wyoming. The vast majority of the world’s accessible trona reserves are located in the Green River Basin. According to historical production statistics, approximately 30% of global soda ash is produced from trona or similar sodium carbonate containing materials, with the remainder being produced synthetically, which requires chemical transformation of limestone and salt using a significantly higher amount of energy. Production of soda ash from trona is significantly less expensive than producing it synthetically. In addition, life-cycle analyses reveal that production from trona consumes less energy and produces less carbon dioxide and fewer undesirable by-products than synthetic production.

The company’s Alkali Business includes the following:

Dry mining of trona ore underground at the company’s Westvaco facility;

Secondary recovery of trona from previously dry mined areas underground at the company’s Westvaco and Granger facilities through brine (solution) mining;

Processing of raw trona ore into soda ash and specialty sodium alkali products; and

Marketing, sale and distribution of alkali products.

During 2022, the company’s Alkali Business had the ability to produce approximately 3.5 million tons of soda ash and downstream specialty products. The company is expecting its production capacity to increase as it restarted its original Granger production facility and its roughly 500,000 tons of annual production on January 1, 2023 in advance of the completion of the Granger Optimization Project, which represents an additional 750,000 tons of annual production, and is expected to have first production in the second half of 2023. All mining and processing activities related to the company’s products take place in its facilities located in the Green River Basin.

Dry Mining of Trona Ore

Trona is dry mined underground at the company’s Westvaco facility primarily through the operation of its single longwall mining machine. Longwall mining provides higher recovery rates leading to extended mine life compared to other dry mining techniques.

Secondary Recovery Brine (Solution) Mining

The company brines (solution) mine trona at both its Westvaco and Granger sites using secondary recovery techniques. The company’s secondary recovery mining starts with the recovery of water streams from its operations and non-trona solids (insolubles) remaining from the processing of dry mined trona. The water and some insolubles are injected through a number of wells into the old dry mine workings at both the company’s Westvaco and Granger sites. The insolubles settle out while the water travels through the old workings, dissolving trona that remained during previous dry mining. Multiple pumping systems are used to pump the enriched brine to the surface for processing.

Processing of Trona into Finished Alkali Products

The company’s Sesqui and Mono plants, located at its Westvaco site, convert dry-mined trona into soda ash. Crushing, dissolution in water, filtration, and crystallization techniques are used to produce the desired final products. In the Mono plant process, the ore is calcined with heat, prior to dissolution, to convert the trona to soda ash by the removal of water and carbon dioxide. A final drying step using steam produces a dense soda ash product from the Mono process. In its Sesqui plant, the calcination is performed at the end of the process, producing a light density soda ash that is preferred in applications desiring increased absorptivity. The Sesqui process also has the ability to produce refined sodium sesquicarbonate (which it sells under the names S-Carb and Sesqui) for use as a buffer in animal feed formulations and in cleaning and personal care applications.

Brine (solution) mined trona is converted into dense soda ash in the company’s ELDM operation at the Westvaco site and at its Granger facility. The steps to produce soda ash are similar to the dry mined processes, except the crushing and dissolving steps are eliminated because the trona is already in a water solution as it leaves the mine.

Intermediate, semi-processed products are extracted from the company’s soda ash processes at Westvaco at strategic locations for use as feedstocks for production of sodium bicarbonate and 50% caustic soda (NaOH).

Marketing, Sale and Distribution of Alkali Products

The company sells is alkali products to customers directly in the U.S., Canada, the European Community, the European Free Trade Area and the South African Customs Union. The company sells through ANSAC exclusively in all other markets. During 2022, ANSAC operated as a nonprofit foreign sales association to promote export sales of U.S. produced soda ash. On January 1, 2023, ANSAC became a wholly owned subsidiary of Genesis Alkali Wyoming, L.P. and the company will continue utilizing its logistical assets and marketing function as an export vehicle for its Alkali Business.

All of the company’s alkali products are shipped by rail and truck from its facilities in the Green River Basin. The company operates a fleet of approximately 3,300 covered hopper cars which it uses to deliver over 90% of the sales of alkali products from the Green River facilities, all of which are shipped via a single rail line owned and operated by Union Pacific Railroad. The company leases these railcars from banks and leasing companies and from FMC Corporation under agreements with varying term-lengths.

The company sells most of its Alkali products as soda ash. Soda ash is the only product it sells to ANSAC. Soda ash is highly valued by manufacturers of flat and container glass because it lowers the temperature of the batch in a glass furnace. It is also valued by detergent manufacturers for its absorptive qualities. Soda ash is also a critical component in the manufacturing of batteries for electric vehicles, as well as storage batteries for renewable energy.

