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v2.4.0.6
Related Party Transactions
9 Months Ended
Sep. 30, 2012
Related Party Transactions

4. Related Party Transactions

Our related parties included:

 

   

MPC, which refines, markets and transports crude oil and petroleum products, primarily in the Midwest, Gulf Coast and Southeast regions of the United States.

 

   

Marathon Oil until June 30, 2011.

 

   

Centennial Pipeline LLC (“Centennial”), in which MPC has a 50 percent interest. Centennial owns a products pipeline and storage facility.

 

   

Muskegon Pipeline LLC (“Muskegon”), in which MPC has a 60 percent interest. Muskegon owns a common carrier products pipeline.

We believe that transactions with related parties, other than certain transactions with MPC and Marathon Oil related to the provision of administrative services, were conducted on terms comparable to those with unrelated parties. See below for a description of transactions with MPC and Marathon Oil.

Sales to related parties were as follows:

 

     Three Months Ended
September 30,
     Nine Months Ended
September 30,
 

(In millions)

   2012      2011      2012      2011  

MPC

   $ 96.6       $ 89.1       $ 265.8       $ 253.4   
  

 

 

    

 

 

    

 

 

    

 

 

 

Related party sales to MPC consisted of crude oil and product pipeline transportation services based on regulated tariff rates and storage services based on contracted rates.

The fees received for operating pipelines for related parties included in other income – related parties on the combined statements of income were as follows:

 

     Three Months Ended
September 30,
     Nine Months Ended
September 30,
 

(In millions)

   2012      2011      2012      2011  

MPC

   $ 3.0       $ 2.0       $ 8.8       $ 3.5   

Marathon Oil

     —           —           —           1.9   

Centennial

     0.1         0.3         0.7         0.8   

Muskegon

     0.1         0.1         0.1         0.1   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 3.2       $ 2.4       $ 9.6       $ 6.3   
  

 

 

    

 

 

    

 

 

    

 

 

 

MPC and, prior to June 30, 2011, Marathon Oil performed certain services related to information technology, engineering, legal, human resources and other financial and administrative services. Rates for shared services were negotiated between us and the service providers. Where costs incurred on our behalf could not practically be determined by specific identification, these costs were primarily allocated to us based on capital employed, wages or headcount. Our management believes those allocations were a reasonable reflection of the utilization of services provided. However, those allocations may not have fully reflected the expenses that would have been incurred had we been a stand-alone company during the periods presented.

 

Charges for services included in purchases from related parties primarily relate to services that support our operations and maintenance activities and employees. These charges were as follows:

 

     Three Months Ended      Nine Months Ended  
     September 30,      September 30,  

(In millions)

   2012      2011      2012      2011  

MPC

   $ 4.4       $ 3.8       $ 11.3       $ 10.8   

Marathon Oil

     —           —           —           0.5   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 4.4       $ 3.8       $ 11.3       $ 11.3   
  

 

 

    

 

 

    

 

 

    

 

 

 

Charges for services included in general and administrative expenses primarily relate to services that support our executive management, accounting and human resources activities and employees, and allocations of corporate overhead costs from MPC and Marathon Oil. These charges were as follows:

 

     Three Months Ended      Nine Months Ended  
     September 30,      September 30,  

(In millions)

   2012      2011      2012      2011  

MPC

   $ 5.9       $ 5.4       $ 17.4       $ 12.0   

Marathon Oil

     —           —           —           1.7   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 5.9       $ 5.4       $ 17.4       $ 13.7   
  

 

 

    

 

 

    

 

 

    

 

 

 

In addition, some service costs related to engineering services are associated with assets under construction. These costs added to property, plant and equipment were as follows:

 

     Three Months Ended      Nine Months Ended  
     September 30,      September 30,  

(In millions)

   2012      2011      2012      2011  

MPC

   $ 1.4       $ 1.1       $ 4.0       $ 2.1   
  

 

 

    

 

 

    

 

 

    

 

 

 

