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Item 1A. Risk Factors

2024-02-28 compared with 2023-03-01 · 116 added, 91 removed, 801 unchanged (21% of the section changed)

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The headings provided in this Item 1A are for convenience and reference purposes only and shall not limit or otherwise affect the extent or interpretation of the risk factors.

Risks Relating to Our Business

Risks Relating to Our Business, Financial Condition, Results of Operations, Ability to Maintain our Assets and Cash Flows

Our relationship with Delek Holdings and their financial condition subjects us to potential risks that are beyond our control.

Delek Holdings is the only customer for a majority of our assets, including but not limited to our assets used to support the Tyler Refinery and the majority of our terminalling assets.

Delek Holdings is the only or primary customer for a majority of our assets, including but not limited to our assets used to support the Tyler Refinery and the majority of our terminalling assets.

In addition, Delek Holdings, through inventory intermediation agreements with its assignee, is effectively the principal customer for our Big Spring Logistics Assets used to support the Big Spring Refinery and our Lion Pipeline System, the Gathering Assets, and our El Dorado, Memphis and North Little Rock terminals.

Please see Items 1 and 2.

"Business and Properties—Delek Holdings' Crude Oil and Refined Products Intermediation Agreement." As we expect to continue to derive the substantial majority of our margins from Delek Holdings, either directly or indirectly, for the foreseeable future, we are subject to the risk of nonpayment, nonperformance or underperformance by Delek Holdings under our commercial agreements.

In addition, we are subject to the risk of nonpayment, nonperformance or underperformance by Delek Holdings’ assignees.

If Delek Holdings were to significantly decrease, or cause the significant decrease of, the materials transported on our pipelines or the volumes of refined products handled at our terminals, whether because of business or operational difficulties or strategic decisions by Delek Holdings’ management, it is unlikely that we would be able to utilize any additional capacity on our pipelines or terminal facilities to service third-party customers without substantial capital outlays and delays, if at all, which could materially and adversely affect our results of operations, financial condition and cash flows.

Likewise, the terms of Delek Holdings' obligations under its agreements with us are for initial terms ranging from five years to ten years, with options to extend at the election of Delek Holdings.

If Delek Holdings fails to renew these contracts as they come up for renewal, or if Delek Holdings fails to use our assets and services after the expiration of the agreements, or should our agreements be invalidated as a result of our performance failure or for any other reason, and we are unable to generate revenue from third parties with respect to such assets, we could be materially and adversely affected.

See Note 4 to the consolidated financial statements in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K, for a complete discussion of our material commercial agreements with Delek Holdings.

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See “Risks Relating to Our Partnership Structure—Our general partner and its affiliates, including Delek Holdings, have conflicts of interest with us and limited duties to us and our unitholders, and they may favor their own interests to the detriment of us and our other common unitholders.”

The COVID-19 Pandemic, any related subsequent waves of the COVID-19 Pandemic or an additional regional or global disease outbreak, and certain developments in the global oil markets have had, may continue to have, or may have an adverse impact on our business, our future results of operations and our overall financial performance.

The COVID-19 Pandemic and spread of new variants of the virus could materially adversely affect our business and operations for the foreseeable future.

The COVID-19 Pandemic has significantly destabilized beyond and will likely continue to impact worldwide economic and commercial activity, financial markets, and the demand for and prices of oil and gas products for the foreseeable future.

In particular, there remains considerable tension in the OPEC-Russia relationship, uncertainty in the global oil markets, substantial global supply chain issues, and significant disruptions in the labor market.

These impact of the COVID-19 Pandemic may precipitate a prolonged economic slowdown and recession.

Developments which impact the global oil markets have had, may continue to have, an adverse impact on our business, our results of operations and our overall financial performance.

While our operations are focused in the Permian Basin (including the Delaware sub-basin) and other select areas on the Gulf Coast region, our business is impacted by events and developments that impact the global markets for oil and other energy products.

Any regional or global event or development that destabilizes worldwide economic and commercial activity, financial markets, or the demand for and prices of oil and gas products could materially adversely affect our business and operations.

In recent years, the COVID-19 Pandemic, the Russia-Ukraine war, the OPEC-Russia relationship, and the conflict between Israel and Hamas have been sources of uncertainty in the global oil markets, substantial global supply chain issues, and significant disruptions in the labor market.

Global economic growth drives demand for energy from all sources, including fossil fuels.

Should the U.S.

and global economies experience weakness, demand for energy may decline.

or global economies experience weakness, demand for energy may decline.

Should growth in global energy production outstrip demand, excess supplies may arise.

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With respect to our business, we have experienced periodic declines in demand thought to be associated with slowing economic growth in certain markets, including the effects of the COVID-19 Pandemic, coupled with new oil and gas supplies coming on line and other circumstances beyond our control that resulted in oil and gas supply exceeding global demand which, in turn, resulted in steep declines in prices of oil and natural gas.

At times, we have also experienced declines in the supply of inputs thought to be associated with supply chain issues and disruptions in the labor market arising from the effects of the COVID-19 Pandemic.

There can be no assurance as to how long the current uncertainty will persist or that a recurrence of price weakness will not arise in the future.

The COVID-19 Pandemic has resulted in modifications to our business practices, including limiting employee and contractor presence at certain work locations, limiting travel, and reducing capital expenditures.

At times, we have also experienced declines in the supply of inputs thought to be associated with supply chain issues and disruptions in the labor market.