In addition, the company markets sodium bicarbonate to private label manufacturers who package it for sale to retail grocery customers as baking soda. The company also sells sodium bicarbonate to manufacturers of packaged baked goods and similar products. Animal feed is an important market for sodium bicarbonate, which is mixed with feed to increase the yield of dairy cows and improve the health of poultry and other livestock. Sodium bicarbonate is also sold to customers who use it in hemodialysis applications and as an active ingredient in pharmaceutical products.

Sulfur Removal Business

The company’s sulfur services business primarily provides sulfur-extraction services to eleven refining and petrochemical processing facilities located mostly in Texas, Louisiana, Arkansas, Oklahoma, Montana and Utah; operates significant storage and transportation assets in relation to those services; and sells NaHS and caustic soda to large industrial and commercial companies. The company’s sulfur removal services primarily involve processing refiners’ high sulfur (or sour) gas streams that the refineries have generated from crude oil processing operations. The company’s process applies its proprietary technology, which uses large quantities of caustic soda (the primary raw material used in its process) to act as a scrubbing agent under prescribed temperature and pressure to remove sulfur. Sulfur removal in a refinery is a key factor in optimizing production of refined products, such as gasoline, diesel and aviation fuel. The company’s sulfur removal technology returns a clean (sulfur-free) hydrocarbon stream to the refinery for further processing into refined products, and simultaneously produces NaHS. The resultant NaHS constitutes the sole consideration the company receives for its sulfur removal services. A majority of the NaHS the company receives is sourced from refineries owned and operated by large companies, including Phillips 66, CITGO, HollyFrontier, Calumet and Ergon. The company’s eleven sulfur removal services contracts have an average remaining term of approximately four years. The timing upon which these contracts renew vary based upon location and terms specified within each specific contract.

The company’s sodium minerals and sulfur services footprint includes NaHS and caustic soda terminals in the Gulf Coast, the Midwest, Montana, Utah, British Columbia and South America. In conjunction with its onshore facilities and transportation segment, the company sells and delivers (via railcars, ships, barges and trucks) NaHS and caustic soda to approximately 140 customers. The company is the largest marketer of NaHS in North and South America. NaHS is used in the specialty chemicals business (plastic additives, dyes and personal care products), in the pulp and paper business, and in connection with mining operations (separating copper from molybdenum and in the mining of nickel and gold), as well as bauxite refining (aluminum). NaHS has also gained acceptance in environmental applications, including waste treatment programs requiring stabilization and reduction of heavy and toxic metals and flue gas scrubbing. Additionally, NaHS can be used for removing hair from hides at the beginning of the tannery process.

Caustic soda is used in many of the same industries as NaHS. Many applications require both chemicals for use in the same process. For example, caustic soda can increase the yields in bauxite refining, pulp manufacturing and in the recovery of copper, gold and nickel. Caustic soda is also used as a cleaning agent (when combined with water and heated) for process equipment and storage tanks at refineries.

Customers

The company’s natural soda ash is sold to a diverse customer base in the U.S., Canada, the European Community, the European Free Trade Area and the South African Customs Union. The company’s Alkali Business sells exclusively through ANSAC in all other markets. During 2022, the company and Tata Chemicals were the two members of ANSAC. Tata Chemicals withdrew from ANSAC as of the end of 2022 and the company became the sole member of ANSAC beginning on January 1, 2023. ANSAC is the company’s Alkali Business’ largest customer. Sales to ANSAC during 2022 represented approximately 34% of total sales in the sodium minerals and sulfur services segment. Soda ash sold to ANSAC is later resold to other customers worldwide.

The company provides on-site sulfur removal services utilizing NaHS units at eleven refining and petrochemical processing facilities locations. Even though some of the company’s customers have elected to own the sulfur removal facilities located at their refineries, it operates those facilities. The company markets all of its NaHS, as well as small amounts of NaHS for a handful of third parties.

The company sells its NaHS to customers in a variety of industries, with the largest customers involved in mining of base metals, primarily copper and molybdenum, and the production of pulp and paper. The company sells to customers in the copper mining industry in the western U.S., Canada and Mexico. The company also exports NaHS to South America for sale to customers for mining in Peru and Chile. Many of the industries that the company’s NaHS customers are in (such as copper mining and the pulp and paper industry) participate in global markets for their products. As a result, this creates an indirect exposure for NaHS to global demand for the end products of the company’s customers. Provisions in the company’s service contracts with refiners allow it to adjust its sour gas processing rates (sulfur removal) to maintain a balance between NaHS supply and demand.

