##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 (Mark One)
 þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended June 30, 2010
 OR
 o
    
    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the transition period from  to
 Commission file number 1-32963
 Buckeye GP Holdings L.P.
  Delaware
    
    11-3776228(State or other jurisdiction of
    
    (IRS Employerincorporation or organization)
    
    Identification number)One Greenway PlazaSuite 600Houston, TX
    
    77046(Address of principal executive offices)
    
    (Zip Code)
 Registrants telephone number, including area code: (832) 615-8600
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



TABLE OF CONTENTS
 PagePART I. FINANCIAL INFORMATIONItem 1.Financial StatementsCondensed Consolidated Statements of Operations for the Three and Six Months Ended
June 30, 2010 and 2009 (Unaudited)
    
    
    2Condensed Consolidated Balance Sheets as of June 30, 2010 and December 31, 2009
(Unaudited)
    
    
    3Condensed Consolidated Statements of Cash Flows for the Six Months Ended
June 30, 2010 and 2009 (Unaudited)
    
    
    4Condensed Consolidated Statements of Partners Capital for the Six Months Ended
June 30, 2010 and 2009 (Unaudited)
    
    
    5Notes to Unaudited Condensed Consolidated Financial Statements:1. Organization and Basis of Presentation
    
    
    62. Acquisition and Disposition
    
    
    83. Commitments and Contingencies
    
    
    94. Inventories
    
    
    105. Prepaid and Other Current Assets
    
    
    116. Equity Investments
    
    
    117. Intangible Assets
    
    
    128. Other Non-Current Assets
    
    
    129. Accrued and Other Current Liabilities
    
    
    1310. Debt Obligations
    
    
    1311. Other Non-Current Liabilities
    
    
    1612. Derivative Instruments, Hedging Activities and Fair Value Measurements
    
    
    1713. Pensions and Other Postretirement Benefits
    
    
    2314. Unit-Based Compensation Plans
    
    
    2415. Related Party Transactions
    
    
    2616. Cash Distributions
    
    
    2717. Earnings Per Partnership Unit
    
    
    2718. Business Segments
    
    
    2719. Supplemental Cash Flow Information
    
    
    2920. Subsequent Event
    
    
    29Item 2.Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    30Item 3.Quantitative and Qualitative Disclosures About Market Risk
    
    
    49Item 4.Controls and Procedures
    
    
    52PART II. OTHER INFORMATIONItem 1.Legal Proceedings
    
    
    53Item 1A.Risk Factors
    
    
    53Item 6.Exhibits
    
    
    57EX-31.1EX-31.2EX-32.1EX-32.2
  1




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 
 BUCKEYE GP HOLDINGS L.P.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per unit amounts)
(Unaudited)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Revenues:Product sales
    
    $
    501,744
    
    
    $
    201,777
    
    
    $
    1,069,914
    
    
    $
    470,556Transportation and other services
    
    
    165,532
    
    
    
    149,443
    
    
    
    328,536
    
    
    
    297,504Total revenue
    
    
    667,276
    
    
    
    351,220
    
    
    
    1,398,450
    
    
    
    768,060Costs and expenses:Cost of product sales
and natural gas storage services
    
    
    498,645
    
    
    
    193,440
    
    
    
    1,068,382
    
    
    
    444,116Operating expenses
    
    
    68,769
    
    
    
    68,842
    
    
    
    135,352
    
    
    
    142,742Depreciation and amortization
    
    
    14,669
    
    
    
    13,559
    
    
    
    29,197
    
    
    
    26,923Asset impairment expense
    
    
    
    
    
    
    72,540
    
    
    
    
    
    
    
    72,540General and administrative
    
    
    13,254
    
    
    
    10,158
    
    
    
    24,089
    
    
    
    20,193Reorganization expense
    
    
    
    
    
    
    28,113
    
    
    
    
    
    
    
    28,113Total costs and expenses
    
    
    595,337
    
    
    
    386,652
    
    
    
    1,257,020
    
    
    
    734,627Operating income (loss)
    
    
    71,939
    
    
    
    (35,432
    )
    
    
    141,430
    
    
    
    33,433Other income (expense):Investment income
    
    
    85
    
    
    
    142
    
    
    
    240
    
    
    
    294Interest and debt expense
    
    
    (21,350
    )
    
    
    (16,236
    )
    
    
    (43,006
    )
    
    
    (33,639
    )Total other expense
    
    
    (21,265
    )
    
    
    (16,094
    )
    
    
    (42,766
    )
    
    
    (33,345
    )Income (loss) before
earnings from equity investments
    
    
    50,674
    
    
    
    (51,526
    )
    
    
    98,664
    
    
    
    88Earnings from equity investments
    
    
    2,764
    
    
    
    3,142
    
    
    
    5,416
    
    
    
    5,224Net income (loss)
    
    
    53,438
    
    
    
    (48,384
    )
    
    
    104,080
    
    
    
    5,312Less: net income (loss) attributable
to noncontrolling interests
    
    
    (41,931
    )
    
    
    58,156
    
    
    
    (81,303
    )
    
    
    14,609Net income attributable
to Buckeye GP Holdings L.P.
    
    $
    11,507
    
    
    $
    9,772
    
    
    $
    22,777
    
    
    $
    19,921Earnings per partnership unit:Basic
    
    $
    0.41
    
    
    $
    0.35
    
    
    $
    0.80
    
    
    $
    0.70Diluted
    
    $
    0.41
    
    
    $
    0.35
    
    
    $
    0.80
    
    
    $
    0.70Weighted average number
of common units outstanding:Basic
    
    
    28,300
    
    
    
    28,300
    
    
    
    28,300
    
    
    
    28,300Diluted
    
    
    28,300
    
    
    
    28,300
    
    
    
    28,300
    
    
    
    28,300
  2




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BUCKEYE GP HOLDINGS L.P.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (In thousands, except unit amounts)
 (Unaudited)
 June 30,
    
    
    December 31,2010
    
    
    2009Assets:Current assets:Cash and cash equivalents
    
    $
    15,497
    
    
    $
    37,574Trade receivables, net
    
    
    113,576
    
    
    
    124,165Construction and pipeline relocation receivables
    
    
    11,626
    
    
    
    14,095Inventories
    
    
    275,174
    
    
    
    310,214Derivative assets
    
    
    10,093
    
    
    
    4,959Assets held for sale
    
    
    
    
    
    
    22,000Prepaid and other current assets
    
    
    68,574
    
    
    
    104,251Total current assets
    
    
    494,540
    
    
    
    617,258Property, plant and equipment, net
    
    
    2,237,598
    
    
    
    2,238,321Equity investments
    
    
    98,568
    
    
    
    96,851Goodwill
    
    
    432,124
    
    
    
    432,124Intangible assets, net
    
    
    42,931
    
    
    
    45,157Other non-current assets
    
    
    38,118
    
    
    
    56,860Total assets
    
    $
    3,343,879
    
    
    $
    3,486,571Liabilities and partners capital:Current liabilities:Line of credit
    
    $
    194,179
    
    
    $
    239,800Current portion of long-term debt
    
    
    4,599
    
    
    
    6,178Accounts payable
    
    
    64,352
    
    
    
    56,723Derivative liabilities
    
    
    367
    
    
    
    14,665Accrued and other current liabilities
    
    
    127,091
    
    
    
    113,474Total current liabilities
    
    
    390,588
    
    
    
    430,840Long-term debt
    
    
    1,421,181
    
    
    
    1,500,495Other non-current liabilities
    
    
    128,280
    
    
    
    102,942Total liabilities
    
    
    1,940,049
    
    
    
    2,034,277Commitments and contingent liabilities
    
    
    
    
    
    
    Partners capital:Buckeye GP Holdings L.P. capital:General Partner (2,830 common units outstanding
as of June 30, 2010 and December 31, 2009)
    
    
    7
    
    
    
    7Limited Partners (27,771,186 common units outstanding
as of June 30, 2010 and December 31, 2009)
    
    
    234,257
    
    
    
    236,545Management (525,984 units outstanding
as of June 30, 2010 and December 31, 2009)
    
    
    3,182
    
    
    
    3,225Equity gains on issuance of Buckeye Partners, L.P. limited partner units
    
    
    2,557
    
    
    
    2,557Total Buckeye GP Holdings L.P. capital
    
    
    240,003
    
    
    
    242,334Noncontrolling interests
    
    
    1,163,827
    
    
    
    1,209,960Total partners capital
    
    
    1,403,830
    
    
    
    1,452,294Total liabilities and partners capital
    
    $
    3,343,879
    
    
    $
    3,486,571
  3




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##### Table of Contents



BUCKEYE GP HOLDINGS L.P.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In thousands)
 (Unaudited)
 Six Months EndedJune 30,2010
    
    
    2009Cash flows from operating activities:Net income
    
    $
    104,080
    
    
    $
    5,312Adjustments to reconcile net income to cash provided by operating activities:Value of ESOP shares released
    
    
    2,271
    
    
    
    380Depreciation and amortization
    
    
    29,197
    
    
    
    26,923Asset impairment expense
    
    
    
    
    
    
    72,540Net changes in fair value of derivatives
    
    
    (12,901
    )
    
    
    4,672Non-cash deferred lease expense
    
    
    2,117
    
    
    
    2,250Reorganization expense
    
    
    
    
    
    
    28,113Earnings from equity investments of Buckeye Partners, L.P.
    
    
    (5,416
    )
    
    
    (5,224
    )Distributions from equity investments of Buckeye Partners, L.P.
    
