Western Refining Logistics, LP - FORM 10-K

Attached files

file	filename
EX-32.2 - EXHIBIT 32.2 - Western Refining Logistics, LP	wnrl-ex322.htm
EX-32.1 - EXHIBIT 32.1 - Western Refining Logistics, LP	wnrl-ex321.htm
EX-31.2 - EXHIBIT 31.2 - Western Refining Logistics, LP	wnrl-ex312.htm
EX-31.1 - EXHIBIT 31.1 - Western Refining Logistics, LP	wnrl-ex311.htm
EX-23.1 - EXHIBIT 23.1 - Western Refining Logistics, LP	wnrl-ex231consentofindepen.htm
EX-21.1 - EXHIBIT 21.1 - Western Refining Logistics, LP	wnrl-ex211.htm
EX-12.1 - EXHIBIT 12.1 - Western Refining Logistics, LP	wnrl-ex121ratioofearningst.htm

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K



þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the fiscal year ended December 31, 2016



o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the transition period from _____ to _____

Commission File Number: 001-36114

WESTERN REFINING LOGISTICS, LP

(Exact name of registrant as specified in its charter)



Delaware		46-3205923
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

212 N. Clark Dr.		79905
El Paso, Texas		(Zip Code)
(Address of principal executive offices)

Registrant’s telephone number, including area code: (915) 775-3300

Securities registered pursuant to Section 12(b) of the Act:



Title of Each Class		Name of Each Exchange on Which Registered
Common Units Representing Limited Partner Interests		New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer o	Accelerated filer þ	Non-accelerated filer o	Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant computed based on the New York Stock Exchange closing price on June 30, 2016 (the last business day of the registrant’s most recently completed second fiscal quarter) was $503,069,908.

As of February 24, 2017, there were 38,074,324 common units and 22,811,000 subordinated units outstanding.

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WESTERN REFINING LOGISTICS, LP

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	PART I
Item 1.	Business	3
Item 1A.	Risk Factors	16
Item 1B.	Unresolved Staff Comments	42
Item 2.	Properties	42
Item 3.	Legal Proceedings	43
Item 4.	Mine Safety Disclosures	43

	PART II
Item 5.	Market for Registrant's Common Equity, Related Unitholder Matters and Issuer Purchases of Equity Securities	44
Item 6.	Selected Financial Data	47
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	50
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	63
Item 8.	Financial Statements and Supplementary Data	65
Item 9.	Changes In and Disagreements with Accountants on Accounting and Financial Disclosure	101
Item 9A.	Controls and Procedures	101
Item 9B.	Other Information	101

	PART III
Item 10.	Directors, Executive Officers and Corporate Governance	102
Item 11.	Executive Compensation	107
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Unitholder Matters	119
Item 13.	Certain Relationships and Related Transactions and Director Independence	120
Item 14.	Principal Accountant Fees and Services	125

	PART IV
Item 15.	Exhibits and Financial Statement Schedules	127
Item 16.	Form 10-K Summary	129
Signatures

EX-12.1
EX-21.1
EX-23.1
EX-31.1
EX-31.2
EX-32.1
EX-32.2
EX-101

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References in this report to “Western Refining Logistics, LP,” “WNRL,” and “we,” “our,” “us,” the “Partnership” or like terms used in context of periods on or after October 16, 2013, refer to Western Refining Logistics, LP and its subsidiaries.

EXPLANATORY NOTE

Western Refining Logistics, LP is a publicly-traded Delaware limited partnership that commenced operations on October 16, 2013 in connection with its initial public offering (the "Offering"). In conjunction with the Offering, Western Refining, Inc. ("Western") and certain of its subsidiaries contributed to us certain logistics assets that we currently operate.

On October 15, 2014, WNRL purchased all of the outstanding limited liability company interests of Western Refining Wholesale, LLC ("WRW") from Western (the "Wholesale Acquisition").

These transactions were between entities under common control. The financial position, results of operations and operating statistics of our accounting predecessor for the contributed Southwest logistics assets for periods prior to the Offering are contained herein. In addition, our accounting predecessor contains the financial position and results of operations of the TexNew Mex Pipeline System assets that were not contributed at the time of the Offering. We refer to the financial position, results of operations and operating statistics of these contributed and non-contributed assets, for periods prior to October 16, 2013 as the "WNRL Predecessor."

The information contained herein for the WNRL Predecessor and WNRL has been retrospectively adjusted to include the historical results of the WRW assets acquired for periods prior to the effective date of the Wholesale Acquisition. We refer to the collective entity of the WNRL Predecessor with the retrospective adjustment for the Wholesale Acquisition as our "Predecessor" for periods prior to October 16, 2013. The results of WNRL contain the retrospective adjustment for the Wholesale Acquisition, the TexNew Mex Pipeline Acquisition beginning October 16, 2013, the date WNRL commenced operations, and the St. Paul Park Logistics Transaction beginning November 12, 2013, the date on which St. Paul Park Logistics became subject to the common control of Western. Because the WNRL Predecessor has always contained the financial position and results of operations and operating statistics of the TexNew Mex Pipeline System, the retrospective adjustments related to the TexNew Mex Pipeline Acquisition are applied to WNRL only.

See Note 1, Organization and Basis of Presentation, and Note 3, Acquisitions, in the Notes to Consolidated Financial Statements included in this annual report for detailed information.

FORWARD-LOOKING STATEMENTS

Certain statements included throughout this Annual Report on Form 10-K and in particular under the sections entitled Item 1. Business, Item 3. Legal Proceedings and Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations relating to matters that are not historical fact are forward-looking statements that represent management’s beliefs and assumptions based on currently available information. These forward-looking statements relate to matters such as our industry including the regulation of our industry, the expected outcomes of legal proceedings involving us or Western, business strategies, future operations, acquisition opportunities, volatility of crude oil prices, gross margins, volumes, taxes, capital expenditures, liquidity and capital resources, sources of financing for acquisitions, maintenance and capital expenditures, distributions and other financial and operating information. Forward-looking statements give our current expectations, contain projections of results of operations or of financial condition or forecasts of future events. We have used the words “anticipate,” “assume,” “believe,” “budget,” “continue,” “could,” “estimate,” “expect,” “forecast,” “intend,” “may,” “plan,” “position,” “potential,” “predict,” “project,” “strategy,” “will,” “future” and similar terms and phrases to identify forward-looking statements in this report.

Forward-looking statements reflect our current expectations regarding future events, results or outcomes. These expectations may or may not be realized. Some of these expectations may be based upon assumptions or judgments that prove to be incorrect or that are affected by unknown risks or uncertainties. Consequently, no forward-looking statements can be guaranteed. In addition, our business and operations involve numerous risks and uncertainties, many that are beyond our control that could result in our expectations not being realized or otherwise materially affect our financial condition, results of operations and cash flows.

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When considering these forward-looking statements, you should keep in mind the risk factors and other cautionary statements in this Form 10-K. Actual events, results and outcomes may differ materially from our expectations due to a variety of factors. Although it is not possible to predict or identify all of these factors, they include, among others, the following:

•

changes in the business strategy or activity levels of Western that may be impacted by a variety of factors, including changes in crack spreads, changes in the spread between West Texas Intermediate ("WTI") crude oil and West Texas Sour ("WTS") crude oil, also known as the sweet/sour spread, changes in the spread between Western Canadian Select ("WCS") and WTI crude oil, changes in the spread between WTI crude oil and Dated Brent crude oil and between WTI Cushing crude oil and WTI Midland crude oil, Western's post-merger integration with Northern Tier Energy LP and Western's announced merger with Tesoro Corporation, a Delaware corporation (the "Tesoro Merger");


•	changes in general economic conditions, including the price volatility of crude oil;


•	competitive conditions in our industry;


•	actions taken by third-party operators, processors and transporters;


•	the demand for crude oil, refined and other products and transportation and storage services;


•	the supply of crude oil in the regions in which we and Western operate;


•	interest rates;


•	labor relations;


•	changes in the availability and cost of capital;


•	changes in tax status;


•	operating hazards, natural disasters, weather-related delays, casualty losses and other matters, including those that may result in a force majeure event under our commercial agreements with Western, that may be beyond our control;


•	the effects of existing and future laws and governmental regulations and the manner in which they are interpreted and implemented;


•	changes in insurance markets impacting costs and the level and types of coverage available;


•	disruptions due to equipment interruption or failure at our facilities, Western’s facilities or third-party facilities on which our business is dependent;


•	our ability to successfully implement our business plan;


•	the effects of future litigation;


•	the closing of the Tesoro Merger; and


•	other factors discussed in more detail under Part I. - Item 1A Risk Factors of this report that are incorporated herein by this reference.

Any one of these factors or a combination of these factors could materially affect our financial condition, results of operations or cash flows and could influence whether any forward-looking statements ultimately prove to be accurate. You are urged to consider these factors carefully in evaluating our forward-looking statements and are cautioned not to place undue reliance on these forward-looking statements.

Although we believe the forward-looking statements we make in this report related to our plans, intentions and expectations are reasonable, we can provide no assurance that such plans, intentions or expectations will be achieved. These statements are based on assumptions made by us based on our experience and perception of historical trends, current conditions, expected future developments and other factors that we believe are appropriate in the circumstances. Such statements are subject to a number of risks and uncertainties, many that are beyond our control. The forward-looking statements included herein are made only as of the date of this report and we are not required to (and will not) update any information to reflect events or circumstances that may occur after the date of this report, except as required by applicable law.

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PART I

Item 1. Business

Overview

WNRL is a Delaware master limited partnership that commenced operations in October 2013. Western Refining Logistics GP, LLC ("WRGP"), our general partner, holds all of the non-economic general partner interests in WNRL and is owned 100% by Western and Western's limited partner interest in WNRL was 52.6% at December 31, 2016. Our units trade on the New York Stock Exchange (“NYSE”) under the symbol “WNRL.”

WNRL is principally a fee-based, growth-oriented partnership that owns, operates, develops and acquires logistics and related assets and businesses to include terminals, storage tanks, pipelines and other logistics assets related to the terminalling, transportation, storage and distribution of crude oil and refined products. WNRL's assets and operations include 705 miles of pipelines, approximately 12.4 million barrels ("bbls") of active storage capacity, distribution of wholesale petroleum products and crude oil and asphalt trucking.

On November 16, 2016, Western entered into an Agreement and Plan of Merger (the “Tesoro Merger Agreement”) with Tesoro Corporation, a Delaware corporation (“Tesoro”), Tahoe Merger Sub 1, Inc., a Delaware corporation and wholly-owned subsidiary of Tesoro (“Merger Sub 1”), and Tahoe Merger Sub 2, LLC, a Delaware limited liability company and wholly owned subsidiary of Tesoro ("Merger Sub 2"), pursuant to which Merger Sub 1 will merge with and into Western (the “First Tesoro Merger,” and, if a second merger election as discussed below is not made, the “Tesoro Merger”), with Western surviving the First Tesoro Merger as a wholly-owned subsidiary of Tesoro. The Tesoro Merger Agreement permits either Western or Tesoro, for tax considerations, to require the surviving corporation of the First Tesoro Merger be merged with and into Merger Sub 2 immediately following the effective time of the First Tesoro Merger, with Merger Sub 2 being the surviving company from the second merger (the “Second Tesoro Merger,” and if the second merger election is made, collectively with the First Tesoro Merger, the “Tesoro Merger”). We will continue as a public entity and our debt will remain outstanding following the completion of the Tesoro Merger.

On September 15, 2016, we acquired the St. Paul Park Logistics Assets. The St. Paul Park Logistics Assets primarily receive, store and distribute crude oil, feedstock and refined products associated with Western's St. Paul Park refinery (the "St. Paul Park Refinery"). We acquired the St. Paul Park Logistics Assets from Western in exchange for $195 million in cash and 628,224 common units representing limited partner interests in WNRL.

On May 16, 2016, we entered into an underwriting agreement relating to the issuance and sale by the Partnership of 3,750,000 common units representing limited partner interests in the Partnership. The closing of the offering occurred on May 20, 2016. We also granted the underwriter an option to purchase up to 562,500 additional common units on the same terms, which was exercised in full and closed on June 1, 2016.

On October 30, 2015, we acquired the TexNew Mex Pipeline System. We also acquired an 80,000 barrel crude oil storage tank located at our crude oil pumping station in Star Lake, New Mexico and certain other related assets. We acquired these assets in exchange for $170 million in cash, 421,031 common units representing limited partner interests in WNRL and 80,000 TexNew Mex Units. This transaction was between entities under common control.

On October 15, 2014, we acquired all of the outstanding limited liability company interests of WRW, which owned substantially all of Western’s wholesale assets in the Southwest U.S. We acquired these interests in exchange for $320 million in cash and 1,160,092 of our common units. The issuance of these additional units to Western increased Western's limited partner interest in WNRL to 66.2%. We funded the cash payment through $269 million in new borrowings under our revolving credit facility and $51 million from cash on hand.

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The following simplified diagram depicts our organizational structure as of December 31, 2016:

All of our incentive distribution rights are held by our general partner and our units are held as follows:



Public Common Units	47.4	%
Common Units held by Western	15.1	%
Subordinated Units held by Western (1)	37.5	%
Non-Economic General Partner Interest held by Western Refining Logistics GP, LLC	—
TexNew Mex Units held by Western	—
Total	100.0	%


(1)	On the first business day following the payment of the distribution for the fourth quarter of 2016 on March 1, 2017, the subordinated units held by Western will convert into common units on a one-for-one basis and the resulting common units will continue to be owned by Western.

We report our operating results in two reportable segments: logistics and wholesale. See Note 4, Segment Information, in the Notes to Consolidated Financial Statements included in this annual report for detailed information on our operating results by segment.

•

We operate our logistics business under commercial and service agreements with Western, as described below, and we currently generate substantially all logistics segment revenues under fee-based agreements with Western. As a result of our fee-based arrangements with Western, we generally do not have exposure to variability in the prices of the hydrocarbons and other products we handle, although these risks indirectly influence our activities and results of operations over the long term.

•

Our wholesale business operates under commercial and service agreements with Western, as described below, and sells refined products to third parties. Revenues, earnings and cash flows from our wholesale segment are primarily affected by the sales volumes and margins of gasoline, diesel fuel and lubricants sold. These margins are equal to the sales price, net of discounts, less total cost of sales and are measured on a cents per gallon ("cpg") basis. Factors that

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influence margins include local supply, demand and competition and the impact to margin of our commercial agreements with Western.

Our agreements with Western (the "Commercial Agreements") have initial ten-year terms:


•	Pipeline and Gathering Services Agreement: We entered into a pipeline and gathering services agreement, as amended, with Western under which we agreed to transport crude oil on our Permian Basin system primarily for use at Western’s El Paso refinery (the "El Paso Refinery") and on our Four Corners system primarily for use at Western’s Gallup refinery (the "Gallup Refinery").

In connection with the TexNew Mex Pipeline Acquisition, WNRL entered into Amendment No. 1 to the Pipeline and Gathering Services Agreement, dated as of October 16, 2013, with Western (the "Amendment to the Pipeline Agreement"). Among other things, the Amendment to the Pipeline Agreement amends the scope of the existing agreement to include the provision of storage services and a minimum volume commitment of 80,000 barrels of storage at the Star Lake storage tank. In the Amendment to the Pipeline Agreement, Western also committed to a minimum volume of 13,000 barrels per day ("bpd") throughput of crude oil on the TexNew Mex Pipeline for ten years from the date of the Amendment to the Pipeline Agreement.

In connection with the TexNew Mex Pipeline Acquisition, our general partner adopted certain amendments to the First Amended and Restated Agreement of Limited Partnership of the Partnership by adopting the Second Amended and Restated Agreement of Limited Partnership (the “Second A&R Partnership Agreement”). The amendments contained in the Second A&R Partnership Agreement create a new class of partner interests in the Partnership, referred to as the TexNew Mex Units, and set forth the rights, preferences and obligations of the TexNew Mex Units.

The Second A&R Partnership Agreement provides for the creation of the “TexNew Mex Shared Segment” that will reflect the financial and operating results of the TexNew Mex Pipeline. The TexNew Mex Units are generally entitled to participate in 80% of the economics attributable to the TexNew Mex Shared Segment resulting from crude oil throughput on the TexNew Mex Pipeline above the 13,000 barrels per day contemplated by the commitment in the Amendment to the Pipeline Agreement. To the extent there is sufficient available cash from operating surplus under the Second A&R Partnership Agreement, the holder of the TexNew Mex Units will be entitled to receive a distribution equal to 80% of the excess of TexNew Mex Shared Segment Distributable Cash Flow over the TexNew Mex Base Amount (as such terms are defined in the Second A&R Partnership Agreement). The TexNew Mex Unit distributions are preferential to all other unit holder distributions.

•

Terminalling, Transportation and Storage Services Agreement: We agreed to, among other things, distribute products produced at Western’s refineries, connect Western’s refineries to third-party pipelines and systems and provide fee-based asphalt terminalling and processing services. At our network of crude oil and refined products terminals and related assets and storage facilities, we charge Western fees for crude oil, blendstock and refined product storage, shipments into and out of storage and additive and blending services. At our asphalt plant and terminal in El Paso and our three stand-alone asphalt terminals, we charge Western fees for asphalt storage, shipments into and out of asphalt storage and asphalt processing and blending services.

We entered into another terminalling, transportation and storage services agreement with Western (the "St. Paul Park Terminalling Agreement"), under which we agreed to provide product storage services, product throughput services and product additive and blending services at the terminal facilities located at or near the St. Paul Park Refinery. In exchange for such services, Western has agreed to certain minimum volume commitments and to pay certain fees. The St. Paul Park Terminalling Agreement has an initial term of ten years, which may be extended for up to two renewal terms of five years each upon the mutual agreement of the parties.

The fees under each of these agreements are indexed for inflation and apply only to services WNRL provides to Western. These agreements include provisions that permit Western to suspend, reduce or terminate its obligations under the applicable agreement if certain events occur. These events include Western deciding to permanently or indefinitely suspend refining operations at either of its refineries as well as certain extraordinary events beyond the control of us or Western that would prevent us from performing required services under the applicable agreement.

•

Product Supply Agreement: We entered into a product supply agreement, as amended, under which Western supplies, and we purchase, approximately 79,000 bpd of refined products for sale to our wholesale customers. The agreement includes product pricing based upon OPIS or Platts indices on the day of delivery. The agreement also contains, subject to certain exceptions, a covenant restricting Western's ability to compete in certain wholesale activities in the Southwest. The agreement provides for make-up payments to the Partnership in any month that the Partnership’s average margin on non-delivered rack sales is below a per gallon threshold.


•	Fuel Distribution and Supply Agreement: Western agreed to purchase a minimum of 645,000 bbls per month of branded and unbranded motor fuels for its retail and automated commercial fueling sites ("cardlocks") at a price equal

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to our product cost at each terminal, plus actual transportation costs, plus a margin of $0.03 per gallon. Under the fuel distribution agreement, a subsidiary of Western is obligated to offer us the first opportunity to satisfy all of its incremental branded and unbranded motor fuel requirements.


•	Crude Oil Trucking Transportation Services Agreement: Western has agreed to utilize our crude oil trucks to haul a minimum of 1.525 million bbls of crude oil each month. Western pays a flat rate per barrel based on the distance between the applicable pick-up and delivery points, plus monthly fuel adjustments and customary applicable surcharges.

•

Asphalt Trucking Transportation Services Agreement: Western has agreed to utilize our asphalt trucks and pay a flat rate per mile per ton (with market adjustments) based on the distance between the applicable pick-up and delivery points, plus monthly fuel adjustments and customary applicable surcharges. Volumes of asphalt transported pursuant to this agreement will be credited, on a barrel per barrel basis, towards Western's contract minimum under the Crude Oil Trucking Transportation Services Agreement.

Western will remain obligated under the Commercial Agreements even if Western no longer controls our general partner.

We entered into a services agreement, as amended, with Western under which Western provides certain personnel for operational services under our supervision in support of our pipeline and gathering assets and terminalling and storage facilities. We reimburse Western for the cost of these services, including routine and emergency maintenance and repair services, routine operational activities, routine administrative services, construction and related services and other services as we and Western may mutually agree. Western prepares a maintenance, operating and capital budget on an annual basis subject to our approval. Western submits actual expenditures to us monthly for reimbursement. Under the agreement, Western indemnifies us from any claims, losses or liabilities that we incur, including third-party claims, arising from Western’s performance of the agreement to the extent caused by Western’s breach of contract, gross negligence or willful misconduct. We have agreed to indemnify Western from any claims, losses or liabilities that Western incurs, including any third-party claims, arising from Western’s performance of the agreement or from our breach of the agreement, except to the extent such claims, losses or liabilities are caused by Western’s breach of contract, gross negligence or willful misconduct.

We have also entered in an omnibus agreement with Western through which Western provides, and we in turn reimburse Western, for certain general and administrative services (this reimbursement is in addition to certain expenses of our general partner and its affiliates that are reimbursed under our partnership agreement and services agreement), as well as certain other direct or allocated costs and expenses incurred by Western on our behalf. Western has also indemnified us for certain environmental and other liabilities, and we have indemnified Western for events and conditions associated with our operations and for environmental liabilities related to our assets. The omnibus agreement generally terminates if we or our general partner experience change in control.

See Note 21, Related Party Transactions, in the Notes to Consolidated Financial Statements included in this annual report for detailed information on our agreements with Western.

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Our Assets and Operations

Logistics Segment

Our logistics assets consist of pipeline and gathering infrastructure and terminalling, transportation and storage assets in the Southwest and the Upper Great Plains region, including 705 miles of pipelines and approximately 12.4 million bbls of active storage capacity, as well as other assets. Most of our assets are integral to the operations of the El Paso Refinery, Gallup Refinery and St. Paul Park Refinery. We generate substantially all of our logistics revenue from fees charged for services provided to Western under the logistics Commercial Agreements.

The following map depicts the locations of our assets (not to scale):

Pipeline and Gathering

Our pipeline and gathering assets are strategically positioned to support crude oil supply options for the El Paso Refinery, the Gallup Refinery and the St. Paul Park Refinery as well as third parties and consist of crude oil pipelines and gathering assets located primarily in the Delaware Basin in the Permian Basin area of West Texas and Southern New Mexico (the "Delaware Basin"), the Four Corners area of Northwestern New Mexico and in the Upper Great Plains region. Through these systems, we gather and transport crude oil by pipeline and trucks from various production locations to Western’s refineries utilizing 705 miles of pipeline, 33 crude oil storage tanks with a total combined active shell storage capacity of approximately 959,000 bbls, eight truck loading and unloading locations and 15 pump stations.

Our pipeline and gathering assets consist of the following:


•	Permian Basin System. Our Permian Basin system includes our Delaware Basin system and other crude oil gathering assets in West Texas. The primary components of our Permian Basin system include:


•	Delaware Basin System. Our Delaware Basin system includes 39 miles of 10-inch and 12-inch mainlines located in Southeast New Mexico and West Texas and handles crude oil produced in the Delaware Basin. The Main 12-

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inch pipeline and the East 10-inch pipeline were placed into service in July 2013. The West 10-inch pipeline was placed into service in August 2013. The Delaware Basin system is designed to handle up to approximately 154,000 bpd, comprised of a mainline capacity of approximately 100,000 bpd and truck unloading capacity of approximately 54,000 bpd and is operated from a central control station located in Bloomfield, New Mexico. Its primary components include:


•	Main 12-inch Pipeline. This 12-inch crude oil pipeline is 20 miles in length and connects our Mason Station crude oil facility to our T Station crude oil facility;


•	West 10-inch Pipeline and CR-285 Crude Oil Station. This 10-inch crude oil pipeline is 7 miles in length and has a capacity in excess of approximately 75,000 bpd. It extends westward from our T Station crude oil facility. This west segment of the system includes a four-bay truck loading and unloading location and associated storage permitting truck deliveries of up to approximately 24,000 bpd;


•	East 10-inch Pipeline and CR-1 Crude Oil Station. This 10-inch crude oil pipeline is 12 miles in length and has a capacity in excess of approximately 75,000 bpd. It extends eastward from our T Station crude oil facility. This east segment of the system includes a six-bay truck loading and unloading location and associated storage permitting truck deliveries of up to approximately 36,000 bpd;


•	T Station Crude Oil Facility. Our T Station crude oil facility operates as a station for aggregating crude oil deliveries from the West 10-inch pipeline and East 10-inch pipeline and contains two staging tanks with a combined shell storage capacity of approximately 111,000 bbls; and

•

Mason Station Crude Oil Facility. Our Mason Station crude oil facility is located in Reeves County, Texas and receives crude oil produced in Southern New Mexico and West Texas. This facility consists of three 80,000 bbl crude oil storage tanks and a nine-bay truck loading and unloading location. This facility has a capacity of up to approximately 54,000 bpd by truck and a capacity of up to 100,000 bpd from our Main 12-inch pipeline. Our Mason Station crude oil facility is connected to Kinder Morgan Energy Partners, LP's ("Kinder Morgan") Mason Junction pump station that injects crude oil into the Kinder Morgan Wink pipeline for delivery to the El Paso Refinery and Western's Bobcat pipeline.


•	Other Permian Basin Crude Gathering Assets. We own other crude gathering assets in West Texas that handle crude oil produced in the Permian Basin with an aggregate capacity of approximately 8,000 bpd.

•

McCamey Crude Oil Station. Our McCamey crude oil station is located in Upton County, Texas and receives crude oil produced in West Texas. This station consists of a four-bay truck rack and crude receipt tanks. This facility has a capacity of up to approximately 5,700 bpd by truck. Our McCamey crude oil station is connected to Plains All American Pipeline, LP’s (“Plains”) McCamey crude oil terminal that either injects crude oil into the Kinder Morgan Wink pipeline for delivery to the El Paso Refinery or into Plains’ McCamey crude oil terminal for delivery to Midland, Texas; and


•	Riverbend 4-inch Gathering Pipeline. Our four-inch crude oil pipeline is three miles in length and connects the Riverbend crude oil tanks in Crane County, Texas owned by third parties to the Kinder Morgan Wink pipeline for delivery to the El Paso Refinery via Kinder Morgan’s Cordona Lake gathering system.

•

Four Corners System. Our Four Corners system includes 270 miles of pipeline in Northwestern New Mexico that gather and transport crude oil and condensate produced in the San Juan and Paradox Basin areas of Colorado, New Mexico and Utah (referred to, collectively as, “Four Corners area crude oil”) and deliver it to the Gallup Refinery or into our TexNew Mex Pipeline System. This Four Corners area crude oil is received at our Bloomfield terminal and at crude oil stations we own located in Bisti, Lybrook, Pettigrew and Star Lake, New Mexico. This system has a delivery capacity of up to approximately 31,600 bpd to the Gallup Refinery. The Four Corners system’s primary components include:


•	San Juan 6-inch Pipeline. This six-inch crude oil pipeline is 17 miles in length, connects our Bloomfield terminal to our Bisti crude oil station and handles Four Corners area crude oil;


•	West 6-inch Pipeline. This six-inch crude oil pipeline is 77 miles in length, connects our Bisti crude oil station to the Gallup Refinery and handles Four Corners area crude oil;


•	TexNew Mex 16" Pipeline Segment. This portion of the 16-inch crude pipeline is 43 miles in length, connects our Bisti crude oil station to our Star Lake crude oil station and handles Four Corners area crude oil;


•	East 6 and 4-inch Pipeline. This pipeline consists of a six-inch crude oil pipeline portion that is 70 miles in length and a four-inch crude oil pipeline portion that is 35 miles in length. It connects our Pettigrew crude oil station to our Star Lake crude oil station and also the Gallup Refinery and handles Four Corners area crude oil;

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•	Wingate 4-inch NGL Pipeline. This four-inch natural gas liquids ("NGL") pipeline is 14 miles in length and connects Western's NGL plant located in Gallup to the Gallup Refinery. It transports NGLs for the Gallup Refinery;


•	Lybrook 10-inch Pipeline. This ten-inch crude oil pipeline is 14 miles in length and connects the Lybrook station to the TexNew Mex 16-inch crude oil pipeline and handles Four Corners area crude oil; and


•	Other. The Bisti, Star Lake, Lybrook and Pettigrew Stations combine to have 16 crude oil storage and breakout tanks with a total combined capacity of approximately 485,400 bbls; four truck receipt locations and a connection point with the Navajo Nation Oil and Gas Company's Running Horse pipeline.


•	TexNew Mex Pipeline System, including 76 mile extension. Our TexNew Mex pipeline extends 299 miles from our crude oil station in Star Lake, New Mexico in the Four Corners area to near Maljamar, New Mexico in the Delaware Basin. In addition, a 76 mile pipeline was constructed to connect the TexNew Mex 16-inch pipeline from Maljamar to our Delaware Basin system.


•	St. Paul Park Refinery System. Our St. Paul Park Refinery pipeline that was acquired in the St. Paul Park Logistics Transaction includes two crude oil pipeline segments and one pipeline segment not currently in service, each of which is 2.5 miles and extends from the St. Paul Park Refinery to Western’s tank farm in Cottage Grove, Minnesota.

The following tables provide certain approximate information regarding our pipeline and gathering assets:



	Summary of Assets
	Length (miles)	Capacity
Mainline Movements (bpd)
Delaware Basin	39	100,000
Four Corners (1)	270	58,800
TexNew Mex	375	70,000
Other (2)	21	—
Total		228,800
Gathering (Truck Offloading) (bpd)
Mason Station	—	54,000
CR-285 (3)	—	24,000
CR-1 (3)	—	36,000
McCamey Station	—	5,700
Four Corners	—	28,800
Total Gathering Capacity		148,500
Pipeline Tank Storage (bbls)
Delaware Basin	—	473,736
Four Corners	—	485,351
Total Pipeline Tank Storage		959,087


(1)	The total capacity to transport crude oil to the Gallup Refinery on the West 6-inch and East 6-inch pipelines is approximately 31,600 bpd.


(2)	These pipeline assets include the St. Paul Park Refinery system and various gathering lines.


(3)	These volumes ship on the Delaware Basin mainline and are included in the 100,000 bpd capacity.

Terminalling, Transportation, Storage and Distribution

Our terminalling, transportation and storage assets support crude oil supply and refined product distribution for the El Paso Refinery, the Gallup Refinery and the St. Paul Park Refinery as well as third parties and primarily consist of storage tanks, terminals, transportation and other assets located in El Paso, Texas; Gallup, Bloomfield and Albuquerque, New Mexico; Phoenix and Tucson, Arizona and St. Paul Park, Minnesota. These assets include crude oil, feedstock, blendstock, refined product and asphalt storage tanks with a total combined shell storage capacity of approximately 11.4 million bbls, truck loading racks, railcar loading racks, pump stations and pipeline and related logistics assets to service Western’s operations.

Our terminalling, transportation and storage assets consist of the following:


•	El Paso Tank Farm. Our El Paso tank farm provides the El Paso Refinery with storage, transfer and blending services required to support the refinery’s operations. The tank farm consists of storage tanks with an aggregate

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shell storage capacity of approximately 5.1 million bbls operating on land leased from Western under a 10-year agreement. The storage tanks handle refinery feedstock, jet fuel, gasoline, ultra-low sulfur diesel, blending components, crude oil, asphalt, slop oil and NGLs. Short pipelines on the tank farm transfer products to and from the refinery and storage tanks and ultimately to terminals or distribution pipelines. The El Paso tank farm also includes a rail loading facility located on the Burlington Northern Santa Fe and Union Pacific railroads and has railcar manifest loading capability. The rail loading facility handles asphalt, NGLs, feedstock, sulfuric acid and fuel oil.

•

El Paso Refined Products Terminal. Our El Paso refined products terminal distributes refined products supplied by the El Paso Refinery from a six-bay truck loading rack with a capacity to handle approximately 45,000 bpd of gasoline, diesel and jet fuel with associated ethanol, biodiesel and additive blending capabilities. The terminal includes storage tanks with a combined shell storage capacity of 74,900 bbls operating on land leased from Western under a 10-year agreement. The storage tanks handle gasoline, transmix, jet fuel, ultra-low sulfur diesel, bio-diesel, blending components and NGLs.

•

Gallup Tank Farm. Our Gallup tank farm provides the Gallup Refinery with storage and transfer services required to support the refinery’s operations. The tank farm consists of storage tanks with a combined shell storage capacity of approximately 887,100 bbls operating on land leased from Western under a 10-year agreement. The storage tanks handle refined products including ultra-low sulfur diesel, blending components, NGLs and gasoline and refinery feedstocks including crude oil, slop oil, intermediate feedstock and transmix. The Gallup tank farm also includes a railcar manifest loading facility located on the Burlington Northern Santa Fe railroad. The rail loading facility handles crude oil, intermediate feedstock, NGLs, fuel oil, ethanol and biodiesel.

•

Gallup Refined Products Terminal. Our Gallup refined products terminal distributes refined products supplied by the Gallup Refinery from a six-bay truck loading rack with a capacity to handle approximately 34,000 bpd of gasoline and ultra-low sulfur diesel with associated ethanol, biodiesel and additive blending capabilities. The terminal includes storage tanks with a combined active shell storage capacity of approximately 23,400 bbls operating on land leased from Western under a 10-year agreement.


•	St. Paul Park Cottage Grove Tank Farm. Our Cottage Grove tank farm provides the St. Paul Park Refinery with storage and transfer services required to support the refinery's operations. The tank farm consists of storage tanks with a combined shell storage capacity of approximately 864,700 bbls.


•	St. Paul Park Refined Products Terminal. Our St. Paul Park refined products terminal distributes feedstocks and refined products supplied by the St. Paul Park Refinery from a light products terminal, a heavy products loading rack, certain rail and barge facilities and certain other related logistics assets, and includes storage tanks with a combined shell storage capacity of 3,106,500 bbls.

•

Bloomfield Terminal. Our Bloomfield terminal is a crude oil gathering and refined products distribution facility serving Western and third-party customers. The Bloomfield terminal includes storage tanks with combined shell storage capacity of approximately 696,000 bbls operating on land leased from Western under a 10-year agreement. The storage tanks handle Four Corners area crude oil, gasoline, ultra-low sulfur diesel and blending components. The terminal receives crude oil across a four-bay truck unloading rack, de-waters the crude oil and stores it for shipment on our San Juan 6-inch pipeline to our crude oil station in Bisti for further transport to the Gallup Refinery. Our Bloomfield terminal distributes refined products for Western and third-party customers over a four-bay truck loading rack that has ethanol and additive blending capabilities. A pipeline from Artesia, New Mexico, owned by Holly Energy Partners LP provides primary supply to the terminal. The terminal also receives supply by trucks from other locations.

•

Albuquerque Refined Products Terminal. Our Albuquerque refined products terminal distributes approximately 9,000 bpd of gasoline, diesel fuel and ethanol from a two-bay truck loading rack for Western and third-party customers. The truck loading rack has a capacity of up to approximately 27,500 bpd with associated ethanol and additive blending capabilities. The terminal includes storage tanks with a combined shell storage capacity of approximately 185,700 bbls operating on land that we own. The El Paso Refinery supplies this terminal via the Magellan common carrier pipeline, owned by Magellan Midstream Partners, LP (“Magellan”), as well as by truck from the Gallup Refinery, our Bloomfield terminal and other locations. Our Albuquerque refined products terminal is also capable of receiving ethanol by truck and rail. The rail loading facility is located on the Burlington Northern Santa Fe railroad.

•

Asphalt Plant and Terminals. We provide fee-based asphalt terminalling and processing services at our asphalt plant and terminal in El Paso, as well as at three stand-alone asphalt terminals in Albuquerque, New Mexico and Phoenix and Tucson, Arizona. Our El Paso asphalt plant is located adjacent to the El Paso Refinery. The plant has the ability to modify asphalt with polymer and polyphosphoric acid that allows for flexibility in meeting stringent

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performance grade asphalt specifications. The asphalt plant can process up to approximately 1,650 tons per day (“tpd”) of asphalt. The related El Paso asphalt terminal distributes asphalt to customers by rail (through its six rail locations) and by truck over a five-bay truck loading rack. Both the El Paso asphalt plant and the related terminal operate on land leased from Western under a 10-year agreement. Our three other asphalt terminals located in Albuquerque, New Mexico and Phoenix and Tucson, Arizona are throughput terminals for finished asphalt with an aggregate terminalling capacity of up to 2,250 tpd. The asphalt plant and terminals have a combined shell storage capacity of approximately 473,000 bbls.

The following table describes the capacities of our terminal and storage assets:



	Tank Shell Storage Capacity
Crude Oil, Intermediates and Refined Products (bbls)
El Paso Tank Farm	5,065,600
El Paso Refined Products Terminal	74,900
Gallup Tank Farm	887,100
Gallup Refined Products Terminal	23,400
St. Paul Park Cottage Grove Tank Farm	864,700
St. Paul Park Refined Products Terminal	3,106,500
Bloomfield Terminal	696,000
Albuquerque Refined Products Terminal	185,700
Total	10,903,900
Asphalt (tpd)
El Paso Asphalt Plant	202,000
Albuquerque Asphalt Terminal	38,500
Tucson Asphalt Terminal	208,700
Phoenix Asphalt Terminal	23,800
Total	473,000

Wholesale Segment

Our wholesale business purchases substantially all of its petroleum fuels from Western and all of its lubricants and additional petroleum fuels from third-party suppliers. In addition to our sales to Western, our principal customers are retail fuel distributors and the mining, construction, utility, manufacturing, transportation, aviation and agricultural industries. We compete with other wholesale petroleum products distributors on product sales pricing and distribution services in the Southwest such as Pro Petroleum, Inc.; Southern Counties Fuels; Synergy Petroleum, LLC; SoCo Group, Inc.; C&R Distributing, Inc.; and Brewer Petroleum Services, Inc. Our sales and services to Western generally accounted for 26% of our fuel volumes and 82% of our fuel trucking volumes for the year ended December 31, 2016. Among our third-party customers, sales to Kroger Company accounted for 20.1%, 23.5%, and 23.0% of consolidated revenues for the years ended December 31, 2016, 2015 and 2014, respectively.

Our wholesale segment consists of the following operations:

Fuel Distribution

Our wholesale segment purchases petroleum fuels primarily from Western’s refining group and sells these fuels. We have entered into a product supply agreement, as amended, with Western and certain of its affiliates, pursuant to which Western has agreed to sell, and we have agreed to buy, between 90% and 110% of 79,000 bpd of Western’s refined products based upon forecasts provided each month by us. The products are purchased according to a predetermined formula based upon OPIS or Platts indices on the day of delivery and the applicable terminal location. Western will provide us margin shortfall support for non-delivered rack sales. The product supply agreement contains customary payment terms that may be extended if our net working capital requirements grow significantly over time.

As part of this fuel distributions business, we have entered into a fuel distribution and supply agreement with Western. Under this arrangement, we are required to sell and deliver to Western, and Western is required to purchase and accept delivery from us, 645,000 bbls per month of branded and unbranded motor fuels to Western retail and cardlock locations in the Southwest. In exchange for the sale and delivery of branded and unbranded motor fuels, Western will pay us an amount equal to our product cost at each terminal, plus applicable taxes and fees, actual transportation costs and a margin of $0.03 per gallon. In the event that Western fails to purchase the committed volume of branded and unbranded motor fuels, Western

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will pay $0.03 per gallon for each gallon below the committed volume. Western will receive a credit for excess volumes purchased in subsequent months to the extent that shortfall payments were made in the prior twelve months. Our net cost per gallon will be determined based on the prices paid under the product supply agreement.

This business includes the operation of a fleet of finished products trucks that deliver a significant portion of the volumes sold by our wholesale segment.

Crude Trucking

Our wholesale segment operates a fleet of crude oil trucks, which are utilized to support crude oil supply options for the El Paso Refinery and the Gallup Refinery. We have entered into a crude oil trucking transportation services agreement, as amended, with Western under which we have agreed to, among other things, gather, transport and deliver crude oil from collection points in Colorado, New Mexico and Utah to the El Paso Refinery and the Gallup Refinery and their interconnected pipelines. Western has agreed to utilize our crude oil trucking fleet to transport a minimum volume of 1.525 million bbls per month.

In exchange for the gathering and transportation services performed under the crude trucking agreement, Western has agreed to pay us a flat rate per barrel (with market adjustments) based on the distance between the applicable pick-up and delivery points, plus monthly fuel adjustments and customary applicable surcharges.

Asphalt Trucking

Our wholesale segment operates a fleet of asphalt trucks, which are utilized to deliver asphalt to Western's asphalt terminals and third party customers. We have entered into an asphalt trucking transportation services agreement with Western under which we have agreed to, among other things, transport and deliver asphalt from the El Paso Refinery to asphalt terminals in Texas, New Mexico and Arizona. Volumes of asphalt transported pursuant to this agreement will be credited, on a barrel per barrel basis, towards Western’s contract minimum under the Crude Oil Trucking Transportation Services Agreement. Under this Agreement, Western has given us the first option to transport all asphalt volumes Western transports by truck.

In exchange for the transportation services performed under the asphalt trucking transportation agreement, Western has agreed to pay us a flat rate per ton (with market adjustments) based on the distance between the applicable pick-up and delivery points, plus monthly fuel adjustments and customary applicable surcharges.

Lubricants Distribution

Our wholesale segment purchases and distributes lubricants to various third-party customers. As part of this business, our wholesale segment operates several lubricants distribution facilities and a fleet of lubricants transports.

During the fourth quarter of 2016, we completed an evaluation of our lubricant operations. After careful consideration, having concluded that lubricants are not strategic to our core operations, we have taken steps to divest the remaining assets associated with this business. We anticipate a completed sale within the first half of 2017. Assets held for sale in our Consolidated Balance Sheet at December 31, 2016 include $10.1 million in inventories and $7.3 million in property, plant and equipment. These assets and associated results from operations are presented in our Wholesale segment. We expect proceeds from this divestiture to result in a gain on disposal of assets; however, no amounts related to this anticipated transaction have been recorded in the Consolidated Statements of Operations for the year ended December 31, 2016.

Environmental Regulation

General

Our operations are subject to extensive and periodically changing federal, state and local laws, regulations and ordinances relating to the protection of the environment, worker health and safety, and natural resources. Among other things, these laws and regulations govern the emission or discharge of pollutants into or onto the land, air and water, the handling and disposal of solid and hazardous wastes, the remediation of contamination and protection of endangered and threatened species. Compliance with existing and anticipated environmental laws and regulations increases our overall cost of business, including our capital costs to develop, maintain, operate and upgrade equipment and facilities. We do not believe that compliance with existing environmental laws and regulations will have a material adverse effect on our operations. However, these laws and regulations are subject to changes, or to changes in the interpretation (including enforcement policies) of such laws and regulations, by regulatory authorities and continued and future compliance with such laws and regulations may require us to incur significant expenditures. Additionally, violation of environmental laws, regulations and permits can result in the imposition of significant administrative, civil and criminal penalties, injunctions limiting or prohibiting our operations, investigatory or remedial liabilities, or construction bans or delays in the development of additional facilities or equipment. In particular, a release of hydrocarbons or hazardous substances into the environment could, to the extent the event is not insured, subject us to substantial expenses, including costs to comply with applicable laws and regulations and to resolve claims by third parties for personal injury or property damage, or by the U.S. federal government or state governments for natural resources damages. In

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addition, many environmental laws contain citizen suit provisions, allowing environmental groups to bring suits to enforce compliance with environmental laws. Environmental groups frequently challenge pipeline infrastructure projects. These issues could directly and indirectly affect our business and may have an adverse impact on our financial position, results of operations and liquidity. We cannot currently determine the amounts of such future impact.

Indemnification

Under our omnibus agreement with Western, Western indemnifies us for all known and certain unknown environmental liabilities that are associated with the ownership or operation of our assets and due to occurrences on or before the closing of the Offering. Indemnification for any unknown environmental liabilities is limited to liabilities due to occurrences on or before the closing of the Offering and identified prior to the fifth anniversary of the closing of the Offering and will be subject to a deductible of $100,000 per claim. There is no limit on the amount for which Western indemnifies us under the omnibus agreement once we meet the deductible, if applicable. Western will also indemnify us for failure to obtain certain consents, licenses and permits necessary to conduct our business, including the cost of curing any such condition and litigation matters, in each case that are identified prior to the fifth anniversary of the closing of the Offering. These claims will be subject to an aggregate deductible of $200,000.

We have agreed to indemnify Western for environmental liabilities related to our assets to the extent Western is not required to indemnify us as described above. There is no limit on the amount for which we will indemnify Western under the omnibus agreement.

Under the separate contribution agreements related to the Wholesale Acquisition, the TexNew Mex Pipeline Acquisition and the St. Paul Park Logistics Transaction, Western agreed to indemnify us with respect to liabilities related to certain historical assets and operations of WRW, the TexNew Mex Pipeline System and the St. Paul Park Logistics Assets that were not contributed to us in the respective acquisitions. In addition, Western made certain representations and warranties regarding the assets of WRW, the TexNew Mex Pipeline System and the St. Paul Park Logistics Assets, including with respect to environmental matters, and agreed to indemnify us for breaches of those representations and warranties, subject to specified deductibles, caps and other limitations.

Air Emissions and Climate Change

Our operations are subject to the Clean Air Act and its regulations and comparable state and local statutes and regulations in connection with air emissions from our operations. Under these laws, permits may be required before construction can commence on a new source of potentially significant air emissions and operating permits may be required for sources that are already constructed. These permits may require controls on our air emission sources and we may become subject to more stringent regulations requiring the installation of additional emission control technologies, the costs of which could be significant.

In addition, various legislative and regulatory measures to address greenhouse gas emissions (including carbon dioxide, methane and other gases) are in various phases of discussion or implementation, including reporting and permitting of greenhouse gas emissions and state and regional cap-and-trade programs. The impact of future regulatory and legislative developments, if adopted or enacted, including any cap-and-trade program or programs, is likely to result in increased compliance costs, increased utility costs, additional operating restrictions on our business and an increase in the cost of products generally. The extent and magnitude of that impact cannot be reliably or accurately estimated due to the present uncertainty regarding the additional measures and how they will be implemented. Some scientists have concluded that increasing concentrations of greenhouse gas in the Earth’s atmosphere may produce climate changes that have significant physical effects, such as increased frequency and severity of storms, droughts and floods and other climatic events. Such climatic events could have an adverse effect on our financial condition and results of operations.

Waste Management and Related Liabilities

Several of the environmental laws and regulations affecting our operations relate to the release of hazardous substances or solid wastes into soils, groundwater and surface water and include measures to control pollution of the environment. These laws generally regulate the generation, storage, treatment, transportation and disposal of solid and hazardous waste. They also require corrective action, including investigation and remediation, at a facility where such waste may have been released or disposed. Pursuant to our omnibus agreement, Western indemnifies us and will fund all of the costs of required remedial action for Western's known historical and legacy spills and releases and, subject to a deductible per claim of $100,000, for spills and releases, if any, existing but unknown at the time of closing of the Offering to the extent such existing but unknown spills and releases are identified within five years after closing of the Offering.

CERCLA. The Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), or the Superfund law, and analogous state laws, impose joint and several liability, without regard to fault or the legality of the original conduct, on certain classes of potentially responsible persons for releases of hazardous substances into the environment. These persons

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include the owner or operator of a site and companies that disposed or arranged for the disposal of the hazardous substances found at the site. By operation of law, if we are determined to be a potentially responsible person, we may be responsible under CERCLA for all or part of the costs required to clean up sites at which such materials are present, in addition to providing compensation for any natural resource damages. We have not been determined to be a potentially responsible party at any sites.

RCRA. We also generate solid wastes, including hazardous wastes, within the tank cleaning process that are subject to the requirements of the federal Resource Conservation and Recovery Act (“RCRA”) and comparable state statutes. While RCRA regulates both solid and hazardous wastes, it imposes strict requirements on the generation, storage, treatment, transportation and disposal of hazardous wastes. In the course of our operations, we generate petroleum product wastes and ordinary industrial wastes such as paint wastes, waste solvents and waste oils that are regulated as hazardous wastes. Certain materials generated in the exploration, development or production of crude oil and natural gas are excluded from RCRA’s hazardous waste regulations. However, it is possible that future changes in law or regulation could result in these wastes, including wastes currently generated by our operations, being designated as “hazardous wastes” and therefore subject to more rigorous and costly disposal requirements. For example, in December 2016, the EPA and certain environmental organizations entered into a consent decree to address EPA’s alleged failure to timely assess its RCRA Subtitle D criteria regulations exempting certain exploration and production related oil and gas wastes from regulation as hazardous wastes under RCRA. The consent decree requires EPA to propose a rulemaking no later than March 15, 2019 for revision of certain Subtitle D criteria regulations pertaining to oil and gas wastes or to sign a determination that revision of the regulations is not necessary. Any such changes in laws and regulations could have a material adverse effect on our capital expenditures and operating expenses.

Hydrocarbon Wastes. We currently own and lease properties where hydrocarbons are being or for many years have been handled. Although operating and disposal practices that were standard in the industry at the time were utilized, hydrocarbons or other waste may have been disposed of or released on or under the properties owned or leased by us or on or under other locations where these wastes have been taken for disposal. These properties and wastes disposed thereon may be subject to CERCLA, RCRA and analogous state laws. Under these laws, we could be required to remove or remediate previously disposed wastes (including wastes disposed of or released by prior owners or operators), to clean up contaminated property (including contaminated groundwater) or to perform remedial operations to prevent further contamination, the costs of which could be significant.

Water

Our operations can result in the discharge of pollutants, including crude oil and other products that we handle, store or transport in the course of our operations. Regulations under the Water Pollution Control Act of 1972 (“Clean Water Act”), the Oil Pollution Act of 1990 (the "Oil Pollution Act") and state laws impose regulatory burdens on our operations. Spill prevention control and countermeasure ("SPCC") requirements of federal laws and some state laws require containment to mitigate or prevent contamination of navigable waters in the event of an oil overflow, rupture or leak.

