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Article by DailyStocks_admin    (11-15-12 01:41 AM)

Description

Nustar GP Holdings, LLC. Director, 10% Owner WILLIAM E GREEHEY bought 128,523 shares on 11-13-2012 at $ 26.03

BUSINESS OVERVIEW

OVERVIEW
NuStar GP Holdings, LLC (NuStar GP Holdings), a Delaware limited liability company, was formed in June 2000. Our units are traded on the New York Stock Exchange (NYSE) under the symbol “NSH.” Our principal executive offices are located at 2330 North Loop 1604 West, San Antonio, Texas 78248 and our telephone number is (210) 918-2000.
Our only cash generating assets are our ownership interests in NuStar Energy L.P. (NuStar Energy), a publicly traded Delaware limited partnership (NYSE: NS). NuStar Energy is engaged in the terminalling and storage of petroleum products, the transportation of petroleum products and anhydrous ammonia, and petroleum refining and marketing. NuStar Energy has terminal facilities in the United States, Canada, Mexico, the Netherlands, including St. Eustatius in the Caribbean, the United Kingdom and Turkey. As of December 31, 2011 , our aggregate ownership interests in NuStar Energy consisted of the following:

•the 2% general partner interest;

•100% of the incentive distribution rights issued by NuStar Energy, which entitle us to receive increasing percentages of the cash distributed by NuStar Energy, currently at the maximum percentage of 23% ; and

•10,312,306 common units of NuStar Energy representing a 14.3% limited partner interest.
Our primary objective is to increase per unit distributions to our unitholders by actively supporting NuStar Energy in executing its business strategy, which includes continued growth through expansion projects and strategic acquisitions. We may facilitate NuStar Energy’s growth through the use of our capital resources, which could involve capital contributions, loans or other forms of financial support.
NuStar Energy is required by its partnership agreement to distribute all of its available cash at the end of each quarter, less reserves established by its general partner, in its sole discretion, to provide for the proper conduct of NuStar Energy’s business or to provide funds for future distributions. Similarly, we are required by our limited liability company agreement to distribute all of our available cash at the end of each quarter, less reserves established by our board of directors. However, unlike NuStar Energy, we do not have a general partner or incentive distribution rights. Therefore, all of our distributions are made on our units, which are our only class of securities outstanding.
Our internet website address is http://www.nustargpholdings.com. Information contained on our website is not part of this report on Form 10-K. Our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K filed with (or furnished to) the Securities and Exchange Commission (SEC) are available on our internet website (in the “Investor Relations” section), free of charge, as soon as reasonably practicable after we file or furnish such material. We also post our corporate governance guidelines, code of business conduct and ethics, code of ethics for senior financial officers and the charters of our board’s committees in the same website location. Our governance documents are available in print to any unitholder that makes a written request to Corporate Secretary, NuStar GP Holdings, LLC, 2330 North Loop 1604 West, San Antonio, Texas 78248.

In the future, we may not have sufficient cash to pay distributions at our current quarterly distribution level or to increase distributions.
Because our only source of operating cash flow consists of cash distributions from NuStar Energy, the amount of distributions we are able to make to our unitholders may fluctuate based on the level of distributions NuStar Energy makes to its unitholders, including us. We cannot assure you that NuStar Energy will continue to make quarterly distributions at its current level of $1.095 per unit, or any other amount, or increase its quarterly distributions in the future. In addition, while we would expect to increase or decrease distributions to our unitholders if NuStar Energy increases or decreases distributions to us, the timing and amount of such changes in distributions, if any, will not necessarily be comparable to the timing and amount of any changes in distributions made by NuStar Energy to us. Our ability to distribute cash received from NuStar Energy to our unitholders is limited by a number of factors, including:

•interest expense and principal payments on any indebtedness we may incur;

•restrictions on distributions contained in any future debt agreements;

•our general and administrative expenses, including expenses we incur as a public company;

•expenses of our subsidiaries, including tax liabilities of our corporate subsidiaries;

•reserves necessary for us to make the necessary capital contributions to maintain our 2% general partner interest in NuStar Energy, as required by the partnership agreement of NuStar Energy upon the issuance of additional partnership securities by NuStar Energy; and

•reserves our board of directors believes prudent for us to maintain for the proper conduct of our business or to provide for future distributions.
We cannot guarantee that in the future we will be able to pay distributions or that any distributions NuStar Energy pays to us will allow us to pay distributions at or above our current quarterly distribution of $0.51 per unit. The actual amount of cash that is available for distribution to our unitholders will depend on numerous factors, many of which are beyond our control or the control of NuStar Energy. Therefore, a reduction in the amount of cash distributed by NuStar Energy per unit or on the incentive distribution rights, or an increase in our expenses, may result in our not being able to pay our current quarterly distribution of $0.51 per unit.
NuStar Energy’s unitholders, excluding the owner of NuStar Energy’s general partner, have the right to remove NuStar Energy’s general partner by a simple majority vote, which would cause us to divest our general partner interest and incentive distribution rights in NuStar Energy in exchange for cash or common units of NuStar Energy and cause us to lose our ability to manage NuStar Energy.
We currently manage NuStar Energy through Riverwalk Logistics, L.P., NuStar Energy’s general partner and our indirect, wholly owned subsidiary. NuStar Energy’s partnership agreement, however, gives unitholders of NuStar Energy the right to remove the general partner of NuStar Energy upon the affirmative vote of holders of a majority of outstanding NuStar Energy common units, excluding the common units owned by us. As of December 31, 2011 , we own a 14.3% limited partner interest in NuStar Energy, and the public unitholders own 83.7%. If Riverwalk Logistics, L.P. were removed as the general partner of NuStar Energy, it would receive cash or common units in exchange for its 2% general partner interest and its incentive distribution rights and would lose its ability to manage NuStar Energy. While the common units or cash that Riverwalk Logistics, L.P. would receive are intended under the terms of NuStar Energy’s partnership agreement to fully compensate it in the event it is removed as general partner, these common units or the investments made with the cash over time may not provide us with as much distributable cash, or be as valuable, as the 2% general partner interest and incentive distribution rights had we retained them.
NuStar Energy’s general partner, with our consent, may limit or modify the incentive distributions we are entitled to receive in order to facilitate the growth strategy of NuStar Energy. Our board of directors can give this consent without a vote of our unitholders.
We indirectly own NuStar Energy’s general partner, which owns the incentive distribution rights in NuStar Energy that entitle us to receive increasing percentages, up to a maximum of 23%, of any cash distributed by NuStar Energy as it exceeds a distribution of $0.60 per NuStar Energy common unit in any quarter. A substantial portion of the cash flows we receive from NuStar Energy is provided by these incentive distributions. Our limited liability company agreement provides that our board of directors may consent to the elimination, reduction or modification of the incentive distribution rights without our unitholders’ approval if our board determines that the elimination, reduction or modification will not adversely affect our unitholders in any material respect.
Restrictions in our credit facility limit our ability to make distributions to our unitholders; credit facility matures in July 2012.
Our credit facility contains covenants limiting our ability to incur indebtedness, grant liens, engage in transactions with affiliates and make distributions to our unitholders. The credit facility also contains covenants requiring NuStar Energy to maintain certain financial ratios. Our and NuStar Energy’s ability to comply with any restrictions and covenants may be affected by events beyond our control, including prevailing economic, financial and industry conditions. If we or NuStar Energy are unable to comply with these restrictions and covenants, a significant portion of any indebtedness under our credit facility may become immediately due and payable, and our lenders’ commitment to make loans to us under our credit facility may terminate. We might not have, or be able to obtain, sufficient funds to make these accelerated payments.
Our payment of principal and interest on any future indebtedness will reduce our cash available for distribution on our units. Our credit facility limits our ability to pay distributions to our unitholders during an event of default or if an event of default would result from the distribution.