    
    3,700
    
    
    
    2,827Amortization of other non-cash items
    
    
    5,060
    
    
    
    3,170Change in assets and liabilities:Trade receivables
    
    
    10,589
    
    
    
    (2,832
    )Construction and pipeline relocation receivables
    
    
    2,469
    
    
    
    4,855Inventories
    
    
    28,065
    
    
    
    (27,742
    )Prepaid and other current assets
    
    
    36,962
    
    
    
    (17,692
    )Accounts payable
    
    
    7,629
    
    
    
    5,236Accrued and other current liabilities
    
    
    11,058
    
    
    
    (5,506
    )Other non-current assets
    
    
    3,370
    
    
    
    (7,069
    )Other non-current liabilities
    
    
    3,701
    
    
    
    9,424Total adjustments from operating activities
    
    
    127,871
    
    
    
    94,325Net cash provided by operating activities
    
    
    231,951
    
    
    
    99,637Cash flows from investing activities:Capital expenditures
    
    
    (27,572
    )
    
    
    (39,819
    )Contributions to equity investments
    
    
    
    
    
    
    (3,880
    )Net proceeds from disposal of property, plant and equipment
    
    
    22,274
    
    
    
    21Net cash used in investing activities
    
    
    (5,298
    )
    
    
    (43,678
    )Cash flows from financing activities:Net proceeds from issuance of Buckeye Partners, L.P. limited partner units
    
    
    
    
    
    
    104,779Proceeds from exercise of Buckeye Partners, L.P. unit options
    
    
    2,976
    
    
    
    38Repayment of long-term debt
    
    
    (3,104
    )
    
    
    (3,162
    )Borrowings under credit facility
    
    
    95,000
    
    
    
    77,333Repayments under credit facility
    
    
    (173,000
    )
    
    
    (166,600
    )Net (repayments) borrowings under BES credit agreement
    
    
    (45,621
    )
    
    
    3,000Debt issuance costs
    
    
    (3,227
    )
    
    
    (18
    )Costs associated with agreement and plan of merger
    
    
    (1,547
    )
    
    
    Distributions paid to noncontrolling partners of Buckeye Partners, L.P.
    
    
    (96,435
    )
    
    
    (87,064
    )Distributions paid to partners
    
    
    (23,772
    )
    
    
    (19,244
    )Net cash used in financing activities
    
    
    (248,730
    )
    
    
    (90,938
    )Net decrease in cash and cash equivalents
    
    
    (22,077
    )
    
    
    (34,979
    )Cash and cash equivalents  Beginning of period
    
    
    37,574
    
    
    
    61,281Cash and cash equivalents  End of period
    
    $
    15,497
    
    
    $
    26,302
  4




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##### Table of Contents



BUCKEYE GP HOLDINGS L.P.
 
 CONDENSED CONSOLIDATED STATEMENTS OF PARTNERS CAPITAL
 (In thousands)
 (Unaudited)
 Buckeye GP Holdings L.P. UnitholdersEquity GainsGeneral
    
    
    Limited
    
    
    
    
    
    
    on IssuancePartner
    
    
    Partner
    
    
    
    
    
    
    of BuckeyesCommon
    
    
    Common
    
    
    Management
    
    
    Limited
    
    
    NoncontrollingUnits
    
    
    Units
    
    
    Units
    
    
    Partner Units
    
    
    Interests
    
    
    TotalBalance  January 1, 2009
    
    $
    7
    
    
    $
    226,565
    
    
    $
    3,037
    
    
    $
    2,451
    
    
    $
    1,166,774
    
    
    $
    1,398,834Net income*
    
    
    
    
    
    
    19,547
    
    
    
    374
    
    
    
    
    
    
    
    (14,609
    )
    
    
    5,312Distributions paid to partners
    
    
    
    
    
    
    (18,883
    )
    
    
    (361
    )
    
    
    
    
    
    
    
    
    
    
    (19,244
    )Recognition of unit-based compensation charges
    
    
    
    
    
    
    718
    
    
    
    16
    
    
    
    
    
    
    
    
    
    
    
    734Equity gains on issuance of Buckeyes
limited partner units
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    106
    
    
    
    (106
    )
    
    
    Net proceeds from issuance of 3.0 million of
Buckeyes limited partner units
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    104,779
    
    
    
    104,779Amortization of Buckeyes
limited partner unit options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    477
    
    
    
    477Exercise of limited partner unit options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    38
    
    
    
    38Services Companys non-cash ESOP distributions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,122
    )
    
    
    (3,122
    )Distributions paid to noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (87,064
    )
    
    
    (87,064
    )Adjustment to funded status of benefit plans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,971
    
    
    
    7,971Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,166
    
    
    
    4,166Balance  June 30, 2009
    
    $
    7
    
    
    $
    227,947
    
    
    $
    3,066
    
    
    $
    2,557
    
    
    $
    1,179,304
    
    
    $
    1,412,881Balance  January 1, 2010
    
    $
    7
    
    
    $
    236,545
    
    
    $
    3,225
    
    
    $
    2,557
    
    
    $
    1,209,960
    
    
    $
    1,452,294Net income*
    
    
    
    
    
    
    22,350
    
    
    
    427
    
    
    
    
    
    
    
    81,303
    
    
    
    104,080Costs associated with agreement and
plan of merger
    
    
    
    
    
    
    (1,941
    )
    
    
    (37
    )
    
    
    
    
    
    
    (1,846
    )
    
    
    (3,824
    )Distributions paid to partners
    
    
    
    
    
    
    (23,327
    )
    
    
    (445
    )
    
    
    
    
    
    
    
    
    
    
    (23,772
    )Recognition of unit-based compensation charges
    
    
    
    
    
    
    630
    
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    642Amortization of Buckeyes
limited partner unit options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,596
    
    
    
    3,596Exercise of limited partner unit options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,976
    
    
    
    2,976Services Companys non-cash ESOP distributions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,639
    )
    
    
    (2,639
    )Distributions paid to noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (96,435
    )
    
    
    (96,435
    )Change in value of derivatives
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (36,600
    )
    
    
    (36,600
    )Investment in Buckeyes limited partner units
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,503
    
    
    
    4,503Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (991
    )
    
    
    (991
    )Balance  June 30, 2010
    
    $
    7
    
    
    $
    234,257
    
    
    $
    3,182
    
    
    $
    2,557
    
    
    $
    1,163,827
    
    
    $
    1,403,830
 
 *
    
    Comprehensive income equals net income.  5




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##### Table of Contents



BUCKEYE GP HOLDINGS L.P.
 
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 Except for per unit amounts, or as otherwise noted within the context of each footnote
disclosure, the dollar amounts presented in the tabular data within these footnote disclosures are
stated in thousands.
 
 1. ORGANIZATION AND BASIS OF PRESENTATION
 Partnership Organization
 we us our BGH Buckeye
    Agreement and Plan of Merger
  6




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##### Table of Contents



BUCKEYE GP HOLDINGS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
      Basis of Presentation
  7




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##### Table of Contents



BUCKEYE GP HOLDINGS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 Reclassifications
  
    
    We have separately disclosed cash flows from the issuance of long-term debt and
borrowings under our credit facilities for the six months ended June 30, 2009. These
amounts had been included within the same line item in the 2009 period.
  Recent Accounting Developments
 Consolidation of Variable Interest Entities (VIEs)
 Fair Value Measurements
 
 2. ACQUISITION AND DISPOSITION
 Refined Petroleum Products Terminals and Pipeline Assets Acquisition
  Inventory
    
    $
    7,287Property, plant and equipment
    
    
    44,400Intangible assets
    
    
    4,580Environmental and other liabilities
    
    
    (1,834
    )Allocated purchase price
    
    $
    54,433
 8




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##### Table of Contents



BUCKEYE GP HOLDINGS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 Sale of Buckeye NGL Pipeline
  
 3. COMMITMENTS AND CONTINGENCIES
 Claims and Proceedings
   Broadbased Equities v. Forrest E. Wylie, et. al
 Henry James Steward v. Forrest E.
Wylie, et. al
 Henry James Steward v.
Forrest E. Wylie, et. al
 Environmental Contingencies
 .
 Ammonia Contract Contingencies
   9




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##### Table of Contents



BUCKEYE GP HOLDINGS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  Customer Bankruptcy
  
 4. INVENTORIES
  June 30,
    
    
    December 31,2010
    
    
    2009Refined petroleum products (1)
    
    $
    264,638
    
    
    $
    299,473Materials and supplies
    
    
    10,536
    
    
    
    10,741Total inventories
    
    $
    275,174
    
    
    $
    310,214
 
 (1)
    
    Ending inventory was 130.4 million and 141.7 million gallons of refined petroleum
products at June 30, 2010 and December 31, 2009, respectively.  10




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BUCKEYE GP HOLDINGS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
 5. PREPAID AND OTHER CURRENT ASSETS
  June 30,
    
    
    December 31,2010
    
    
    2009Prepaid insurance
    
    $
    2,435
    
    
    $
    7,088Insurance receivables
    
    
    11,238
    
    
    
    13,544Ammonia receivable
    
    
    1,690
    
    
    
    7,429Margin deposits
    
    
    7,921
    
    
    
    21,037Prepaid services
    
    
    21,742
    
    
    
    21,571Unbilled revenue
    
    
    2,469
    
    
    
    13,201Tax receivable
    
    
    7,162
    
    
    
    7,162Prepaid taxes
    
    
    4,001
    
    
    
    2,213Other
    
    
    9,916
    
    
    
    11,006Total prepaid and other current assets
    
    $
    68,574
    
    
    $
    104,251
 
 6. EQUITY INVESTMENTS
  June 30,
    
    
    December 31,Ownership
    
    2010
    
    
    2009Muskegon Pipeline LLC
    
    40.0%
    
    $
    14,514
    
    
    $
    15,273Transport4, LLC
    
    25.0%
    
    
    373
    
    
    
    379West Shore Pipe Line Company
    
    24.9%
    
    
    30,526
    
    
    
