NuStar Energy L.P. Stock

NuStar Energy L.P. (NuStar Energy) primarily engaged in the transportation, terminalling and storage of petroleum products and renewable fuels; and the transportation of anhydrous ammonia. The company also markets petroleum products.

As of December 31, 2022, the company’s assets included 9,465 miles of pipeline and 63 terminal and storage facilities, which provide approximately 49 million barrels of storage capacity. The company conducts its operations through its wholly owned subsidiaries, primarily NuStar Logistics, L.P. (NuStar Logistics) and NuStar Pipeline Operating Partnership L.P. (NuPOP).

The company generates revenue primarily from tariffs for transportation through the company’s pipelines; fees for the use of the company’s terminal and storage facilities and related ancillary services; and sales of petroleum products.

Segments

The company divides its operations into the following three reportable business segments: Pipeline, Storage and Fuels Marketing.

Pipeline segment

As of December 31, 2022, the company’s pipeline operations consisted of the transportation of refined products, crude oil and anhydrous ammonia, including:

Refined product pipelines with an aggregate length of 2,920 miles and crude oil pipelines with an aggregate length of 2,050 miles in Texas, Oklahoma, Colorado and New Mexico (collectively, the Central West System);

A 2,045-mile refined product pipeline originating in southern Kansas and terminating at Jamestown, North Dakota, with a western extension to North Platte, Nebraska and an eastern extension into Iowa (the East Pipeline);

A 450-mile refined product pipeline originating at Marathon Petroleum Corporation’s (Marathon) Mandan, North Dakota refinery and terminating in Minneapolis, Minnesota (the North Pipeline); and

A 2,000-mile anhydrous ammonia pipeline originating in the Louisiana delta area and then running north through the Midwestern United States to Missouri before forking east and west to terminate in Indiana and Nebraska (the Ammonia Pipeline).

Description of Pipelines

Central West System

The Central West System covers a total of 4,970 miles, including refined product and crude oil pipelines. The refined product pipelines have an aggregate length of 2,920 miles (Central West Refined Products Pipelines) and transport gasoline, distillates (including diesel and jet fuel), renewable fuels, natural gas liquids and other products produced at the refineries to which they are connected, including Valero Energy Corporation’s (Valero Energy) McKee, Corpus Christi and Three Rivers refineries.

The crude oil pipelines have an aggregate length of 2,050 miles (Central West Crude Oil Pipelines) and transport crude oil and other feedstocks to the refineries to which they are connected, including Valero Energy’s McKee, Three Rivers and Ardmore refineries, or from the Permian Basin and Eagle Ford Shale regions to the company’s North Beach marine export terminal or to third-party refineries in Corpus Christi, Texas. The company’s Corpus Christi Crude Pipeline System is consisted of pipelines that transport crude oil from the Eagle Ford region to Corpus Christi, Texas, including eight terminals along those pipelines, with aggregate storage capacity of 2.2 million barrels. In addition, the Corpus Christi Crude Pipeline System is connected to third-party long-haul pipelines that transport crude oil from the Permian Basin region to Corpus Christi, Texas.

The company’s Permian Crude System consists of crude oil transportation, pipeline connection and storage assets located in the Midland Basin of West Texas, that aggregate receipts from wellhead connection lines into intra-basin trunk lines for delivery to regional hubs and to connections with third-party mainline takeaway pipelines. The system consists of 1,005 miles of pipelines and covers approximately 500,000 dedicated acres controlled by producers, with approximately 345 receipt points. The Permian Crude System also includes three terminals in Texas, at Big Spring, Stanton and Colorado City, as well as several truck stations and other operational storage facilities, with an aggregate storage capacity of 1.6 million barrels.

Central East System

The Central East System covers a total of 4,495 miles and consists of the East Pipeline, the North Pipeline and the Ammonia Pipeline.

The East Pipeline covers 2,045 miles and transports refined products and natural gas liquids north via pipelines to the company’s terminals and third-party terminals along the system and to receiving pipeline connections in Kansas. Shippers on the East Pipeline mainly obtain refined products from refineries in Kansas, Oklahoma and Texas. The East Pipeline includes 18 terminals, with aggregate storage capacity of 4.5 million barrels and two tank farms with aggregate storage capacity of 1.4 million barrels at McPherson and El Dorado, Kansas.

The North Pipeline originates at Marathon’s Mandan, North Dakota refinery and runs from west-to-east for approximately 450 miles to its termination in Minneapolis, Minnesota. The North Pipeline includes four terminals with aggregate storage capacity of 1.5 million barrels.

The 2,000-mile Ammonia Pipeline originates in the Louisiana delta area, where it connects to three third-party marine terminals and three anhydrous ammonia plants located along the Mississippi River. The line then runs north through Louisiana and Arkansas into Missouri, where, at Hermann, Missouri, it splits into two branches, one of which goes east into Illinois and Indiana, while the other branch continues north into Iowa and then turns west into Nebraska. The Ammonia Pipeline is connected to multiple third-party-owned terminals, which include industrial facility delivery locations. Product is supplied to the pipeline from anhydrous ammonia plants in Louisiana and imported product delivered through the marine terminals. Anhydrous ammonia is primarily used as agricultural fertilizer. It is also used as a feedstock to produce other nitrogen derivative fertilizers and explosives.