The company sells caustic soda to many of the same customers who purchase NaHS from it, including pulp and paper manufacturers and customers in the copper mining industry. The company also supplies caustic soda to some of the refineries in which it operates for use in cleaning processing equipment.

Apart from ANSAC, the company’s largest Alkali customer, its sodium minerals and sulfur services segment is not dependent on any single or small group of customers.

Competition - Alkali Business

In North America, primary competition is from other U.S.-based natural soda ash operations such as Solvay Chemicals, Sisecam Resources LP, and Tata Chemicals Soda Ash Partners in Wyoming, and Searles Valley Minerals in California. The company’s Alkali Business’ specialty Alkali products also experience significant competition from producers of sodium bicarbonate, such as Church & Dwight Co., Solvay Chemicals and Natural Soda LLC.

Onshore Facilities and Transportation

The company provides onshore facilities and transportation services to Gulf Coast crude oil refineries and producers through a combination of purchasing, transporting, storing, blending and marketing of crude oil and refined products (primarily fuel oil, asphalt, and other heavy refined products). In connection with these services, the company utilizes its increasingly integrated portfolio of logistical assets consisting of pipelines, trucks, terminals and barges. The integrated nature of the company’s onshore facilities and transportation assets is particularly evident in areas, such as Louisiana and Texas. The company’s crude oil related services include gathering crude oil from producers at the wellhead, transporting crude oil by gathering line, truck and barge to pipeline injection points, transporting crude oil for its gathering and marketing operations and for other shippers on its pipelines and marketing crude oil to refiners. Not unlike its crude oil operations, the company also gathers refined products from refineries, transport refined products via pipeline, truck, railcar and barge, and sell refined products to customers in wholesale markets. For certain of these services, the company generates fee-based income related to the transportation services provided.

The company’s crude oil onshore facilities and transportation operations are concentrated in Texas, Louisiana, Alabama, Florida and Mississippi. These operations help to ensure (among other things) a base supply source for the company’s crude oil pipeline systems, refinery customers and other shippers while providing its producer customers with a market outlet for their production. By utilizing its network of pipelines, trucks, railcars, barges, and terminals, the company is able to provide transportation related services to, and in many cases back-to-back gathering and marketing arrangements with, crude oil refiners and producers. Additionally, the company’s crude oil and petroleum product gathering and marketing expertise and knowledge base provide it with an ability to capitalize on opportunities that arise from time to time in its market areas. The company gathers and markets approximately 24,000 Bbls/day (as of December 31, 2022) of crude oil and petroleum products, most of which is produced from large resource basins throughout Texas and the Gulf Coast. The company’s crude oil pipelines transport many of these barrels, as well as barrels for third party producers and refiners to which it charges fees for its transportation services. Given its network of terminals, the company also has the ability to store crude oil during periods of contango (crude oil prices for future deliveries are higher than for current deliveries) for delivery in future months.

Onshore Crude Oil Pipelines

Through the onshore pipeline systems and related assets the company owns and operates, transports crude oil for its gathering and marketing operations and for other shippers pursuant to tariff rates regulated by FERC or the Railroad Commission of Texas (TXRRC). Accordingly, the company offers transportation services to any shipper of crude oil, if the products tendered for transportation satisfy the conditions and specifications contained in the applicable tariff. Pipeline revenues are a function of the level of throughput and the particular point where the crude oil is injected into the pipeline and the delivery point. The company also may earn revenue from pipeline loss allowance volumes. In exchange for bearing the risk of pipeline volumetric losses, it deducts volumetric pipeline loss allowances and crude oil quality deductions. Such allowances and deductions are offset by measurement gains and losses. When its actual volume losses are less than the related allowances and deductions, the company recognizes the difference as income and inventory available for sale valued at the market price for the crude oil.

The company owns and operates four onshore common carrier crude oil pipeline systems: the Texas System, the Jay System, the Mississippi System, and the Louisiana System.

Texas System: The company’s Texas System takes delivery of crude oil volumes at Texas City (which includes the capability of receiving various Gulf of Mexico pipeline volumes) for delivery to its Webster, Texas facility, which ultimately connects to other crude oil pipelines. The company’s Texas System also transports crude oil from Hastings Junction (south of Houston) to several delivery points near Houston, Texas (including its Webster, Texas facility). The company earns a tariff for its transportation services, with the tariff rate per barrel of crude oil varying with the distance from injection point to delivery point.