In addition, the transportation and storage of crude oil and products over and adjacent to water involves risk and subjects us to the provisions of the Oil Pollution Act and related state requirements. In case of any such release, the Oil Pollution Act requires the responsible company to pay resulting removal costs and natural resource damages. We operate facilities and transport crude oil and products where releases in water of oil and hazardous substances could occur. We have implemented emergency oil response plans for all of our components and facilities covered by the Oil Pollution Act and we have established SPCC plans for facilities subject to Clean Water Act SPCC requirements.

Construction or maintenance of our pipelines, terminals and storage facilities may impact wetlands or surface waters that are regulated under the Clean Water Act by the U.S. Environmental Protection Agency (the "EPA") and the U.S. Army Corps of Engineers. Regulatory requirements governing wetlands (including associated mitigation projects) and surface water crossings may result in the delay of our pipeline projects while we obtain necessary permits and may increase the cost of new projects and maintenance activities. In addition, in September 2015, the EPA and U.S. Army Corps of Engineers issued a rule defining the scope of the EPA’s and the Corps’ jurisdiction over waters of the United States. To the extent the rule expands the scope of jurisdiction of the Clean Water Act, we could face increased costs and delays with respect to obtaining permits for dredge and fill activities in wetland areas. The rule has been challenged in court on the grounds that it unlawfully expands the reach of Clean Water Act programs, and implementation of the rule has been stayed pending resolution of the court challenge.

Endangered Species

The Endangered Species Act and analogous state laws restrict activities that may affect endangered or threatened species or their habitats. The designation of previously unprotected species as threatened or endangered in areas where underlying property operations are conducted could cause us to incur increased costs arising from species protection measures or could result in limitations on our operating activities that could have an adverse impact on our results of operations.

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Hazardous Materials Transportation Requirements

The Pipeline and Hazardous Materials Safety Administration (“PHMSA”) of the U.S. Department of Transportation (the "DOT") has promulgated regulations affecting pipeline safety for certain of our pipelines. These regulations require, amongst other things, that pipeline operators implement measures designed to reduce the environmental impact of crude oil and product discharge from onshore crude oil and product pipelines. These regulations also require operators to maintain comprehensive spill response plans, including extensive spill response training for pipeline personnel. In addition, the DOT regulations contain detailed specifications for pipeline and storage tank operation and maintenance, which can result in substantial compliance costs. These laws and regulations are subject to frequent change. For example, in January 2017, PHMSA finalized regulations for hazardous liquid pipelines that significantly extend and expand the reach of certain PHMSA integrity management requirements (i.e., periodic assessments, leak detection and repairs), regardless of the pipeline’s proximity to a high consequence area. The final rule also imposes new reporting requirements for certain unregulated pipelines, including all hazardous liquid gathering lines. The timing for implementation of this rule is uncertain at this time due to the recent change in Presidential Administrations.

The Federal Motor Carrier Safety Administration (“FMCSA”) of the DOT regulates safety standards and monitors drivers and equipment of commercial motor carrier fleets. Standards include vehicle and maintenance inspection requirements, limitations on the number of hours drivers may operate vehicles, and financial responsibility requirements.

Employee Safety

We are subject to the requirements of the Occupational Safety and Health Act (“OSHA”) and comparable state statutes that regulate the protection of the health and safety of workers. In addition, the OSHA hazard communication standard requires that information be maintained about hazardous materials used or produced in operations and that this information be provided to employees, state and local government authorities and citizens.

Employees

We are managed and operated by Western Refining Logistics GP, LLC, our general partner. As of December 31, 2016, we directly employed 559 employees through our wholesale subsidiary. Through our general partner's affiliates, we have 295 full-time employees as well as other employees who may provide services to us from time to time, all of whom are seconded to us pursuant to our services agreement with Western. These seconded employees provide operating, maintenance and other services under our direction, supervision and control with respect to the assets that our pipeline and terminalling subsidiaries own and operate. Other Western employees may also provide services to us from time to time.

Available Information

We file reports with the Securities and Exchange Commission (the "SEC"), including annual reports on Form 10-K, quarterly reports on Form 10-Q and other reports from time to time. The public may read and copy any materials that we file with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. We are an electronic filer and the SEC’s Internet site at http://www.sec.gov contains the reports and other information filed electronically. We do not, however, incorporate any information on that website into this Form 10-K.

As required by Section 406 of the Sarbanes-Oxley Act of 2002, we have adopted a code of ethics that applies specifically to our Chief Executive Officer, Chief Financial Officer and Principal Accounting Officer. We have also adopted a Code of Business Conduct and Ethics applicable to all our directors, officers and employees. Those codes of ethics are posted on our website. Our website address is: http://www.wnrl.com. Within the time period required by the SEC and the NYSE, we will post any amendment to our code of ethics and any waiver applicable to any of our Chief Executive Officer, Chief Financial Officer and Principal Accounting Officer on our website. We make our website content available for informational purposes only. It should not be relied upon for investment purposes, nor is it incorporated by reference in this Form 10-K. We make our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports simultaneously to the electronic filings of those materials with, or furnishing of those materials to, the SEC available on our website under “Investor Relations,” free of charge. We also make hard copies of our complete audited financial statements available to unitholders, free of charge upon request.

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Item 1A.	Risk Factors

Limited partner interests are inherently different from capital stock of a corporation, although many of the business risks that we are subject to are similar to those that would be faced by a corporation engaged in similar businesses. Security holders and potential investors should carefully consider the following risk factors together with all of the other information included in this report. If any of the following risks were actually to occur, our business, financial condition, results of operations or cash flows could be materially adversely affected.

The risks described below are not the only ones that we face. Additional risks not presently known to us or that we currently deem immaterial individually or in the aggregate may also impair our business operations.

Risks Relating to Our Business

The closing of the Tesoro Merger will enable Tesoro to control our affairs.

If the Tesoro Merger closes, Western will become a wholly owned subsidiary of Tesoro. Because Western owns our general partner and also controls a majority of our outstanding voting units, the change of control at Western will enable Tesoro and its affiliates to exert ultimate control over our affairs and they could exercise such influence in a manner that is not in the best interests of our unitholders.

The proposed Tesoro Merger could have an adverse impact on our business.

On November 16, 2016, Western entered into the Tesoro Merger Agreement with Tesoro that provides for the acquisition of Western by Tesoro. As a result of the Tesoro Merger, Tesoro will indirectly own approximately 52.6% of our outstanding common units and 100% of our non-economic general partner interests. As a result, Tesoro will have control over our management and affairs and over all matters requiring unitholder approval, including significant corporate transactions, such as a merger or other sale of our company or its assets. This effectively permits a “change of control" without the vote or consent of our unitholders.

The foregoing changes to Western could be disruptive to our business and operations. The proposed Tesoro Merger may be time consuming and disruptive to Western’s business operations, including its relationship with us as the beneficial owner of a majority of our outstanding common units, the indirect owner of our general partner and the counterparty to certain of our commercial contracts. It is also possible that, following the Tesoro Merger, there could be changes to the composition of our board of directors and members of our senior management team. In addition, it may be difficult for Tesoro to address integration challenges following the completion of the merger, and the anticipated benefits of the integration of the two companies may not be realized fully or at all. Further, the completion of the Tesoro Merger may give rise to additional conflicts of interest and competition for business opportunities among us, Western and Tesoro and their respective affiliates.

The Tesoro Merger is subject to a number of conditions that must be fulfilled or waived prior to the completion of the merger, and there can be no assurance that the merger will be consummated. In addition, if the merger transaction is consummated, any value created for Tesoro’s or Western’s stockholders may not result in the creation of value for our unitholders.

Western currently accounts for a substantial portion of our revenues and is one of our significant suppliers, and therefore we are subject to the business risks of Western. If Western changes its business strategy, is unable to satisfy its obligations under our Commercial Agreements for any reason or significantly reduces the volumes transported through our pipelines and gathering systems or handled at our terminals, our revenues would decline and our financial condition, results of operations, cash flows and ability to service our indebtedness would be adversely affected.

Western is the primary shipper on our pipelines and gathering systems, our primary customer for our terminalling and storage activities and a significant supplier to and customer of our wholesale business. As we expect to continue to derive a substantial portion of our logistics revenues and wholesale fuel supply from Western for the foreseeable future, we are subject to the risk of nonpayment or nonperformance by Western under our Commercial Agreements. Any event, whether in our existing areas of operation or otherwise, that materially and adversely affects Western’s financial condition, results of operations or cash flows may adversely affect our ability to service our indebtedness or make cash distributions. Accordingly, we are indirectly subject to the operational and business risks of Western, some of which are related to the following:


•	the price volatility of crude oil (including prolonged periods of low crude oil prices that could impact production growth of inland crude oil and reduce the amount of advantaged crude oil available and/or the discount of such crude oil), other feedstocks, refined products and fuel and utility services has had and may have a material adverse effect on Western’s earnings and cash flows;


•	if the price of crude oil increases significantly or Western’s credit profile changes, or if Western is unable to access its revolving credit facility for borrowings or for letters of credit, Western’s liquidity and ability to purchase enough crude oil to operate its refineries at full capacity could be materially and adversely affected;

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•	Western’s hedging transactions may limit its gains and expose Western to other risks;


•	Compliance with and changes in tax laws could adversely affect Western’s performance;


•	the risk of contract cancellation, non-renewal or failure to perform by Western’s customers and Western’s inability to replace such contracts and/or customers could have a material adverse effect on Western’s earnings and cash flows;


•	Western’s indebtedness, including any indebtedness it may incur in the future, may limit its ability to obtain additional financing and Western may also face difficulties complying with the terms of its indebtedness agreements;


•	covenants and events of default in Western’s debt instruments could limit its ability to undertake certain types of transactions and adversely affect its liquidity;


•	Western has capital needs for which its internally generated cash flows and other sources of liquidity may not be adequate;


•	future acquisitions by Western may reduce, rather than increase, its cash flows and the impacts of such acquisitions, together with any indebtedness incurred to fund such acquisitions, could have a negative impact on Western’s creditworthiness;


•	the dangers inherent in Western’s operations could cause disruptions and could expose Western to potentially significant losses, costs or liabilities. Any significant interruptions in the operations of any of Western’s refineries could materially and adversely affect its business, financial condition, results of operations and cash flows;


•	Western’s operations involve environmental risks that could give rise to material liabilities;


•	Western may incur significant costs to comply with environmental, health and safety laws and regulations;


•	Western could experience business interruptions caused by pipeline shutdowns or interruptions;


•	a material decrease in the supply of crude oil available to Western’s refineries could significantly reduce its production levels;


•	severe weather could interrupt the supply of some of Western’s feedstock for its refineries that could have a material adverse effect on its business, financial condition, results of operation and cash flows;


•	Western could incur substantial costs or disruptions in its business if it cannot obtain or maintain necessary permits and authorizations;


•	competition in the refining, marketing and retail industry is intense, and an increase in competition in the areas in which Western sells its refined and other products could adversely affect Western’s sales and profitability;


•	Western’s business, financial condition, results of operations and cash flow may be materially adversely affected by a continued economic downturn;


•	Western’s insurance policies do not cover all losses, costs or liabilities that Western may experience;


•	Western could be subject to damages based on claims brought by its customers or lose customers as a result of a failure of its products to meet certain quality specifications;


•	a substantial portion of Western’s refining workforce is unionized and Western may face labor disruptions that would interfere with their operations;


•	if Western loses any of its key personnel, Western’s ability to manage its business could be negatively impacted; and


•	terrorist attacks, cyber-attacks, threats of war or actual war may negatively affect Western’s operations, financial condition, results of operations, cash flows and prospects.

Petroleum refining and marketing is highly competitive. Due to their geographic diversity, larger and more complex refineries, integrated operations and greater resources, some of Western’s competitors may be better able to withstand volatile market conditions, compete on the basis of price, obtain crude oil in times of shortage and bear the economic risk inherent in all phases of the refining industry. The El Paso Refinery and the Gallup Refinery primarily compete with Valero Energy Corp., Phillips 66 Company, Alon USA Energy, Inc., HollyFrontier Corporation, Tesoro Corporation, Chevron Products Company and Suncor Energy, Inc., as well as refineries in other regions of the country that serve the regions that Western serves through pipelines. Our St. Paul Park Refinery competes directly with Koch Industries’ Flint Hills Resources Refinery in Pine Bend, Minnesota, as well as the other refiners in the region, that access the region by pipeline, and, to a lesser extent, other U.S. and

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foreign refiners. Some areas where Western sells refined products are also supplied by various refined product pipelines. Any expansions or additional products supplied by these third-party pipelines could put downward pressure on refined product prices in these areas.

Western is not obligated to use our services with respect to volumes of crude oil or refined and other products in excess of the minimum volume commitments under its Commercial Agreements with us. In addition, the terms of Western’s obligations under those agreements are 10 years. If Western fails to use our assets and services after expiration of those agreements, or should our Commercial Agreements be invalidated for any reason, and we are unable to generate additional revenue from third parties, our ability to service our indebtedness may be materially and adversely affected. Furthermore, our Commercial Agreements with Western were not the result of arm’s-length negotiations and we may enter into future agreements with Western that are not the result of arm’s-length negotiations.

Additionally, Western may consider opportunities presented by third parties with respect to its refinery assets. These opportunities may include offers to purchase assets and joint venture propositions. Western may also change its refineries’ operations by developing new facilities, suspending or reducing certain operations, modifying or closing facilities or terminating operations. Changes may be considered to meet market demands, to satisfy regulatory requirements or environmental and safety objectives, to improve operational efficiency or for other reasons. Western actively manages its assets and operations, and therefore, changes of some nature, possibly material to its business relationship with us, are likely to occur at some point in the future. No such changes will be subject to our consent.

Furthermore, conflicts of interest may arise between Western and its affiliates, including our general partner, on the one hand, and us and our unitholders, on the other hand. We have no control over Western, our largest source of revenue and our primary customer, and Western may elect to pursue a business strategy that does not favor us and our business.

We may not have sufficient cash from operations following the establishment of cash reserves and payment of fees and expenses, including cost reimbursements to our general partner and its affiliates, to enable us to pay the minimum quarterly distribution to our unitholders.

We may not have sufficient available cash from operating surplus each quarter to enable us to pay the minimum quarterly distribution. The amount of cash we can distribute on our units principally depends upon the amount of cash we generate from our operations, which will fluctuate from quarter to quarter based on, among other things:


•	the volume of crude oil and refined and other products we handle;


•	the transportation, terminalling and storage fees with respect to volumes that we handle;


•	our entitlement to payments associated with the minimum volume commitments under our Commercial Agreements with Western;


•	timely payments by Western and our other customers; and


•	prevailing economic conditions.

In addition, the actual amount of cash we will have available for distribution will also depend on other factors, some of which are beyond our control, including:


•	the amount of our operating expenses and selling, general and administrative expenses, including our obligation to reimburse Western or our general partner in respect of those expenses, which obligation is not limited in amount under our partnership agreement, omnibus agreement or services agreement;


•	the level of capital expenditures we make;


•	the cost of acquisitions and organic growth projects, if any;


•	our debt service requirements and other liabilities;


•	fluctuations in our working capital needs;


•	our ability to borrow funds and access capital markets;


•	restrictions contained in our revolving credit facility and other debt service requirements;


•	the amount of cash reserves established by our general partner; and


•	other business risks affecting our cash levels.

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Western may suspend, reduce or terminate its obligations under each of our Commercial Agreements and our services agreement in some circumstances, which would have a material adverse effect on our financial condition, results of operations, cash flows and ability to service our indebtedness.

Our Commercial Agreements and services agreement with Western include provisions that permit Western to suspend, reduce or terminate its obligations under the applicable agreement if certain events occur. These events include a material breach of the agreement by us, or, in some cases, Western deciding to permanently or indefinitely suspend refining operations at one or more of its refineries, as well as our being subject to certain force majeure events that would prevent us from performing required services under the applicable agreement. Western has the discretion to make such decisions notwithstanding the fact that they may significantly and adversely affect us. For instance, under the Commercial Agreements entered into in connection with the Offering, if Western decides to permanently or indefinitely suspend, in full or in part, refining operations at a refinery for a period that will continue for at least twelve consecutive months, then it may terminate or proportionately reduce, as applicable, its obligations under the agreement on no less than twelve-months’ prior written notice to us, unless it publicly announces its intent to resume operations at the refinery at least two months prior to the expiration of the twelve-month notice period. Under the Commercial Agreements entered into in connection with the Offering, the Wholesale Acquisition, TexNew Mex Pipeline Acquisition and St. Paul Park Logistics Transaction, Western has the right to terminate such agreements with respect to any services for which performance will be suspended by a force majeure event for a period in excess specified periods ranging from six to twelve-months. Additionally, under the Commercial Agreements and the services agreement, Western has the right to terminate such agreements in the event of a material breach by us, subject to a specified cure period.

Generally, although Western is not entitled to claim a force majeure event under the Commercial Agreements, Western’s and our obligations under these agreements will be proportionately reduced or suspended to the extent that we are unable to perform under the agreements upon our declaration of a force majeure event. As defined in our Commercial Agreements and in the services agreement, force majeure events include any acts or occurrences that prevent services from being performed under the applicable agreement, including, but not limited to:


•	acts of God, or fires, floods or storms;


•	compliance with orders of courts or any governmental authority;


•	explosions, wars, terrorist acts, riots, strikes, lockouts or other industrial disturbances;


•	accidental disruption of service;


•	breakdown of machinery, storage tanks or pipelines and inability to obtain, or unavoidable delay in obtaining, material or equipment; and


•	similar events or circumstances, so long as such events or circumstances are beyond the service provider’s reasonable control and could not have been prevented by the service provider’s due diligence.

Accordingly, under our Commercial Agreements there exists a broad range of events that could result in our no longer being required to transport or distribute Western’s minimum throughput or volume commitments on our assets, or to reserve dedicated storage capacity for Western’s products and Western no longer being required to pay the full amount of fees that would have been associated with its minimum throughput or volume commitments and storage capacity reservations. Additionally, we have no control over Western’s business decisions and operations and conflicts of interest may arise between Western and its affiliates, including our general partner or Western’s controlled subsidiary, Northern Tier, on the one hand, and us and our unitholders, on the other hand. Western is not required to pursue a business strategy that favors us or utilizes our assets, and could elect to decrease refinery production or shutdown or re-configure a refinery. Furthermore, a single event or business decision relating to one of Western’s refineries could have an impact on each of our Commercial Agreements with Western. These actions, as well as the other activities described above, could result in a reduction or suspension of Western’s obligations under one or more of our Commercial Agreements. Any such reduction or suspension would have a material adverse effect on our financial condition, results of operations, cash flows and ability to service our indebtedness.

If Western satisfies only its minimum obligations under, or if we are unable to renew or extend, the various Commercial Agreements we have with Western, our ability to service our indebtedness will be reduced.

Western is not obligated to use our services with respect to volumes of crude oil or refined and other products in excess of the minimum commitments under the various Commercial Agreements with us. Our ability to service our indebtedness could be adversely affected if we do not transport additional volumes for Western on our pipeline and gathering systems (in excess of the minimum volume commitments under our Commercial Agreements), and handle additional Western and/or third-party volumes at our terminals, or if Western’s obligations under our Commercial Agreements are suspended, reduced or terminated due to a refinery shutdown or force majeure event. In addition, the terms of Western’s obligations under those agreements extend 10 years from the Offering and the agreements we entered into in connection with the Wholesale Acquisition will extend 10 years from the date of the closing of the Wholesale Acquisition. If Western fails to use our facilities and services after

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expiration of those agreements and we are unable to generate additional revenues from third parties, our ability to service our indebtedness will be reduced.

A material decrease in the refining margins at Western’s refineries could materially reduce the volumes of crude oil or refined and other products that we handle, which could adversely affect our financial condition, results of operations, cash flows and ability to service our indebtedness.

A material reduction in the refining margins at Western could make operating at full capacity uneconomical for Western and would impact the volume of refined and other products that we handle. Refining margins are dependent both upon the price of crude oil or other refinery feedstock and the price of refined and other products. Refining margins historically have been volatile, and are likely to continue to be volatile, as a result of a variety of factors, including fluctuations in the prices of crude oil, other feedstocks, refined products and fuel and utility services. Historically, Western’s refining margins have been positively impacted by the discount of WTI crude oil to Brent crude oil and the discount of WTI Midland crude oil to WTI Cushing crude oil, as the majority of its crude oil purchases are based on pricing tied to WTI Midland. However, the discount of WTI crude oil to Brent crude oil declined to $0.38 per barrel in 2016 from $3.68 per barrel in 2015, and the WTI Midland/Cushing differential averaged a discount of $0.15 per barrel for 2016 compared to $0.37 in 2015. In addition, both the WTI/Brent discount and the WTI Midland/Cushing discount remain volatile, and either or both of these discounts could remain narrow, further decline or invert in the future. We expect continued volatility in crude oil pricing. It is possible that this volatility in crude oil pricing and crack spreads may continue for prolonged periods of time due to numerous factors beyond our and Western's control, including the global supply and demand for crude oil, gasoline and refined and other products. Prolonged periods of low crude oil prices could impact production growth of inland crude oil, which could impact the availability of crude oil and the associated volumes gathered and transported on our logistics systems.

In addition to current market conditions, there are long-term factors that may impact the supply and demand of refined and other products in the United States. These factors include:


•	changes in global and local economic and political conditions;


•	domestic and foreign demand for crude oil and refined products, especially in the U.S., China and India;


•	worldwide political conditions, particularly in significant oil producing regions such as the Middle East, West Africa, Russia and Latin America;


•	political and geopolitical instability or armed conflict in oil producing regions;


•	the level of foreign and domestic production of crude oil and refined products and the level of crude oil, feedstocks and refined products imported into the U.S., that can be impacted by accidents, interruptions in transportation, inclement weather or other events affecting producers and suppliers;


•	U.S. government regulations, including legislation affecting the exportation of domestic crude oil;


•	utilization rates of U.S. refineries;


•	changes in fuel specifications required by environmental and other laws;


•	the ability of the members of the Organization of Petroleum Exporting Countries (“OPEC”) to influence oil prices and production controls;


•	commodities speculation;


•	development and marketing of alternative and competing fuels;


•	pricing and other actions taken by competitors that impact the market;


•	product pipeline capacity, including the Magellan Southwest System pipeline, Kinder Morgan’s East Line, the Aranco pipeline and the Magellan pipeline system, all of which could increase supply in certain of Western’s service areas and therefore reduce Western’s margins;


•	accidents, interruptions in transportation, inclement weather or other events that can cause unscheduled shutdowns or otherwise adversely affect our plants, machinery or equipment or those of our suppliers or customers; and


•	local factors, including market conditions, weather conditions and the level of operations of other refineries and pipelines in our service areas.

If the demand for refined and other products, particularly in Western’s primary distribution areas, decreases significantly, or if there were a material increase in the price of crude oil supplied to Western’s refineries without an increase in the value of the products produced by those refineries, either temporary or permanent, that caused Western to reduce production of refined and other products at its refineries, there would likely be a reduction in the volumes of crude oil and refined and other products

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we handle for Western. Any such reduction could adversely affect our financial condition, results of operations, cash flows and ability to service our indebtedness.

Our logistics operations and Western’s refining operations are subject to many risks and operational hazards, some of which may result in business interruptions and shutdowns of our or Western’s facilities and damages for which we may not be fully covered by insurance. If a significant accident or event occurs that results in business interruption or shutdown for which we are not adequately insured, our operations and financial results could be adversely affected.

Our logistics operations are subject to all of the risks and operational hazards inherent in transporting and storing crude oil and refined and other products, including:


•	damages to pipelines and facilities, related equipment and surrounding properties caused by earthquakes, floods, fires, severe weather, explosions and other natural disasters and acts of terrorism;


•	the inability of third-party facilities on which our operations are dependent, including Western’s facilities, to complete capital projects and to restart timely refining operations following a shutdown;


•	mechanical or structural failures at our facilities or at third-party facilities on which our operations are dependent, including Western’s facilities;


•	curtailments of operations relative to severe seasonal weather;


•	inadvertent damage to pipelines from construction, farm and utility equipment; and


•	other hazards.

These risks could result in substantial losses due to personal injury and/or loss of life, severe damage to and destruction of property and equipment and pollution or other environmental damage, as well as business interruptions or shutdowns of our facilities. Any such event or unplanned shutdown could have a material adverse effect on our business, financial condition and results of operations. In addition, Western’s refining operations, on which our operations are substantially dependent, are subject to similar operational hazards and risks inherent in refining crude oil. A serious accident at our facilities or at Western’s facilities could result in serious injury or death to employees of our general partner or its affiliates or contractors and could expose us to significant liability for personal injury claims and reputational risk. We have no control over the operations at Western’s refineries.

We are insured under the property, liability and business interruption policies of Western, subject to the deductibles and limits under those policies. To the extent Western experiences losses under the insurance policies, the limits of our coverage may be decreased. The occurrence of an event that is not fully covered by insurance or failure by one or more insurers to honor its coverage commitments for an insured event could have a material adverse effect on our business, financial condition and results of operations.

Our substantial dependence on the El Paso, Gallup and St. Paul Park refineries as well as the lack of diversification of our assets and geographic locations could adversely affect our ability to service our indebtedness.

We believe that a significant portion of our revenues for the foreseeable future will be derived from operations supporting the El Paso, Gallup and St. Paul Park refineries. Any event that renders either refinery temporarily or permanently unavailable or that temporarily or permanently reduces rates at either refinery could have a material adverse effect on our financial condition, results of operations, cash flows and ability to service our indebtedness.

We rely on revenues generated from our pipelines and gathering operations and our transportation, terminalling and storage operations that are located in Arizona, Minnesota, New Mexico and West Texas. Due to our lack of diversification in assets and geographic location, an adverse development in our businesses or areas of operations, including adverse developments due to catastrophic events, weather, regulatory action and decreases in demand for crude oil and refined products, could have a significantly greater impact on our results of operations and cash available to service our indebtedness than if we maintained more diverse assets and locations. Such events may constitute force majeure events under our Commercial Agreements, potentially resulting in the suspension, reduction or termination of one or more Commercial Agreements in the impacted geographic area. In addition, during a refinery turnaround, we expect that Western may only satisfy its minimum volume commitments with respect to our assets that serve such refinery.

A material decrease in wholesale fuel or lubricants margins could adversely affect our financial condition, results of operations, cash flows and ability to service our indebtedness.

A significant portion of our wholesale fuel sales and all of our lubricants sales are made to third-party customers. The margins we earn on these sales are dependent on a number of factors outside of our control, including the overall supply of refined products and lubricants as well as the demand for these products by our customers. Among other circumstances, the margins we earn through these activities would likely be adversely impacted in the event of excess supply of refined products

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or lubricants and corresponding customer demand that is below historical norms. These supply and demand dynamics are subject to day-to-day variability and may result in volatility in the margins that we achieve. Extended periods of conditions that result in our earning margins being lower than anticipated at the time of the acquisition could adversely affect our financial condition, results of operations and cash flows.

Terrorist attacks or cyber-attacks, threats of war or actual war may negatively affect our and Western’s operations, financial condition, results of operations, cash flows and prospects.

Terrorist attacks in the U.S., as well as events occurring in response to or in connection with them, may adversely affect our or Western’s operations, financial condition, results of operations, cash flows and prospects. Energy-related assets (that could include third-party pipelines and refineries, such as the Western refineries on which we are substantially dependent, and terminals and pipelines such as ours) may be at greater risk of future terrorist attacks than other possible targets. A direct attack on our assets or assets used by us could have a material adverse effect on our operations, financial condition, results of operations, cash flows and prospects. In addition, any terrorist attack could have an adverse impact on energy prices, including prices for Western’s crude oil and refined and other products. While we are an additional insured party under insurance policies maintained by Western that provide coverage against terrorist attacks, such insurance has become increasingly expensive and difficult to obtain. As a result, insurance providers may not continue to offer this coverage to us on terms that we consider affordable, or at all.

We and Western are dependent on technology infrastructure and maintain and rely upon certain critical information systems for the effective operation of our respective businesses. These information systems include data network and telecommunications, internet access and our websites and various computer hardware equipment and software applications, including those that are critical to the safe operation of our pipelines and terminals. These information systems are subject to damage or interruption from a number of potential sources including natural disasters, software viruses or other malware, power failures, cyber-attacks and other events. To the extent that these information systems are under our control, we have implemented measures such as virus protection software and emergency recovery processes to address the outlined risks. However, security measures for information systems cannot be guaranteed. Breaches to our networks could lead to such information being accessed, publicly disclosed, lost or stolen, and could result in legal claims or proceedings, liability under laws that protect the privacy of customer information, disrupt the services we provide and damage our reputation, any of which could have a material adverse effect on our operations, financial condition, results of operations, and cash flows. Any compromise of our data security or our inability to use or access these information systems at critical points in time could unfavorably impact the timely and efficient operation of our business and subject us to additional costs and liabilities.

A material decrease in the supply of crude oil available to Western’s refineries could significantly reduce the volume of crude oil gathered and transported by our pipeline systems and the refined and other products distributed by our terminals which could adversely affect our financial condition, results of operations, cash flows and ability to service our indebtedness.

The volume of crude oil that we gather and transport on our pipeline systems and the volume of refined and other products that we distribute at our terminals depends on the volume of refined and other products produced at Western’s refineries. Western continually contracts with third-party crude oil suppliers to maintain a sufficient supply of crude oil for production at their refineries. In order to maintain or increase refined and other product production levels at their refineries, Western must continually contract for new crude oil supplies at a greater rate than the rate of decline in Western’s current supplies. A decline in available crude oil to Western’s refineries could result in an overall decline in volumes of refined and other products produced by Western’s refineries. If the volume of attractively-priced, high-quality crude oil available to Western’s refineries is materially reduced for a prolonged period of time, including due to decreased production activity resulting from recent periods of depressed crude oil prices, the volume of crude oil gathered and transported by our pipeline systems and the volume of refined and other products distributed by our terminals and the related fees for those services, could be materially reduced which could adversely affect our financial condition, results of operations, cash flows and ability to service our indebtedness.

We may not be able to increase our third-party revenue significantly or at all due to competition and other factors, which could limit our ability to grow and extend our dependence on Western.

Part of our growth strategy includes diversifying our customer base by identifying opportunities to offer services to third parties with our existing assets or by acquiring or developing new assets independently from Western. Our ability to increase our third-party revenue is subject to numerous factors beyond our control, including competition from third parties and the extent to which we lack available capacity when third-party shippers require it. To the extent that we have available capacity at our refined products terminals available for third-party volumes, competition from other existing or future refined products terminals owned by third parties may limit our ability to utilize this available capacity.

We have historically provided pipeline, gathering, transportation, terminalling and storage services to third parties on only a limited basis. We can provide no assurance that we will be able to attract any material third-party service opportunities,

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and we are currently restricted from doing so under our Commercial Agreements with Western in circumstances where it would inhibit our ability to provide services to Western except where such restriction will be contrary to or in violation of FERC regulations. Our efforts to attract new unaffiliated customers may be adversely affected by our relationship with Western, our desire to principally provide services pursuant to fee-based contracts and, with respect to the pipeline systems, Western’s operational requirements at its refineries that rely upon our pipeline and gathering systems to supply a significant portion of their crude oil requirements and that we expect to continue to utilize a significant portion of the available capacity of the current pipeline systems for transportation of crude oil to Western’s refineries. Our potential customers may prefer to obtain services under other forms of contractual arrangements under which we would be required to assume direct commodity exposure. In addition, we will need to establish a reputation among our potential customer base for providing high-quality service in order to successfully attract unaffiliated third parties.

Our and Western’s expansion of existing assets and development of new assets may not result in revenue increases and will be subject to risks associated with crude oil production and regulatory, environmental, political, legal and economic risks, which could adversely affect our operations and financial condition.

A portion of our strategy to grow and increase distributions to our unitholders is dependent on projected increased crude oil production in our existing areas of operation and on our or Western’s ability to expand existing assets and to develop additional assets. There can be no assurance that expected crude oil production increases will occur in the future or that crude oil production in our existing areas of operations will not decline in the future. Recently, oil and natural gas prices have declined significantly. In recent years, the prices of crude oil, other feedstocks and refined products have fluctuated. The NYMEX WTI postings of crude oil for 2016 ranged from $29.64 per barrel in February 2016 to $52.17 per barrel in December 2016 to $52.94 as of February 24, 2017. An extended decline in crude oil prices could lead to a decline in drilling activity and production, which could impact the availability of crude oil and the associated volumes gathered and transported on our logistics systems. Additionally, drilling activities by third parties as well as the construction of a new pipeline or terminal or the expansion of an existing pipeline or terminal, such as by adding horsepower or pump stations, increasing storage capacity or otherwise, involves numerous regulatory, environmental, political, legal and economic uncertainties, most of which are beyond our control.

If we or Western undertake these projects, they may not be completed on schedule, completed at all or completed at the budgeted cost. Moreover, we may not receive sufficient long-term contractual commitments from customers to provide the revenue needed to support such projects and we may be unable to negotiate acceptable interconnection agreements with third-party pipelines to provide destinations for increased throughput. Even if we receive such commitments or make such interconnections, we may not realize an increase in revenue for an extended period of time. For instance, we may develop facilities to capture anticipated future growth in production in a region in which such growth does not materialize. Moreover, if we build a new pipeline, the construction will occur over an extended period of time and we will not receive any material increases in revenues until after completion of the project. As a result, new facilities may not be able to attract enough throughput to achieve our expected investment return, which could adversely affect our financial condition, results of operations and our ability to service our indebtedness.

If we are unable to make acquisitions on economically acceptable terms from Western or third parties, our future growth would be limited, and any acquisitions we make may reduce, rather than increase, our cash flows and ability to service our indebtedness.

A portion of our strategy to grow our business and increase distributions to unitholders is dependent on our ability to make acquisitions that result in an increase in cash flow. The acquisition component of our growth strategy is based, in large part, on our expectation of ongoing divestitures of gathering, transportation and storage assets by industry participants, including Western. A material decrease in such divestitures would limit our opportunities for future acquisitions and could adversely affect our ability to grow our operations and increase cash distributions to our unitholders. If we are unable to make acquisitions from Western or third parties, because we are unable to identify attractive acquisition candidates or negotiate acceptable purchase contracts, we are unable to obtain financing for these acquisitions on economically acceptable terms or we are outbid by competitors, our future growth and ability to service our indebtedness will be limited. Furthermore, even if we do consummate acquisitions that we believe will be accretive, they may in fact result in a decrease in cash flow. Any acquisition involves potential risks, including, among other things:


•	mistaken assumptions about revenues and costs, including synergies;


•	an inability to integrate successfully the businesses or assets we acquire;


•	the assumption of unknown liabilities;


•	limitations on rights to indemnity from the seller;


•	mistaken assumptions about the overall costs of equity or debt;

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•	the diversion of management’s attention from other business concerns;


•	unforeseen difficulties operating in new product areas or new geographic areas; and


•	customer or key employee losses at the acquired businesses.

If we consummate any future acquisitions, our capitalization and results of operations may change significantly, and unitholders will not have the opportunity to evaluate the economic, financial and other relevant information that we will consider in determining the application of these funds and other resources.

Our right of first offer to acquire certain of Western’s existing assets is subject to risks and uncertainty, and ultimately we may not acquire any of those assets.

Our omnibus agreement provides us with a right of first offer on certain of Western’s existing assets and certain logistics assets Western may acquire or construct in the future in the Permian Basin or the Four Corners area through October 2023. We do not have a current agreement or understanding with Western to purchase any assets covered by our rights of first offer. The consummation and timing of any future acquisitions of these assets will depend upon, among other things, Western’s willingness to offer these assets for sale, our ability to negotiate acceptable purchase agreements and Commercial Agreements with respect to the assets and our ability to obtain financing on acceptable terms. We can offer no assurance that we will be able to successfully consummate any future acquisitions in keeping with our rights of first offer, and Western is under no obligation to accept any offer that we may choose to make. In addition, certain of the assets covered by our rights of first offer may require substantial capital expenditures in order to maintain compliance with applicable regulatory requirements or otherwise make them suitable for our commercial needs. For these or a variety of other reasons, we may decide not to exercise our rights of first offer if and when any assets are offered for sale, and our decision will not be subject to unitholder approval. In addition, our rights of first offer may be terminated by Western at any time after it no longer controls our general partner.

Our ability to expand and increase our utilization rates may be limited if Western’s refining and marketing operations do not grow as expected.

Part of our growth strategy depends on the growth of Western’s refining and marketing operations. For example, we believe our growth will primarily be influenced by identifying and executing organic expansion projects that will result in increased throughput volumes from Western and third parties. Our prospects for organic growth currently include projects that we expect Western to undertake, such as adding gathering lines to our existing systems, and that we expect to have an opportunity to purchase from Western. If Western focuses on other growth areas or does not make capital expenditures to fund the organic growth of its logistics operations, we may not be able to fully execute our growth strategy.

Any reduction in the capacity of, or the allocations to, shippers in interconnecting, third-party pipelines could cause a reduction of volumes distributed through our terminals and pipelines.

Western is dependent upon connections to third-party pipelines to transport refined and other products to certain of our terminals and to ship crude oil through certain of our pipelines. For example, the El Paso Refinery is dependent on a pipeline owned by a subsidiary of Kinder Morgan for the delivery of all of its crude oil. Any reduction of capacities of these interconnecting pipelines due to testing, line repair, reduced operating pressures, retirement or abandonment of facilities or other causes could result in reduced volumes of refined and other products distributed through our terminals and shipments of crude oil through our pipelines. Similarly, if additional shippers begin transporting volumes of refined and other products or crude oil over interconnecting pipelines, the allocations to Western and other existing shippers on these pipelines could be reduced, which could also reduce volumes distributed through our terminals or transported through our pipelines. Allocation reductions of this nature are not infrequent and are beyond our control. Any significant reduction in volumes would adversely affect our revenues and cash flow and our ability to service our indebtedness.

We could incur substantial costs or disruptions in our business if we cannot obtain or maintain necessary permits and authorizations or otherwise comply with health, safety, environmental and other laws and regulations.

Our operations require numerous permits and authorizations under various laws and regulations, including environmental and worker health and safety laws and regulations. These authorizations and permits are subject to revocation, renewal or modification and can require operational changes that may involve significant costs to limit impacts or potential impacts on the environment and/or health and safety. A violation of these authorization or permit conditions or other legal or regulatory requirements could result in substantial fines, criminal sanctions, permit revocations and injunctions prohibiting our operations. In addition, major modifications of our operations could require modifications to our existing permits or expensive upgrades to our existing pollution control equipment that could have a material adverse effect on our business, financial condition, results of operations and cash flows.

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We may be unsuccessful in integrating the operations of the St. Paul Park Logistics Assets, or in realizing all or any part of the anticipated benefits of the St. Paul Park Logistics Transaction.

The acquisition component of our growth strategy depends on the successful integration of acquisitions such as the St. Paul Park Logistics Transaction. We face numerous risks and challenges to successful integration of the St. Paul Park Logistics Assets, including:


•	the potential for unexpected costs, delays and challenges that may arise in integrating the St. Paul Park Logistics Assets into our existing business;


•	environmental or regulatory compliance matters or liabilities or accidents;


•	the temporary diversion of management’s attention from our existing businesses;


•	our inability or limited ability to control the operations and management of the St. Paul Park Logistics Assets; and


•	the incurrence of unanticipated liabilities and costs for which indemnification is unavailable or inadequate.

If we are unable to successfully integrate the St. Paul Park Logistics Assets due to any of these factors, our future business, operations and distributable cash flow could be adversely impacted.

We do not own all of the land on which our pipelines, terminals and other assets are located, which could result in disruptions to our operations.

We do not own all of the land on which our pipelines, terminals and other assets are located, and we are, therefore, subject to the possibility of more onerous terms and increased costs to continue to use this land. Our pipeline rights-of-way and leases expire after a specific period of time. Our loss of these rights-of-way or leases could have a material adverse effect on our business, results of operations, financial condition and ability to service our indebtedness.

Severe weather could interrupt the supply of some of Western’s feedstock and our wholesale and logistics operations.

Crude oil supplies for the El Paso Refinery and the Gallup Refinery come from the Permian Basin in Texas and New Mexico, and therefore are not generally subject to interruption from hurricanes. However, due to severe weather or other factors, if there is an interruption to Western’s supply of feedstock for the El Paso Refinery and the Gallup Refinery for a prolonged period of time, the volume of crude oil gathered and transported by our pipeline systems and the volume of refined and other products distributed by our terminals, and the related fees for those services, could be materially reduced. In addition, severe weather could interrupt our wholesale and logistics operations. If severe weather or other factors were to impact the supply of some of Western’s feedstock or our wholesale and logistics operations, our financial condition, results of operations, cash flows and ability to service our indebtedness may be adversely effected.

Restrictions in our revolving credit facility and the indenture governing our senior notes could adversely affect our business, financial condition, results of operations and ability to service our indebtedness.

We are dependent upon the earnings and cash flow generated by our operations in order to meet our debt service obligations. The operating and financial restrictions and covenants in our revolving credit facility, the indenture governing our senior notes, and any future financing agreements could restrict our ability to finance future operations or capital needs, or to expand or pursue our business activities, which may limit our ability to make cash distributions to our unitholders. For example, each of our revolving credit facility and the indenture governing our senior notes contain restrictions on our ability to, among other things:


•	make certain cash distributions;


•	incur certain indebtedness;


•	create certain liens;


•	make certain investments; and


•	merge or sell all or substantially all of our assets.

Furthermore, our revolving credit facility contains covenants requiring us to maintain certain financial ratios. The provisions of our revolving credit facility and the indenture governing our senior notes may affect our ability to obtain future financing and pursue attractive business opportunities and our flexibility in planning for, and reacting to, changes in business conditions. In addition, a failure to comply with the provisions of our revolving credit facility or the indenture governing our senior notes could result in an event of default that could enable our lenders or note holders, subject to the terms and conditions of the revolving credit facility or the indenture, as applicable, to declare the outstanding principal of that debt, together with accrued interest, to be immediately due and payable. If we were unable to repay the accelerated amounts, our lenders could proceed against the collateral granted to them to secure such debt, if any. If the payment of our debt is accelerated, defaults

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under our other debt instruments may be triggered, and our assets may be insufficient to repay such debt in full and the holders of our units could experience a partial or total loss of their investment.

Our current and future debt levels may limit our flexibility to obtain financing and to pursue other business opportunities.

Our current and future levels of debt could have important consequences to us, including the following:


•	our ability to obtain additional financing, if necessary, for working capital, capital expenditures or other purposes may be impaired, or such financing may not be available on favorable terms;


•	our funds available for operations, future business opportunities and distributions to unitholders will be reduced by that portion of our cash flow required to make interest payments on our debt;


•	we may be more vulnerable to competitive pressures or a downturn in our business or the economy generally; and


•	our flexibility in responding to changing business and economic conditions may be limited.

As of December 31, 2016, we had long-term debt of $320.3 million, excluding unamortized financing costs. Any of these factors could result in a material adverse effect on our business, financial condition, results of operations and business prospects.

Our ability to service our debt will depend upon, among other things, our future financial and operating performance, which will be affected by prevailing economic conditions and financial, business, regulatory and other factors, some of which are beyond our control. If our operating results are not sufficient to service our notes or any future indebtedness, we will be forced to take actions such as reducing distributions, reducing or delaying our business activities, acquisitions, organic growth projects, investments or capital expenditures, selling assets or issuing equity. We may not be able to affect any of these actions on satisfactory terms, or at all.

The amount of cash we have available for distribution to holders of our common and subordinated units depends primarily on our cash flow rather than on our profitability, which may prevent us from making distributions, even during periods in which we record net income.

The amount of cash we have available for distribution depends primarily upon our cash flow and not solely on profitability, which will be affected by non-cash items. As a result, we may make cash distributions during periods when we record net losses for financial accounting purposes, and we may not make cash distributions during periods when we record net income for financial accounting purposes.

Western’s level of indebtedness, the terms of its borrowings and its credit ratings could adversely affect our ability to grow our business, our ability to service our indebtedness and our credit ratings and profile. Our ability to obtain credit in the future may also be affected by Western’s credit ratings.

Western must devote a portion of its cash flows from operating activities to service its indebtedness, and therefore cash flows may not be available for use in pursuing its growth strategy. Furthermore, a higher level of indebtedness at Western in the future increases the risk that it may default on its obligations to us under each of our Commercial Agreements. Western may incur additional indebtedness in the future which could further impact Western’s ability to pursue its growth strategy with respect to its logistics operations.

The covenants contained in the agreements governing Western’s outstanding and future indebtedness may limit its ability to borrow additional funds for development and make certain investments and may directly or indirectly impact our operations in a similar manner. For example, Western’s indebtedness requires that any transactions it enters into with us must be on terms no less favorable to Western than those that would have been obtained in a comparable arm’s-length transaction with an unaffiliated person. Furthermore, in the event that Western were to default under certain of its debt obligations, there is a risk that Western’s creditors would attempt to assert claims against our assets during the litigation of their claims against Western. The defense of any such claims could be costly and could materially impact our financial condition, even absent any adverse determination. In the event these claims were successful, our ability to meet our obligations to our creditors, make distributions and finance our operations could be materially adversely affected.

Western’s long-term credit ratings are currently below investment grade. If these ratings are lowered in the future, Western’s borrowing costs may increase. In addition, credit rating agencies will likely consider Western’s debt ratings when assigning ours because of Western’s ownership interest in us, the significant commercial relationships between Western and us, and our reliance on Western for a substantial portion of our revenues. If one or more credit rating agencies were to downgrade the outstanding indebtedness of Western, we could experience an increase in our borrowing costs or difficulty accessing the capital markets. Such a development could adversely affect our ability to grow our business and to service our indebtedness.

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Our assets and operations are subject to federal, state and local laws and regulations relating to environmental protection and worker health and safety that could require us to make substantial expenditures.

Our assets and operations involve the transportation, terminalling and storage of crude oil and refined and other products, which is subject to increasingly stringent federal, state and local laws and regulations governing operational safety and the discharge of materials into the environment. Environmental laws can result in the imposition of strict, joint and several liability for pollution in some instances. Our business of transporting, terminalling and storing crude oil and refined and other products involves the risk that crude oil, refined and other products and other hydrocarbons may gradually or suddenly be released into the environment. We also own or lease a number of properties that have been used to store or distribute crude oil and refined and other products for many years and hazardous substances, wastes or petroleum hydrocarbons may have been released on, under or from the properties owned or leased by us, or on, under or from other locations, including off-site locations where such substances have been taken for recycling or disposal. In addition, many of these properties have been operated by third parties whose handling, disposal or release of hydrocarbons and other wastes were not under our control. To the extent not covered by insurance or an indemnity, responding to the release of regulated substances into the environment may cause us to incur potentially material expenditures related to response actions, remediation costs, government penalties, natural resources damages, personal injury or property damage claims from third parties and business interruption.

Our pipelines, terminals and storage assets are also subject to increasingly strict federal, state and local laws and regulations related to protection of the environment and that require us to comply with various safety requirements regarding the design, installation, testing, construction and operational management of our pipeline systems, terminals and storage assets. These regulations have raised operating costs for the crude oil and refined products industry and compliance with such laws and regulations may cause us and Western to incur potentially material capital expenditures associated with the construction, maintenance and upgrading of equipment and facilities. Environmental laws and regulations, in particular, are subject to frequent change, and many of them have become and will continue to become more stringent.

We could incur potentially significant additional expenses should we determine that any of our assets are not in compliance with applicable laws and regulations. Our failure to comply with these or any other environmental or safety-related regulations could result in the assessment of administrative, civil or criminal penalties, the imposition of investigatory and remedial liabilities and the issuance of injunctions that may subject us to additional operational constraints or prohibit operations altogether. Any such penalties or liability could have a material adverse effect on our business, financial condition or results of operations.

Our pipeline systems are subject to stringent environmental regulations governing spills and releases that could require us to make substantial expenditures.

Transportation of crude oil and refined and other products involves inherent risks of spills and releases from our facilities, and can subject us to various federal and state laws governing spills and releases, including reporting and remediation obligations. The costs associated with such obligations can be substantial, as can costs associated with related enforcement matters, including possible fines and penalties. Transportation of such products over water or proximate to navigable water bodies involves inherent risks, including risks of spills, which could lead to the assessment of penalties, response costs and natural resource damages under the Oil Pollution Act. In addition, the Oil Pollution Act requires us to prepare a facility response plan identifying the personnel and equipment necessary to remove to the maximum extent practicable a “worst case discharge.” Some of our facilities are required to maintain such facility response plans. To meet this requirement, we and Western have contracted with various spill response service companies in the areas in which we transport or store crude oil and refined and other products. However, these companies may not be able to adequately contain a “worst case discharge” in all instances, and we cannot ensure that all of their services would be available for our or Western’s use at any given time. Many factors that could inhibit the availability of these service providers include, but are not limited to, weather conditions, governmental regulations or other global events. In these and other cases, we may be subject to liability in connection with the discharge of crude oil or products into navigable waters.

If any of these events occur or are discovered in the future, whether in connection with any of our pipelines, gathering, transportation, terminals or storage assets, or any other facility that we send or have sent wastes or by-products to for treatment or disposal, we could be liable for all costs and penalties associated with the remediation of such facilities under federal, state and local environmental laws or common law. We may also be liable for personal injury or property damage claims from third parties alleging contamination from spills or releases from our facilities or operations. In addition, we will be subject to a deductible of $100,000 per claim before we are entitled to indemnification from Western for certain environmental liabilities under our omnibus agreement. Even if we are insured or indemnified against such risks, we may be responsible for costs or penalties to the extent our insurers or indemnitors do not fulfill their obligations to us.

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Increased regulation of hydraulic fracturing could result in reductions or delays in crude oil production in our existing areas of operation, which could adversely impact our revenues.