    30,320West Texas LPG Pipeline Limited Partnership
    
    20.0%
    
    
    53,155
    
    
    
    50,879Total equity investments
    
    
    
    $
    98,568
    
    
    $
    96,851
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Muskegon Pipeline LLC
    
    $
    227
    
    
    $
    173
    
    
    $
    571
    
    
    $
    538Transport4, LLC
    
    
    30
    
    
    
    40
    
    
    
    69
    
    
    
    70West Shore Pipe Line Company
    
    
    1,294
    
    
    
    1,094
    
    
    
    2,501
    
    
    
    2,197West Texas LPG Pipeline Limited
Partnership
    
    
    1,213
    
    
    
    1,835
    
    
    
    2,275
    
    
    
    2,419Total earnings from equity investments
    
    $
    2,764
    
    
    $
    3,142
    
    
    $
    5,416
    
    
    $
    5,224
 11




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BUCKEYE GP HOLDINGS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2010
    
    2009
    
    2010
    
    2009Revenues
    
    $
    35,754
    
    
    $
    32,846
    
    
    $
    67,299
    
    
    $
    64,414Costs and expenses
    
    
    20,343
    
    
    
    16,543
    
    
    
    36,244
    
    
    
    32,613Non-operating expense
    
    
    3,461
    
    
    
    2,961
    
    
    
    7,038
    
    
    
    5,869Net income
    
    
    11,950
    
    
    
    13,342
    
    
    
    24,017
    
    
    
    25,932
 
 7. INTANGIBLE ASSETS
  June 30,
    
    
    December 31,2010
    
    
    2009Customer relationships
    
    $
    38,300
    
    
    $
    38,300Accumulated amortization
    
    
    (7,115
    )
    
    
    (5,631
    )Net carrying amount
    
    
    31,185
    
    
    
    32,669Customer contracts
    
    
    16,380
    
    
    
    16,380Accumulated amortization
    
    
    (4,634
    )
    
    
    (3,892
    )Net carrying amount
    
    
    11,746
    
    
    
    12,488Total intangible assets
    
    $
    42,931
    
    
    $
    45,157
  
 8. OTHER NON-CURRENT ASSETS
  June 30,
    
    
    December 31,2010
    
    
    2009Prepaid services
    
    $
    8,065
    
    
    $
    11,640Derivative assets
    
    
    
    
    
    
    17,204Debt issuance costs
    
    
    12,459
    
    
    
    11,058Insurance receivables
    
    
    7,530
    
    
    
    7,265Other
    
    
    10,064
    
    
    
    9,693Total other non-current assets
    
    $
    38,118
    
    
    $
    56,860
 12




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##### Table of Contents



BUCKEYE GP HOLDINGS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
 9. ACCRUED AND OTHER CURRENT LIABILITIES
  June 30,
    
    
    December 31,2010
    
    
    2009Taxes  other than income
    
    $
    16,278
    
    
    $
    15,487Accrued employee benefit liability
    
    
    3,287
    
    
    
    3,287Environmental liabilities
    
    
    11,549
    
    
    
    10,799Accrued interest
    
    
    30,699
    
    
    
    30,613Payable for ammonia purchase
    
    
    1,803
    
    
    
    7,015Deferred revenue
    
    
    20,306
    
    
    
    6,829Compensation and vacation
    
    
    9,748
    
    
    
    11,385Accrued capital expenditures
    
    
    425
    
    
    
    1,611Reorganization
    
    
    
    
    
    
    2,133Deferred consideration
    
    
    2,010
    
    
    
    1,675Other
    
    
    30,986
    
    
    
    22,640Total accrued and other current liabilities
    
    $
    127,091
    
    
    $
    113,474
 
 10. DEBT OBLIGATIONS
 Long-term debt consists of the following at the dates indicated:
 June 30,
    
    
    December 31,2010
    
    
    2009BGH:BGH Credit Agreement
    
    $
    
    
    
    $
    Services Company:3.60% ESOP Notes due March 28, 2011
    
    
    4,634
    
    
    
    7,790Retirement premium
    
    
    (35
    )
    
    
    (87
    )Buckeye:4.625% Notes due July 15, 2013 (1)
    
    
    300,000
    
    
    
    300,0005.300% Notes due October 15, 2014 (1)
    
    
    275,000
    
    
    
    275,0005.125% Notes due July 1, 2017 (1)
    
    
    125,000
    
    
    
    125,0006.050% Notes due January 15, 2018 (1)
    
    
    300,000
    
    
    
    300,0005.500% Notes due August 15, 2019 (1)
    
    
    275,000
    
    
    
    275,0006.750% Notes due August 15, 2033 (1)
    
    
    150,000
    
    
    
    150,000Credit Facility
    
    
    
    
    
    
    78,000BES Credit Agreement
    
    
    194,179
    
    
    
    239,800Total debt
    
    
    1,623,778
    
    
    
    1,750,503Other, including unamortized discounts and fair value hedges
    
    
    (3,819
    )
    
    
    (4,030
    )Subtotal debt
    
    
    1,619,959
    
    
    
    1,746,473Less: Current portion of long-term debt
    
    
    (198,778
    )
    
    
    (245,978
    )Total long-term debt
    
    $
    1,421,181
    
    
    $
    1,500,495
 
 (1)
    
    We make semi-annual interest payments on these notes based on the rates noted above
with the principal balances outstanding to be paid on or before the due dates as shown
above. 13




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BUCKEYE GP HOLDINGS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  BGH
    Services Company ESOP Notes
  14




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BUCKEYE GP HOLDINGS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 Credit Facility
     BES Credit Agreement
   15




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BUCKEYE GP HOLDINGS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  Borrowings
    
    Minimum
    
    Minimum
    
    Maximumoutstanding on
    
    Consolidated Tangible
    
    Consolidated Net
    
    ConsolidatedBES Credit Agreement
    
    Net Worth
    
    Working Capital
    
    Leverage Ratio$150
    
    $
    40
    
    
    $
    30
    
    
    7.0 to 1.0Above $150 up to $200
    
    $
    50
    
    
    $
    40
    
    
    7.0 to 1.0Above $200 up to $250
    
    $
    60
    
    
    $
    50
    
    
    7.0 to 1.0Above $250 up to $300
    
    $
    72
    
    
    $
    60
    
    
    7.0 to 1.0Above $300 up to $350
    
    $
    84
    
    
    $
    70
    
    
    7.0 to 1.0Above $350 up to $400
    
    $
    96
    
    
    $
    80
    
    
    7.0 to 1.0Above $400 up to $450
    
    $
    108
    
    
    $
    90
    
    
    7.0 to 1.0Above $450 up to $500
    
    $
    120
    
    
    $
    100
    
    
    7.0 to 1.0
   
 11. OTHER NON-CURRENT LIABILITIES
  June 30,
    
    
    December 31,2010
    
    
    2009Accrued employee benefit liabilities (see Note 13)
    
    $
    45,799
    
    
    $
    45,837Accrued environmental liabilities
    
    
    18,891
    
    
    
    19,053Derivative liabilities
    
    
    18,953
    
    
    
    Deferred consideration
    
    
    17,420
    
    
    
    18,425Deferred rent
    
    
    11,275
    
    
    
    9,158Deferred revenue
    
    
    7,082
    
    
    
    1,532Other
    
    
    8,860
    
    
    
    8,937Total other non-current liabilities
    
    $
    128,280
    
    
    $
    102,942
 16




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BUCKEYE GP HOLDINGS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
 12. DERIVATIVE INSTRUMENTS, HEDGING ACTIVITIES AND FAIR VALUE MEASUREMENTS
   Interest Rate Derivatives
    17




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BUCKEYE GP HOLDINGS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  Commodity Derivatives
     Volume (1)
    
    AccountingDerivative Purpose
    
    Current
    
    Long-Term (2)
    
    TreatmentDerivatives NOT designated as hedging
instruments:Fixed-price sales contracts
    
    
    29,050
    
    
    
    168
    
    
    Mark-to-marketFutures contracts for fixed-price sales contracts
    
    
    24,612
    
    
    
    168
    
    
    Mark-to-marketFutures contracts for inventory
    
    
    2,777
    
    
    
    
    
    
    Mark-to-marketDerivatives designated as hedging instruments:Futures contracts for inventory
    
    
    123,522
    
    
    
    
    
    
    Fair Value HedgeFutures contracts for natural gas (BBtu) (3)
    
    
    360
    
    
    
    30
    
    
    Cash Flow Hedge
 
 (1)
    
    Volume represents net notional position.(2)
    
    The maximum term for derivatives included in the long-term column is October 2011.(3)
    
    BBtu represents one billion British thermal units. 18




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BUCKEYE GP HOLDINGS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  June 30, 2010
    
    
    December 31, 2009Derivative
    
    
    
    
    
    
    
    
    
    
    DerivativeAssets
    
    
    (Liabilities)
    
    
    Net Carrying
    
    
    Assets
    
    
    (Liabilities)
    
    
    Net CarryingFair value
    
    
    Fair value
    
    
    Value
    
    
    Fair value
    
    
    Fair value
    
    
    ValueDerivatives NOT designated as hedging 
instruments:Fixed-price sales contracts
    
    $
    5,213
    
    
    $
    (258
    )
    
    $
    4,955
    
    
    $
    4,959
    
    
    $
    (3,662
    )
    
    $
    1,297Futures contracts for fixed-price sales contracts
    
    
    1,492
    
    
    
    (1,806
    )
    
    
    (314
    )
    
    
    7,594
    
    
    
    (384
    )
    
    
    7,210Futures contracts for inventory
    
    
    3,336
    
    
    
    (3,457
    )
    
    
    (121
    )
    
    
    
    
    
    
    
    
    
    
    Derivatives designated as hedging instruments:Futures contracts for inventory
    
    
    8,094
    
    
    
