##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2009
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934
 For the transition period from  to .
 Commission File Number: 1-32225
 HOLLY ENERGY PARTNERS, L.P.
 
  Delaware
    
    20-0833098(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 
 
  
  
  þ o
  o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o(Do not check if a smaller reporting
company)
    
    Smaller reporting company o
  o þ




---



##### 



PART I. FINANCIAL INFORMATION
    
    
    3FORWARD-LOOKING STATEMENTS
    
    
    3Item 1. Financial Statements (Unaudited, except December 31, 2008 Balance Sheet)
    
    
    4Consolidated Balance Sheets
    
    
    4Consolidated Statements of Income
    
    
    5Consolidated Statements of Cash Flows
    
    
    6Consolidated Statement of Equity
    
    
    7Notes to Consolidated Financial Statements
    
    
    8Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    28Item 3. Quantitative and Qualitative Disclosures About Market Risks
    
    
    47Item 4. Controls and Procedures
    
    
    47PART II. OTHER INFORMATION
    
    
    48Item 1. Legal Proceedings
    
    
    48Item 6. Exhibits
    
    
    48SIGNATURES
    
    
    49EX-12.1EX-31.1EX-31.2EX-32.1EX-32.2
  - 2 -




---



##### Table of Contents



FORWARD-LOOKING STATEMENTS
  
    
    Risks and uncertainties with respect to the actual quantities of petroleum products and
crude oil shipped on our pipelines and/or terminalled in our terminals;
    
    The economic viability of Holly Corporation, Alon USA, Inc. and our other customers;
    
    The demand for refined petroleum products in markets we serve;
    
    Our ability to successfully purchase and integrate additional operations in the future;
    
    Our ability to complete previously announced pending or contemplated acquisitions;
    
    The availability and cost of additional debt and equity financing;
    
    The possibility of reductions in production or shutdowns at refineries utilizing our
pipeline and terminal facilities;
    
    The effects of current and future government regulations and policies;
    
    Our operational efficiency in carrying out routine operations and capital construction
projects;
    
    The possibility of terrorist attacks and the consequences of any such attacks;
    
    General economic conditions; and
    
    Other financial, operations and legal risks and uncertainties detailed from time to time
in our Securities and Exchange Commission filings.
  - 3 -




---



##### Table of Contents



Item 1. Financial Statements
 Holly Energy Partners, L.P.
 
 Consolidated Balance Sheets
 September 30,2009
    
    
    December 31,(Unaudited)
    
    
    2008(In thousands, except unit data)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    4,050
    
    
    $
    5,269Accounts receivable:Trade
    
    
    4,965
    
    
    
    5,082Affiliates
    
    
    11,176
    
    
    
    9,39516,141
    
    
    
    14,477Prepaid and other current assets
    
    
    1,070
    
    
    
    593Total current assets
    
    
    21,261
    
    
    
    20,339Properties and equipment, net
    
    
    349,062
    
    
    
    290,284Transportation agreements, net
    
    
    117,173
    
    
    
    122,383Investment in SLC Pipeline
    
    
    26,809
    
    
    
    Other assets
    
    
    4,660
    
    
    
    6,682Total assets
    
    $
    518,965
    
    
    $
    439,688LIABILITIES AND EQUITYCurrent liabilities:Accounts payable:Trade
    
    $
    3,001
    
    
    $
    5,816Affiliates
    
    
    1,965
    
    
    
    2,2024,966
    
    
    
    8,018Accrued interest
    
    
    916
    
    
    
    2,845Deferred revenue
    
    
    7,582
    
    
    
    15,658Accrued property taxes
    
    
    1,486
    
    
    
    1,145Other current liabilities
    
    
    1,368
    
    
    
    1,505Short-term borrowings under credit agreement
    
    
    
    
    
    
    29,000Total current liabilities
    
    
    16,318
    
    
    
    58,171Long-term debt
    
    
    429,819
    
    
    
    355,793Other long-term liabilities
    
    
    13,759
    
    
    
    17,604Equity:Holly Energy Partners, L.P. partners equity (deficit):Common unitholders (17,582,400 and 8,390,000 units issued and outstanding at September
30, 2009 and December 31, 2008, respectively)
    
    
    136,746
    
    
    
    169,126Subordinated unitholders (7,000,000 units issued and outstanding at December 31, 2008)
    
    
    
    
    
    
    (85,059
    )Class B subordinated unitholders (937,500 units issued and outstanding at September
30, 2009 and December 31, 2008)
    
    
    21,054
    
    
    
    21,455General partner interest (2% interest)
    
    
    (99,359
    )
    
    
    (94,653
    )Accumulated other comprehensive loss
    
    
    (10,181
    )
    
    
    (12,967
    )Total Holly Energy Partners, L.P. partners equity (deficit)
    
    
    48,260
    
    
    
    (2,098
    )Noncontrolling interest
    
    
    10,809
    
    
    
    10,218Total equity
    
    
    59,069
    
    
    
    8,120Total liabilities and equity
    
    $
    518,965
    
    
    $
    439,688
  - 4 -




---



##### Table of Contents



Holly Energy Partners, L.P.
 
 Consolidated Statements of Income
 (Unaudited)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(In thousands, except per unit data)Revenues:Affiliates
    
    $
    28,359
    
    
    $
    22,737
    
    
    $
    71,746
    
    
    $
    61,210Third parties
    
    
    14,385
    
    
    
    6,774
    
    
    
    43,724
    
    
    
    22,35242,744
    
    
    
    29,511
    
    
    
    115,470
    
    
    
    83,562Operating costs and expenses:Operations
    
    
    11,450
    
    
    
    11,033
    
    
    
    33,332
    
    
    
    30,745Depreciation and amortization
    
    
    6,820
    
    
    
    5,884
    
    
    
    19,929
    
    
    
    16,259General and administrative
    
    
    1,848
    
    
    
    1,596
    
    
    
    4,990
    
    
    
    4,24120,118
    
    
    
    18,513
    
    
    
    58,251
    
    
    
    51,245Operating income
    
    
    22,626
    
    
    
    10,998
    
    
    
    57,219
    
    
    
    32,317Other income (expense):Equity in earnings of SLC Pipeline
    
    
    711
    
    
    
    
    
    
    
    1,309
    
    
    
    SLC Pipeline acquisition costs
    
    
    
    
    
    
    
    
    
    
    (2,500
    )
    
    
    Interest income
    
    
    2
    
    
    
    25
    
    
    
    10
    
    
    
    146Interest expense
    
    
    (6,418
    )
    
    
    (5,161
    )
    
    
    (16,225
    )
    
    
    (14,201
    )Other
    
    
    
    
    
    
    1,007
    
    
    
    65
    
    
    
    1,043(5,705
    )
    
    
    (4,129
    )
    
    
    (17,341
    )
    
    
    (13,012
    )Income before income taxes
    
    
    16,921
    
    
    
    6,869
    
    
    
    39,878
    
    
    
    19,305State income tax
    
    
    (113
    )
    
    
    (84
    )
    
    
    (317
    )
    
    
    (237
    )Net income
    
    
    16,808
    
    
    
    6,785
    
    
    
    39,561
    
    
    
    19,068Less noncontrolling interest in net income
    
    
    269
    
    
    
    164
    
    
    
    1,191
    
    
    
    834Net income attributable to Holly Energy Partners, L.P.
    
    $
    16,539
    
    
    $
    6,621
    
    
    $
    38,370
    
    
    $
    18,234Less general partner interest in net income
attributable to Holly Energy Partners, L.P.
    
    
    2,022
    
    
    
    1,008
    
    
    
    5,163
    
    
    
    2,736Limited partners interest in net income
attributable to Holly Energy Partners, L.P.
    
    $
    14,517
    
    
    $
    5,613
    
    
    $
    33,207
    
    
    $
    15,498Limited partners per unit interest in net income
attributable to Holly Energy Partners, L.P.  basic
and diluted
    
    $
    0.78
    
    
    $
    0.34
    
    
    $
    1.89
    
    
    $
    0.95Weighted average limited partners units outstanding
    
    
    18,520
    
    
    
    16,328
    
    
    
    17,546
    
    
    
    16,279
  - 5 -




---



##### Table of Contents



Holly Energy Partners, L.P.
 