A significant percentage of the crude oil production in our existing areas of operation is being developed from unconventional sources, such as shale, using hydraulic fracturing. Hydraulic fracturing involves the injection of water, sand and chemicals under pressure into the formation to stimulate production. A number of federal agencies, including the EPA and the U.S. Department of Energy, are analyzing, or have been requested to review, a variety of environmental issues associated with shale development, including hydraulic fracturing. In addition, the EPA has asserted federal regulatory authority over hydraulic fracturing activities under the Safe Drinking Water Act’s Underground Injection Control Program and under the Toxic Substances Control Act of 1976 and in June 2016 issued final rules regulating methane emissions from oil and natural gas completion operations. Further, some states and municipalities have adopted and other states and municipalities are considering adopting, regulations prohibiting hydraulic fracturing in certain areas or imposing more stringent disclosure. At the same time, certain environmental groups have suggested that additional laws may be needed to more closely and uniformly regulate the hydraulic fracturing process and legislation has been proposed by some members of Congress to provide for such regulation. We cannot predict whether any such legislation will ever be enacted and if so, what its provisions would be. If additional levels of regulation are imposed at the federal, state or local level, this could result in corresponding delays, increased operating costs and process prohibitions for crude oil producers and potentially reduce throughput on our systems, which could materially adversely affect our revenues, results of operations and ability to service our indebtedness.

We may incur significant costs and liabilities as a result of pipeline integrity management programs or safety standards.

Certain of our pipeline facilities are subject to the pipeline safety regulations of the PHMSA of the DOT. PHMSA regulates the design, construction, testing, operation, maintenance and emergency response of crude oil, petroleum products and other hazardous liquid pipeline facilities.

Pursuant to the Pipeline Safety Improvement Act of 2002, PHMSA has adopted regulations requiring pipeline operators to develop integrity management programs for hazardous liquids pipelines located where a leak or rupture could affect “high consequence areas” that are populated or environmentally sensitive areas. PHMSA has also issued regulations that subject certain rural low-stress hazardous liquids pipelines to the integrity management requirements. The integrity management regulations require operators, including us, to:


•	perform ongoing assessments of pipeline integrity;


•	identify and characterize applicable threats to pipeline segments that could impact a high consequence area;


•	maintain processes for data collection, integration and analysis;


•	repair and remediate pipelines as necessary; and


•	implement preventive and mitigating actions.

PHMSA also carries out the Pipeline Safety, Regulatory Certainty and Job Creation Act of 2011 (the “2011 Pipeline Safety Act”), which reauthorized funding for federal pipeline safety programs through 2015, increased penalties for safety violations, established additional safety requirements for newly constructed pipelines, imposed new emergency response and incident notification requirements and required studies of certain safety issues that could result in the adoption of new regulatory requirements for existing pipelines. The 2011 Pipeline Safety Act increases the maximum penalty for violation of pipeline safety regulations from $100,000 to $200,000 per violation per day and also a maximum penalty of $1 million to $2 million for a series of related violations.

On June 22, 2016, the President signed into law important new legislation entitled Protecting our Infrastructure of Pipelines and Enhancing Safety Act of 2016 (the “PIPES Act”). The PIPES Act reauthorizes PHMSA through 2019, and facilitates greater pipeline safety by providing PHMSA with emergency order authority, including authority to issue prohibitions and safety measures on owners and operators of gas or hazardous liquid pipeline facilities to address imminent hazardous, without prior notice or an opportunity for a hearing, as well as enhanced release reporting requirements, requiring a review of both natural gas and hazardous liquid integrity management programs, and mandating the creation of a working group to consider the development of an information-sharing system related to integrity risk analyses. The PIPES Act also requires that PHMSA publish periodic updates on the status of those mandates outstanding from 2011 Pipeline Safety Act, of which approximately half remain to be completed. The mandates yet to be acted upon include requiring certain shut-off valves on transmission lines, mapping all high consequence areas, and shortening the deadline for accident and incident notifications.

PHMSA regularly revises its pipeline safety regulations. For example, in March of 2015, PHMSA finalized new rules applicable to hazardous liquid pipelines that, among other changes, impose new post-construction inspections, welding, gas component pressure testing requirements, as well as requirements for calculating pressure reductions for immediate repairs on liquid pipelines. In addition, in January 2017, PHMSA finalized regulations for hazardous liquid pipelines that significantly extend and expand the reach of certain PHMSA integrity management requirements (i.e., periodic assessments, leak detection

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and repairs), regardless of the pipeline’s proximity to a high consequence area. The final rule also imposes new reporting requirements for certain unregulated pipelines, including all hazardous liquid gathering lines. Additional future regulatory action expanding PHMSA jurisdiction and imposing stricter integrity management is likely. At this time, we cannot predict the cost of such requirements, but they could be significant. However, the timing for implementation of this rule is uncertain at this time due to the recent change in Presidential Administrations.

We may incur significant costs and liabilities associated with compliance with pipeline safety regulations and any corresponding repair, remediation, preventive or mitigation measures required for our nonexempt pipeline facilities, including lost cash flows resulting from shutting down our pipelines during the pendency of such repairs. Any material penalties or fines under these or other statues, rules, regulations or orders could have a material adverse impact on our business, financial condition, results of operation and cash flows. Moreover, changes to pipeline safety laws and regulations that result in more stringent or costly pipeline integrity management or safety standards could have a material adverse effect on us and similarly situated operators. Furthermore, the implementation of the 2011 Pipeline Safety Act, the PIPES Act, or any issuance or reinterpretation of guidance by PHMSA or similar state agencies could require us to install new or modified safety controls, pursue additional capital projects or conduct maintenance programs on an accelerated basis, any or all of which could result in our incurring increased operating costs that could be significant and have a material adverse effect on our results of operations or financial position. For example, notwithstanding the applicability of the OSHA’s Process Safety Management (“PSM”) regulations and the EPA’s Risk Management Plan (“RMP”) requirements at facilities storing designated chemicals above a certain threshold, PHMSA and one or more state regulators, including the Texas Railroad Commission, have recently expanded the scope of their regulatory inspections to include certain in-plant equipment and pipelines found within midstream facilities and associated storage facilities to assess compliance with hazardous liquid pipeline safety requirements. If PHMSA and other similar state agencies continue to expand their authority and impose hazardous liquid pipeline safety requirements on facilities previously thought to be exempt, we could be forced to make certain operational changes or modifications to our facilities beyond existing OSHA and EPA requirements. Such changes could result in additional capital costs and increased costs of operation that, in some instances, may be significant.

We could incur significant costs to comply with greenhouse gas emissions regulation or legislation.

In response to concerns related to the emission of greenhouse gases, the EPA has implemented regulations to restrict emissions of greenhouse gases under certain provisions of the federal Clean Air Act. One of the rules adopted by the EPA requires permitting of certain emissions of greenhouse gases from certain large stationary sources, such as refineries. The EPA has also adopted rules requiring certain sources in the oil and natural gas industry to report greenhouse gas emissions on an annual basis, including greenhouse gas emissions from gathering systems and certain transmission pipelines. In addition, in June 2016, the EPA proposed a suite of requirements and draft guidance related to the reduction in methane emissions from certain equipment and processes in the oil and natural gas sector applicable to production, processing, transmission and storage activities, including requirements for fugitive emissions of methane and new leak detection and repair requirements. These rules could result in increased compliance costs.

Further, from time to time, the U.S. Congress has considered legislation related to the reduction of greenhouse gases through “cap and trade” programs, and a number of state and regional efforts have emerged that are aimed at tracking and/or reducing greenhouse emissions by means of cap and trade programs. Various states have also proposed and/or enacted Low Carbon Fuel Standards intended to reduce carbon intensity in transportation fuels. To the extent these types of rules and regulations continue to be implemented or other legislation related to the control of greenhouse gas emissions is enacted by federal or state governments, our operating costs, including capital expenditures, will increase and additional operating restrictions could be imposed on our business; all of which could have a material adverse effect on our business, financial condition, results of operations and cash flows. Such regulations could also decrease demand for petroleum products and potentially reduce throughput on our systems, which would materially adversely affect our revenues and results of operations. Finally, some scientists have concluded that increasing concentrations of greenhouse gases in the earth’s atmosphere may produce climate changes that may have significant physical effects, such as increased frequency and severity of storms, droughts, floods and other extreme climatic events, which if any such event were to occur, it may have a material adverse effect on our business.

Our business is impacted by environmental risks inherent in our operations.

Our operation of crude oil and refined products pipelines, refined products terminals and crude oil and refined products storage assets is inherently subject to the risks of spills, discharges or other inadvertent releases of petroleum or other hazardous substances. If any of these events have previously occurred or occur in the future, whether in connection with any of Western’s refineries, our pipelines, refined products terminals or storage assets or any other facility that we send or have sent wastes or by-products to for treatment or disposal, we could be liable for all costs and penalties associated with the remediation of such facilities under federal, state and local environmental laws or the common law. We may also be liable for personal injury or property damage claims from third parties alleging contamination from spills or releases from our facilities or operations. In addition, our indemnification for certain environmental liabilities under the omnibus agreement will be limited to liabilities

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identified prior to the fifth anniversary of the closing of the Offering. Even if we are insured or indemnified against such risks, we may be responsible for costs or penalties to the extent our insurers or indemnitors do not fulfill their obligations to us. The payment of such costs or penalties could be significant and have a material adverse effect on our business, financial condition and results of operations.

We are subject to regulation by multiple governmental agencies, which could adversely impact our business, results of operations and financial condition.

Our business activities are subject to regulation by multiple federal, state and local governmental agencies. Our historical and projected operating costs reflect the recurring costs resulting from compliance with these regulations, and we do not anticipate material expenditures in excess of these amounts in the absence of future acquisitions, or changes in regulation or discovery of existing but unknown compliance issues. Additional proposals and proceedings that affect the crude oil and refined products industry are regularly considered by Congress, as well as by state legislatures and federal and state regulatory commissions and agencies and courts. We cannot predict when or whether any such proposals may become effective or the magnitude of the impact changes in laws and regulations may have on our business, however, additions or enhancements to the regulatory burden on our industry generally increase the cost of doing business and affect our profitability.

Transportation on certain of our pipelines is subject to federal or state rate and service regulation, and the imposition and/or cost of compliance with such regulation could adversely affect our operations, revenues and cash flows available.

Our Main 12-inch pipeline, West 10-inch pipeline, East 10-inch pipeline, San Juan 6-inch pipeline, West 6-inch pipeline, TexNew Mex 16-inch Pipeline segment, East 6-inch pipeline, Wingate 4-inch NGL pipeline, Riverbend 4-inch gathering pipeline, TexNew Mex Pipeline System and St. Paul Park Refinery System provide services that may be subject to regulation by the Federal Energy Regulatory Commission (“FERC”), under the Interstate Commerce Act (“ICA”) and the Energy Policy Act (the “EPAct 1992”), and/or state regulators. The FERC uses prescribed rate methodologies for developing regulated tariff rates for interstate oil and product pipelines. Our tariff rates approved by the FERC may not recover all of our costs of providing services. In addition, changes to the FERC’s approved rate methodologies, or challenges to our application of an approved methodology, could also adversely affect our rates.

Shippers may protest, and the FERC may investigate, the lawfulness of new or changed tariff rates. The FERC can suspend those tariff rates for up to seven months. It can also require refunds of amounts collected based on rates that are ultimately found to be unlawful and prescribe new rates prospectively. The FERC and interested parties can also challenge tariff rates that have become final and effective.

The FERC can order new rates to take effect prospectively and order reparations for past rates that exceed the just and reasonable level for time periods up to two years prior to the date of a complaint. Due to the complexity of rate making, the lawfulness of any rate is never assured. A successful challenge of our rates could adversely affect our revenues. The FERC also regulates the terms and conditions of service, including access rights, for interstate transportation on common carrier pipelines subject to its jurisdiction.

Certain of our pipelines are common carriers and, as a consequence, we may be required to provide service to customers with credit and other performance characteristics with whom we would otherwise choose not to do business. Certain of our pipelines provide intrastate service that is subject to regulation by the New Mexico Public Regulation Commission and the Texas Railroad Commission. The New Mexico Public Regulation Commission and the Texas Railroad Commission could limit our ability to increase our rates or to set rates based on our costs or could order us to reduce our rates and could require the payment of refunds to shippers. Such regulation or a successful challenge to our intrastate pipeline rates could adversely affect our financial position, cash flows or results of operations.

If we are unable to maintain the requirements of Section 404 of the Sarbanes-Oxley Act, or our internal control over financial reporting is not effective, the reliability of our financial statements may be questioned, and our unit price may suffer.

Section 404 of the Sarbanes-Oxley Act requires any company subject to the reporting requirements of the U.S. securities laws to perform a comprehensive evaluation of its and its subsidiaries’ internal controls. To comply with these requirements, we are required to document and test our internal control procedures, our management is required to assess and issue a report concerning our internal control over financial reporting, and, pursuant to the Sarbanes-Oxley Act, our independent auditors are required to issue an opinion on management’s assessment and the effectiveness of our internal control over financial reporting. The rules governing the standards that must be met for management to assess our internal control over financial reporting are complex and require significant documentation, testing and possible remediation. During the course of its annual testing, our management may identify material weaknesses, which may not be remedied in time to meet the annual deadline imposed by the SEC. If our management cannot favorably assess the effectiveness of our internal control over financial reporting, or our auditors identify material weaknesses in our internal control, investor confidence in our financial results may weaken, and the price of our common units may suffer.

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Our insurance policies do not cover all losses, costs or liabilities that we may experience.

The policies we are insured under do not cover all potential losses, costs or liabilities that we may experience. We could suffer losses for uninsurable or uninsured risks or in amounts in excess of existing insurance coverage. Our ability to obtain and maintain adequate insurance may be adversely affected by conditions in the insurance market over which we have no control. In addition, if we experience insurable events, our annual premiums could increase further or insurance may not be available at all. The occurrence of an event that is not fully covered by insurance or the loss of insurance coverage could have a material adverse effect on our business, financial condition, results of operations and cash flows.

The loss of key personnel could adversely affect our ability to operate.

We depend on the leadership, involvement and services of a relatively small group of our general partner’s key management personnel, including its Chief Executive Officer and other executive officers and key technical and commercial personnel of Western who perform services for us under the operational services agreement. The services of these individuals may not be available to us in the future. Because competition for experienced personnel in the midstream industry is intense, we may not be able to find acceptable replacements with comparable skills and experience. Accordingly, the loss of the services of one or more of these individuals could have a material adverse effect on our ability to operate our business.

Our pipeline and terminalling subsidiaries do not have any employees and rely solely on employees of Western.

We are managed and operated by Western Refining Logistics GP, LLC, our general partner. We directly employed 559 employees through our wholesale subsidiary. Through our general partner's affiliates' we have 295 full-time employees as well as other employees who may provide services to us from time to time, all of whom are seconded to us pursuant to our services agreement with Western. These seconded employees provide operating, maintenance and other services under our direction, supervision and control with respect to the assets that our pipeline and terminalling subsidiaries own and operate. Other Western employees also may provide services to us from time to time.

Many of our assets have been in service for several years and require significant expenditures to maintain them. As a result, our maintenance or repair costs may increase in the future.

Our pipelines, terminals and storage assets are generally long-lived assets, and many of them have been in service for many years. The age and condition of our assets could result in increased maintenance or repair expenditures in the future. Any significant increase in these expenditures could adversely affect our results of operations, financial position or cash flows, as well as our ability to service our indebtedness.

The adoption of derivatives legislation by Congress could have an adverse impact on our customers’ ability to hedge risks associated with their business.

The U.S. Congress adopted the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010 (the “Dodd-Frank Act”). This comprehensive financial reform legislation establishes federal oversight and regulation of the over-the-counter derivatives market and entities, such as us, that participate in that market. The legislation was signed into law by the President on July 21, 2010, and requires the Commodity Futures Trading Commission (“CFTC”) and the SEC to promulgate rules and regulations implementing the new legislation within 360 days from the date of enactment. The CFTC has adopted regulations to set position limits for certain futures and option contracts in the major energy markets and has also proposed to establish minimum capital requirements, although it is not possible at this time to predict whether or when the CFTC will adopt these rules as proposed or include comparable provisions in its rulemaking under the Dodd-Frank Act. The Dodd-Frank Act may also require compliance with margin requirements and with certain clearing and trade-execution requirements in connection with certain derivative activities, although the application of those provisions is uncertain at this time. The legislation may also require the counterparties to our commodity derivative contracts to spin-off some of their derivatives activities to a separate entity, which may not be as creditworthy as the current counterparty, or cause the entity to comply with the capital requirements, which could result in increased costs to counterparties such as us.

The new legislation and regulations promulgated thereunder could increase the operational and transactional cost of derivatives contracts and affect the number and/or creditworthiness of counterparties available to us, to Western, or to our or Western’s customers.

Certain components of our logistics revenue have exposure to commodity price risk and our exposure to commodity price risk may increase in the future.

We have exposure to commodity price risk through the loss allowance provisions contained in our logistics commercial agreements. Any future losses due to our commodity price risk exposure could materially and adversely affect our results of operations and financial condition and our ability in the future to service our indebtedness.

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Increases in interest rates could adversely affect our business.

We have exposure to increases in interest rates under our revolving credit facility. Our current borrowings bear, and any future borrowings will bear, interest either at a base rate, plus an applicable margin, or at LIBOR plus an applicable margin. As a result, our results of operations, cash flows and financial condition could be materially adversely affected by significant increases in interest rates. In addition, if interest rates rise, the interest rates on future credit facilities and debt offerings could be higher than current levels, causing our financing costs to increase accordingly.

As with other yield-oriented securities, our unit price is impacted by the level of our cash distributions and implied distribution yield. The distribution yield is often used by investors to compare and rank related yield-oriented securities for investment decision-making purposes. Therefore, changes in interest rates, either positive or negative, may affect the yield requirements of investors who invest in our units, and a rising interest rate environment could have an adverse impact on our unit price and our ability to issue additional equity, to incur debt to expand or for other purposes or to make cash distributions at our intended levels.

Certain U.S. federal income tax deductions currently available with respect to oil and gas exploration and development may be eliminated as a result of future legislation, which could reduce the amount of transportation and storage fees we receive and our ability to service our indebtedness.

The Fiscal Year 2016 Budget proposed by the President recommends the elimination of certain key U.S. federal income tax incentives currently available to oil and gas exploration and production companies and from time to time legislation has been introduced in Congress which would implement many of these proposals. The proposed changes include, but are not limited to, (i) the repeal of the percentage depletion allowance for oil and gas properties, (ii) the elimination of current deductions for intangible drilling and development costs, (iii) the elimination of the deduction for certain domestic production activities and (iv) an extension of the amortization period for certain geological and geophysical expenditures. We cannot predict whether these or similar changes will be introduced into law and, if so, when any such changes would become effective. The passage of any legislation as a result of these proposals or any other similar changes in U.S. federal income tax laws could raise the cost of energy production and reduce oil and gas exploration and production activities. Because we generate revenue primarily by charging fees and tariffs for transporting crude oil and refined products and for providing storage at our storage tanks and terminals, a reduction in oil and gas production activities could reduce our transportation and storage fee revenue and thus reduce our ability to service our indebtedness.

Risks Related to Our Partnership Structure

Western owns a 52.6% limited partner interest in us and controls our general partner, which has sole responsibility for conducting our business and managing our operations. Our general partner and its affiliates, including Western, may have conflicts of interest with us and limited duties to us and may favor their own interests to the detriment of our unitholders.

Western owns and controls our general partner and appointed all of the directors of our general partner. Some of the directors and all of the executive officers of our general partner are also directors or officers of Western. Although our general partner has a duty to manage us in a manner it subjectively believes to be in, or not opposed to, our best interests, the directors and officers of our general partner also have a duty to manage our general partner in a manner that is in the best interests of Western, in its capacity as the sole member of our general partner. Conflicts of interest may arise between Western and its affiliates, including our general partner, on the one hand, and us and our unitholders, on the other hand. In resolving these conflicts of interest, our general partner may favor its own interests and the interests of its affiliates over the interests of our unitholders. These conflicts include, among others, the following situations:

•

neither our partnership agreement nor any other agreement requires Western to pursue a business strategy that favors us or utilizes our assets, which could involve decisions by Western to increase or decrease refinery production, connect our pipeline systems to third-party delivery points, shutdown or reconfigure a refinery, enter into commercial agreements with us or pursue and grow particular markets. Western’s directors and officers have a fiduciary duty to make these decisions in the best interests of the owners of Western and affiliated entities, which may be contrary to our interests;


•	Western may be constrained by the terms of its debt instruments from taking actions, or refraining from taking actions, that may be in our best interests;


•	Western, as our primary customer, has an economic incentive to cause us to not seek higher tariff rates or terminalling fees, even if such higher rates or fees would reflect rates and fees that could be obtained in arm’s length, third-party transactions;


•	almost all officers of Western who provide services to us also will devote significant time to the business of Western, and will be compensated by Western for the services rendered to it;

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•	our general partner determines the amount and timing of asset purchases and sales, borrowings, issuance of additional partnership securities and reserves, each of which can affect our ability to service our indebtedness;


•	our general partner may cause us to borrow funds in order to permit the payment of cash distributions, even if the purpose or effect of the borrowing is to make a distribution on the subordinated units, to make incentive distributions or to accelerate the expiration of the subordination period;


•	our general partner determines which costs incurred by it are reimbursable by us;


•	our partnership agreement permits us to distribute up to $40.0 million as operating surplus, even if it is generated from asset sales, non-working capital borrowings or other sources that would otherwise constitute capital surplus. This cash may be used to fund distributions on our subordinated units or the incentive distribution rights;


•	our general partner is allowed to take into account the interests of parties other than us in exercising certain rights under our partnership agreement;


•	our partnership agreement limits the liability of, and replaces the duties owed by, our general partner and also restricts the remedies available to our unitholders for actions that, without the limitations, might constitute breaches of fiduciary duty;


•	contracts between us, on the one hand, and our general partner and its affiliates, on the other hand, are not and will not be the result of arm’s-length negotiations;


•	except in limited circumstances, our general partner has the power and authority to conduct our business without unitholder approval;


•	disputes may arise under our Commercial Agreements with Western;

•

our general partner will determine the amount and timing of many of our cash expenditures and whether a cash expenditure is classified as discretionary capital expenditure, which would not reduce operating surplus, or a maintenance capital expenditure, which would reduce our operating surplus. This determination can affect the amount of cash from operating surplus that is distributed to our unitholders and to our general partner, the amount of adjusted operating surplus generated in any given period and the ability of the subordinated units to convert into common units;


•	our general partner may exercise its right to call and purchase all of the common units not owned by it and its affiliates if it and its affiliates own more than 80% of the common units;


•	our general partner controls the enforcement of obligations owed to us by our general partner and its affiliates, including our Commercial Agreements, omnibus agreement and services agreement with Western;


•	our general partner decides whether to retain separate counsel, accountants or others to perform services for us;


•	our general partner, as the holder of our incentive distribution rights, may elect to cause us to issue common units to it in connection with a resetting of incentive distribution levels without the approval of our unitholders. This election may result in lower distributions to our common unitholders in certain situations; and


•	our general partner, as the holder of our incentive distribution rights, may transfer the incentive distribution rights without the approval of our unitholders.

Western may compete with us.

Western may compete with us, including by developing or acquiring additional logistics assets which may not be in the geographic region subject to our rights of first offer set forth in the omnibus agreement, both directly and through its controlled subsidiary, Northern Tier. In keeping with the terms of our partnership agreement, the doctrine of corporate opportunity or any analogous doctrine, does not apply to our general partner or any of its affiliates, including Western and its executive officers and directors. Except as provided in the omnibus agreement, any such person or entity that becomes aware of a potential transaction, agreement, arrangement or other matter that may be an opportunity for us will not have any duty to communicate or offer such opportunity to us. For example, this could permit Western to elect to develop new midstream assets or acquire third-party midstream assets itself, or through Northern Tier. Any such person or entity will not be liable to us or to any limited partner for breach of any fiduciary duty or other duty (other than the implied contractual covenant of good faith and fair dealing) by reason of the fact that such person or entity pursues or acquires such opportunity for itself, directs such opportunity to another person or entity or does not communicate such opportunity or information to us. This may create actual and potential conflicts of interest between us and affiliates of our general partner and result in less than favorable treatment of us and our unitholders.

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Our general partner intends to limit its liability regarding our obligations.

Our general partner intends to limit its liability under contractual arrangements between us and third parties so that the counterparties to such arrangements have recourse only against our assets, and not against our general partner or its assets. Our general partner may therefore cause us to incur indebtedness or other obligations that are nonrecourse to our general partner. Our partnership agreement provides that any action taken by our general partner to limit its liability is not a breach of our general partner’s duties, even if we could have obtained more favorable terms without the limitation on liability. In addition, we are obligated to reimburse or indemnify our general partner to the extent that it incurs obligations on our behalf. Any such reimbursement or indemnification payments would reduce our ability to service our indebtedness.

Ongoing cost reimbursements due to our general partner and its affiliates for services provided, which will be determined by our general partner, will be substantial and will reduce our cash available for distribution to our unitholders.

Prior to making distributions on our common units, we will reimburse our general partner and its affiliates for expenses they incur on our behalf. These expenses will include costs incurred by our general partner and its affiliates in managing and operating us, including costs for rendering corporate staff and support services to us. There is no limit on the amount of expenses for which our general partner and its affiliates may be reimbursed. Our partnership agreement provides that our general partner will determine the expenses that are allocable to us in good faith. In addition, under Delaware partnership law, our general partner has unlimited liability for our obligations, such as our debts and environmental liabilities, except for our contractual obligations that are expressly made without recourse to our general partner. To the extent our general partner incurs obligations on our behalf, we are obligated to reimburse or indemnify it. If we are unable or unwilling to reimburse or indemnify our general partner, our general partner may take actions to cause us to make payments of these obligations and liabilities. Any such payments could reduce the amount of cash otherwise available for distribution to our unitholders.

Our partnership agreement requires that we distribute all of our available cash, which could limit our ability to grow and make acquisitions.

Because we distribute all of our available cash to our unitholders, we expect that we will rely primarily upon external financing sources, including commercial bank borrowings and the issuance of debt and equity securities, to fund our discretionary capital expenditures and acquisitions. As a result, to the extent we are unable to finance growth externally, our cash distribution policy will significantly impair our ability to grow.

In addition, because we distribute all of our available cash, our growth may not be as fast as businesses that reinvest their available cash to expand ongoing operations. To the extent we issue additional units in connection with any acquisitions or discretionary capital expenditures, the payment of distributions on those additional units may increase the risk that we will be unable to maintain or increase our per unit distribution level. There are no limitations in our partnership agreement or our new revolving credit facility on our ability to issue additional units, including units ranking senior to the common units. The incurrence of additional commercial borrowings or other debt to finance our growth strategy would result in increased interest expense, which in turn may impact our ability to service our indebtedness.

Our partnership agreement replaces our general partner’s fiduciary duties to holders of our units with contractual standards governing its duties.

Our partnership agreement contains provisions that eliminate and replace the fiduciary standards that our general partner would otherwise be held to by state fiduciary duty law. For example, our partnership agreement permits our general partner to make a number of decisions, in its individual capacity, as opposed to in its capacity as our general partner, or otherwise, free of fiduciary duties to us and our unitholders other than the implied contractual covenant of good faith and fair dealing, which means that a court will enforce the reasonable expectations of the parties where the language in our partnership agreement does not provide for a clear course of action. This entitles our general partner to consider only the interests and factors that it desires, and it has no duty or obligation to give any consideration to any interest of, or factors affecting, us, our affiliates or our limited partners. Examples of decisions that our general partner may make in its individual capacity include:


•	how to allocate business opportunities among us and its other affiliates;


•	whether to exercise its call right;


•	how to exercise its voting rights with respect to the units it owns;


•	whether to exercise its registration rights;


•	whether to elect to reset target distribution levels;


•	whether or not to consent to any merger or consolidation of the partnership or amendment to the partnership agreement; and

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•	whether or not the general partner should elect to seek the approval of the conflicts committee or the unitholders, or neither, of any conflicted transaction.

By purchasing a common unit, a unitholder is treated as having consented to the provisions in the partnership agreement, including the provisions discussed above.

Our partnership agreement restricts the remedies available to holders of our units for actions taken by our general partner that might otherwise constitute breaches of fiduciary duty.

Our partnership agreement contains provisions that restrict the remedies available to unitholders for actions taken by our general partner that might otherwise constitute breaches of fiduciary duty under state fiduciary duty law. For example, our partnership agreement provides that:

•

whenever our general partner makes a determination or takes, or declines to take, any other action in its capacity as our general partner, our general partner is required to make such determination, or take or decline to take such other action, in good faith, and will not be subject to any other or different standard imposed by our partnership agreement, Delaware law, or any other law, rule or regulation, or at equity (other than the implied contractual covenant of good faith and fair dealing);


•	our general partner will not have any liability to us or our unitholders for decisions made in its capacity as a general partner so long as it acted in good faith, meaning that it subjectively believed that the decision was in, or not opposed to, the best interests of our partnership;


•	our partnership agreement is governed by Delaware law and any claims, suits, actions or proceedings:


•	arising out of or relating in any way to the partnership agreement (including any claims, suits or actions to interpret, apply or enforce the provisions of the partnership agreement or the duties, obligations or liabilities among limited partners or of limited partners to us, or the rights or powers of, or restrictions on, the limited partners or us);


•	brought in a derivative manner on our behalf;


•	asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of us or our general partner, or owed by our general partner, to us or the limited partners;


•	asserting a claim arising from any provision of the Delaware Revised Uniform Limited Partnership Act (the “Delaware Act”); or


•	asserting a claim governed by the internal affairs doctrine;

must be exclusively brought in the Court of Chancery of the State of Delaware (or, if such court does not have subject matter jurisdiction thereof, any other court located in the State of Delaware with subject matter jurisdiction), regardless of whether such claims, suits, actions or proceedings sound in contract, tort, fraud or otherwise, are based on common law, statutory, equitable, legal or other grounds, or are derivative or direct claims. By purchasing a common unit, a limited partner is irrevocably consenting to these limitations and provisions regarding claims, suits, actions or proceedings and submitting to the exclusive jurisdiction of the Court of Chancery of the State of Delaware (or such other Delaware courts) in connection with any such claims, suits, actions or proceedings;

•

our general partner and its officers and directors will not be liable for monetary damages to us or our limited partners resulting from any act or omission unless there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining that our general partner or its officers and directors, as the case may be, acted in bad faith or engaged in fraud or willful misconduct, or, in the case of a criminal matter, acted with knowledge that the conduct was unlawful; and


•	our general partner will not be in breach of its obligations under the partnership agreement or its duties to us or our limited partners if a transaction with an affiliate or the resolution of a conflict of interest is:


•	approved by the conflicts committee of the board of directors of our general partner, although our general partner is not obligated to seek such approval; or


•	approved by the vote of a majority of the outstanding common units, excluding any common units owned by our general partner and its affiliates.

Our general partner will not have any liability to us or our unitholders for decisions whether or not to seek the approval of the conflicts committee of the board of directors of our general partner or holders of a majority of the outstanding common units, excluding any common units owned by our general partner and its affiliates. If an affiliate transaction or the resolution of

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a conflict of interest is not approved by our common unitholders or the conflicts committee then it will be presumed that, in making its decision, taking any action or failing to act, the board of directors acted in good faith, and in any proceeding brought by or on behalf of any limited partner or the partnership, the person bringing or prosecuting such proceeding will have the burden of overcoming such presumption.

Our general partner may elect to cause us to issue common units to it in connection with a resetting of the target distribution levels related to our general partner’s incentive distribution rights, without the approval of the conflicts committee of the board of directors of our general partner or the holders of our common units. This could result in lower distributions to holders of our common units.

Our general partner has the right, as the initial holder of our incentive distribution rights, at any time when there are no subordinated units outstanding and our general partner has received incentive distributions at the highest level to which it is entitled (50.0%) for the prior four consecutive fiscal quarters and the amount of the total distributions during such four-quarter period did not exceed aggregate adjusted operating surplus during such period, to reset the initial target distribution levels at higher levels based on our distributions at the time of the exercise of the reset election. Following a reset election by our general partner, the minimum quarterly distribution will be adjusted to equal the reset minimum quarterly distribution and the target distribution levels will be reset to correspondingly higher levels based on percentage increases above the reset minimum quarterly distribution.

If our general partner elects to reset the target distribution levels, it will be entitled to receive a number of common units. The number of common units to be issued to our general partner will equal the number of common units that would have entitled the holder to an aggregate quarterly cash distribution in the quarter prior to the reset election equal to the distribution to our general partner on the incentive distribution rights in the quarter prior to the reset election. We anticipate that our general partner would exercise this reset right in order to facilitate acquisitions or internal growth projects that would not be sufficiently accretive to cash distributions per common unit without such conversion. It is possible, however, that our general partner could exercise this reset election at a time when it is experiencing, or expects to experience, declines in the cash distributions it receives related to its incentive distribution rights and may, therefore, desire to be issued common units rather than retain the right to receive incentive distributions based on the initial target distribution levels. This risk could be elevated if our incentive distribution rights have been transferred to a third party. As a result, a reset election may cause our common unitholders to experience a reduction in the amount of cash distributions that our common unitholders would have otherwise received had we not issued new common units to our general partner in connection with resetting the target distribution levels.

As a publicly traded limited partnership we qualify for, and will rely on, certain exemptions from the NYSE’s corporate governance requirements.

As a publicly traded partnership, we qualify for, and will rely on, certain exemptions from the NYSE’s corporate governance requirements, including:


•	the requirement that a majority of the board of directors of our general partner consist of independent directors;


•	the requirement that the board of directors of our general partner have a nominating/corporate governance committee that is composed entirely of independent directors; and


•	the requirement that the board of directors of our general partner have a compensation committee that is composed entirely of independent directors.

As a result of these exemptions, our general partner’s board of directors is not, and is not required to be, comprised of a majority of independent directors and our general partner does not have a compensation committee or nominating and corporate governance. Accordingly, unitholders will not have the same protections afforded to equity holders of companies that are subject to all of the corporate governance requirements of the NYSE. See Item 10. Directors, Executive Officers and Corporate Governance.

Holders of our common units have limited voting rights and are not entitled to elect our general partner or the board of directors of our general partner, which could reduce the price at which our common units will trade.

Unlike the holders of common stock in a corporation, unitholders have only limited voting rights on matters affecting our business and, therefore, limited ability to influence management’s decisions regarding our business. Unitholders will not elect our general partner or the board of directors of our general partner, and will have no right to elect our general partner or the board of directors of our general partner on an annual or other continuing basis. The board of directors of our general partner, including its independent directors, will be chosen by the member of our general partner. Furthermore, if unitholders are dissatisfied with the performance of our general partner, they will have little ability to remove our general partner. Our partnership agreement also contains provisions limiting the ability of unitholders to call meetings or to acquire information about our operations, as well as other provisions limiting the unitholders’ ability to influence the manner or direction of

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management. As a result of these limitations, the price at which the common units will trade could be diminished because of the absence or reduction of a takeover premium in the trading price.

Even if unitholders are dissatisfied, they cannot initially remove our general partner without its consent.

The unitholders will initially be unable to remove our general partner without its consent because our general partner and its affiliates own sufficient units to be able to prevent its removal. The vote of the holders of at least 66 ²/₃% of all outstanding units voting together as a single class is required to remove the general partner. As of February 24, 2017, our general partner and its affiliates own a 52.6% limited partner interest in us. Also, if our general partner is removed without cause during the subordination period and units held by our general partner and its affiliates are not voted in favor of that removal, all remaining subordinated units will automatically convert into common units and any existing arrearages on our common units will be extinguished. A removal of our general partner under these circumstances would adversely affect our common units by prematurely eliminating their distribution and liquidation preference over our subordinated units, which would otherwise have continued until we had met certain distribution and performance tests. Cause is narrowly defined to mean that a court of competent jurisdiction has entered a final, non-appealable judgment finding the general partner liable for actual fraud or willful or wanton misconduct in its capacity as our general partner. Cause does not include most cases of charges of poor management of the business.

Our partnership agreement restricts the voting rights of unitholders owning 20% or more of our common units.

Unitholders’ voting rights are further restricted by the partnership agreement provision providing that any units held by a person that owns 20% or more of any class of units, other than our general partner, its affiliates, their transferees and persons who acquired such units with the prior approval of the board of directors of our general partner, cannot vote on any matter.

Control of our general partner may be transferred to a third party without unitholder consent.

Our general partner may transfer its general partner interest to a third party in a merger or in a sale of all or substantially all of its assets without the consent of our unitholders. Furthermore, our partnership agreement does not restrict the ability of Western from transferring all or a portion of the ownership interest in our general partner to a third party. The new owner of our general partner would then be in a position to replace the board of directors and officers of our general partner with its own choices and thereby exert significant control over the decisions made by the board of directors and officers. This effectively permits a “change of control” without the vote or consent of the unitholders.

The incentive distribution rights held by our general partner may be transferred to a third party without unitholder consent.

Our general partner may transfer the incentive distribution rights to a third party at any time without the consent of our unitholders. If our general partner transfers the incentive distribution rights to a third party, it may not have the same incentive to grow our partnership and increase quarterly distributions to unitholders over time as it would if it had retained ownership of the incentive distribution rights. For example, a transfer of incentive distribution rights by our general partner could reduce the likelihood of Western accepting offers made by us relating to assets owned by it, as Western would have less of an economic incentive to grow our business, which in turn would impact our ability to grow our asset base.

We may issue additional units, including units that are senior to the common units, without unitholder approval that would dilute existing ownership interests.

Our partnership agreement does not limit the number of additional limited partner interests that we may issue at any time without the approval of our unitholders. The issuance by us of additional common units or other equity securities of equal or senior rank will have the following effects:


•	each unitholder’s proportionate ownership interest in us will decrease;


•	the amount of cash available for distribution on each unit may decrease;


•	because a lower percentage of total outstanding units will be subordinated units, the risk that a shortfall in the payment of the minimum quarterly distribution will be borne by our common unitholders will increase;


•	because the amount payable to holders of incentive distribution rights is based on a percentage of the total cash available for distribution, the distributions to holders of incentive distribution rights will increase even if the per unit distribution on common units remains the same;


•	the ratio of taxable income to distributions may increase;


•	the relative voting strength of each previously outstanding unit may be diminished; and


•	the market price of the common units may decline.

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There are no limitations in our partnership agreement on our ability to issue units ranking senior to the common units.

In accordance with Delaware law and the provisions of our partnership agreement, we may issue additional partnership interests that are senior to the common units in right of distribution, liquidation and voting. The issuance by us of units of senior rank may (1) reduce or eliminate the amount of cash available for distribution to our common unitholders; (2) diminish the relative voting strength of the total common units outstanding as a class; or (3) subordinate the claims of the common unitholders to our assets in the event of our liquidation.

Western may sell common units in the public markets or otherwise, which sales could have an adverse impact on the trading price of the common units.

All of the subordinated units will convert into common units at the end of the subordination period on the first business day following the March 1, 2017 payment of the cash distribution attributable to the fourth quarter of 2016.

Additionally, we have agreed to provide Western with certain registration rights. The sale of these units could have an adverse impact on the price of the common units or on any trading market that may develop.

Our general partner’s discretion in establishing cash reserves may reduce the amount of cash available for distribution to unitholders.

Our partnership agreement requires our general partner to deduct from operating surplus cash reserves that it determines are necessary to fund our future operating expenditures. In addition, the partnership agreement permits the general partner to reduce available cash by establishing cash reserves for the proper conduct of our business, to comply with applicable law or agreements that we are a party to or to provide funds for future distributions to partners. These cash reserves will affect the amount of cash available for distribution to unitholders.

Our general partner has a limited call right that may require unitholders to sell their common units at an undesirable time or price.

If at any time our general partner and its affiliates own more than 80% of the common units, our general partner will have the right, but not the obligation, which it may assign to any of its affiliates or to us, to acquire all, but not less than all, of the common units held by unaffiliated persons at a price equal to the greater of (1) the average of the daily closing price of the common units over the 20 trading days preceding the date three days before notice of exercise of the call right is first mailed and (2) the highest per-unit price paid by our general partner or any of its affiliates for common units during the 90-day period preceding the date such notice is first mailed. As a result, unitholders may be required to sell their common units at an undesirable time or price and may not receive any return or a negative return on their investment. Unitholders may also incur a tax liability upon a sale of their units. Our general partner is not obligated to obtain a fairness opinion regarding the value of the common units to be repurchased by it upon exercise of the limited call right. There is no restriction in our partnership agreement that prevents our general partner from issuing additional common units and exercising its call right. If our general partner exercised its limited call right, the effect would be to take us private.

Your liability may not be limited if a court finds that unitholder action constitutes control of our business.

A general partner of a partnership generally has unlimited liability for the obligations of the partnership, except for those contractual obligations of the partnership that are expressly made without recourse to the general partner. Our partnership is organized under Delaware law and we currently own assets and conduct business in Arizona, Colorado, Minnesota, Nevada, New Mexico, Texas, and Utah. You could be liable for any and all of our obligations as if you were a general partner if:


•	a court or government agency determines that we were conducting business in a state but had not complied with that particular state’s partnership statute; or


•	your rights to act with other unitholders to remove or replace the general partner, to approve some amendments to our partnership agreement or to take other actions under our partnership agreement constitute "control" of our business.

Unitholders may have liability to repay distributions that were wrongfully distributed to them.

Under certain circumstances, unitholders may have to repay amounts wrongfully returned or distributed to them. Under Section 17-607 of the Delaware Act, we may not make a distribution to you if the distribution would cause our liabilities to exceed the fair value of our assets. Delaware law provides that for a period of three years from the date of the impermissible distribution, limited partners who received the distribution and who knew at the time of the distribution that it violated Delaware law will be liable to the limited partnership for the distribution amount. Substituted limited partners are liable for the obligations of the assignor to make contributions to the partnership that are known to the substituted limited partner at the time it became a limited partner and for unknown obligations if the liabilities could be determined from the partnership agreement. Liabilities to partners on account of their partnership interest and liabilities that are nonrecourse to the partnership are not counted for purposes of determining whether a distribution is permitted.

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Common units held by persons who are non-taxpaying assignees will be subject to the possibility of redemption.

To avoid any adverse effect on the maximum applicable rates chargeable to customers by us under the FERC regulations, or in order to reverse an adverse determination that has occurred regarding such maximum rate, our partnership agreement gives our general partner the power to amend our partnership agreement. If our general partner, with the advice of counsel, determines that our not being treated as an association taxable as a corporation or otherwise taxable as an entity for U.S. federal income tax purposes, coupled with the tax status (or lack of proof thereof) of one or more of our limited partners, has, or is reasonably likely to have, a material adverse effect on the maximum applicable rates chargeable to customers by us, then our general partner may adopt such amendments to our partnership agreement as it determines are necessary or advisable to obtain proof of the U.S. federal income tax status of our limited partners (and their owners, to the extent relevant) and permit us to redeem the units held by any person whose tax status has or is reasonably likely to have a material adverse effect on the maximum applicable rates or who fails to comply with the procedures instituted by our general partner to obtain proof of the U.S. federal income tax status.

Furthermore, in order to comply with certain of the FERC rate-making policies applicable to entities like us that pass their taxable income through to their owners, we have adopted requirements regarding who can be our owners. Our partnership agreement requires that a transferee of common units, including underwriters and those who purchase common units from underwriters, properly complete and deliver to us a transfer application containing a certification that such transferee is an Eligible Holder as of the date of such transfer application. Eligible Holders are individuals or entities whose U.S. federal income tax status (or lack thereof) has not or is not reasonably likely to have, as determined by our general partner, a material adverse effect on the rates that can be charged to our customers with respect to assets that are subject to regulation by the FERC or a similar regulatory body. In addition, our general partner may require any owner of our units to recertify its status as being subject to U.S. federal income taxation on the income generated by us. The form or forms used for any such recertification will be specified by our general partner and may be changed in any manner our general partner determines necessary or appropriate. If a transferee or other unitholder does not properly complete the transfer application or recertification, for any reason, the transferee or other unitholder will have no right to receive any distributions or allocations of income or loss on its common units or to vote its units on any matter and we will have the right to redeem such units at a price equal to the lower of the transferee’s purchase price or the then-current market price of such units, calculated in accordance with a formula specified in our partnership agreement. The redemption price will be paid in cash or by delivery of a promissory note, as determined by our general partner.

Tax Risks to Our Common Unitholders

Our tax treatment depends on our status as a partnership for federal income tax purposes, as well as our not being subject to a material amount of entity-level taxation by individual states. If the Internal Revenue Service were to treat us as a corporation for federal income tax purposes, or we become subject to entity-level taxation for state tax purposes, our cash available for distribution to our unitholders would be substantially reduced.

The anticipated after-tax economic benefit of an investment in our common units depends largely on our being treated as a partnership for U.S. federal income tax purposes.

Despite the fact that we are organized as a limited partnership under Delaware law, we will be treated as a corporation for U.S. federal income tax purposes unless we satisfy a "qualifying income" requirement. Based upon our current operations, we believe we satisfy the qualifying income requirement. However, we have not requested and do not plan to request, a ruling from the Internal Revenue Service ("IRS") on this or any other matter affecting us. Failing to meet the qualifying income requirement or a change in current law could cause us to be treated as a corporation for U.S. federal income tax purposes or otherwise subject us to taxation as an entity.

If we were treated as a corporation for U.S. federal income tax purposes, we would pay U.S. federal income tax on our income at the corporate tax rate. Distributions to our unitholders would generally be taxed again as corporate distributions and no income, gains, losses, deductions or credits would flow through to our unitholders. Because taxes would be imposed upon us as a corporation, our cash available for distribution to our unitholders would be substantially reduced. Therefore, treatment of us as a corporation would result in a material reduction in the anticipated cash flow and after-tax return to our unitholders, likely causing a substantial reduction in the value of our common units.

At the state level, several states have been evaluating ways to subject partnerships to entity-level taxation through the imposition of state income taxes, franchise taxes, or other forms of taxation. For example, we currently own assets and conduct business in several states, many of which impose a margin or franchise tax. Imposition of a similar tax on us in other jurisdictions to which we may expand could substantially reduce the cash available for distribution to our unitholders.

Our partnership agreement provides that if a law is enacted or existing law is modified or interpreted in a manner that subjects us to taxation as a corporation or otherwise subjects us to entity-level taxation for U.S. federal, state or local or foreign

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income tax purposes, the minimum quarterly distribution amount and the target distribution amounts may be adjusted to reflect the impact of that law or interpretation on us.

The tax treatment of publicly traded partnerships or an investment in our units could be subject to potential legislative, judicial or administrative changes or differing interpretations, possibly applied on a retroactive basis.

The present U.S. federal income tax treatment of publicly traded partnerships, including us, or an investment in our common units may be modified by administrative, legislative or judicial changes or differing interpretations at any time. From time to time, members of Congress propose and consider substantive changes to the existing U.S. federal income tax laws that affect publicly traded partnerships. Although there is no current legislative proposal, a prior legislative proposal would have eliminated the qualifying income exception to the treatment of all publicly-traded partnerships as corporations upon which we rely for our treatment as a partnership for U.S. federal income tax purposes.

In addition, on January 24, 2017, final regulations regarding which activities give rise to qualifying income within the meaning of Section 7704 of the Internal Revenue Code (the “Final Regulations”) were published in the Federal Register. The Final Regulations are effective as of January 19, 2017, and apply to taxable years beginning after January 19, 2017. We do not believe the Final Regulations affect our ability to be treated as a partnership for U.S. federal income tax purposes.

However, any modification to the U.S. federal income tax laws may be applied retroactively and could make it more difficult or impossible for us to meet the exception for certain publicly traded partnerships to be treated as partnerships for U.S. federal income tax purposes. We are unable to predict whether any of these changes or other proposals will ultimately be enacted. Any similar or future legislative changes could negatively impact the value of an investment in our common units.

If the IRS were to contest the federal income tax positions we take, it may adversely impact the market for our common units, and the costs of any such contest would reduce cash available for distribution to our unitholders.

We have not requested a ruling from the IRS with respect to our treatment as a partnership for U.S. federal income tax purposes. The IRS may adopt positions that differ from the positions that we take. It may be necessary to resort to administrative or court proceedings to sustain some or all of the positions we take. A court may not agree with some or all of the positions we take. Any contest with the IRS may materially and adversely impact the market for our common units and the price at which they trade. Moreover, the costs of any contest between us and the IRS will result in a reduction in cash available for distribution to our unitholders and thus will be borne indirectly by our unitholders.

If the IRS makes audit adjustments to our income tax returns for tax years beginning after December 31, 2017, it (and some states) may assess and collect any taxes (including any applicable penalties and interest) resulting from such audit adjustment directly from us, in which case our cash available for distribution to our unitholders might substantially be reduced.

Pursuant to the Bipartisan Budget Act of 2015, for tax years beginning after December 31, 2017, if the IRS makes audit adjustments to our income tax returns, it (and some states) may assess and collect any taxes (including any applicable penalties and interest) resulting from such audit adjustment directly from us. To the extent possible under the new rules, our general partner any elect to either pay the taxes (including any applicable penalties and interest) directly to the IRS or, if we are eligible, issue a revised Schedule K-1 to each unitholder with respect to an audited and adjusted return. Although our general partner any elect to have our unitholders take such audit adjustment into account in accordance with their interests in us during the tax year under audit, there can be no assurance that the election will be practical, permissible, or effective in all circumstances. As a result, our current unitholders may bear some or all of the tax liability resulting from such audit adjustment, even if those unitholders did not own units in us during the tax year under audit. If, as a result of any such audit adjustment, we are required to make payments of taxes, penalties, or interest, our cash available for distribution to our unitholders might be substantially reduced. These rules are not applicable for tax years beginning on or prior to December 31, 2017.