    (2,748
    )
    
    
    5,346
    
    
    
    1,992
    
    
    
    (20,517
    )
    
    
    (18,525
    )Futures contracts for natural gas
    
    
    
    
    
    
    (140
    )
    
    
    (140
    )
    
    
    312
    
    
    
    
    
    
    
    312Interest rate contracts
    
    
    
    
    
    
    (18,953
    )
    
    
    (18,953
    )
    
    
    17,204
    
    
    
    
    
    
    
    17,204Total
    
    
    
    
    
    
    
    
    
    $
    (9,227
    )
    
    
    
    
    
    
    
    
    
    $
    7,498
 June 30,
    
    
    December 31,Balance Sheet Locations:
    
    2010
    
    
    2009Derivative assets
    
    $
    10,093
    
    
    $
    4,959Other non-current assets
    
    
    
    
    
    
    17,204Derivative liabilities
    
    
    (367
    )
    
    
    (14,665
    )Other non-current liabilities
    
    
    (18,953
    )
    
    
    Total
    
    $
    (9,227
    )
    
    $
    7,498
  19




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BUCKEYE GP HOLDINGS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  Gain (Loss) Recognized in Income on DerivativesThree Months Ended
    
    Six Months EndedJune 30,
    
    June 30,Location
    
    2010
    
    2009
    
    2010
    
    2009Derivatives NOT designated as hedging instruments:Fixed-price sales contracts
    
    Product sales
    
    $
    6,268
    
    
    $
    (13,866
    )
    
    $
    8,678
    
    
    $
    (571
    )Futures contracts for fixed-price sales contracts
    
    Cost of product sales and natural gas storage services
    
    
    (2,972
    )
    
    
    19,007
    
    
    
    (3,466
    )
    
    
    11,461Futures contracts for inventory
    
    Cost of product sales and natural gas storage services
    
    
    20
    
    
    
    
    
    
    
    266
    
    
    
    Derivatives designated as fair value hedging instruments:Futures contracts for inventory
    
    Cost of product sales and natural gas storage services
    
    $
    18,123
    
    
    $
    (31,251
    )
    
    $
    13,213
    
    
    $
    (3,603
    )
  Gain (Loss) Reclassified from AOCI to IncomeThree Months Ended
    
    Six Months EndedJune 30,
    
    June 30,Location
    
    2010
    
    2009
    
    2010
    
    2009Derivatives designated as cash flow hedging instruments:Futures contracts for natural gas
    
    Cost of product sales and natural gas storage services
    
    $
    (96
    )
    
    $
    (162
    )
    
    $
    (168
    )
    
    $
    (215
    )Futures contracts for refined petroleum products
    
    Cost of product sales and natural gas storage services
    
    
    
    
    
    
    (379
    )
    
    
    
    
    
    
    (146
    )Interest rate contracts
    
    Interest and debt expense
    
    
    (242
    )
    
    
    (164
    )
    
    
    (482
    )
    
    
    (656
    )
 Change in Value Recognized in OCI on DerivativesThree Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2010
    
    2009
    
    2010
    
    2009Derivatives designated as cash flow hedging instruments:Futures contracts for natural gas
    
    $
    85
    
    
    $
    46
    
    
    $
    (611
    )
    
    $
    163Interest rate contracts
    
    
    (34,853
    )
    
    
    (158
    )
    
    
    (36,157
    )
    
    
    (157
    )
 20




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BUCKEYE GP HOLDINGS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 Fair Value Measurements
   
    
    Level 1 inputs are based on quoted prices, which are available in active markets for
identical assets or liabilities as of the reporting date. Active markets are defined
as those in which transactions for identical assets or liabilities occur with
sufficient frequency and volume to provide pricing information on an ongoing basis.
    
    Level 2 inputs are based on pricing inputs other than quoted prices in active
markets and are either directly or indirectly observable as of the measurement date.
Level 2 fair values include instruments that are valued using financial models or other
appropriate valuation methodologies and include the following:
 §
    
    Quoted prices in active markets for similar assets or liabilities.§
    
    Quoted prices in markets that are not active for identical or similar assets or
liabilities.§
    
    Inputs other than quoted prices that are observable for the asset or liability.§
    
    Inputs that are derived primarily from or corroborated by observable market data
by correlation or other means.
 
    
    Level 3 inputs are based on unobservable inputs for the asset or liability.
Unobservable inputs are used to measure fair value to the extent that observable inputs
are not available, thereby allowing for situations in which there is little, if any,
market activity for the asset or liability at the measurement date. Unobservable
inputs reflect the reporting entitys own ideas about the assumptions that market
participants would use in pricing an asset or liability (including assumptions about
risk). Unobservable inputs are based on the best information available in the
circumstances, which might include the reporting entitys internally developed data.
The reporting entity must not ignore information about market participant assumptions
that is reasonably available without undue cost and effort. Level 3 inputs are
typically used in connection with internally developed valuation methodologies where
management makes its best estimate of an instruments fair value.
 21




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##### Table of Contents



BUCKEYE GP HOLDINGS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 Recurring
  June 30, 2010
    
    
    December 31, 2009Significant
    
    
    
    
    
    
    SignificantQuoted Prices
    
    
    Other
    
    
    Quoted Prices
    
    
    Otherin Active
    
    
    Observable
    
    
    in Active
    
    
    ObservableMarkets
    
    
    Inputs
    
    
    Markets
    
    
    Inputs(Level 1)
    
    
    (Level 2)
    
    
    (Level 1)
    
    
    (Level 2)Financial assets:Fixed-price sales contracts
    
    $
    
    
    
    $
    5,121
    
    
    $
    
    
    
    $
    4,959Futures contracts for inventory
and fixed-price sales contracts
    
    
    4,973
    
    
    
    
    
    
    
    
    
    
    
    Asset held in trust
    
    
    
    
    
    
    
    
    
    
    1,793
    
    
    
    Interest rate derivatives
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,204Financial liabilities:Fixed-price sales contracts
    
    
    
    
    
    
    (166
    )
    
    
    
    
    
    
    (3,662
    )Futures contracts for inventory
and fixed-price sales contracts
    
    
    (202
    )
    
    
    
    
    
    
    (11,003
    )
    
    
    Interest rate derivatives
    
    
    
    
    
    
    (18,953
    )
    
    
    
    
    
    
    Total
    
    $
    4,771
    
    
    $
    (13,998
    )
    
    $
    (9,210
    )
    
    $
    18,501
   22




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BUCKEYE GP HOLDINGS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 Non-Recurring
  June 30,
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total2009
    
    Level 1
    
    Level 2
    
    Level 3
    
    LossesAssets held for sale (1)
    
    $
    5,760
    
    
    $
    
    
    
    $
    
    
    
    $
    5,760
    
    
    $
    72,540
 
 (1)
    
    Represents net assets held for sale that were included in prepaid and other current assets at
June 30, 2009 (see Note 2).  
 13. PENSIONS AND OTHER POSTRETIREMENT BENEFITS
    RIGP
    
    
    Retiree Medical PlanThree Months Ended
    
    
    Three Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Service cost
    
    $
    65
    
    
    $
    207
    
    
    $
    117
    
    
    $
    105Interest cost
    
    
    227
    
    
    
    369
    
    
    
    786
    
    
    
    491Expected return on plan assets
    
    
    (86
    )
    
    
    (189
    )
    
    
    
    
    
    
    Amortization of prior service benefit
    
    
    (11
    )
    
    
    (118
    )
    
    
    (1,175
    )
    
    
    (859
    )Amortization of unrecognized losses
    
    
    242
    
    
    
    355
    
    
    
    354
    
    
    
    261Settlement/curtailment charge (1)
    
    
    
    
    
    
    7,171
    
    
    
    
    
    
    
    800Net periodic benefit costs
    
    $
    437
    
    
    $
    7,795
    
    
    $
    82
    
    
    $
    798
 
 (1)
    
    In connection with Buckeyes reorganization in 2009, $8.0 million of the aggregate
amount of $28.1 million of expenses incurred through June 30, 2009 was recorded as an
adjustment to the funded status of the RIGP and the Retiree Medical Plan, which represent
settlement and curtailment adjustments. 23




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BUCKEYE GP HOLDINGS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  RIGP
    
    
    Retiree Medical PlanSix Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Service cost
    
    $
    133
    
    
    $
    415
    
    
    $
    147
    
    
    $
    210Interest cost
    
    
    459
    
    
    
    740
    
    
    
    991
    
    
    
    983Expected return on plan assets
    
    
    (174
    )
    
    
    (380
    )
    
    
    
    
    
    
    Amortization of prior service benefit
    
    
    (23
    )
    
    
    (235
    )
    
    
    (1,482
    )
    
    
    (1,719
    )Amortization of unrecognized losses
    
    
    490
    
    
    
    712
    
    
    
    447
    
    
    
    522Settlement/curtailment charge (1)
    
    
    
    
    
    
    7,171
    
    
    
    
    
    
    
    800Net periodic benefit costs
    
    $
    885
    
    
    $
    8,423
    
    
    $
    103
    
    
    $
    796
 
 (1)
    
    In connection with Buckeyes reorganization in 2009, $8.0 million of the aggregate
amount of $28.1 million of expenses incurred through June 30, 2009 was recorded as an
adjustment to the funded status of the RIGP and the Retiree Medical Plan, which represent
settlement and curtailment adjustments.  
 14. UNIT-BASED COMPENSATION PLANS
   24




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BUCKEYE GP HOLDINGS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 BGH GPs Override Units
  Number of Override Units
 
    Total  NumberOperating
    
    of UnitsValue A Units
    
    Value B Units
    
    Units
    
    AwardedUnvested at December 31, 2009
    
    
    1,699
    
    
    
    1,699
    
    
    