There can be no assurance as to how long such uncertainty will persist or that a recurrence of price weakness will not arise in the future.

The ultimate extent of the impact of volatile conditions in the oil and gas industry on our business, financial condition, results of operation and liquidity will depend largely on future developments which are outside of our control, including the extent and duration of any price reductions, any additional decisions by OPEC and disputes between the members of OPEC+.

Furthermore, developments in the global oil markets may also have the effect of heightening many of the other risks described below.

A regional or global disease outbreak could have a material adverse effect on our business, financial condition, results of operation and liquidity.

Like the COVID-19 Pandemic, a regional or global disease outbreak could result in financial and operational impacts that have a material adverse effect on our business, financial condition, results of operation and liquidity.

Any regional or global disease outbreak may result in modifications to our business practices, including limiting employee and contractor presence at certain work locations, limiting travel, and reducing capital expenditures.

We may take further actions as required by government authorities or that we determine are in the best interests of our contractors, customers, suppliers and communities.

However, there is no assurance that such measures will be sufficient to mitigate the risks posed by the virus, and our ability to successfully execute our business operations could be adversely impacted.

In addition, while we have not recorded any goodwill impairment to date, the continued effects of the COVID-19 Pandemic could result in impairments of long-lived or indefinite-lived assets, including goodwill, at some point in the future.

However, there is no assurance that such measures will be sufficient to mitigate the risks posed by any outbreak, and our ability to successfully execute our business operations could be adversely impacted.

In addition, a regional or global disease outbreak could result in impairments of long-lived or indefinite-lived assets, including goodwill, at some point in the future.

Such impairment charges could be material.

The full impact of the ongoing COVID-19 Pandemic is unknown and continues to rapidly evolve.

It is difficult to predict how significant the impact of the COVID-19 Pandemic, any related subsequent waves of the COVID-19 Pandemic, an additional regional or global disease outbreak, and any responses to such events, will be on the U.S.

It is difficult to predict how significant the impact of any regional or global disease outbreak and any responses to such events will be on the U.S.

and global economies and our business or for how long disruptions are likely to continue.

The extent of such impact will depend on future developments and factors outside of our control, including new information which may emerge concerning the severity or duration of the COVID-19 Pandemic, the evolving governmental and private sector actions to contain the pandemic or treat its health, economic, and other impacts, and the timing and effectiveness of the ongoing rollout of currently available vaccines.

The ultimate extent of the impact of the volatile conditions in the oil and gas industry on our business, financial condition, results of operation and liquidity will also depend largely on future developments, including the extent and duration of any price reductions, any additional decisions by OPEC and disputes between the members of OPEC+.

To the extent COVID-19 and the developments in the global oil markets adversely affects our business, financial condition, results of operation and liquidity, they may also have the effect of heightening many of the other risks described below.

The extent of such impact will depend on future developments and factors outside of our control, including new information which may emerge concerning the severity or duration of such disease, the evolving governmental and private sector actions to contain the disease or treat its health, economic, and other impacts, and the timing and effectiveness of the ongoing rollout of currently available vaccines.

To the extent any regional or global disease outbreak impacts our business or the global markets for our products, it could have a material adverse effect on our business, financial condition, results of operation and liquidity.

Our operations are subject to many risks and operational hazards, some of which may result in business interruptions and shutdowns of our facilities and liability for damages.

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Also, following an acquisition, we may discover previously unknown liabilities associated with the acquired business or assets for which we have no recourse under applicable indemnification provisions.

On June 1, 2022, we completed the 3 Bear Acquisition, which will require management to devote significant attention and resources to integrating the 3 Bear business with our business.

On June 1, 2022, we completed the Delaware Gathering Acquisition, which has required management to devote significant attention and resources to integrating the Delaware Gathering business with our business.

Potential difficulties that may be encountered in the integration process include, among others:

• the inability to successfully integrate the 3 Bear business into our business in a manner that permits us to achieve the revenue and cost savings that we announced as anticipated from the acquisition;

• the inability to successfully integrate the Delaware Gathering business into our business in a manner that permits us to achieve the revenue and cost savings that we announced as anticipated from the acquisition;

• complexities associated with managing the larger, integrated business;

• potential unknown liabilities and unforeseen expenses, delays or regulatory conditions associated with the 3 Bear Acquisition;

• potential unknown liabilities and unforeseen expenses, delays or regulatory conditions associated with the Delaware Gathering Acquisition;

• integrating personnel from the two companies while maintaining focus on providing consistent, high-quality products and services;

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• integrating relationships with customers, vendors and business partners;

• performance shortfalls at one or both of the companies as a result of the diversion of management’s attention caused by completing the acquisition and integration of 3 Bear’s operations into the Partnership;

• performance shortfalls at either or both of our existing businesses or the acquired business as a result of the diversion of management's attention caused by completing the acquisition and integration of Delaware Gathering's operations into the Partnership;

• the disruption or loss in momentum in, each company’s ongoing business or inconsistencies in standards, controls, procedures and policies.

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Insurance companies that have historically participated in underwriting energy-related facilities may discontinue that practice, may reduce the insurance coverage they are willing to offer or demand significantly higher premiums or deductibles.

If we experience significant claims, or if there are significant changes occur in the number or financial solvency of insurance underwriters for the energy industry, or if other adverse conditions over which we have no control prevail in the insurance market, we may be unable to obtain and maintain adequate insurance at a reasonable cost.