For purposes of these combined financial statements, we are considered to participate in multiemployer benefit plans of MPC. Our allocated share of MPC’s employee benefit plan expenses, including costs related to stock-based compensation plans, is shown in the table below by income statement line and is based upon a percentage of the salaries and wages of employees whose costs are recorded in each income statement line. The costs of employees directly involved in or supporting operations and maintenance activities are classified as purchases from related parties. The costs of employees involved in executive management, accounting and human resources activities are classified as general and administrative expenses. Our allocated share of benefit plan expenses recorded in general and administrative expenses for the three and nine months ended September 30, 2012 included $2.8 million and $9.5 million of pension expenses related to lump sum payments made by MPC during the three and nine months ended September 30, 2012. Expenses for employee benefit plans other than stock-based compensation plans are allocated to us primarily as a percentage of headcount. For the stock-based compensation plans, we were charged with the expenses directly attributed to our employees which were $0.2 million for both the three months ended September 30, 2012 and 2011 and $0.8 million and $0.4 million for the nine months ended September 30, 2012 and 2011, respectively.

 

     Three Months Ended      Nine Months Ended  
     September 30,      September 30,  

(In millions)

   2012      2011      2012      2011  

Purchases from related parties

   $ 3.3       $ 3.6       $ 10.0       $ 10.2   

General and administrative expenses

     5.0         3.5         19.5         10.4   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 8.3       $ 7.1       $ 29.5       $ 20.6   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

Receivables from related parties were as follows:

 

     September 30,      December 31,  

(In millions)

   2012      2011  

MPC

   $ 58.9       $ 52.5   

Centennial

     0.5         0.5   

Muskegon

     0.3         0.4   
  

 

 

    

 

 

 

Total

   $ 59.7       $ 53.4   
  

 

 

    

 

 

 

Payables to related parties were as follows:

 

     September 30,      December 31,  

(In millions)

   2012      2011  

MPC

   $ 3.1       $ 1.9   

Muskegon

     0.6         —     
  

 

 

    

 

 

 

Total

   $ 3.7       $ 1.9   
  

 

 

    

 

 

 

To centralize cash management activities for MPC, MPC Investment Fund, Inc. (“MPCIF”), a wholly owned subsidiary of MPC, was established and an agreement was executed on June 21, 2011 between MPCIF and MPL and ORPL. On a daily basis, we sent our excess cash to MPCIF as an advance or requested cash from MPCIF as a draw. Our net cash balance with MPCIF on the last day of each quarter was classified as loans receivable from related party or as loans payable to related party. Our loans receivable from MPCIF was $220.4 million at December 31, 2011. These agreements were terminated on September 28, 2012, in connection with the Offering.

Our investments in shares of Redeemable Class A, Series 1 Preferred Stock of MOC Portfolio Delaware, Inc., a subsidiary of Marathon Oil, (“PFD Preferred Stock”) were accounted for as investments in related party available-for-sale debt securities and were redeemed prior to June 30, 2011.

Related party interest and other financial income was as follows:

 

     Three Months Ended      Nine Months Ended  
     September 30,      September 30,  

(In millions)

   2012      2011      2012      2011  

Dividend income:

           

PFD Preferred Stock

   $ —         $ —         $ —         $ 1.9   

Interest income:

           

Loans receivable from MPCIF

     0.5         0.2         1.3         0.2   
  

 

 

    

 

 

    

 

 

    

 

 

 

Related party interest and other financial income

   $ 0.5       $ 0.2       $ 1.3       $ 2.1   
  

 

 

    

 

 

    

 

 

    

 

 

 

We also recorded property, plant and equipment additions related to capitalized interest incurred by MPC on our behalf of $0.7 million in the nine months ended September 30, 2012, which was reflected as a contribution from MPC.

Certain asset transfers between us and MPC and certain expenses, such as stock-based compensation, incurred by MPC on our behalf have been recorded as non-cash capital contributions or distributions. The net non-cash capital distribution to MPC was $0.5 million in the nine months ended September 30, 2011.