Jay System: The company’s Jay System provides crude oil shippers access to refineries, pipelines and storage near Mobile, Alabama. That system also includes gathering connections, additional crude oil storage capacity of approximately 20,000 barrels in the field, an interconnect with the company’s Walnut Hill rail facility, a delivery connection to a refinery in Alabama and an interconnection to another common carrier pipeline that delivers crude oil into Mississippi.

Mississippi System: The company’s Mississippi System provides shippers of crude oil in Mississippi indirect access to refineries, pipelines, storage, terminals and other crude oil infrastructure located in the Midwest. That system is adjacent to several crude oil fields that are in various phases of being produced through tertiary recovery strategy, including carbon dioxide (CO2) injection and flooding. The company provides transportation services on its Mississippi pipeline through an incentive tariff, which provides that the average rate per barrel that it charges during any month decreases as its aggregate throughput for that month increases above specified thresholds.

Louisiana System: The company’s Louisiana System connects the Anchorage Tank Farm to its Port of Baton Rouge Terminal (which was built to service Exxon Mobil Corporation’s Baton Rouge refinery, which is one of the largest refinery complexes in North America, with more than 500,000 Bbls/day of refining capacity), allowing bidirectional flow of crude oil, intermediates and refined products between the Anchorage Tank Farm and this terminal via a dedicated crude oil pipeline and a dedicated intermediates pipeline. Total daily volume for the year ended December 31, 2022, included 28,850 and 53,459 Bbls/day of intermediate refined products and crude oil, respectively, associated with its Port of Baton Rouge Terminal pipelines. The company’s Louisiana system also transports crude oil from Port Hudson to its Baton Rouge Scenic Station rail unloading facility and continues downstream to the Anchorage Tank Farm. This pipeline system serves as a key asset in the company’s integrated Baton Rouge area midstream infrastructure.

Other Onshore Facilities and Transportation Operations

The company owns four operational crude oil rail unloading facilities located in Baton Rouge, Louisiana; Raceland, Louisiana; Walnut Hill, Florida; and Natchez, Mississippi which provide synergies to its existing asset footprint. The company generally earns a fee for unloading railcars at these facilities. Three of these facilities, the company’s Baton Rouge, Louisiana, Raceland, Louisiana, and Walnut Hill, Florida facilities are directly connected to the company’s existing integrated crude oil pipeline and terminal infrastructure.

Within its onshore facilities and transportation business segment, the company employs many types of logistically flexible assets. These assets include a suite of trucks, trailers, crude oil railcars, as well as terminals and other tankage with approximately 4.2 million barrels of leased and owned storage capacity in multiple locations along the Gulf Coast, accessible by pipeline, truck, rail or barge, in addition to tankage related to its crude oil pipelines, previously mentioned.

Customers

The company’s onshore facilities and transportation business encompasses numerous refiners and hundreds of producers, for which it provides transportation related services, as well as gather from and market to crude oil and refined products.

Marine Transportation

The company’s marine transportation segment consists of its inland marine fleet which transports intermediate refined petroleum products, including asphalt, principally serving refineries and storage terminals along the Gulf Coast, Intracoastal Canal and western river systems of the U.S., principally along the Mississippi River and its tributaries; its offshore marine fleet which transports crude oil and refined petroleum products, principally serving refineries and storage terminals along the Gulf Coast, Eastern Seaboard, Great Lakes and Caribbean; and its modern double-hulled, Jones Act qualified tanker M/T American Phoenix which is under charter serving a customer along the Gulf Coast and Eastern Seaboard. The below table operational information relating to its marine transportation fleet.

Customers

The company’s marine customers are primarily refiners and large energy companies. The company’s M/T American Phoenix is operating under a charter with a refining customer. The company is a provider of transportation services for its customers and, in almost all cases, do not assume ownership of the products it transports. Marine transportation services are conducted under term contracts, some of which have renewal options for customers with whom the company has traditionally had long-standing relationships, as well as spot contracts.

Regulation

The rates and the terms and conditions of service of the company’s interstate common carrier pipeline operations are subject to regulation by FERC (Federal Energy Regulatory Commission) under the Interstate Commerce Act (ICA). The company’s offshore pipelines, with the exception of its Eugene Island pipeline, are neither interstate nor common carrier pipelines. These pipelines are subject to federal regulation under the Outer Continental Shelf Lands Act, which requires all pipelines operating on or across the outer continental shelf to provide nondiscriminatory transportation service. The company’s intrastate common carrier pipeline operations in Texas are subject to regulation by the Railroad Commission of Texas.