    812
    
    
    
    4,210Vested
    
    
    
    
    
    
    
    
    
    
    (165
    )
    
    
    (165
    )Unvested at June 30, 2010
    
    
    1,699
    
    
    
    1,699
    
    
    
    647
    
    
    
    4,045
 Compensation Costs for Override UnitsOperatingValue A Units
    
    Value B Units
    
    Units
    
    TotalsTotal fair value of all outstanding override units
    
    $
    3,587
    
    
    $
    2,179
    
    
    $
    5,808
    
    
    $
    11,574Less: Expense recorded from plan inception to
June 30, 2010
    
    
    
    
    
    
    
    
    
    
    (3,984
    )
    
    
    (3,984
    )Estimated future compensation costs at June 30,
2010
    
    $
    3,587
    
    
    $
    2,179
    
    
    $
    1,824
    
    
    $
    7,590
 Buckeyes Long-Term Incentive Plan
   Awards under the LTIP
  25




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##### Table of Contents



BUCKEYE GP HOLDINGS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  WeightedAverageGrant DateNumber of
    
    
    Fair ValueLP Units
    
    

per LP Unit (1)
    
    
    Total ValueUnvested at January 1, 2010
    
    
    140,095
    
    
    $
    39.81
    
    
    $
    5,577Granted
    
    
    257,216
    
    
    
    56.20
    
    
    
    14,455Vested
    
    
    (18,454
    )
    
    
    39.17
    
    
    
    (723
    )Forfeited
    
    
    (11,281
    )
    
    
    48.28
    
    
    
    (545
    )Unvested at June 30, 2010
    
    
    367,576
    
    
    $
    51.05
    
    
    $
    18,764
 
 (1)
    
    Determined by dividing the aggregate grant date fair value of awards by the number of
awards issued. The weighted-average grant date fair value per LP Unit for forfeited and
vested awards is determined before an allowance for forfeitures.  Buckeyes Unit Option and Distribution Equivalent Plan
   
 15. RELATED PARTY TRANSACTIONS
    26




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##### Table of Contents



BUCKEYE GP HOLDINGS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
 16. CASH DISTRIBUTIONS
   
 17. EARNINGS PER PARTNERSHIP UNIT
   Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Basic:Weighted average common units outstanding
    
    
    27,774
    
    
    
    27,770
    
    
    
    27,774
    
    
    
    27,770Weighted average management units outstanding
    
    
    526
    
    
    
    530
    
    
    
    526
    
    
    
    530Units for basic
    
    
    28,300
    
    
    
    28,300
    
    
    
    28,300
    
    
    
    28,300Diluted:Units used for basic calculation
    
    
    28,300
    
    
    
    28,300
    
    
    
    28,300
    
    
    
    28,300Dilutive effect of additional management units
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Units for diluted
    
    
    28,300
    
    
    
    28,300
    
    
    
    28,300
    
    
    
    28,300
 
 18. BUSINESS SEGMENTS
   27




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BUCKEYE GP HOLDINGS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Revenue:Pipeline Operations
    
    $
    99,339
    
    
    $
    98,175
    
    
    $
    195,876
    
    
    $
    197,370Terminalling & Storage
    
    
    40,768
    
    
    
    29,429
    
    
    
    83,139
    
    
    
    60,072Natural Gas Storage
    
    
    21,249
    
    
    
    16,672
    
    
    
    46,655
    
    
    
    31,749Energy Services
    
    
    501,949
    
    
    
    201,676
    
    
    
    1,070,151
    
    
    
    470,156Development & Logistics
    
    
    10,785
    
    
    
    8,805
    
    
    
    18,300
    
    
    
    17,930Intersegment
    
    
    (6,814
    )
    
    
    (3,537
    )
    
    
    (15,671
    )
    
    
    (9,217
    )Total revenue
    
    $
    667,276
    
    
    $
    351,220
    
    
    $
    1,398,450
    
    
    $
    768,060Operating income (loss):Pipeline Operations
    
    
    44,535
    
    
    $
    (51,085
    )
    
    $
    89,900
    
    
    $
    (6,638
    )Terminalling & Storage
    
    
    23,914
    
    
    
    11,115
    
    
    
    47,039
    
    
    
    21,772Natural Gas Storage
    
    
    3,302
    
    
    
    5,817
    
    
    
    6,753
    
    
    
    11,981Energy Services
    
    
    (471
    )
    
    
    (1,432
    )
    
    
    (3,868
    )
    
    
    4,784Development & Logistics
    
    
    659
    
    
    
    153
    
    
    
    1,606
    
    
    
    1,534Total operating income (loss)
    
    $
    71,939
    
    
    $
    (35,432
    )
    
    $
    141,430
    
    
    $
    33,433Depreciation and amortization:Pipeline Operations
    
    
    9,079
    
    
    $
    8,984
    
    
    $
    18,032
    
    
    $
    17,823Terminalling & Storage
    
    
    2,349
    
    
    
    1,866
    
    
    
    4,665
    
    
    
    3,588Natural Gas Storage
    
    
    1,640
    
    
    
    1,243
    
    
    
    3,281
    
    
    
    2,702Energy Services
    
    
    1,176
    
    
    
    983
    
    
    
    2,371
    
    
    
    1,960Development & Logistics
    
    
    425
    
    
    
    483
    
    
    
    848
    
    
    
    850Total depreciation and amortization
    
    $
    14,669
    
    
    $
    13,559
    
    
    $
    29,197
    
    
    $
    26,923Capital additions, net:(1)Pipeline Operations
    
    
    
    
    
    
    
    
    
    $
    14,252
    
    
    $
    12,561Terminalling & Storage
    
    
    
    
    
    
    
    
    
    
    7,621
    
    
    
    12,021Natural Gas Storage
    
    
    
    
    
    
    
    
    
    
    3,292
    
    
    
    12,906Energy Services
    
    
    
    
    
    
    
    
    
    
    2,064
    
    
    
    1,802Development & Logistics
    
    
    
    
    
    
    
    
    
    
    343
    
    
    
    529Total capital additions, net
    
    
    
    
    
    
    
    
    
    $
    27,572
    
    
    $
    39,819Contributions to equity investments:Pipeline Operations
    
    
    
    
    
    
    
    
    
    $
    
    
    
    $
    3,880Total contributions to equity investments
    
    
    
    
    
    
    
    
    
    $
    
    
    
    $
    3,880
 
 (1)
    
    Amount excludes ($1.2) million and ($0.9) million of non-cash changes in accruals for
capital expenditures for the six months ended June 30, 2010 and 2009, respectively (see Note
19). 28




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BUCKEYE GP HOLDINGS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 June 30,
    
    
    December 31,2010
    
    
    2009Total Assets:Pipeline Operations (1)
    
    $
    1,536,124
    
    
    $
    1,592,916Terminalling & Storage
    
    
    526,720
    
    
    
    532,971Natural Gas Storage
    
    
    548,061
    
    
    
    573,261Energy Services
    
    
    436,271
    
    
    
    482,025Development & Logistics
    
    
    63,159
    
    
    
    74,476Consolidating level
    
    
    233,544
    
    
    
    230,922Total assets
    
    $
    3,343,879
    
    
    $
    3,486,571Goodwill:Pipeline Operations
    
    $
    198,632
    
    
    $
    198,632Terminalling & Storage
    
    
    49,618
    
    
    
    49,618Natural Gas Storage
    
    
    169,560
    
    
    
    169,560Energy Services
    
    
    1,132
    
    
    
    1,132Development & Logistics
    
    
    13,182
    
    
    
    13,182Total goodwill
    
    $
    432,124
    
    
    $
    432,124
 
 (1)
    
    All equity investments are included in the assets of the Pipeline Operations segment. 
 19. SUPPLEMENTAL CASH FLOW INFORMATION
  Six Months EndedJune 30,2010
    
    2009Cash paid for interest (net of capitalized interest)
    
    $
    40,165
    
    
    $
    33,349Cash paid for income taxes
    
    
    419
    
    
    
    1,298Capitalized interest
    
    
    1,117
    
    
    
    2,684Non-cash changes in assets and liabilities:Change in capital expenditures in accounts payable
    
    $
    (1,186
    )
    
    $
    (865
    )
 
 20. SUBSEQUENT EVENT
  29




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Item 2. Managements Discussion and Analysis of Financial Condition and Results
of Operations
   Cautionary Note Regarding Forward-Looking Statements
 This discussion contains various forward-looking statements and information that are based on
our beliefs, as well as assumptions made by us and information currently available to us. When
used in this document, words such as proposed, anticipate, project, potential, could,
should, continue, estimate, expect, may, believe, will, plan, seek, outlook and
similar expressions and statements regarding our plans and objectives for future operations are
intended to identify forward-looking statements. Although we believe that such expectations
reflected in such forward-looking statements are reasonable, we cannot give any assurances that
such expectations will prove to be correct. Such statements are subject to a variety of risks,
uncertainties and assumptions as described in more detail in Item 1A Risk Factors included in our
Annual Report on Form 10-K for the year ended December 31, 2009 and in this quarterly report on
Form 10-Q. If one or more of these risks or uncertainties materialize, or if underlying
assumptions prove incorrect, our actual results may vary materially from those anticipated,
estimated, projected or expected. You should not put undue reliance on any forward-looking
statements. The forward-looking statements in this Quarterly Report speak only as of the date
hereof. Except as required by federal and state securities laws, we undertake no obligation to
publicly update or revise any forward-looking statements, whether as a result of new information,
future events or any other reason.
 Overview of Critical Accounting Policies and Estimates
  Overview of BGH
 we us our BGH Buckeye
 30