Our unitholders are required to pay taxes on their share of our income even if they do not receive any cash distributions from us.

Our unitholders are required to pay any U.S. federal income taxes and, in some cases, state and local income taxes on their share of our taxable income, whether or not they receive cash distributions from us. For example, if we sell assets and use the proceeds to repay existing debt or fund capital expenditures, you may be allocated taxable income and gain resulting from the sale and our cash available for distribution would not increase. Similarly, taking advantage of opportunities to reduce our existing debt, such as debt exchanges, debt repurchases, or modifications of our existing debt could result in "cancellation of indebtedness income" being allocated to our unitholders as taxable income without any increase in our cash available for distribution. Our unitholders may not receive cash distributions from us equal to their share of our taxable income or even equal to the actual tax liability that results from that income.

Tax gain or loss on the disposition of our common units could be more or less than unitholders expect.

If a unitholder sells common units, the unitholder will recognize gain or loss equal to the difference between the amount realized and that unitholder's tax basis in those common units. Because distributions in excess of a unitholder's allocable share

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of our net taxable income decrease the unitholder's tax basis in its common units, the amount, if any, of such prior excess distributions with respect to the units a unitholder sells will, in effect, become taxable income to the unitholder if it sells such units at a price greater than its tax basis in those units, even if the price the unitholder receives is less than its original cost. In addition, because the amount realized includes a unitholder’s share of our non-recourse liabilities, if a unitholder sells its units, the unitholder may incur a tax liability in excess of the amount of cash it receives from the sale.

A substantial portion of the amount realized from the sale of a unitholder's units, whether or not representing gain, may be taxed as ordinary income to the unitholder due to potential recapture items, including depreciation recapture. Thus, a unitholder may recognize both ordinary income and capital loss from the sale of its units if the amount realized on a sale of its units is less than its adjusted basis in the units. Net capital loss may only offset capital gains and, in the case of individuals, up to $3,000 of ordinary income per year. In the taxable period in which a unitholder sells its units, the unitholder may recognize ordinary income from our allocations of income and gain to the unitholder prior to the sale and from recapture items that generally cannot be offset by any capital loss recognized upon the sale of units.

Tax-exempt entities and non-U.S. persons face unique tax issues from owning our units that may result in adverse tax consequences to them.

Investment in our common units by tax-exempt entities, such as employee benefit plans and individual retirement accounts ("IRAs") and non-U.S. persons, raises issues unique to them. For example, virtually all of our income allocated to organizations that are exempt from U.S. federal income tax, including IRAs and other retirement plans, will be unrelated business taxable income and will be taxable to them. Distributions to non-U.S. persons are subject to withholding taxes imposed at the highest effective tax rate applicable to such non-U.S. persons and each non-U.S. person will be required to file U.S. federal tax returns and pay tax on its share of our taxable income. Any tax exempt entity or a non-U.S. person, should consult its tax advisor before investing in our common units.

We treat each purchaser of our common units as having the same tax benefits without regard to the common units actually purchased. The IRS may challenge this treatment, which could adversely affect the value of our common units.

Because we cannot match transferors and transferees of our common units, we have adopted depreciation and amortization positions that may not conform to all aspects of existing Treasury Regulations. A successful IRS challenge to those positions could adversely affect the amount of tax benefits available to our unitholders. It also could affect the timing of these tax benefits or the amount of gain from any sale of common units and could have a negative impact on the value of our units or result in audit adjustments to a unitholder's tax returns.

We generally prorate our items of income, gain, loss and deduction between transferors and transferees of our units each month based upon the ownership of our units on the first day of each month, instead of on the basis of the date a particular unit is transferred. The IRS may challenge this treatment, which could change the allocation of items of income, gain, loss and deduction among our unitholders.

We generally prorate our items of income, gain, loss and deduction between transferors and transferees of our units each month based upon the ownership of our units on the first day of each month (the "Allocation Date"), instead of on the basis of the date a particular unit is transferred. Similarly, we generally allocate certain depreciation of capital additions, gain or loss realized on a sale or other disposition of our assets and, in the discretion of our general partner, any other extraordinary item of income, gain, loss or deduction based upon ownership on the Allocation Date. Treasury Regulations allow a similar monthly simplifying convention but such regulations do not specifically authorize all aspects of our proration method. If the IRS were to challenge our proration method, we could be required to change the allocation of items of income, gain, loss and deduction among our unitholders.

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

Because there are no specific rules governing the U.S. federal income tax consequence of loaning a partnership interest, a unitholder whose units are the subject of a securities loan may be considered to have disposed of the loaned units. In that case, the unitholder may no longer be treated for tax purposes as a partner with respect to those units during the period of the loan to the short seller and the unitholder may recognize gain or loss from such disposition. Moreover, during the period of the loan, any of our income, gain, loss or deduction with respect to those units may not be reportable by the unitholder and any cash distributions received by the unitholder as to those units could be fully taxable as ordinary income. Unitholders desiring to assure their status as partners and avoid the risk of gain recognition from a securities loan are urged to modify any applicable brokerage account agreements to prohibit their brokers from borrowing their units.

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

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

A successful IRS challenge to these methods or allocations could adversely affect the timing or amount of taxable income or loss being allocated to our unitholders. It also could affect the amount of gain from our unitholders’ sale of common units and could have a negative impact on the value of the common units or result in audit adjustments to our unitholders’ tax returns without the benefit of additional deductions.

The sale or exchange of 50% or more of our capital and profits interests during any twelve-month period will result in the termination of our partnership for federal income tax purposes.

We will be considered to have terminated as a partnership for federal income tax purposes if there is a sale or exchange of 50% or more of the total interests in our capital and profits within a twelve-month period. As of December 31 2016, Western indirectly owned 52.6% of the total interests in our capital and profits. Therefore, a transfer by Western of all or a portion of its interests in us could, in conjunction with the trading of common units held by the public, result in a termination of our partnership for federal income tax purposes. For purposes of determining whether the 50% threshold has been met, multiple sales of the same interest will be counted only once. Our termination would, among other things, result in the closing of our taxable year for all unitholders, which would result in our filing two tax returns for one calendar year and could result in a significant deferral of depreciation deductions allowable in computing our taxable income. In the case of a unitholder reporting on a taxable year other than a calendar year, the closing of our taxable year may also result in more than twelve months of our taxable income or loss being includable in taxable income for the unitholder’s taxable year that includes our termination. Our termination would not affect our classification as a partnership for federal income tax purposes, but it would result in our being treated as a new partnership for U.S. federal income tax purposes following the termination. If we were treated as a new partnership, we would be required to make new tax elections and could be subject to penalties if we were unable to determine that a termination occurred. The IRS has announced a relief procedure whereby if a publicly traded partnership that has technically terminated requests and the IRS grants special relief, among other things, the partnership may be permitted to provide only a single Schedule K-1 to unitholders for the two short tax periods included in the year in which the termination occurs.

Our unitholders will likely be subject to state and income tax local taxes and return filing requirements in jurisdictions they do not live as a result of investing in our common units.

In addition to U.S. federal income taxes, our unitholders may be subject to other taxes, including foreign, state and local taxes, unincorporated business taxes and estate, inheritance or intangible taxes that are imposed by the various jurisdictions in which we conduct business or own property now or in the future, even if they do not live in any of those jurisdictions. Our unitholders will likely be required to file foreign, state and local income tax returns and pay state and local income taxes in some or all of these various jurisdictions. Further, our unitholders may be subject to penalties for failure to comply with those requirements.

We currently own assets in multiple states. Many of these states currently impose a personal income tax on individuals, corporations and other entities. As we make acquisitions or expand our business, we may own assets or conduct business in additional states that impose a personal income tax. It is our unitholder's responsibility to file all U.S. federal, state, local and foreign tax returns.


Item 1B.	Unresolved Staff Comments

None.


Item 2.	Properties

Our principal properties are described under Item 1. Business and the information is incorporated herein by reference.

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Item 3.	Legal Proceedings

In the ordinary conduct of our business, we are subject to periodic lawsuits, investigations and claims, including environmental claims and employee related matters. Although we cannot predict with certainty the ultimate resolution of lawsuits, investigations and claims asserted against us, we do not believe that any currently pending legal proceedings or proceedings to which we are a party will have a material adverse effect on our business, financial condition, results of operations or cash flows.


Item 4.	Mine Safety Disclosures

Not Applicable.

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PART II


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

Unit Price and Cash Distributions

Our common units represent limited partner interests in us that entitle the holders to the rights and privileges specified in our partnership agreement. Our common units trade on the NYSE under the symbol "WNRL." As of December 31, 2016, Western and its subsidiaries owned 9,207,847 of our common units and 22,811,000 of our subordinated units that together constituted a 52.6% limited partner interest in us. As of December 31, 2016, Western and its subsidiaries also held 80,000 TexNew Mex Units. The public owns the remaining 28,866,477 common units. As of February 24, 2017, we had four holders of record of our common units. One subsidiary of Western holds all of our subordinated units and is the only holder of record of subordinated units.

The following table sets forth the range of the daily high and low sales prices per common unit and cash distributions to common and subordinated unitholders for the period presented:



Period	High		Low		Quarterly Cash Distribution per Unit		Distribution Date	Record Date
2016:
First quarter	$	26.15	$	17.35	$	0.3925	2/26/2016	2/11/2016
Second quarter	26.58		21.12		0.4025		5/27/2016	5/13/2016
Third quarter	26.25		22.08		0.4125		8/26/2016	8/12/2016
Fourth quarter	24.52		18.85		0.4225		11/23/2016	11/7/2016
2015:
First quarter	$	31.42	$	25.40	$	0.3325	2/23/2015	2/13/2015
Second quarter	32.70		27.67		0.3475		5/26/2015	5/15/2015
Third quarter	30.65		18.43		0.3650		8/24/2015	8/14/2015
Fourth quarter	26.94		18.48		0.3825		11/23/2015	11/13/2015

During the years ended December 31, 2016 and 2015, we made incentive distribution right payments of $4.4 million and $1.1 million, respectively, to our General Partner. We made no incentive distribution right payments to our General Partner prior to 2015. Refer to Note 14, Equity, for further information regarding incentive distribution rights.

Our ability to pay cash distributions is limited under the terms of our $500 million senior secured revolving credit facility ("Revolving Credit Facility") and the Indenture governing our Senior Notes and in part depends on our ability to satisfy certain financial covenants. See Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, Liquidity and Capital Resources - Revolving Credit Facility.

General

Our partnership agreement requires that, within 60 days after the end of each quarter, beginning with the quarter ending December 31, 2013, we distribute all of our available cash to unitholders of record on the applicable record date.

Definition of Available Cash

Available cash, for any quarter, generally consists of all cash and cash equivalents on hand at the end of that quarter:


•	less, the amount of cash reserves established by our general partner to:

•provide for the proper conduct of our business;

•comply with applicable law, any of our debt instruments or other agreements or any other obligation; and

•

provide funds for distributions to our unitholders for any one or more of the next four quarters (provided that our general partner may not establish cash reserves for the payment of distributions unless it determines that the establishment of such reserves will not prevent us from distributing the minimum quarterly distribution on all common units and any cumulative arrearages on such common units for the current quarter);


•	plus, if our general partner so determines on the date of determination, all or any portion of the cash on hand immediately prior to the date of determination of available cash for the quarter, including cash on hand resulting from working capital borrowings made after the end of the quarter.

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The purpose and effect of the last bullet point above is to allow our general partner, if it so decides, to use cash received by us after the end of the quarter but on or before the date of determination of available cash for that quarter, including cash on hand resulting from working capital borrowings made after the end of the quarter, to pay distributions to unitholders. Under our partnership agreement, working capital borrowings are borrowings that are made under a credit agreement, commercial paper facility or similar financing arrangement with the intent to repay such borrowings within twelve months from sources other than additional working capital borrowings and that are used solely for working capital purposes or to pay distributions to partners.

Minimum Quarterly Distribution

Our partnership agreement provides that during the subordination period, holders of our common units have the right to receive distributions of available cash from our operating surplus (as defined in our partnership agreement) each quarter in an amount equal to $0.2875 per common unit, defined in our partnership agreement as the minimum quarterly distribution, plus any arrearages in the payment of the minimum quarterly distribution to holders of the common units from prior quarters, before any distributions of available cash from operating surplus may be made to holders of the subordinated units. These units are deemed to be subordinated because for the subordination period, holders of the subordinated units are not entitled to receive any distributions from operating surplus until holders of the common units have received the minimum quarterly distribution plus any arrearages in the payment of the minimum quarterly distribution from prior quarters. No arrearages are paid on the subordinated units.

As defined in our partnership agreement, the subordination period will end on the first business day after we have earned and paid distributions of available cash of at least (1) $1.15 (the minimum quarterly distribution on an annualized basis) on each outstanding common and subordinated unit for each of three consecutive, non-overlapping four-quarter periods ending on or after September 30, 2016, or (2) $1.725 (150% of the annualized minimum quarterly distribution) on each outstanding common and subordinated unit and the related distributions on the incentive distribution rights for any four-quarter period ending on or after September 30, 2014, in each case provided there are no arrearages in the payment of the minimum quarterly distributions on our common units at that time.

On the first business day following the March 1, 2017 payment of the cash distribution attributable to the fourth quarter of 2016, the requirements for the conversion of all subordinated units into common units will be satisfied under the partnership agreement. As a result, the 22,811,000 subordinated units held by Western will convert into common units on a one-for-one basis and thereafter participate on terms equal with all other common units in distributions of available cash. The conversion of the subordinated units will not impact the amount of cash distributions paid by us or the total number of outstanding units.

General Partner Interest and Incentive Distribution Rights

Our general partner owns a non-economic general partner interest in us that does not entitle it to receive cash distributions. Our general partner may own common units or other equity securities in us in the future and will be entitled to receive distributions on any such interests as provided for in our partnership agreement.

Our general partner also holds incentive distribution rights that entitle it to receive increasing percentages, up to a maximum of 50.0% of the cash we distribute from our operating surplus (as defined below) in excess of $0.3306 per unit per quarter. The maximum distribution of 50.0% does not include any distributions that Western may receive on any limited partner units that it owns.

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The following table illustrates the percentage allocations of available cash from our operating surplus between the unitholders and our general partner (as the holder of our incentive distribution rights) based on the specified target distribution levels subject to the preferential distributions, if any, on the TexMex New Units. The amounts set forth under the column heading "Marginal Percentage Interest in Distributions" are the percentage interests of our general partner and the unitholders in any available cash from operating surplus we distribute up to and including the corresponding amount in the column "Total Quarterly Distribution per Unit Target Amount." The percentage interests shown for our unitholders and our general partner for the minimum quarterly distribution are also applicable to quarterly distribution amounts that are less than the minimum quarterly distribution. The percentage interests set forth below assume our general partner has not transferred its incentive distribution rights and there are no arrearages on common units.



	Total Quarterly Distribution per Unit Target Amount	Marginal Percentage Interest in Distributions
	Total Quarterly Distribution per Unit Target Amount	Unitholders		General Partner
Minimum Quarterly Distribution	$0.2875	100.0	%	—
First Target Distribution	above $0.2875 up to $0.3306	100.0	%	—
Second Target Distribution	above $0.3306 up to $0.3594	85.0	%	15.0	%
Third Target Distribution	above $0.3594 up to $0.4313	75.0	%	25.0	%
Thereafter	above $0.4313	50.0	%	50.0	%

The information under the caption "Securities Authorized for Issuance under Equity Compensation Plans” in Item 12 is incorporated herein by reference.

Issuance of Additional Interests

On September 15, 2016, WNRL issued 628,224 of its common units to Western in connection with the assets acquired in the St. Paul Park Logistics Transaction.

On September 7, 2016, we entered into an underwriting agreement relating to the issuance and sale by the Partnership of 7,500,000 common units representing limited partner interests in the Partnership. The closing of the offering occurred on September 13, 2016. We also granted the underwriter an option to purchase additional common units on the same terms which was exercised in full and closed on September 30, 2016, for 1,125,000 additional common units. We used the net proceeds from this offering to repay the borrowings outstanding under our revolving credit facility and fund the cash portion of the purchase price for the St. Paul Logistics Transaction.

On May 16, 2016, we entered into an underwriting agreement relating to the issuance and sale by the Partnership of 3,750,000 common units representing limited partner interests in the Partnership. The closing of the offering occurred on May 20, 2016. We also granted the underwriters an option to purchase up to 562,500 additional common units on the same terms, which was exercised in full and closed on June 1, 2016. We used the net proceeds from this offering to repay a portion of the borrowings outstanding under our revolving credit facility.

On October 30, 2015, WNRL issued 421,031 of its common units and 80,000 TexNew Mex Units to a wholly-owned subsidiary of Western as partial consideration for the assets acquired in the TexNew Mex Pipeline Acquisition.

On October 15, 2014, WNRL issued 1,160,092 of its common units to Western in connection with the assets acquired in the Wholesale Acquisition.

Issuance of TexNew Mex Units

The Second A&R Partnership Agreement sets forth the rights, preferences and obligations of the TexNew Mex Units. The TexNew Mex Units are generally entitled to participate in 80% of the economics attributable to the TexNew Mex Shared Segment resulting from crude oil throughput on the TexNew Mex Pipeline above the 13,000 bpd contemplated by the commitment in the Amendment to Pipeline Agreement. To the extent there is sufficient available cash from operating surplus under the Second A&R Partnership Agreement, the holder of the TexNew Mex Units will be entitled to receive a distribution equal to 80% of the excess of TexNew Mex Shared Segment Distributable Cash Flow over the TexNew Mex Base Amount. The TexNew Mex Unit distributions are preferential to all other unit holder distributions.

Holders of TexNew Mex Units will generally not have voting rights, except for limited voting rights related to amendments to the rights of the TexNew Mex Units, the issuance of partnership securities senior to the TexNew Mex Units or additional TexNew Mex Units, the sale of the TexNew Mex Pipeline, and the reservation by the Partnership of any distribution amounts to which the holders of TexNew Mex Units would otherwise be entitled.

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Partner, unless the transfer either is to an affiliate of the holder or is to any person who is, or will be substantially concurrently with the completion of the transfer, an affiliate of the General Partner.


Item 6.	Selected Financial Data

The following tables set forth certain selected consolidated financial data as of and for each of the five years in the period ended December 31, 2016. See the section titled Explanatory Note on page 1 of this annual report for a detailed explanation of the series of transactions that led to our current, retrospectively adjusted, presentation of the Predecessor, WNRL Predecessor and WNRL.

The information presented below should be read in conjunction with Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and the consolidated financial statements and notes thereto included in Item 8. Financial Statements and Supplementary Data.



	Year Ended
	December 31, 2016			December 31, 2015			December 31, 2014			December 31, 2013			December 31, 2012
													Predecessor
	(In thousands, except per unit data)
Statement of Operations Data
Total revenues (1)	$	2,222,718		$	2,599,867		$	3,501,888		$	3,407,128		$	3,474,920
Total operating costs and expenses	2,152,623			2,544,073			3,466,281			3,454,156			3,525,408
Operating income (loss)	70,095			55,794			35,607			(47,028		)	(50,488		)

Net income (loss)	43,347			32,706			32,908			(47,295		)	$	(50,214	)
Less net loss attributable to General Partner	(23,309		)	(29,867		)	(20,084		)	(55,823		)
Net income attributable to limited partners	$	66,656		$	62,573		$	52,992		$	8,528

Net income per limited partner unit:
Common - basic	$	1.16		$	1.31		$	1.16		$	0.19
Common - diluted	1.16			1.30			1.15			0.19
Subordinated - basic and diluted	1.21			1.30			1.15			0.19

Weighted average limited partner units outstanding:
Common - basic	29,979			24,084			23,059			22,811
Common - diluted	29,994			24,099			23,107			22,813
Subordinated - basic and diluted	22,811			22,811			22,811			22,811

Distribution per common and subordinated unit (2)	$	1.6750		$	1.4875		$	1.2550		$	0.2407

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	Year Ended
	December 31, 2016		December 31, 2015			December 31, 2014			December 31, 2013		December 31, 2012
											Predecessor
	(In thousands)
Other Data
EBITDA (3)	$	126,212	$	106,662		$	70,330		$	11,598	$	—
Distributable cash flow (3)	100,059		78,631			66,127			13,146		—
Balance Sheet Data (at end of period)
Cash and cash equivalents	$	14,652	$	44,605		$	54,298		$	84,004	$	5
Property, plant and equipment, net	412,170		430,141			403,997			346,737		158,080
Total assets	580,854		610,222			602,564			478,624		185,462
Total debt	313,032		437,467			267,016			—		—
Total liabilities	482,530		570,632			412,303			14,062		6,480
Division equity	—		108,013			217,355			231,210		178,982
Partners' capital	98,324		(68,423		)	(27,094		)	233,352		—
Total liabilities, division equity and partners' capital	580,854		610,222			602,564			478,624		185,462

(1)

Prior to the Offering, our business was a part of the integrated operations of Western and the WNRL Predecessor generally recognized only the costs and did not record revenue associated with the transportation, terminalling or storage services provided to Western on an intercompany basis. Accordingly, the revenues in the WNRL Predecessor’s historical consolidated financial information relate only to amounts received from third parties for these services and minimum amounts required to be recorded for Western for regulatory purposes. Following the closing of the Offering, our revenues were generated by existing third-party contracts and from the commercial agreements with Western.


(2)	On January 31, 2014, our general partner's board of directors declared a quarterly cash distribution of $0.2407 per unit for the prorated period, following the Offering, from October 16, 2013 through December 31, 2013.

(3)

We define EBITDA as earnings before interest and debt expense, provision for income taxes and depreciation and amortization. We define Distributable Cash Flow as EBITDA plus the change in deferred revenues, less interest accruals, income taxes paid, maintenance capital expenditures and distributions declared on our TexNew Mex units. The GAAP performance measure most directly comparable to EBITDA is net income. The GAAP liquidity measure most directly comparable to EBITDA and distributable cash flow is net cash provided by operating activities. These non-GAAP financial measures should not be considered alternatives to GAAP net income or net cash provided by operating activities.

EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:


•	EBITDA does not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments;


•	EBITDA does not reflect the interest expense or the cash requirements necessary to service interest or principal payments on our debt;


•	EBITDA does not reflect changes in, or cash requirements for, our working capital needs; and


•	EBITDA, as we calculate it, may differ from the EBITDA calculations of our affiliates or other companies in our industry, thereby limiting its usefulness as a comparative measure.

EBITDA and Distributable Cash Flow are used as supplemental financial measures by management and by external users of our financial statements, such as investors and commercial banks, to assess:


•	our operating performance as compared to those of other companies in the midstream energy industry, without regard to financial methods, historical cost basis or capital structure;


•	the ability of our assets to generate sufficient cash to make distributions to our unitholders;


•	our ability to incur and service debt and fund capital expenditures; and

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•	the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities.

Distributable Cash Flow is a standard used by the investment community with respect to publicly traded partnerships because the value of a partnership unit is, in part, measured by its yield. Yield is based on the amount of cash distributions a partnership can pay to a unitholder. Although distributable cash flow is a liquidity measure, it is presented in this reconciliation to net income as supplemental information.

We believe that the presentation of these non-GAAP measures provides useful information to investors in assessing our financial condition and results of operations. These non-GAAP measures should not be considered as alternatives to net income or any other measure of financial performance presented in accordance with GAAP. EBITDA excludes some, but not all, items that affect net income attributable to limited partners. These non-GAAP measures may vary from those of other companies. As a result, EBITDA and Distributable Cash Flow as presented herein may not be comparable to similarly titled measures of other companies.

The calculation of EBITDA and Distributable Cash Flow includes the results of operations for the period subsequent to the Offering, the results of operations for the wholesale segment for the period subsequent to the Wholesale Acquisition, the results of the TexNew Mex Pipeline System subsequent to the TexNew Mex Pipeline Acquisition and the results of the St. Paul Park Logistics Assets subsequent to the St. Paul Park Logistics Transaction.

The following table reconciles net income attributable to limited partners to EBITDA and Distributable Cash Flow for the years ended December 31, 2016, 2015, 2014 and for the period from October 16, 2013 through December 31, 2013:



	Period Ended
	December 31, 2016			December 31, 2015			December 31, 2014			December 31, 2013
	(In thousands)
Net income attributable to limited partners	$	66,656		$	62,573		$	52,992		$	8,528
Interest and debt expense	25,972			23,107			2,359			299
Provision for income taxes	706			47			459			95
Depreciation and amortization	32,878			20,935			14,520			2,676
EBITDA	126,212			106,662			70,330			11,598

Change in deferred revenues	9,002			3,351			4,190			2,589
Interest accruals	(25,312		)	(21,836		)	(1,837		)	(190		)
Income taxes paid	(415		)	(456		)	(1		)	—
Maintenance capital expenditures	(9,428		)	(9,562		)	(6,555		)	(851		)
Distributions on TexNew Mex Units	—			(310		)	—			—
Proceeds from asset sale to affiliate	—			782			—			—
Distributable cash flow	$	100,059		$	78,631		$	66,127		$	13,146

Minimum annual distribution	$	63,447		$	53,978		$	52,802		$	—

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

You should read the following discussion together with the financial statements and notes thereto included elsewhere in this report. This discussion contains forward-looking statements that are based on management’s current expectations, estimates and projections about our business and operations. The cautionary statements made in this report should be read as applying to all related forward-looking statements wherever they appear in this report. Our actual results may differ materially from those currently anticipated and expressed in such forward-looking statements as a result of a number of factors, including those we discuss in the section entitled "Risk Factors" and elsewhere in this report. You should read such "Risk Factors" and "Forward-Looking Statements" in this report.

Overview

See Part I — Item 1. Business included in this annual report for detailed information on our business.

Major Influences on Results of Operations

Supply and Demand for Crude Oil and Refined Products. We generate a significant portion of our revenues under fee-based agreements with Western. These contracts generally provide for stable and predictable cash flows and limit our direct exposure to commodity price fluctuations related to the loss allowance provisions in our commercial agreements. We typically do not have exposure to variability in the prices of the hydrocarbons and other products we handle on Western's behalf, although these risks indirectly influence our activities and results of operations over the long term because of their impact on Western's operations. Our terminal throughput volumes depend primarily on the volume of refined and other products produced at Western’s refineries that, in turn, is ultimately dependent on Western’s refining margins.

Refining margins depend on both the price of crude oil or other feedstock and the price of refined products. Factors affecting the prices of petroleum based commodities include supply and demand in crude oil, gasoline and other refined products. Supply and demand for these products depend on changes in domestic and foreign economies, weather conditions, domestic and foreign political affairs, production levels, logistics constraints, availability of imports, marketing of competitive fuels, crude oil price differentials and government regulation.

A significant portion of our wholesale fuel sales and all of our lubricants sales are to third-party customers. We purchase substantially all of our fuel from Western on the same day that we sell it, which minimizes our exposure to commodity price fluctuations. The margins we earn on these sales are dependent on a number of factors that are outside of our control, including the overall supply of refined products and lubricants as well as the demand for these products by our customers. Among other circumstances, the margins we earn through these activities would likely be adversely impacted in the event of excess supply of refined products or lubricants and corresponding customer demand that is below historical norms. These supply and demand dynamics are subject to day-to-day variability and may result in volatility in the margins that our wholesale business achieves. Extended periods of market conditions that result in our earning margins that are lower than anticipated could adversely affect our financial condition, results of operations and cash flows.

Acquisition Opportunities. We may acquire additional logistics assets from Western or third parties. Under our omnibus agreement, subject to certain exceptions, we have rights of first offer on certain logistics assets owned by Western to the extent Western decides to sell, transfer or otherwise dispose of any of those assets. We also have rights of first offer to acquire additional logistics assets in the Permian Basin or the Four Corners area that Western may construct or acquire in the future. We plan to pursue strategic asset acquisitions from third parties to the extent such acquisitions complement our or Western’s existing asset base or provide attractive potential returns in new areas within our geographic footprint. We believe that we are well-positioned to acquire logistics assets from Western and third parties should such opportunities arise. Identifying and executing acquisitions is a key part of our strategy. If we do not make acquisitions on economically acceptable terms, our future growth will be limited and the acquisitions we do make may reduce, rather than increase, our cash available for distribution. These acquisitions could also affect the comparability of our results from period to period. We expect to fund future growth capital expenditures primarily from a combination of cash-on-hand, borrowings under our Revolving Credit Facility and the issuance of additional equity or debt securities. To the extent we issue additional units to fund future acquisitions or discretionary capital expenditures, the payments of distributions on those additional units may increase the risk that we will be unable to maintain or increase our per unit distribution level.

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Factors Affecting the Comparability of Our Financial Results

Our results of operations may not be comparable to our historical results of operations for the reasons described below:

Revenues. There are differences in the way our Predecessor recorded revenues and the way we record revenues as follows:

•

Revenues generated and reported by the WNRL Predecessor related to the operation of our logistics assets were minimal and were for amounts received from third parties and other amounts required to be recorded for Western for regulatory reporting. Intercompany revenues were not reported by the WNRL Predecessor related to its operation of logistics assets for the benefit of Western. Our logistics related revenues are generated primarily through the commercial agreements that we entered into with Western and are from October 2013 and future reporting periods. Our reported logistics assets revenue are fee-based and subject to contractual minimum volume commitments. The contractual fees are indexed for inflation in accordance with either the FERC indexing methodology or the U.S. Producer Price Index.


•	We did not record revenue related to the operations of the St. Paul Park Logistics Assets prior to the St. Paul Park Logistics Transaction on September 15, 2016.

•

Revenues generated and reported by the TexNew Mex Pipeline System, prior to the TexNew Mex Pipeline Acquisition on October 30, 2015, were minimal and were for amounts required to be recorded for Western for regulatory reporting. We did not record intercompany revenues related to the operation of the TexNew Mex Pipeline System and related assets for the benefit of Western prior to the TexNew Mex Pipeline Acquisition.

•

Revenues reported by WRW prior to the Wholesale Acquisition related to its wholesale operations were for sales primarily to third parties and included zero margin sales to Western’s retail business. Revenues and related margins from third-party sales were somewhat sensitive to market prices and demand for related commodities. Our wholesale operations continue to include sales to third parties and also provide for contractual margins on our sales to Western’s retail business. Our wholesale sales are less sensitive to related commodity pricing due to our contractual agreements with Western. However, such sales continue to be sensitive to market demand for our products. Our wholesale revenues also include transportation fees for both refined product and crude oil that were previously not reported as they were considered to be intercompany charges to Western and were not reported by our Predecessor.

Issuance of Additional Interests

Critical Accounting Policies and Estimates

We prepare our financial statements in conformity with U.S. GAAP. Note 2, Summary of Accounting Policies, to our Consolidated Financial Statements contains a summary of our significant accounting policies. Certain amounts included in or affecting our consolidated financial statements and related disclosures must be estimated, requiring us to make certain assumptions with respect to values or conditions that cannot be known with certainty at the time our financial statements are prepared. These estimates and assumptions affect the amounts we report for our assets and liabilities, our revenues and expenses during the reporting period, and our disclosure of contingent assets and liabilities at the date of our financial statements. We routinely evaluate these estimates, utilizing historical experience, consultation with experts and other methods we consider reasonable in the particular circumstances. Actual results may differ significantly from our estimates, and any effects on our financial condition, results of operations or cash flows resulting from revisions to these estimates are recorded in the period in which the facts that give rise to the revision become known.

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We believe that of our significant accounting policies, the following are noteworthy because they are based on estimates and assumptions that require complex and/or subjective assumptions by management that can materially impact reported results.

Historically, the refining industry has experienced significant fluctuations in operating results over an extended business cycle including changes in crack spreads and refining margins, changes in operating costs including natural gas and electricity and higher costs of complying with government regulations. It is reasonably possible that at some future downturn in refining operations that the assumptions used in our forecasts and projections used to determine impairment of long-live assets would significantly change, resulting in an impairment charge in the future. A prolonged, moderate decrease in our operating margins could potentially result in impairment to our long-live assets. Such impairment charges could be material in the period taken.

Long-Lived Assets. We calculate depreciation and amortization on a straight-line basis over the estimated useful lives of the various classes of depreciable assets. We make estimates of an asset's reasonable useful life when it is placed into service. We review the carrying values of our long-lived assets for possible impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of assets held and used is measured by a comparison of the carrying value of an asset to future net cash flows expected to be generated by the asset. If the carrying value of an asset exceeds its expected future cash flows, an impairment loss is recognized based on the excess of the carrying value of the impaired asset over its fair value. These future cash flows and fair values are estimates based on our judgment and assumptions. Assets to be disposed of are reported at the lower of the carrying amount or fair value less the cost of dispositions.

Environmental and Other Loss Contingencies. We record liabilities for loss contingencies, including environmental remediation costs, when such losses are probable and can be reasonably estimated. Environmental costs are expensed if they relate to an existing condition caused by past operations with no future economic benefit. Estimates of projected environmental costs are made based upon internal and third-party assessments of contamination, available remediation technology and environmental regulations. Loss contingency accruals, including those for environmental remediation, are subject to revision as further information develops or circumstances change. Such accruals may take the legal liability of other parties into account.

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board or other standard setting bodies that may have an impact on our accounting and reporting. For further discussion on the impact of recent accounting pronouncements, see Note 2, Summary of Accounting Policies, in the Notes to Consolidated Financial Statements included in this annual report.

How We Evaluate Our Operations

Our management uses a variety of financial and operating metrics to analyze our performance. These metrics are significant factors in assessing our operating results and profitability and include but are not limited to pipeline throughput and terminal volumes; wholesale volumes and margins; operating and maintenance expenses; EBITDA and distributable cash flow.

Logistics Volumes. The amount of revenue we generate depends on the volumes of crude oil and refined and other products that we handle with our pipeline and gathering operations and our terminalling, transportation and storage assets. These volumes are primarily affected by the supply of and demand for crude oil, refined products and asphalt in the markets served directly or indirectly by our assets. Although Western has committed to minimum volumes under our commercial agreements, we expect over time that Western will ship volumes in excess of its minimum volume commitment on our pipeline and gathering systems and will terminal volumes in excess of its minimum volume commitments at our terminals. Our results of operations will be impacted by whether or not Western ships and terminals such incremental volumes and by the amount of volumes we handle for third parties.

Wholesale Volumes and Margins. Revenues, earnings and cash flows from our wholesale business are primarily affected by sales volumes and margins for gasoline, diesel fuel and lubricants sold and crude oil and asphalt trucking volumes. We primarily use fuel margin per gallon and fuel gallons sold to evaluate the operating results of the wholesale segment. Our fuel margin per gallon is not generally correlated with changes in absolute price per gallon. Sales volumes of gasoline, diesel fuel and lubricants are affected primarily by demand and competition. Crude oil and asphalt trucking volumes can fluctuate based on local production, competition and demand. Refined product margins are equal to the sales price, net of discounts, less total cost of sales and are measured on a cents per gallon basis. Factors that influence margins include local supply, demand and competition, and the impact to margin of our commercial agreements with Western.

Operating and Maintenance Expenses. Our management seeks to maximize the profitability of our operations by effectively managing operating and maintenance expenses. These expenses primarily consist of labor and employee expenses, lease costs, utility costs, cost of insurance, maintenance materials, supplies, repairs and related expenses and property taxes. These expenses generally remain relatively stable across broad ranges of throughput volumes but can fluctuate from period to period depending on the level of maintenance related activities performed during that period and the timing of such expenses.

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Our maintenance costs are generally cyclical in nature. Our terminal facilities are subject to recurring maintenance for normal wear and related maintenance costs are generally consistent from period to period. Our routine service cycle for tank inspections and maintenance at our storage facilities is generally every 10 years. Our pipelines are also subject to routine periodic inspections. When a storage tank change in service occurs, maintenance costs will generally be greater due to increased costs of tank cleaning and hazardous material disposal. The cost of our maintenance is dependent upon the level of repairs deemed necessary as a result of the inspection of the specific asset. We manage our maintenance expenditures on our pipelines, terminals, truck fleet and other distribution assets by scheduling maintenance over time to avoid significant variability and minimize impact on our cash flows.

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Results of Operations

A discussion and analysis of our consolidated and reportable segment financial data and key operating statistics for the three years ended December 31, 2016, is presented below.

Consolidated



	Year Ended
	December 31,
	2016			2015			2014
	(In thousands, except per unit data)
Revenues:
Fee based:
Affiliate	$	223,124		$	203,435		$	176,372
Third-party	2,911			2,771			2,718
Sales based:
Affiliate	479,033			582,888			835,203
Third-party	1,517,650			1,810,773			2,487,595
Total revenues	2,222,718			2,599,867			3,501,888
Operating costs and expenses:
Cost of products sold:
Affiliate	468,935			573,264			871,751
Third-party	1,447,178			1,734,873			2,373,168
Operating and maintenance expenses	174,936			175,767			168,432
Selling, general and administrative expenses	23,386			25,063			23,839
Loss (gain) and impairments on disposal of assets, net	(1,054		)	(278		)	157
Depreciation and amortization	39,242			35,384			28,934
Total operating costs and expenses	2,152,623			2,544,073			3,466,281
Operating income	70,095			55,794			35,607
Other income (expense):
Interest income	—			—			4
Interest and debt expense	(25,972		)	(23,107		)	(2,374		)
Other income (expense), net	(70		)	66			130
Net income before income taxes	44,053			32,753			33,367
Provision for income taxes	(706		)	(47		)	(459		)
Net income	43,347			32,706			32,908
Less net loss attributable to General Partner	(23,309		)	(29,867		)	(20,084		)
Net income attributable to limited partners	$	66,656		$	62,573		$	52,992

Net income per limited partner unit:
Common - basic	$	1.16		$	1.31		$	1.16
Common - diluted	1.16			1.30			1.15
Subordinated - basic and diluted	1.21			1.30			1.15

Weighted average limited partner units outstanding:
Common - basic	29,979			24,084			23,059
Common - diluted	29,994			24,099			23,107
Subordinated - basic and diluted	22,811			22,811			22,811

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Gross Margin

Gross margin is a non-GAAP performance measure that we calculate as total revenues, net of excise taxes, less cost of products sold, exclusive of depreciation and amortization. Gross margin is a non-GAAP performance measure that we believe is important to investors in evaluating our performance as a general indication of the amount above costs of products that we are able to sell our products.



	Year Ended
	December 31,
	2016		2015		2014
	(In thousands)
Total revenues	$	2,222,718	$	2,599,867	$	3,501,888
Cost of products sold (exclusive of depreciation and amortization)	1,916,113		2,308,137		3,244,919
Gross margin	$	306,605	$	291,730	$	256,969

Gross margin increased $14.9 million from 2015 to 2016. This increase was primarily due to increased fee based gross margin in our logistics segment of $17.2 million resulting from the St. Paul Park Logistics Acquisition in 2016. Also contributing to the increase was higher gross margin of $4.7 million period over period from new asphalt hauling activity by truck. Partially offsetting the gross margin increase were decreased wholesale fuel margins of $1.2 million, reduced crude oil trucking margin of $1.6 million and a $4.5 million decrease in margin from lubricant sales. Wholesale fuel sales revenue decreased due to overall pricing declines. The average price per gallon in 2016 was $1.51 compared to $1.80 for 2015.

Gross margin increased $34.8 million from 2014 to 2015. This increase was primarily due to increased fee based revenue in our logistics segment of $23.6 million resulting from increased pipeline utilization and increases to certain pipeline, terminal and other service fee rates over 2014 rates. Also contributing to the increase were higher wholesale fuel margins of $9.9 million and higher truck freight revenue from crude oil gathering activity in the Permian Basin area of $3.5 million. Sales based revenues decreased due to a lower average price per gallon sold by our wholesale segment in 2015 of $1.80 compared to $2.83 for 2014.

Operating and Maintenance Expenses

Operating and maintenance expenses decreased from 2015 to 2016 primarily due to a decrease in our wholesale segment ($2.7 million), partially offset by an increase in our logistics segment ($1.9 million).

Operating and maintenance expenses increased from 2014 to 2015 primarily due to an increase in our logistics segment ($5.7 million) and wholesale segment ($1.6 million).

Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased from 2015 to 2016 primarily due to decreases in our wholesale segment and logistics segment of $1.3 million and $0.3 million, respectively.

The increase in selling, general and administrative expenses from 2014 to 2015 was primarily due to increases in our other category and logistics segment of $1.3 million and $0.6 million, partially offset by a decrease in our wholesale segment of $0.7 million. The increase in our other category is primarily due to increased corporate overhead related to the TexNew Mex Pipeline Acquisition ($1.6 million).

Depreciation and Amortization

The increase in depreciation and amortization from 2015 to 2016 was primarily due to the ongoing expansion of our Delaware Basin and Four Corners logistics systems.

The increase in depreciation and amortization from 2014 to 2015 was primarily due to TexNew Mex Pipeline depreciation, the ongoing expansion of our Delaware Basin and Four Corners logistics systems and the expansion of our truck fleet.

Interest Expense

The increase in interest expense from 2015 to 2016 was attributable to interest incurred from our issuance of $300.0 million of the WNRL 2023 Senior Notes during the first quarter of 2015 and higher borrowings under our Revolving Credit Facility during the current period.

The increase in interest expense from 2014 to 2015 was due to the issuance of the $300 million WNRL 2023 Senior Notes and borrowings of $145 million under our Revolving Credit Facility during 2015.

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Logistics Segment



	Year Ended
	December 31,
	2016			2015		2014
	(In thousands, except key operating statistics)
Statement of Operations Data:
Fee based revenues:
Affiliate	$	178,600		$	161,536	$	137,986
Third-party	2,911			2,771		2,718
Total revenues	181,511			164,307		140,704
Operating costs and expenses:
Operating and maintenance expenses	101,328			99,430		93,710
General and administrative expenses	2,627			2,953		2,359
Loss (gain) and impairments on disposal of assets, net	(17		)	146		262
Depreciation and amortization	33,710			30,898		25,041
Total operating costs and expenses	137,648			133,427		121,372
Operating income	$	43,863		$	30,880	$	19,332
Key Operating Statistics:
Pipeline and gathering (bpd):
Mainline movements (1):
Permian/Delaware Basin system	51,805			47,368		24,644
TexNew Mex system	9,543			12,302		—
Four Corners system	53,204			56,079		45,232
Gathering (truck offloading):
Permian/Delaware Basin system	17,662			23,617		24,166
Four Corners system	10,464			13,438		11,550
Pipeline Gathering and Injection system:
Permian/Delaware Basin system	12,295			5,861		1,525
TexNew Mex system	1,354			—		—
Four Corners system	25,052			24,490		19,943
Tank storage capacity (bbls) (2)	898,307			669,356		598,057
Terminalling, transportation and storage:
Shipments into and out of storage (bpd) (includes asphalt)	441,865			391,842		381,371
Terminal storage capacity (bbls) (2)	8,564,061			7,447,391		7,356,348

(1)

Some barrels of crude oil in route to Western's Gallup refinery and Permian/Delaware Basin are transported on more than one of our mainlines. Mainline movements for the Four Corners and Delaware Basin systems include each barrel transported on each mainline. During the second quarter of 2015, we began shipping crude oil from the Four Corners system, through the TexNew Mex Pipeline System, to the Permian/Delaware system.


(2)	Storage shell capacities represent weighted-average capacities for the periods indicated.

Fee Based Revenues

We generate our logistics revenues from third-party contracts and commercial agreements with Western. On July 1, 2016, we decreased certain pipeline, terminal and other service fee rates with such decreases averaging 3.0% for terminal, storage and gathering activities and 2.0% for crude oil pipeline shipments based on decreases in the Producer Price Index stipulated in our commercial agreements with Western. Despite decreased rates, our fee based revenues increased slightly by $0.2 million from 2015 to 2016 based on several contributing factors throughout our operating regions.

Our Permian Basin assets increased overall volumes by 4,437 bpd compared to 2015, resulting in increased fees of $2.0 million. Our Four Corners system volumes were down slightly, by 2,875 bpd, but current period volumes included movements on newly constructed, higher capacity pipelines that receive higher regulatory tariffs than did comparable pipeline deliveries in 2015. These redirected volumes resulted in a $2.0 million increase in Four Corners fees period over period. Our TexNew Mex Pipeline System, which commenced operations in April 2015, generated a full year of 2016 fees, resulting in a

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$3.4 million increase. Our St. Paul Park Logistics Assets that we acquired on September 15, 2016, generated $13.6 million in new fee based revenue during 2016. Prior to acquiring the St. Paul Park Logistics Assets, they did not generate revenue. Offsetting these increases were decreased terminalling fees and additive revenue of $3.4 million and $2.0 million, respectively, period over period.

Our revenues were generated from third-party contracts and commercial agreements with Western. On July 1, 2015, we increased certain pipeline, terminal and other service fee rates over 2014 rates with such increases ranging from 1.9% for terminal, storage and trucking activities to 4.6% for crude oil pipeline shipments based on annual fee escalators included in our Commercial Agreements with Western. These increases collectively accounted for a $2.0 million increase in fee based revenues period over period. In addition, increased utilization of our Permian Basin assets (comprised of an additional 22,724 bpd) resulted in a $10.2 million increase in fees over the prior period and increased volumes handled by our Four Corners system assets (comprised of an additional 10,847 bpd), resulted in a $2.7 million in fees period over period. The TexNew Mex pipeline system, that commenced operations in April 2015, resulted in a $13.7 million increase in fees in 2015 without comparable activity in the prior period. These increases were partially offset by decreased additive sales of $2.9 million.

Operating and Maintenance Expenses

Operating and maintenance expenses increased from 2015 to 2016 primarily due to increased employee expenses ($3.9 million), outside support services ($3.0 million) due to in-line inspections of certain pipeline segments and various tank repairs, property taxes ($1.3 million) and electricity utility expense ($0.7 million). Partially offsetting these increases were decreased operating materials and supplies ($4.6 million), chemicals and energy expense ($1.3 million), allocated expenses ($0.6 million) and right of way expenses ($0.5 million).

Operating and maintenance expenses increased from 2014 to 2015 primarily due to increased employee expenses ($4.0 million) and maintenance expense ($3.9 million), partially offset by decreased operating materials and supplies ($1.6 million) and outside support services ($0.9 million).

Depreciation and Amortization

Depreciation increased due to TexNew Mex Pipeline depreciation and the ongoing expansion of our Delaware Basin and Four Corners logistics systems.

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Wholesale Segment



	Year Ended
	December 31,
	2016			2015			2014
	(In thousands, except key operating statistics)
Statement of Operations Data:
Fee based revenues (1):
Affiliate	$	44,524		$	41,899		$	38,386
Sales based revenues (1):
Affiliate	479,033			582,888			835,203
Third party	1,517,650			1,810,773			2,487,595
Total revenues	2,041,207			2,435,560			3,361,184
Operating costs and expenses:
Cost of products sold:
Affiliate	468,935			573,264			871,751
Third-party	1,447,178			1,734,873			2,373,168
Operating and maintenance expenses	73,608			76,337			74,722
Selling, general and administrative expenses	7,607			8,865			9,521
Gain and impairments on disposal of assets, net	(1,037		)	(424		)	(105		)
Depreciation and amortization	5,532			4,486			3,893
Total operating costs and expenses	2,001,823			2,397,401			3,332,950
Operating income	$	39,384		$	38,159		$	28,234
Key Operating Statistics:
Fuel gallons sold (in thousands)	1,258,027			1,237,994			1,147,860
Fuel gallons sold to retail (included in fuel gallons sold, above) (in thousands)	332,214			314,604			268,148
Fuel margin per gallon (2)	$	0.028		$	0.030		$	0.022
Lubricant gallons sold (in thousands)	6,787			11,697			12,082
Lubricant margin per gallon (3)	$	0.85		$	0.73		$	0.86
Asphalt trucking volume (bpd)	4,727			—			—
Crude oil trucking volume (bpd)	38,582			45,337			36,314
Average crude oil revenue per barrel	$	2.16		$	2.53		$	2.90


(1)	All wholesale fee based revenues are generated through fees charged to Western's refining segment for truck transportation and delivery of crude oil and asphalt. Affiliate and third-party sales based revenues result from sales of refined products to Western and third-party customers at a delivered price that includes charges for product transportation.


(2)	Fuel margin per gallon is a measurement calculated by dividing the difference between fuel sales, net of transportation charges, and cost of fuel sales for our wholesale segment by the number of gallons sold. Fuel margin per gallon is a measure frequently used in the petroleum products wholesale industry to measure operating results related to fuel sales.


(3)	Lubricant margin per gallon is a measurement calculated by dividing the difference between lubricant sales, net of transportation charges, and lubricant cost of products sold by the number of gallons sold. Lubricant margin is a measure frequently used in the petroleum products wholesale industry to measure operating results related to lubricant sales.

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Gross Margin

Gross margin is a non-GAAP performance measure that we calculate as total revenues, net of excise taxes, less cost of products sold, exclusive of depreciation and amortization. Gross margin is a non-GAAP performance measure that we believe is important to investors in evaluating our segment's performance as a general indication of the amount above costs of products that we are able to sell our products.



	Year Ended
	December 31,
	2016		2015		2014
	(In thousands)
Total revenues	$	2,041,207	$	2,435,560	$	3,361,184
Cost of products sold (exclusive of depreciation and amortization)	1,916,113		2,308,137		3,244,919
Gross margin	$	125,094	$	127,423	$	116,265

We primarily use fuel margin per gallon and fuel gallons sold to evaluate the operating results of the wholesale segment. We believe this metric is more useful to investors than utilizing the absolute price per gallon and cost of product sold since fuel prices can be volatile and our fuel margin per gallon is not generally correlated with changes in absolute price per gallon. Wholesale gross margin decreased $2.3 million for 2016 compared to 2015. Fuel margins accounted for $1.2 million of this decrease primarily due to a per gallon decrease in fuel margins of $0.002, partially offset by a 20.0 million gallon increase in total fuel sales. Decreased gross margin of $1.6 million associated with crude oil gathering activity by truck and a $4.5 million decrease in margin from lubricant sales also contributed to the decreased gross margin, partially offset by increased gross margin of $4.7 million period over period from new asphalt hauling activity by truck.