If we experience significant claims, or if significant changes occur in the number or financial solvency of insurance underwriters for the energy industry, or if other adverse conditions over which we have no control prevail in the insurance market, we may be unable to obtain and maintain adequate insurance at a reasonable cost.

Furthermore, any losses under the insurance policies experienced by Delek Holdings may impact our ability to obtain, renew or arrange for adequate alternative coverage.

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We have systems in place to manage potential acute physical risks, including those that may be caused by climate change, but if any such events were to occur, they could have an adverse effect on our assets and operations.

Examples of potential physical risks include floods, hurricane-force winds, wildfires, freezing temperatures and snowstorms.

Examples of potential physical risks include extreme heat, severe thunderstorms, lightning strikes, floods, hurricane-force winds, wildfires, freezing temperatures and snowstorms.

As the climate changes, the frequency and severity of these physical risks may increase.

We have incurred, and will continue to incur, costs to protect our assets from physical risks and to employ processes, to the extent available, to mitigate such risks.

Any extreme weather events may disrupt the ability to operate our facilities or to transport crude oil, refined petroleum or petrochemical and plastics products in these areas.

Extreme weather events may disrupt our ability to operate and maintain our facilities or to transport crude oil, refined petroleum or petrochemical and plastics products, both within and outside affected areas.

In addition, substantial weather-related conditions could impact our relationships and arrangements with our major customers and suppliers by materially affecting the normal flow of crude oil and refined products.

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Extended periods of such disruption could have an adverse effect on our results of operations.

We could also incur substantial costs to prevent or repair damage to these facilities.

Finally, depending on the severity and duration of any extreme weather events or climate conditions, our operations may need to be modified and material costs incurred, which could materially and adversely affect our business, financial condition and results of operations.

We have incurred, and will continue to incur, substantial costs to prevent or repair damage to our facilities as a result of severe weather events.

Finally, depending on the severity and duration of any extreme weather events or climate conditions, our maintenance procedures may need to be delayed or expanded, operations may need to be modified and material costs incurred, which could materially and adversely affect our business, financial condition and results of operations.

If we are unable to generate sufficient cash flow, our ability to pay quarterly distributions to our common unitholders at all or at current levels or our ability to increase our quarterly distributions in the future could be impaired materially.

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Any failure to pay distributions at expected levels could result in a loss of investor confidence and a decrease in the trading price of our units.

The Russia-Ukraine War, and events occurring in response thereto, including sanctions brought by the United States and other countries against Russia and any expansion of hostilities, may have an adverse impact on our business, our future results of operations, and our overall financial performance.

The effects of the military conflict that began with the Russian invasion of Ukraine in February 2022 on our business, financial condition, and results of operations are impossible to predict.

Sanctions brought by the United States and other countries against Russia or any of its allies, any escalation of the conflict, including the regional or global expansion of hostilities, and other future developments could significantly affect the global economy, lead to market volatility and supply chain disruptions, have an adverse impact on energy prices, including prices for crude oil, other feedstocks, and refined petroleum products, have an adverse impact on the margins from our petroleum product marketing operations, and have a material adverse effect on our business, financial condition, and results of operations.

The Russia-Ukraine War, Israel-Hamas War, events occurring in response thereto and any expansion of hostilities, may have an adverse impact on our business, our future results of operations, and our overall financial performance.

The effect of the conflicts between Russia and Ukraine beginning in February 2022 and between Israel and Hamas beginning in October 2023, on our business, financial condition, and results of operations are impossible to predict.

Any increase in sanctions, escalating of the conflicts, including the regional or global expansion of hostilities, and other future developments could significantly affect the global economy, lead to market volatility and supply chain disruptions, have an adverse impact on energy prices, including prices of crude oil, other feedstocks, and refined petroleum products, have an adverse impact on the margins from our petroleum product marketing operations, and have a material adverse effect on our business, financial condition, and results of operations.

The effects of the conflicts between Russia and Ukraine beginning in February 2022 and between Israel and Hamas beginning in October 2023, on our business, financial condition, and results of operations are impossible to predict.

Any increase in sanctions, escalation of the conflicts, including the regional or global expansion of hostilities, and other future developments could significantly affect the global economy, lead to market volatility and supply chain disruptions, have an adverse impact on energy prices, including prices for crude oil, other feedstocks, and refined petroleum products, have an adverse impact on the margins from our petroleum product marketing operations, and have a material adverse effect on our business, financial condition, and results of operations.

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

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The costs associated with such obligations can be substantial, as can costs associated with related enforcement matters, including possible fines and penalties.

Transportation of crude oil and products over water, or proximate to navigable bodies of water, involves inherent risks (including risks of spills) and could subject us to the provisions of the OPA, the Clean Water Act and similar state environmental laws should a spill occur from our facilities.

laws should a spill occur from our facilities.

See Items 1 and 2.

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Any such expenses, penalties or liabilities could have a material adverse effect on our business, financial condition or results of operations.

While we are entitled to reimbursement or indemnification from Delek Holdings for certain

environmental liabilities under the Omnibus Agreement, such reimbursement or indemnification may not fully cover any damages we may incur, or Delek Holdings may default on or otherwise fail to satisfy its obligations to us, which could have a material adverse effect on our business, financial condition or results of operations.

While we are entitled to reimbursement or indemnification from Delek Holdings for certain environmental liabilities under the Omnibus Agreement for certain assets which we purchased from Delek Holdings, such reimbursement or indemnification may not fully cover any damages we may incur, or Delek Holdings may default on or otherwise fail to satisfy its obligations to us, which could have a material adverse effect on our business, financial condition or results of operations.