Our ability to sell our ownership interests in NuStar Energy may be limited by securities laws restrictions and liquidity constraints.
All of the units of NuStar Energy that we own are unregistered, restricted securities, within the meaning of Rule 144 under the Securities Act of 1933. Unless we exercise our registration rights with respect to these units, we are limited to selling into the market in any three-month period an amount of NuStar Energy common units that does not exceed the greater of 1% of the total number of common units outstanding or the average weekly reported trading volume of the common units for the four calendar weeks prior to the sale. We face contractual limitations on our ability to sell our 2% general partner interest and incentive distribution rights, and the market for such interests is illiquid.
The market price of our units could be adversely affected by sales of substantial amounts of our units into public markets, including sales by our existing unitholders.
Sales by us or any of our existing unitholders, including William E. Greehey, Chairman of the Boards of Directors of NuStar GP Holdings and NuStar GP, LLC, of a substantial number of our units in the public markets, or the perception that such sales might occur, could have a material adverse effect on the price of our units or could impair our ability to obtain capital through an offering of equity securities. Mr. Greehey currently owns 17.7% of our outstanding units.
Distributions on our incentive distribution rights in NuStar Energy are more uncertain than distributions on the common units we hold.
Our indirect ownership of the incentive distribution rights in NuStar Energy entitles us to receive our pro rata share of specified percentages of total cash distributions made by NuStar Energy with respect to any particular quarter only in the event that NuStar Energy distributes more than $0.60 per unit for such quarter. As a result, the holders of NuStar Energy’s common units have a priority over the holders of NuStar Energy’s incentive distribution rights to the extent of cash distributions by NuStar Energy up to and including $0.60 per unit for any quarter.
Our incentive distribution rights entitle us to receive increasing percentages, up to 23%, of all cash distributed by NuStar Energy. Because the incentive distribution rights currently participate at the maximum 23% target cash distribution level in all distributions made by NuStar Energy at or above the current distribution level, future growth in distributions we receive from NuStar Energy will not result from an increase in the target cash distribution level associated with the incentive distribution rights.
Furthermore, a decrease in the amount of distributions by NuStar Energy to less than $0.66 per unit per quarter would reduce our percentage of the incremental cash distributions above $0.60 per unit per quarter from 23% to 8%. As a result, any such reduction in quarterly cash distributions from NuStar Energy would have the effect of disproportionately reducing the amount of all distributions that we receive from NuStar Energy based on our ownership interest in the incentive distribution rights in NuStar Energy as compared to cash distributions we receive from NuStar Energy on our 2% general partner interest in NuStar Energy and our NuStar Energy common units.
If NuStar Energy’s general partner is not fully reimbursed or indemnified for obligations and liabilities it incurs in managing the business and affairs of NuStar Energy, it may not be able to satisfy its obligations and its cash flows will be reduced.
The general partner of NuStar Energy and its affiliates may make expenditures on behalf of NuStar Energy for which they will seek reimbursement from NuStar Energy. In addition, under Delaware law, the general partner, in its capacity as the general partner of NuStar Energy, has unlimited liability for the obligations of NuStar Energy, such as its debts and environmental liabilities, except for those contractual obligations of NuStar Energy that are expressly made without recourse to the general partner. To the extent Riverwalk Logistics, L.P. incurs obligations on behalf of NuStar Energy, it is entitled to be reimbursed or indemnified by NuStar Energy. If NuStar Energy does not reimburse or indemnify its general partner, Riverwalk Logistics, L.P. may be unable to satisfy these liabilities or obligations, which would reduce its cash flows. In turn, Riverwalk Logistics, L.P.