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##### Table of Contents




    
    the incentive distribution rights in Buckeye;
    
    the indirect ownership of the general partner interests in certain of Buckeyes
operating subsidiaries (representing an approximate 1% interest in each of such
operating subsidiaries);
    
    the general partner interests in Buckeye (representing 243,914 general partner units
(the GP Units), or an approximate 0.5% interest in Buckeye); and
    
    80,000 of Buckeyes LP Units.
    Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Incentive payments from Buckeye
    
    $
    12,604
    
    
    $
    11,466
    
    
    $
    24,918
    
    
    $
    21,971Distributions from the indirect 1% ownership
in certain of Buckeyes operating
subsidiaries
    
    
    
    
    
    
    534
    
    
    
    403
    
    
    
    896Distributions from the ownership of 243,914
of Buckeyes GP Units
    
    
    231
    
    
    
    220
    
    
    
    460
    
    
    
    436Distributions from the ownership of 80,000 of
Buckeyes LP Units
    
    
    76
    
    
    
    72
    
    
    
    151
    
    
    
    143Cash received
    
    $
    12,911
    
    
    $
    12,292
    
    
    $
    25,932
    
    
    $
    23,446
 Overview of Buckeye Partners, L.P.
   31




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Recent Developments
 Agreement and Plan of Merger
       Amendment to BES Credit Agreement
  32




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##### Table of Contents



Purchase of Additional Interest in West Shore Pipe Line Company
  Sale of Buckeye NGL Pipeline
  Results of Operations
  
    
    Interest of noncontrolling partners in Buckeye  Our condensed consolidated balance
sheets include a noncontrolling interests capital account that reflects the proportion of
Buckeye owned by its partners other than us. Similarly, the ownership interests in Buckeye
held by its partners other than us are reflected in our condensed consolidated statements
of operations as income attributable to noncontrolling interests. These noncontrolling
interest accounts are not reflected in Buckeyes condensed consolidated financial
statements.
    
    Our capital structure  In addition to incorporating the assets and liabilities of
Buckeye, our condensed consolidated balance sheets include our own indebtedness and related
debt placement costs, and the partners capital on our condensed consolidated balance
sheets represent our partners capital as opposed to the capital reflected in Buckeyes
condensed consolidated balance sheets, which reflects the ownership interest of all its
partners, including its owners other than us or Services Company. Consequently, our
condensed consolidated statements of operations reflect additional interest expense,
interest income and debt amortization expense that is not reflected in Buckeyes condensed
consolidated financial statements.
    
    Inclusion of Services Company  The financial statements of Services Company, which
employs the employees who manage and operate our assets, are consolidated into our
financial statements. The condensed consolidated financial statements of Buckeye do not
include the financial statements of Services Company.
    
    Our general and administrative expenses  We incur general and administrative expenses
that are independent from Buckeyes operations and are not reflected in Buckeyes condensed
consolidated financial statements.
    
    Elimination of intercompany transactions  Intercompany obligations and payments among
Buckeye and its consolidated subsidiaries, us and Services Company are reflected in
Buckeyes condensed consolidated financial statements but are eliminated in our condensed
consolidated financial statements.
 33




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##### Table of Contents



Segment Results
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Revenues:Pipeline Operations
    
    $
    99,339
    
    
    $
    98,175
    
    
    $
    195,876
    
    
    $
    197,370Terminalling & Storage
    
    
    40,768
    
    
    
    29,429
    
    
    
    83,139
    
    
    
    60,072Natural Gas Storage
    
    
    21,249
    
    
    
    16,672
    
    
    
    46,655
    
    
    
    31,749Energy Services
    
    
    501,949
    
    
    
    201,676
    
    
    
    1,070,151
    
    
    
    470,156Development & Logistics
    
    
    10,785
    
    
    
    8,805
    
    
    
    18,300
    
    
    
    17,930Intersegment
    
    
    (6,814
    )
    
    
    (3,537
    )
    
    
    (15,671
    )
    
    
    (9,217
    )Total revenues
    
    $
    667,276
    
    
    $
    351,220
    
    
    $
    1,398,450
    
    
    $
    768,060Total costs and expenses:(1)Pipeline Operations
    
    $
    54,804
    
    
    $
    149,260
    
    
    $
    105,976
    
    
    $
    204,008Terminalling & Storage
    
    
    16,854
    
    
    
    18,314
    
    
    
    36,100
    
    
    
    38,300Natural Gas Storage
    
    
    17,947
    
    
    
    10,855
    
    
    
    39,902
    
    
    
    19,768Energy Services
    
    
    502,420
    
    
    
    203,108
    
    
    
    1,074,019
    
    
    
    465,372Development & Logistics
    
    
    10,126
    
    
    
    8,652
    
    
    
    16,694
    
    
    
    16,396Intersegment
    
    
    (6,814
    )
    
    
    (3,537
    )
    
    
    (15,671
    )
    
    
    (9,217
    )Total costs and expenses
    
    $
    595,337
    
    
    $
    386,652
    
    
    $
    1,257,020
    
    
    $
    734,627Depreciation and amortization:Pipeline Operations
    
    $
    9,079
    
    
    $
    8,984
    
    
    $
    18,032
    
    
    $
    17,823Terminalling & Storage
    
    
    2,349
    
    
    
    1,866
    
    
    
    4,665
    
    
    
    3,588Natural Gas Storage
    
    
    1,640
    
    
    
    1,243
    
    
    
    3,281
    
    
    
    2,702Energy Services
    
    
    1,176
    
    
    
    983
    
    
    
    2,371
    
    
    
    1,960Development & Logistics
    
    
    425
    
    
    
    483
    
    
    
    848
    
    
    
    850Total depreciation and amortization
    
    $
    14,669
    
    
    $
    13,559
    
    
    $
    29,197
    
    
    $
    26,923Asset impairment expense:Pipeline Operations
    
    $
    
    
    
    $
    72,540
    
    
    $
    
    
    
    $
    72,540Reorganization expense:Pipeline Operations
    
    $
    
    
    
    $
    23,054
    
    
    $
    
    
    
    $
    23,054Terminalling and Storage
    
    
    
    
    
    
    2,402
    
    
    
    
    
    
    
    2,402Natural Gas Storage
    
    
    
    
    
    
    291
    
    
    
    
    
    
    
    291Energy Services
    
    
    
    
    
    
    944
    
    
    
    
    
    
    
    944Development and Logistics
    
    
    
    
    
    
    1,422
    
    
    
    
    
    
    
    1,422Total reorganization expense
    
    $
    
    
    
    $
    28,113
    
    
    $
    
    
    
    $
    28,113Operating income (loss):Pipeline Operations
    
    $
    44,535
    
    
    $
    (51,085
    )
    
    $
    89,900
    
    
    $
    (6,638
    )Terminalling & Storage
    
    
    23,914
    
    
    
    11,115
    
    
    
    47,039
    
    
    
    21,772Natural Gas Storage
    
    
    3,302
    
    
    
    5,817
    
    
    
    6,753
    
    
    
    11,981Energy Services
    
    
    (471
    )
    
    
    (1,432
    )
    
    
    (3,868
    )
    
    
    4,784Development & Logistics
    
    
    659
    
    
    
    153
    
    
    
    1,606
    
    
    
    1,534Total operating income (loss)
    
    $
    71,939
    
    
    $
    (35,432
    )
    
    $
    141,430
    
    
    $
    33,433
 
 (1)
    
    Total costs and expenses includes depreciation and amortization, asset impairment expense and
reorganization expense. 34




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Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Attributable to Buckeye
    
    $
    593,437
    
    
    $
    385,728
    
    
    $
    1,253,591
    
    
    $
    732,465Elimination of Buckeye deferred charge
    
    
    (1,175
    )
    
    
    (1,175
    )
    
    
    (2,349
    )
    
    
    (2,349
    )Net effect of ESOP charges
    
    
    1,211
    
    
    
    246
    
    
    
    2,086
    
    
    
    645Attributable to BGH
    
    
    1,864
    
    
    
    1,853
    
    
    
    3,692
    
    
    
    3,866Total costs and expenses
    
    $
    595,337
    
    
    $
    386,652
    
    
    $
    1,257,020
    
    
    $
    734,627
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Payroll and payroll benefits
    
    $
    1,109
    
    
    $
    1,182
    
    
    $
    2,225
    
    
    $
    2,369Professional fees
    
    
    311
    
    
    
    359
    
    
    
    432
    
    
    
    656Other
    
    
    444
    
    
    
    312
    
    
    
    1,035
    
    
    
    841Total
    
    $
    1,864
    
    
    $
    1,853
    
    
    $
    3,692
    
    
    $
    3,866
   Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Pipeline Operations (average bpd):Gasoline
    
    
    668,900
    
    
    
    685,700
    
    
    
    639,100
    
    
    
    659,200Jet fuel
    
    
    339,300
    
    
    
    345,100
    
    
    
    330,900
    
    
    
    339,200Diesel fuel
    
    
    223,100
    
    
    
    193,200
    
    
    
    225,300
    
    
    
    207,500Heating oil
    
    
    36,100
    
    
    
    52,200
    
    
    
    74,800
    
    
    
    91,500LPGs
    
    
    21,300
    
    
    
    18,800
    
    
    
    20,900
    
    
    
    16,600NGLs
    
    
    
    
    
    
    20,500
    
    
    
    
    
    
    
    20,900Other products
    
    
    3,700
    
    
    
    10,000
    
    
    
    2,100
    
    
    
    11,700Total Pipeline Operations
    
    
    1,292,400
    
    
    
    1,325,500
    
    
    
    1,293,100
    
    
    
    1,346,600Terminalling & Storage (average bpd):Products throughput (1)
    
    
    570,000
    
    
    
    459,800
    
    
    
    563,200
    
    
    
    470,200Energy Services (in thousands of gallons):Sales volumes
    
    
    235,100
    
    
    
    134,000
    
    
    