Further, certain of our pipeline facilities are subject to the pipeline safety regulations of the PHMSA.

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The operation of refineries, pipelines, terminals and vessels is inherently subject to the risks of spills, discharges or other inadvertent releases of petroleum or hazardous substances.

If any of these events had previously occurred or occurs in the future in connection with any of our refineries, pipelines or refined petroleum products terminals, or in connection with any facilities that receive our wastes or byproducts for treatment or disposal, other than events for which we are indemnified, we could be liable for all costs and penalties associated with their remediation under federal, state, local and international environmental laws or common law, and could be liable for property damage to third parties caused by contamination from releases and spills.

When these events occur in connection with any of our refineries, pipelines or refined petroleum products terminals, or in connection with any facilities that receive our wastes or byproducts for treatment or disposal, we have in the past and could in the future be liable for costs and penalties associated with their remediation under federal, state, local and international environmental laws or common law, as well as for property damage to third parties caused by contamination from releases and spills.

A material decrease in the supply of attractively priced crude oil could materially reduce the volumes of crude oil and refined products that we transport and store, which could materially and adversely affect our financial condition, results of operations, cash flows, ability to service our indebtedness and ability to make distributions to our unitholders.

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In our West Texas wholesale marketing business, we sell refined products that we purchase from Delek Holdings and unaffiliated third parties.

The prior contract under which we purchased the majority of the products we sold in West Texas expired in December 2017.

We are now purchasing the majority of product we sell in West Texas from Delek Holdings.

We purchase the majority of product we sell in West Texas from Delek Holdings.

The remainder of the barrels we sell in West Texas are spot purchased from various suppliers or refiners.

We could experience an interruption or reduction in the supply or delivery of refined products if our suppliers, the refineries who supply us or our suppliers, or the pipelines that deliver that product partially or completely ceased operations, temporarily or permanently, or ceased to supply us with refined products for any reason.

The ability of these refineries and our suppliers to supply refined products to us could be disrupted by anticipated events, such as scheduled upgrades or maintenance, as well as events beyond their control, such as unscheduled maintenance, the COVID-19 Pandemic, fires, floods, storms, explosions, power outages, accidents, acts of terrorism or other catastrophic events, labor difficulties and work stoppages, governmental or private party litigation, or legislation or regulation that adversely impacts refinery operations.

The ability of these refineries and our suppliers to supply refined products to us could be disrupted by anticipated events, such as scheduled upgrades or maintenance, as well as events beyond their control, such as unscheduled maintenance, regional or global disease outbreaks, fires, floods, storms, explosions, power outages, accidents, acts of terrorism or other catastrophic events, labor difficulties and work stoppages, governmental or private party litigation, or legislation or regulation that adversely impacts refinery operations.

An interruption or reduction in the volume of refined products supplied to our wholesale business could adversely affect our sales and profitability.

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In addition, a failure to comply with the provisions of our revolving credit facility or the indentures governing the 2025 Notes and 2028 Notes could result in a default or an event of default that could enable our lenders to declare the outstanding principal of that debt, together with accrued and unpaid interest and certain other indebtedness and other outstanding amounts, to be immediately due and payable.

Such event of default would also permit our lenders to foreclose on our assets serving as collateral for our obligations under the revolving credit

Such event of default would also permit our lenders to foreclose on our assets serving as collateral for our obligations under the revolving credit facility.

If the payment of our debt is accelerated, our assets may be insufficient to repay such debt in full, and our unitholders could experience a partial or total loss of their investment.

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Any of the foregoing could adversely affect our revenues and cash flows.

We note that the FERC index has been set at a level for the period from 2021-2025 that is lower than that which was in effect from 2016-2021;

this is likely to result in lower annual rate increases, where there are increases permitted, for the coming period for our transportation rates that are subject to the FERC index for annual adjustments, compared to the previous five-year period, and has in the past and may in the future require us to decrease our interstate transportation rates to comply with the reduced ceiling level.

Shippers may protest, and the FERC may investigate, the lawfulness of new or changed tariff rates.

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Whether a pipeline provides service in interstate commerce or intrastate commerce is highly fact-dependent and determined on a case-by-case basis.

We cannot provide assurance that the FERC will not, at some point, assert that some or all of the transportation service we provide that is not currently subject to our FERC tariffs within its jurisdiction.

If the FERC were successful with any such assertion, we may be required to pay refunds to customers and the FERC's rate-making methodologies may limit our ability to set rates based on our actual costs, delay the use of rates that reflect increased costs and subject us to potentially burdensome and expensive operational, reporting and other requirements.

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In addition, regulation by the FERC may subject us to potentially burdensome and expensive operational, reporting and other requirements.

We own pipeline assets in Texas, Arkansas, Louisiana and Oklahoma.

We own pipeline assets in Texas, Arkansas, Louisiana, New Mexico and Oklahoma.

In Texas, a pipeline, with some exceptions, is required to operate as a common carrier and provide transportation without discrimination.

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In Louisiana, all pipelines conveying petroleum from a point of origin within the state to a destination within the state are declared common carriers.

T he Louisiana Public Service Commission is empowered with the authority to establish reasonable rates and regulations for the transport of petroleum by a common carrier, mandating public tariffs and providing of transportation without discrimination.

In Oklahoma, oil and gas companies engaged in transporting oil or gas by pipeline within the state operate as common carriers, and are not permitted to engage in unlawful discrimination.