Our ability to sell our ownership interests in NuStar Energy may be limited by securities laws restrictions and liquidity constraints.
All of the units of NuStar Energy that we own are unregistered, restricted securities, within the meaning of Rule 144 under the Securities Act of 1933. Unless we exercise our registration rights with respect to these units, we are limited to selling into the market in any three-month period an amount of NuStar Energy common units that does not exceed the greater of 1% of the total number of common units outstanding or the average weekly reported trading volume of the common units for the four calendar weeks prior to the sale. We face contractual limitations on our ability to sell our 2% general partner interest and incentive distribution rights, and the market for such interests is illiquid.
The market price of our units could be adversely affected by sales of substantial amounts of our units into public markets, including sales by our existing unitholders.
Sales by us or any of our existing unitholders, including William E. Greehey, Chairman of the Boards of Directors of NuStar GP Holdings and NuStar GP, LLC, of a substantial number of our units in the public markets, or the perception that such sales might occur, could have a material adverse effect on the price of our units or could impair our ability to obtain capital through an offering of equity securities. Mr. Greehey currently owns 17.7% of our outstanding units.
Distributions on our incentive distribution rights in NuStar Energy are more uncertain than distributions on the common units we hold.
Our indirect ownership of the incentive distribution rights in NuStar Energy entitles us to receive our pro rata share of specified percentages of total cash distributions made by NuStar Energy with respect to any particular quarter only in the event that NuStar Energy distributes more than $0.60 per unit for such quarter. As a result, the holders of NuStar Energy’s common units have a priority over the holders of NuStar Energy’s incentive distribution rights to the extent of cash distributions by NuStar Energy up to and including $0.60 per unit for any quarter.
Our incentive distribution rights entitle us to receive increasing percentages, up to 23%, of all cash distributed by NuStar Energy. Because the incentive distribution rights currently participate at the maximum 23% target cash distribution level in all distributions made by NuStar Energy at or above the current distribution level, future growth in distributions we receive from NuStar Energy will not result from an increase in the target cash distribution level associated with the incentive distribution rights.
Furthermore, a decrease in the amount of distributions by NuStar Energy to less than $0.66 per unit per quarter would reduce our percentage of the incremental cash distributions above $0.60 per unit per quarter from 23% to 8%. As a result, any such reduction in quarterly cash distributions from NuStar Energy would have the effect of disproportionately reducing the amount of all distributions that we receive from NuStar Energy based on our ownership interest in the incentive distribution rights in NuStar Energy as compared to cash distributions we receive from NuStar Energy on our 2% general partner interest in NuStar Energy and our NuStar Energy common units.
If NuStar Energy’s general partner is not fully reimbursed or indemnified for obligations and liabilities it incurs in managing the business and affairs of NuStar Energy, it may not be able to satisfy its obligations and its cash flows will be reduced.
The general partner of NuStar Energy and its affiliates may make expenditures on behalf of NuStar Energy for which they will seek reimbursement from NuStar Energy. In addition, under Delaware law, the general partner, in its capacity as the general partner of NuStar Energy, has unlimited liability for the obligations of NuStar Energy, such as its debts and environmental liabilities, except for those contractual obligations of NuStar Energy that are expressly made without recourse to the general partner. To the extent Riverwalk Logistics, L.P. incurs obligations on behalf of NuStar Energy, it is entitled to be reimbursed or indemnified by NuStar Energy. If NuStar Energy does not reimburse or indemnify its general partner, Riverwalk Logistics, L.P. may be unable to satisfy these liabilities or obligations, which would reduce its cash flows. In turn, Riverwalk Logistics, L.P.

CEO BACKGROUND

Mr. Clingman became a director of NuStar GP Holdings, LLC in December 2006. From 1984 through 2003, Mr. Clingman served as the President and Chief Operating Officer of HEB Grocery Company. He also served on the board of HEB from 1984 through 2008. From 2003 through June 2010, Mr. Clingman served on the board of directors of CarMax, a publicly held NYSE-listed company; he also served as a member of its audit committee and from 2003 through 2005, its compensation committee. He has also served as Chairman of the Board of three privately held food manufacturing companies owned by Silver Ventures Inc. since 2005. Mr. Clingman's pertinent experience, qualifications, attributes and skills include: the knowledge and experience attained through decades of service for HEB, both as an officer and as a director, and the experience attained through his service on the boards of CarMax and NuStar.

Mr. Greehey became the Chairman of the Board of NuStar GP Holdings, LLC in March 2006. He has also been the Chairman of the board of directors of NuStar GP, LLC since January 2002. Mr. Greehey served as Chairman of the board of directors of Valero Energy Corporation from 1979 through January 2007. Mr. Greehey was Chief Executive Officer of Valero Energy Corporation from 1979 through December 2005, and President of Valero Energy Corporation from 1998 until January 2003. Mr. Greehey's pertinent experience, qualifications, attributes and skills include: his decades of experience in virtually every aspect of the refining and logistics industries, including his extensive years of service as both CEO and Chairman of the Board at Valero Energy Corporation, and the knowledge and experience he has attained through his service as Chairman of the Board at NuStar Energy L.P. and NuStar.

Mr. Anastasio became President and Chief Executive Officer of NuStar GP Holdings, LLC in March 2006, and has been a director of NuStar GP Holdings, LLC since January 2007. Mr. Anastasio has also served as the President and a director of NuStar GP, LLC since December 1999. He became its Chief Executive Officer in June 2000. Prior to that, Mr. Anastasio served as Vice President, General Counsel and Secretary of Ultramar Diamond Shamrock Corporation (UDS). Mr. Anastasio's pertinent experience, qualifications, attributes and skills include: his many years of experience in the refining and logistics industries and the extensive knowledge and experience he has attained through his service as President and CEO and director of NuStar GP, LLC and NuStar.

Mr. Burnett became a director of NuStar GP Holdings, LLC in August 2006. Mr. Burnett served as the Chief Financial Officer of Lucifer Lighting Company, a San Antonio, Texas-based manufacturer of architectural lighting products from 2004 to 2007 and as a director of Lucifer from 2004 to 2009. Mr. Burnett is a C.P.A., and in 2001, retired as a partner with Arthur Andersen LLP after 29 years of service. Mr. Burnett's pertinent experience, qualifications, attributes and skills include: financial literacy and expertise, managerial experience through his years at Arthur Andersen and Lucifer, and the knowledge and experience he has attained through his service as a director of NuStar.

Mr. McLelland became a director of NuStar GP Holdings, LLC in July 2006. He has also served as a director of NuStar GP, LLC since October 2005. Mr. McLelland has served as a director of two privately held companies, Patton Surgical Corp. and the general partner of Yorktown Technologies, LP, since November 2003 and June 2004, respectively. Mr. McLelland was U.S. Ambassador to Jamaica from January 1997 until March 2001. Prior to being named U.S. Ambassador to Jamaica, Mr. McLelland was a senior executive with Valero Energy Corporation. He joined Valero Energy Corporation in 1981 as Senior Vice President and General Counsel, and served as Executive Vice President and General Counsel from 1990 until 1997. Mr. McLelland's pertinent experience, qualifications, attributes and skills include: managerial experience through his service as an executive at Valero Energy Corporation, political and international relations expertise attained through his experience as a U.S. Ambassador, and the knowledge and experience he has attained through his board service for the companies above and for NuStar GP, LLC and NuStar.