    502,100
    
    
    
    317,000
 
 (1)
    
    Reported quantities exclude transfer volumes, which are non-revenue generating transfers
among our various terminals. For the three and six months ended June 30, 2009, we previously
reported 489.4 thousand and 505.1 thousand, respectively, which included transfer volumes. 35




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Three Months Ended June 30, 2010 Compared to Three Months Ended June 30, 2009
 Consolidated
 Consolidated income attributable to unitholders
 Revenue.
 
    
    an increase of $300.2 million in revenue from the Energy Services segment, resulting
from an overall increase in refined petroleum product prices and volumes of product
sold during the three months ended June 30, 2010 as compared to the corresponding
period in 2009;
    
    an increase of $11.4 million in revenue from the Terminalling & Storage segment,
resulting from increased throughput volumes, increased fees, storage and rental
revenue, including $1.5 million in storage fees from previously underutilized tankage
identified in connection with our best practices initiative and other marketing
opportunities, increased revenue from the contribution of terminals acquired in
November 2009 and favorable settlement experience;
    
    an increase of $4.5 million in revenue from the Natural Gas Storage segment,
resulting primarily from higher fees from hub services transactions recognized as
revenue, partially offset by reduced lease revenues as a result of general market
conditions, including reduced market-based fees charged for storage services as a
result of high storage inventory levels in the western region, above normal
temperatures and general uncertainty regarding the economic recovery;
    
    an increase of $2.0 million in revenue from the Development & Logistics segment,
resulting primarily from the sale of ammonia linefill; and
    
    an increase of $1.1 million in revenue from the Pipeline Operations segment,
resulting from the benefit of higher tariffs, favorable settlement experience,
increased revenues from the contribution of pipeline assets acquired in November 2009
and increased other revenues.
 Total Costs and Expenses.
 
    
    an increase in refined petroleum product prices, which, coupled with an increase in
volumes sold, resulted in a $299.7 million increase in the Energy Services segments
cost of product sales in the 2010 period as compared to the 2009 period;
    
    an increase of $7.1 million in the Natural Gas Storage segments costs and expenses
resulting from higher costs associated with hub services transactions recognized as
expense caused primarily by general market conditions as discussed above;
    
    an increase in the Development & Logistics segments costs and expenses due to $2.4
million of expenses related to the write-off in the 2010 period of a portion of an
outstanding receivable balance and other costs associated with a customer bankruptcy
(see Note 3 in the Notes to Unaudited Condensed Consolidated Financial Statements for
further discussion); and
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
    
    an increase of $1.0 million in depreciation and amortization, primarily due to
expense on assets placed in service in the second half of 2009 in connection with the
Kirby Hills Phase II expansion project, and certain internal-use software, which was
placed in service in the fourth quarter of 2009, and an increase of $1.1 million in
non-cash unit-based compensation expense.
   
    
    a decrease in costs and expenses of the Pipeline Operations segment, resulting
substantially from a decrease related to the asset impairment expense and the
organizational restructuring charges recognized in the 2009 period as discussed above
and lower payroll and benefits costs, which was primarily attributable to the
organizational restructuring that occurred in 2009 and resulted in reduced headcount,
partially offset by increased integrity program expenses and increased professional
fees; and
    
    a decrease in costs and expenses of the Terminalling & Storage segment, resulting
primarily from a decrease related to expenses for organizational restructuring
recognized in the 2009 period and decreased payroll and benefits costs, partially
offset by higher environmental remediation expenses and higher operating expenses for
terminals acquired in November 2009.
 Operating Income.
 Income attributable to noncontrolling interests.
  Pipeline Operations
 Revenue
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Total Costs and Expenses
 Operating Income
 Terminalling & Storage
 Revenue
 Total Costs and Expenses
 Operating Income
 38




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Natural Gas Storage
 Revenue
 Total Costs and Expenses
 Operating Income
 Energy Services
 Revenue
 Total Costs and Expenses
 39




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Operating Income (loss)
 Development & Logistics
 Revenue
 Total Costs and Expenses
 Operating Income
 Six Months Ended June 30, 2010 Compared to Six Months Ended June 30, 2009
 Consolidated
  Revenue
 
    
    an increase of $600.0 million in revenue from the Energy Services segment, resulting
from an overall increase in refined petroleum product prices and volumes of product
sold during the six months ended June 30, 2010 as compared to the corresponding period
in 2009;
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
    
    an increase of $23.0 million in revenue from the Terminalling & Storage segment,
resulting from increased throughput volumes, increased fees, storage and rental
revenue, including $3.2 million in storage fees from previously underutilized tankage
identified in connection with our best practices initiative and other marketing
opportunities, increased revenue from the contribution of terminals acquired in
November 2009 and favorable settlement experience;
    
    an increase of $15.0 million in revenue from the Natural Gas Storage segment,
resulting primarily from higher fees from hub services transactions recognized as
revenue; and
    
    an increase of $0.4 million in revenue from the Development & Logistics segment,
resulting primarily from the sale of ammonia linefill.
  
    
    a decrease of $1.5 million in revenue from the Pipeline Operations segment,
resulting primarily from lower transportation volumes and lower other revenue,
partially offset by increased tariffs, favorable settlement experience and increased
revenues from the contribution of pipeline assets acquired in November 2009.
 Total Costs and Expenses
 
    
    an increase in refined petroleum product prices, which, coupled with an increase in
volume sold, resulted in a $609.6 million increase in the Energy Services segments
cost of product sales in the 2010 period as compared to the 2009 period;
    
    an increase of $20.2 million in the Natural Gas Storage segments costs and expenses
resulting from higher costs associated with hub services transactions recognized as
expense caused primarily by general market conditions;
    
    an increase of $2.3 million in depreciation and amortization, primarily due to
expense on assets placed in service in the second half of 2009 in connection with the
Kirby Hills Phase II expansion project, and certain internal-use software, which was
placed in service in the fourth quarter of 2009, and an increase of $2.3 million in
non-cash unit-based compensation expense; and
    
    an increase of $0.3 million in the Development & Logistics segments costs and
expense reflecting $2.4 million of expenses related to the write-off in the 2010 period
of a portion of an outstanding receivable balance and other costs associated with a
customer bankruptcy and increased operating services activities in the 2010 period,
partially offset by a decrease of $1.4 million related to an organizational
restructuring recognized in the 2009 period and reduced construction contract activity
in the 2010 period.
   
    
    a decrease in costs and expenses of the Pipeline Operations segment, resulting
substantially from a decrease related to the asset impairment expense and the
organizational restructuring charges recognized in the 2009 period as discussed above
and lower payroll and benefits costs, which was primarily attributable to the
organizational restructuring that occurred in 2009 and resulted in reduced headcount,
as well as from lower contract service activities, lower environmental remediation
expenses, lower contract service activities and lower operating power costs due to
lower transportation volumes and power contract renegotiations as part of our best
practices initiative; and
 41




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
    
    a decrease in costs and expenses of the Terminalling & Storage segment, resulting
primarily from a decrease related to expenses for organizational restructuring
recognized in the 2009 period, lower environmental remediation expenses and lower
payroll and benefits costs, partially offset by higher operating expense for terminals
acquired in November 2009 and higher bad debt expense.
 Operating Income
 Income attributable to noncontrolling interests.
  Pipeline Operations
 Revenue
 Total Costs and Expenses
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Operating Income
 Terminalling & Storage
 Revenue
 Total Costs and Expenses
 Operating Income
 Natural Gas Storage
 Revenue
 Total Costs and Expenses
 43




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Operating Income
 Energy Services
 Revenue
 Total Costs and Expenses
 Operating Income (loss )
 Development & Logistics
 Revenue
 Total Costs and Expenses
 44




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Operating Income
 Liquidity and Capital Resources
 BGH
     Services Company
  Buckeye
  45




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
    
    $300.0 million of 4.625% Notes due 2013 (the 4.625% Notes);
    
    $275.0 million of 5.300% Notes due 2014 (the 5.300% Notes);
    
    $125.0 million of 5.125% Notes due 2017 (the 5.125% Notes);
    
    $300.0 million of 6.050% Notes due 2018 (the 6.050% Notes);
    
    $275.0 million of 5.500% Notes due 2019 (the 5.500% Notes);
    
    $150.0 million of 6.750% Notes due 2033 (the 6.750% Notes); and
    
    $194.2 million outstanding under the BES Credit Agreement.
   Registration Statement
  Cash Flows from Operating, Investing and Financing Activities
  Six Months EndedJune 30,2010
    
    2009Cash provided by (used in):Operating activities
    
    $
    231,951
    
    
    $
    99,637Investing activities
    
    
    (5,298
    )
    
    
    (43,678
    )Financing activities
    
    
    (248,730
    )
    
    
    (90,938
    )
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Operating Activities
  
    
    The net change in fair values of derivatives was a decrease of $12.9 million to cash
flows from operating activities for the six months ended June 30, 2010, resulting from
the increase in value related to fixed-price sales contracts compared to a lower level
of opposite fluctuations in futures contracts purchased to hedge such fluctuations.
    