Wholesale gross margin increased $11.2 million from 2014 to 2015. Fuel margins accounted for $9.9 million of this increase primarily due to a per gallon increase in fuel margins of $0.008 combined with a 90.1 million gallon increase in total fuel sales. Increased gross margin of $3.5 million period over period from crude oil gathering activity by truck also contributed to the increased gross margin, offset by a $1.6 million decrease in gross margin from lubricant sales.

Operating and Maintenance Expenses

Operating and maintenance expenses decreased from 2015 to 2016 due to decreased fuel expense for our truck fleet ($1.0 million), lower employee expense ($0.9 million) due to the sale of assets related to lubricant sales activities in California, decreased maintenance expense ($0.3 million) and decreased insurance expense ($0.2 million).

Operating and maintenance expenses increased from 2014 to 2015 as a the result of higher employee expense ($3.9 million) from increased headcount primarily to staff the additions to our truck fleet, increased lease expense ($0.5 million), increased taxes due to vehicle registration ($0.2 million) and increased outside support services ($0.2 million) partially offset by decreased fuel expense for our truck fleet ($3.6 million).

Gain and Impairments on Disposal of Assets, Net

The increase in gain and impairments on disposal of assets, net was primarily due to the sale of assets related to our lubricant sales activities in California during the current period.

Depreciation and Amortization

The increase in depreciation and amortization from 2015 to 2016 was primarily due to a change in the useful life pertaining to certain of our transportation assets during 2016.

The increase in depreciation and amortization from 2014 to 2015 was primarily due to the addition of crude oil tanker trailers during the latter half of 2014.

Liquidity and Capital Resources

We maintain bank accounts separate from Western, but Western continues to provide treasury services on our general partner’s behalf under our omnibus agreement. Western retained the working capital of the WNRL Predecessor generated prior to the Offering, those of WRW prior to the Wholesale Acquisition, those of the TexNew Mex Pipeline System prior to the TexNew Mex Pipeline Acquisition and those of the St. Paul Park Logistics Assets prior to the St. Paul Park Logistics Transaction, as these balances represented assets and liabilities related to the Predecessor’s assets.

As of December 31, 2016, we had cash and cash equivalents of $14.7 million. Our sources of liquidity include cash generated from operations, borrowings under our Revolving Credit Facility and the issuance of equity or debt securities.

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On September 15, 2016, we purchased the St. Paul Park Logistics Assets for $195.0 million and 628,224 common units. We funded the cash portion of the consideration through a combination of $20.3 million in direct borrowings under our Revolving Credit Facility and $174.7 million of cash on hand primarily generated from a September 2016 equity offering of 8,625,000 common units for $185.3 million.

On May 16, 2016, we entered into an underwriting agreement relating to the issuance and sale by the Partnership of 3,750,000 common units representing limited partner interests in the Partnership. The closing of the offering occurred on May 20, 2016. We also granted the underwriters an option to purchase up to 562,500 additional common units on the same terms, which was exercised in full and closed on June 1, 2016. We generated $92.5 million from this equity offering.

We funded the purchase of the TexNew Mex Pipeline System using $170 million in cash, including borrowings of $145 million under our Revolving Credit Facility and $25 million from cash on hand, the issuance of 421,031 common units representing limited partner interests in WNRL and 80,000 TexNew Mex Units.

On February 11, 2015, we issued the $300.0 million WNRL 2023 Senior Notes and used the proceeds to repay the existing borrowings under our Revolving Credit Facility.

At December 31, 2016, the Revolving Credit Facility had availability of $479.0 million, net of $20.3 million in direct borrowings and $0.7 million in outstanding letters of credit. Our Revolving Credit Facility and the indenture governing our WNRL 2023 Senior Notes both contain covenants that limit or restrict our ability to make cash distributions. Under our Revolving Credit Facility, we are permitted to make cash distributions to our equity holders, including our general partner, but only up to the amount of available cash under our partnership agreement and so long as no default exists or will be caused by such distributions. Under the Revolving Credit Facility, we are also required to maintain certain financial ratios, each tested on a quarterly basis for the immediately preceding four quarter period. The indenture governing the WNRL 2023 Senior Notes also prohibits us from making cash distributions to our equity holders, unless no default has occurred or will be caused by such distributions and such distributions are less than the cap amount prescribed in the indenture. See Note 13, Debt, in the Notes to Consolidated Financial Statements for further discussion on our Revolving Credit Facility and WNRL 2023 Senior Notes.

We currently have an effective universal shelf Registration Statement on Form S-3 that provides for the registration and sale of up to $1 billion of our or certain of our subsidiaries' equity or debt securities. We may over time, and subject to market conditions, in one or more offerings, offer and sell any combination of the securities described in the prospectus. During the second and third quarter of 2016, we completed equity offerings pursuant to the shelf registration statement and resulted in reduced availability. The current availability under our shelf Registration Statement on Form S-3 is $713.8 million.

Our minimum quarterly distribution of $0.2875 per unit per quarter, or $1.15 per unit on an annualized basis, aggregates to $17.5 million per quarter and $70.0 million per year based on the current number of common and subordinated units outstanding. We do not have a legal obligation to pay this distribution. Any distributions are subject to compliance with the restrictions of our Revolving Credit Facility.

During the years ended December 31, 2016 and 2015, we made incentive distribution right payments of $4.4 million and $1.1 million, respectively, to our General Partner. We made no incentive distribution right payments to our General Partner prior to 2015. Refer to Note 14, Equity, in the Notes to Consolidated Financial Statements for further information regarding incentive distribution rights.

The table below summarizes our 2016 quarterly distribution declarations, payments and scheduled payments through December 31, 2016:



Declaration Date	Record Date	Payment Date	Distribution per Common and Subordinated Unit
February 1	February 11	February 26	$	0.3925
April 25	May 13	May 27	0.4025
July 26	August 12	August 26	0.4125
October 24	November 7	November 23	0.4225
			$	1.6300

On January 31, 2017, our general partner's board of directors declared a quarterly cash distribution of $0.4375 per unit for the fourth quarter of 2016. We will pay the distribution on March 1, 2017 to all unitholders of record at the close of market on February 13, 2017.

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Cash Flows

The following table sets forth our cash flows for the periods indicated:



	Year Ended December 31,
	2016			2015			2014
	(In thousands)
Net cash provided by operating activities	$	108,180		$	72,546		$	89,365
Net cash used in investing activities	(25,005		)	(67,119		)	(79,232		)
Net cash used in financing activities	(113,128		)	(15,120		)	(39,839		)
Net change in cash and cash equivalents	$	(29,953	)	$	(9,693	)	$	(29,706	)

The increase in net cash from operating activities from 2015 to 2016 was primarily the result of the increase in net income as discussed above offset by changes in our working capital as disclosed in our Consolidated Statements of Cash Flows for the years ended December 31, 2016 and 2015. The change in trade accounts receivables was due to higher wholesale sales volumes during the current year and a change in affiliate accounts payable and accrued liabilities attributable to the St. Paul Park Logistics Transaction. Cash flows provided by operating activities for the year ended December 31, 2016, combined with the issuance of common units of $277.8 million and borrowings from our Revolving Credit Facility of $54.4 million were primarily used to fund the St. Paul Park Logistics Transaction, repay borrowings under our Revolving Credit Facility, make distributions to unitholders and fund capital expenditures and operating costs.

The decrease in net cash from operating activities from 2014 to 2015 was primarily the result of the decrease in net income as discussed above offset by changes in our working capital as disclosed in our Consolidated Statements of Cash Flows for the years ended December 31, 2015 and 2014. The change in trade accounts receivables and accounts payable was directly attributable to the TexNew Mex Pipeline Acquisition and related sales activity. Cash flows provided by operating activities for the year ended December 31, 2015, combined with the issuance of the $300.0 million WNRL 2023 Senior Notes and borrowings from our Revolving Credit Facility of $145.0 million were primarily used to fund the TexNew Mex Pipeline Acquisition, repayment of borrowings under our Revolving Credit Facility, distributions to unitholders, capital expenditures and operating costs.

Capital Expenditures

Our capital requirements have consisted of and are expected to continue to consist of maintenance related capital expenditures and discretionary capital expenditures. Maintenance capital expenditures include expenditures required to maintain equipment reliability, tankage and pipeline integrity and safety, and to address environmental and other regulatory requirements. Discretionary capital expenditures include expenditures to acquire assets and expand existing facilities that increase throughput capacity of our pipelines and in our terminals or increase storage capacity at our storage facilities. We rely primarily upon external financing sources, including borrowings under our Revolving Credit Facility and the issuance of debt and equity securities, to fund any significant discretionary capital expenditures.

The following table presents the total annual expenditures by segment for the last three years:



	2016		2015		2014
	(In thousands)
Logistics (1)	$	27,894	$	61,204	$	71,470
Wholesale (2)	2,414		6,421		7,868
Total	$	30,308	$	67,625	$	79,338


(1)	Capital expenditures in our logistics segment relate to logistics assets acquired from Western and from third parties along with the construction of certain logistics assets in each respective year reported.

The following table summarizes the budgeted spending allocation between maintenance and discretionary projects for 2017:



	Logistics		Wholesale		Total
	(In thousands)
Maintenance and regulatory	$	13,600	$	2,000	$	15,600
Discretionary	27,000		—		27,000
Total	$	40,600	$	2,000	$	42,600

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Contractual Obligations

Information regarding our contractual obligations of the types described below as of December 31, 2016, is set forth in the following table:



	Payments Due by Period
	Totals		2017		2018 and 2019		2020 and 2021		2022 and Beyond
	(In thousands)
Long-term debt obligations (1)	$	478,910	$	29,388	$	70,772	$	45,000	$	333,750
Operating lease obligations	15,653		7,289		6,944		1,051		369
Purchase obligations (2)	13,323,104		1,710,493		3,420,987		3,420,987		4,770,637
Total obligations	$	13,817,667	$	1,747,170	$	3,498,703	$	3,467,038	$	5,104,756


(1)	Includes minimum principal payments and interest calculated using interest rates at December 31, 2016. See Note 13, Debt in the Notes to Consolidated Financial Statements included in this annual report.


(2)	Purchase obligations include agreements to buy a minimum volume per day of refined products from Western. We multiplied the minimum contract volumes by market pricing for gasoline, diesel fuel and feedstocks at December 31, 2016, to estimate the value of these commitments. See Note 21, Related Party Transactions in the Notes to Consolidated Financial Statements included in this annual report.

Off-Balance Sheet Arrangements

We have not entered into any transactions, agreements or other contractual arrangements that would result in off-balance sheet liabilities.

Regulatory Matters

Our pipeline systems are subject to regulation by various federal, state, and local agencies. Our interstate common carrier crude oil pipeline is subject to regulation by the FERC under the Interstate Commerce Act (the “ICA”) and the Energy Policy Act of 1992 and the rules and regulations promulgated under those laws.

The FERC regulations require, among other things, that rates for interstate pipelines that transport crude oil and refined petroleum products and certain other liquids (collectively referred to as “petroleum pipelines”), be just and reasonable and must not be unduly discriminatory or confer any undue preference upon any shipper. The ICA also requires interstate common carrier petroleum pipelines to file with the FERC and publicly post tariffs stating their interstate transportation rates and terms and conditions of service and apply them uniformly to all shippers. Under the ICA, the FERC or interested persons may challenge existing or changed rates or services. If the FERC determines that a protested rate is unjust and unreasonable, the FERC may order refunds of amounts charged in excess of the just and reasonable rate. The FERC may also order a pipeline to change its rates, and may require a common carrier to pay shippers reparations for damages sustained for a period up to two years prior to the filing of a complaint.

We operate certain segments of our pipeline system pursuant to tariffs filed with the FERC. The FERC or a state commission could investigate our rates on its own initiative or at the urging of a third party. If our rate levels are investigated by the FERC or a state commission, the inquiry could result in a comparison of our rates to those charged by others or to an investigation of our costs. For several segments of our pipeline system, the FERC has granted us a temporary waiver of the filing and reporting requirements. These segments are still subject to the FERC’s jurisdiction under the ICA and we are still subject to the other requirements of the ICA. If the facts upon which the waiver was granted change materially (for example, if an unaffiliated third party seeks access to our pipelines), we are required to inform the FERC, which may result in revocation of the waiver.

In July 2016, the United States Court of Appeals for the District of Columbia Circuit issued its opinion in United Airlines, Inc., et al. v. FERC, finding that FERC had acted arbitrarily and capriciously when it failed to demonstrate that permitting an interstate petroleum products pipeline organized as a limited partnership to include an income tax allowance in the cost of service underlying its rates in addition to the discounted cash flow return on equity would not result in the pipeline partnership owners double-recovering their income taxes. The court vacated FERC’s order and remanded to FERC to consider mechanisms for demonstrating that there is no double recovery as a result of the income tax allowance. On December 15, 2016, FERC issued a Notice of Inquiry requesting energy industry input on how FERC should address income tax allowances in cost-based rates proposed by pipeline companies organized as part of a master limited partnership. FERC’s current policy on income tax allowance permits an income tax allowance in cost-based rates proposed by such pipeline companies to the extent the pipeline companies can show an actual or potential income tax liability to be paid on income generated by the companies’ FERC-regulated assets. FERC issued the Notice of Inquiry in response to the remand from the U.S. Court of Appeals for the D.C.

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Circuit in United Airlines, Inc., et al. v. FERC. We cannot predict whether FERC will successfully justify its conclusion that there is no double recovery of taxes by the oil pipeline when FERC granted the pipeline a tax allowance in its cost-based rates and at the same time set a return on equity underlying the cost-based rates on a pre-tax basis or whether FERC will modify its current policy on income tax allowances for pipeline companies organized as part of a master limited partnership. However, any modification that reduces or eliminates an income tax allowance for pipeline companies organized as a part of a master limited partnership could result in an adverse impact on our revenues associated with the transportation services we provide pursuant to cost-based rates.

We are also subject to regulation by the U.S. Department of Transportation (“DOT”) through safety standards and regulations promulgated by the Pipeline and Hazardous Materials Safety Administration (“PHMSA”), the Texas Railroad Commission, the New Mexico Public Regulation Commission, as well as various federal and state environmental agencies. These regulations include, but are not limited to, regulations regarding pipeline design, construction, operation, maintenance, integrity, testing, spill prevention and spill response plans. Many of these regulations are becoming increasingly stringent and the cost of compliance can be expected to increase over time.

Environmental and Other Matters

Environmental Regulation. Our operations are subject to extensive and periodically changing federal, state and local laws, regulations and ordinances relating to the protection of the environment. Among other things, these laws and regulations govern the emission or discharge of pollutants into or onto the land, air and water, the handling and disposal of solid and hazardous wastes, the remediation of contamination and protection of endangered and threatened species. Compliance with existing and anticipated environmental laws and regulations increases our overall cost of business, including our capital costs to develop, maintain, operate and upgrade equipment and facilities. We believe our facilities are in substantial compliance with applicable environmental laws and regulations. However, these laws and regulations are subject to changes, or to changes in the interpretation of such laws and regulations, by regulatory authorities and continued and future compliance with such laws and regulations may require us to incur significant expenditures. Additionally, violation of environmental laws, regulations and permits can result in the imposition of significant administrative, civil and criminal penalties, injunctions limiting our operations, investigatory or remedial liabilities or construction bans or delays in the development of additional facilities or equipment. Additionally, a release of hydrocarbons or hazardous substances into the environment could, to the extent the event is not insured, subject us to substantial expenses, including costs to comply with applicable laws and regulations and to resolve claims by third parties for personal injury or property damage, or by the U.S. federal government or state governments for natural resources damages. These impacts could directly and indirectly affect our business and may have an adverse impact on our financial position, results of operations and liquidity. We cannot currently determine the amounts of such future impacts.

Environmental Liabilities. Western has been party to various litigation and contingent loss matters, including environmental matters, arising in the ordinary course of business. We cannot accurately predict the outcome of these matters. Our historical costs have not been material. We are not currently aware of any environmental or other asserted or unasserted claims against us or that involve our assets that would be expected to have a material effect on our financial condition, results of operations or cash flows. Western has agreed to indemnify us for certain environmental cleanup expenses.

Seasonality

The crude oil, refined product and asphalt throughput in our pipelines and terminals and crude oil trucking volume are directly affected by the level of supply and demand for crude oil, refined products and asphalt in the markets served directly or indirectly by our assets. However, many effects of seasonality on our revenues will be substantially mitigated through our fee based commercial agreements with Western that include minimum monthly volume commitments.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Market risk is the risk of loss arising from adverse changes in interest rates, exchange rates and commodity prices. We currently operate only in the United States and are therefore not exposed to foreign currency exchange rate risk. We have minimal direct exposure to risks associated with fluctuating commodity prices as it relates to our logistics business. We do not own the refined product or crude oil that is shipped through our pipelines, distributed through our terminals or held in our logistics storage facilities. Certain of our pipeline tariffs include a contractual loss allowance, calculated as a percentage of throughput volume multiplied by the quoted market price of the commodity being shipped. This loss allowance, which comprised 1.5%, 1.7% and 3.4% of total logistics revenues for the years ended December 31, 2016, 2015 and 2014, respectively, is more volatile than tariffs and terminalling fees, as it depends on and fluctuates with commodity prices. We do not mitigate this risk to our revenues by hedging this commodity price exposure. Our commercial logistics agreements with Western are indexed for inflation and are designed to substantially mitigate our exposure to increases in additive prices and the cost of other supplies used in our logistics business. We do not hedge our exposure to commodity risk related to imbalance gains and losses or other supply costs.

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We carry wholesale refined product and lubricant inventories on our balance sheet for the period from the time of purchase of the motor fuels and lubricants from Western and third-party suppliers to our sales to industry, wholesale and retail customers. During this period we are exposed to commodity price risk as it relates to motor fuel and lubricant price fluctuations. We hold fuel inventories for the time in transport from the products terminal to the customer location, typically less than a day. We hold lubricant inventories on average between one and two months. With these inventory holding periods, we believe market volatility will generally have minimal impact on our results of operations. We currently do not hedge against this commodity price risk. As of December 31, 2016, we had $10.1 million of lubricants and refined product inventory. A 1.0% change in the related commodity pricing would not have had a significant impact on our results of operations or cash flows.

Debt that we incur under our Revolving Credit Facility bears interest at a variable rate and exposes us to interest rate risk. At December 31, 2016, we had $20.3 million outstanding in variable interest debt. If interest rates were to increase by 1%, annual interest expense would increase $0.2 million, assuming the same principal amount remained outstanding during the year. Unless interest rates increase significantly in the future, our exposure to interest rate risk is minimal. We may use certain derivative instruments to hedge our exposure to variable interest rates. We do not currently have any hedges or forward contracts in place.

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Item 8. Financial Statements and Supplementary Data

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:


•	pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and dispositions of the assets;


•	provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and the receipts and expenditures are being made only in accordance with authorizations of our management and directors; and


•	provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2016. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in the 2013 Internal Control-Integrated Framework. Based on its assessment, our management believes that, as of December 31, 2016, our internal control over financial reporting is effective based on those criteria.

Our independent registered public accounting firm, Deloitte & Touche LLP, has issued an audit report on our internal control over financial reporting. This report appears on page 66 of this annual report.

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Report of Independent Registered Public Accounting Firm

The Board of Directors of Western Refining Logistics, GP LLC and

Unitholders of Western Refining Logistics, LP

El Paso, Texas

We have audited the internal control over financial reporting of Western Refining Logistics, LP and subsidiaries (the "Company") as of December 31, 2016, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying “Management's Report on Internal Control Over Financial Reporting”. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2016, based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended December 31, 2016 of the Company and our report dated March 1, 2017 expressed an unqualified opinion on those financial statements and included an explanatory paragraph relating to the St. Paul Park Logistics Transaction, which represented a transfer of assets between entities under common control resulting in the consolidated financial statements being retrospectively adjusted to present results as if the related assets had been owned historically.

/s/ DELOITTE & TOUCHE LLP

Phoenix, Arizona

March 1, 2017

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INDEX TO FINANCIAL STATEMENTS



	Page
Report of Independent Registered Public Accounting Firm	68
Consolidated Balance Sheets as of December 31, 2016 and 2015	69
Consolidated Statements of Operations for the Three Years ended December 31, 2016	70
Consolidated Statements of Changes in Partners' Equity for the Three Years ended December 31, 2016	71
Consolidated Statements of Cash Flows for the Three Years ended December 31, 2016	72
Notes to Consolidated Financial Statements	73

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Report of Independent Registered Public Accounting Firm

The Board of Directors of Western Refining Logistics, GP LLC and

Unitholders of Western Refining Logistics, LP

El Paso, Texas

We have audited the accompanying consolidated balance sheets of Western Refining Logistics, LP and subsidiaries (the “Company”) as of December 31, 2016 and 2015, and the related consolidated statements of operations, changes in partners’ equity, and cash flows for each of the three years in the period ended December 31, 2016. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Western Refining Logistics, LP and subsidiaries at December 31, 2016 and 2015, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2016, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 1 to the consolidated financial statements, on September 15, 2016 the Company acquired certain terminalling, transportation and storage assets from Western Refining Inc. ("St. Paul Park Logistics Transaction"). As the St. Paul Park Logistics Transaction represented the transfer of assets between entities under common control, the consolidated financial statements have been retrospectively adjusted to present results as if the related assets had been owned historically.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of December 31, 2016, based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 1, 2017 expressed an unqualified opinion on the Company's internal control over financial reporting.

/s/ DELOITTE & TOUCHE LLP

Phoenix, Arizona

March 1, 2017

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WESTERN REFINING LOGISTICS, LP

CONSOLIDATED BALANCE SHEETS

(In thousands)



	December 31, 2016			December 31, 2015
ASSETS
Current assets:
Cash and cash equivalents	$	14,652		$	44,605
Accounts receivable, net:
Affiliate	48,798			44,014
Third-party, net of a reserve for doubtful accounts of $132 and $106, respectively	65,240			55,053
Inventories	68			15,200
Prepaid expenses	6,421			4,133
Other current assets	6,403			5,943
Assets held for sale	17,354			—
Total current assets	158,936			168,948
Property, plant and equipment, net	412,170			430,141
Intangible assets, net	6,515			7,757
Other assets	3,233			3,376
Total assets	$	580,854		$	610,222
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable:
Affiliate	$	120,063		$	92,031
Third-party	9,186			10,501
Accrued liabilities	39,599			30,624
Total current liabilities	168,848			133,156
Long-term liabilities:
Long-term debt, less current portion	313,032			437,467
Deferred income tax liability, net	641			—
Other liabilities	9			9
Total long-term liabilities	313,682			437,476
Commitments and contingencies
Equity:
Division equity	—			108,013
General Partner	(5,532		)	(1,085		)
TexNew Mex unitholders (80,000 units issued and outstanding)	(310		)	(310		)
Common unitholders - Public (28,866,477 and 15,866,761 units issued and outstanding, respectively)	600,100			327,351
Common unitholders - Western (9,207,847 and 8,579,623 units issued and outstanding, respectively)	(132,802		)	(105,090		)
Subordinated unitholders - Western (22,811,000 units issued and outstanding)	(363,132		)	(289,289		)
Total equity	98,324			39,590
Total liabilities and equity	$	580,854		$	610,222

Prior-period financial information has been retrospectively adjusted for the St. Paul Park Logistics Transaction.

The accompanying notes are an integral part of these consolidated financial statements

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WESTERN REFINING LOGISTICS, LP

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per unit data)



	Year Ended
	December 31, 2016			December 31, 2015			December 31, 2014
Revenues:
Fee based:
Affiliate	$	223,124		$	203,435		$	176,372
Third-party	2,911			2,771			2,718
Sales based:
Affiliate	479,033			582,888			835,203
Third-party	1,517,650			1,810,773			2,487,595
Total revenues	2,222,718			2,599,867			3,501,888
Operating costs and expenses:
Cost of products sold:
Affiliate	468,935			573,264			871,751
Third-party	1,447,178			1,734,873			2,373,168
Operating and maintenance expenses	174,936			175,767			168,432
Selling, general and administrative expenses	23,386			25,063			23,839
Loss (gain) and impairments on disposal of assets, net	(1,054		)	(278		)	157
Depreciation and amortization	39,242			35,384			28,934
Total operating costs and expenses	2,152,623			2,544,073			3,466,281
Operating income	70,095			55,794			35,607
Other income (expense):
Interest income	—			—			4
Interest and debt expense	(25,972		)	(23,107		)	(2,374		)
Other income (expense), net	(70		)	66			130
Net income before income taxes	44,053			32,753			33,367
Provision for income taxes	(706		)	(47		)	(459		)
Net income	43,347			32,706			32,908
Less net loss attributable to General Partner	(23,309		)	(29,867		)	(20,084		)
Net income attributable to limited partners	$	66,656		$	62,573		$	52,992

Net income per limited partner unit:
Common - basic	$	1.16		$	1.31		$	1.16
Common - diluted	1.16			1.30			1.15
Subordinated - basic and diluted	1.21			1.30			1.15

Weighted average limited partner units outstanding:
Common - basic	29,979			24,084			23,059
Common - diluted	29,994			24,099			23,107
Subordinated - basic and diluted	22,811			22,811			22,811

Cash distributions declared per common unit	$	1.6300		$	1.4275		$	1.1632

Prior-period financial information has been retrospectively adjusted for the St. Paul Park Logistics Transaction.

The accompanying notes are an integral part of these consolidated financial statements

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WESTERN REFINING LOGISTICS, LP

CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' EQUITY

(In thousands)



				Partnership
	Division			General			TexNew			Common			Common			Subordinated
	Equity			Partner			Mex			Public			Western			Western			Total
Balance at December 31, 2013	$	231,210		$	—		$	—		$	326,151		$	(33,174	)	$	(59,625	)	$	464,562
Net loss attributable to General Partner	(20,084		)	—			—			—			—			—			(20,084		)
Contributions from Predecessor affiliate	64,597			—			—			—			—			—			64,597
Allocation of net investment of Wholesale Acquisition	(60,870		)	—			—			—			14,291			46,579			—
Consideration paid for Wholesale Acquisition	—			—			—			—			(75,128		)	(244,872		)	(320,000		)
Offering costs	—			—			—			66			—			—			66
Unit-based compensation	—			—			—			1,564			—			—			1,564
Distributions to partners declared of $1.1632 per unit	—			—			—			(18,394		)	(8,508		)	(26,534		)	(53,436		)
Net income attributable to partners	—			—			—			18,205			8,525			26,262			52,992
Other	2,502			—			—			—			(589		)	(1,913		)	—
Balance at December 31, 2014	217,355			—			—			327,592			(94,583		)	(260,103		)	190,261
Net loss attributable to General Partner	(29,867		)	—			—			—			—			—			(29,867		)
Contributions from Predecessor affiliate	53,784			—			—			—			—			—			53,784
Allocation of net investment of TexNew Mex Acquisition	(133,259		)	—			—			—			35,105			98,154			—
Consideration paid for TexNew Mex Acquisition	—			—			—			—			(44,785		)	(125,215		)	(170,000		)
Unit-based compensation	—			—			—			1,454			—			—			1,454
Distributions to partners declared of $1.4275 per unit	—			(1,085		)	—			(22,629		)	(11,807		)	(32,563		)	(68,084		)
Distributions to TexNew Mex unitholders	—			—			(310		)	—			—			—			(310		)
Net income attributable to partners	—			—			—			21,155			10,980			30,438			62,573
Other	—			—			—			(221		)	—			—			(221		)
Balance at December 31, 2015	108,013			(1,085		)	(310		)	327,351			(105,090		)	(289,289		)	39,590
Net loss attributable to General Partner	(23,309		)	—			—			—			—			—			(23,309		)
Contributions from Predecessor affiliate	20,092			—			—			—			—			—			20,092
Allocation of net investment of St. Paul Park Logistics Transaction	(104,796		)	—			—			—			28,643			76,153			—
Consideration paid for St. Paul Park Logistics Transaction	—			—			—			—			(53,235		)	(141,765		)	(195,000		)
Issuance of common units	—			—			—			277,751			—			—			277,751
Offering costs for issuance of common units	—			—			—			(655		)	—			—			(655		)
Unit-based compensation	—			—			—			2,111			—			—			2,111
Distributions to partners declared of $1.6300 per unit	—			(4,447		)	—			(33,203		)	(14,250		)	(37,182		)	(89,082		)
Net income attributable to limited partners	—			—			—			26,745			11,081			28,830			66,656
Other	—			—			—			—			49			121			170
Balance at December 31, 2016	$	—		$	(5,532	)	$	(310	)	$	600,100		$	(132,802	)	$	(363,132	)	$	98,324

Prior-period financial information has been retrospectively adjusted for the St. Paul Park Logistics Transaction.

The accompanying notes are an integral part of these consolidated financial statements

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WESTERN REFINING LOGISTICS, LP

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)



	Year Ended December 31,
	2016			2015			2014
Cash flows from operating activities:
Net income	$	43,347		$	32,706		$	32,908
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	39,242			35,384			28,934
Reserve for doubtful accounts	26			(1		)	88
Amortization of loan fees	1,556			1,271			523
Unit-based compensation expense	2,659			2,000			1,564
Deferred income taxes	641			—			—
Loss (gain) and impairments on disposal of assets, net	(1,054		)	(278		)	157
Changes in operating assets and liabilities:
Accounts receivable - Third-party	(10,213		)	(267		)	(54,377		)
Accounts receivable - Affiliate	(4,615		)	8,042			(40,625		)
Inventories	5,056			(717		)	1,799
Prepaid expenses	(2,288		)	4,143			(1,466		)
Other assets	(660		)	(2,770		)	(3,507		)
Accounts payable and accrued liabilities	34,483			(6,976		)	123,372
Other long-term liabilities	—			9			(5		)
Net cash provided by operating activities	108,180			72,546			89,365
Cash flows from investing activities:
Capital expenditures	(30,308		)	(67,625		)	(79,338		)
Proceeds from sale of assets	5,303			506			106
Net cash used in investing activities	(25,005		)	(67,119		)	(79,232		)
Cash flows from financing activities:
Additions to long-term debt	—			300,000			—
Borrowings on revolving credit facility	54,400			145,000			269,000
Payments on revolving credit facility	(179,100		)	(269,000		)	—
Proceeds from issuance of common units	277,751			—			—
Offering costs for issuance of common units	(655		)	—			—
Quarterly distribution to Western	(56,189		)	(45,455		)	(35,042		)
Quarterly distribution to common unitholders - public	(33,203		)	(22,629		)	(18,394		)
Deferred financing costs	(1,224		)	(6,820		)	—
Contributions from affiliate	20,092			53,784			64,597
Distribution to Western due to acquisitions	(195,000		)	(170,000		)	(320,000		)
Net cash used in financing activities	(113,128		)	(15,120		)	(39,839		)
Net change in cash and cash equivalents	(29,953		)	(9,693		)	(29,706		)
Cash and cash equivalents at beginning of year	44,605			54,298			84,004
Cash and cash equivalents at end of year	$	14,652		$	44,605		$	54,298

Prior-period financial information has been retrospectively adjusted for the St. Paul Park Logistics Transaction.

The accompanying notes are an integral part of these consolidated financial statements

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WESTERN REFINING LOGISTICS, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Basis of Presentation

Western Refining Logistics, LP ("WNRL" or the "Partnership") is a Delaware limited partnership formed in July 2013 by Western Refining Logistics GP, LLC ("WRGP" or the "General Partner"), our general partner. WRGP is owned 100% by Western Refining, Inc. ("Western") and holds all of the non-economic general partner interests in WNRL. On October 16, 2013, we completed our initial public offering (the "Offering") of 15,812,500 common units representing limited partner interests. In exchange for the assets contributed, Western received 6,998,500 common units and 22,811,000 subordinated units, all of WNRL's incentive distribution rights and an aggregate cash distribution of $244.9 million to certain of Western's wholly-owned subsidiaries.

WNRL is principally a fee-based growth-oriented partnership that was formed to own, operate, develop and acquire logistics and related assets and businesses to include terminals, storage tanks, pipelines and other logistics assets related to the terminalling, transportation, storage and distribution of crude oil and refined products. WNRL's assets include 705 miles of pipelines, approximately 12.4 million barrels of active storage capacity, distribution of wholesale petroleum products and crude oil trucking.

On September 15, 2016, WNRL acquired certain terminalling, transportation and storage assets from a wholly-owned subsidiary of Western consisting of the Cottage Grove tank farm and certain terminals, storage assets, pipelines and other logistics assets located at Western's St. Paul Park refinery ("St. Paul Park Logistics Assets"). The St. Paul Park Logistics Assets primarily receive, store and distribute crude oil, feedstock and refined products associated with Western's St. Paul Park refinery. We acquired the St. Paul Park Logistics Assets from Western in exchange for $195 million in cash and 628,224 common units representing limited partner interests in WNRL. We refer to this transaction as the "St. Paul Park Logistics Transaction." This transaction was between entities under common control. See Note 3, Acquisitions, for further discussion.

On October 30, 2015, WNRL acquired a segment of the TexNew Mex Pipeline system from Western that currently extends from our crude oil station in Star Lake, New Mexico, in the Four Corners region to our T station in Eddy County, New Mexico (the "TexNew Mex Pipeline System"). We also acquired an 80,000 barrel crude oil storage tank located at our crude oil pumping station in Star Lake, New Mexico and certain other related assets ("TexNew Mex Pipeline Acquisition"). We acquired these assets in exchange for $170 million in cash, 421,031 common units representing limited partner interests in WNRL and 80,000 units of a newly created class of limited partner interests in WNRL, referred to as the "TexNew Mex Units." This purchase was between entities under common control. See Note 3, Acquisitions, for further discussion.

On October 15, 2014, WNRL purchased from Western all of the outstanding limited liability company interests of Western Refining Wholesale, LLC ("WRW") for $320 million in cash and 1,160,092 common units (the "Wholesale Acquisition"). This purchase transferred substantially all of WRW's operations from Western to WNRL, constituting the purchase of a business between entities under common control. See Note 3, Acquisitions, for further discussion.

The financial statements presented in this Annual Report on Form 10-K have been retrospectively adjusted to include the combined financial results of the St. Paul Park Logistics Assets prior to September 15, 2016, the TexNew Mex Pipeline System prior to October 30, 2015 and the WRW assets prior to October 15, 2014. The historical operations of the St. Paul Park Logistics Assets prior to the St. Paul Park Logistics Transaction generally recorded operating costs and other expenses associated with storage and terminalling services and recorded no revenue. For periods subsequent to the St. Paul Park Logistics Transaction, the results of operations for the St. Paul Park Logistics Assets will reflect revenues based on contractual rates set forth in our commercial agreements with Western. See Note 21, Related Party Transactions, for further discussion.

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WESTERN REFINING LOGISTICS, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Our operations include two business segments: the logistics segment and the wholesale segment. See Note 4, Segment Information, for further discussion of our segments.

The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for financial information and with the instructions to Form 10-K. We have not reported comprehensive income due to the absence of items of other comprehensive income or loss during the periods presented.

2. Summary of Accounting Policies

Common Control Transactions

Businesses acquired from Western and its subsidiaries are accounted for as common control transactions whereby the net assets acquired are combined with ours at their historical costs. Any recognized consideration transferred in such a transaction that exceeds or is below the carrying value of the net assets acquired is treated as a capital distribution or contribution to/from our General Partner, as applicable. If the carrying value of the net assets acquired exceeds any recognized consideration transferred including, if applicable, the fair value of any limited partner units issued, then that excess is treated as a capital contribution from our General Partner. To the extent that such transactions require prior periods to be recast, historical net equity amounts prior to the transaction date are reflected in “Division Equity.”

As defined in our partnership agreement, the subordination period ends on the first business day after we have earned and paid distributions of available cash of at least (1) $1.15 (the minimum quarterly distribution on an annualized basis) on each outstanding common and subordinated unit for each of three consecutive, non-overlapping four-quarter periods ending on or after September 30, 2016, or (2) $1.725 (150% of the annualized minimum quarterly distribution) on each outstanding common and subordinated unit and the related distributions on the incentive distribution rights for any four-quarter period ending on or after September 30, 2014, in each case provided there are no arrearages in the payment of the minimum quarterly distributions on our common units at that time. On the first business day following the payment of the distribution for the fourth quarter of 2016 on March 1, 2017, the subordinated units held by Western will convert into common units on a one-for-one basis and the resulting common units will continue to be owned by Western. See Note 14, Equity, for further discussion.

Cash Equivalents

We consider all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

Accounts Receivable

Credit for non-affiliated customers is extended based on an evaluation of our customer’s financial condition. Past due or delinquency status of our trade accounts receivable are generally based on contractual arrangements with our customers. Uncollectible accounts receivable are charged against the reserve for doubtful accounts when all reasonable efforts to collect the amounts due have been exhausted.

Inventories

Our lubricant and refined product inventories are determined using the first-in, first-out (“FIFO”) inventory valuation method. All lubricant inventories are purchased from third parties. Refined product inventories are purchased from either Western’s refineries or from third parties.

Property, Plant and Equipment

Property, plant and equipment are stated at cost. We capitalize interest on expenditures for capital projects in process greater than six months and greater than $1 million until such projects are ready for their intended use.

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WESTERN REFINING LOGISTICS, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Depreciation is provided on the straight-line method at rates based upon the estimated useful lives of the various classes of depreciable assets. The lives used in computing for such assets are as follows:



Wholesale facilities and equipment	3	—	20	years
Buildings and improvements	3	—	30	years
Pipeline and related assets	3	—	20	years
Terminals and related assets	5	—	20	years
Asphalt plant, terminals and related assets	5	—	30	years
Service vehicles, computer systems and other assets	3	—	7	years

Leasehold improvements are depreciated on the straight-line method over the shorter of the lease term or the improvement’s estimated useful life.

Expenditures for periodic maintenance and repair costs are expensed when incurred. Such expenses are reported in operating and maintenance expenses in our Consolidated Statements of Operations.

Intangible Assets

Intangible assets, net, consist of amortizable intangible assets, net of accumulated amortization. These intangible assets are comprised of customer relationships and right of way assets. We amortize our intangible assets over their estimated economic useful lives. We consider factors such as the asset’s history, our plans for that asset and the market for products associated with the asset when the intangible asset is acquired.

Amortizable intangible assets must be tested for recoverability whenever events or changes in circumstances indicate that the carrying amount of those assets may not be recoverable. Amortizable intangible assets are not recoverable if their carrying amount exceeds the sum of the undiscounted cash flows expected to result from their use and eventual disposition. If an amortizable intangible asset is not recoverable, an impairment loss is recognized in an amount that its carrying amount exceeds its fair value, generally based on discounted estimated net cash flows.

In order to test amortizable intangible assets for recoverability, management must make estimates of projected cash flows related to the asset being evaluated that include, but are not limited to, assumptions about the use or disposition of the asset, its estimated remaining life and future expenditures necessary to maintain its existing service potential. In order to determine fair value, management must make certain estimates and assumptions including, among other things, an assessment of market conditions, projected volumes, margins, cash flows, investment rates, interest/equity rates and growth rates, that could significantly impact the fair value of the asset being tested for impairment.

The risk of intangible asset impairment losses may increase to the extent that our results of operations or cash flows decline. Impairment losses may result in a material, non-cash write-down of intangible assets. Furthermore, impairment losses could have a material effect on our results of operations and equity.

Impairment of Long-Lived Assets

We review the carrying values of our long-lived assets for possible impairment whenever events or changes in circumstances indicate that the carrying amount of assets to be held and used may not be recoverable. A long-lived asset is not recoverable if its carrying amount exceeds the sum of the undiscounted cash flows expected to result from its use and eventual disposition. If a long-lived asset is not recoverable, an impairment loss is recognized in an amount by which its carrying amount exceeds its fair value.

In order to test long-lived assets for recoverability, we must make estimates of projected cash flows related to the asset being evaluated that include, but are not limited to, assumptions about the use or disposition of the asset, its estimated remaining life and future expenditures necessary to maintain its existing service potential. In order to determine fair value, we must make certain estimates and assumptions including, among other things, an assessment of market conditions, projected volumes, margins, cash flows, investment rates, interest/equity rates and growth rates or change to which could significantly impact the estimated fair value of the asset being tested for impairment.

The risk of long-lived asset impairment losses may increase to the extent that our results of operations or cash flows decline. Impairment losses may result in a material, non-cash write-down of long-lived assets. Furthermore, impairment losses could have a material effect on our results of operations and equity.

For assets to be disposed of, we report long-lived assets at the lower of carrying amount or fair value less cost to sell.

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WESTERN REFINING LOGISTICS, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Revenue Recognition

We recognize revenue for crude oil and refined petroleum product pipeline transportation based on the delivery of actual volumes transported at agreed upon tariff rates and for crude oil and refined petroleum product terminalling and storage as performed based on contractual rates related to throughput volumes or cost-plus-margin arrangements. We derived a substantial portion of our revenue from our sales to Western, and the agreed upon rates do not necessarily reflect market rates for the historical periods presented. Our revenues are generated by existing third-party contracts and from the commercial agreements with Western.

Western is obligated to pay fees based on monthly volume minimums established under our logistics and wholesale commercial agreements. In any month that Western's volume activity under these agreements is less than the monthly minimum, we record fees related to the difference between actual and minimum volumes (shortfall payments) as deferred revenue. Western has the right to receive future services for these billings for up to 12 months following the month in which the volume shortfall occurred. The balance of deferred revenue in our consolidated balance sheets as of December 31, 2016 and 2015, includes $19.1 million and $10.1 million, respectively, from our logistics and wholesale segments related to shortfall billings. We recognize revenue upon the earlier of:


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


•	the expiration of the period in which the customer is contractually allowed to receive the services (contractually stipulated as twelve months); or


•	the determination that future services will not be required.

Our sales to Western accounted for 31.6%, 30.2% and 28.9%, respectively, of our consolidated revenues for the years ended December 31, 2016, 2015 and 2014.

We record revenues for products sold upon delivery of the products to customers, the point at which title is transferred, the customer has the assumed risk of loss and when payment has been received or collection is reasonably assured. We record freight revenues for crude oil and refined petroleum product transportation based on the delivery of actual volumes transported at agreed upon rates. Excise and other taxes collected from customers and remitted to governmental authorities are not included in revenues or cost of products sold.

Imbalances

Within our pipelines and storage assets, we occasionally experience volume gains and losses. Under our commercial agreements, in accordance with the pipeline loss allowance provisions of our transportation agreements, there is a 0.20% pipeline loss allowance for the crude oil shipped on our pipeline systems. Each month we invoice Western for 0.20% of the volume delivered to us by Western for the month as a volume loss at a price equal to that month's calendar day average for WTI crude oil, as quoted on the New York Mercantile Exchange, less $8.00 per barrel. Following the end of the month, we calculate the actual volume loss and provide a credit to Western for the amount of actual volume loss at a price equal to the month's calendar day average for WTI crude oil, as quoted on the New York Mercantile Exchange, less $8.00 per barrel.

Cost Classifications

Cost of products sold includes the cost of fuel and lubricants, transportation and distribution costs, service parts and labor. Transportation, shipping and handling costs incurred are included in cost of products sold. Operating and maintenance expenses include direct costs of labor, maintenance materials and services, natural gas, additives, utilities and other direct operating expenses. Operating and maintenance expenses also include insurance expense and property taxes.

Unit-Based Compensation

Our general partner provides unit-based compensation to officers, non-employee directors and employees of our general partner or its affiliates. The fair value of our phantom units are measured using the fair market value of the underlying common unit on the date of grant based on the closing price of our common units on the grant date. The estimated fair value of our phantom units is amortized over the vesting period using the straight-line method. Awards vest over a one or three year service period. The phantom unit awards may be settled in common units, cash or a combination of both at the option of the compensation committee of the board of directors. Expenses related to unit-based compensation are included in selling, general and administrative expenses.

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WESTERN REFINING LOGISTICS, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Financial Instruments and Fair Value

Financial instruments that potentially subject us to concentrations of credit risk primarily consist of accounts receivable. We believe that our credit risk is minimized as a result of the credit quality of our customer base. See Note 16, Concentration Risk for further information. The carrying amounts of cash and cash equivalents, which we consider Level 1 assets, approximated their fair values at December 31, 2016 and 2015, respectively, due to their short-term maturities.

Asset Retirement Obligations

We are required to recognize certain obligations for the retirement of our tangible long-lived assets that result from acquisition, construction, development and normal operation. A retirement obligation exists if a party is required to settle an obligation as a result of an existing or enacted law, statute, ordinance or written or oral contract or by legal construction of a contract under the doctrine of promissory estoppel. We record the fair value of a liability for an asset retirement obligation (“ARO”) in the period in which it is incurred if a reasonable estimate of fair value can be made. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. The increase in the ARO due to the passage of time is recorded as an operating expense (accretion expense).

Some of our assets have contractual or regulatory obligations to perform remediation and, in some instances, dismantlement and removal activities when the assets are abandoned. These obligations include varying levels of activity including disconnecting inactive assets from active assets, cleaning and purging assets, and in some cases, completely removing the assets and returning the land to its original state. These assets have been in existence for many years and with regular maintenance will continue to be in service for many years to come. It is not possible to predict when demand for the related transportation or storage services will cease, and we do not believe that such demand will cease for the foreseeable future. Accordingly, we believe the date when these assets will be abandoned is indeterminate. With no reasonably determinable abandonment date, we cannot reasonably estimate the fair value of the associated asset retirement obligations. We will record asset retirement obligations for these assets in the period in which sufficient information becomes available for us to reasonably determine the settlement dates.

Environmental and Other Loss Contingencies

We record liabilities for loss contingencies, including environmental remediation costs when such losses are probable and can be reasonably estimated. Loss contingency accruals, including those for environmental remediation are subject to revision as further information develops or circumstances change and such accruals can take into account the legal liability of other parties. Where the available information is sufficient to estimate the amount of liability, that estimate is used. Where the information is only sufficient to establish a range of probable liability and no point within the range is more likely than another, the lower end of the range is used. We do not have any environmental loss contingencies accrued presently.

Under the omnibus agreement, Western indemnifies us for all known and certain unknown environmental liabilities that are associated with the ownership or operation of our assets and due to occurrences on or before the closing of our initial public offering. Under the Contribution Agreement, Western agreed to indemnify us with respect to liabilities related to certain historical assets and operations of WRW that were not contributed to us in the Wholesale Acquisition, the TexNew Mex Pipeline Acquisition and the St. Paul Park Logistics Transaction. In addition, Western made certain representations and warranties regarding the assets of WRW, the TexNew Mex Pipeline System, the Star Lake storage tank assets and the St. Paul Park Logistics Assets, including with respect to environmental matters, and agreed to indemnify us for breaches of those representations and warranties, subject to specified deductibles, caps and other limitations.

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized to reflect temporary differences between the basis of assets and liabilities for financial reporting purposes and income tax purposes. Our operations are treated as a partnership for federal and state income tax purposes, with each partner being separately taxed on its share of the taxable income. Therefore, we have excluded income taxes from these consolidated financial statements, except for certain states that tax partnerships. Any interest and penalties associated with these income taxes are included in the provision for income taxes. WNRL is treated as a publicly-traded partnership for federal and state income tax purposes, however, Western Refining Product Transport, LLC (a wholly-owned subsidiary) is taxed as a corporation for federal and state tax purposes.

Liabilities created for unrecognized tax benefits are presented as a separate liability and are not combined with deferred tax liabilities or assets. We classify interest to be paid on an underpayment of income taxes and any related penalties as income tax expense.

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WESTERN REFINING LOGISTICS, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Recent Accounting Pronouncements

For interim and annual periods beginning after December 15, 2016, the requirements related to employee share-based payment accounting were modified. The revised requirements involve several aspects of accounting for share-based payment transactions, including income tax consequences, classification of awards as either equity or liabilities, classification in the statement of cash flows and forfeiture rate calculations. The updated guidance is effective as of January 1, 2017. The impact of this guidance will not be material to our financial position, results of operations or cash flows when implemented.

From time to time, new accounting pronouncements are issued by various standard setting bodies that may have an impact on our accounting and reporting. We are currently evaluating the effect that certain of these new accounting requirements may have on our accounting and related reporting and disclosures in our consolidated financial statements.

•

Recognition and reporting of revenues - the requirements were amended to remove inconsistencies in revenue requirements and to provide a more complete framework for addressing revenue issues across a broad range of industries and transaction types. The revised standard’s core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The revised standard also addresses principal versus agent considerations and indicators related to transfer of control over specified goods. These provisions are effective January 1, 2018, and can be adopted using either a full retrospective approach or a modified approach, with early adoption permitted for periods beginning after December 15, 2016, and interim periods thereafter.

We have been evaluating and continue to evaluate the provisions of this standard and its impact on our business processes, business and accounting systems, and financial statements and related disclosures. A multi-disciplined implementation team has gained an understanding of the standard’s revenue recognition model, is reviewing and documenting our contracts, and is analyzing whether enhancements are needed to our business and accounting systems. We currently plan to adopt this standard on January 1, 2018.

•

Lease accounting - the requirements were amended with regard to recognizing lease assets and lease liabilities on the balance sheet and disclosing information about leasing arrangements. The core principle is that a lessee should recognize the assets and liabilities that arise from leases. These provisions are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. We have been evaluating and continue to evaluate the provisions of this standard and its impact on our business processes, business and accounting systems, and financial statements and related disclosures.


•	Cash flow statement - the requirements address certain classification issues related to the statement of cash flows. These provisions are effective for annual periods beginning after December 15, 2017, including interim periods within those annual periods. Early adoption is permitted in any interim or annual period.