MANAGEMENT DISCUSSION FROM LATEST 10K

OVERVIEW
NuStar GP Holdings, LLC (NuStar GP Holdings) is a Delaware limited liability company. Our units are traded on the New York Stock Exchange (NYSE) under the symbol “NSH.” Unless otherwise indicated, the terms “NuStar GP Holdings,” “we,” “our” and “us” are used in this report to refer to NuStar GP Holdings, LLC, to one or more of our consolidated subsidiaries or to all of them taken as a whole.
Our only cash generating assets are our ownership interests in NuStar Energy L.P. (NuStar Energy), a publicly traded Delaware limited partnership (NYSE: NS). As of December 31, 2011 , our aggregate ownership interests in NuStar Energy consisted of the following:

•the 2% general partner interest;

•100% of the incentive distribution rights (IDR) issued by NuStar Energy, which entitle us to receive increasing percentages of the cash distributed by NuStar Energy, currently at the maximum percentage of 23% ; and

•10,312,306 common units of NuStar Energy representing a 14.3% limited partner interest.
We account for our ownership interest in NuStar Energy using the equity method. Therefore, our financial results reflect a portion of NuStar Energy’s net income based on our ownership interest. We have no separate operating activities apart from those conducted by NuStar Energy and therefore generate no revenues from operations.
NuStar Energy is engaged in the terminalling and storage of petroleum products, the transportation of petroleum products and anhydrous ammonia, and petroleum refining and marketing. NuStar Energy has terminal facilities in the United States, Canada, Mexico, the Netherlands, including St. Eustatius in the Caribbean, the United Kingdom and Turkey.
NuStar Energy is required by its partnership agreement to distribute all of its available cash at the end of each quarter, less reserves established by its general partner, in its sole discretion, to provide for the proper conduct of NuStar Energy’s business. Similarly, we are required by our limited liability company agreement to distribute all of our available cash at the end of each quarter, less reserves established by our board of directors.

Other income, net
Other income, net increased for the year ended December 31, 2010, compared to the year ended December 31, 2009 due to NuStar Energy’s issuance of 4,400,000 common units in May 2010. This issuance resulted in a gain of $7.8 million representing the increase in the value of our proportionate share of NuStar Energy’s capital. Additionally, other income, net increased for the year ended December 31, 2010, compared to the year ended December 31, 2009 due to a $1.7 million gain on the sale of NuStar Energy units in connection with unit-based compensation.

TRENDS AND OUTLOOK
NuStar Energy expects its operating income for 2012 to be higher than 2011 mainly due to increases in the earnings from all three of its reportable segments.

NuStar Energy’s Storage Segment
NuStar Energy continues to pursue growth in this segment through expansion and optimization of its existing assets. NuStar Energy expects its 2012 results to benefit from internal growth projects that it completed in 2011, including its 3.2 million barrel storage tank expansion project at its St. James, Louisiana terminal facility completed during the third quarter of 2011. In addition, NuStar Energy’s 2012 results should benefit from new internal growth projects at its St. James, Louisiana, Texas City, Texas, and St. Eustatius terminal facilities, a portion of which should be completed in 2012. As a result, NuStar Energy expects its earnings in 2012 for the storage segment to exceed 2011.

NuStar Energy’s Transportation Segment
NuStar Energy expects throughputs for 2012 to be higher than 2011 mainly as a result of the pipeline expansion projects completed in 2011 that serve Eagle Ford shale production. The tariffs on NuStar Energy’s pipelines regulated by the Federal Energy Regulatory Commission, which adjust annually on July 1st based upon changes in the producer price index, are expected to increase effective July 1, 2012. NuStar Energy is continuing its strategy for growth in this segment into 2012 through construction of new assets and optimization of existing assets. NuStar Energy expects to benefit in 2012 from the tariff increase, the completion of expansion projects during 2012, and a full year’s contribution of the pipeline expansion projects completed in 2011. Therefore, NuStar Energy expects the transportation segment earnings for 2012 to be higher than 2011.


NuStar Energy’s Asphalt and Fuels Marketing Segment
In 2012, NuStar Energy plans on making further investments to improve the results of its asphalt and fuels marketing segment. In an attempt to improve margins from its asphalt operations, NuStar Energy is taking steps to diversify its crude supply and upgrade its product slate. Weak demand for asphalt that NuStar Energy experienced in its markets in 2011 could continue into 2012. NuStar Energy currently expects the results in 2012 for the asphalt and fuels marketing segment to improve compared to 2011.

NuStar Energy’s outlook for the company overall could change depending on, among other things, the prices of crude oil, the state of the economy, changes to refinery maintenance schedules and other factors that affect overall demand for the products it stores, transports and sells, as well as changes in commodity prices for the products it markets.

We expect our equity in earnings of NuStar Energy to increase or decrease consistent with NuStar Energy’s earnings.

LIQUIDITY AND CAPITAL RESOURCES
General
Our cash flows consist of distributions from NuStar Energy on our partnership interests, including the IDR that we own. Due to our ownership of NuStar Energy’s IDR, our portion of NuStar Energy’s total distributions may exceed our ownership interest in NuStar Energy as of December 31, 2011 . Our primary cash requirements are for distributions to members, capital contributions to maintain our 2% general partner interest in NuStar Energy in the event that NuStar Energy issues additional units, debt service requirements, if any, benefit plan funding and general and administrative expenses. In addition, because NuStar GP, LLC, a wholly owned subsidiary of NuStar GP Holdings, elected to be treated as a taxable entity in August 2006, we may be required to pay income taxes, which may exceed the amount of tax expense recorded in the consolidated financial statements. We expect to fund our cash requirements primarily with the quarterly cash distributions we receive from NuStar Energy and borrowings under our revolving credit facility, if necessary. Additionally, NuStar Energy reimburses us for all costs incurred on their behalf, primarily employee-related costs.