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Our current and future credit ratings may be adversely affected by any current and future credit rating of Delek Holdings, as credit rating agencies may consider the leverage and credit profile of Delek Holdings and its affiliates, because of their ownership interest in and control of us and because Delek Holdings accounts for a substantial majority of our contribution margin.

Any adverse effect on our current and future

credit ratings could increase our cost of borrowing or hinder our ability to raise financing in the capital markets, which could impair our ability to grow our business and make cash distributions to our unitholders.

Any adverse effect on our current and future credit ratings could increase our cost of borrowing or hinder our ability to raise financing in the capital markets, which could impair our ability to grow our business and make cash distributions to our unitholders.

Increases in interest rates could adversely impact the price of our common units, our ability to issue equity or incur debt for acquisitions or other purposes and our ability to make cash distributions at our intended levels.

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Therefore, changes in interest rates, either positive or negative, may affect the yield requirements of investors who invest in our common units, and a rising interest rate environment could have an adverse impact on the price of our common units, our ability to issue equity or incur debt for acquisitions or other purposes and our ability to make cash distributions at our intended levels.

Further, the administrator for LIBOR ceased publishing one-week and two-month U.S.

dollar LIBOR at the end of 2021 and will cease publishing all remaining U.S.

dollar LIBOR tenors in mid-2023.

Concurrently, the United Kingdom’s Financial Conduct Authority announced the cessation or loss of representativeness of the U.S.

dollar LIBOR tenors from those dates.

Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of, among other entities, large U.S.

financial institutions, has recommended replacing U.S.

dollar LIBOR with a new index, the Secured Overnight Financing Rate ("SOFR"), that measures the cost of borrowing cash overnight, backed by U.S.

Treasury securities.

SOFR is observed and backward-looking, which stands in contrast with LIBOR under the current methodology, which is an estimated forward-looking rate and relies, to some degree, on the expert judgement of submitting panel members.

We are evaluating the potential impact of the eventual replacement of the LIBOR benchmark interest rate, including the possibility of SOFR as the dominant replacement.

Certain of our agreements use LIBOR as a “benchmark” or “reference rate” for various terms.

Some agreements contain an existing LIBOR alternative.

Where there is not an alternative, we expect to replace the LIBOR benchmark with an alternative reference rate.

While we do not expect the transition to an alternative rate to have a significant impact on our business or operations, it is possible that the move away from LIBOR could materially impact our borrowing costs on our variable rate indebtedness.

Fixed rate debt, such as the 2025 Notes and 2028 Notes, exposes us to changes in the fair value of our debt due to changes in market interest rates.

Fixed rate debt also exposes us to the risk that we may need to refinance maturing debt with new debt at higher rates.

Our right of first offer to acquire certain of Delek Holdings' existing logistics assets and certain assets that it may acquire or construct in the future is subject to risks and uncertainty, and we ultimately may not acquire any of those assets.

The Omnibus Agreement provides us with a right of first offer on certain of Delek Holdings’ existing logistics assets and certain assets that it may acquire or construct in the future, subject to certain exceptions and time limitations.

The consummation and timing of any future acquisitions pursuant to this right will depend on, among other things, Delek Holdings’ willingness to offer such assets for sale and obtain any necessary consents, our ability to negotiate acceptable purchase agreements and commercial agreements with respect to such 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 pursuant to our right of first offer, and Delek Holdings is under no obligation to accept any offer that we may choose to make.

In addition, we may decide not to exercise our right 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 right of first offer may be terminated by Delek Holdings at any time in the event that it no longer controls our general partner.

If we are unable to make investments in joint ventures or acquisitions on economically acceptable terms, our future growth could be limited, and any investments or acquisitions we may make may negatively impact our financial condition, results of operations, cash flows, ability to service our indebtedness and ability to make distributions to unitholders.

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We obtain the rights to construct and operate our pipelines on land owned by third parties and governmental agencies, and some of those agreements may grant us those rights for only a specific period of time.

Our loss of such rights, through our inability to renew any rights-of-way contracts, or a significant increase in the costs of these rights, could have a material adverse effect on our business, financial condition, results of operations and cash flows and our ability to make distributions to our unitholders.

Our loss of such rights, through our inability to renew any rights-of-way contracts, or a significant increase in the costs of these rights, could have a material adverse effect on our business, financial condition, results of operations, ability to maintain our assets and cash flows and our ability to make distributions to our unitholders.

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

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Any or all of these matters could have a negative effect on our business, results of operations and cash flows.

We have not obtained independent evaluations of all of the reserves connected to our gathering systems;

therefore, in the future, customer volumes on our systems could be less than we anticipate.

We do not routinely obtain or update independent evaluations of the reserves connected to our systems.

Moreover, even if we did obtain independent evaluations of all of the reserves connected to our systems, such evaluations may prove to be incorrect.

Crude oil and natural gas reserve engineering requires subjective estimates of underground accumulations of crude oil and natural gas and assumptions concerning future crude oil and natural gas prices, future production levels and operating and development costs.

Accordingly, we may not have accurate estimates of total reserves dedicated to our systems of the anticipated life of such reserves.

If the total reserves or estimated life of the reserves connected to our gathering system is less than we anticipate and we are unable to secure additional volumes, it could have a material adverse effect on our business, results of operations, financial condition and our ability to make cash distributions to our unitholders.