•

Contingent put and call options in debt instruments - the requirements will reduce diversity of practice in identifying embedded derivatives in debt instruments and clarify the nature of an exercise contingency is not subject to the “clearly and closely” criteria for purposes of assessing whether the call or put option must be separated from the debt instrument and accounted for separately as a derivative. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, with early adoption permitted subject to certain requirements.

•

Business Combinations - the requirements clarify the definition of a business and provide a framework that gives entities a basis for making reasonable judgments about whether a transaction involves an asset or a business. This guidance is effective in annual periods beginning after December 15, 2017, including interim periods therein. It must be applied prospectively on or after the effective date with early adoption permitted subject to certain requirements, and no disclosures for a change in accounting principle are required at transition.

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WESTERN REFINING LOGISTICS, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

3. Acquisitions

St. Paul Park Logistics Transaction

On September 15, 2016, we acquired the St. Paul Park Logistics Assets from Western in exchange for $195 million in cash and 628,224 common units representing limited partner interests in WNRL.

The St. Paul Park Logistics Assets acquired by WNRL included approximately 4.0 million barrels of refined product and crude oil storage tanks, a light products terminal, a heavy products loading rack, certain rail and barge facilities, certain other related logistics assets and two crude oil pipeline segments and one pipeline segment not currently in service, each of which is 2.5 miles and extends from Western's refinery in St. Paul Park, Minnesota to Western's tank farm in Cottage Grove, Minnesota.

In connection with the St. Paul Park Logistics Transaction, we entered into a terminalling, transportation and storage services agreement with Western (the "St. Paul Park Terminalling Agreement"). Pursuant to the St. Paul Park Terminalling Agreement, we agreed to provide product storage services, product throughput services and product additive and blending services at the terminal facilities located at or near Western's refinery in St. Paul Park, Minnesota. In exchange for such services, Western has agreed to certain minimum volume commitments and to pay certain fees. The St. Paul Park Terminalling Agreement has an initial term of ten years, which may be extended for up to two renewal terms of five years each upon the mutual agreement of the parties. See Note 21, Related Party Transactions, for additional information.

TexNew Mex Pipeline Acquisition

On October 30, 2015, WNRL acquired the TexNew Mex Pipeline System in exchange for $170 million in cash, 421,031 common units representing limited partner interests in WNRL and 80,000 TexNew Mex Units.

In connection with the TexNew Mex Pipeline Acquisition, WNRL also entered into Amendment No. 1 to the Pipeline and Gathering Services Agreement, dated as of October 16, 2013, with Western (the "Amendment to the Pipeline Agreement"). Among other things, the Amendment to the Pipeline Agreement amends the scope of the existing agreement to include the provision of storage services and a minimum volume commitment of 80,000 barrels of storage at the Star Lake storage tank. In the Amendment to the Pipeline Agreement, Western also agreed to provide a minimum volume commitment of 13,000 barrels per day ("bpd") of crude oil on the TexNew Mex Pipeline for 10 years from the date of the Amendment to the Pipeline Agreement.

In connection with the TexNew Mex Pipeline Acquisition, the General Partner adopted certain amendments to the First Amended and Restated Agreement of Limited Partnership of the Partnership by adopting the Second Amended and Restated Agreement of Limited Partnership (the “Second A&R Partnership Agreement”). The amendments contained in the Second A&R Partnership Agreement create a new class of limited partner interests in the Partnership, referred to as the TexNew Mex Units, and set forth the rights, preferences and obligations of the TexNew Mex Units.

Wholesale Acquisition

On October 15, 2014 (the "Closing Date"), under the terms of the Contribution Agreement, WNRL purchased all of the outstanding limited liability company interests of WRW from WRSW, in exchange for $320 million of cash and 1,160,092 common units representing limited partner interests in WNRL. The issuance of these units to Western increased Western's limited partner interest in WNRL to 66.2%. We funded the cash consideration through $269 million in new borrowings under the Revolving Credit Facility and $51 million from cash on hand.

At the Closing Date, WNRL purchased substantially all of Western’s southwest wholesale assets including assets and related inventories of WRW's lubricant distribution, southwest bulk petroleum fuels distribution and products transportation. The purchased assets were recorded at Western's historical book value as the purchase of WRW's assets was treated as a reorganization of entities under common control as required for accounting purposes.

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We entered into the following agreements that have initial ten year terms with Western in connection with our entry into the Contribution Agreement:


•	Product Supply Agreement, as amended – Western supplies and we purchase approximately 79,000 barrels per day of refined products for sale to our wholesale customers. The agreement includes product pricing based upon OPIS or Platts.

•

Fuel Distribution and Supply Agreement – Western has agreed to purchase a minimum of 645,000 barrels per month of branded and unbranded motor fuels for its retail and cardlocks at a price equal to our product cost at each terminal, plus actual transportation costs, plus a margin of $0.03 per gallon. Under the Fuel Distribution and Supply Agreement, a subsidiary of Western is obligated to offer us the first opportunity to satisfy all of its incremental branded and unbranded motor fuel requirements.


•	Crude Oil Trucking Transportation Services Agreement, as amended – Western has agreed to utilize our crude oil trucks to haul a minimum of 1.525 million barrels of crude oil each month. Western pays a flat rate per barrel based on the distance between the applicable pick-up and delivery points plus monthly fuel adjustments and customary applicable surcharges.

4. Segment Information

Our operations are organized into two reportable segments based on marketing criteria and the nature of our products and services and our types of customers. These segments are logistics and wholesale.

Logistics. Our pipeline and gathering assets are positioned to support crude oil supply for Western's El Paso, Gallup and St. Paul Park refineries as well as third parties and consist of crude oil pipelines and gathering assets located primarily in the Delaware Basin, in the Four Corners area of Northwestern New Mexico and in the Upper Great Plains region. These systems gather and transport crude oil by pipeline from various production locations to Western’s refineries utilizing 705 miles of pipeline; 33 crude oil storage tanks with a total combined active shell storage capacity of approximately 959,000 barrels; eight truck loading and unloading locations; and 15 pump stations.

Our terminalling, transportation and storage assets support crude oil supply and refined product distribution for Western's El Paso, Gallup and St. Paul Park refineries as well as third parties and primarily consist of storage tanks, terminals, transportation and other assets located in El Paso, Texas; Gallup, Bloomfield and Albuquerque, New Mexico; Phoenix and Tucson, Arizona and St. Paul Park, Minnesota. These assets include crude oil, feedstock, blendstock, refined product and asphalt storage tanks with a total combined shell storage capacity of 11.4 million barrels; truck, railcar and barge loading racks; pump stations and pipeline and related logistics assets to service Western’s operations.

Wholesale. Our wholesale segment includes the operations of several lubricant and bulk petroleum distribution plants and a fleet of crude oil, refined product, asphalt and lubricant delivery trucks. Our wholesale segment distributes commercial wholesale petroleum products primarily in Arizona, Colorado, Nevada, New Mexico and Texas. The wholesale segment purchases petroleum fuels and lubricants from Western's refining segment and from third-party suppliers.

During 2016, we disposed of certain assets related to our lubricant sales in California. In connection with these asset disposals, we reported employee severance costs of $0.4 million within direct operating expenses and selling, general and administrative expenses in our Consolidated Statement of Operations for the year ended December 31, 2016. A gain of $0.6 million has been included in gain on disposal of assets, net for the year ended December 31, 2016, in the Consolidated Statements of Operations.

Segment Accounting Principles. Operating income for each segment consists of net revenues less cost of products sold; direct operating expenses; selling, general and administrative expenses; net impact of the disposal of assets and depreciation and amortization.

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Activities of our business that are not included in the two segments mentioned above are included in the "Other" category. These activities consist primarily of corporate staff operations and other items that are not specific to the normal business of any one of our two reportable segments.

The total assets of each segment consist primarily of cash and cash equivalents; inventories; net accounts receivable; net property, plant and equipment; net intangible assets and net other assets directly associated with the individual segment’s operations. Included in the total assets of the corporate operations are cash and cash equivalents; various net accounts receivable; prepaid expenses; other current assets; net deferred income tax items; net property, plant and equipment and other long-term assets.

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Disclosures regarding our reportable segments with reconciliations to consolidated totals for the three years ended December 31, 2016, are presented below:



	Year Ended
	December 31, 2016			December 31, 2015			December 31, 2014
	(In thousands)
Operating Results:
Logistics:
Revenues: Affiliate	$	178,600		$	161,536		$	137,986
Revenues: Third-party	2,911			2,771			2,718
Total revenues	181,511			164,307			140,704
Wholesale:
Revenues: Affiliate	523,557			624,787			873,589
Revenues: Third-party	1,517,650			1,810,773			2,487,595
Total revenues	2,041,207			2,435,560			3,361,184

Consolidated revenues	$	2,222,718		$	2,599,867		$	3,501,888

Operating income:
Logistics	$	43,863		$	30,880		$	19,332
Wholesale	39,384			38,159			28,234
Other	(13,152		)	(13,245		)	(11,959		)
Operating income	70,095			55,794			35,607
Other income (expense), net	(26,042		)	(23,041		)	(2,240		)
Consolidated income before income taxes	$	44,053		$	32,753		$	33,367

Depreciation and amortization:
Logistics	$	33,710		$	30,898		$	25,041
Wholesale	5,532			4,486			3,893
Consolidated depreciation and amortization	$	39,242		$	35,384		$	28,934

Capital expenditures:
Logistics	$	27,894		$	61,204		$	71,470
Wholesale	2,414			6,421			7,868
Consolidated capital expenditures	$	30,308		$	67,625		$	79,338

Total assets:
Logistics	$	412,551		$	413,847		$	385,918
Wholesale	151,669			147,597			160,158
Other	16,634			48,778			56,488
Consolidated total assets	$	580,854		$	610,222		$	602,564

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5. Earnings Per Unit

Earnings in excess of distributions are allocated to the limited partners based on their respective ownership interests. Payments made to our unitholders are determined in relation to actual distributions declared and are not based on the net income allocations used in the calculation of earnings per unit.

Diluted earnings per unit includes the effects of potentially dilutive units of our common units that consist of unvested phantom units. These units are non-participating securities due to the forfeitable nature of their associated distribution equivalent rights, prior to vesting. We do not consider these units in the two-class method when calculating earnings per unit. Basic and diluted earnings per unit applicable to subordinated limited partners are the same because there are no potentially dilutive subordinated units outstanding.

In addition to the common and subordinated units, we have identified the general partner interest, incentive distribution rights and distributions associated with the TexNew Mex Units as participating securities and use the two-class method when calculating earnings per unit applicable to limited partners that is based on the weighted-average number of common units outstanding during the period. We make incentive distribution payments to our General Partner when our per unit distribution amount exceeds the target distribution. During the years ended December 31, 2016 and 2015, we made incentive distribution right payments of $4.4 million and $1.1 million, respectively, to our General Partner. We made no incentive distribution right payments to our General Partner prior to 2015. Refer to Note 14, Equity, for further information regarding incentive distribution rights.

The holder of the TexNew Mex Units will be entitled to receive a distribution equal to 80% of the excess of TexNew Mex Shared Segment Distributable Cash Flow over the TexNew Mex Base Amount. The TexNew Mex Unit distributions are preferential to all other unit holder distributions. During the year ended December 31, 2015, we declared distributions to TexNew Mex unitholders in the amount of $0.3 million. We made no distributions in 2016 or prior to 2015. Refer to Note 14, Equity, for further information.

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The calculation of net income per unit for the years ended December 31, 2016, 2015 and 2014 is as follows:



	Period Ended December 31,
	2016			2015			2014
	(In thousands, except per unit data)
Net income	$	43,347		$	32,706		$	32,908
Net loss attributable to General Partner (1)	(23,309		)	(29,867		)	(20,084		)
Net income attributable to limited partners	66,656			62,573			52,992
Distributions on TexNew Mex Units (2)	—			(310		)	—
General Partner distributions	(4,447		)	(1,085		)	—
Limited partners' distributions on common units	(47,453		)	(34,436		)	(26,902		)
Limited partners' distributions on subordinated units	(37,182		)	(32,563		)	(26,534		)
Distributions greater than earnings	$	(22,426	)	$	(5,821	)	$	(444	)

General Partners' earnings:
Distributions	$	4,447		$	1,085		$	—
Net loss attributable to General Partner (1)	(23,309		)	(29,867		)	(20,084		)
Total General Partners' loss	$	(18,862	)	$	(28,782	)	$	(20,084	)

Limited partners' earnings on common units:
Distributions	$	47,453		$	34,436		$	26,902
Allocation of distributions greater than earnings	(12,736		)	(2,990		)	(223		)
Total limited partners' earnings on common units	$	34,717		$	31,446		$	26,679

Limited partners' earnings on subordinated units:
Distributions	$	37,182		$	32,563		$	26,534
Allocation of distributions greater than earnings	(9,690		)	(2,831		)	(221		)
Total limited partners' earnings on subordinated units	$	27,492		$	29,732		$	26,313

Weighted average limited partner units outstanding:
Common units - basic	29,979			24,084			23,059
Common units - diluted	29,994			24,099			23,107
Subordinated units - basic and diluted	22,811			22,811			22,811

Net income per limited partner unit:
Common - basic	$	1.16		$	1.31		$	1.16
Common - diluted	1.16			1.30			1.15
Subordinated - basic and diluted	1.21			1.30			1.15


(1)	We apply the two-class method to calculate earnings per unit and allocate the results of operations of WRW, the TexNew Mex Pipeline System and the St. Paul Park Logistics Assets prior to the respective acquisitions entirely to our general partner. The limited partners had no rights to the results of operations before these acquisitions.


(2)	The TexNew Mex Units entitle Western to participate in 80% of the operating results attributable to the TexNew Mex Shared Segment resulting from crude oil throughput on the TexNew Mex pipeline above 13,000 barrels per day. See Note 3, Acquisitions, for further information.

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6. Inventories

Inventories were as follows:



	December 31,
	2016		2015
	(In thousands)
Lubricants	$	—	$	14,959
Refined products	68		241
Inventories	$	68	$	15,200

Assets held for sale in our Consolidated Balance Sheet at December 31, 2016 include $10.1 million in lubricant inventories. See Note 4, Segment Information, for further discussion.

7. Prepaid Expenses

Prepaid expenses were as follows:



	December 31,
	2016		2015
	(In thousands)
Prepaid insurance	$	2,270	$	1,339
Prepaid inventories	1,206		1,493
Prepaid income taxes	407		—
Other	2,538		1,301
Prepaid expenses	$	6,421	$	4,133

8. Other Current Assets

Other current assets were as follows:



	December 31,
	2016		2015
	(In thousands)
Excise and other taxes receivable	$	4,910	$	3,860
Material and chemical inventories	961		1,252
Exchange and other receivables	532		831
Other current assets	$	6,403	$	5,943

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9. Property, Plant and Equipment, Net

Property, plant and equipment, net was as follows:



	December 31,
	2016			2015
	(In thousands)
Buildings and improvements	$	26,463		$	38,454
Pipelines and related assets	264,398			241,222
Terminals and related assets	245,512			237,234
Asphalt plant, terminals and related assets	26,861			26,898
Wholesale facilities and equipment	24,879			32,248
	588,113			576,056
Accumulated depreciation	(182,743		)	(157,328		)
	405,370			418,728
Construction in progress	6,800			11,413
Property, plant and equipment, net	$	412,170		$	430,141

Assets held for sale in our Consolidated Balance Sheet at December 31, 2016 include $7.3 million in net property, plant and equipment. See Note 4, Segment Information, for further discussion.

Depreciation expense was $38.0 million, $34.2 million and $27.6 million for the years ended December 31, 2016, 2015 and 2014, respectively. Capitalized interest expense related to capital projects was $0.9 million for the year ended December 31, 2016 with no comparable activity for the years ended December 31, 2015 and 2014.

10. Intangible Assets, Net

A summary of intangible assets, net is presented in the table below:



	December 31, 2016							December 31, 2015							Weighted Average Amortization Period (Years)
	Gross Carrying Value		Accumulated Amortization			Net Carrying Value		Gross Carrying Value		Accumulated Amortization			Net Carrying Value		Weighted Average Amortization Period (Years)
	(In thousands)
Customer relationships	$	7,172	$	(4,234	)	$	2,938	$	7,551	$	(3,921	)	$	3,630	5.5
Pipeline rights-of-way	6,527		(2,950		)	3,577		6,414		(2,287		)	4,127		4.9
	$	13,699	$	(7,184	)	$	6,515	$	13,965	$	(6,208	)	$	7,757

Intangible asset amortization expense was $1.2 million, $1.2 million and $1.3 million for the years ended December 31, 2016, 2015 and 2014, respectively, based upon estimates of useful lives ranging from 1 to 35 years.

Estimated amortization expense for the next five fiscal years is as follows (in thousands):



2017	$	1,087
2018	1,087
2019	1,087
2020	792
2021	639

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11. Other Assets

Other assets were as follows:



	December 31,
	2016		2015
	(In thousands)
Notes receivable	$	2,003	$	1,729
Other	1,230		1,647
Other assets	$	3,233	$	3,376

12. Accrued Liabilities

Accrued liabilities were as follows:



	December 31,
	2016		2015
	(In thousands)
Deferred revenue - affiliate	$	19,132	$	10,130
Interest	8,439		8,438
Excise and other taxes	6,329		5,335
Payroll and related costs	2,703		4,000
Property taxes	2,454		1,500
Branding	245		633
Other	297		588
Accrued liabilities	$	39,599	$	30,624

13. Debt

Revolving Credit Facility

In connection with the St. Paul Park Logistics Transaction, on September 15, 2016, we entered into a Commitment Increase and First Amendment to Credit Agreement (the “Amendment”) to our senior secured revolving credit facility (the "Revolving Credit Facility") to bring the total commitment to $500.0 million. The Revolving Credit Facility will mature on October 16, 2018. We have the ability to increase the total commitment of our Revolving Credit Facility by up to $150.0 million for a total facility size of up to $650.0 million, subject to receiving increased commitments from lenders and to the satisfaction of certain conditions. The Revolving Credit Facility includes a $25.0 million sub-limit for standby letters of credit and a $10.0 million sub-limit for swing line loans. Obligations under the Revolving Credit Facility and certain cash management and hedging obligations are guaranteed by all of our subsidiaries and are secured by a first priority lien on substantially all of our and our subsidiaries' significant assets. Our creditors under the Revolving Credit Facility have no recourse to Western's assets. Borrowings under our Revolving Credit Facility bear interest at either a base rate plus an applicable margin ranging from 0.75% to 1.75%, or at LIBOR plus an applicable margin ranging from 1.75% to 2.75%. The applicable margin will vary based on our Consolidated Total Leverage Ratio, as defined in the Revolving Credit Facility.

Pursuant to the Amendment, certain existing lenders and new lenders agreed to provide incremental commitments in an aggregate principal amount of $200.0 million. In addition, the Amendment amended the Revolving Credit Facility by, among other things, (a) adding an anti-cash hoarding provision and (b) permitting the Partnership to increase the total leverage ratio permitted thereunder from 4.50:1.00 to 5.00:1.00 following any material permitted acquisition through the last day of the second full fiscal quarter following such acquisition. The incremental commitments established by the Amendment benefit from the same covenants, events of default, guarantees and security as the existing commitments under the Revolving Credit Facility. We incurred financing costs associated with the Amendment of $1.2 million.

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On October 15, 2014, to partially fund the purchase of certain assets from Western, we borrowed $269.0 million under the Revolving Credit Facility. On February 11, 2015, we repaid our outstanding direct borrowings under the Revolving Credit Facility with a portion of the proceeds from the issuance of our 7.5% Senior Notes, discussed below. On October 30, 2015, we borrowed $145.0 million under the Revolving Credit Facility to partially fund the TexNew Mex Pipeline Transaction. During the year ended December 31, 2016, we repaid these direct borrowings using the net proceeds generated from our equity offering during the second quarter of 2016 and from cash-on-hand. On September 15, 2016, we borrowed $20.3 million under the Revolving Credit Facility, to partially fund the St. Paul Park Logistics Transaction.

As of December 31, 2016, the availability under the Revolving Credit Facility was $479.0 million. We had direct borrowings of $20.3 million, outstanding letters of credit of $0.7 million and no swing line borrowings under our Revolving Credit Facility as of December 31, 2016. The estimated fair value of the Revolving Credit Facility approximates its carrying amount. The interest rate for the borrowings under the Revolving Credit Facility was 4.75% as of December 31, 2016. The unamortized financing costs of $2.0 million and $1.5 million as of December 31, 2016 and 2015, respectively, are included, net of amortization, in long-term debt, less current portion, in the Consolidated Balance Sheets. The effective rate of interest, including contractual interest and amortization of loan fees, on the Revolving Credit Facility was 3.77% as of December 31, 2016

The Revolving Credit Facility contains covenants that limit or restrict our ability to make cash distributions. We are required to maintain certain financial ratios, each tested on a quarterly basis for the immediately preceding four quarter period.

7.5% Senior Notes

On February 11, 2015, we entered into an Indenture (the “Indenture”) among the Partnership, WNRL Finance Corp., a Delaware corporation and 100% owned subsidiary of the Partnership (“Finance Corp.” and together with the Partnership, the “Issuers”), the Guarantors named therein and U.S. Bank National Association, as trustee (the “Trustee”) under which the Issuers issued $300.0 million in aggregate principal amount of 7.5% Senior Notes due 2023 (the "WNRL 2023 Senior Notes"). The Partnership will pay interest on the WNRL 2023 Senior Notes semi-annually in arrears on February 15 and August 15 of each year, beginning on August 15, 2015. The WNRL 2023 Senior Notes will mature on February 15, 2023. Proceeds from the WNRL 2023 Senior Notes were used to repay $269.0 million of then outstanding borrowings under our Revolving Credit Facility. The estimated fair value of the WNRL 2023 Senior Notes was $324.8 million as of December 31, 2016. We incurred financing costs associated with the issuance of the WNRL 2023 Senior Notes of $6.8 million. The unamortized financing costs of $5.2 million and $6.1 million as of December 31, 2016 and 2015, respectively, is included, net of amortization, in long-term debt, less current portion, in the Consolidated Balance Sheets. The effective rate of interest, including contractual interest and amortization of loan fees, on the WNRL 2023 Senior Notes was 7.78% as of December 31, 2016.

The WNRL 2023 Senior Notes are fully and unconditionally and jointly and severally guaranteed on a senior unsecured basis by all of WNRL's current 100% owned subsidiaries, with the exception of Finance Corp. Finance Corp. is a minor subsidiary of WNRL and is a co-issuer of the WNRL 2023 Senior Notes. The co-issuance between WNRL and Finance Corp. is on a joint and several basis. WNRL has no independent assets or operations. There are no significant restrictions on the ability of WNRL or its subsidiary guarantors and Finance Corp. to obtain or transfer funds from its subsidiary guarantors by dividend or loan. None of the subsidiary guarantors’ and Finance Corp.'s assets represent restricted assets.

The subsidiary guarantees of the WNRL 2023 Senior Notes are subject to certain automatic customary releases, including upon the sale, disposition or transfer of capital stock or all or substantially all of the assets (including by way of merger or consolidation) of a subsidiary guarantor to a person other than the Partnership or one of its restricted subsidiaries, designation of a subsidiary guarantor as an unrestricted subsidiary in accordance with the Indenture, a legal defeasance or covenant defeasance, liquidation or dissolution of the subsidiary guarantor, and a subsidiary guarantor ceasing to guarantee debt of the Partnership, Finance Corp. or any other guarantor under a credit facility other than the WNRL 2023 Senior Notes. The Partnership’s subsidiaries may not sell or otherwise dispose of all or substantially all of their properties or assets to, or consolidate with or merge into, another company if such a sale would cause a default under the Indenture.

The Indenture contains covenants that limit WNRL’s and its restricted subsidiaries’ ability to, among other things: (i) incur, assume or guarantee additional indebtedness or issue preferred units, (ii) create liens to secure indebtedness, (iii) pay distributions on equity securities, repurchase equity securities or redeem subordinated indebtedness, (iv) make investments, (v) effect distributions, loans or other asset transfers from the Partnership’s restricted subsidiaries, (vi) consolidate with or merge with or into, or sell substantially all of the Partnership’s properties to, another person, (vii) sell or otherwise dispose of assets, including equity interests in subsidiaries and (viii) enter into transactions with affiliates. These covenants are subject to a number of limitations and exceptions. The Indenture would permit or require the principal, premium, if any, and interest on all the then outstanding WNRL 2023 Senior Notes to be due and payable immediately in the event of default.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

14. Equity

We had 28,866,477 common units held by the public outstanding as of December 31, 2016. Western owns 9,207,847 common units and 22,811,000 of our subordinated units constituting a total ownership interest of 52.6%.

During the years ended December 31, 2016 and 2015, 62,216 and 43,353 common units, respectively, were issued upon the vesting of phantom units under the Western Refining Logistics, LP 2013 Long-Term Incentive Plan (the "LTIP"). All phantom units are granted under the LTIP.

WNRL issued 628,224 common units to Western in connection with the St. Paul Park Logistics Transaction, 421,031 common units and 80,000 TexNew Mex Units to Western in connection with the TexNew Mex Pipeline Acquisition and 1,160,092 common units to Western in connection with the Wholesale Acquisition. See Note 3, Acquisitions, for further information.

On May 16, 2016, we entered into an underwriting agreement relating to the issuance and sale by the Partnership of 3,750,000 common units representing limited partner interests in the Partnership. The closing of the offering occurred on May 20, 2016. We also granted the underwriters an option to purchase up to 562,500 additional common units on the same terms, which was exercised in full and closed on June 1, 2016.

In accordance with our partnership agreement, Western's subordinated units will convert to common units once we meet specified distribution targets and successfully complete other tests set forth in our Second A&R Partnership Agreement. On the first business day following the March 1, 2017 payment of the cash distribution attributable to the fourth quarter of 2016, the requirements for the conversion of all subordinated units into common units will be satisfied under the partnership agreement. As a result, the 22,811,000 subordinated units held by Western will convert into common units on a one-for-one basis and thereafter participate on terms equal with all other common units in distributions of available cash. The conversion of the subordinated units will not impact the amount of cash distributions paid by us or the total number of outstanding units.

Issuance of TexNew Mex Units

Holders of TexNew Mex Units will generally not have voting rights, except for limited voting rights related to amendments to the rights of holders of the TexNew Mex Units, the issuance of additional TexNew Mex Units or partnership securities with distribution rights senior to or on a parity with the TexNew Mex Units, the sale of any material portion of the TexNew Mex Pipeline, and the reservation by the Partnership of any distribution amounts to which the holders of TexNew Mex Units would otherwise be entitled.

The TexNew Mex Units are perpetual and have no rights of redemption or of conversion. No holder of any TexNew Mex Unit may transfer any or all of the TexNew Mex Units held by such holder without the prior written approval of the General Partner, unless the transfer either is to an affiliate of the holder or is to any person who is, or will be substantially concurrently with the completion of the transfer, an affiliate of the General Partner.

Issuance of Additional Interests

Our partnership agreement authorizes us to issue additional partnership interests for consideration and on the terms and conditions determined by our General Partner without the approval of the unitholders. We may fund future acquisitions through the issuance of additional common units, subordinated units or other partnership interests. Holders of any additional common units we issue will be entitled to share proportionally in accordance with their respective percentage interests with the then-

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

existing common unitholders in our distributions of available cash. See Note 15, Equity-Based Compensation, for further information.

Allocations of Net Income

The Second A&R Partnership Agreement contains provisions for the allocation of net income and loss to the unitholders and the General Partner. For purposes of maintaining partner capital accounts, the Second A&R Partnership Agreement specifies that items of income and loss shall be allocated among the partners in accordance with their respective percentage interest. Normal allocations according to percentage interests are made after giving effect, if any, to priority income allocations in an amount equal to incentive distribution right payments allocated 100% to the General Partner.

Percentage Allocations of Available Cash from Operating Surplus

The following table illustrates the percentage allocations of available cash from operating surplus between the unitholders and our General Partner (as the holder of our incentive distribution rights) based on the specified target distribution levels, subject to the preferential distribution rights of holders of the TexNew Mex Units. The amounts set forth under the column heading "Marginal Percentage Interest in Distributions" are the percentage interests of our General Partner and the unitholders in any available cash from operating surplus we distribute up to and including the corresponding amount in the column "Total Quarterly Distribution per Unit Target Amount". The percentage interests shown for our unitholders and our General Partner for the minimum quarterly distribution are also applicable to quarterly distribution amounts that are less than the minimum quarterly distribution. The percentage interests set forth below assume our General Partner has not transferred its incentive distribution rights and there are no arrearages on common units.



	Total Quarterly Distribution per Unit Target Amount	Marginal Percentage Interest in Distributions
	Total Quarterly Distribution per Unit Target Amount	Unitholders		General Partner
Minimum Quarterly Distribution	$0.2875	100.0	%	—
First Target Distribution	above $0.2875 up to $0.3306	100.0	%	—
Second Target Distribution	above $0.3306 up to $0.3594	85.0	%	15.0	%
Third Target Distribution	above $0.3594 up to $0.4313	75.0	%	25.0	%
Thereafter	above $0.4313	50.0	%	50.0	%

Our partnership agreement sets forth the calculation to be used to determine the amount and priority of cash distributions that the common and subordinated unitholders and general partner will receive. We declare distributions subsequent to quarter end. The table below summarizes our 2016 quarterly distribution declarations, payments and scheduled payments through December 31, 2016:



Declaration Date	Record Date	Payment Date	Distribution per Common and Subordinated Unit
February 1	February 11	February 26	$	0.3925
April 25	May 13	May 27	0.4025
July 26	August 12	August 26	0.4125
October 24	November 7	November 23	0.4225
Total			$	1.6300

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WESTERN REFINING LOGISTICS, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

During 2016, we declared and paid distributions that were in excess of the target distribution amounts set forth in our partnership agreement, resulting in distributions to our General Partner as the holder of incentive distribution rights. The total quarterly cash distributions made to general and limited partners for the years ended December 31, 2016, 2015 and 2014, respectively, was as follows:



	Year Ended
	December 31, 2016		December 31, 2015		December 31, 2014
	(In thousands, except per unit data)
TexNew Mex Unit distributions:
TexNew Mex Unit distributions	$	310	$	—	$	—
Total TexNew Mex Unit distributions	$	310	$	—	$	—

General Partners' distributions:
General Partner's incentive distribution rights	$	4,447	$	1,085	$	—
Total General Partner's distributions	$	4,447	$	1,085	$	—

Limited partners' distributions:
Common	$	47,453	$	34,436	$	26,902
Subordinated	37,182		32,563		26,534
Total limited partners' distributions	84,635		66,999		53,436
Total cash distributions	$	89,392	$	68,084	$	53,436

Cash distributions per limited partner unit	$	1.6300	$	1.4275	$	1.1632

We currently have an effective universal shelf Registration Statement on Form S-3 that provides for the registration and sale of up to $1 billion of equity or debt securities of us and certain of our subsidiaries. We may over time, and subject to market conditions, in one or more offerings, offer and sell any combination of the securities described in the prospectus. During the second and third quarter of 2016, we completed equity offerings pursuant to the shelf registration statement and resulted in reduced availability. The current availability under our shelf Registration Statement on Form S-3 is $713.8 million.

15. Equity-Based Compensation

Our General Partner's board of directors adopted the LTIP for the benefit of employees, consultants and non-employee directors of our General Partner and its affiliates. Awards granted under the LTIP vest over a scheduled vesting period and their market value at the date of the grant is amortized over the restricted period on a straight-line basis.

As of December 31, 2016, there were 4,098,368 phantom units reserved for future grants under the LTIP.

The fair value of the phantom units is determined based on the closing price of WNRL common units on the grant date. The estimated fair value of the phantom units is amortized on a straight-line basis over the scheduled vesting periods of individual awards. We incurred unit-based compensation expense of $2.7 million, $2.0 million and $1.6 million for the years ended December 31, 2016, 2015 and 2014, respectively.

The fair value at grant date of non-vested phantom units outstanding as of December 31, 2016, was $7.5 million. The aggregate intrinsic value of such phantom units was $6.1 million. Total unrecognized compensation cost related to our non-vested phantom units totaled $5.6 million as of December 31, 2016, that is expected to be recognized over a weighted-average period of 2.4 years.

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WESTERN REFINING LOGISTICS, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

A summary of our unit award activity for the three years ended December 31, 2016, is set forth below:



	Number of Phantom Units		Weighted Average Grant Date Fair Value
Not vested at December 31, 2013	10,908		$	22.00
Awards granted	293,810		28.52
Awards vested	(10,908	)	22.00
Awards forfeited	(13,559	)	33.02
Not vested at December 31, 2014	280,251		28.30
Awards granted	72,005		28.33
Awards vested	(60,556	)	28.95
Awards forfeited	(11,913	)	30.78
Not vested at December 31, 2015	279,787		28.06
Awards granted	101,955		22.69
Awards vested	(86,406	)	25.80
Awards forfeited	(10,181	)	31.87
Not vested at December 31, 2016	285,155		26.42

16. Concentration Risk

We are part of the consolidated operations of Western, and we derive a substantial portion of our revenue from transactions with Western and its affiliates. Western accounted for 31.6%, 30.2% and 28.9%, respectively, of our consolidated revenues for the years ended December 31, 2016, 2015 and 2014.

We sell a variety of refined products to a diverse customer base. Sales to Kroger Company accounted for 20.1%, 23.5% and 23.0% of consolidated reveneus for the years ended December 31, 2016, 2015 and 2014, respectively. Sales to Western’s retail group and unmanned fleet fueling sites accounted for 23.3%, 26.4% and 23.6% of consolidated net sales for the years ended December 31, 2016, 2015 and 2014, respectively.

See Note 21, Related Party Transactions, for detailed information on our agreements with Western.

17. Income Taxes

WNRL is treated as a publicly-traded partnership for federal and state income tax purposes, however, Western Refining Product Transport, LLC (a wholly-owned subsidiary) is taxed as a corporation for federal and state tax purposes. Taxes on net income for WNRL and its subsidiaries generally are borne by our partners through the allocation of taxable income. The aggregate difference in the basis of our net assets for financial and tax reporting purposes cannot be readily determined as we do not have access to information about each partner's tax attributes in us. Our deferred income tax liabilities and income tax expense result from our taxable subsidiary and state laws that apply to entities organized as partnerships, primarily in the state of Texas and from federal and state laws for corporations. Our deferred income tax liability as of December 31, 2016 was $0.6 million. Our income tax expense was $0.7 million, $0.05 million and $0.5 million for the years ended December 31, 2016, 2015 and 2014, respectively. Our effective tax rate for the years ended December 31, 2016, 2015 and 2014 was 1.6%, 0.1% and 1.4%, respectively.

As of December 31, 2016 and 2015, we had no unrecognized tax benefit liability. No interest or penalties were recognized related to income taxes during the years ended December 31, 2016, 2015 and 2014.

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WESTERN REFINING LOGISTICS, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

18. Cash Flows

Supplemental disclosures of cash flow information were as follows:



	Year Ended December 31,
	2016		2015		2014
	(In thousands)
Non-cash operating activities were as follows:
Income taxes paid	$	415	$	456	$	1
Interest paid, excluding amounts capitalized	25,303		13,411		1,837
Non-cash investing activities were as follows:
Accrued capital expenditures	$	3,326	$	2,421	$	8,653
Non-cash financing activities were as follows:
Contribution of net assets from affiliate	$	104,796	$	133,259	$	60,870
Accrued TexNew Mex unit distributions	—		310		—
Accrued financing costs	67		—		—
Other	—		—		(2,502		)

19. Commitments

We have commitments under various operating leases with initial terms greater than one year for property, machinery and facilities. These leases have terms that will expire on various dates through 2026. We expect that in the normal course of business, these leases will be renewed or replaced by other leases. Rent expense for operating leases that provide for periodic rent escalations or rent holidays over the term of the lease is recognized on a straight-line basis. We also have commitments to purchase minimum volumes of refined product from Western under commercial agreements that we have entered into with Western. See Note 21, Related Party Transactions, for further discussion of these agreements.

The following table presents our annual minimum rental payments under non-cancelable operating leases that have lease terms of one year or more as of December 31, 2016 (in thousands):



2017	$	7,289
2018	4,568
2019	2,376
2020	702
2021	349
2022 and thereafter	369
	$	15,653

Total rental expense was $9.2 million, $9.2 million and $8.8 million for the years ended December 31, 2016, 2015 and 2014, respectively. Contingent rentals and subleases were not significant in any year.

20. Contingencies

Like other operators of petroleum-related storage and transportation facilities, our operations are subject to extensive and periodically changing federal and state environmental regulations governing air emissions, wastewater discharges and solid and hazardous waste management activities. Many of these regulations are becoming increasingly stringent and we expect the cost of compliance to increase over time. Our policy is to accrue environmental and clean-up related costs of a non-capital nature when it is probable that a liability exists and when we can reasonably estimate the amount. We may revise such estimates in the future as regulations and other conditions change. We may receive communications from various federal, state and local governmental authorities asserting violations of environmental laws and/or regulations. These governmental entities may also propose or assess fines or require corrective action for such asserted violations. We intend to respond in a timely manner to all such communications and to take appropriate corrective action.

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WESTERN REFINING LOGISTICS, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

We are not currently aware of any environmental or other asserted or unasserted claims against us that would be expected to have a material effect on our financial condition, results of operations or cash flows.

21. Related Party Transactions

Certain of our employees are shared employees with Western. At the closing of the Offering, we entered into a services agreement with Western under which Western agreed to share certain employees with us. These employees are responsible for operation, maintenance and other services related to the assets we own and operate. Western employees provide these services under our direction, supervision and control pursuant to this services agreement. Western also provides us with support for accounting, legal, human resources and various other administrative functions.

We have incurred indirect charges from Western for the allocation of services including executive oversight, accounting, treasury, tax, legal, procurement, engineering, logistics, maintenance, information technology and similar items. We classify these indirect charges between operating and maintenance expenses and selling, general and administrative expenses based on the functional nature of the employee and other services that Western provides for our operations. Indirect charges from Western that we include within our selling, general and administrative and operating and maintenance expenses were as follows:



	Year Ended
	December 31, 2016		December 31, 2015		December 31, 2014
	(In thousands)
Indirect charges:
Operating and maintenance expenses	$	65,347	$	59,863	$	57,182
Selling, general and administrative expenses	9,747		9,443		8,895
Total indirect charges	$	75,094	$	69,306	$	66,077

Our management believes the indirect charges allocated to us from Western are a reasonable reflection of the utilization of Western's service to our operations. We also incur direct charges to our operations and administration. The indirect allocations noted above may not fully reflect the additional expenses that we would have incurred had we been a stand-alone company during the periods presented.

Commercial Agreements with Western

Logistics Segment Agreements

We derive substantially all of our logistics revenues from ten-year, fee-based agreements with Western supported by minimum volume commitments and annual adjustments to fees that we and Western may renew for two additional five-year periods upon mutual agreement. Western has committed to provide us with minimum fees based on minimum monthly throughput volumes of crude oil and refined and other products and reserved storage capacity.

Pipeline and Gathering Services Agreement

We entered into a pipeline and gathering services agreement, as amended, with Western under which we agreed to transport crude oil on our Permian Basin system primarily for use at the El Paso refinery and on our Four Corners system to the Gallup refinery. We charge Western fees for pipeline movements, truck offloading and product storage.

In connection with the TexNew Mex Pipeline Acquisition, WNRL entered into the Amendment to the Pipeline Agreement. Among other things, the Amendment to the Pipeline Agreement amends the scope of the existing agreement to include the provision of storage services and a minimum volume commitment of 80,000 barrels of storage at the Star Lake storage tank. In the Amendment to the Pipeline Agreement, Western also agreed to provide a minimum volume commitment of 13,000 bpd of crude oil on the TexNew Mex Pipeline for 10 years from the date of the Amendment to the Pipeline Agreement.

In connection with the TexNew Mex Pipeline Acquisition, the General Partner adopted certain amendments to the First Amended and Restated Agreement of Limited Partnership of the Partnership by adopting the Second A&R Partnership Agreement. The amendments contained in the Second A&R Partnership Agreement create a new class of limited partner interests in the Partnership, referred to as the TexNew Mex Units, and set forth the rights, preferences and obligations of the TexNew Mex Units.

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WESTERN REFINING LOGISTICS, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

participate in 80% of the economics attributable to the TexNew Mex Shared Segment resulting from crude oil throughput on the TexNew Mex Pipeline above the 13,000 barrels per day contemplated by the commitment in the Amendment to the Pipeline Agreement. To the extent there is sufficient available cash from operating surplus under the Second A&R Partnership Agreement, the holder of the TexNew Mex Units will be entitled to receive a distribution equal to 80% of the excess of TexNew Mex Shared Segment Distributable Cash Flow over the TexNew Mex Base Amount. The TexNew Mex Unit distributions are preferential to all other unit holder distributions.

Terminalling, Transportation and Storage Services Agreement

Southwest

We entered into a terminalling, transportation and storage services agreement, as amended, with Western under which we have agreed to, among other things, distribute products produced at Western’s refineries, connect Western’s refineries to third-party pipelines and systems and provide fee-based asphalt terminalling and processing services. At our network of crude oil and refined products terminals and related assets and storage facilities, we charge Western fees for crude oil, blendstock and refined product storage, shipments into and out of storage and additive and blending services. At our asphalt plant and terminal in El Paso and our three stand-alone asphalt terminals, we charge Western fees for asphalt storage, shipments into and out of asphalt storage and asphalt processing and blending.

St. Paul Park

In connection with the St. Paul Park Logistics Transaction, we entered into the St. Paul Park Terminalling Agreement. Pursuant to the St. Paul Park Terminalling Agreement, we agreed to provide product storage services, product throughput services and product additive and blending services at the terminal facilities located at or near Western's refinery in St. Paul Park, Minnesota. In exchange for such services, Western has agreed to certain minimum volume commitments and to pay certain fees. The St. Paul Park Terminalling Agreement will have an initial term of ten years, which may be extended for up to two renewal terms of five years each upon the mutual agreement of the parties.

Wholesale Segment Agreements

In connection with the Wholesale Acquisition, we entered into the following 10-year agreements with Western. These agreements include certain minimum volume commitments by Western.

Product Supply Agreement

Under the product supply agreement, as amended, Western will supply, and we will purchase, approximately 79,000 bpd of refined products. The price per barrel will be based upon OPIS or Platts indices on the day of delivery. Pricing is subject to annual revision based on mutual agreement between us and Western. The agreement provides for make-up payments to us in any month that our average margin on non-delivered rack sales is less than a certain amount.

Fuel Distribution and Supply Agreement

Western agreed to purchase all of its retail requirements for branded and unbranded motor fuels for its retail and unmanned fleet fueling sites at a price per gallon that is $0.03 above our cost. Western has agreed to purchase a minimum of 645,000 barrels per month of branded and unbranded motor fuels for its retail and unmanned fleet fueling sites. In any month that Western doesn’t purchase the minimum volume, Western will pay us $0.03 per gallon shortfall. In any month in which Western purchases volumes in excess of the minimum, we will pay Western $0.03 per gallon over the minimum until the balance of the trailing twelve month shortfall payments is reduced to $0.

Crude Oil Trucking Transportation Services Agreement

Under the crude oil trucking and transportation services agreement, Western has agreed to pay a flat rate per mile per barrel plus monthly fuel adjustments and customary applicable surcharges. The rates are subject to adjustment annually based on mutual agreement between us and Western. Western has agreed to contract a minimum of 1.525 million barrels of crude oil to us for hauling each month.

Asphalt Trucking Transportation Services Agreement

Our wholesale segment operates a fleet of asphalt trucks, which are utilized to deliver asphalt to Western's asphalt terminals and third party customers. We have entered into an asphalt trucking transportation services agreement with Western under which we have agreed to, among other things, transport and deliver asphalt from the El Paso refinery to asphalt terminals in Texas, New Mexico and Arizona. Volumes of asphalt transported pursuant to this agreement will be credited, on a barrel per barrel basis, towards Western’s contract minimum under the Crude Oil Trucking Transportation Services Agreement. Under this Agreement, Western has given us the first option to transport all asphalt volumes Western transports by truck.

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WESTERN REFINING LOGISTICS, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Western’s obligations under these commercial agreements will not terminate if Western no longer controls our general partner. Our commercial agreements include provisions that permit Western to suspend, reduce or terminate its obligations under the applicable agreement if certain events occur. These events include Western deciding to permanently or indefinitely suspend refining operations at one or all of its refineries, as well as our being subject to certain force majeure events that would prevent us from performing required services under the applicable agreement.

Other Agreements with Western

Omnibus Agreement

We entered into an omnibus agreement with Western, certain of its subsidiaries and our general partner. The omnibus agreement addresses the following items:


•	our obligation to reimburse Western for the provision by Western of certain general and administrative services (this reimbursement is in addition to certain expenses of our general partner and its affiliates that are reimbursed under our partnership agreement and services agreement), as well as certain other direct or allocated costs and expenses incurred by Western on our behalf;


•	our rights of first offer to acquire certain logistics assets from Western;


•	an indemnity by Western for certain environmental and other liabilities, and our obligation to indemnify Western for events and conditions associated with the operation of our assets that occur after closing of the Offering and for environmental liabilities related to our assets to the extent Western is not required to indemnify us;


•	Western’s transfer of certain environmental permits related to our assets to us and our use of such permits prior to the transfer thereof; and


•	the granting of a license from Western to us with respect to use of certain Western trademarks and our granting of a license to Western with respect to use of certain of our trademarks.

The omnibus agreement generally terminates in the event of a change of control of us or our general partner.

Contribution, Conveyance and Assumption Agreement dated September 7, 2016

We entered into a Contribution, Conveyance and Assumption Agreement with Western under which WNRL acquired approximately 4.0 million barrels of refined product and crude oil storage tanks, a light products terminal, a heavy products loading rack, certain rail and barge facilities, certain other related logistics assets, and two crude oil pipeline segments and one pipeline segment not currently in service, each of which is approximately 2.5 miles and extends from Western's refinery in St. Paul Park, Minnesota to Western’s tank farm in Cottage Grove, Minnesota. Western made certain representations and warranties regarding the acquired assets, including with respect to environmental matters, and agreed to indemnify us for breaches of those representations and warranties, subject to specified deductibles, caps and other limitations.

Contribution, Conveyance and Assumption Agreement dated October 30, 2015

We entered into a Contribution, Conveyance and Assumption Agreement with Western under which we acquired (i) a segment of the TexNew Mex Pipeline system that currently extends from our crude oil station in Star Lake, New Mexico, in the Four Corners region to our T station in Eddy County, New Mexico, and (ii) an 80,000 barrel crude oil storage tank located at our crude oil pumping station in Star Lake, New Mexico and certain other related assets (the “TexNew Mex Pipeline Acquisition”). Western made certain representations and warranties regarding the acquired assets, including with respect to environmental matters, and agreed to indemnify us for breaches of those representations and warranties, subject to specified deductibles, caps and other limitations.

Contribution, Conveyance and Assumption Agreement dated September 25, 2014

We entered into a contribution agreement with Western on September 25, 2014 under which we acquired all of the outstanding limited liability company interests of Western Refining Wholesale, LLC (“WRW”), which owned substantially all of Western’s southwest wholesale assets. Among other things, Western agreed to indemnify us with respect to liabilities related to certain historical assets and operations of WRW that were not contributed to us in the Wholesale Acquisition. In addition, Western made certain representations and warranties regarding the assets of WRW, including with respect to environmental

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WESTERN REFINING LOGISTICS, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

matters, and agreed to indemnify us for breaches of those representations and warranties, subject to specified deductibles, caps and other limitations.

Services Agreement

We entered into a services agreement with Western under which we reimburse Western for its provision to us of certain personnel to provide operational services to us and under our supervision in support of our pipelines and gathering assets and terminalling and storage facilities, including routine and emergency maintenance and repair services, routine operational activities, routine administrative services, construction and related services and such other services as we and Western may mutually agree upon from time to time. Western will prepare a maintenance, operating and capital budget on an annual basis subject to our approval. Western submits actual expenditures for reimbursement on a monthly basis, and we reimburse Western for providing these services.

We may terminate any of the services provided by the personnel provided by Western upon 30 days prior written notice. Either party may terminate this agreement upon prior written notice if the other party is in material default under the agreement and such party fails to cure the material default within 20 business days. The services agreement has an initial term of ten years and may be renewed by two additional five-year terms upon our agreement with Western evidenced in writing prior to the end of the initial term of ten years or the first renewal term of five years. If a force majeure event prevents a party from carrying out its obligations (other than to make payments due) under the agreement, such obligations, to the extent affected by force majeure, will be suspended during the continuation of the force majeure event. These force majeure events include acts of God, strikes, lockouts or other industrial disturbances, wars, riots, fires, floods, storms, orders of courts or governmental authorities, explosions, terrorist acts, accidental disruption of service, breakage, breakdown of machinery, storage tanks or lines of pipe and inability to obtain or unavoidable delays in obtaining material or equipment and any other circumstances not reasonably within the control of the party claiming suspension and that by the exercise of due diligence such party is unable to prevent or overcome.

On May 4, 2015, we entered into a Joinder Agreement with Western and Northern Tier Energy ("NTI") that joined us as a party to the Shared Services Agreement, dated October 30, 2014, between Western and NTI and under which Western and NTI provide services to each other in support of their operations. Under the Joinder Agreement, we provide certain scheduling and other services in support of NTI’s operations and NTI reimburses us for the costs associated with providing such services. During the years ended December 31, 2016 and 2015, we incurred expenses of $0.4 million and $0.3 million, respectively or change to which are reimbursable from NTI under the shared services agreement.

Leasing Agreements

We entered into three separate ground lease and access agreements with Western. All three agreements are for 10-year terms with provision for automatic renewal of up to four consecutive 10-year periods. Under each separate agreement, WNRL pays nominal annual rents. Rents due under these three agreements in the aggregate are less than $0.1 million over the initial term of the agreements.