Credit Facility
Borrowings under our revolving credit facility are used to fund capital contributions to NuStar Energy to maintain our 2% general partner interest as NuStar Energy issues additional units and meet other liquidity and capital resource requirements.
On July 15, 2010, we entered into a 364-day revolving credit facility that we amended on July 14, 2011 to extend the maturity date to July 12, 2012 (2010 Credit Facility). The 2010 Credit Facility has a borrowing capacity of up to $30.0 million, of which up to $10.0 million may be available for letters of credit. Interest on the 2010 Credit Facility, as amended, is based upon, at our option, either an alternative base rate plus 0.75% or a LIBOR-based rate plus 1.75%, which was 2.1% as of December 31, 2011 . These interest rates are 1.00% lower than the rates that were in effect prior to the amendment on July 14, 2011.
Our obligations under the 2010 Credit Facility are unsecured. The 2010 Credit Facility contains customary covenants and provisions including limitations on indebtedness, liens, dispositions of material property, mergers and asset transfers.
The terms of the 2010 Credit Facility require NuStar Energy to maintain, as of the end of any four consecutive quarters, a consolidated debt coverage ratio not to exceed 5.0-to-1.0. On March 7, 2011, we amended the 2010 Credit Facility to exclude NuStar Energy’s unused proceeds from the Gulf Opportunity Zone Act of 2005 bond issuances from its total indebtedness in the calculation of the consolidated debt coverage ratio. As of December 31, 2011, NuStar Energy’s consolidated debt coverage ratio was 4.1x. We are also required to receive cash distributions of at least $35.0 million in respect of our ownership interests in NuStar Energy for the preceding four fiscal quarters ending on the last day of each fiscal quarter. Our management believes that we are in compliance with the covenants of the 2010 Credit Facility as of December 31, 2011 .
During the year ended December 31, 2011 , we borrowed $6.0 million under the 2010 Credit Facility, mainly to fund our $6.7 million in contributions to NuStar Energy to maintain our 2% general partner interest following its issuances of common units in 2011. During the year ended December 31, 2011 , we repaid $5.5 million under the 2010 Credit Facility. As of December 31, 2011 , we had availability of $13.5 million and $10.0 million for borrowings and letters of credit, respectively, under the 2010 Credit Facility. The weighted-average interest rate related to borrowings under the 2010 Credit Facility for the year ended December 31, 2011 was 2.6%.
We are in discussions with the lenders to renew or replace our 2010 Credit Facility.
Investment in NuStar Energy
In December 2011, NuStar Energy issued 6,037,500 common units representing limited partner interests at a price of $53.45 per unit for proceeds of $311.4 million , net of issuance cost. In September and October 2011, NuStar Energy issued 108,029 common units for proceeds of $5.9 million , net of issuance cost. In conjunction with these issuances of common units, we contributed $6.7 million to NuStar Energy in order to maintain our 2% general partner interest.

Pension and Other Postretirement Benefit Funded Status
During 2011 , we contributed $7.2 million to our pension and postretirement benefit plans. We expect to contribute approximately $7.3 million to our pension and postretirement benefit plans in 2012, which principally represents contributions either required by regulations or laws or, with respect to unfunded plans, necessary to fund current benefits. We have not disclosed pension and postretirement funding beyond 2012 as the funding can vary from year to year based upon changes in the fair value of the plan assets and actuarial assumptions. Since costs incurred by us related to our pension and other retirement benefit plans are reimbursed by NuStar Energy, funding for these plans will primarily be provided by NuStar Energy.
Related Party Agreements
Agreements with NuStar Energy
Effective January 1, 2008, NuStar GP, LLC and NuStar Energy entered into a services agreement stating that NuStar Energy will reimburse NuStar GP, LLC for furnishing administrative and certain operating services necessary to conduct the business of NuStar Energy. We also have a non-compete agreement with NuStar Energy related to business opportunities. Please refer to Note 5 of the Notes to Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary Data” for a more detailed discussion of agreements with NuStar Energy.

Contingencies
As previously discussed, our only cash-generating assets are our indirect ownership interests in NuStar Energy. NuStar Energy is subject to certain loss contingencies, the outcome of which could have a material effect on NuStar Energy’s results of operations and cash flows. Please refer to Note 11 of the Notes to Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary Data” for a more detailed discussion of contingencies.

CRITICAL ACCOUNTING POLICIES
The preparation of financial statements in accordance with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. The following summary provides further information about our critical accounting policies that involve critical accounting estimates, and should be read in conjunction with Note 2 of the Notes to Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary Data” which summarizes our significant accounting policies. The following accounting policies involve estimates that are considered critical due to the level of sensitivity and judgment involved, as well as the impact on our consolidated financial position and results of operations. We believe that all of our estimates are reasonable.
Investment in NuStar Energy
We evaluate our investment in NuStar Energy for impairment if and when there is evidence that we may not be able to recover the carrying amount of our investment or that NuStar Energy is unable to sustain an earnings capacity that justifies the carrying amount. A loss in the value of our investment that is other than a temporary decline is recognized currently in earnings based on the difference between the estimated current fair value of the investment and our carrying amount. In order to determine fair value, our management must make certain estimates and assumptions regarding NuStar Energy’s operations, including, among other things, an assessment of market conditions, projected cash flows, interest rates and growth rates that could significantly impact the fair value of our investment. Due to the significant subjectivity of the assumptions used to determine fair value, changes in market conditions and/or changes in assumptions could result in significant impairment charges in the future, thus affecting our earnings. We believe that the carrying amount of our investment in NuStar Energy, as of December 31, 2011 , is recoverable.
Unit-Based Compensation
We account for awards of NS unit options, performance awards and restricted units to employees and directors of NuStar GP, LLC at fair value, whereby a liability for the award is initially recorded and subsequent changes in the fair value are included in the determination of net income. The fair value of NS unit options is determined using the Black-Scholes model at each reporting date. The fair value of NS restricted units and performance awards equals the market price of NS common units at each reporting date. However, NS performance awards are earned only upon NuStar Energy’s achievement of an objective performance measure. We record compensation expense each reporting period such that the cumulative compensation expense equals the portion of the award’s current fair value that has vested. We record compensation expense related to NS unit options until such options are exercised, and we record compensation expense for NS restricted units and performance awards until the date of vesting.

We account for awards of NSH restricted units and unit options granted to employees of NuStar GP, LLC and our directors based on the fair value of the awards at the grant date. The fair value of NSH unit options is determined using the Black-Scholes model at the grant date, and the fair value of the NSH restricted units equals the market price of NSH common units at the grant date. Compensation expense for NSH restricted units and unit options is recognized ratably over the vesting period based on the initial fair value determination.
We make certain assumptions to determine the fair value of NS and NSH unit options related to the expected life of the option, volatility of the related units, expected distribution yield and risk-free interest rate. Changes in these assumptions impact the amount of expense associated with the award and the amount of our liability.