Certain of our gathering agreements contain provisions that can reduce that cash flow stability that the agreements were designed to achieve.

We designed those gathering agreements that contain MVC provisions to generate stable cash flows for us over the life of the MVC contract term.

Under certain of these agreements, Delek Holdings agreed to ship a minimum volume on our gathering systems or over certain periods during the term of the agreement.

If Delek Holdings' actual throughput volumes are less than its MVC for the contracted measurement period, it must make a shortfall payment to us at the end of the applicable measurement period.

The amount of the shortfall payment is based on the difference between the actual throughput volume shipped or processed for the applicable period and the MVC for the applicable period, multiplied by the applicable fee.

To the extent that Delek Holdings' actual throughput volumes are above or below its MVC for the applicable contracted measurement period, certain of our gathering agreements contain provisions that allow Delek Holdings to use the excess volumes or the shortfall payment to credit against future excess volumes or future shortfall payments, which could have a material adverse effect on our results of operations, financial condition and cash flows and our ability to make cash distributions to our unitholders.

Climate change legislation or regulations restricting emissions of greenhouse gases could result in increased operating and capital costs and reduced demand for our products and services.

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In addition, changes in the product quality of the products we receive on our pipeline system could reduce or eliminate our ability to blend products.

Increasing attention to environmental, social and governance matters may impact our business, financial results or stock price.

Increased regulation of hydraulic fracturing could result in reductions or delays in customer production, which could materially adversely impact our revenues.

Hydraulic fracturing is an important and increasingly common practice that is used to stimulate production of natural gas and/or crude oil from dense subsurface rock formations and is primarily regulated by state agencies.

However, Congress has in the past, and may in the future consider legislation to regulate hydraulic fracturing by federal agencies.

Many states have already adopted laws and/or regulations that require disclosure of the chemicals used in hydraulic fracturing.

States also could elect to prohibit hydraulic fracturing altogether, as New York, Maryland, and Vermont have done.

In addition, certain local governments have adopted, and additional local governments may adopt, ordinances within their jurisdictions regulating the time, place and manner of drilling activities in general or hydraulic fracturing activities in particular.

These initiatives and similar efforts elsewhere could restrict oil and gas development in the future.

The EPA has also moved forward with various regulatory actions, including a proposal to issue new regulations under the New Source Performance Standards (NSPS) to expand and strengthen emissions reduction requirements under NSPS OOOOa for new, modified and reconstructed oil and natural gas sources, and require states to reduce methane emissions from existing sources nationwide.

The BLM has also asserted regulatory authority over aspects of the hydraulic fracturing process and issued a final rule in March 2015 that established more stringent standards for performing hydraulic fracturing on federal and Indian lands, including requirements relating to well construction and integrity, handling of wastewater and chemical disclosure.

However, in December 2017, the BLM published a final rule rescinding the 2015 rule.

District Court for the Northern District of California upheld the December 2017 rescission rule in a March 2020 decision, and the State of California and environmental plaintiffs appealed.

Litigation is currently ongoing.

Further, several federal governmental agencies have conducted reviews and studies on the environmental aspects of hydraulic fracturing, including the EPA.

The results of such reviews or studies could spur initiatives to further regulate hydraulic fracturing.

State and federal regulatory agencies recently have focused on a possible connection between the hydraulic fracturing related activities and the increased occurrence of seismic activity.

When caused by human activity, such events are called induced seismicity.

Some state regulatory agencies, including those in Colorado, Ohio, and Texas, have modified their regulations or guidance to account for induced seismicity.

These developments could result in additional regulation and restrictions on the use of injection disposal wells and hydraulic fracturing.

Such regulations and restrictions could cause delays and impose additional costs and restrictions on our customers.

Additionally, certain of our customers produce oil and gas on federal lands.

On January 20, 2021, the Acting Secretary for the Department of the Interior signed an order effectively suspending new fossil fuel leasing and permitting on federal lands for 60 days.

Then on January 27, 2021, President Biden issued an executive order indefinitely suspending new oil and natural gas leases on public lands or in offshore waters pending completion of a comprehensive review and reconsideration of federal oil and gas permitting and leasing practices.

Several states filed lawsuits challenging the suspension, and on June 15, 2021, a judge in the U.S.

District Court for the Western District of Louisiana issued a nationwide temporary injunction blocking the suspension.

The Department of the Interior appealed the U.S.

District Court’s ruling, but resumed oil and gas leasing pending resolution of the appeal.

In November 2021, the Department of the Interior completed its review and issued a report on the federal oil and gas leasing program.

The Department of the Interior’s report recommends several changes to federal leasing practices, including changes to royalty payments, bidding, and bonding requirements.

If new or more stringent federal, state or local legal restrictions relating to drilling activities or to the hydraulic fracturing process are adopted, this could result in a reduction in the supply of natural gas and/or crude oil that our customers produce and could thereby adversely affect our revenues and results of operations.

Compliance with such rules could also generally result in additional costs, including increased capital expenditures and operating costs, for our customers, which could ultimately decrease end-user demand for our services and could have a material adverse effect on our business.

Increasing attention on environmental, social and governance matters may impact our business, financial results or stock price.

In recent years, increasing attention has been given to corporate activities related to environmental, social and governance (“ESG”) matters in public discourse and the investment community.

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If we failed to prevail in any such litigation and were required to pay significant damages and/or materially alter the manner in which we conduct our business, there could be a material adverse impact on our operations, financial condition or results of operations.