 Consolidated Statements of Cash Flows
 (Unaudited)
 Nine Months EndedSeptember 30,2009
    
    
    2008(In thousands)Cash flows from operating activitiesNet income
    
    $
    39,561
    
    
    $
    19,068Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization
    
    
    19,929
    
    
    
    16,259Equity in earnings of SLC Pipeline
    
    
    (1,309
    )
    
    
    Change in fair value  interest rate swaps
    
    
    300
    
    
    
    Amortization of restricted and performance units
    
    
    631
    
    
    
    1,194Gain on sale of assets
    
    
    
    
    
    
    (36
    )(Increase) decrease in current assets:Accounts receivable  trade
    
    
    117
    
    
    
    (892
    )Accounts receivable  affiliates
    
    
    (1,781
    )
    
    
    (3,388
    )Prepaid and other current assets
    
    
    (477
    )
    
    
    (312
    )Increase (decrease) in current liabilities:Accounts payable  trade
    
    
    (2,815
    )
    
    
    (52
    )Accounts payable  affiliates
    
    
    (237
    )
    
    
    (3,684
    )Accrued interest
    
    
    (1,929
    )
    
    
    (1,985
    )Deferred revenue
    
    
    (8,076
    )
    
    
    10,638Accrued property taxes
    
    
    341
    
    
    
    200Other current liabilities
    
    
    (137
    )
    
    
    278Other, net
    
    
    670
    
    
    
    802Net cash provided by operating activities
    
    
    44,788
    
    
    
    38,090Cash flows from investing activitiesAdditions to properties and equipment
    
    
    (27,478
    )
    
    
    (29,024
    )Acquisition of 16-inch intermediate pipeline
    
    
    (34,200
    )
    
    
    Investment in SLC Pipeline
    
    
    (25,500
    )
    
    
    Acquisition of Tulsa loading racks
    
    
    (11,800
    )
    
    
    Acquisition of crude pipelines and tankage assets
    
    
    
    
    
    
    (171,000
    )Proceeds from sale of assets
    
    
    
    
    
    
    36Net cash used for investing activities
    
    
    (98,978
    )
    
    
    (199,988
    )Cash flows from financing activitiesBorrowings under credit agreement
    
    
    197,000
    
    
    
    221,000Repayments under credit agreement
    
    
    (152,000
    )
    
    
    (26,000
    )Proceeds from issuance of common units
    
    
    58,355
    
    
    
    104Capital contribution from general partner
    
    
    1,191
    
    
    
    186Distributions to HEP unitholders
    
    
    (44,393
    )
    
    
    (38,908
    )Purchase price in excess of transferred basis in Tulsa loading racks
    
    
    (5,700
    )
    
    
    Distributions to noncontrolling interest
    
    
    (600
    )
    
    
    (1,200
    )Cost of issuing common units
    
    
    (266
    )
    
    
    Purchase of units for restricted grants
    
    
    (616
    )
    
    
    (795
    )Deferred financing costs
    
    
    
    
    
    
    (692
    )Net cash provided by financing activities
    
    
    52,971
    
    
    
    153,695Cash and cash equivalentsDecrease for period
    
    
    (1,219
    )
    
    
    (8,203
    )Beginning of period
    
    
    5,269
    
    
    
    10,321End of period
    
    $
    4,050
    
    
    $
    2,118
  - 6 -




---



##### Table of Contents



Holly Energy Partners, L.P.
 
 Consolidated Statement of Equity

(Unaudited)
 Holly Energy Partners, L.P. Partners Equity (Deficit):AccumulatedClass B
    
    
    General
    
    
    Other
    
    
    Non-Common
    
    
    Subordinated
    
    
    Subordinated
    
    
    Partner
    
    
    Comprehensive
    
    
    ControllingUnits
    
    
    Units
    
    
    Units
    
    
    Interest
    
    
    Loss
    
    
    Interest
    
    
    Total(In thousands)Balance December 31, 2008
    
    $
    169,126
    
    
    $
    (85,059
    )
    
    $
    21,455
    
    
    $
    (94,653
    )
    
    $
    (12,967
    )
    
    $
    10,218
    
    
    $
    8,120Issuance of common units in public
offering
    
    
    58,355
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    58,355Conversion of subordinated units
    
    
    (90,824
    )
    
    
    90,824
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cost of issuing common units
    
    
    (266
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (266
    )Capital contribution
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,191
    
    
    
    
    
    
    
    
    
    
    
    1,191Distributions  HEP unitholders
    
    
    (21,253
    )
    
    
    (16,275
    )
    
    
    (2,180
    )
    
    
    (4,685
    )
    
    
    
    
    
    
    
    
    
    
    (44,393
    )Distributions  noncontrolling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (600
    )
    
    
    (600
    )Purchase price in excess of transferred
basis in Tulsa loading racks
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,700
    )
    
    
    
    
    
    
    
    
    
    
    (5,700
    )Purchase of units for restricted grants
    
    
    (616
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (616
    )Amortization of restricted and
performance units
    
    
    631
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    631Comprehensive income:Net income
    
    
    21,593
    
    
    
    10,510
    
    
    
    1,779
    
    
    
    4,488
    
    
    
    
    
    
    
    1,191
    
    
    
    39,561Change in fair value of cash flow hedge
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,786
    
    
    
    
    
    
    
    2,786Comprehensive income
    
    
    21,593
    
    
    
    10,510
    
    
    
    1,779
    
    
    
    4,488
    
    
    
    2,786
    
    
    
    1,191
    
    
    
    42,347Balance September 30, 2009
    
    $
    136,746
    
    
    $
    
    
    
    $
    21,054
    
    
    $
    (99,359
    )
    
    $
    (10,181
    )
    
    $
    10,809
    
    
    $
    59,069
  - 7 -




---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 Note 1: Description of Business and Presentation of Financial Statements
           - 8 -




---



##### Table of Contents



Recent Accounting Pronouncements
 Accounting Standards Codification
  Subsequent Events
  Interim Disclosures about Fair Value of Financial Instruments
  Noncontrolling Interests in Consolidated Financial Statements
  Business Combinations
  Disclosures about Derivative Instruments and Hedging Activities
  - 9 -




---



##### Table of Contents



Earnings per Share  Master Limited Partnerships
  Participating Securities  Instruments Granted in Share-Based Transactions
  Note 2: Acquisitions
 Tulsa Loading Racks Transaction
   Lovington-Artesia Pipeline Transaction
   SLC Pipeline Joint Venture Interest
  - 10 -




---



##### Table of Contents



Crude Pipelines and Tankage Transaction
   Note 3: Financial Instruments
   Fair Value Measurements
  
    
    (Level 1) Quoted prices in active markets for identical assets or liabilities.
 
    
    (Level 2) Observable inputs other than quoted prices included in Level 1, such as quoted
prices for similar assets and liabilities in active markets, similar assets and liabilities
in markets that are not active or can be corroborated by observable market data.
 
    
    (Level 3) Unobservable inputs that are supported by little or no market activity and
that are significant to the fair value of the assets or liabilities. This includes
valuation techniques that involve significant unobservable inputs.
  - 11 -




---



##### Table of Contents



Note 4: Properties and Equipment
 September 30,
    
    
    December 31,2009
    
    
    2008(In thousands)Pipelines and terminals
    
    $
    344,084
    
    
    $
    308,056Land and right of way
    
    
    26,978
    
    
    
    24,991Other
    
    
    11,882
    
    
    
    11,498Construction in progress
    
    
    75,088
    
    
    
    38,589458,032
    
    
    
    383,134Less accumulated depreciation
    
    
    108,970
    
    
    
    92,850$
    349,062
    
    
    $
    290,284
  Note 5: Transportation Agreements
  
    
    The Alon pipelines and terminals agreement (the Alon PTA) represents a portion of the
total purchase price of the Alon assets that was allocated based on an estimated fair value
derived under an income approach. This asset is being amortized over 30 years ending 2035,
the 15-year initial term of the Alon PTA plus the expected 15-year extension period.
 
    
    The Holly crude pipelines and tankage agreement represents a portion of the total
purchase price of the Crude Pipelines and Tankage Assets that was allocated using a fair
value based on the agreements expected contribution to our future earnings under an income
approach. This asset is being amortized over 15 years ending 2023, the 15-year term of the
Holly CPTA.
  September 30,
    
    
    December 31,2009
    
    
    2008(In thousands)Alon transportation agreement
    
    $
    59,933
    
    
    $
    59,933Holly crude pipelines and tankage
agreement
    
    
    74,231
    
    
    
    74,231134,164
    
    
    
    134,164Less accumulated amortization
    
    
    16,991
    
    
    
    11,781$
    117,173
    
    
    $
    122,383
  - 12 -




---



##### Table of Contents



Note 6: Employees, Retirement and Incentive Plans
    Restricted Units
   Weighted-Weighted-
    
    
    Average
    
    
    AggregateAverage
    
    
    Remaining
    
    
    IntrinsicGrant-Date
    
    
    Contractual
    
    
    ValueRestricted Units
    
    Grants
    
    
    Fair Value
    
    
    Term
    
    
    ($000)Outstanding January 1, 2009 (not vested)
    
    
    53,505
    
    
    $
    41.28Granted
    
    
    33,422
    
    
    
    26.00Forfeited
    
    
    (2,152
    )
    
    
    42.53Vesting and transfer of full ownership to recipients
    
    
    (31,504
    )
    
    
    36.76Outstanding at September 30, 2009 (not vested)
    
    
    53,271
    
    
    $
    34.31
    
    
    0.8 year
    
    $
    2,078
   - 13 -




---



##### Table of Contents



Performance Units
    PayablePerformance Units
    
    In UnitsOutstanding at January 1, 2009 (not vested)
    
    
    36,971Granted
    
    
    28,113Forfeited
    
    
    Vesting and transfer of common units to recipients
    
    
    (10,313
    )Outstanding at September 30, 2009 (not vested)
    