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WESTERN REFINING LOGISTICS, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

22. Quarterly Financial Information (Unaudited)

The quarterly condensed financial data for the years ended December 31, 2016 and 2015 is presented below. Due to the St. Paul Park Logistics Transaction, we have adjusted retrospectively the quarterly information contained herein to include the historical results of the St. Paul Park Logistics Assets acquired prior to the effective date of the St. Paul Park Logistics Transaction. We did not record revenue related to the operations of the St. Paul Park Logistics Assets prior to the St. Paul Park Logistics Transaction on September 15, 2016.



	Year Ended December 31, 2016
	Quarter
	First		Second		Third		Fourth
	(Unaudited) (In thousands, except per unit data)
Total revenues	$	468,039	$	578,602	$	569,261	$	606,816
Total operating costs and expenses	454,851		562,005		555,990		579,777
Operating income	13,188		16,597		13,271		27,039
Net income	5,757		9,980		6,858		20,752

Net income attributable to limited partners	$	14,007	$	17,874	$	14,023	$	20,752

Net income per limited partner unit:
Common - basic	$	0.28	$	0.33	$	0.23	$	0.31
Common - diluted	0.28		0.33		0.23		0.31
Subordinated - basic and diluted	0.28		0.36		0.25		0.31

Weighted average limited partner units outstanding:
Common - basic	24,448		26,409		30,884		38,074
Common - diluted	24,454		26,427		30,901		38,095
Subordinated - basic and diluted	22,811		22,811		22,811		22,811

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WESTERN REFINING LOGISTICS, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)



	Year Ended December 31, 2015
	Quarter
	First		Second		Third		Fourth
	(Unaudited) (In thousands, except per unit data)
Total revenues	$	607,396	$	735,904	$	680,670	$	575,897
Total operating costs and expenses	597,864		722,406		662,246		561,557
Operating income	9,532		13,498		18,424		14,340
Net income	5,382		7,120		12,233		7,971

Net income attributable to limited partners	$	15,323	$	15,915	$	16,493	$	14,842

Net income per limited partner unit:
Common - basic	$	0.33	$	0.34	$	0.35	$	0.30
Common - diluted	0.33		0.34		0.35		0.30
Subordinated - basic and diluted	0.33		0.34		0.35		0.29

Weighted average limited partner units outstanding:
Common - basic	23,985		24,017		24,017		24,314
Common - diluted	23,996		24,051		24,024		24,321
Subordinated - basic and diluted	22,811		22,811		22,811		22,811

The following tables reconciles the retrospectively adjusted quarterly information to the financial data filed with the SEC.



	Year Ended December 31, 2016
	Quarter
	First			Second
	(Unaudited) (In thousands)
Total revenues (1)	$	468,039		$	578,602
Total revenues (2)	—			—
Total revenues	$	468,039		$	578,602

Total operating costs and expenses (1)	$	446,601		$	554,111
Total operating costs and expenses (2)	8,250			7,894
Total operating costs and expenses	$	454,851		$	562,005

Operating income (1)	$	21,438		$	24,491
Operating loss (2)	(8,250		)	(7,894		)
Operating income	$	13,188		$	16,597

Net income (1)	$	14,007		$	17,874
Net loss (2)	(8,250		)	(7,894		)
Net income	$	5,757		$	9,980

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WESTERN REFINING LOGISTICS, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)



	Year Ended December 31, 2015
	Quarter
	First			Second			Third		Fourth
	(Unaudited) (In thousands)
Total revenues (1)	$	607,396		$	735,904		$	680,670	$	575,897
Total revenues (2)	—			—			—		—
Total revenues	$	607,396		$	735,904		$	680,670	$	575,897

Total operating costs and expenses (1)	$	589,835		$	714,873		$	662,246	$	554,141
Total operating costs and expenses (2)	8,029			7,533			—		7,416
Total operating costs and expenses	$	597,864		$	722,406		$	662,246	$	561,557

Operating income (1)	$	17,561		$	21,031		$	18,424	$	21,756
Operating loss (2)	(8,029		)	(7,533		)	—		(7,416		)
Operating income	$	9,532		$	13,498		$	18,424	$	14,340

Net income (1)	$	13,411		$	14,653		$	12,233	$	15,387
Net loss (2)	(8,029		)	(7,533		)	—		(7,416		)
Net income	$	5,382		$	7,120		$	12,233	$	7,971

(1) This financial data was filed with the SEC in our Quarterly Report on Form 10-Q or Annual Report on Form 10-K.

(2) This financial data is the historical results of the St. Paul Park Logistics Assets. See Note 1, Organization and Basis of Presentation, for further discussion of our retrospective adjustments for the St. Paul Park Logistics Transaction.

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Item 9.	Changes In and Disagreements With Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Evaluation of disclosure controls and procedures. Our chief executive officer and chief financial officer, after evaluating the effectiveness of our “disclosure controls and procedures” (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) as of December 31, 2016 (the “Evaluation Date”), concluded that as of the Evaluation Date, our disclosure controls and procedures were effective.

Management’s Report on Internal Control Over Financial Reporting. Included herein under the caption “Management’s Report on Internal Control Over Financial Reporting” on page 65 of this report.

Attestation Report of the Registered Public Accounting Firm. Included herein under the caption "Report of Independent Registered Public Accounting Firm" on page 66 of this report.

Changes in internal control over financial reporting. There were no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2016, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


Item 9B.	Other Information

None.

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PART III


Item 10.	Directors, Executive Officers and Corporate Governance

Management of Western Refining Logistics, LP

We are managed by the directors and executive officers of our general partner, Western Refining Logistics GP, LLC. Our general partner is not elected by our unitholders and will not be subject to re-election by our unitholders in the future. Western indirectly owns all of the membership interests in our general partner. Our general partner has a board of directors, and our unitholders are not entitled to elect the directors or, directly or indirectly, to participate in our management or operations. Our general partner will be liable, as general partner, for all of our debts (to the extent not paid from our assets), except for indebtedness or other obligations that are made specifically nonrecourse to it. Whenever possible, we intend to incur indebtedness that is nonrecourse to our general partner.

Certain of our general partner's affiliates' employees are seconded to us pursuant to our services agreement with Western. These seconded employees provide operating, maintenance and other services under our direction, supervision and control with respect to the assets that our pipeline and terminalling subsidiaries own and operate. In addition to our employees and seconded employees, other Western employees also provide services to us from time to time. We sometimes refer to these individuals in this annual report as our employees because they provide services to us directly.

Composition of the Board of Directors

Our general partner has six directors that include Messrs. Paul L. Foster, Andrew L. Atterbury, David D. Kinder, Michael C. Linn, Jeff A. Stevens and Scott D. Weaver. Western, as the sole member of our general partner, appointed all members to the board of directors of our general partner. We have three independent directors: Messrs. Andrew L. Atterbury, David D. Kinder and Michael C. Linn.

The board is led by Mr. Foster, the Chairman of the board of directors. Our general partner has separated the role of chairman of the board of directors and president, and Mr. Stevens serves as the President and Chief Executive Officer of our general partner in addition to serving as a director.

Director Independence

Although most companies listed on the NYSE are required to have a majority of independent directors serving on the board of directors of the listed company, the NYSE does not require a publicly traded limited partnership like us to have a majority of independent directors on the board of directors of our general partner or to establish a compensation or a nominating and corporate governance committee. We are, however, required to have an audit committee of at least three independent members within one year of the date our common units are first listed on the NYSE, and all of our audit committee members are required to meet the independence and financial literacy tests established by the NYSE and the Securities and Exchange Act of 1934, as amended. In connection with meeting our requirements under the NYSE phase-in rules, on July 9, 2014, Western, as the sole member of our general partner, appointed Mr. Atterbury to the board of directors, who also serves as a member of our audit committee.

The board of directors has affirmatively determined that Messrs. Atterbury, Kinder, and Linn are independent under NYSE rules. In reaching this determination, the board of directors affirmatively determined that Messrs. Atterbury, Kinder, and Linn have no material relationship with the Partnership, either directly or as a partner, shareholder or officer of an organization that has a relationship with the Partnership.

Committees of the Board of Directors

The board of directors of our general partner has two standing committees, an Audit Committee and a Conflicts Committee, and may have such other committees as the board of directors shall determine from time to time. Each of the standing committees of the board of directors has the composition and responsibilities described below.

Each of these standing committees has a written charter that may be found on our website at www.wnrl.com. In addition, paper copies of the charters are available free of charge to all unitholders by calling (915) 775-3300 or by writing to Lowry Barfield, Secretary, at our corporate headquarters located at 212 N. Clark Dr., El Paso, Texas 79905. Each committee reviews the adequacy of its charter on an annual basis, in addition to evaluating its performance and reporting to the board on such evaluation. All of the members of the standing committees are independent directors as defined by the rules and regulations of the NYSE, the SEC and our corporate guidelines, as applicable.

Audit Committee

Our Audit Committee assists the board of directors in its oversight of the integrity of our financial statements and our compliance with legal and regulatory requirements and corporate policies and controls. Our Audit Committee has the sole

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authority to retain and terminate our independent registered public accounting firm, approve all auditing services and related fees and the terms thereof and pre-approve any non-audit services to be rendered by our independent registered public accounting firm. Our audit committee also is responsible for confirming the independence and objectivity of our independent registered public accounting firm. Our independent registered public accounting firm is given unrestricted access to our Audit Committee. The board of directors has determined that each of Messrs. Atterbury, Kinder, and Linn meet the requirements to serve and each has been appointed as a member of our Audit Committee. Mr. Kinder serves as the Chairman of our Audit Committee and as an "audit committee financial expert."

In fulfilling its oversight responsibilities, the Audit Committee has reviewed and discussed the consolidated financial statements contained in this Annual Report on Form 10-K with management, the Partnership's internal auditors and its independent auditors. Management has represented to the Audit Committee that the Partnership's consolidated financial statements were prepared in accordance with GAAP. The Audit Committee has received the written disclosures and letter from the independent auditors required by applicable requirements of the Public Company Accounting Oversight Board ("PCAOB") regarding the independent auditors communications with the Audit Committee concerning independence. The Audit Committee has also discussed with the independent auditors their independence including any relationships that may impact their independence. The Audit Committee discussed and reviewed with the independent auditors all communications required to be discussed by the PCAOB, including those described in the Statement of Auditing Standards No. 16, as amended (AICPA, Professional Standards, Vol. 1, AU section 380), as adopted by the PCAOB in Rule 3200T. Based on the Audit Committee's discussion with management, the internal auditors and the independent auditors, the Audit Committee recommended that the audited consolidated financial statements be included in this Annual Report on Form 10-K.

Conflicts Committee

At least two members of the board of directors of our general partner are required to serve on our Conflicts Committee to review specific matters that may involve conflicts of interest in accordance with the terms of our partnership agreement that the board of directors submits to the Conflicts Committee for review. Our Conflicts Committee determines if the resolution of the conflict of interest is fair and reasonable to us. The members of our Conflicts Committee are not officers or employees of our general partner or directors, officers or employees of its affiliates, and meet the independence and experience standards established by the NYSE and the Exchange Act to serve on an Audit Committee of a board of directors. In addition, the members of our Conflicts Committee may not own any interest in our general partner or any interest in us or our subsidiaries other than common units or awards under our incentive compensation plan. Any matters approved by our Conflicts Committee in good faith will be deemed to be approved by all of our partners and not a breach by our general partner of any duties it may owe us or our unitholders. The board of directors has determined that each of Messrs. Atterbury, Kinder, and Linn meet the requirements to serve on our Conflicts Committee and our Conflicts Committee is therefore comprised of the following independent directors: Messrs. Atterbury, Kinder and Linn. Mr. Linn serves as the Chairman of our Conflicts Committee.

Meetings of the Board

During the last fiscal year, the Audit Committee met four times, the Conflicts Committee met seven times, and the board of directors met seven times, either in person or by telephone. All directors have access to members of management and a substantial amount of information transfer and informal communication occurs between meetings. None of our directors attended fewer than 75% of the aggregate number of meetings of the board of directors and committees of the board on which the director served.

Under our Corporate Governance Guidelines, executive sessions of the non-management directors are held after each regular meeting of the board of directors and at such other times as the non-management directors may choose. Mr. Kinder presides at these executive sessions. The non-management directors may request that certain employees and executive officers of our general partner and/or Western and other advisors and consultants to make presentations or participate in discussions at such meetings. To the extent this group of non-management directors does not also meet the independence standards of the NYSE, the directors who do meet such independence requirements shall also meet in executive sessions at least once a year.

Corporate Governance Guidelines

The Partnership has adopted a set of Corporate Governance Guidelines. A copy of the Corporate Governance Guidelines may be found on the Partnership’s website at www.wnrl.com. In addition, paper copies of the Corporate Governance Guidelines are available to all unitholders free of charge by calling (915) 775-3300 or by writing to Lowry Barfield, Secretary, at the Partnership’s corporate headquarters located at 212 N. Clark Dr., El Paso, Texas 79905. The guidelines set out the Partnership’s and the Board's thoughts on, among other things, the following:


•	The role of the board of directors and management;


•	The functions of the board of directors and its committees and the expectations for directors;

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•	The selection of directors, the Chairman of the board of directors and the Chief Executive Officer and the qualifications for directors to sit on the standing committees of the board of directors;


•	Independence requirements, election terms, retirement of directors, unit ownership requirements, management succession and executive sessions for non-management directors;


•	Compensation of directors;


•	Annual evaluation of the board and each of its committees; and


•	Evaluation of director performance.

Directors and Executive Officers of Western Refining Logistics GP, LLC

The following table shows information for the executive officers and directors of our general partner as of February 24, 2017. Directors are elected by the sole member of our general partner and hold office until their successors have been elected or qualified or until the earlier of their death, resignation, retirement, removal or disqualification. Executive officers are appointed by, and serve at the discretion of, the board of directors. There are no family relationships among any of our directors or executive officers. Some of our directors and all of our executive officers also serve as executive officers of Western.



Name	Age (as of February 24, 2017 )	Position with Western Refining Logistics GP, LLC
Jeff A. Stevens	53	Chief Executive Officer, President and Director
Paul L. Foster	59	Director
David D. Kinder	42	Director
Michael C. Linn	65	Director
Scott D. Weaver	58	Director
Andrew L. Atterbury	43	Director
Mark J. Smith	57	Executive Vice President - Operations
Karen B. Davis	60	Executive Vice President and Chief Financial Officer
Gary R. Dalke	64	Former Executive Vice President and Chief Financial Officer
William R. Jewell	62	Former Chief Accounting Officer
Lowry Barfield	59	Senior Vice President - Legal, General Counsel and Secretary
Jeffrey S. Beyersdorfer	55	Senior Vice President - Treasurer, Corporate Development and Director of Investor Relations
Matthew L. Yoder	47	Senior Vice President - WNRL

Jeff A. Stevens has served as the Chief Executive Officer and President of our general partner and as a director of our general partner since July 2013. Mr. Stevens has also served as a director of Western since September 2005, as Western’s Chief Executive Officer since January 2010. Previously, Mr. Stevens served in various senior management roles with Western, including President, Chief Operating Officer, Executive Vice President, and Executive Vice President of one of Western’s affiliates. In November 2013, Mr. Stevens was elected to the board of directors of Northern Tier Energy GP LLC, the general partner of Northern Tier, which was publicly traded until June 2016 and Northern Tier Energy LLC, a wholly-owned operating subsidiary of Northern Tier. Mr. Stevens also serves on the board of directors of Vomaris Innovations, Inc., a privately held medical device company. Mr. Stevens has spent his entire career working in the refined product production and marketing industry. Except as previously mentioned, in the past five years, Mr. Stevens has not served as a director of a publicly traded company, or as a director of a registered investment company. Mr. Stevens was extensively involved in our initial public offering and has a deep understanding of our business and operations as well as the marketing, terminalling, transportation and storage of crude oil and refined products that make him well qualified to serve as a director. Mr. Stevens also brings to the Board extensive experience in the energy industry, the business and operations of our sponsor, Western, as well as in corporate strategy and business development.

Paul L. Foster has served as a director of our general partner since July 2013. Mr. Foster has also served as Chairman of Western's board of directors since September 2005. Mr. Foster served as Western’s Chief Executive Officer from September 2005 until January 2010, when he was appointed Executive Chairman of Western. Mr. Foster also served as President of Western from September 2005 to February 2009. Mr. Foster has served on the board of directors of the University of Texas System Board of Regents since 2007, and he is currently Chairman. He also serves on the board of directors of WestStar Bank, an El Paso-based bank; as Chairman of the board of directors of Vomaris Innovations, Inc., a privately held medical device company; on the board of directors of the Federal Reserve Bank of Dallas - El Paso Branch; and on various other civic and professional organizations. Mr. Foster has spent virtually his entire career working in the refined product production and

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marketing industry. In November 2013, he was elected to the Board of Directors of Northern Tier Energy GP LLC, the general partner of Northern Tier, which was publicly traded until June 2016, and Northern Tier Energy LLC, a wholly-owned operating subsidiary of Northern Tier. Except as provided above, Mr. Foster has not served as a director of any other publicly traded company or as a director of a registered investment company in the last five years. Mr. Foster’s extensive understanding of our business and operations as well as the production and marketing, terminalling, transportation and storage of crude oil and refined products are key attributes, among others, that make him well qualified to serve as a director. Mr. Foster also has an extensive understanding of the business and operations of our sponsor, Western, and brings to the Board leadership and industry experience.

Andrew L. Atterbury has served as a member of the board of directors of our general partner and as member of the Audit Committee and the Conflicts Committee since July 2014. Mr. Atterbury currently serves as the President of Bowood Capital Advisors, LLC, an energy-focused investment management company. From 2002 through 2011, Mr. Atterbury held various positions at Inergy, LP, a natural gas and natural gas liquids storage, transportation and marketing company, and Inergy Holdings, LP, serving as Senior Vice President - Corporate Development from 2007 through 2011. From 1999 to 2001, Mr. Atterbury worked in the Corporate Development Group of Kinder Morgan, Inc. and Kinder Morgan Energy Partners, L.P. He also serves on the board of directors of Palmer Square Capital Management, LLC, a private investment management company, and Probiotics Holdings, LLC, a private probiotic technology company. Except as provided above, Mr. Atterbury has not served as a director of a public company or a registered investment company in the past five years. We believe that Mr. Atterbury’s many years of experience in oil and gas storage and logistics and in the wholesale marketing of crude oil and refined products make him particularly well qualified to serve on the board of directors of our general partner.

David D. Kinder has served as a member of the board of directors of our general partner and as Chairman of the Audit Committee and a member of the Conflicts Committee since October 2013. From May 2005 until March 2013, Mr. Kinder served as the Treasurer of Kinder Morgan Management, LLC, Kinder Morgan G.P., Inc. and Kinder Morgan Inc., and he also served as the Vice President, Corporate Development of each of these entities since October 2002. Mr. Kinder served as Treasurer of Kinder Morgan Holdco LLC from May 2007 until February 2011, and continued in the role of Vice President, Corporate Development and Treasurer of Kinder Morgan Inc. upon its conversion. From May 2012 until March 2013, he served as Vice President, Corporate Development and Treasurer of the general partner of El Paso Pipeline Partners, L.P., a master limited partnership that owns and operates natural gas transportation, pipelines, storage and other assets. Mr. Kinder served as a member of the board of directors of Sunova Energy Corp., a residential solar service company from May 2015 until August 2016. Since February 2015, Mr. Kinder has served as a member of the board of directors of Zenith Energy Partners, an international terminal development and operational company for petroleum, natural gas liquids and petrochemicals and on various other civic and professional organizations. In addition, since January 2, 2017, Mr. Kinder has served as an Industry Advisor to the Warburg Pincus Energy Group. Mr. Kinder also currently serves as President of CGK Holdings, LLC. Except as provided above, Mr. Kinder has not served as a director of a public company or a registered investment company in the last five years. We believe that Mr. Kinder’s many years of experience in the acquisition, divestiture and development of midstream energy assets and the financing of such transactions, as well as his knowledge of the industries in which we operate and master limited partnerships generally, make him particularly well-suited to serve on the board of directors of our general partner.

Michael C. Linn has served as a member of the board of directors of our general partner and as the Chairman of our Conflicts Committee and a member of the Audit Committee since October 2013. Mr. Linn is the founder, President and Chief Executive Officer of MCL Ventures LLC, a private oil, gas, and real estate investment firm. Mr. Linn is the founder of Linn Energy, LLC (“Linn Energy”), an independent oil and natural gas company, and has served as a director of Linn Energy since December 2011. Prior to such time, he served as Executive Chairman of the board of directors of Linn Energy from January 2010 to December 2011 and Chairman and Chief Executive Officer of Linn Energy from December 2007 to January 2010. Mr. Linn has served as a member of the board of directors of Nabors Industries Ltd., which owns and operates national and international land drilling and servicing rigs, since February 2012; a senior advisor to Quantum Energy Partners, LLC, a private equity provider, since December 2012; a member of the board of directors of LinnCo LLC, the formerly publicly traded holding company of Linn Energy, since April 2012; a member of the board of directors of Black Stone Minerals, L.L.C., a private holding company, since March 2015; a former member of the board of directors of the general partner of Black Stone Minerals, L.P., a publicly traded owner and operator of U.S. oil and natural gas minerals and royalty interests; a former member of the board of directors of Centrica, plc, an integrated energy company; and a member of various other civic and professional organizations. Except as provided above, Mr. Linn has not served as a director of a public company or a registered investment company in the last five years. We believe that Mr. Linn’s many years of experience as the chief executive officer of a publicly traded oil and gas company, as well as his deep industry knowledge and prior public company board experience, make him particularly well-suited to serve on the board of directors of our general partner.

Scott D. Weaver has served as a director of our general partner since July 2013. Mr. Weaver has also served as a director of Western since September 2005. Mr. Weaver served as one of Western’s executive officers from September 2005 to December 2016. From 2000 to August 2005, he served as Chief Financial Officer, Treasurer and Secretary of one of Western’s affiliates.

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Mr. Weaver also served as Western’s Chief Administrative Officer from September 2005 to December 2007 and as interim Treasurer for Western from September 2009 to January 2010. From December 2013 to April 2014, Mr. Weaver served as Interim Vice President-Administration of Northern Tier Energy GP LLC, the general partner of Northern Tier, which was publicly traded until June 2016, and Northern Tier Energy LLC, a wholly-owned operating subsidiary of Northern Tier. Mr. Weaver currently serves on the boards of directors of Encore Wire Corporation, a publicly traded copper wire manufacturing company; Wellington Insurance Company, a privately held insurance holding company; Mountain Star Sports Group, LLC, a privately held professional sports team holding company; and Vomaris Innovations, Inc., a privately held medical device company. In addition, in November 2013, he was elected to the board of directors of Northern Tier Energy GP LLC, the general partner of Northern Tier, which was publicly traded until June 2016, and Northern Tier Energy LLC, a wholly-owned operating subsidiary of Northern Tier. Except as provided above, Mr. Weaver has not served as a director of a public company or a registered investment company in the past five years. Mr. Weaver’s extensive understanding of our business and operations as well as the production and marketing, terminalling, transportation and storage of crude oil and refined products are key attributes, among others, that make him well qualified to serve as a director. Mr. Weaver also has an extensive understanding of the business and operations of our sponsor, Western, and brings to the Board leadership and industry experience. Mr. Weaver’s experience as the Chief Financial Officer of other public entities and his knowledge of public company finance matters are key attributes that make him well qualified to serve as a director.

Mark J. Smith has served as Executive Vice President of our general partner since July 2013. Mr. Smith has also served as Western’s Executive Vice President - Operations since August 2016, and prior to that time as Western’s President-Refining and Marketing since February 2009 and as Western’s Executive Vice President-Refining since August 2006. From September 2000 to August 2006, Mr. Smith served as Vice President and General Manager, Lemont Refinery, for CITGO Petroleum Corporation, where he was responsible for all business and operational aspects of the Lemont business unit.

Karen B. Davis has served as the Executive Vice President and Chief Financial Officer of our general partner since August 2016. She has also served as the Executive Vice President and Chief Financial Officer of Western since August 2016. Previously, Ms. Davis served as the Executive Vice President and Chief Financial Officer of NTGP, the general partner of Northern Tier, which was publicly traded until June 2016, from February 2015 to August 2016; the Chief Financial Officer of our general partner, from December 2014 through February 2015; and the Vice President - Director of Investor Relations of Western, from December 2014 through February 2015. Previously, Ms. Davis served as the Chief Accounting Officer of PBF Energy Inc., an independent crude oil refiner, from February 2011 to November 2014, and of PBF Logistics GP LLC the general partner of PBF Logistics LP, a master limited partnership, from its inception in February 2013 until November 2014. Prior to this, Ms. Davis has served in various chief financial officer and financial reporting officer positions with public and private companies in the United States. Ms. Davis received a Bachelor of Science degree in Business Administration with an emphasis in accounting from California State University in Chico.

Gary R. Dalke left the position of Executive Vice President and Interim Chief Financial Officer effective August 15, 2016. Mr. Dalke agreed to remain with the Partnership in a consulting capacity. Mr. Dalke served as our general partner’s Executive Vice President since December 2014 and as Interim Chief Financial Officer since February 2015. Prior to his promotion to Executive Vice President, Mr. Dalke served as our general partner’s Chief Financial Officer from July 2013 to December 2014. Mr. Dalke has also served as Western’s Chief Financial Officer since August 2005. Previously, from 2003 until August 2005, Mr. Dalke served as the Chief Accounting Officer of one of Western’s affiliates. From September 2005 to June 2007, Mr. Dalke also served as Treasurer of Western.

William R. Jewell left the position of Chief Accounting Officer effective August 15, 2016. Mr. Jewell agreed to remain with the Partnership in a consulting capacity. Mr. Jewell served as our general partner’s Chief Accounting Officer since July 2013. Mr. Jewell also served as Western’s Chief Accounting Officer since July 2007. From 2001 to 2007, Mr. Jewell was with KPMG LLP, where he last served as an Assurance Senior Manager.

Lowry Barfield has served as the Senior Vice President-Legal, General Counsel and Secretary of our general partner since July 2013. Mr. Barfield has served as Western’s Executive Vice President, General Counsel and Secretary since August 2016 and as Western’s Senior Vice President-Legal, General Counsel and Secretary from 2007 to August 2016. Previously, Mr. Barfield served as Western’s primary outside counsel from 1999 until November 2005, when he joined Western as Vice President - Legal, General Counsel and Secretary. In November 2013, Mr. Barfield was elected to the Board of Directors of Northern Tier Energy GP LLC, the general partner of Northern Tier, which was publicly traded until June 2016, and Northern Tier Energy LLC, a wholly-owned operating subsidiary of Northern Tier.

Jeffrey S. Beyersdorfer has served as the Senior Vice President - Corporate Development, Treasurer and Director of Investor Relations of our general partner since August 2016. Prior to that time, he served as the Senior Vice President - Treasurer, Director of Investor Relations and Assistant Secretary of our general partner from July 2013 to August 2016. Mr. Beyersdorfer has also served as Western’s Senior Vice President - Corporate Development, Treasurer and Director of Investor Relations since August 2016, as Western’s Senior Vice President-Treasurer and Assistant Secretary from January 2010 to August 2016 and as Western’s Director of Investor Relations from January 2010 to December 2014. From 2008 to 2009, Mr.

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Beyersdorfer served as Corporate Treasurer of FMC Technologies, Inc., where he was responsible for treasury operations, balance sheet management, foreign exchange and risk management. From 2002 to 2007, Mr. Beyersdorfer served as Vice President-Treasurer of Smurfit-Stone Container Corporation. From 1997 to 2002, he served as the Vice President-Corporate Development for Premcor, Inc., an independent oil refiner.

Matthew L. Yoder has served as Senior Vice President - WNRL of our general partner since August 2016, and prior to that time as Senior Vice President-Operations of our general partner from July 2013 to August 2016. Mr. Yoder has also served as Western’s Senior Vice President - WNRL, Retail and Supermom’s from August 2016 and as Western’s Senior Vice President-Retail and Administration from December 2007 to August 2016.

Compliance with Section 16(a) of the Securities Exchange Act

Section 16(a) of the Securities Exchange Act of 1934 ("Exchange Act") requires our (or those of our general partner) officers, directors and persons who beneficially own more than 10% of our common units to file reports of securities ownership and changes in such ownership with the SEC. Officers, directors and greater than 10% beneficial owners also are required by rules promulgated by the SEC to furnish us with copies of all Section 16(a) forms they file. Based solely upon a review of the Forms 3 and 4, including any amendments, filed with the SEC in 2016 (no Forms 5, or any amendments, were filed with respect to 2016), all required report filings by our (or our general partner's) directors and executive officers and greater than 10% affiliated beneficial owners were timely made, except that Mr. Stevens filed a late Form 4 on April 15, 2016 to report a transaction that took place on August 11, 2015.

Code of Business Conduct and Ethics

We have adopted a Code of Business Conduct and Ethics that applies to all directors, officers and employees as well as a Code of Ethics for the Chief Executive Officer, Chief Financial Officer and Principal Accounting Officer. These codes are posted on our website at www.wnrl.com under "Corporate Governance" in the "Investor Relations" section. In addition, paper copies of these codes are available to all unitholders free of charge by calling (915) 775-3300 or by writing to Lowry Barfield, Secretary, at our corporate headquarters located at 212 N. Clark Dr., El Paso, Texas 79905. We will, within the time periods proscribed by the SEC and the NYSE, timely post on our website at www.wnrl.com any amendments to these codes and any waiver applicable to any of the Chief Executive Officer, Chief Financial Officer or Principal Accounting Officer.

Communications with Unitholders and Other Interested Parties

Unitholders and other interested parties may send communications to the board of directors or any committee thereof, the Chairman of the Board or any other director to Western Refining Logistics, LP, 212 N. Clark Dr., El Paso, Texas 79905 and should clearly mark the envelope as "Unitholder Communications with Directors" and clearly identify the intended recipient(s). The General Counsel of our general partner will review each communication received and will forward the communication, as expeditiously as reasonably practicable, to the addressees if: (1) the communication complies with the requirements of any applicable policy adopted by the board of directors relating to the subject matter of the communication; and (2) the communication falls within the scope of matters generally considered by the board of directors. To the extent the subject matter of a communication relates to matters that have been delegated by the board of directors to a committee or to an executive officer of our general partner, then the General Counsel may forward the communication to the executive officer or chairman of the committee to which the matter has been delegated. The acceptance and forwarding of communications to the directors or an executive officer does not imply or create any fiduciary duty of the directors or executive officer to the person submitting the communications.


Item 11.	Executive Compensation

We are managed by our general partner, the executive officers of which are employees of Western. Our executive officers perform services for our general partner as well as Western and its affiliates. We and our general partner are parties to an omnibus agreement and a services agreement with Western under which, among other things:


•	Western will make available to our general partner the services of the Western employees, including those employees who will serve as the executive officers of our general partner; and


•	Our general partner will be obligated to reimburse Western for the portion of the costs allocated to us that Western incurs providing compensation and benefits to such Western employees.

We do not allocate any portion of the expense reimbursement provided for in the omnibus or services agreements to services provided by an individual executive officer to us; rather, the amount reimbursed covers a wide range of selling, general and administrative costs that Western calculates annually at its discretion.

All of our executive officers are compensated for the services they perform for us solely through awards of equity-based compensation granted pursuant to the LTIP. Western provides compensation to its executives in the form of base salaries, annual performance bonuses, long-term performance unit awards, restricted share unit awards and participation in various

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employee benefits plans and arrangements, including the Western match for the Western 401(k) plan and Western-paid life insurance premiums. The form and amount of compensation provided by Western is determined solely by Western. We compensate our executive officers for the services they perform for us solely through awards of equity-based compensation with the goal of compensating them in a way that meaningfully aligns their interests with the interests of our unitholders.

COMPENSATION DISCUSSION AND ANALYSIS

This "Compensation Discussion and Analysis" or "CD&A" sets forth the objectives and principles underlying the Partnership's executive compensation programs and the key executive compensation decisions that were made for 2016. It also explains the most important factors relevant to such decisions. This CD&A provides context and background for the compensation earned by and awarded to our named executive officers, as reflected in the compensation tables that follow the CD&A. Our named executive officers for 2016 consist of the following executive officers of our general partner:

•Jeff A. Stevens, President and Chief Executive Officer

•Karen B. Davis, Executive Vice President and Chief Financial Officer

•Mark J. Smith, Executive Vice President - Operations

•Lowry Barfield, Senior Vice President - Legal, General Counsel and Secretary


•	Matthew L. Yoder, Senior Vice President - WNRL


•	Gary R. Dalke, Former Interim Chief Financial Officer

Mr. Dalke was appointed Interim Chief Financial Officer of the general partner on February 2, 2015 in addition to his continuing role as Executive Vice President. Mr. Dalke left both positions with our general partner, effective August 15, 2016, but continues to work with the Partnership in a consulting capacity. Ms. Davis was appointed Executive Vice President and Chief Financial Officer of the general partner on August 15, 2016.

Compensation Decisions and Compensation Expenses

All of our executive officers are compensated for the services they perform for us solely through awards of equity-based compensation granted pursuant to the LTIP. The board of directors of our general partner currently administers the LTIP and approves any awards granted to our executive officers. We are solely responsible for the cost of awards granted under the LTIP.

Neither we nor Western allocate any portion of the expense reimbursement provided for in the omnibus or services agreements to services provided by an individual executive officer to us; rather, the amount reimbursed covers a wide range of general and administrative costs that Western calculates annually at its discretion. Our general partner pays the amounts allocated to us, which may include, among other things, compensation costs associated with Western employees who provide services to us. We reimburse our general partner for the amounts paid to Western on our behalf.

We do not maintain any employee benefit plans or arrangements, any defined benefit pension plan or nonqualified deferred compensation plans, or any retirement plans. Western provides compensation to its executives in the form of base salaries, annual performance bonuses, long-term performance unit awards, restricted share unit awards and participation in various employee benefits plans and arrangements, including the Western match for the Western 401(k) plan and Western-paid life insurance premiums. Western may provide different and/or additional compensation to our executive officers to ensure the officers have a balanced, comprehensive and competitive compensation structure. Although the estimated overall cost to Western of providing compensation and benefits to the Western employees who provide services to us, including the individuals who serve as the executive officers of our general partner, are included in the general and administrative costs reimbursed to Western by our general partner, we have no control over such costs and do not establish or direct the compensation policies or practices of Western.

Compensation Considerations

In establishing named executive officer compensation, the board of directors of our general partner considers the success and performance of the Partnership, the contributions of the named executive officers to the Partnership's success and performance, and the desire to attract and retain highly qualified executives to lead the Partnership. In addition, the board considers the input and advice of certain senior officers, advice and analysis from independent compensation consultants, the current economic conditions and industry environment in which the Partnership operates and relies on the board members' common sense, experience and judgment.

Role of Certain Senior Officers. The board of directors makes all compensation decisions related to our named executive officers; however, Jeff A. Stevens, the President and Chief Executive Officer, may from time to time, as requested by the board, provide information and recommendations relating to the other executive officers' compensation. Such information may include the executive officers' roles and responsibilities, their individual performance including their individual impact on the Partnership's performance, and such other information as may be requested by the board.

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Role of Compensation Consultants. The board of directors has determined it is appropriate to engage an independent outside compensation consultant to provide comprehensive analysis and recommendations as to named executive officer compensation every three years with interim annual updates. To the extent the board perceives there are significant shifts in compensation trends or the Partnership's operations or if the board determines in its discretion to modify named executive officer compensation, then the board of directors may retain an independent compensation consultant to provide comprehensive or interim analyses more or less frequently.

At the end of 2014, the board of directors of the general partner retained Pearl Meyer & Partners ("PM&P") to provide a comprehensive analysis of the Partnership's director and named executive officer compensation and to provide comparative data and associated recommendations regarding peer groups. PM&P provided its comprehensive analysis in January 2015.

PM&P provided an interim update to its January 2015 comprehensive analysis of named executive officer compensation in October 2015, and the Board utilized this data and analysis, in conjunction with other sources of information in awarding time-based phantom unit awards to the named executive officers in March 2016 (the "2016 PUAs"). PM&P also provided an interim update to its January 2015 comprehensive analysis of named executive officer compensation in February 2017 to assist the board of directors of the general partner in establishing compensation for the named executive officers for the 2017 fiscal year.

In connection with retaining PM&P to provide the analysis of director and executive officer compensation described above, the board of directors evaluated the independence of PM&P and concluded that PM&P was independent under the standards set forth in the Dodd-Frank Wall Street Reform and Consumer Protection Act and the rules of the SEC and that its work did not raise any conflict of interest. The board of directors considered the following when making this determination:


•	PM&P performed no services for the Partnership other than the provision of advice regarding the evaluation and disclosure of director and executive officer compensation;


•	The ratio of fees PM&P receives from the Partnership compared to PM&P's total revenue is less than 1%;


•	PM&P retains a "conflicts policy" to prevent any conflict of interests between PM&P and the Partnership;


•	None of PM&P's staff providing services to the Partnership has any business or personal relationship with any executive or board member of our general partner other than the provision of the services to the general partner's board of directors;


•	None of the PM&P personnel performing services for the Partnership individually owns any Partnership common units; and


•	PM&P has not provided nor received from the Partnership any gifts, benefits or donations other than its compensation for providing services.

In addition, PM&P interacts directly with the board of directors, and only interacts with the Partnership's management at the request of or with the knowledge of the board of directors.

Role of Market Data and Peer Groups. With the help of its independent outside compensation consultant, the board of directors of the general partner of the Partnership utilizes market data, supplemented with broad-based compensation survey data, to provide a comprehensive view of the competitive market. This market data is drawn from master limited partnerships that are comparable to the Partnership. The board of directors of the general partner utilizes this market data, as supplemented with broad-based compensation survey data, as comparative information and not as a formulaic approach to compensate our executive officers. The board of directors generally targets total long-term incentive compensation to named executive officers to be competitive with our peers and reflective of the actual performance of the named executive officer and the Partnership's accomplishments over the prior year. The board believes this will help position the Partnership to attract and retain the management talent necessary to effectively manage and lead the Partnership while utilizing time-based equity awards to further align executives' interests with the Partnership's unitholders.

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The board of directors considered compensation paid to executive officers of the peer group below (the "2016 Peer Group") in establishing named executive officer compensation in February 2016:

Compensation Peer Group

Access Midstream Partners, L.P.

Alon USA Partners, LP

CVR Refining, LP

Exterran Partners, L.P.

Holly Energy Partners L.P.

MPLX LP

PBF Logistics LP

Phillips 66 Partners LP

Rose Rock Midstream, L.P.

Spectra Energy Partners, LP

Sunoco Logistics Partners L.P.

Tesoro Logistics LP

Valero Energy Partners LP

Williams Partners L.P.

The board of directors consulted with PM&P in selecting the 2016 Peer Group, and considered the Partnership's operations and competitive posture following the TexNew Mex Pipeline Acquisition, as well as the number and composition of the companies in the peer group including their total revenue and market capitalization among other items. At the time of such analysis, based on the data available at that time, the revenues of these peer group companies were estimated to range from $136.0 million to $13.1 billion. The companies included in the Partnership's peer group includes companies that the Partnership believes it competes with operationally and/or for competitive talent.

In connection with establishing named executive officer compensation for 2017, PM&P provided an interim update to its January 2015 comprehensive analysis of named executive officer compensation in February 2017. In evaluating compensation for 2017, the board of directors considered the 2016 Peer Group and considered it to be representative of companies that the Partnership competes with operationally and/or for competitive talent and determined to maintain the composition of the Partnership's peer group for 2017 compensation decisions.

Employment and Indemnification Agreements

Except for Mr. Yoder, all of our executive officers have entered into employment agreements with Western. Pursuant to these agreements they would receive severance payments and continued benefits from Western in the event of certain involuntary terminations of employment with an enhanced level of severance payment, payout of performance awards, and accelerated vesting of equity awards if termination were to occur in connection with a change in control of Western.

In addition, we will indemnify each executive officer for actions associated with serving as our executive officer to the fullest extent permitted under Delaware law pursuant to an indemnification agreement and our partnership agreement.

Named Executive Officer Compensation for 2016

The board of directors of our general partner made a grant of Awards under the LTIP to our executive officers in the form of time-based phantom units in March 2016, which are scheduled to vest near the end of March of 2017, 2018 and 2019. In addition, in 2016, previous awards of time-based phantom unit awards granted to executive officers in 2014 and 2015 vested. None of the named executive officers have been granted or hold any unit options or unit appreciation rights and none participate in a pension plan or non-qualified deferred compensation plan.

Compensation paid or awarded by us in 2016 to our executive officers, consisted only of time-based phantom unit awards granted under the LTIP. The compensation tables set forth below provide information regarding the Partnership's named executive officers for services rendered in all capacities to the Partnership and its subsidiaries for 2016.

Phantom units are rights to receive common units, cash or a combination of both at the end of a specified period. The 2016 PUAs will vest and settle in equal installments near the end of March of 2017, 2018 and 2019, subject to the named executive officer's continued provision of services to the general partner and the Partnership through the applicable vesting dates. The 2016 PUAs may be satisfied by delivery of common units, cash equal to the fair market value of the specified number of common units covered by the award on the vest date, or any combination thereof as determined by the board of directors. The 2016 PUAs included dividend equivalent rights ("DERs"). DERs entitle the participant to receive cash at the time of vesting equal to the amount of any cash distributions made by us during the period the DER is outstanding. DERs that relate to the 2016 PUAs will be forfeited to the extent the award is forfeited.

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Compensation Risk Assessment

The board of directors has reviewed the compensation policies and practices as generally applicable to the officers of our general partner, including our named executive officers, the employees of our wholesale subsidiary, and the employees of our general partner's affiliates' that are seconded to us pursuant to our services agreement with Western and believe that such policies and practices do not encourage excessive and unnecessary risk-taking, and are not reasonably likely to have a material adverse effect on us. In reaching this conclusion, the board of directors reviewed and discussed design features of our compensation programs, reimbursement arrangements under the services agreements with Western and the approval mechanisms for compensation. In addition, the board believes that the regular evaluation of the effectiveness of compensation programs and practices and the effort to provide compensation at levels that are competitive with the market, among other factors, reduce risks associated with our compensation policies and practices.

Named Executive Officer Compensation for 2017

In February 2017, the board of directors considered executive officer compensation for 2017 and used the processes and objectives consistent with those set forth above for 2016 executive officer compensation. The board of directors granted awards under the LTIP to our executive officers in the form of time-based phantom unit awards to compensate our executive officers for their services as officers of our general partner. In accordance with the SEC's rules and regulations, these time-based phantom unit awards will be reflected in the summary compensation table for compensation paid to named executive officers in 2017 that will be included in our Annual Report on Form 10-K for the year ended December 31, 2017.

COMPENSATION COMMITTEE REPORT

The following report of the Board on executive compensation shall not be deemed to be "soliciting material" or to be “filed” with the SEC nor shall this information be incorporated by reference into any future filing made by the Partnership with the SEC, except to the extent that the Partnership specifically incorporates it by reference into any filing.

Our general partner currently does not have a compensation committee. The board of directors of the general partner of the Partnership has reviewed and discussed with management the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K and, based on this review and discussion, the board of directors of the general partner of the Partnership recommends that the Compensation Discussion and Analysis be included in this Annual Report on Form 10-K.

Paul L. Foster, Chairman

Andrew L. Atterbury

David D. Kinder

Michael C. Linn

Jeff A. Stevens

Scott D. Weaver

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2016 SUMMARY COMPENSATION TABLE



		Unit Awards	Total
Name and Principal Position	Year	($)(1)	($)
Jeff A. Stevens	2016	275,111	275,111
Chief Executive Officer, President and Director	2015	390,492	390,492
	2014	1,745,755	1,745,755
Karen B. Davis	2016	—	—
Executive Vice President and Chief Financial Officer (2)	2015	—	—
	2014	366,682	366,682
Mark J. Smith	2016	143,562	143,562
Executive Vice President	2015	66,301	66,301
	2014	954,353	954,353
Lowry Barfield	2016	100,387	100,387
Senior Vice President - Legal, General Counsel and Secretary	2015	77,090	77,090
	2014	667,258	667,258
Matthew L. Yoder	2016	277,667	277,667
Senior Vice President - Operations	2015	267,000	267,000
Gary R. Dalke	2016	112,634	125,061
Former Executive Vice President and Interim Chief Financial Officer (3)	2015	95,486	95,486
	2014	748,733	748,733

(1)

This column represents the full value of all compensation paid to our named executive officers for the services they provide to us and is the aggregate grant date fair value for awards of time-based phantom unit awards granted to each named executive officer in 2014, 2015 and 2016. All amounts in this column are calculated in accordance with Financial Accounting Standards Board Accounting Codification Topic 718, Compensation - Stock Compensation ("FASB ASC Topic 718") by multiplying the volume of phantom units granted by the closing price of the Partnership's common units as of the grant date. For a further discussion of the assumptions and methodologies used to value the awards reported in this column, see the discussion contained in Note 2, Summary of Accounting Policies, in the Notes to Consolidated Financial Statements.

(2)

Karen B. Davis served as the Chief Financial Officer of the general partner of the Partnership from December 1, 2014, to February 2, 2015. Effective on February 2, 2015, Ms. Davis resigned as Chief Financial Officer and subsequently forfeited the phantom units awarded to her on December 1, 2014, and reported above. Ms. Davis was appointed Executive Vice President and Chief Financial Officer of the general partner on August 15, 2016, after phantom units were granted to our named executive officers in 2016. As such, Ms. Davis did not receive compensation for services provided to us during 2016.

(3)

Gary R. Dalke served as Chief Financial Officer of the general partner of the Partnership from July 2013 through December 1, 2014, at which time he was promoted to Executive Vice President. Following Ms. Davis' resignation as Chief Financial Officer of the general partner on February 2, 2015, he served as Executive Vice President and Interim Chief Financial Officer of the general partner of the Partnership. Mr. Dalke left this position effective August 15, 2016. Mr. Dalke agreed to remain with the Partnership in a consulting capacity.

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GRANTS OF PLAN-BASED AWARDS — FISCAL 2016



	Grant	Number of Shares of Stock or Units	Grant Date Fair Value of Stock and Option Awards
Name	Date	(#)(1)	($)(2)
Jeff A. Stevens	3/28/2016	12,916	275,111
Karen B. Davis (3)	—	—	—
Mark J. Smith	3/28/2016	6,740	143,562
Lowry Barfield	3/28/2016	4,713	100,387
Matthew L. Yoder	3/28/2016	13,036	277,667
Gary R. Dalke (4)	3/28/2016	5,288	112,634


(1)	This column reflects the number of phantom units awarded to each named executive officer during 2016.

(2)

This column represents the grant date fair value of the phantom units awarded on March 28, 2016. This amount is computed in accordance with FASB ASC Topic 718 and is calculated by multiplying the volume of phantom units granted by the weighted average closing price of the Partnership's common units as of the grant date. The weighted average closing price of the Partnership's common units on March 28, 2016, was $21.30. For a further discussion of the assumptions and methodologies used to value the awards reported in this column, see Note 2, Summary of Accounting Policies, in the Notes to Consolidated Financial Statements.


(3)	Ms. Davis was appointed Executive Vice President and Chief Financial Officer of the general partner on August 15, 2016, and thus did not receive a phantom unit award for 2016.

(4)

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OUTSTANDING EQUITY AWARDS AT FISCAL 2016 YEAR END



	Unit Awards
	Number of Shares or Units of Stock That Have Not Vested	Market Value of Shares or Units of Stock That Have Not Vested
Name	(#)(1)	($)(2)
Jeff A. Stevens	61,462	1,312,214
Karen B. Davis (3)	—	—
Mark J. Smith	29,285	625,235
Lowry Barfield	21,310	454,969
Matthew L. Yoder	30,596	653,225
Gary R. Dalke (4)	24,155	515,709


(1)	Amounts in this column represent equity awards of time-based phantom unit awards that were outstanding as of December 31, 2016. The following table presents by grant date the vesting schedule of outstanding awards of phantom units as of December 31, 2016, the last business day of the fiscal year:



	Grant Awards (a)
	Grant	Units	Remaining Annual Vestings
Name	Date	Granted	2017	2018	2019	2020
Jeff A. Stevens	1/31/2014	63,252	12,650	12,650	12,650
	3/26/2015	13,246	2,649	2,649	2,649	2,649
	3/28/2016	12,916	4,306	4,305	4,305
Mark J. Smith	1/31/2014	34,578	6,916	6,915	6,915
	3/26/2015	2,249	450	450	450	449
	3/28/2016	6,740	2,247	2,247	2,246
Lowry Barfield	1/31/2014	24,176	4,835	4,835	4,835
	3/26/2015	2,615	523	523	523	523
	3/28/2016	4,713	1,571	1,571	1,571
Matthew L. Yoder	1/31/2014	17,193	3,439	3,438	3,438
	3/26/2015	9,057	1,812	1,811	1,811	1,811
	3/28/2016	13,036	4,346	4,345	4,345
Gary R. Dalke	1/31/2014	27,128	5,426	5,425	5,425
	3/26/2015	3,239	648	648	648	647
	3/28/2016	5,288	1,763	1,763	1,762

(a)

These columns represent equity awards of time-based phantom unit awards, granted on the date noted, that remain subject to vesting requirements as of December 31, 2016. The time-based phantom unit awards granted on January 31, 2014 and March 26, 2015, vest ratably over five years on the fourth business day prior to the end of the Partnership's first fiscal quarter in each year following the grant date. The time-based phantom unit awards granted on March 28, 2016, vest ratably over three years on the fourth business day prior to the end of the Partnership's first fiscal quarter in each year following the grant date.


(2)	The market value of the unvested time-based phantom units was calculated by multiplying the number of unvested time-based phantom units by $21.35, the closing price of the Partnership's common units on December 31, 2016, the last business day of the fiscal year.