MANAGEMENT DISCUSSION FOR LATEST QUARTER

OVERVIEW
NuStar GP Holdings, LLC (NuStar GP Holdings) (NYSE: NSH) is a publicly held Delaware limited liability company. Unless otherwise indicated, the terms “NuStar GP Holdings,” “we,” “our” and “us” are used in this report to refer to NuStar GP Holdings, LLC, to one or more of our consolidated subsidiaries or to all of them taken as a whole.
Our only cash generating assets are our ownership interests in NuStar Energy L.P. (NuStar Energy), a publicly held Delaware limited partnership (NYSE: NS). As of September 30, 2012 , our aggregate ownership interests in NuStar Energy consisted of the following:

•the 2% general partner interest;

•100% of the incentive distribution rights (IDR) issued by NuStar Energy, which entitle us to receive increasing percentages of the cash distributed by NuStar Energy, currently at the maximum percentage of 23%; and

•10,391,275 common units of NuStar Energy representing a 13.1% limited partner interest.
We account for our ownership interest in NuStar Energy using the equity method. Therefore, our financial results reflect a portion of NuStar Energy’s net (loss) income based on our ownership interest. We have no separate operating activities apart from those conducted by NuStar Energy and therefore generate no revenues from operations.

NuStar Energy is engaged in the terminalling and storage of petroleum products, the transportation of petroleum products and anhydrous ammonia, and petroleum refining and marketing. NuStar Energy has terminal facilities in the United States, Canada, Mexico, the Netherlands, including St. Eustatius in the Caribbean, the United Kingdom and Turkey.
NuStar Energy is required by its partnership agreement to distribute all of its available cash at the end of each quarter, less reserves established by its general partner, in its sole discretion, to provide for the proper conduct of NuStar Energy’s business. Similarly, we are required by our limited liability company agreement to distribute all of our available cash at the end of each quarter, less reserves established by our board of directors.

On September 28, 2012, NuStar Energy sold a 50% voting interest (the Asphalt Sale) in NuStar Asphalt LLC (Asphalt JV) previously a wholly owned subsidiary of NuStar Energy, to an affiliate of Lindsay Goldberg LLC (Lindsay Goldberg), a private investment firm. Asphalt JV owns and operates asphalt refining assets that were previously wholly owned by NuStar Energy, including the asphalt refineries located in Paulsboro, New Jersey and Savannah, Georgia (collectively, the Asphalt Operations). Lindsay Goldberg paid $175.0 million for the Class A equity interests (Class A Interests) of Asphalt JV, while NuStar Energy retained the Class B equity interests with a fair value of $52.0 million (Class B Interests) of Asphalt JV. The Class A Interests have a distribution preference over the Class B Interests, as well as a liquidation preference.

NuStar Asphalt Refining, LLC and NuStar Marketing LLC are wholly-owned subsidiaries of NuStar Asphalt LLC. Unless otherwise indicated, the term “Asphalt JV” is used in this report to refer to Asphalt JV, to one or more of its consolidated subsidiaries or to all of them taken as a whole.

At closing, NuStar Energy received $261.3 million from Asphalt JV for inventory related to the Asphalt Operations, pending a final inventory valuation. Additionally, NuStar Energy deconsolidated Asphalt JV, recognized a loss of $21.6 million on the Asphalt Sale and started reporting its remaining investment in Asphalt JV using the equity method of accounting.

In anticipation of the Asphalt Sale, NuStar Energy recorded an impairment loss of $266.4 million in the second quarter of 2012 to write-down the carrying value of long-lived assets related to the Asphalt Operations, including fixed assets, goodwill, intangible assets and other long-term assets to their estimated fair value.

Other income (expense), net
Other income (expense), net increased for the nine months ended September 30, 2012, compared to the nine months ended September 30, 2011 due to NuStar Energy’s issuance of 7,130,000 common units in September 2012. This issuance resulted in a gain of $10.7 million representing the increase in the value of our proportionate share of NuStar Energy’s capital.

TRENDS AND OUTLOOK

NuStar Energy’s Storage Segment
In the fourth quarter of 2012, NuStar Energy expects the storage segment to continue to benefit from internal growth projects completed in 2011 as well as those completed in 2012, mainly at its St. James, Louisiana terminal. NuStar Energy’s fourth quarter results should also begin to benefit from a tank expansion project at its St. Eustatius terminal in the Caribbean, which it expects to complete in the fourth quarter. However, NuStar Energy’s fourth quarter 2012 earnings are expected to be comparable to the fourth quarter of 2011 as the expected additional earnings from those completed projects should be partially offset by higher maintenance costs at several of its terminal facilities. Overall, NuStar Energy expects the full year 2012 earnings for the storage segment to exceed 2011.
NuStar Energy’s Transportation Segment
NuStar Energy expects earnings of the transportation segment for the fourth quarter and the full year 2012 to be higher as compared to the same periods in 2011. NuStar Energy’s earnings for this segment should benefit from higher throughputs related to the pipeline expansion projects completed in 2011 and in July and October of 2012 that serve Eagle Ford Shale production. NuStar Energy’s fourth quarter results will also benefit from the tariff increase in the second quarter of 2012 on its pipelines regulated by the Federal Energy Regulatory Commission.

NuStar Energy’s Asphalt and Fuels Marketing Segment
NuStar Energy completed the sale of 50% of the Asphalt Operations in the third quarter of 2012. Upon closing of the sale, NuStar Energy deconsolidated the Asphalt Operations and will prospectively report its remaining investment using the equity method of accounting. Because of NuStar Energy’s ongoing involvement with the Asphalt Operations, it will not report its historic results of operations as discontinued operations. Therefore, NuStar Energy’s future results of operations for this segment, subsequent to deconsolidation, will not be comparable to the corresponding prior periods.

Although NuStar Energy expects fourth quarter 2012 results for its fuels marketing operations to exceed the fourth quarter of 2011, full year 2012 earnings for the fuels marketing operations are expected to be less than the full year results for the prior year, primarily due to lower earnings from heavy fuel oil and bunker fuel marketing.

NuStar Energy’s fourth quarter 2012 results for the asphalt and fuels marketing segment are expected to be higher than fourth quarter 2011 mainly due to losses sustained by the Asphalt Operations in 2011 that will no longer be reported as part of this segment.

NuStar Energy’s outlook for the partnership overall could change depending on, among other things, crude oil prices, the state of the economy, changes to refinery maintenance schedules and other factors that affect overall demand for the products it stores, transports and sells as well as changes in commodity prices for the products it markets.

We expect our equity in earnings (loss) of NuStar Energy to increase or decrease consistent with NuStar Energy’s earnings (loss).