    
    54,771
  Note 7: Debt
 Credit Agreement
    - 14 -




---



##### Table of Contents



Senior Notes Due 2015
    September 30,
    
    
    December 31,2009
    
    
    2008(In thousands)Credit Agreement
    
    $
    245,000
    
    
    $
    200,000Senior NotesPrincipal
    
    
    185,000
    
    
    
    185,000Unamortized discount
    
    
    (2,058
    )
    
    
    (2,344
    )Unamortized premium  dedesignated fair value hedge
    
    
    1,877
    
    
    
    2,137184,819
    
    
    
    184,793Total debt
    
    
    429,819
    
    
    
    384,793Less net short-term borrowings under credit agreement(1)
    
    
    
    
    
    
    29,000Total long-term debt(1)
    
    $
    429,819
    
    
    $
    355,793
 
 (1)
    
    We currently classify all borrowings under the Credit Agreement as long-term. At
December 31, 2008, we classified certain of our Credit Agreement borrowings as short-term. - 15 -




---



##### Table of Contents



Interest Rate Risk Management
         - 16 -




---



##### Table of Contents



Balance Sheet
    
    
    
    
    
    
    Location of Offsetting
    
    
    OffsettingInterest Rate Swaps
    
    Location
    
    
    Fair Value
    
    
    Balance
    
    
    Amount(In thousands)AssetFixed-to-variable interest rate swap
    
    Other assets
    
    $
    2,658
    
    
    Long-term debt
    
    
    $
    (1,877
    )- $60 million of 6.25% Senior Notes
    
    
    
    
    
    
    
    HEP partners equity
    
    
    (1,942
    )(1)Interest expense
    
    
    1,161
    (2)$
    2,658
    
    
    
    
    
    
    $
    (2,658
    )LiabilityCash flow hedge  $171 million
    
    Other long-term
    
    
    
    
    
    Accumulated otherLIBOR based debt
    
    liabilities
    
    $
    (10,182
    )
    
    comprehensive loss
    
    $
    10,182Variable-to-fixed interest rate swap
    
    Other long-term
    
    
    
    
    
    HEP partners equity
    
    
    4,166
    (1)- $60 million
    
    liabilities
    
    
    (3,044
    )
    
    Interest expense
    
    
    (1,122
    )$
    (13,226
    )
    
    
    
    
    
    $
    13,226
 
 (1)
    
    Represents prior year charges to interest expense.(2)
    
    Net of amortization of premium attributable to dedesignated hedge. Interest Expense and Other Debt Information
  Nine Months EndedSeptember 30,2009
    
    
    2008(In thousands)Interest on outstanding debt:Senior Notes, net of interest rate swaps
    
    $
    8,320
    
    
    $
    7,901Credit Agreement, net of interest rate swap
    
    
    8,045
    
    
    
    6,013Net amortization of discount and deferred debt issuance costs
    
    
    529
    
    
    
    739Commitment fees
    
    
    202
    
    
    
    241Total interest incurred
    
    
    17,096
    
    
    
    14,894Less capitalized interest
    
    
    871
    
    
    
    693Net interest expense
    
    $
    16,225
    
    
    $
    14,201Cash paid for interest(1)
    
    $
    18,307
    
    
    $
    11,414
 
 (1)
    
    Net of cash received under our interest rate swap agreements of $3.8 million for the
nine months ended September 30, 2009 and 2008. Note 8: Significant Customers
  Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2009
    
    2008
    
    2009
    
    2008Holly
    
    
    66
    %
    
    
    77
    %
    
    
    62
    %
    
    
    73
    %Alon
    
    
    24
    %
    
    
    13
    %
    
    
    27
    %
    
    
    15
    %BP
    
    
    3
    %
    
    
    6
    %
    
    
    5
    %
    
    
    8
    %
 - 17 -




---



##### Table of Contents



Note 9: Related Party Transactions
 Holly and Alon Agreements
        
    
    Pipeline, terminal and tankage revenues received from Holly were $28.4 million and
$22.7 million for the three months ended September 30, 2009 and 2008, respectively, and $71.7
million and $61.2 million for the nine months ended September 30, 2009 and 2008, respectively.
These amounts include the revenues received under the Holly PTA, Holly IPA, Holly CPTA and
Holly ETA.
 
    
    Holly charged general and administrative services under the Omnibus Agreement of
$0.6 million for the three months ended September 30, 2009 and 2008 and $1.7 million and $1.6
million for the nine months ended September 30, 2009 and 2008, respectively.
 - 18 -




---



##### Table of Contents




    
    We reimbursed Holly for costs of employees supporting our operations of $4.2
million and $3.7 million for the three months ended September 30, 2009 and 2008, respectively,
and $12.8 million and $9.8 million for the nine months ended September 30, 2009 and 2008,
respectively.
 
    
    We distributed $7.6 million and $6.5 million during the three months ended
September 30, 2009 and 2008, respectively, to Holly as regular distributions on its common
units, subordinated units and general partner interest, including general partner incentive
distributions. We distributed $21.6 million and $18.9 million during the nine months ended
September 30, 2009 and 2008, respectively.
 
    
    Our accounts receivable from Holly was $11.2 million and $9.4 million at September
30, 2009 and December 31, 2008, respectively.
 
    
    Holly has failed to meet its minimum volume commitment for each of the seventeen
quarters since inception of the Holly IPA. Through September 30, 2009, we have charged Holly
$9.8 million for these shortfalls to date, $0.6 million and $0.5 million of which is included
in affiliate accounts receivable at September 30, 2009 and December 31, 2008, respectively.
 
    
    Our revenues for the three and nine months ended September 30, 2009 include $0.8
million and $1.9 million, respectively, of shortfalls billed under the Holly IPA in 2008 as
Holly did not exceed its minimum volume commitment in any of the subsequent four quarters.
Deferred revenue in the consolidated balance sheets at September 30, 2009 and December 31,
2008, includes $3.3 million and $2.4 million, respectively, relating to the Holly IPA. It is
possible that Holly may not exceed its minimum obligations under the Holly IPA to allow Holly
to receive credit for any of the $3.3 million deferred at September 30, 2009.
 
    
    We acquired the Tulsa Loading Racks, our 16-inch intermediate pipeline and the
Crude Pipelines and Tankage Assets from Holly in August 2009, June 2009 and February 2008,
respectively. See Note 2 for a description of these transactions.
 
    
    We paid Holly a $2.5 million finders fee in the first quarter of 2009 in
consideration for its assistance in obtaining our joint venture interest in the SLC Pipeline.
  
    
    Pipeline and terminal revenues received from Alon were $8.8 million and $1.9
million for the three months ended September 30, 2009 and 2008, respectively, and $25.8
million and $6.8 million for the nine months ended September 30, 2009 and 2008, respectively,
under the Alon PTA. Additionally, pipeline revenues received under a pipeline capacity lease
agreement with Alon were $1.6 million and $1.8 million for the three months ended September
30, 2009 and 2008, respectively, and $5.0 million and $5.3 million for the nine months ended
September 30, 2009 and 2008, respectively.
 
    
    We distributed $0.7 million during the three months ended September 30, 2009 and
2008 and $2.2 million and $2.1 million during the nine months ended September 30, 2009 and
2008, respectively, to Alon as distributions on its Class B subordinated units.
 
    
    Our accounts receivable  trade include receivable balances from Alon of $3.2
million and $2.5 million at September 30, 2009 and December 31, 2008, respectively.
 
    
    Our revenues for the three and nine months ended September 30, 2009 include $4.3
million and $11.9 million, respectively, of shortfalls billed under the Alon PTA in 2008 as
Alon did not exceed its minimum revenue obligation in any of the subsequent four quarters.
Deferred revenue in the consolidated balance sheets at September 30, 2009 and December 31,
2008 includes $4.3 million and $13.3 million, respectively, relating to the Alon PTA. It is
possible that Alon may not exceed its minimum obligations under the Alon PTA to allow Alon to
receive credit for any of the $4.3 million deferred at September 30, 2009.
 - 19 -




---



##### Table of Contents



BP
  
    
    BP is one of multiple shippers on the Rio Grande pipeline. We recorded revenues
from BP of $1.4 million and $1.7 million for the three months ended September 30, 2009 and
2008, respectively, and $5.3 million and $6.6 million for the nine months ended September 30,
2009 and 2008, respectively.
 