    The net impact of working capital changes was an increase of $96.8 million to cash
flows from operating activities for the six months ended June 30, 2010. The principal
factors affecting the working capital changes were:
 o
    
    Prepaid and other current assets decreased by $37.0 million
primarily due to a decrease in margin deposits on futures contracts in our
Energy Services segment as a result of increased commodity prices during the
six months ended June 30, 2010 (increased commodity prices result in an
increase in our broker equity account and therefore less margin deposit is
required), a decrease in unbilled revenue within our Natural Gas Storage
segment reflecting billings to counterparties in accordance with terms of their
storage agreements, a decrease in receivables related to ammonia contracts and
a decrease in prepaid insurance due to continued amortization of the balance
over the policy period.o
    
    Inventories decreased by $28.1 million due to a decrease in
volume of hedged inventory stored by the Energy Services segment. From time to
time, the Energy Services segment stores hedged inventory to attempt to capture
value when market conditions are economically favorable.o
    
    Trade receivables decreased by $10.6 million primarily due to
the timing of collections from customers, partially offset by increased
activity from our Energy Services segment due to higher volumes and higher
commodity prices in the 2010 period.o
    
    Accrued and other current liabilities increased by $11.1
million primarily due to increases in unearned revenue primarily in the Natural
Gas Storage segment as a result of increased hub services contracts during the
six months ended June 30, 2010 for which the customer is billed up front for
services provided over the entire term of the contract, partially offset by the
payment of accrued ammonia purchases during the period and a reduction in the
reorganization accrual.o
    
    Accounts payable increased by $7.6 million primarily due to
higher payable balances at June 30, 2010 as a result of increased trading
activity at BES resulting from increased volumes and increased commodity prices
during the period.o
    
    Construction and pipeline relocation receivables decreased by
$2.5 million primarily due to a decrease in construction activity in the 2010
period.
 Investing Activities
 
 
    
    Capital expenditures decreased by $12.2 million for the six months ended June 30,
2010 compared with the six months ended June 30, 2009. See below for a discussion of
capital spending.
    
    We contributed $3.9 million to West Texas LPG Pipeline Limited Partnership in the
six months ended June 30, 2009 for our pro-rata share of an expansion project required
to meet increased pipeline demand caused by increased product production in the Fort
Worth basin and East Texas regions.
    
    Cash proceeds from the sale of the Buckeye NGL Pipeline were $22.0 million during
the six months ended June 30, 2010.
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Six Months EndedJune 30,2010
    
    
    2009Sustaining capital expenditures
    
    $
    9,195
    
    
    $
    7,773Expansion and cost reduction
    
    
    18,377
    
    
    
    32,046Total capital expenditures, net
    
    $
    27,572
    
    
    $
    39,819
   Financing Activities
 
 
    
    Buckeye borrowed $95.0 million and $77.3 million and repaid $173.0 million and
$166.6 million under its Credit Facility during the six months ended June 30, 2010 and
2009, respectively.
    
    Net repayments under the BES Credit Agreement were $45.6 million during the six
months ended June 30, 2010, while net borrowings under the BES Credit Agreement were
$3.0 million during the six months ended June 30, 2009.
    
    We incurred $3.2 million of debt issuance costs during the six months ended June 30,
2010 related to the amendment to the BES Credit Agreement in June 2010 (see Note 10 in
the Notes to Unaudited Condensed Consolidated Financial Statements).
    
    We received $3.0 million in net proceeds from the exercise of Buckeyes LP Unit
options during the six months ended June 30, 2010. We received $104.8 million in net
proceeds from an underwritten equity offering in March and April of 2009 for Buckeyes
public issuance of 3.0 million LP Units.
    
    Cash distributions paid to our partners increased by $4.6 million period-to-period
due to an increase in our quarterly cash distribution rate per Common Unit. We paid
cash distributions of $23.8 million ($0.84 per Common Unit) and $19.2 million ($0.68
per Common Unit) during the six months ended June 30, 2010 and 2009, respectively.
    
    We paid $1.5 million of costs associated with the Merger during the six months ended
June 30, 2010.
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Derivatives
 
 Other Considerations
 Contractual Obligations
   Off-Balance Sheet Arrangements
  Related Party Transactions
  Recent Accounting Pronouncements
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
 Market Risk  Trading Instruments
  Market Risk  Non-Trading Instruments
  Commodity Risk
 Natural Gas Storage
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##### Table of Contents



June 30,2010Assets:Hub service agreements
    
    $
    32,394Liabilities:Hub service agreements
    
    
    (26,750
    )Total
    
    $
    5,644
 Energy Services
    June 30,2010Assets:Fixed-price sales contracts
    
    $
    5,121Futures contracts for inventory and fixed-price sales contracts
    
    
    4,973Liabilities:Fixed-price sales contracts
    
    
    (166
    )Futures contracts for inventory and fixed-price sales contracts
    
    
    (202
    )Total
    
    $
    9,726
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CommodityFinancialInstrumentResulting
    
    PortfolioScenario
    
    Classification
    
    Fair ValueFair value assuming no change in underlying
commodity prices (as is)
    
    Asset
    
    $
    9,726Fair value assuming 10% increase in underlying
commodity prices
    
    Liability
    
    $
    (3,589
    )Fair value assuming 10% decrease in underlying
commodity prices
    
    Asset
    
    $
    23,044
   Interest Rate Risk
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##### Table of Contents



FinancialInstrumentResulting
    
    PortfolioScenario
    
    Classification
    
    Fair ValueFair value assuming no change in underlying
interest rates (as is)
    
    Liability
    
    $
    (18,953
    )Fair value assuming 10% increase in underlying
interest rates
    
    Asset
    
    $
    414Fair value assuming 10% decrease in underlying
interest rates
    
    Liability
    
    $
    (39,148
    )
 
 Item 4. Controls and Procedures
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PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  The market value of the stated consideration to our unitholders in the Merger will be
determined by the price of Buckeyes LP Units, the value of which will decrease if the market value
of Buckeyes LP Units decreases, and our unitholders cannot be sure of the market value of
Buckeyes LP Units that will be issued.
    The right of our unitholders to distributions will be changed following the Merger.
  53




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While the Merger Agreement is in effect, our opportunities to enter into different business
combination transactions with other parties on more favorable terms may be limited, and both we and
Buckeye may be limited in our ability to pursue other attractive business opportunities.
     The number of outstanding Buckeye LP Units will increase as a result of the Merger, which
could make it more difficult for Buckeye to pay the current level of quarterly distributions.
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Failure to complete the Merger or delays in completing the Merger could negatively impact the
price of Buckeyes LP Units and our Common Units.
  
    
    Buckeye will not realize the benefits expected from the Merger, including a
potentially enhanced financial and competitive position;
    
    the price of Buckeyes LP Units or our Common Units may decline to the extent that
the current market price of these securities reflects a market assumption that the
Merger will be completed; and
    
    some costs relating to the Merger, such as certain investment banking fees and legal
and accounting fees, must be paid even if the Merger is not completed.
 The costs of the Merger could adversely affect Buckeyes operations and cash flows available
for distribution to its unitholders.
  If the Merger Agreement were terminated, we may be obligated to pay Buckeye for costs incurred
related to the Merger. These costs could require us to seek loans or use our available cash that
would have otherwise been available for distributions.
   Tax Risks Related to the Merger
 No ruling has been obtained with respect to the tax consequences of the Merger.
  The intended tax consequences of the Merger are dependent upon our and Buckeye being treated
as partnerships for tax purposes.
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The tax treatment of the Merger could be subject to potential legislative, judicial or
administrative changes and differing interpretations, possibly on a retroactive basis.
  Existing BGH unitholders may recognize taxable income as a result of receiving cash in lieu of
fractional LP Units.
 .
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Item 6. Exhibits
  2.1
    
    Agreement and Plan of Merger, dated June 10, 2010, by and among Buckeye
Partners, L.P., Buckeye GP LLC, Buckeye GP Holdings L.P., MainLine Management
LLC and Grand Ohio, LLC, a subsidiary of Buckeye Partners, L.P. (Incorporated
by reference to Exhibit 2.1 of Buckeye Partners, L.P.s Current Report on Form
8-K filed on June 11, 2010).*10.1
    
    Buckeye Partners, L.P. Annual Incentive Compensation Plan, as Amended and
Restated, effective as of May 6, 2010 (Incorporated by reference to Exhibit
10.15 of Buckeye Partners, L.P.s Registration Statement on Form S-4 filed on
July 14, 2010).10.2
    
    Amended and Restated Credit Agreement, dated as of June 25, 2010, among
Buckeye Energy Services LLC, BNP Paribas and other lenders party thereto
(Incorporated by reference to Exhibit 10.1 of Buckeye Partners, L.P.s Current
Report on Form 8-K filed on July 1, 2010).10.3
    
    Support Agreement, by and among Buckeye Partners, L.P., BGH GP Holdings, LLC,
ArcLight Energy Partners Fund III, L.P., ArcLight Energy Partners Fund IV,
L.P., Kelso Investment Associates VIII, L.P. and KEP VI, LLC (Incorporated by
reference to Exhibit 10.1 of Buckeye Partners, L.P.s Current Report on Form
8-K filed on June 11, 2010).10.4
    
    Registration Rights Agreement, by and among Buckeye Partners, L.P., BGH GP
Holdings, LLC, ArcLight Energy Partners Fund III, L.P., ArcLight Energy
Partners Fund IV, L.P., Kelso Investment Associates VIII, L.P. and KEP VI, LLC
(Incorporated by reference to Exhibit 10.2 of Buckeye Partners, L.P.s Current
Report on Form 8-K filed on June 11, 2010).**31.1
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14 (a) under the
Securities Exchange Act of 1934.**31.2
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the
Securities Exchange Act of 1934.**32.1
    
    Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350.**32.2
    
    Certification by Chief Financial Officer pursuant to 18 U.S.C. Section 1350.
 
 *
    
    Represents management contract or compensatory plan or arrangement.**
    
    Filed herewith.
    
    Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. BGH agrees to
furnish supplementally a copy of the omitted schedules to the SEC upon request. 57




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SIGNATURES
  By:
    
    BUCKEYE GP HOLDINGS L.P.(Registrant)By:
    
    MainLine Management LLC,as General PartnerDate: August 6, 2010
    
    By:
    
    /s/ Keith E. St.ClairKeith E. St.ClairSenior Vice President and Chief Financial Officer(Principal Accounting Officer and Principal
Financial Officer)
 58