Pipeline Operations

The company charges tariffs on a per-barrel basis for transporting refined products, crude oil and other feedstocks in the company’s refined product and crude oil pipelines and on a per-ton basis for transporting anhydrous ammonia in the Ammonia Pipeline.

Shippers on the company’s crude oil and refined product pipelines deliver petroleum products to the company’s pipelines for transport to/from: refineries that connect to the company’s pipelines, third-party pipelines or terminals, and the company’s terminals for further delivery via marine vessels, pipelines or trucks. The company charges its shippers tariff rates based on transportation from the origination point on the pipeline to the point of delivery.

The company’s pipelines are regulated by one or more of the following federal governmental agencies: the Federal Energy Regulatory Commission (the FERC), the Surface Transportation Board (the STB), the Department of Transportation (the DOT), the Environmental Protection Agency (the EPA) and the Department of Homeland Security. In addition, the company’s pipelines are subject to the respective jurisdictions of the states those lines traverse.

The company operates its pipelines remotely through an operational technology system called the Supervisory Control and Data Acquisition, or SCADA, system.

Demand for and Sources of Refined Products and Crude Oil

Throughput activity on the company’s Central West Refined Product Pipelines and the East and North pipelines depends on the level of demand for refined products and other products in the markets served by those pipelines, as well as the ability and willingness of the refiners and marketers with access to the pipelines to supply that demand through the company’s pipelines.

The majority of the refined products delivered through the Central West Refined Product Pipelines and the North Pipeline are gasoline and diesel fuel that originate at refineries connected to the company’s pipelines.

Much of the refined products and natural gas liquids delivered through the East Pipeline, and a portion of volumes on the North Pipeline, are ultimately used as fuel for railroads, ethanol denaturant or in agricultural operations, including fuel for farm equipment, irrigation systems, trucks used for transporting crops and crop-drying facilities.

The company’s refined product pipelines are also dependent upon adequate levels of production of refined products by refineries connected to the pipelines, directly or through connecting pipelines. Certain of the company’s Central West Refined Products Pipelines are connected directly to Valero Energy refineries and are subject to long-term throughput agreements with Valero Energy.

The North Pipeline is heavily dependent on Marathon’s Mandan, North Dakota refinery, which primarily runs regionally-sourced crude oil (although it has the ability to process other crude oils), and an interruption in operations at the Marathon refinery could have a material adverse effect on the company’s operations. In addition, the North Pipeline receives refined products from the Laurel, Montana refinery operated by CHS Inc. The majority of the refined products transported through the East Pipeline are produced at three refineries located at McPherson and El Dorado, Kansas and Ponca City, Oklahoma, which are operated by CHS Inc., HollyFrontier Corporation and Phillips 66, respectively. The East Pipeline also has access to Gulf Coast supplies of products through third-party connecting pipelines that receive products originating from Gulf Coast refineries.

In addition, certain of the company’s crude oil pipelines, including the McKee System, are the primary source of crude oil for the company’s customers’ refineries.

Demand for and Sources of Anhydrous Ammonia

The company’s Ammonia Pipeline is the only major pipeline in the United States transporting anhydrous ammonia into the nation’s corn belt. The pipeline is connected to domestic production facilities and also has the capability to receive products from outside the United States directly into the system.

Customers

The company’s customers include integrated oil companies, refining companies and others.

Storage segment

The company’s Storage segment is consisted of its facilities that provide storage, handling and other services for refined products, crude oil, specialty chemicals, renewable fuels and other liquids. As of December 31, 2022, the company owned and operated 29 terminal and storage facilities in the United States and one terminal in Nuevo Laredo, Mexico, with an aggregate storage capacity of 36.4 million barrels.

Description of Terminal and Storage Facilities

Central West Terminals

The company’s Central West Terminals include terminals located in Texas, Oklahoma, New Mexico and Colorado, as well as one terminal located in Nuevo Laredo, Mexico, with an aggregate storage capacity of 8.5 million barrels. Most of these terminals are connected to the company’s Central West Refined Product Pipelines. The company’s Corpus Christi North Beach terminal, located at the Port of Corpus Christi in Texas, has 4.0 million barrels of crude oil storage and supports the company’s Corpus Christi Crude Pipeline System that transports crude oil from the Eagle Ford and Permian Basin regions to Corpus Christi for export or refineries owned by third parties. This facility also provides the company’s customers with the flexibility to segregate and deliver crude oil and processed condensate and has access to four docks, including two private docks. The company can accommodate Suezmax-class vessels and load crude oil onto marine vessels simultaneously on all four docks.