    
    Our accounts receivable  trade at September 30, 2009 and December 31, 2008
includes Rio Grandes receivable balances from BP of $0.6 million and $0.8 million,
respectively.
 Note 10: HEP Partners Equity, Income Allocations, Cash Distributions and Comprehensive Income
 Issuances of units
     Allocations of Net Income
  - 20 -




---



##### Table of Contents



Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(In thousands, except per unit data)General partner interest in net income
    
    $
    300
    
    
    $
    115
    
    
    $
    691
    
    
    $
    316General partner incentive distribution
    
    
    1,722
    
    
    
    893
    
    
    
    4,472
    
    
    
    2,420Total general partner interest in net
income attributable to HEP
    
    $
    2,022
    
    
    $
    1,008
    
    
    $
    5,163
    
    
    $
    2,736
 Cash Distributions
     Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(In thousands, except per unit data)General partner interest
    
    $
    336
    
    
    $
    268
    
    
    $
    947
    
    
    $
    792General partner incentive distribution
    
    
    1,722
    
    
    
    893
    
    
    
    4,472
    
    
    
    2,420Total general partner distribution
    
    
    2,058
    
    
    
    1,161
    
    
    
    5,419
    
    
    
    3,212Limited partner distribution
    
    
    14,723
    
    
    
    12,357
    
    
    
    41,938
    
    
    
    36,591Total regular quarterly cash distribution
    
    $
    16,781
    
    
    $
    13,518
    
    
    $
    47,357
    
    
    $
    39,803Cash distribution per unit applicable to
limited partners
    
    $
    0.795
    
    
    $
    0.755
    
    
    $
    2.355
    
    
    $
    2.235
  - 21 -




---



##### Table of Contents



Comprehensive Income
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(In thousands)Net income
    
    $
    16,808
    
    
    $
    6,785
    
    
    $
    39,561
    
    
    $
    19,068Other comprehensive income:Change in fair value of cash flow hedge
    
    
    (1,482
    )
    
    
    (1,623
    )
    
    
    2,786
    
    
    
    825Comprehensive income
    
    
    15,326
    
    
    
    5,162
    
    
    
    42,347
    
    
    
    19,893Less noncontrolling interest in comprehensive income
    
    
    269
    
    
    
    164
    
    
    
    1,191
    
    
    
    834Comprehensive income attributable to HEP unitholders
    
    $
    15,057
    
    
    $
    4,998
    
    
    $
    41,156
    
    
    $
    19,059
 Note 11: Supplemental Guarantor/Non-Guarantor Financial Information
   - 22 -




---



##### Table of Contents



Condensed Consolidating Balance Sheet
 Guarantor
    
    
    Non-September 30, 2009
    
    Parent
    
    
    Subsidiaries
    
    
    Guarantor
    
    
    Eliminations
    
    
    Consolidated(In thousands)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    2
    
    
    $
    303
    
    
    $
    3,745
    
    
    $
    
    
    
    $
    4,050Accounts receivable
    
    
    
    
    
    
    14,589
    
    
    
    1,552
    
    
    
    
    
    
    
    16,141Intercompany accounts receivable (payable)
    
    
    (191,973
    )
    
    
    191,983
    
    
    
    (10
    )
    
    
    
    
    
    
    Prepaid and other current assets
    
    
    387
    
    
    
    683
    
    
    
    
    
    
    
    
    
    
    
    1,070Total current assets
    
    
    (191,584
    )
    
    
    207,558
    
    
    
    5,287
    
    
    
    
    
    
    
    21,261Properties and equipment, net
    
    
    
    
    
    
    317,612
    
    
    
    31,450
    
    
    
    
    
    
    
    349,062Investment in subsidiaries
    
    
    425,592
    
    
    
    25,222
    
    
    
    
    
    
    
    (450,814
    )
    
    
    Transportation agreements, net
    
    
    
    
    
    
    117,173
    
    
    
    
    
    
    
    
    
    
    
    117,173Investment in SLC Pipeline
    
    
    
    
    
    
    26,809
    
    
    
    
    
    
    
    
    
    
    
    26,809Other assets
    
    
    3,669
    
    
    
    991
    
    
    
    
    
    
    
    
    
    
    
    4,660Total assets
    
    $
    237,677
    
    
    $
    695,365
    
    
    $
    36,737
    
    
    $
    (450,814
    )
    
    $
    518,965LIABILITIES AND EQUITYCurrent liabilities:Accounts payable
    
    $
    
    
    
    $
    4,699
    
    
    $
    267
    
    
    $
    
    
    
    $
    4,966Accrued interest
    
    
    (888
    )
    
    
    1,804
    
    
    
    
    
    
    
    
    
    
    
    916Deferred revenue
    
    
    
    
    
    
    7,582
    
    
    
    
    
    
    
    
    
    
    
    7,582Accrued property taxes
    
    
    
    
    
    
    1,348
    
    
    
    138
    
    
    
    
    
    
    
    1,486Other current liabilities
    
    
    2,442
    
    
    
    (1,375
    )
    
    
    301
    
    
    
    
    
    
    
    1,368Total current liabilities
    
    
    1,554
    
    
    
    14,058
    
    
    
    706
    
    
    
    
    
    
    
    16,318Long-term debt
    
    
    184,819
    
    
    
    245,000
    
    
    
    
    
    
    
    
    
    
    
    429,819Other long-term liabilities
    
    
    3,044
    
    
    
    10,715
    
    
    
    
    
    
    
    
    
    
    
    13,759Equity  HEP
    
    
    48,260
    
    
    
    425,592
    
    
    
    36,031
    
    
    
    (461,623
    )
    
    
    48,260Equity  noncontrolling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,809
    
    
    
    10,809Total liabilities and equity
    
    $
    237,677
    
    
    $
    695,365
    
    
    $
    36,737
    
    
    $
    (450,814
    )
    
    $
    518,965
 Condensed Consolidating Balance Sheet
 Guarantor
    
    
    Non-December 31, 2008
    
    Parent
    
    
    Subsidiaries
    
    
    Guarantor
    
    
    Eliminations
    
    
    Consolidated(In thousands)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    2
    
    
    $
    3,706
    
    
    $
    1,561
    
    
    $
    
    
    
    $
    5,269Accounts receivable
    
    
    
    
    
    
    13,332
    
    
    
    1,145
    
    
    
    
    
    
    
    14,477Intercompany accounts receivable (payable)
    
    
    (197,828
    )
    
    
    197,979
    
    
    
    (151
    )
    
    
    
    
    
    
    Prepaid and other current assets
    
    
    176
    
    
    
    417
    
    
    
    
    
    
    
    
    
    
    
    593Total current assets
    
    
    (197,650
    )
    
    
    215,434
    
    
    
    2,555
    
    
    
    
    
    
    
    20,339Properties and equipment, net
    
    
    
    
    
    
    257,886
    
    
    
    32,398
    
    
    
    
    
    
    
    290,284Investment in subsidiaries
    
    
    378,481
    
    
    
    23,842
    
    
    
    
    
    
    
    (402,323
    )
    
    
    Transportation agreements, net
    
    
    
    
    
    
    122,383
    
    
    
    
    
    
    
    
    
    
    
    122,383Other assets
    
    
    5,300
    
    
    
    1,382
    
    
    
    
    
    
    
    
    
    
    
    6,682Total assets
    
    $
    186,131
    
    
    $
    620,927
    
    
    $
    34,953
    
    
    $
    (402,323
    )
    
    $
    439,688LIABILITIES AND EQUITYCurrent liabilities:Accounts payable
    
    $
    
    
    
    $
    7,357
    
    
    $
    661
    
    
    $
    
    
    
    $
    8,018Accrued interest
    
    
    (27,778
    )
    
    
    30,623
    
    
    
    
    
    
    
    
    
    
    
    2,845Deferred revenue
    
    
    
    
    
    
    15,658
    
    
    
    
    
    
    
    
    
    
    
    15,658Accrued property taxes
    
    
    
    
    
    
    1,015
    
    
    
    130
    
    
    
    
    
    
    
    1,145Other current liabilities
    
    
    31,214
    
    
    
    (29,811
    )
    
    
    102
    
    
    
    
    
    
    
    1,505Short-term borrowings under credit agreement
    
    
    
    
    
    
    29,000
    
    
    
    
    
    
    
    
    
    
    
    29,000Total current liabilities
    
    
    3,436
    
    
    
    53,842
    
    
    
    893
    
    
    
    
    
    
    
    58,171Long-term debt
    
    
    184,793
    
    
    
    171,000
    
    
    
    
    
    
    
    
    
    
    
    355,793Other long-term liabilities
    
    
    
    
    
    
    17,604
    
    
    
    
    
    
    
    
    
    
    
    17,604Equity  HEP
    
    
    (2,098
    )
    
    
    378,481
    
    
    
    34,060
    
    
    
    (412,541
    )
    
    
    (2,098
    )Equity  noncontrolling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,218
    
    
    
    10,218Total liabilities and equity
    
    $
    186,131
    
    
    $
    620,927
    
    
    $
    34,953
    
    
    $
    (402,323
    )
    
    $
    439,688
 - 23 -




---



##### Table of Contents



Condensed Consolidating Statement of Income
 Guarantor
    
    
    Non-Three months ended September 30, 2009
    
    Parent
    
    
    Subsidiaries
    
    
    Guarantor
    
    
    Eliminations
    
    
    Consolidated(In thousands)Revenues:Affiliates
    
    $
    
    
    
    $
    28,359
    
    
    $
    
    
    
    $
    
    
    
    $
    28,359Third parties
    
    
    
    
    
    
    12,791
    
    
    
    1,939
    
    
    
    (345
    )
    
    
    14,385
    
    
    
    41,150
    
    
    
    1,939
    
    
    
    (345
    )
    
    
    42,744Operating costs and expenses:Operations
    
    
    
    
    
    
    11,105
    
    
    
    690
    
    
    
    (345
    )
    
    
    11,450Depreciation and amortization
    
    
    
    
    
    
    6,481
    
    
    
    339
    
    
    
    
    
    
    