All of the company’s barges are inspected by the U.S. Coast Guard (USCG) and carry certificates of inspection. All of its towboats and tugboats are certificated by the USCG. Most of its vessels are built to American Bureau of Shipping (ABS), classification standards and in some instances are inspected periodically by ABS to maintain the vessels in class standards. The crews the company employs aboard vessels, including captains, pilots, engineers, tankermen and ordinary seamen, are documented by the USCG.

The company is responsible for monitoring the ownership of its subsidiary that engages in maritime transportation and for taking any remedial action necessary to insure that no violation of the Jones Act ownership restrictions occurs. Its railcar operations are subject to the regulatory jurisdiction of the Federal Railroad Administration of the U.S. Department of Transportation (DOT), the Occupational Safety and Health Administration (OSHA), as well as other federal and state regulatory agencies.

The company has the right to mine trona through leases it holds from the U.S. Federal government, the state of Wyoming and Occidental Petroleum Corporation (Occidental). Its leases with the U.S. government are issued under the provisions of the Mineral Leasing Act of 1920 (30 U.S.C. 18 et. Seq.) and are administered by the U.S. Bureau of Land Management (BLM) and its leases with the state of Wyoming are issued under Wyoming Statutes 36-6-101 et. seq.

The company’s mining operations in Wyoming are subject to mine permits issued by the Land Quality Division of the Wyoming Department of Environmental Quality (WDEQ). WDEQ imposes detailed reclamation obligations on the company as a holder of mine permits.

The safety of the company’s operations at Westvaco are regulated by the U.S. Mine Safety and Health Administration (MSHA) and its Granger facility by the Wyoming Occupational Safety and Health Administration (Wyoming OSHA). MSHA administers the provisions of the Federal Mine Safety and Health Act of 1977 and enforces compliance with that statute’s mandatory safety and health standards. As part of MSHA’s oversight, representatives perform at least four unannounced inspections (approximately once quarterly) each year at Westvaco. Wyoming OSHA regulates the health and safety of non-mining operations under a plan approved by the U.S. Occupational Health and Safety Administration. When the company’s Granger facility was restarted in 2009 on solution mine feed (i.e., without any miners working underground), Wyoming OSHA assumed responsibility for the facility.

The company also complies with worldwide, voluntary standards developed by the International Organization for Standardization (ISO), a nongovernmental organization that promotes the development of standards and serves as a bridging organization for quality standards, such as ISO 9001:2015 for quality management and ISO 22000 for food safety management.

Several of the production operations in the company’s Alkali Business are subject to regulation by the U.S. Food and Drug Administration (FDA). Its sodium bicarbonate plant is a registered facility for the production of food and pharmaceutical grade ingredients and the company complies with strict Current Good Manufacturing Practice (CGMP) requirements in its operations. The U.S. Food Safety Modernization Act requires that parts of its facility that produce animal nutrition products comply with new more rigorous manufacturing standards. The company also complies with industry standards developed by various private organizations, such as the U.S. Pharmacopeia, Organic Materials Review Institute, and the Orthodox Union. Alkali has also sought and received certification of its Wyoming facilities under ISO.9001:2015.

The company’s crude oil pipelines are subject to construction, installation, operation and safety regulation by the U.S. Department of Transportation (DOT); and various other federal, state and local agencies. The company is subject to the Pipeline and Hazardous Materials Safety Administration (PHMSA) Integrity Management (IM), regulations, which require that it performs baseline assessments of all pipelines that could affect a High Consequence Area (HCA), including certain populated areas and environmentally sensitive areas.

The company has developed a Risk Management Plan required by the Environmental Protection Agency (EPA) as part of its Integrity Management Plan (IMP). Its crude oil, refined products and Sodium Minerals and Sulfur Services operations are also subject to the requirements of OSHA and comparable state statutes. Various other federal and state regulations require that the company trains all operations employees in Hazardous Communication (HAZCOM) and disclose information about the hazardous materials used in its operations.

As a motor carrier, the company is subject to certain safety regulations issued by the DOT. The company is also subject to OSHA with respect to its trucking operations. The USCG regulates occupational health standards related to its marine operations.

History

Genesis Energy, L.P. was founded in Delaware in 1996. The company was incorporated in 1996.