The company refers to its pipelines that transport crude oil from the Eagle Ford and Permian Basin regions to Corpus Christi, together with the company’s Corpus Christi North Beach terminal, as the Corpus Christi Crude System.

Gulf Coast Terminals

The company’s Gulf Coast Terminals have an aggregate storage capacity of 10.0 million barrels and include the company’s St. James terminal, which is located on the Mississippi River near St. James, Louisiana, and one terminal located in Houston, Texas. The company’s St. James terminal has a total storage capacity of 9.9 million barrels and is located on almost 900 acres of land, some of which is undeveloped. The majority of the storage tanks and infrastructure are suited for light to medium crude oil, with certain tanks capable of fuel oil or heated crude oil storage. Additionally, the facility has one barge dock and two ship docks, and can accommodate exports up to Aframax-class vessels. The company’s St. James terminal is connected to offshore pipelines in the Gulf of Mexico; long-haul pipelines that can receive crude oil from the Eagle Ford, Permian Basin, other domestic shale plays and Canada; and pipelines connecting to refineries in the Gulf Coast. The St. James terminal also has two unit train rail facilities that are served by the Union Pacific Railroad. Each facility has the capacity to simultaneously off-load 120 railcars, at a minimum, in a 24-hour period.

West Coast Terminals

The company’s West Coast Terminals include terminals located in California, Oregon and Washington, with an aggregate storage capacity of 7.0 million barrels. The largest of these terminals is the company’s Selby, California terminal, with a total storage capacity of 2.7 million barrels. The company has completed several renewable fuel storage projects at the company’s West Coast Terminals over the last several years; and is able to receive and distribute renewable fuels across the West Coast, including renewable diesel, sustainable aviation fuel, ethanol, biodiesel and renewable feedstock. The company’s West Coast Terminals are connected to supply from various domestic and foreign sources.

Refinery Storage Tanks

The company owns crude oil storage tanks with an aggregate storage capacity of 10.9 million barrels that are physically integrated with and serve refineries owned by Valero Energy at Corpus Christi and Texas City, Texas and Benicia, California. The company leases its refinery storage tanks to Valero Energy in exchange for a fixed fee.

Storage Operations

The company generates Storage segment revenues through fees for tank storage agreements, under which a customer agrees to pay for a certain amount of storage in a tank over a period of time (storage terminal revenues), and throughput agreements, under which a customer pays a fee per barrel for volumes moved through the company’s terminals (throughput terminal revenues). The company’s terminals also provide blending, additive injections, handling and filtering services for which the company charge additional fees.

Demand for Storage Services

The operations of the company’s refined product terminals depend in large part on the level of demand for products stored in the company’s terminals in the markets served by those assets. The company’s storage terminal revenues are somewhat insulated from demand volatility due to contracted rates for storage and minimum volume commitments.

Crude oil delivered to the company’s St. James and Corpus Christi North Beach terminals will generally increase or decrease with crude oil production rates in western Canada and the Bakken, Permian and Eagle Ford shale plays.

Customers

The company provides storage and terminalling services for crude oil, refined products and other products to many of the world’s largest producers of crude oil, integrated oil companies, chemical companies, oil traders and refiners.

Fuels Marketing segment

The Fuels Marketing segment mainly includes the company’s bunkering operations in the Gulf Coast, as well as certain of the company’s blending operations associated with the company’s Central East System.

Rate Regulation

Several of the company’s crude oil and refined products pipelines are interstate common carrier pipelines, which are subject to regulation by the FERC under the Interstate Commerce Act (ICA) and the Energy Policy Act of 1992 (the EP Act).

The company’s ammonia pipeline is subject to regulation by the STB pursuant to the ICA applicable to such pipelines (which differs from the ICA applicable to interstate liquids pipelines).

Environmental, Health, Safety and Security Regulation

The company is subject to the Occupational Safety and Health Act, as amended, and analogous or more stringent international, state and local laws and regulations for the protection of worker safety and health. In addition, the company has operations subject to the Occupational Safety and Health Administration’s Process Safety Management regulations. These regulations apply to processes that involve certain chemicals at or above specified thresholds.

The company’s pipeline, storage tank and other operations are subject to extensive international, federal, state and local laws and regulations governing integrity, safety and security, including those in Title 49 of the U.S. Code and its implementing regulations. These laws and regulations include the Pipeline and Hazardous Materials Safety Administration’s requirements for safe pipeline design, construction, operation, maintenance, inspection, testing and corrosion control, control rooms and qualification programs for operating personnel. In addition, the company has marine terminal operations subject to Coast Guard safety, integrity and security regulations and standards. The company also has operations subject to the Department of Homeland Security Chemical Facility Anti-Terrorism Standards and security guidelines and directives issued by the Transportation Security Administration.

History

The company, a Delaware limited partnership, was founded in 1999. It was incorporated in 1999. The company was formerly known as Valero L.P. and changed its name to NuStar Energy L.P. in 2007.