    6,820General and administrative
    
    
    1,907
    
    
    
    (59
    )
    
    
    
    
    
    
    
    
    
    
    1,8481,907
    
    
    
    17,527
    
    
    
    1,029
    
    
    
    (345
    )
    
    
    20,118Operating income (loss)
    
    
    (1,907
    )
    
    
    23,623
    
    
    
    910
    
    
    
    
    
    
    
    22,626Other income (expense):Equity in earnings of subsidiaries
    
    
    25,032
    
    
    
    628
    
    
    
    
    
    
    
    (25,660
    )
    
    
    Equity in earnings of SLC Pipeline
    
    
    
    
    
    
    711
    
    
    
    
    
    
    
    
    
    
    
    711Interest income (expense)
    
    
    (6,586
    )
    
    
    170
    
    
    
    
    
    
    
    
    
    
    
    (6,416
    )18,446
    
    
    
    1,509
    
    
    
    
    
    
    
    (25,660
    )
    
    
    (5,705
    )Income (loss) before income taxes
    
    
    16,539
    
    
    
    25,132
    
    
    
    910
    
    
    
    (25,660
    )
    
    
    16,921State income tax
    
    
    
    
    
    
    (100
    )
    
    
    (13
    )
    
    
    
    
    
    
    (113
    )Net income
    
    
    16,539
    
    
    
    25,032
    
    
    
    897
    
    
    
    (25,660
    )
    
    
    16,808Less noncontrolling interest in net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    269
    
    
    
    269Net income attributable to HEP
    
    $
    16,539
    
    
    $
    25,032
    
    
    $
    897
    
    
    $
    (25,929
    )
    
    $
    16,539
 Condensed Consolidating Statement of Income
 Guarantor
    
    
    Non-Three months ended September 30, 2008
    
    Parent
    
    
    Subsidiaries
    
    
    Guarantor
    
    
    Eliminations
    
    
    Consolidated(In thousands)Revenues:Affiliates
    
    $
    
    
    
    $
    22,737
    
    
    $
    
    
    
    $
    
    
    
    $
    22,737Third parties
    
    
    
    
    
    
    5,437
    
    
    
    1,663
    
    
    
    (326
    )
    
    
    6,774
    
    
    
    28,174
    
    
    
    1,663
    
    
    
    (326
    )
    
    
    29,511Operating costs and expenses:Operations
    
    
    
    
    
    
    10,593
    
    
    
    766
    
    
    
    (326
    )
    
    
    11,033Depreciation and amortization
    
    
    
    
    
    
    5,538
    
    
    
    346
    
    
    
    
    
    
    
    5,884General and administrative
    
    
    887
    
    
    
    710
    
    
    
    (1
    )
    
    
    
    
    
    
    1,596887
    
    
    
    16,841
    
    
    
    1,111
    
    
    
    (326
    )
    
    
    18,513Operating income (loss)
    
    
    (887
    )
    
    
    11,333
    
    
    
    552
    
    
    
    
    
    
    
    10,998Other income (expense):Equity in earnings of subsidiaries
    
    
    10,189
    
    
    
    385
    
    
    
    
    
    
    
    (10,574
    )
    
    
    Interest income (expense)
    
    
    (2,681
    )
    
    
    (2,463
    )
    
    
    8
    
    
    
    
    
    
    
    (5,136
    )Other income
    
    
    
    
    
    
    1,007
    
    
    
    
    
    
    
    
    
    
    
    1,0077,508
    
    
    
    (1,071
    )
    
    
    8
    
    
    
    (10,574
    )
    
    
    (4,129
    )Income (loss) before income taxes
    
    
    6,621
    
    
    
    10,262
    
    
    
    560
    
    
    
    (10,574
    )
    
    
    6,869State income tax
    
    
    
    
    
    
    (73
    )
    
    
    (11
    )
    
    
    
    
    
    
    (84
    )Net income
    
    
    6,621
    
    
    
    10,189
    
    
    
    549
    
    
    
    (10,574
    )
    
    
    6,785Less noncontrolling interest in net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    164
    
    
    
    164Net income attributable to HEP
    
    $
    6,621
    
    
    $
    10,189
    
    
    $
    549
    
    
    $
    (10,738
    )
    
    $
    6,621
 - 24 -




---



##### Table of Contents



Condensed Consolidating Statement of Income
 Guarantor
    
    
    Non-Nine months ended September 30, 2009
    
    Parent
    
    
    Subsidiaries
    
    
    Guarantor
    
    
    Eliminations
    
    
    Consolidated(In thousands)Revenues:Affiliates
    
    $
    
    
    
    $
    71,746
    
    
    $
    
    
    
    $
    
    
    
    $
    71,746Third parties
    
    
    
    
    
    
    37,430
    
    
    
    7,334
    
    
    
    (1,040
    )
    
    
    43,724
    
    
    
    109,176
    
    
    
    7,334
    
    
    
    (1,040
    )
    
    
    115,470Operating costs and expenses:Operations
    
    
    
    
    
    
    32,091
    
    
    
    2,281
    
    
    
    (1,040
    )
    
    
    33,332Depreciation and amortization
    
    
    
    
    
    
    18,909
    
    
    
    1,020
    
    
    
    
    
    
    
    19,929General and administrative
    
    
    3,195
    
    
    
    1,784
    
    
    
    11
    
    
    
    
    
    
    
    4,9903,195
    
    
    
    52,784
    
    
    
    3,312
    
    
    
    (1,040
    )
    
    
    58,251Operating income (loss)
    
    
    (3,195
    )
    
    
    56,392
    
    
    
    4,022
    
    
    
    
    
    
    
    57,219Other income (expense):Equity in earnings of subsidiaries
    
    
    50,026
    
    
    
    2,780
    
    
    
    
    
    
    
    (52,806
    )
    
    
    Equity in earnings of SLC Pipeline
    
    
    
    
    
    
    1,309
    
    
    
    
    
    
    
    
    
    
    
    1,309SLC Pipeline acquisition costs
    
    
    
    
    
    
    (2,500
    )
    
    
    
    
    
    
    
    
    
    
    (2,500
    )Interest income (expense)
    
    
    (8,461
    )
    
    
    (7,754
    )
    
    
    
    
    
    
    
    
    
    
    (16,215
    )Other
    
    
    
    
    
    
    65
    
    
    
    
    
    
    
    
    
    
    
    6541,565
    
    
    
    (6,100
    )
    
    
    
    
    
    
    (52,806
    )
    
    
    (17,341
    )Income (loss) before income taxes
    
    
    38,370
    
    
    
    50,292
    
    
    
    4,022
    
    
    
    (52,806
    )
    
    
    39,878State income tax
    
    
    
    
    
    
    (266
    )
    
    
    (51
    )
    
    
    
    
    
    
    (317
    )Net income
    
    
    38,370
    
    
    
    50,026
    
    
    
    3,971
    
    
    
    (52,806
    )
    
    
    39,561Less noncontrolling interest in net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,191
    
    
    
    1,191Net income attributable to HEP
    
    $
    38,370
    
    
    $
    50,026
    
    
    $
    3,971
    
    
    $
    (53,997
    )
    
    $
    38,370
 Condensed Consolidating Statement of Income
 Guarantor
    
    
    Non-Nine months ended September 30, 2008
    
    Parent
    
    
    Subsidiaries
    
    
    Guarantor
    
    
    Eliminations
    
    
    Consolidated(In thousands)Revenues:Affiliates
    
    $
    
    
    
    $
    61,210
    
    
    $
    
    
    
    $
    
    
    
    $
    61,210Third parties
    
    
    
    
    
    
    16,735
    
    
    
    6,584
    
    
    
    (967
    )
    
    
    22,352
    
    
    
    77,945
    
    
    
    6,584
    
    
    
    (967
    )
    
    
    83,562Operating costs and expenses:Operations
    
    
    
    
    
    
    28,908
    
    
    
    2,804
    
    
    
    (967
    )
    
    
    30,745Depreciation and amortization
    
    
    
    
    
    
    15,262
    
    
    
    997
    
    
    
    
    
    
    
    16,259General and administrative
    
    
    2,389
    
    
    
    1,856
    
    
    
    (4
    )
    
    
    
    
    
    
    4,2412,389
    
    
    
    46,026
    
    
    
    3,797
    
    
    
    (967
    )
    
    
    51,245Operating income (loss)
    
    
    (2,389
    )
    
    
    31,919
    
    
    
    2,787
    
    
    
    
    
    
    
    32,317Other income (expense):Equity in earnings of subsidiaries
    
    
    28,923
    
    
    
    1,947
    
    
    
    
    
    
    
    (30,870
    )
    
    
    Interest income (expense)
    
    
    (8,300
    )
    
    
    (5,795
    )
    
    
    40
    
    
    
    
    
    
    
    (14,055
    )Gain on sale of assets
    
    
    
    
    
    
    36
    
    
    
    
    
    
    
    
    
    
    
    36Other income
    
    
    
    
    
    
    1,007
    
    
    
    
    
    
    
    
    
    
    
    1,00720,623
    
    
    
    (2,805
    )
    
    
    40
    
    
    
    (30,870
    )
    