These activities could reduce demand for our products, reduce our profits, increase the potential for investigations and litigation, impair our brand and have negative impacts on our common limited partner unit price and access to capital markets.

The increasing attention to ESG activities and a shift by consumers to more fuel-efficient or alternative fuel vehicles could reduce demand for our products, reduce our profits, increase the potential for investigations and litigation, impair our brand and have negative impacts on our common limited partner unit price and access to capital markets.

Additionally, increased attention may increase opposition to the development, permitting, construction or operation of our pipelines and facilities from environmental groups, landowners, local groups and other advocates.

In addition to litigation such opposition may take the form of organized protests, attempts to block or sabotage our operations, intervention in regulatory or administrative proceedings involving our assets or other actions designed to prevent, disrupt or delay the development, operation, or maintenance of our assets and business.

In addition, organizations that provide information to investors on corporate governance and related matters have developed ratings systems for evaluating companies on their approach to ESG matters.

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Energy-related assets (which could include refineries, pipelines and terminals) may be at greater risk of future terrorist attacks than other possible targets in the U.S.

In addition, the State of Israel, where Delek Holdings Group, the former parent company of Delek Holdings, is based, has suffered armed conflicts and political instability in recent years.

In addition, the State of Israel, where Delek Holdings Group, the former parent company of Delek Holdings, is based, has suffered armed conflicts and political instability in recent years, including the Israel-Hamas War.

We may be more susceptible to a direct attack as a result of our connection to Israel.

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In addition, any terrorist attack, armed conflict, war or political instability in the significant oil producing regions such as the Middle East, Africa, the former Soviet Union and South America could have an adverse impact on energy prices, including prices for crude oil, other feedstocks and refined petroleum products, and an adverse impact on the margins from our petroleum product marketing operations.

The long-term impacts of terrorist attacks and the threat of future terrorist on the energy transportation terrorist attacks or vandalism could result in increased costs to our business.

The long-term impacts of terrorist attacks and the threat of future terrorist on energy transportation infrastructure or vandalism could result in increased costs to our business.

In addition, disruption or significant increases in energy prices could result in government-imposed price controls.

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We rely on information technology in our operations, and any material failure, inadequacy, interruption, cyber-attack or security failure of that technology could harm our business.

We rely on information technology across our operations, including in the monitoring of the movement of petroleum through our pipelines and terminals and of various other processes and transactions.

We utilize information technology systems and controls throughout our operations to capture accounting, technical and regulatory data for subsequent archiving, analysis and reporting.

Disruption, failure, or cyber security breaches affecting or targeting our computer and telecommunications, our infrastructure, or the infrastructure of our cloud-based IT service providers may materially impact our business and operations.

An undetected failure of these systems, because of power loss, unsuccessful transition to upgraded or replacement systems, unauthorized access or other cyber breach or attack could result in disruption to our business operations, access to or disclosure or loss of data and/or proprietary information, personal injuries and environmental damage, which could have an adverse effect on our business, reputation, and effectiveness.

We could also be subject to resulting investigation and remediation costs as well as regulatory enforcement of private litigation and related costs, which could have a material adverse impact on our cash flow and results of operations.

We rely on information technology across our operations, including in the monitoring of the movement of petroleum through our pipelines and terminals and in various other processes and transactions.

We also utilize information technology systems and controls throughout our operations to capture accounting, technical and regulatory data for subsequent archiving, analysis and reporting.

Disruption, failure, or cyber security breaches affecting or targeting our computer or telecommunications systems, our infrastructure, or the infrastructure of our cloud-based IT service providers may materially impact our business and operations.

A failure of these systems, whether due to power loss, unsuccessful transition to upgraded or replacement systems, unauthorized access or other cyber breach or attack could result in disruption to our business operations, access to or disclosure or loss of data and/or proprietary information, personal injuries and environmental damage, any of which could have an adverse effect on our business, reputation, and effectiveness.

We could also be subject to resulting investigation and remediation costs, as well as regulatory enforcement, private litigation and related costs, any of which could have a material adverse impact on our cash flow and results of operations.

Furthermore, public disclosure of any such event could result in negative publicity and a loss of investor confidence, which could have a negative impact on the trading price of our common units.

We rely on commercially available systems, software, tools and monitoring to provide security for processing, transmission and storage of confidential customer information, such as payment card and personal credit information.

The implementation of social distancing measures and other limitations on the workforce of our affiliates in response to the COVID-19 Pandemic have necessitated portions of the workforce of our affiliates switching to remote work arrangements.

The increase in companies and individuals working remotely has increased the frequency and scope of cyber-attacks and the risk of potential cybersecurity incidents, both deliberate attacks and unintentional events.

Despite our security measures, we experience attempts by external parties to penetrate and attack our networks and systems.

Although such attempts to date have not, to our knowledge, resulted in any material breaches, disruptions, or loss of business-critical information, our systems and procedures for protecting against such attacks and mitigating such risks may prove to be insufficient in the future and such attacks could have an adverse impact on our business and operations, including damage to our reputation and competitiveness, remediation costs, litigation or regulatory actions.

In addition, as technologies evolve, and cyber-attacks become more sophisticated, we may incur significant costs to upgrade or enhance our security measures to protect against such attacks and we may face difficulties in fully anticipating or implementing adequate preventive measures or mitigating potential harm.