(3)	Ms. Davis was appointed Executive Vice President and Chief Financial Officer of the general partner on August 15, 2016, and thus did not receive a phantom unit award for 2016.

(4)

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Potential Payments Upon Termination or Change of Control

As the only compensation provided to named executive officers are equity awards of time-based phantom units under the Partnership's LTIP, the terms of the phantom unit award agreement and the LTIP govern in the event a named executive officer terminates service either within or outside a change of control period. Pursuant to the phantom unit award agreement, if a named executive officer separates from service due to his death or Disability or during the 24 months following a Change of Control and such termination is without Cause or for Good Reason (each capitalized term is defined in the phantom unit award agreement and is described below), prior to the date that all phantom units under the award have vested, then the named executive officer will be entitled to immediate vesting of all unvested phantom unit awards. If a named executive officer separates from service for any other reason, then unless the phantom unit award is accelerated in whole or in part by the board of directors, in its sole discretion, then all unvested phantom unit awards shall be forfeited as of the date of such separation from service.

Pursuant to the phantom unit award agreement, “Disability” means that the executive is unable to engage in substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months.

Further, the phantom unit award agreement provides that “Cause” has such meaning as assigned to it under any employment agreement entered into between us or our affiliates and the executive, and that is in effect on the date of the executive’s separation from service, or, if no such agreement exists, “Cause” means the executive (A) has engaged in gross negligence, gross incompetence or willful misconduct in the performance of his or her duties, (B) has refused, without proper reason, to perform his or her duties, (C) has willfully engaged in conduct which is materially injurious to us or our affiliates (monetarily or otherwise), (D) has committed an act of fraud, embezzlement or willful breach of a fiduciary duty to us or our affiliates (including the unauthorized disclosure of confidential or proprietary material information), or (E) has been convicted of, pled guilty to, or pled no contest to, a crime involving fraud, dishonesty, or moral turpitude.

The phantom unit agreement also provides that “Good Reason” means any of the following, but only if occurring without the executive’s consent: (1) a material diminution in the executive’s base salary, (2) a material diminution in the executive’s authority, duties, or responsibilities, (3) a material diminution in the authority, duties, or responsibilities of the supervisor to whom the executive is required to report, including a requirement that the executive report to a corporate officer or employee instead of reporting directly to the board of directors, (4) a material diminution in the budget over which the executive retains authority, (5) a material change in the geographic location at which the executive must perform services for the us or our affiliates, or (6) the failure of us or our affiliates to comply with any material provision of the agreement under which the executive provides services to the us or our affiliates, if any; provided, however, that (a) in each case, the executive must provide notice in writing to the general partner of the existence of the condition and the general partner shall have an opportunity to remedy the condition before the executive may separate from service for “Good Reason,” and (b) the executive must ultimately terminate his or her services no later than 24 months following the initial existence of the condition described above.

Pursuant to the terms of the LTIP, a “Change of Control” means, and shall be deemed to have occurred upon one or more of the following events:

any “person” or “group” within the meaning of those terms as used in Sections 13(d) and 14(d)(2) of the Exchange Act, other than members of the general partner, the Partnership, or an affiliate of either the general partner or the Partnership, shall become the beneficial owner, by way of merger, consolidation, recapitalization, reorganization or otherwise, of 50% or more of the voting power of the voting securities of the general partner or the Partnership;


ii.	the limited partners of the general partner or the Partnership approve, in one transaction or a series of transactions, a plan of complete liquidation of the general partner or the Partnership;


iii.	the sale or other disposition by either the general partner or the Partnership of all or substantially all of its assets in one or more transactions to any person other than an affiliate;


iv.	the general partner or an affiliate of the general partner or the Partnership ceases to be the general partner of the Partnership;


v.	any event that is a “Corporate Change” under Section 4.5(c)(1),(2), or (3) of the 2010 Incentive Plan of Western Refining, Inc., as amended; or


vi.	any other event specified as a “Change of Control” in an applicable award agreement.

Notwithstanding the above, with respect to an award that constitutes deferred compensation under Section 409A of the Code, a “Change of Control” shall not occur unless it also constitutes a “change in the ownership of a corporation,” a “change

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in the effective control of a corporation,” or a “change in the ownership of a substantial portion of a corporation’s assets,” in each case, within the meaning of 1.409A-3(i)(5) of the Treasury Regulations, as applied to non-corporate entities.

This description of the named executive officer phantom unit award agreement does not purport to be a complete statement of the parties' rights and obligations thereunder. The above statements are qualified in their entirety by reference to the form of phantom unit award agreement, which is incorporated by reference as an exhibit to this annual report.

Assuming the named executive officers experienced a separation from service as of December 31, 2016, due to death or Disability or during the 24 months following a Change of Control and such termination is without Cause or for Good Reason, then the following payments would be applicable for each named executive officer.



	Accelerated Vesting of Phantom Units	Total
Name	($)(1)	($)
Jeff A. Stevens	1,312,214	1,312,214
Karen B. Davis (2)	—	—
Mark J. Smith	625,235	625,235
Lowry Barfield	454,969	454,969
Matthew L. Yoder	653,225	653,225
Gary R. Dalke (3)	515,709	515,709


(1)	This column represents the market value of the time-based phantom units subject to acceleration calculated by multiplying the number of unvested units on December 31, 2016, by $21.35, which was the closing price of the Partnership's common units on December 30, 2016.


(2)	Ms. Davis was appointed Executive Vice President and Chief Financial Officer of the general partner on August 15, 2016, and thus did not receive a phantom unit award for 2016.

(3)

Neither we nor Western allocate any portion of the expense reimbursement provided for in the omnibus or services agreements to services provided by an individual executive officer to us, including upon a named executive officer terminating service; rather, the amount reimbursed covers a wide range of selling, general and administrative costs that Western calculates annually at its discretion. As such, we would not be responsible for any payments, other than those described above, in the event our named executive officers cease providing services to us or to Western or in the event of a change of control of us or Western. Further, Western would be under no obligation to make any payments to our named executive officers solely because we severed our service relationship with them or we experienced a change of control.

Director Compensation

Non-Employee Director Compensation Process Generally

The compensation paid to directors of our general partner who do not also serve as an officer or employee of our general partner ("Non-employee Directors") is designed to attract and retain nationally recognized, highly qualified directors to lead the Partnership and to meaningfully align the interests of directors with the interests of unitholders. Since the Offering, Non-employee Director compensation has consisted of both cash and equity awards under our LTIP.

Our general partner’s board of directors is not required to maintain, and does not maintain, a compensation committee. Accordingly, the board of directors evaluates and sets Non-employee Director compensation. In setting Non-employee Director compensation, the board of directors generally follows a process similar to that used for setting named executive officer compensation, as discussed above. The board of directors considers the advice, analysis and information provided by independent compensation consultants as well as the current market conditions and industry environment in which the Partnership operates. The board of directors further considers the significant amount of time that directors spend fulfilling their duties and the skill and experience required of the directors. After considering all of these factors and using their common sense, experience and judgment, the board of directors established a Non-employee Director compensation program comprised of both cash and equity components awarded under our LTIP in the amounts described below for each of 2016 and 2017.

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Non-Employee Director Compensation for 2016

The board of directors has determined to engage an independent outside compensation consultant every three years to provide comprehensive analysis and recommendations as to Non-employee Director compensation. To the extent the board perceives there are significant shifts in compensation trends or the Partnership's operations or if the board determines in its discretion to modify Non-employee Director compensation, then the board of directors may retain an independent compensation consultant to provide comprehensive or interim analyses more or less frequently.

At the end of 2014, the board of directors of the general partner retained PM&P to provide a comprehensive analysis of the Partnership's director and named executive officer compensation and to provide comparative data and associated recommendations regarding peer groups. PM&P provided its comprehensive analysis in January 2015, and the board of directors utilized this data and analysis, in conjunction with the other sources of information described above, in setting 2016 Non-employee Director compensation.

Officers or employees of our general partner who also serve as directors of our general partner do not receive additional compensation for such service. Currently, Mr. Stevens is the only director who is also an officer of our general partner, and as such, he does not receive additional compensation for such service as a director. In 2016, Non-employee Directors received compensation as follows:


•	A cash retainer of $65,000 per year, paid quarterly in arrears.


•	For the Audit Committee chair, an additional cash retainer of $15,000 per year and for the Conflicts Committee chair, an additional cash retainer of $10,000 per year, each paid quarterly.


•	An additional cash payment of $1,500 for each board of directors or committee meeting attended.


•	Annual grants under our LTIP of a number of phantom units with a fair market value equal to approximately $75,000 at the date of grant. These phantom units generally vest at the end of the quarter in which the one-year anniversary of the date of grant occurs.

In addition, we reimburse each director for out-of-pocket expenses incurred in connection with attending meetings. We will fully indemnify each director for actions associated with being a director to the fullest extent permitted under Delaware law pursuant to a director indemnification agreement and our partnership agreement.

None of the directors were granted or held any options or unit appreciation rights and none of the directors participated in a pension plan.

On July 26, 2016, the board of directors granted Non-employee Directors phantom units that generally vest and settle in September 2017, subject to the director's continued provision of services to the general partner and the Partnership through the applicable vesting date. The phantom units may be satisfied by delivery of common units, cash equal to the fair market value of the specified number of common units covered by the award on the vest date, or any combination thereof as determined by the board of directors. The phantom units include DERs, which entitle the director to receive cash at the time of vesting equal to the amount of any cash distributions made by the Partnership during the period the DER is outstanding. DERs that relate to the phantom units will be forfeited to the extent the award is forfeited.

The following table reflects all compensation granted to each Non-employee Director during 2016. Mr. Stevens serves as the Chief Executive Officer and President of our general partner and, as such, does not receive any additional compensation for his service as a director.

2016 NON-EMPLOYEE DIRECTOR COMPENSATION



	Fees Earned or Paid in Cash	Stock Awards	Total
Name	($)(1)	($)(2)(3)(4)	($)
Paul L. Foster	74,000	75,000	149,000
Scott D. Weaver	74,000	75,000	149,000
David D. Kinder	107,000	75,000	182,000
Michael C. Linn	102,000	75,000	177,000
Andrew L. Atterbury	92,000	75,000	167,000


(1)	The amounts in this column reflect the annual cash fees earned for each Non-employee Directors' board and committee service during the 2016 fiscal year for services provided during 2016.


(2)	On July 26, 2016, each of the Non-employee Directors received a grant of 3,171 phantom units, representing his annual phantom unit award grant of $75,000, based on the closing trading price of $23.65 per common unit of the Partnership.

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(3)

This amounts in this column represent the aggregate grant date fair value of the award of phantom units, computed in accordance with FASB ASC Topic 718. All amounts in this column are calculated, in accordance with FASB ASC Topic 718, by multiplying the volume of phantom units granted by the closing price of a unit of our common units as of the date of grant. For a further discussion of the assumptions and methodologies used to value the awards reported in this column, see Note 2, Summary of Accounting Policies, in the Notes to Consolidated Financial Statements.


(4)	As of December 31, 2016, each Non-employee Director had the following number of outstanding phantom unit awards:



		Stock Awards
		Number Phantom Units That Have Not Vested
Name		(#)(1)
Paul L. Foster		3,171
Scott D. Weaver		3,171
David D. Kinder		3,171
Michael C. Linn		3,171
Andrew L. Atterbury		3,171


(a)	Equity awards of phantom units granted to non-employee directors generally will vest in full twelve months after the grant date.

Non-Employee Director Compensation for 2017

In October 2016, the board of directors evaluated Non-employee Director compensation for 2017, including the factors described above in Non-Employee Director Compensation Process Generally, and the analysis provided by PM&P in January 2015 and October 2016 of the Partnership's Non-employee Director compensation, comparative data and associated recommendations regarding peer groups. Following this evaluation, the board of directors determined to adjust the levels of Non-employee Director compensation as follows:


•	A cash retainer of $75,000 per year, paid quarterly.


•	For the Audit Committee chair, an additional cash retainer of $15,000 per year, paid quarterly


•	For the Conflicts Committee chair, an additional cash retainer of $15,000 per year, paid quarterly.


•	An additional cash payment of $1,500 for each Conflicts Committee meeting attended.


•	Annual grants under our LTIP of a number of phantom units with a fair market value equal to approximately $75,000 at the date of grant. These phantom units generally vest at the end of the quarter in which the one-year anniversary of the date of grant occurs.

Unit Ownership Guidelines

The board of directors has approved common unit ownership guidelines for each of the Non-employee Directors equal to three times such director's annual cash retainer. Non-employee Directors may satisfy their ownership requirements with common units, units that are time-vested restricted units, phantom units or restricted units held directly or indirectly or in a retirement or deferred compensation account. Each Non-employee Director has five years from the adoption of the guidelines to achieve these ownership levels and newly elected directors have five years from the date they are elected or appointed, as applicable, to meet these requirements. The board is responsible for monitoring compliance with these guidelines. As of the date of this Annual Report on Form 10-K, all of the Non-employee Directors satisfy the minimum unit ownership requirements.

Compensation Committee Interlocks and Insider Participation

As previously discussed, our general partner’s board of directors is not required to maintain, and does not maintain, a compensation committee. Mr. Stevens, who is a director of our general partner, is also an executive officer of our general partner and Western. Mr. Stevens does not participate in board deliberations regarding LTIP grants to him. All other decisions regarding Mr. Stevens' compensation are made solely by Western. Please see Item 13. Certain Relationships and Related Transactions, and Director Independence below for information about relationships among us, our general partner and Western. Please see above for information about our director and executive officer compensation.

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

The following table sets forth the beneficial ownership of our units held by:


•	each person who beneficially owns 5% or more of the outstanding units;


•	each director and named executive officer of Western Refining Logistics GP, LLC; and


•	all directors and officers of Western Refining Logistics GP, LLC as a group.

We report the amounts and percentage of units beneficially owned on the basis of regulations of the SEC governing the determination of beneficial ownership of securities. The rules of the SEC deem a person a “beneficial owner” of a security if that person has or shares “voting power” that includes the power to vote or to direct the voting of the security, or “investment power” that includes the power to dispose of or to direct the disposition of the security. In computing the number of common units beneficially owned by a person and the percentage ownership of that person, common units subject to options or warrants held by that person that are currently exercisable or exercisable within 60 days of February 24, 2017, if any, are deemed outstanding, but are not deemed outstanding for computing the percentage ownership of any other person. Except as indicated by footnote, the persons named in the table below have sole voting and investment power with respect to all units that they beneficially own, subject to community property laws where applicable.

The following table includes common units granted under the LTIP and that directors and executive officers have purchased, including through the directed unit program during the Offering. The percentage of our units beneficially owned is based on a total of 38,074,324 common units and 22,811,000 subordinated units outstanding. The percentage of Western shares beneficially owned is based on a total of 108,698,435 common shares outstanding.



	Western Refining Logistics, LP								Western Refining, Inc.
Name of Beneficial Owner (1)	Common Units Beneficially Owned	Percentage of Common Units Beneficially Owned		Subordinated Units Beneficially Owned	Percentage of Subordinated Units Beneficially Owned		Percentage of Total Common and Subordinated Units Beneficially Owned		Common Stock Beneficially Owned		Percentage of Common Stock Beneficially Owned
Paul L. Foster (2)	802,484	2.1	%	—	—		1.3	%	19,564,047		18.0	%
Jeff A. Stevens	430,297	1.1	%	—	—		0.7	%	3,626,893		3.3	%
Scott D. Weaver	123,373	0.3	%	—	—		0.2	%	1,307,229		1.2	%
Mark J. Smith	44,000	0.1	%	—	—		*		73,051		0.1	%
Michael C. Linn	31,252	*		—	—		*		—		—
Gary R. Dalke	22,937	*		—	—		*		61,345		0.1	%
Matthew L. Yoder	24,319	*		—	—		*		55,047		0.1	%
Jeffrey S. Beyersdorfer	12,868	*		—	—		*		81,401		0.1	%
Andrew L. Atterbury	29,825	*		—	—		*		—	—	—
David D. Kinder	24,052	*		—	—		*		—		—
William R. Jewell	8,924	*		—	—		*		110,398		0.1	%
Lowry Barfield	13,536	*		—	—		*		67,772		0.1	%
Karen B. Davis	—	—		—	—		—		6,428		*
All directors and executive officers as a group (13 persons)	1,567,867	4.1	%	—	—		2.6	%	24,953,611		23.0	%
Other 5% or more unitholders:
Western Refining, Inc. (3)	9,207,847	24.2	%	22,811,000	100.0	%	52.6	%	—		—
Harvest Fund Advisors LLC (4)	3,753,899	9.9	%	—	—		6.2	%	—		—
MTP Energy Master Fund Ltd (5)	1,999,000	5.3	%	—	—		3.3	%	—		—



*	Less than .1%.


(1)	Unless otherwise indicated, the address for all beneficial owners in this table is 212 N. Clark Dr., El Paso, Texas 79905.

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(2)

Of the Western shares indicated as beneficially owned by Mr. Foster, 16,129,581 are beneficially owned by Franklin Mountain Investments Limited Partnership ("FMILP"), in which Mr. Foster holds a 100.0% interest. Mr. Foster is the sole shareholder and President of Franklin Mountain G.P., LLC, the General Partner of FMILP and, as such, he may be deemed to have voting and dispositive power over the shares beneficially owned by FMILP.

(3)

As of December 31, 2016, Western indirectly held 9,207,847 common units and 22,811,000 subordinated units. Western Refining Southwest, Inc. ("WRSW"), a wholly-owned subsidiary of Western, is the record holder of 8,579,623 common units and 22,811,000 subordinated units and St. Paul Park Refining Co. LLC is the record holder of 628,224 common units. Western is the ultimate parent company of Western Refining Southwest, Inc. and St. Paul Park Refining Co. LLC and may, therefore, be deemed to beneficially own the units held by it. Western files information with or furnishes information to the Securities and Exchange Commission pursuant to the information requirements of the Securities Exchange Act of 1934, as amended. As of December 31, 2016, Western also indirectly held, through WRSW, 80,000 TexNew Mex Units.


(4)	According to a Schedule 13G filed with the SEC on February 5, 2016, by Harvest Fund Advisors LLC, with an address of 100 W. Lancaster Ave, Ste 200, Wayne, Pennsylvania 19087. The Schedule 13G reports that Harvest Fund Advisors LLC holds sole voting and sole dispositive power with respect to the reported units.


(5)	According to a Schedule 13G filed with the SEC on February 4, 2016, by MTP Energy Master Fund Ltd, with an address of 1603 Orrington Avenue, Suite 1300, Evanston, Illinois, 60201. The Schedule 13G reports that MTP Energy Master Fund Ltd holds sole voting and sole dispositive power with respect to the reported units.

Securities Authorized for Issuance Under Equity Compensation Plans

The following table sets forth information relating to our equity compensation plans as of December 31, 2016:



Plan Category	(a) Number of securities to be issued upon exercise of outstanding options, warrants and rights (1)	(b) Weighted average exercise price of outstanding options, warrants and rights (2)	(c) Number of securities remaining available for future issuance under equity compensation plans, excluding securities reflected in column (a)
Equity compensation plans approved by security holders	—	—	—
Equity compensation plans not approved by security holders (3)	285,155	—	4,098,368
Total	285,155	—	4,098,368

(1)

The amounts in column (a) of this table reflect only phantom units that have been granted under the LTIP. No equity or equity-based awards have been made by us, including under the LTIP, other than the award of time-based phantom units. Phantom units represent rights to receive (at vesting) one common unit in the Partnership or an amount of cash equal to the fair market value of such unit, at the sole discretion of the board of directors of the general partner of the Partnership.


(2)	This column is not applicable because phantom units do not have an exercise price.

(3)

The LTIP was adopted by the Western Refining Logistics GP, LLC in connection with the closing of the Offering and provides for the grant of a wide variety of cash and equity awards. For additional information about the LTIP, please refer to Item 11 of this Annual Report on Form 10-K. For a summary of the material terms of the LTIP, please refer to the section of our Form S-1 filed with the SEC on October 2, 2013, entitled "Long-Term Incentive Plan."


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

Certain Relationships and Related Party Transactions

As of February 24, 2017, Western owns 9,207,847 common units and 22,811,000 subordinated units, representing a 52.6% limited partner interest in us. Western also owns through its wholly-owned subsidiary, WRSW, 80,000 TexNew Mex Units. Transactions with Western and its affiliated entities are considered to be related party transactions because Western and its affiliates own more than 5% of our equity interests; in addition, Western's executive officers serve as executive officers of both Western and our general partner.

Whenever a conflict arises between our general partner or its affiliates on the one hand, and us or our limited partners on the other hand, the resolution or course of action in respect of such conflict of interest shall be permitted and deemed approved by all our limited partners and shall not constitute a breach of our partnership agreement, of any agreement contemplated thereby or of any duty, if the resolution or course of action in respect of such conflict of interest is:


•	approved by the conflicts committee of our general partner, although our general partner is not obligated to seek such approval; or

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•	approved by the holders of a majority of the outstanding common units, excluding any such units owned by our general partner or any of its affiliates.

Our general partner may, but is not required to, seek the approval of such resolutions or courses of action from the Conflicts Committee of its board of directors or from the holders of a majority of the outstanding common units as described above. If our general partner does not seek approval from the Conflicts Committee or from holders of common units as described above and the board of directors of our general partner approves the resolution or course of action taken with respect to the conflict of interest, then it will be presumed that, in making its decision, the board of directors of our general partner acted in good faith, and in any proceeding brought by or on behalf of us or any of our unitholders, the person bringing or prosecuting such proceeding will have the burden of overcoming such presumption. Unless the resolution of a conflict is specifically provided for in our partnership agreement, the board of directors of our general partner or the Conflicts Committee of the board of directors of our general partner may consider any factors they determine in good faith to consider when resolving a conflict. An independent third party is not required to evaluate the resolution. Under our partnership agreement, a determination, other action or failure to act by our general partner, the board of directors of our general partner, or any committee thereof (including the Conflicts Committee) will be deemed to be in “good faith” if our general partner, the board of directors of our general partner or any committee thereof (including the Conflicts Committee) subjectively believed such determination, other action or failure to act was in, or not opposed to, the best interests of the partnership or meets the standard otherwise specified in our partnership agreement.

Procedures for Review, Approval and Ratification of Transactions with Related Persons

The Audit Committee of our general partner is generally charged with the responsibility of reviewing, approving and ratifying all transactions with related persons that are required to be disclosed under the SEC’s rules and regulations and to determine whether such transactions are appropriate for WNRL to undertake. This responsibility is set forth in the Audit Committee’s charter which is posted on our website at www.wnrl.com or a copy of which can be provided by sending a written request to the general partner’s General Counsel at WNRL’s corporate headquarters located at 212 N. Clark Dr., El Paso, Texas 79905.

In determining whether to approve or disapprove entry into a related party transaction, the Audit Committee will consider all of the relevant facts and circumstances available, including (if applicable) but not limited to: (1) whether there is an appropriate business justification for the transaction; (2) the benefits that accrue to us as a result of the transaction; (3) the terms available to unrelated third parties entering into similar transactions; (4) the impact of the transaction on a director’s independence (in the event the related person is a director, an immediate family member of a director, or an entity in which a director or an immediate family member of a director is a partner, shareholder, member or executive officer); (5) the availability of other sources for comparable products or services; (6) whether it is a single transaction or a series of ongoing, related transactions; and (7) whether entering into the transaction would be consistent with our Code of Business Conduct and Ethics.

St. Paul Park Logistics Transaction

On September 15, 2016, WNRL acquired Western's St. Paul Park Logistics Assets. The St. Paul Park Logistics Assets primarily receive, store and distribute crude oil, feedstock and refined products associated with Western's St. Paul Park refinery. We acquired the St. Paul Park Logistics Assets from Western in exchange for $195 million in cash and 628,224 common units representing limited partner interests in WNRL.

TexNew Mex Pipeline Acquisition

On October 30, 2015, we acquired Western's TexNew Mex Pipeline System. We also acquired an 80,000 barrel crude oil storage tank located at our crude oil pumping station in Star Lake, New Mexico and certain other related assets. We acquired these assets in exchange for $170 million in cash, 421,031 common units representing limited partner interests in WNRL and 80,000 TexNew Mex Units. This purchase was between entities under common control. The cash payment was primarily financed using bank financing under our existing credit facility.

Wholesale Acquisition

On October 15, 2014, we completed the acquisition from Western of the outstanding limited liability company interests of WRW, which owned primarily all of Western’s southwest wholesale assets, pursuant to the Contribution Agreement, by and among WNRL, Western, WRSW and the General Partner. Pursuant to the Contribution Agreement, we acquired all of the outstanding limited liability company interests of WRW in exchange for consideration of approximately $320 million in cash and the issuance of 1,160,092 common units representing limited partner interests in WNRL. The cash payment was primarily financed using bank financing under our existing credit facility.

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Initial Public Offering

On October 10, 2013, the common units of WNRL began trading on the New York Stock Exchange under the symbol "WNRL." On October 16, 2013, WNRL completed the Offering of 15,812,500 common units representing limited partner interests at a price of $22.00 per unit.

On October 16, 2013 in exchange for assets contributed at historical cost, Western received:


•	6,998,500 common units and 22,811,000 subordinated units, representing an aggregate 65.3% limited partner interest;


•	All of WNRL's incentive distribution rights; and


•	An aggregate cash distribution of $244.9 million to certain of Western's wholly-owned subsidiaries.

Distributions and Payments to Our General Partner and its Affiliates

We will generally make cash distributions to our unitholders pro rata, including Western, as the holder of 9,207,847 common units and 22,811,000 subordinated units. In addition, if distributions exceed the minimum quarterly distribution and other higher target distribution levels, Western will be entitled to increasing percentages of the distributions, up to 50% of the distributions above the highest target distribution level. During 2016, we declared and paid distributions that were in excess of the target distribution amounts set forth in our partnership agreement, resulting in distributions to our General Partner as the holder of incentive distribution rights.

Assuming we have sufficient available cash to pay the full minimum quarterly distribution on all of our outstanding units for four quarters, Western would receive an annual distribution of approximately $36.8 million on its common and subordinated units. See Note 14, Equity, in the Notes to Consolidated Financial Statements included in this annual report for additional information.

Our general partner and its affiliates are entitled to reimbursement for all expenses they incur on our behalf, including salaries and employee benefit costs for employees who provide services to us, and all other necessary or appropriate expenses allocable to us or reasonably incurred by our general partner and its affiliates in connection with operating our business. Except to the extent specified in the omnibus agreement or services agreement, our general partner will determine the expenses that are allocable to us in good faith, but there is no limit on the amount of expenses for which our general partner and its affiliates will be reimbursed.

If our general partner withdraws or is removed, its incentive distribution rights will either be sold to the new general partner for cash or converted into common units, in each case for an amount equal to the fair market value of those interests.

If we are ever liquidated, the partners, including our general partner, will be entitled to receive liquidating distributions according to their respective capital account balances.

Commercial Agreements with Western

Logistics Agreements

We derive substantially all of our logistics revenues from fee-based agreements with Western supported by minimum volume commitments and annual adjustments to fees that we and Western may renew for two additional five-year periods upon mutual agreement. Under these agreements, we provide various pipeline, gathering, transportation, terminalling and storage services to Western and Western has committed to provide us with minimum fees based on minimum monthly throughput volumes of crude oil and refined and other products and reserved storage capacity.

Pipeline and Gathering Services Agreement

We entered into a pipeline and gathering services agreement, as amended, with Western under which we agreed to transport crude oil on our Permian Basin system to Western’s El Paso refinery and on our Four Corners system to Western’s Gallup refinery. We charge Western fees for pipeline movements, truck offloading and product storage. During 2016, we recorded fee based revenues of $75.4 million related to this agreement.

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interests in the Partnership, referred to as the TexNew Mex Units, and set forth the rights, preferences and obligations of the TexNew Mex Units.

The Second A&R Partnership Agreement provides for the creation of the “TexNew Mex Shared Segment” that will reflect the financial and operating results of the TexNew Mex Pipeline. The TexNew Mex Units are generally entitled to participate in 80% of the economics attributable to the TexNew Mex Shared Segment resulting from crude oil throughput on the TexNew Mex Pipeline above the 13,000 barrels per day contemplated by the commitment in the Amendment to the Pipeline Agreement. To the extent there is sufficient available cash from operating surplus under the Second A&R Partnership Agreement, the holder of the TexNew Mex Units will be entitled to receive a distribution equal to 80% of the excess of TexNew Mex Shared Segment Distributable Cash Flow over the TexNew Mex Base Amount. The TexNew Mex Unit distributions are preferential to all other unit holder distributions.

Terminalling, Transportation and Storage Services Agreement

Southwest

St. Paul Park

Wholesale Agreements

We entered into the following 10-year agreements with Western.

Product Supply Agreement

We entered into a product supply agreement, as amended, under which Western will supply and we will purchase approximately 79,000 bpd of refined products. The price per barrel will be based upon OPIS or Platts indices on the day of delivery. Pricing is subject to annual revision based on mutual agreement between us and Western. The agreement provides for make-up payments to us in any month that our average margin on non-delivered rack sales is less than a certain amount. During 2016, we recorded $2.2 million in revenues related to make-up payments from Western under this agreement.

Fuel Distribution and Supply Agreement

We entered into a fuel distribution and supply agreement under which Western agreed to purchase all of its retail requirements for branded and unbranded motor fuels for its retail and unmanned fleet fueling sites at a price per gallon that is $0.03 above our cost. Western has agreed to purchase a minimum of 645,000 barrels per month of branded and unbranded motor fuels for its retail and unmanned fleet fueling sites. In any month that Western doesn’t purchase the minimum volume, Western will pay us $0.03 per gallon shortfall. In any month in which Western purchases volumes in excess of the minimum, we will pay Western $0.03 per gallon over the minimum until the balance of the trailing twelve month shortfall payments is reduced to $0. During 2016, we recorded $10.1 million in revenues from Western under this agreement.

Crude Oil Trucking Transportation Services Agreement

We entered into a crude oil trucking transportation services agreement, as amended, under which Western has agreed to pay a flat rate per mile per barrel plus monthly fuel adjustments and customary applicable surcharges. The rates are subject to adjustment annually based on mutual agreement between us and Western. Western has agreed to contract a minimum of 1.525 million barrels of crude oil to us for hauling each month. During the year ended December 31, 2016, we recorded $36.3 million in revenues related to mileage rates and other adjustments and surcharges from Western under this agreement.

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Asphalt Trucking Transportation Services Agreement

We entered into an asphalt trucking transportation services agreement under which Western has agreed to pay a flat rate per mile per ton (with market adjustments) based on the distance between the applicable pick-up and delivery points, plus monthly fuel adjustments and customary applicable surcharges. The rates are subject to adjustment annually based on mutual agreement between us and Western. Volumes of asphalt transported pursuant to this agreement will be credited, on a barrel per barrel basis, towards Western’s contract minimum under the Crude Oil Trucking Transportation Services Agreement. Under this Agreement, Western has given us the first option to transport all asphalt volumes Western transports by truck.

During the year ended December 31, 2016, we recorded $8.3 million in revenues related to mileage rates and other adjustments and surcharges from Western under this agreement.

Other Agreements with Western

Omnibus Agreement

We entered into an omnibus agreement with Western, certain of its subsidiaries and our general partner. The omnibus agreement addresses the following items:


•	our obligation to reimburse Western for the provision by Western of certain general and administrative services (this reimbursement is in addition to certain expenses of our general partner and its affiliates that are reimbursed under our partnership agreement and services agreement), as well as certain other direct or allocated costs and expenses incurred by Western on our behalf;


•	our rights of first offer to acquire certain logistics assets from Western;


•	an indemnity by Western for certain environmental and other liabilities, and our obligation to indemnify Western for events and conditions associated with the operation of our assets that occur after closing of the Offering and for environmental liabilities related to our assets to the extent Western is not required to indemnify us;


•	Western’s transfer of certain environmental permits related to our assets to us and our use of such permits prior to the transfer thereof; and


•	the granting of a license from Western to us with respect to use of certain Western trademarks and our granting of a license to Western with respect to use of certain of our trademarks.

The omnibus agreement generally terminates in the event of a change of control of us or our general partner.

Contribution, Conveyance and Assumption Agreement

Contribution, Conveyance and Assumption Agreement dated September 7, 2016

Contribution, Conveyance and Assumption Agreement dated October 30, 2015

We entered into a contribution agreement with Western under which we acquired the TexNew Mex Pipeline System. Among other things, Western agreed to indemnify us with respect to liabilities related to certain historical assets and operations of the TexNew Mex Pipeline System that were not contributed to us in the TexNew Mex Pipeline Acquisition. In addition, Western made certain representations and warranties regarding the assets of TexNew Mex Pipeline System, including with respect to environmental matters, and agreed to indemnify us for breaches of those representations and warranties, subject to specified deductibles, caps and other limitations.

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Contribution, Conveyance and Assumption Agreement dated September 25, 2014

We entered into a contribution agreement with Western on September 25, 2014 under which we acquired all of the outstanding limited liability company interests of WRW, which owned substantially all of Western’s southwest wholesale assets. Among other things, Western agreed to indemnify us with respect to liabilities related to certain historical assets and operations of WRW that were not contributed to us in the Wholesale Acquisition. In addition, Western made certain representations and warranties regarding the assets of WRW, including with respect to environmental matters, and agreed to indemnify us for breaches of those representations and warranties, subject to specified deductibles, caps and other limitations.

Services Agreement

We entered into a services agreement with Western under which Western provides certain personnel for operational services under our supervision in support of our pipeline and gathering assets and terminalling and storage facilities. We reimburse Western for the cost of these services, including routine and emergency maintenance and repair services, routine operational activities, routine administrative services, construction and related services and other services as we and Western may mutually agree. Western prepares a maintenance, operating and capital budget on an annual basis subject to our approval. Western submits actual expenditures to us monthly for reimbursement.

We may terminate any of the services provided by the personnel provided by Western upon 30 days’ prior written notice. Either party may terminate this agreement upon prior written notice if the other party is in material default under the agreement and such party fails to cure the material default within 20 business days. The services agreement has an initial term of ten years and may be renewed by two additional five-year terms upon our agreement with Western evidenced in writing prior to the end of the initial term of ten years or the first renewal term of five years. If a force majeure event prevents a party from carrying out its obligations (other than to make payments due) under the agreement, such obligations, to the extent affected by force majeure, will be suspended during the continuation of the force majeure event. These force majeure events include acts of God, strikes, lockouts or other industrial disturbances, wars, riots, fires, floods, storms, orders of courts or governmental authorities, explosions, terrorist acts, accidental disruption of service, breakage, breakdown of machinery, storage tanks or lines of pipe and inability to obtain or unavoidable delays in obtaining material or equipment and any other circumstances not reasonably within the control of the party claiming suspension and that by the exercise of due diligence such party is unable to prevent or overcome.

On May 4, 2015, we entered into a Joinder Agreement with Western and Northern Tier Energy ("NTI") that joined us as a party to the Shared Services Agreement, dated October 30, 2014, between Western and NTI and under which Western and NTI provide services to each other in support of their operations. Under the Joinder Agreement, we provide certain scheduling and other services in support of NTI’s operations and NTI reimburses us for the costs associated with providing such services. During the years ended December 31, 2016 and 2015, we incurred expenses of $0.4 million and $0.3 million, respectively, or change to which are reimbursable from NTI under the shared services agreement.

For amounts paid by us or Western, as applicable, under the above described agreements, see Note 21, Related Party Transactions to our Consolidated Financial Statements included in Item 8. Financial Statements and Supplementary Data above.

The information required by Item 407(a) of Regulation S-K is included in Item 10. Directors, Executive Officers and Corporate Governance above.


Item 14.	Principal Accountant Fees and Services

For fiscal year 2016 and 2015, Deloitte & Touche LLP billed the following fees and expenses for the indicated services:



	Deloitte Fiscal Year Ended 12/31/2016		Deloitte Fiscal Year Ended 12/31/2015
Audit Fees	$	871,300	$	685,300
Audit-Related Fees	—		—
Tax Fees	—		—
All Other Fees	—		—
Total Fees and Expenses	$	871,300	$	685,300

Audit fees paid for the services of Deloitte during fiscal year 2016 and 2015 include fees billed for professional services rendered for (i) the audits of our consolidated financial statements; (ii) the audit of the effectiveness of our internal control over financial reporting; (iii) the review of our interim consolidated financial statements included in quarterly reports; (iv) audit of carve out financial statements; and (v) services provided in connection with our regulatory filings and registration statements.

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Fees and expenses are for services in connection with the audit of our fiscal year ended December 31, 2016 and 2015 financial statements regardless of the timing of payment for those fees and expenses.

Audit Committee Approval of Audit and Non-Audit Services

The Audit Committee of WNRL’s general partner has adopted a Pre-Approval Policy with respect to services that may be performed by Deloitte & Touche LLP. This policy lists specific audit-related services as well as any other services that Deloitte & Touche LLP is authorized to perform and sets out specific dollar limits for each specific service, which may not be exceeded without additional Audit Committee authorization. The Audit Committee receives quarterly reports on the status of expenditures pursuant to that Pre-Approval Policy. The Audit Committee reviews the policy at least annually in order to approve services and limits for the current year. Any service that is not clearly enumerated in the policy must receive specific pre-approval by the Audit Committee or by its Chairperson, to whom such authority has been conditionally delegated, prior to engagement. During 2016, all fees reported above were approved in accordance with the Pre-Approval Policy.

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PART IV

ITEM 15. Exhibits and Financial Statement Schedules

(a) Financial Statements:

See Index to Financial Statements included in Item 8 of this Form 10-K.

(b) Financial Statement Schedules

We have omitted all schedules because they are either not applicable, not required or the information called for therein appears in the consolidated financial statements or notes thereto.

Exhibit Index***



Exhibit Number		Description
2.1		Contribution, Conveyance and Assumption Agreement, dated as of October 16, 2013, by and among Western Refining Logistics, LP, Western Refining Logistics GP, LLC, Western Refining Southwest, Inc., San Juan Refining Company, LLC, Western Refining Pipeline, LLC, Western Refining Terminals, LLC, Western Refining Company, L.P. and Western Refining, Inc. (incorporated by reference to Exhibit 10.2 to WNRL's Current Report on Form 8-K, filed with the SEC on October 22, 2013).
2.2		Contribution, Conveyance and Assumption Agreement, dated as of September 25, 2014, by and among Western Refining, Inc., Western Refining Southwest, Inc., Western Refining Logistics GP, LLC and Western Refining Logistics, LP (incorporated by reference to Exhibit 2.1 to WNRL’s Current Report on Form 8-K, filed with the SEC on October 1, 2014).
2.3		Amendment No. 1 to the Contribution, Conveyance and Assumption Agreement, dated as of October 15, 2014, by and among Western Refining, Inc., Western Refining Southwest, Inc., Western Refining Logistics GP, LLC and Western Refining Logistics, LP (incorporated by reference to Exhibit 2.2 to WNRL's Quarterly Report on Form 10-Q, filed with the SEC on November 6, 2014).
2.4		Contribution, Conveyance and Assumption Agreement, dated as of October 30, 2015, by and among Western Refining, Inc., Western Refining Southwest, Inc., Western Refining Logistics GP, LLC and Western Refining Logistics, LP (incorporated by reference to Exhibit 2.1 to WNRL’s Quarterly Report on Form 8-K, filed with the SEC on November 2, 2015).
2.5		Contribution, Conveyance and Assumption Agreement, dated as of September 7, 2016, by and among Western Refining, Inc., St. Paul Park Refining Co. LLC, Western Refining Logistics GP, LLC and Western Refining Logistics, LP. (incorporated by reference to Exhibit 2.1 to WNRL’s Current Report on Form 8-K, filed with the SEC on September 7, 2016).
3.1		Certificate of Limited Partnership of Western Refining Logistics, LP (incorporated by reference to Exhibit 3.1 to WNRL's Registration Statement on Form S-1 (File No. 333-190135), filed with the SEC on July 25, 2013).
3.2		Second Amended and Restated Agreement of Limited Partnership of Western Refining Logistics, LP dated October 30, 2015 (incorporated by reference to Exhibit 3.1 to WNRL's Current Report on Form 8-K, filed with the SEC on November 2, 2015).
3.3		Certificate of Formation of Western Refining Logistics GP, LLC (incorporated by reference to Exhibit 3.3 to WNRL's Registration Statement on Form S-1 (File No. 333-190135), filed with the SEC on July 25, 2013).
3.4		First Amended and Restated Limited Liability Company Agreement of Western Refining Logistics GP, LLC, dated October 16, 2013, (incorporated by reference to Exhibit 3.3 to WNRL's Current Report on Form 8-K, filed with the SEC on October 22, 2013).
4.1		Indenture, dated February 11, 2015, by and among Western Refining Logistics, LP, WNRL Finance Corp., the Guarantors named therein and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.1 to WNRL's Current Report on Form 8-K, filed with the SEC on February 11, 2015).
4.2		Form of 7.50% Senior Note (included in Exhibit 4.1).
4.3		Registration Rights Agreement, dated February 11, 2015, by and among Western Refining Logistics, LP, WNRL Finance Corp. and the Guarantors named therein and Merrill Lynch, Pierce, Fenner & Smith Incorporated, Wells Fargo Securities, LLC, Credit Agricole Securities (USA) Inc., RBS Securities Inc., SunTrust Robinson Humphrey, Inc., Barclays Capital Inc., Comerica Securities Inc., Deutsche Bank Securities Inc., PNC Capital Markets LLC, RB International Markets (USA) LLC, Regions Securities LLC and UBS Securities LLC as the Initial Purchasers (incorporated by reference to Exhibit 4.3 to WNRL's Current Report on Form 8-K, filed with the SEC on February 11, 2015).

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Exhibit Number		Description
4.4		Form of Senior Indenture (incorporated by reference to Exhibit 4.1 to Western Refining Logistics, LP’s Registration Statement on Form S-3 (File No. 333-204437), filed with the SEC on May 22, 2015).
4.5		Form of Senior Debt Securities (included in Exhibit 4.4).
10.1		Credit Agreement, dated October 16, 2013, by and among Western Refining Logistics, LP, as borrower, the lenders from time to time party thereto and Well Fargo Bank, National Association, as Administrative Agent, Swingline Lender and L/C Issuer (incorporated by reference to Exhibit 10.1 to WNRL's Current Report on Form 8-K, filed with the SEC on October 22, 2013).
10.2		Omnibus Agreement, dated October 16, 2013, by and among Western Refining Logistics, LP, Western Refining Logistics GP, LLC, Western Refining, Inc., Western Refining Southwest, Inc., Western Refining Company, L.P. and Western Refining Wholesale, Inc. (incorporated by reference to Exhibit 10.3 to WNRL's Current Report on Form 8-K, filed with the SEC on October 22, 2013).
10.3		Operational Services Agreement, dated October 16, 2013, by and among Western Refining Logistics, LP, Western Refining Company, L.P. and Western Refining Southwest, Inc. (incorporated by reference to Exhibit 10.4 to WNRL's Current Report on Form 8-K, filed with the SEC on October 22, 2013).
10.4††		Pipeline and Gathering Services Agreement, dated October 16, 2013, by and among Western Refining Company, L.P., Western Refining Southwest, Inc. and Western Refining Pipeline, LLC (incorporated by reference to Exhibit 10.5 to WNRL's Current Report on Form 8-K, filed with the SEC on October 22, 2013).
10.4.1††		Amendment No. 1 to Pipeline and Gathering Services Agreement, dated as of October 16, 2013, by and among Western Refining Company, L.P., Western Refining Southwest, Inc. and Western Refining Pipeline, LLC (incorporated by reference to Exhibit 10.1 to WNRL’s Current Report on Form 8-K, filed with the SEC on November 2, 2015).
10.5††		Terminalling, Transportation and Storage Services Agreement, dated October 16, 2013, by and among Western Refining Company, L.P., Western Refining Southwest, Inc. and Western Refining Terminals, LLC (incorporated by reference to Exhibit 10.6 to WNRL's Current Report on Form 8-K, filed with the SEC on October 22, 2013).
10.6††		Product Supply Agreement, dated October 15, 2014, by and among Western Refining Southwest, Inc., Western Refining Company, L.P. and Western Refining Wholesale, LLC (incorporated by reference to Exhibit 10.1 to WNRL’s Current Report on Form 8-K, filed with the SEC on October 16, 2014).
10.7††		Fuel Distribution and Supply Agreement, dated October 15, 2014, by and between Western Refining Wholesale, LLC and Western Refining Southwest, Inc. (incorporated by reference to Exhibit 10.2 to WNRL’s Current Report on Form 8-K, filed with the SEC on October 16, 2014).
10.8††		Crude Oil Trucking Transportation Services Agreement, dated October 15, 2014, by and among Western Refining Wholesale, LLC, Western Refining Company, L.P. and Western Refining Southwest, Inc. (incorporated by reference to Exhibit 10.3 to WNRL’s Current Report on Form 8-K, filed with the SEC on October 16, 2014).
10.9		Shared Services Agreement, dated October 30, 2014, by and among Western Refining Southwest, Inc., Western Refining Company, L.P. and Northern Tier Energy LLC (incorporated by reference to Exhibit 10.2 to WNRL's Quarterly Report on Form 10-Q, filed with the SEC on May 7, 2015).
10.10		Joinder Agreement (Shared Services), dated May 4, 2015, by and among Western Refining Logistics, LP, Western Refining Southwest, Inc., Western Refining Company, L.P. and Northern Tier Energy LLC (incorporated by reference to Exhibit 10.1 to WNRL's Quarterly Report on Form 10-Q, filed with the SEC on May 7, 2015).
10.11†		Form of Indemnification Agreement (incorporated by reference to Exhibit 10.10 to WNRL’s Registration Statement on Form S-1 (File No. 333-190135), filed with the SEC on September 27, 2013).
10.12†		Western Refining Logistics, LP 2013 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.7 to WNRL's Current Report on Form 8-K, filed with the SEC on October 22, 2013).
10.13†		Form of Phantom Unit Award Agreement (time-based vesting) (incorporated by reference to Exhibit 10.8 to WNRL’s Form S-1 Registration Statement (File No. 333-190135), filed with the SEC on September 27, 2013).
10.14†		Form of Phantom Unit Award Agreement (performance-based vesting) (incorporated by reference to Exhibit 10.9 to the WNRL's Form S-1 Registration Statement (File No. 333-190135), filed with the SEC on September 27, 2013).
10.15†		Form of Phantom Unit Award Agreement (time-based vesting) (incorporated by reference to Exhibit 10.1 to WNRL's Quarterly Report on Form 10-Q, filed with the SEC on May 12, 2014).
10.16††		Asphalt Trucking Transportation Services Agreement, dated May 4, 2016 and effective as of January 1, 2016, by and among Western Refining Wholesale, LLC, Western Refining Company, L.P., and, for certain limited purposes stated therein, Western Refining Southwest, Inc. (incorporated by reference to Exhibit 10.1 to WNRL's Quarterly Report on Form 10-Q, filed with the SEC on August 4, 2016).
10.17††		Terminalling, Transportation and Storage Services Agreement, dated September 15, 2016, by and between St. Paul Park Refining Co. LLC and Western Refining Terminals, LLC (incorporated by reference to Exhibit 10.1 to WNRL’s Current Report on Form 8-K, filed with the SEC on September 20, 2016).

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Exhibit Number		Description
10.18		Commitment Increase and First Amendment to Credit Agreement, dated September 15, 2016, among Western Refining Logistics, LP, as borrower, certain subsidiaries of the Partnership, the lenders from time to time party thereto and Well Fargo Bank, National Association, as Administrative Agent, Swingline Lender and L/C Issuer (incorporated by reference to Exhibit 10.2 to WNRL’s Current Report on Form 8-K, filed with the SEC on September 20, 2016).
12.1*		Statements of Computation of Ratio of Earnings to Fixed Charges.
21.1*		List of Subsidiaries of WNRL.
23.1*		Consent of Deloitte & Touche LLP, dated March 1, 2017.
31.1*		Certification Statement of Chief Executive Officer of the Company pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certification Statement of Chief Financial Officer of the Company pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**		Certification Statement of Chief Executive Officer of the Company pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**		Certification Statement of Chief Financial Officer of the Company pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101*		Interactive Data Files.

_______________________________________



*		Filed herewith.
**		Furnished herewith.
***		Reports filed under the Securities Exchange Act of 1934, as amended (including Form 10-K, Form 10-Q and Form 8-K), are filed under File No. 001-36114.
†		Management contract or compensatory plan or arrangement.
††		The SEC has granted confidential treatment for certain portions of this Exhibit pursuant to a confidential treatment order. Such portions have been omitted and filed separately with the SEC.

Item 16. Form 10-K Summary

None.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

WESTERN REFINING LOGISTICS, LP

BY: WESTERN REFINING LOGISTICS GP, LLC



Signature	Title	Date
/s/ Jeff A. Stevens	President and Chief Executive Officer	March 1, 2017
Jeff A. Stevens

________________________________________________________________________________________________________________________

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.



Signature	Title	Date
/s/ Jeff A. Stevens	Chief Executive Officer, President and Director	March 1, 2017
Jeff A. Stevens	(Principal Executive Officer)

/s/ Paul L. Foster	Director	March 1, 2017
Paul L. Foster

/s/ Scott D. Weaver	Director	March 1, 2017
Scott D. Weaver

/s/ David D. Kinder	Director	March 1, 2017
David D. Kinder

/s/ Michael C. Linn	Director	March 1, 2017
Michael C. Linn

/s/ Andrew L. Atterbury	Director	March 1, 2017
Andrew L. Atterbury

/s/ Karen B. Davis	Chief Financial Officer	March 1, 2017
Karen B. Davis	(Principal Financial Officer and Principal Accounting Officer)

130

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Western Refining Logistics, LP Reports

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