LIQUIDITY AND CAPITAL RESOURCES
General
Our cash flows consist of distributions from NuStar Energy on our partnership interests, including the IDR that we own. Due to our ownership of NuStar Energy’s IDR, our portion of NuStar Energy’s total distributions may exceed our ownership interest in NuStar Energy. Our primary cash requirements are for distributions to members, capital contributions to maintain our 2% general partner interest in NuStar Energy in the event that NuStar Energy issues additional units, debt service requirements, benefit plan funding and general and administrative expenses. In addition, because NuStar GP, LLC, a wholly owned subsidiary of NuStar GP Holdings, elected to be treated as a taxable entity in August 2006, we may be required to pay income taxes, which may exceed the amount of tax expense recorded in the consolidated financial statements. We expect to fund our cash requirements primarily with the quarterly cash distributions we receive from NuStar Energy and borrowings under our revolving credit facility, if necessary. Additionally, NuStar Energy reimburses us for all costs incurred on their behalf, primarily employee-related costs.

Cash Flows for the Nine Months Ended September 30, 2012 and September 30, 2011
Cash distributions received from NuStar Energy for the nine months ended September 30, 2012 were $68.5 million compared to $64.2 million for the nine months ended September 30, 2011 . The cash distributions we received were used principally to fund distributions to our unitholders totaling $65.1 million for the nine months ended September 30, 2012 , compared to $61.9 million for the nine months ended September 30, 2011 . We borrowed $21.0 million from our revolving credit facility for the nine months ended September 30, 2012, mainly to repay $16.5 million on our previous revolving credit facility. Additionally, we contributed $15.0 million to NuStar Energy for the nine months ended September 30, 2012 , to fund our contribution to NuStar Energy in order to maintain our 2% general partner interest following its issuance of common units in September 2012 and to purchase NuStar Energy units to satisfy awards granted in connection with unit-based compensation.

For the nine months ended September 30, 2011, we used excess cash to repay $5.5 million on our revolving credit facility and purchased $5.0 million of NuStar Energy units mainly to satisfy awards granted in connection with unit-based compensation.
Credit Facility
Our 364-day revolving credit agreement dated June 29, 2012 , matures on June 28, 2013 and has a borrowing capacity of up to $40.0 million , of which, up to $10.0 million may be available for letters of credit (the 2012 Credit Facility). As of September 30, 2012 , we had outstanding borrowings of $21.0 million and availability of $19.0 million for borrowings under the 2012 Credit Facility. Interest on the 2012 Credit Facility is based upon, at our option, either an alternative base rate plus 0.75% or a LIBOR-based rate plus 1.75% , which was 2.0% as of September 30, 2012 .

The terms of the 2012 Credit Facility require NuStar Energy to maintain, as of the end of each rolling period, consisting of any period of four consecutive quarters, a consolidated debt coverage ratio not to exceed 5.0-to-1.0. If NuStar Energy consummates an acquisition for an aggregate net consideration of at least $50.0 million, the maximum consolidated debt coverage ratio will increase to 5.5-to-1.0 for two rolling periods. Additionally, if NuStar Energy’s Asphalt Operations are not owned by an unconsolidated joint venture, the 2012 Credit Facility allows the consolidated debt coverage ratio not to exceed 6.5-to-1.0 and 6.0-to-1.0 for the rolling periods ending June 30, 2012 and September 30, 2012, respectively. Since NuStar Energy’s Asphalt Operations were owned by an unconsolidated joint venture as of September 30, 2012, the consolidated debt coverage ratio could not exceed 5.0-to-1.0 and was 4.3 x. We are also required to receive cash distributions of at least $50.0 million in respect of our ownership interests in NuStar Energy for the preceding four fiscal quarters ending on the last day of each fiscal quarter . Our management believes that we are in compliance with the covenants of the 2012 Credit Facility as of September 30, 2012 .

CONF CALL

Chris Russell - Vice President of Investor Relations

Thank you, Marley. Good morning, and welcome to our conference call to discuss NuStar Energy L.P. and NuStar GP Holdings, LLC's Third Quarter 2012 Earnings Results. With me today is Curt Anastasio, CEO and President of NuStar Energy L.P. and NuStar GP Holdings, LLC; Steve Blank, our CFO; and other members of our management team.

Before we get started, we would like to remind you that during the course of the call, NuStar management will make statements about our current views concerning the future performance of NuStar that are forward-looking statements within the meaning of the federal securities laws. These statements are subject to the various uncertainties and assumptions described in our filings with the Securities and Exchange Commission and will not be updated to conform to actual results or revised expectations.

During the course of this call, we will also make reference to certain non-GAAP financial measures. Our non-GAAP financial measures should not be considered as alternatives to GAAP measures. Reconciliations of these non-GAAP financial measures to U.S. GAAP may be found either in our earnings press release or on our website. Now let me turn the call over to Curt.
Curtis V. Anastasio - Chief Executive Officer, President, Director, Chief Executive Officer of NuStar GP LLC and President of NuStar GP LLC

Good morning, and thanks for joining us today. During the third quarter, results in our pipeline transportation and storage segments continued to improve over last year as both segments benefited from additional EBITDA being generated as a result of the capital we've invested in internal growth projects the last couple of years. However, the asphalt and fuels marketing segment reported negative EBITDA of $14 million during the quarter, down from the $31 million of EBITDA earned in the third quarter last year. The segment continued to be negatively impacted by the large Brent to WTI and LLS to WTI spreads as well as continued weak demand for asphalt. While asphalt did generate $2 million of EBITDA during the quarter, the results were $7 million lower than the third quarter of last year. Lower gross margins, as a result of our asphalt refineries buying the majority of their crude oil based on Brent-related market prices and continued weak asphalt demand, were the main drivers for the decrease in EBITDA.

As you are probably aware, on September 28, we closed on the sale of a 50% interest in our asphalt operations and deconsolidated asphalt from NuStar's financial statements going forward. That transaction was the first step of our plan to change the strategic direction of NuStar by shifting away from the margin-based portion of our business to fee-based storage and pipeline. The San Antonio Refinery lost $8 million in EBITDA during the quarter, lower than the $4 million of EBITDA earned in the third quarter of 2011. Again wide LLS to WTI spreads negatively impacted the refinery's crude cost during the quarter. Losses were also incurred on hedges that remained in place on some of the refinery's production.

Our fuels marketing operations lost $9 million of EBITDA during the quarter, lower than the $19 million generated last year. A principal reason for the loss was we decided this quarter to reduce the scope of bunkering business by exiting 2 markets, Los Angeles and Portland, where results had been weak, and liquidating the related inventory.

In addition, our heavy fuel oil operations recognized a loss due to some timing differences on the company's hedged fuel oil inventories, which will be recouped as the related physical sales are realized. This inventory is 100% hedged, so the loss again is only a timing difference. We expect our remaining bunker businesses and heavy fuel businesses to continue to be good, profitable businesses for us for the rest of 2012 and beyond.

As I mentioned earlier, results in both our pipeline transportation and storage segments continued to improve. In the first week of July, our transportation segment began benefiting from the connection of our Corpus Christi to Three Rivers, Texas, 16-inch crude oil pipeline to a pipeline constructed by TexStar Midstream Services. These 2 interconnected pipeline systems are transporting Eagle Ford Shale region crude oil from Frio County in South Texas to Corpus Christi. Primarily as a result of the completion of this project, crude oil pipeline throughputs were 16% or 50,000 barrels a day higher than in the third quarter of 2011. That is why the transportation segment's throughputs were 6% higher compared to last year's third quarter even though refined product throughputs were close to flat.

Those increased throughputs, plus higher pipeline tariffs as a result of the 2012 FERC tariff increases, contributed to transportation segment EBITDA increasing to $56 million, $5 million higher than third quarter of 2011. Storage segment third quarter EBITDA of $74 million was $3 million higher than the third quarter of last year. The third quarter 2011 completion of a storage expansion project, plus the April 2012 completion of the unit train project, both at our St. James, Louisiana, terminal facility, as well as higher storage rates on new and existing storage contracts, all had positive impacts on the segment's EBITDA.

With regard to third quarter corporate expenses, G&A expenses were $25 million, $7 million higher than last year. Third quarter 2011 G&A expenses benefited from a lower compensation expense. In conjunction with the closing of the asphalt JV transaction, we recognized a loss of about $22 million primarily associated with the sale of inventory of the asphalt operations, which is included in other income and expense in our third quarter financial tables.

Interest expense for the quarter was $25 million, up $3 million from last year. Increased debt levels for the majority of the quarter prior to funding [indiscernible] program, higher borrowing costs associated with a new credit facility that closed in May and reduced savings from fixed to floating-rate interest rate swaps were the main reasons for the increase.

In September, we received $344 million in proceeds by issuing about 7.1 million common units of NuStar Energy. Those equity proceeds and the proceeds received upon closing the asphalt joint venture transaction were used for working capital purposes and to reduce outstanding borrowings under our revolver. As of September 30, 2012, our debt balance was $2 billion, down almost $500 million from September 30, 2011, and our debt-to-EBITDA ratio was 4.3x.

With regard to our third quarter distribution, NuStar Energy's Board of Directors declared our distribution of $1.095 per unit. That distribution will be paid on November 14. The Board of NuStar GP Holdings declared a third quarter distribution of $0.545 per unit, which is $0.05 per unit or 10% higher than the third quarter of 2011 distribution. Increased cash flows as a result of NuStar Energy's equity issuance in September allowed NuStar GP Holdings to increase the third quarter distribution. The GP holdings distribution will be paid on November 16.

As we move into the fourth quarter, our storage and transportation segments should benefit from the startup of 2 more internal growth projects. Earlier this month, we completed construction on a 55-mile, 12-inch pipeline that will transport Eagle Ford crude to the Corpus Christi area. This is the fourth project we've completed in the Eagle Ford Shale in the last 18 months, giving us now the ability to transport approximately 300,000 barrels per day of Eagle Ford crude to the U.S. Gulf Coast. We also expect to complete a 1 million barrel expansion project at our St. Eustatius terminal later this quarter. This will expand the storage capacity of St. Eustatius to close to 14 million barrels.

Fourth quarter EBITDA in the transportation segment should be higher than the $56 million earned in the fourth quarter last year. The increase is mainly a result of increased throughputs from our internal growth projects in the Eagle Ford Shale. Storage segment EBITDA for the fourth quarter should be comparable to fourth quarter of 2011. The EBITDA benefit from the 1 million barrel St. Eustatius expansion project should be offset by increased maintenance expense we're taking at some of our terminals during the quarter.

Effective September 28, the asphalt operations were deconsolidated from NuStar's financial statements. Future earnings results from the JV will be recorded within equity and earnings from joint ventures on the income statement. We expect total EBITDA for asphalt and fuels marketing to be positive in the fourth quarter. Our fuels marketing operations' EBITDA should be higher than last year's fourth quarter, while the San Antonio Refinery's fourth quarter 2012 EBITDA should be close to breakeven.

In terms of guidance for fourth quarter corporate expenses, G&A expenses are expected in the range of $29 million to $30 million; depreciation and amortization around $42 million to $43 million; and interest expense of $23 million to $24 million. 2012 full year reliability capital should be $45 million to $50 million, while our strategic capital should be around $400 million.

In the coming weeks, we're going to be providing more details on 2013 and 2014. For today's call, we're saying that 2013 strategic capital will be at least in the $225 million to $250 million range. However, we continue to pursue and have identified new strategic growth projects that are not included in this strategic capital spending guidance, as well as acquisition opportunities. If those projects were to come to fruition, our guidance for 2013 would increase significantly. On the pipeline transportation side of our business, we're pursuing additional projects in the Eagle Ford Shale region and other shale areas where our pipelines are located.

Last week, we launched a 30-day open season to assess shipper interest for the transport of crude oil from the Niobrara Shale near Platteville in Watkins, Colorado to Wichita Falls, Texas. This project, called the Niobrara Falls Project, could include the construction of 2 new crude oil gathering pipelines. In addition, 2 of NuStar's existing pipelines could also be utilized in the project. The 30-day open season will end on November 15. We also continue to pursue additional opportunities in the Eagle Ford that we should be able to publicly announce within the next few weeks. We continue to pursue storage expansion opportunities at both St. James and St. Eustatius.

So based on today's low-case strategic capital spending guidance for 2012 and 2013, we expect transportation segment EBITDA to be $10 million to $20 million higher in 2012 than in 2011, and then to increase another $40 million to $60 million in 2013. Storage segment EBITDA is expected to be $20 million to $30 million higher in 2012 when compared to 2011. In 2013, in this low case, we expect storage segment EBITDA to be comparable to the amount earned in 2012. 2012 EBITDA for asphalt and fuels marketing is expected to generate $10 million to $30 million of negative EBITDA for the year after excluding the $266 million noncash asset impairment recorded in the second quarter to write down the value of the company's asphalt refineries and other intangible assets, including goodwill.

In 2013, we expect EBITDA from asphalt and fuels marketing to be $40 million to $60 million higher than it was in 2012. So at this time, let me turn it over to the operator, so we can open up the call to Q&A.

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