    
    (13,012
    )Income (loss) before income taxes
    
    
    18,234
    
    
    
    29,114
    
    
    
    2,827
    
    
    
    (30,870
    )
    
    
    19,305State income tax
    
    
    
    
    
    
    (191
    )
    
    
    (46
    )
    
    
    
    
    
    
    (237
    )Net income
    
    
    18,234
    
    
    
    28,923
    
    
    
    2,781
    
    
    
    (30,870
    )
    
    
    19,068Less noncontrolling interest in net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    834
    
    
    
    834Net income attributable to HEP
    
    $
    18,234
    
    
    $
    28,923
    
    
    $
    2,781
    
    
    $
    (31,704
    )
    
    $
    18,234
 - 25 -




---



##### Table of Contents



Condensed Consolidating Statement of Cash Flows
 Guarantor
    
    
    Non-Nine months ended September 30, 2009
    
    Parent
    
    
    Subsidiaries
    
    
    Guarantor
    
    
    Eliminations
    
    
    Consolidated(in thousands)Cash flows from operating activities
    
    $
    (14,271
    )
    
    $
    56,203
    
    
    $
    4,256
    
    
    $
    (1,400
    )
    
    $
    44,788Cash flows from investing activitiesInvestment in SLC Pipeline
    
    
    
    
    
    
    (25,500
    )
    
    
    
    
    
    
    
    
    
    
    (25,500
    )Additions to properties and equipment
    
    
    
    
    
    
    (73,406
    )
    
    
    (72
    )
    
    
    
    
    
    
    (73,478
    )
    
    
    
    (98,906
    )
    
    
    (72
    )
    
    
    
    
    
    
    (98,978
    )Cash flows from financing activitiesNet borrowings under credit agreement
    
    
    
    
    
    
    45,000
    
    
    
    
    
    
    
    
    
    
    
    45,000Proceeds from issuance of common units
    
    
    58,355
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    58,355Capital contribution from general partner
    
    
    1,191
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,191Distributions to HEP unitholders
    
    
    (44,393
    )
    
    
    
    
    
    
    (2,000
    )
    
    
    2,000
    
    
    
    (44,393
    )Purchase price in excess of transferred
basis in Tulsa loading racks
    
    
    
    
    
    
    (5,700
    )
    
    
    
    
    
    
    
    
    
    
    (5,700
    )Distributions to noncontrolling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (600
    )
    
    
    (600
    )Other financing activities, net
    
    
    (882
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (882
    )14,271
    
    
    
    39,300
    
    
    
    (2,000
    )
    
    
    1,400
    
    
    
    52,971Cash and cash equivalentsIncrease (decrease) for the period
    
    
    
    
    
    
    (3,403
    )
    
    
    2,184
    
    
    
    
    
    
    
    (1,219
    )Beginning of period
    
    
    2
    
    
    
    3,706
    
    
    
    1,561
    
    
    
    
    
    
    
    5,269End of period
    
    $
    2
    
    
    $
    303
    
    
    $
    3,745
    
    
    $
    
    
    
    $
    4,050
 Condensed Consolidating Statement of Cash Flows
 Guarantor
    
    
    Non-Nine months ended September 30, 2008
    
    Parent
    
    
    Subsidiaries
    
    
    Guarantor
    
    
    Eliminations
    
    
    Consolidated(in thousands)Cash flows from operating activities
    
    $
    (44,408
    )
    
    $
    81,053
    
    
    $
    4,245
    
    
    $
    (2,800
    )
    
    $
    38,090Cash flows from investing activitiesAdditions to properties and equipment
    
    
    
    
    
    
    (28,530
    )
    
    
    (494
    )
    
    
    
    
    
    
    (29,024
    )Acquisition of crude pipelines and tankage assets
    
    
    
    
    
    
    (171,000
    )
    
    
    
    
    
    
    
    
    
    
    (171,000
    )Proceeds from sale of assets
    
    
    
    
    
    
    36
    
    
    
    
    
    
    
    
    
    
    
    36
    
    
    
    (199,494
    )
    
    
    (494
    )
    
    
    
    
    
    
    (199,988
    )Cash flows from financing activitiesNet borrowings under credit agreement
    
    
    9,000
    
    
    
    186,000
    
    
    
    
    
    
    
    
    
    
    
    195,000Proceeds from issuance of common units
    
    
    
    
    
    
    104
    
    
    
    
    
    
    
    
    
    
    
    104Capital
contribution from
general partner
    
    
    186
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    186Distributions to HEP unitholders
    
    
    (38,908
    )
    
    
    
    
    
    
    (4,000
    )
    
    
    4,000
    
    
    
    (38,908
    )Distributions to noncontrolling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,200
    )
    
    
    (1,200
    )Other financing activities, net
    
    
    (795
    )
    
    
    (692
    )
    
    
    
    
    
    
    
    
    
    
    (1,487
    )(30,517
    )
    
    
    185,412
    
    
    
    (4,000
    )
    
    
    2,800
    
    
    
    153,695Cash and cash equivalentsIncrease (decrease) for the period
    
    
    (74,925
    )
    
    
    66,971
    
    
    
    (249
    )
    
    
    
    
    
    
    (8,203
    )Beginning of period
    
    
    2
    
    
    
    8,060
    
    
    
    2,259
    
    
    
    
    
    
    
    10,321End of period
    
    $
    (74,923
    )
    
    $
    75,031
    
    
    $
    2,010
    
    
    $
    
    
    
    $
    2,118
 - 26 -




---



##### Table of Contents



Note 12: Subsequent Events
   - 27 -




---



##### Table of Contents



HOLLY ENERGY PARTNERS, L.P.
 
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
  OVERVIEW
         - 28 -




---



##### Table of Contents



Agreements with Holly Corporation and Alon
       Minimum AnnualizedCommitment
    
    
    Year ofAgreement
    
    (In millions)
    
    
    Maturity
    
    Contract TypeHolly PTA
    
    $
    43.7
    
    
    2019
    
    Minimum revenue commitmentHolly IPA*
    
    
    20.7
    
    
    2024
    
    Minimum revenue commitmentHolly CPTA
    
    
    28.4
    
    
    2023
    
    Minimum revenue commitmentHolly ETA
    
    
    2.7
    
    
    2024
    
    Minimum revenue commitmentAlon PTA
    
    
    21.7
    
    
    2020
    
    Minimum volume commitmentAlon capacity lease
    
    
    6.4
    
    
    Various
    
    Capacity leaseTotal
    
    $
    123.6
 
 *
    
    Reflects amended terms of the Holly IPA effective June 2009.   - 29 -




---



##### Table of Contents



RESULTS OF OPERATIONS (Unaudited)
 Income, Distributable Cash Flow and Volumes
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(In thousands, except per unit data)RevenuesPipelines:Affiliates  refined product pipelines
    
    $
    12,267
    
    
    $
    10,553
    
    
    $
    31,186
    
    
    $
    28,994Affiliates  intermediate pipelines
    
    
    5,370
    
    
    
    2,953
    
    
    
    11,438
    
    
    
    9,002Affiliates  crude pipelines
    
    
    7,563
    
    
    
    6,776
    
    
    
    21,215
    
    
    
    15,52425,200
    
    
    
    20,282
    
    
    
    63,839
    
    
    
    53,520Third parties  refined product pipelines
    
    
    12,491
    
    
    
    5,773
    
    
    
    38,459
    
    
    
    19,28937,691
    
    
    
    26,055
    
    
    
    102,298
    
    
    
    72,809Terminals, refinery tankage and loading racks:Affiliates
    
    
    3,159
    
    
    
    2,455
    
    
    
    7,907
    
    
    
    7,690Third parties
    
    
    1,894
    
    
    
    1,001
    
    
    
    5,265
    
    
    
    3,0635,053
    
    
    
    3,456
    
    
    
    13,172
    
    
    
    10,753Total revenues
    
    
    42,744
    
    
    
    29,511
    
    
    
    115,470
    
    
    
    83,562Operating costs and expenses:Operations
    
    
    11,450
    
    
    
    11,033
    
    
    
    33,332
    
    
    
    30,745Depreciation and amortization
    
    
    6,820
    
    
    
    5,884
    
    
    
    19,929
    
    
    
    16,259General and administrative
    
    
    1,848
    
    
    
    1,596
    
    
    
    4,990
    
    
    
    4,24120,118
    
    
    
    18,513
    
    
    
    58,251
    
    
    
    51,245Operating income
    
    
    22,626
    
    
    
    10,998
    
    
    
    57,219
    
    
    
    32,317Other income (expense):Equity in earnings of SLC Pipeline
    
    
    711
    
    
    
    
    
    
    
    1,309
    
    
    
    SLC Pipeline acquisition costs
    
    
    
    
    
    
    
    
    
    
    (2,500
    )
    
    
    Interest income
    
    
    2
    
    
    
    25
    
    
    
    10
    
    
    
    146Interest expense, including amortization
    
    
    (6,418
    )
    
    
    (5,161
    )
    
    
    (16,225
    )
    
    
    (14,201
    )Other
    
    
    
    
    
    
    1,007
    
    
    
    65
    
    
    
    1,043(5,705
    )
    
    
    (4,129
    )
    
    
    (17,341
    )
    
    
    (13,012
    )Income before income taxes
    
    
    16,921
    
    
    
    6,869
    
    
    
    39,878
    
    
    
    19,305State income tax
    
    
    (113
    )
    
    
    (84
    )
    
    
    (317
    )
    
    
    (237
    )Net income(8)
    
    
    16,808
    
    
    
    6,785
    
    
    
    39,561
    
    
    
    19,068Less noncontrolling interest in net income(8)
    
    
    269
    
    
    
    164
    
    
    
    1,191
    
    
    
    834Net income attributable to HEP(8)
    
    
    16,539
    
    
    
    6,621
    
    
    
    38,370
    
    
    
    18,234Less general partner interest in net income
attributable to HEP,
including incentive distributions (1)
    
    
    2,022
    
    
    
    1,008
    
    
    
    5,163
    
    
    
    2,736Limited partners interest in net income attributable
to HEP
    
    $
    14,517
    
    
    $
    5,613
    
    
    $
    33,207
    
    
    $
    15,498Limited partners per unit interest in net income
attributable
to HEP  basic and diluted(1)(9)
    
    $
    0.78
    
    
    $
    0.34
    
    
    $
    1.89
    
    
    $
    0.95Weighted average limited partners units outstanding
    
    
    18,520
    
    
    
    16,328
    
    
    
    17,546
    
    
    
    16,279EBITDA(2)
    
    $
    29,888
    
    
    $
    17,725
    
    
    $
    74,831
    
    
    $
    48,785Distributable cash flow(3)
    
    $
    20,678
    
    
    $
    15,749
    
    
    $
    51,677
    
    
    $
    43,452Volumes  barrels per day (bpd)(4)Pipelines:Affiliates  refined product pipelines
    
    
    98,987
    
    
    
    79,192
    
    
    
    85,489
    
    
    
    79,852Affiliates  intermediate pipelines
    
    
    88,053
    
    
    
    54,583
    
    
    
    64,494
    
    
    
    58,014Affiliates  crude pipelines
    
    
    143,902
    
    
    
    132,120
    
    
    
    136,315
    
    
    
    103,465330,942
    
    
    
    265,895
    
    
    
    286,298
    
    
    
    241,331Third parties  refined product pipelines
    
    
    55,384
    
    
    
    25,046
    
    
    
    59,471
    
    
    
    31,635386,326
    
    
    
    290,941
    
    
    
    345,769
    
    
    
    272,966Terminals and loading racks:Affiliates
    
    
    122,413
    
    
    
    102,128
    
    
    
    106,969
    
    
    
    107,611Third parties
    
    
    44,459
    
    
    
    27,845
    
    
    
    42,873
    
    
    
    32,073166,872
    
    
    
    129,973
    
    
    
    149,842
    
    
    
    139,684Total for pipelines and terminal assets (bpd)
    
    
    553,198
    
    
    
    420,914
    
    
    
    495,611
    
    
    
    412,650
 - 30 -




---



##### Table of Contents



(1)
    
    Net income attributable to HEP is allocated between limited partners and the general
partner interest in accordance with the provisions of the partnership agreement. HEP net
income allocated to the general partner includes incentive distributions declared
subsequent to quarter end. General partner incentive distributions for the three months
ended September 30, 2009 and 2008 were $1.7 million and $0.9 million, respectively, and for
the nine months ended September 30, 2009 and 2008 were $4.5 million and $2.4 million,
respectively. HEP net income attributable to the limited partners is divided by the
weighted average limited partner units outstanding in computing the limited partners per
unit interest in HEP net income.(2)
    
    Earnings before interest, taxes, depreciation and amortization (EBITDA) is calculated
as net income attributable to HEP plus (i) interest expense net of interest income, (ii)
state income tax and (iii) depreciation and amortization. EBITDA is not a calculation
based upon U.S. generally accepted accounting principles (U.S. GAAP). However, the
amounts included in the EBITDA calculation are derived from amounts included in our
consolidated financial statements. EBITDA should not be considered as an alternative to
net income or operating income, as an indication of our operating performance or as an
alternative to operating cash flow as a measure of liquidity. EBITDA is not necessarily
comparable to similarly titled measures of other companies. EBITDA is presented here
because it is a widely used financial indicator used by investors and analysts to measure
performance. EBITDA is also used by our management for internal analysis and as a basis
for compliance with financial covenants.  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(In thousands)Net income attributable to HEP
    
    $
    16,539
    
    
    $
    6,621
    
    
    $
    38,370
    
    
    $
    18,234Add (subtract):Interest expense
    
    
    5,314
    
    
    
    4,902
    
    
    
    15,396
    
    
    
    13,462Amortization of discount and
deferred debt issuance costs
    
    
    176
    
    
    
    259
    
    
    
    529
    
    
    
    739Increase in interest expense  change
in fair value of interest rate swaps
    
    
    928
    
    
    
    
    
    
    
    300
    
    
    
    Interest income
    
    
    (2
    )
    
    
    (25
    )
    
    
    (10
    )
    
    
    (146
    )State income tax
    
    
    113
    
    
    
    84
    
    
    
    317
    
    
    
    237Depreciation and amortization
    
    
    6,820
    
    
    
    5,884
    
    
    
    19,929
    
    
    
    16,259EBITDA
    
    $
    29,888
    
    
    $
    17,725
    
    
    $
    74,831
    
    
    $
    48,785
 
 (3)
    
    Distributable cash flow is not a calculation based upon U.S. GAAP. However, the
amounts included in the calculation are derived from amounts separately presented in our
consolidated financial statements, with the exception of maintenance capital expenditures.
Distributable cash flow should not be considered in isolation or as an alternative to net
income or operating income, as an indication of our operating performance or as an
alternative to operating cash flow as a measure of liquidity. Distributable cash flow is
not necessarily comparable to similarly titled measures of other companies. Distributable
cash flow is presented here because it is a widely accepted financial indicator used by
investors to compare partnership performance. We believe that this measure provides
investors an enhanced perspective of the operating performance of our assets and the cash
our business is generating. - 31 -




---



##### Table of Contents



Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(In thousands)Net income attributable to HEP
    
    $
    16,539
    
    
    $
    6,621
    
    
    $
    38,370
    
    
    $
    18,234Add (subtract):Depreciation and amortization
    
    
    6,820
    
    
    
    5,884
    
    
    
    19,929
    
    
    
    16,259Amortization of discount and
deferred debt issuance costs
    
    
    176
    
    
    
    259
    
    
    
    529
    
    
    
    739Increase in interest expense  change
in fair value of interest rate swaps
    
    
    928
    
    
    
    
    
    
    
    300
    
    
    
    Equity in excess cash flows over
earnings of SLC Pipeline
    
    
    167
    
    
    
    
    
    
    
    387
    
    
    
    Increase (decrease) in deferred
revenue
    
    
    (3,407
    )
    
    
    3,857
    
    
    
    (8,076
    )
    
    
    10,638SLC Pipeline acquisition costs*
    
    
    
    
    
    
    
    
    
    
    2,500
    
    
    
    Maintenance capital expenditures**
    
    
    (545
    )
    
    
    (872
    )
    
    
    (2,262
    )
    
    
    (2,418
    )Distributable cash flow
    
    $
    20,678
    
    
    $
    15,749
    
    
    $
    51,677
    
    
    $
    43,452
 *
    
    Under provisions of Accounting Standards Codification (ASC) Topic Business
Combinations (previously Statement of Financial Accounting Standard (SFAS) No.
141(R)), effective January 1, 2009, we were required to expense rather than capitalize
certain acquisition costs of $2.5 million associated with our joint venture agreement
with Plains that closed in March 2009. As these costs directly relate to our interest
in the new joint venture pipeline and are similar to expansion capital expenditures, we
have added back these costs to arrive at distributable cash flow.**
    
    Maintenance capital expenditures are capital expenditures made to replace
partially or fully depreciated assets in order to maintain the existing operating
capacity of our assets and to extend their useful lives.(4)
    
    The amount reported for the nine months ended September 30, 2008 include volumes
transported on the crude pipelines for the period from March 1, 2008 through September 30,
2008 only. Volumes shipped during the months of March through September 2008 averaged
132.5 thousand barrels per day (mbpd). For the nine months ended September 30, 2008,
crude pipeline volumes are based on volumes for the months of March through September,
averaged over the 274 days in the first nine months of 2008. Under the Holly CPTA, fees
are based on volumes transported on each pipeline component comprising the crude pipeline
system (the crude oil gathering pipelines and the crude oil trunk lines). Accordingly,
volumes transported on the crude pipelines represent the sum of volumes transported on both
pipeline components. In cases where volumes are transported over both components of the
crude pipeline system, such volumes are reflected twice in the total crude oil pipeline
volumes. September 30,
    
    December 31,2009
    
    2008(In thousands)Balance Sheet DataCash and cash equivalents
    
    $
    4,050
    
    
    $
    5,269Working capital(5)
    
    $
    4,943
    
    
    $
    (37,832
    )Total assets(6)
    
    $
    518,965
    
    
    $
    439,688Long-term debt(7)
    
    $
    429,819
    
    
    $
    355,793Total equity(6)(8)
    
    $
    59,069
    
    
    $
    8,120
 
 (5)
    
    Working capital at December 31, 2008 reflects $29.0 million of credit agreement
advances that were classified as short-term borrowings.(6)
    
    As a master limited partnership, we distribute our available cash, which historically
has exceeded net income because depreciation and amortization expense represents a non-cash
charge against income. The result is a decline in equity since our regular quarterly
distributions have exceeded our quarterly net income. Additionally, if the assets
transferred to us upon our initial public offering in 2004, the intermediate pipelines
purchased from Holly in 2005 and the Tulsa Loading Racks purchased in August 2009 had been
acquired from third parties, our acquisition - 32 -




---



##### Table of Contents



cost in excess of Hollys basis in the transferred assets of $163.0 million would have been
recorded as increases to our properties and equipment and intangible assets instead of
reductions to equity.(7)
    
    Includes $245.0 million of credit agreement advances that were classified as long-term
debt at September 30, 2009.(8)
    
    On January 1, 2009, we adopted accounting standards under ASC Topic Noncontrolling
Interest in a Subsidiary (previously SFAS No. 160). As a result, net income attributable
to the noncontrolling interest in our Rio Grande subsidiary is now presented as an
adjustment to net income to arrive at Net income attributable to Holly Energy Partners,
L.P. in our Consolidated Statements of Income. Prior to our adoption of these standards,
this amount was presented as Minority interest in Rio Grande, a non-operating expense
item before Income before income taxes. Additionally, equity attributable to
noncontrolling interests in our Rio Grande subsidiary is now presented as a separate
component of total equity in our Consolidated Financial Statements. We have applied these
standards on a retrospective basis. While this presentation differs from previous U.S. GAAP
requirements, it did not affect our net income and equity attributable to HEP.(9)
    
    On January 1, 2009, we also adopted accounting standards under ASC Topic Earnings Per
Share (previously Emerging Issues Task Force (EITF) No. 07-4), which prescribe the
application of the two-class method in computing earnings per unit to reflect a master
limited partnerships contractual obligation to make distributions to the general partner,
limited partners and incentive distribution rights holders. As a result, our quarterly
earnings allocations to the general partner now include incentive distributions that were
declared subsequent to quarter end. Prior to our adoption of these standards, our general
partner earnings allocations included incentive distributions that were declared during
each quarter. We have applied these standards on a retrospective basis. The adoption of
these standards resulted in a decrease in our limited partners interest in net income
attributable to Holly Energy Partners, L.P. for the three and nine months ended September
30, 2008, reducing earnings per limited partner unit by $.01 to $0.34 and $0.95 for the
three and nine months ended September 30, 2008, respectively. Results of Operations  Three Months Ended September 30, 2009 Compared with Three Months Ended
September 30, 2008
 Summary
  Revenues
  - 33 -




---



##### Table of Contents



Operating Costs
  Depreciation and Amortization
  General and Administrative
  Equity in earnings of SLC Pipeline
  Interest Expense
  - 34 -




---



##### Table of Contents



State Income Tax
  Results of Operations  Nine Months Ended September 30, 2009 Compared with Nine Months Ended
September 30, 2008
 Summary
   Revenues
    - 35 -




---



##### Table of Contents



Operating Costs
  Depreciation and Amortization
  General and Administrative
  Equity in earnings of SLC Pipeline
  SLC Pipeline Acquisition Costs
  Interest Expense
  - 36 -




---



##### Table of Contents



State Income Tax
  LIQUIDITY AND CAPITAL RESOURCES
 Overview
        - 37 -




---



##### Table of Contents



Cash Flows  Operating Activities
   Cash Flows  Investing Activities
   Cash Flows  Financing Activities
  - 38 -




---



##### Table of Contents



Capital Requirements
         - 39 -




---



##### Table of Contents



Credit Agreement
    - 40 -




---



##### Table of Contents



Senior Notes Due 2015
    September 30,
    
    
    December 31,2009
    
    
    2008(In thousands)Credit Agreement
    
    $
    245,000
    
    
    $
    200,000Senior NotesPrincipal
    
    
    185,000
    
    
    
    185,000Unamortized discount
    
    
    (2,058
    )
    
    
    (2,344
    )Unamortized premium  de-designated fair value hedge
    
    
    1,877
    
    
    
    2,137184,819
    
    
    
    184,793Total debt
    
    
    429,819
    
    
    
    384,793Less net short-term borrowings under credit agreement(1)
    
    
    
    
    
    
    29,000Total long-term debt(1)
    
    $
    429,819
    
    
    $
    355,793
 
 (1)
    
    We are currently classifying all borrowings under the Credit Agreement as long-term. At
December 31, 2008, we classified certain of our Credit Agreement borrowings as short-term.  - 41 -




---



##### Table of Contents



Contractual Obligations
  Impact of Inflation
   Environmental Matters
     - 42 -




---



##### Table of Contents



CRITICAL ACCOUNTING POLICIES
   Recent Accounting Pronouncements
 Accounting Standards Codification
  Subsequent Events
  Interim Disclosures about Fair Value of Financial Instruments
  Noncontrolling Interests in Consolidated Financial Statements
  - 43 -




---



##### Table of Contents



Business Combinations
  Disclosures about Derivative Instruments and Hedging Activities
  Earnings per Share  Master Limited Partnerships
  Participating Securities  Instruments Granted in Share-Based Transactions
  RISK MANAGEMENT
    - 44 -




---



##### Table of Contents



Balance Sheet

    
    

    
    Location of Offsetting
    
    OffsettingInterest Rate Swaps
    
    Location

    
    Fair Value

    
    Balance
    
    Amount(In thousands)AssetFixed-to-variable interest rate swap
    
    Other assets

    $
    2,658

    
    Long-term debt
    $
    (1,877
)-$60 million of 6.25% Senior Notes
    
    

    
    

    
    HEP partners equity
    
    (1,942
)(1)Interest expense
    
    1,161
(2)$
    2,658

    
    
    $
    (2,658
)LiabilityCash flow hedge - $171 million
    
    Other long-term

    
    

    
    Accumulated otherLIBOR based debt
    
    liabilities

    $
    (10,182
)
    
    comprehensive loss
    $
    10,182Variable-to-fixed interest rate swap
    
    Other long-term

    
    

    
    HEP partners equity
    
    4,166
(1)- $60 million
    
    liabilities

    
    (3,044
)
    
    Interest expense
    
    (1,122
)$
    (13,226
)
    
    
    $
    13,226
 
 (1)
    
    Represents prior year charges to interest expense.(2)
    
    Net of amortization of premium attributable to designated hedge.    - 45 -




---



##### Table of Contents



- 46 -




---



##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risks
   
 Item 4. Controls and Procedures
 (a) Evaluation of disclosure controls and procedures
  (b) Changes in internal control over financial reporting
  - 47 -




---



##### Table of Contents



Item 1. Legal Proceedings
  
 Item 6. Exhibits
 10.1
    
    Asset Purchase Agreement, dated as of August 1, 2009, between Holly Refining &
Marketing  Tulsa LLC and HEP Tulsa LLC (incorporated by reference to Exhibit 10.1 of
Registrants Form 8-K Current Report dated August 6, 2009, File No. 1-32225).10.2
    
    Second Amended and Restated Omnibus Agreement, dated as of August 1, 2009, by and among
Holly Corporation, Holly Energy Partners, L.P., and certain of their respective
subsidiaries (incorporated by reference to Exhibit 10.2 of Registrants Form 8-K Current
Report dated August 6, 2009, File No. 1-32225).10.3
    
    Tulsa Equipment and Throughput Agreement, dated as of August 1, 2009, between Holly
Refining & Marketing  Tulsa LLC and HEP Tulsa LLC (incorporated by reference to Exhibit
10.3 of Registrants Form 8-K Current Report dated August 6, 2009, File No. 1-32225).10.4
    
    Tulsa Purchase Option Agreement, dated as of August 1, 2009, between Holly Refining &
Marketing  Tulsa LLC and HEP Tulsa LLC (incorporated by reference to Exhibit 10.4 of
Registrants Form 8-K Current Report dated August 6, 2009, File No. 1-32225).12.1*
    
    Computation of Ratio of Earnings to Fixed Charges.31.1*
    
    Certification of Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002.31.2*
    
    Certification of Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002.32.1**
    
    Certification of Chief Executive Officer under Section 906 of the Sarbanes-Oxley Act of 2002.32.2**
    
    Certification of Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002.
 
 *
    
    Filed herewith**
    
    Furnished herewith - 48 -




---



##### Table of Contents



SIGNATURES
  HOLLY ENERGY PARTNERS, L.P.(Registrant)By: HEP LOGISTICS HOLDINGS, L.P.its General PartnerBy: HOLLY LOGISTIC SERVICES, L.L.C.its General Partner
 Date: October 30, 2009
    /s/ Bruce R. ShawBruce R. ShawSenior Vice President and
Chief Financial Officer
(Principal Financial Officer)/s/ Scott C. SurplusScott C. SurplusVice President and Controller
(Principal Accounting Officer) - 49 -