In addition, as technologies evolve, work trends change such as the increase in remote work in the wake of the COVID-19 Pandemic, and cyber-attacks become more sophisticated, we may incur significant costs to upgrade or enhance our security measures to protect against such attacks and we may face difficulties in fully anticipating or implementing adequate preventive measures or mitigating potential harm.

We could also be liable under laws that protect the privacy of personal information, subject to regulatory penalties, experience damage to our reputation or a loss of consumer confidence, or incur additional costs for remediation and modification or enhancement of our information systems to prevent future occurrences, all of which could adversely affect our reputation, business, operations or financial results.

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As legislation continues to develop and cyber incidents continue to evolve, we may be required to expend significant additional resources to respond to cyberattacks, to continue to modify or enhance our protective measures, or to detect, assess, investigate and remediate any critical infrastructure security vulnerabilities and report any cyber incidents to the applicable regulatory authorities.

Any failure to remain in compliance with these government regulations may results in enforcement actions which may have a material adverse effect on our business and operations.

Any failure to remain in compliance with these government regulations may result in enforcement actions which may have a material adverse effect on our business and operations.

An impairment of our long-lived assets or goodwill could reduce our earnings or negatively impact our financial condition and results of operations.

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In such case, it is not entitled to the presumption of good faith discussed above.

Our Partnership Agreement designates the Court of Chancery of the State of Delaware as the exclusive forum for certain types of actions and proceedings that may be initiated by our unitholders, which limits our unitholders’ ability to choose the judicial forum for disputes with us or our general partner’s directors, officers or other employees.

Our Partnership Agreement provides that, with certain limited exceptions, the Court of Chancery of the State of Delaware is the exclusive forum for any claims, suits, actions or proceedings (1) arising out of or relating in any way to our Partnership Agreement (including any claims, suits or actions to interpret, apply or enforce the provisions of our Partnership Agreement of the duties, obligations or liabilities among our partners, or obligations or liabilities of our partners to us, of the rights of powers of, or restrictions on, our partners or us), (2) brought in a derivative manner on our behalf, (3) asserting a claim of breach of a duty (including a fiduciary duty) owed by any of our, or general partner's, directors, officers, or other employees, or owed by our general partner, to us or our partners, (4) asserting a claim against us arising pursuant to any provision of the Delaware Revised Uniform Limited Partnership Act or (5) asserting a claim against us governed by the internal affairs doctrine.

Any person or entity purchasing or otherwise acquiring any interest in our common units is deemed to have received notice of and consented to the foregoing provisions.

This exclusive forum provision does not apply to a cause of action brought under federal or state securities laws.

Although management believes this choice of forum provision benefits us by providing increased consistency in the application of Delaware law in the types of lawsuits to which it applies, the provision may have the effect of discouraging lawsuits against us and our general partner's directors and officers.

The enforceability of similar choice of forum provisions in other companies' certificates of incorporation or similar governing documents has been challenged in legal proceedings and it is possible that in connection with any action a court could find the choice of forum provision contained in our Partnership Agreement to be inapplicable or unenforceable in such action.

If a court where to find this choice of forum provision inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our financial position, results of operations and ability to make cash distributions to our unitholders.

The administrative services fee and reimbursements due to our general partner and its affiliates for services provided to us or on our behalf will reduce our cash available for distribution to our common unitholders.

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Prior to making any distribution on our common limited partner units, we will reimburse our general partner and its affiliates, including Delek Holdings, for costs and expenses they incur and payments they make on our behalf.

Under the Omnibus Agreement, we will pay Delek

Holdings an annual fee and reimburse Delek Holdings and its subsidiaries for Delek Holdings’ provision of various centralized corporate services.

Under the Omnibus Agreement, we will pay Delek Holdings an annual fee and reimburse Delek Holdings and its subsidiaries for Delek Holdings’ provision of various centralized corporate services.

Additionally, we will reimburse Delek Holdings for direct or allocated costs and expenses incurred on our behalf, including administrative costs, such as compensation expense for those persons who provide services necessary to run our business, and insurance expenses.

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Our general partner intends to limit its liability under contractual arrangements, 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 general partner may therefore cause us to incur indebtedness or other obligations that are nonrecourse to our general partner.

Our Partnership Agreement permits our general partner to limit its liability, even if we could have obtained more favorable terms without the limitation on liability.

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From time to time, members of the U.S.

Congress propose and consider substantive changes to the existing federal income tax laws that affect publicly traded partnerships, such as with the "Clean Energy for America Act", which is similar to legislation that was commonly proposed during the Obama Administration.

Congress propose and consider substantive changes to the existing federal income tax laws that affect publicly traded partnerships.

If successful, such a proposal could eliminate the qualifying income exception to the treatment of publicly traded partnerships as corporations upon which we rely for our treatment as a partnership for federal income tax purposes.

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However, such final regulations do not specifically authorize the use of the proration method we have adopted.

If the IRS were to challenge our proration method, we may be required to change the allocation of items of income, gain, loss

and deduction among our unitholders.

If the IRS were to challenge our proration method, we may be required to change the allocation of items of income, gain, loss and deduction among our unitholders.

Our counsel has not rendered an opinion with respect to whether our monthly convention for allocating taxable income and losses is permitted by existing Treasury Regulations.

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However, under the Tax Reform Act, for taxable years beginning after December 31, 2017, our deduction for “business interest” is limited to the sum of our business interest income and 30% of our “adjusted taxable income.” For purposes of this limitation, our adjusted taxable income is computed without regard to any business interest expense or business interest income.

UNRESOLVED STAFF COMMENTS

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors