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•	risks and uncertainties with respect to the actual quantities of petroleum products and crude oil shipped on our pipelines and/or terminalled, stored or throughput in our terminals;

•	the economic viability of HollyFrontier Corporation, Alon USA, Inc. and our other customers;

•	the demand for refined petroleum products in markets we serve;

•	our ability to purchase and integrate future acquired operations;

•	our ability to complete previously announced 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, operational and legal risks and uncertainties detailed from time to time in our Securities and Exchange Commission filings.

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(1)	Includes 15,000 bpd capacity on the Orla to El Paso segment of this pipeline, leased to Alon under capacity lease agreements.

(2)	The White Lakes Junction to Moriarty segment of our Artesia to Moriarty pipeline and the Moriarty to Bloomfield pipeline is leased from Mid-America under a long-term lease agreement.

(3)	Capacity for this pipeline is reflected in the information for the Artesia to Moriarty pipeline.

(4)	Tulsa gasoline and diesel fuel connections to Magellan’s pipeline are less than one mile.

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(5)	The capacities of the three gas pipelines are 10 million standard cubic feet per day (“MMSCFD”), 22 MMSCFD and 10 MMSCFD, and the two liquid pipelines are 45,000 bpd and 60,000 bpd.

(6)	The capacity is in MMSCFD per day.

(7)	Pipeline is currently idled.

•	distribution;

•	blending to achieve specified grades of gasoline and diesel, including the blending of butane, ethanol and biodiesel;

•	other ancillary services that include the injection of additives and filtering of jet fuel; and

•	storage and inventory management.

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(1)	Inactive

(2)	The underlying ground at the Tucson terminal is leased.

(3)	Handles only jet fuel.

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Item 1A.	Risk Factors

•	competition from other refineries and pipelines that may be able to supply the refinery's end-user markets on a more cost-effective basis;

•	operational problems such as catastrophic events at the refinery, labor difficulties, environmental proceedings or other litigation that cause a stoppage of all or a portion of the operations at the refinery;

•	planned maintenance or capital projects;

•	increasingly stringent environmental laws and regulations, such as the U.S. Environmental Protection Agency's gasoline and diesel sulfur control requirements that limit the concentration of sulfur in motor gasoline and diesel fuel for both on-

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•	an inability to obtain crude oil for the refinery at competitive prices; or

•	a general reduction in demand for refined products in the area due to:

◦	a local or national recession or other adverse economic condition that results in lower spending by businesses and consumers on gasoline and diesel fuel;

◦	higher gasoline prices due to higher crude oil costs, higher taxes or stricter environmental laws or regulations; or

◦	a shift by consumers to more fuel-efficient or alternative fuel vehicles or an increase in fuel economy, whether as a result of technological advances by manufacturers, legislation either mandating or encouraging higher fuel economy or the use of alternative fuel or otherwise.

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•	meet our obligations as they come due;

•	execute our growth strategy;

•	complete future acquisitions or construction projects;

•	take advantage of other business opportunities; or

•	respond to competitive pressures.

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•	the accuracy of our assumptions about growth in the markets that we currently serve or have plans to serve in the Southwestern, Northwest and Mid-Continent regions of the United States;

•	HFC's willingness and ability to capture a share of additional demand in its existing markets; and

•	HFC's willingness and ability to identify and penetrate new markets in the Southwestern, Northwest and Mid-Continent regions of the United States.

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•	certain pre-closing environmental liabilities discovered within specified time periods after the date of the applicable acquisition;

•	certain matters arising from the pre-closing ownership and operation of assets; and

•	ongoing remediation related to the assets.

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•	denial or delay in issuing requisite regulatory approvals and/or permits;

•	unplanned increases in the cost of construction materials or labor;

•	disruptions in transportation of modular components and/or construction materials;

•	severe adverse weather conditions, natural disasters, or other events (such as equipment malfunctions explosions, fires or spills) affecting our facilities, or those of vendors and suppliers;

•	shortages of sufficiently skilled labor, or labor disagreements resulting in unplanned work stoppages;

•	market-related increases in a project's debt or equity financing costs; and/or

•	nonperformance by, or disputes with, vendors, suppliers, contractors, or sub-contractors involved with a project.

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•	HFC, as a shipper on our pipelines, has an economic incentive not to cause us to seek higher tariff rates or terminalling fees, even if such higher rates or terminalling fees would reflect rates that could be obtained in arm's-length, third-party transactions;

•

neither our partnership agreement nor any other agreement requires HFC to pursue a business strategy that favors us or utilizes our assets, including whether to increase or decrease refinery production, whether to shut down or reconfigure a refinery, or what markets to pursue or grow. HFC's directors and officers have a fiduciary duty to make these decisions in the best interests of the stockholders of HFC;

•	our general partner is allowed to take into account the interests of parties other than us, such as HFC, in resolving conflicts of interest;

•	our partnership agreement provides for modified or reduced fiduciary duties for our general partner, and also restricts the remedies available to our unitholders for actions that, without the limitations, might constitute breaches of fiduciary duty;

•	our general partner determines which costs incurred by HFC and its affiliates are reimbursable by us;

•	our partnership agreement does not restrict our general partner from causing us to pay it or its affiliates for any services rendered to us or entering into additional contractual arrangements with any of these entities on our behalf;

•	our general partner may, in some circumstances, cause us to borrow funds to make cash distributions, even where the purpose or effect of the borrowing benefits our general partner or affiliates;

•	our general partner determines the amount and timing of our asset purchases and sales, capital expenditures and borrowings, each of which can affect the amount of cash available to us; and

•	our general partner controls the enforcement of obligations owed to us by our general partner and its affiliates, including the pipelines and terminals agreement with HFC.

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•	our unitholders' proportionate ownership interest in us will decrease;

•	the amount of cash available for distribution on each unit may decrease;

•	the relative voting strength of each previously outstanding unit may be diminished; and

•	the market price of the common units may decline.

•	any business operated by HFC or any of its subsidiaries at the closing of our initial public offering;

•	any business or asset that HFC or any of its subsidiaries acquires or constructs that has a fair market value or construction cost of less than $5 million; and

•	any business or asset that HFC or any of its subsidiaries acquires or constructs that has a fair market value or construction cost of $5 million or more if we have been offered the opportunity to purchase the business or asset at fair market value, and we decline to do so.

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Item 1B.	Unresolved Staff Comments

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Item 3.	Legal Proceedings

Item 4.	Mine Safety Disclosures

Item 5.	Market for the Registrant’s Common Units, Related Unitholder Matters and Issuer Purchases of Common Units

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Item 6.	Selected Financial Data

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(1)	Retrospectively adjusted as described in Note 2 of Consolidated Financial Statements.

(2)

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 that are declared subsequent to quarter end. After the amount of incentive distributions and other priority allocations are allocated to the general partner, the remaining net income attributable to HEP is allocated to the partners based on their weighted average ownership percentage during the period.

(3)

Earnings before interest, taxes, depreciation and amortization (“EBITDA”) is calculated as net income attributable to Holly Energy Partners plus (i) interest expense net of interest income and loss on early extinguishment of debt, (ii) state income tax and (iii) depreciation and amortization excluding amounts related to the Predecessor. EBITDA is not a calculation based upon generally accepted accounting principles (“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 attributable to HEP 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.

(4)

Distributable cash flow is not a calculation based upon GAAP. However, the amounts included in the calculation are derived from amounts presented in our consolidated financial statements, with the general 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. It is also used by management for internal analysis and for our performance units. We believe that this measure provides investors an enhanced perspective of the operating performance of our assets and the cash our business is generating.

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(5)	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. Maintenance capital expenditures include expenditures required to maintain equipment reliability, tankage and pipeline integrity, safety and to address environmental regulations.

(6)	Includes $553 million, $712 million, $571 million, $363 million and $421 million in Credit Agreement advances that were classified as long-term debt at December 31, 2016, 2015, 2014, 2013 and 2012, respectively.

(7)

As a master limited partnership, we distribute our available cash, which historically has exceeded our net income attributable to HEP because depreciation and amortization expense represents a non-cash charge against income. The result is a decline in partners’ equity since our regular quarterly distributions have exceeded our quarterly net income attributable to HEP. Additionally, if the assets contributed and acquired from HFC while we were a consolidated variable interest entity of HFC had been acquired from third parties, our acquisition cost in excess of HFC’s basis in the transferred assets would have been recorded in our financial statements as increases to our properties and equipment and intangible assets at the time of acquisition instead of decreases to partners’ equity.

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Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

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(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 that are declared subsequent to quarter end. After the amount of incentive distributions and other priority allocations are allocated to the general partner, the remaining net income attributable to HEP is allocated to the partners based on their weighted average ownership percentage during the period.

(2)

Earnings before interest, taxes, depreciation and amortization (“EBITDA”) is calculated as net income attributable to HEP plus (i) interest expense and loss on early extinguishment of debt, net of interest income (ii) state income tax and (iii) depreciation and amortization excluding Predecessor. EBITDA is not a calculation based upon generally accepted accounting principles (“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 attributable to Holly Energy Partners 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. See our calculation of EBITDA under Item 6, “Selected Financial Data.”

(3)

Distributable cash flow is not a calculation based upon GAAP. However, the amounts included in the calculation are derived from amounts presented in our consolidated financial statements, with the general 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. It is also used by management for internal analysis and for our performance units. We believe that this measure provides investors an enhanced perspective of the operating performance of our assets and the cash our business is generating. See our calculation of distributable cash flow under Item 6, “Selected Financial Data.”

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•	the customer receiving the future services provided by these billings,

•	the period in which the customer is contractually allowed to receive the services expires, or

•	our determination that we will not be required to provide services within the allowed period.

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Item 7A.	Quantitative and Qualitative Disclosures about Market Risk

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Item 8.	Financial Statements and Supplementary Data

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Note 1:	Description of Business and Summary of Significant Accounting Policies

•	24 main pipeline segments

•	Crude gathering networks in Texas and New Mexico

•	10 refined product terminals

•	1 crude terminal

•	8,300 track feet of rail storage located at one facility

•	7 locations with truck and/or rail racks

•	Tankage at all six of HFC's refining facility locations

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•	the customer receiving the future services provided by these billings,

•	the period in which the customer is contractually allowed to receive the services expires, or

•	our determination that we will not be required to provide services within the allowed period.

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Note 2:	Acquisitions

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Note 3:	Financial Instruments

•	(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.

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Note 4:	Properties and Equipment

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Note 5:	Transportation Agreements

Note 6:	Employees, Retirement and Incentive Plans

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Note 7:	Debt

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Note 8:	Commitments and Contingencies

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Note 9:	Significant Customers

Note 10:	Related Party Transactions

•	Revenues from services to HFC were $333.1 million, $292.2 million and $275.2 million for the years ended December 31, 2016, 2015 and 2014, respectively.

•	HFC charged us general and administrative services under the Omnibus Agreement of $2.5 million for the year ended December 31, 2016, $2.4 million for the year ended December 31, 2015, and $2.3 million for the year ended December 31, 2014.

•	We reimbursed HFC for costs of employees supporting our operations of $40.9 million, $34.5 million and $38.9 million for the years ended December 31, 2016, 2015 and 2014, respectively.

•	HFC reimbursed us $14.0 million, $13.5 million and $16.8 million for the years ended December 31, 2016, 2015 and 2014, respectively, for expense and capital projects.

•	We distributed $105.2 million, $90.4 million and $80.5 million, for the years ended December 31, 2016, 2015 and 2014, respectively, to HFC as regular distributions on its common units and general partner interest, including general partner incentive distributions.

•	Accounts receivable from HFC were $42.6 million and $32.5 million at December 31, 2016 and 2015, respectively.

•	Accounts payable to HFC were $16.4 million and $11.6 million at December 31, 2016 and 2015, respectively.

•	Revenues for the years ended December 31, 2016, 2015 and 2014 include $6.1 million, $7.3 million and $10.1 million, respectively, of shortfall payments billed in 2015, 2014 and 2013, respectively. Deferred revenue in the consolidated balance sheets at December 31, 2016 and 2015, includes $5.6 million and $6.4 million, respectively, relating to certain shortfall billings.

•	In November 2015, we acquired from HFC all the outstanding membership interests in El Dorado Operating which owns the newly constructed naphtha fractionation and hydrogen generation units at HFC’s El Dorado refinery. See Note 2 for a description of this transaction.

•	On March 31, 2016, we acquired crude oil tanks located at HFC’s Tulsa refinery from an affiliate of Plains for $39.5 million. See Note 2 for a description of this transaction.

•	Effective October 1, 2016, we acquired all the membership interests of Woods Cross Operating, a wholly owned subsidiary of HFC, which owns the newly constructed atmospheric distillation tower, fluid catalytic cracking unit, and polymerization

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Note 11:	Net Income Per Limited Partner Unit

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Note 12:	Partners’ Equity, Income Allocations and Cash Distributions

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Note 13:	Environmental

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Note 14:	Operating Segments

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Note 15:	Quarterly Financial Data (Unaudited)

Note 16:	Supplemental Guarantor/Non-Guarantor Financial Information

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Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Item 9A.	Controls and Procedures

Item 9B.	Other Information

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(1)	Mr. Damiris was appointed President of HLS, effective as of February 1, 2017, which was the closing date of HFC’s acquisition of Petro-Canada Lubricants Inc. Mr. Mark A. Plake, who served as President of HLS prior to that date, resigned from that position to accept the position of President of Petro-Canada Lubricants Inc.

(2)	Mr. Aron has announced his resignation from his position as Executive Vice President effective as of February 28, 2017.

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•	designating and calling meetings of the Board;

•	presiding at all Board meetings, other than executive sessions of the non-employee directors of the Board;

•	consulting with management on Board and committee meeting agendas;

•	facilitating teamwork and communication between the Board and management; and

•	acting as a liaison between management and the Board.

•	presiding at all executive sessions of the non-employee directors of the Board;

•	consulting with management on Board and committee meeting agendas;

•	acting as a liaison in appropriate instances between management and the non-employee directors, including advising the Chairman and the Chief Executive Officer on the efficiency of the Board meetings; and

•	facilitating teamwork and communication between the non-employee directors and management.

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•	The Compensation Committee oversees the management of risks relating to HLS’s executive compensation plans and arrangements.

•	The Audit Committee oversees management of financial reporting and controls risks.

•	The Conflicts Committee oversees specific matters that the Board or the Conflicts Committee believes may involve conflicts of interest with HFC.

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Matthew P. Clifton	Director since July 2004. Age 65.

Principal Occupation:	Chairman of the Board of HLS

Business Experience:

Mr. Clifton has served as Chairman of the Board of HLS, in a non-employee capacity, since February 2014. Mr. Clifton served as a consultant for HFC from June 2014 to October 2014. Mr. Clifton previously served as Executive Chairman of HLS from January 2014 until his retirement in February 2014, as Chairman of the Board and Chief Executive Officer of HLS from March 2004 through December 2013 and as President of HLS from July 2011 to November 2012. Mr. Clifton joined Holly Corporation in 1980 and served as the Executive Chairman of HFC from July 2011 through December 2012. Mr. Clifton previously served as Chief Executive Officer of Holly Corporation from 2006 until the merger with Frontier Oil Corporation in July 2011, as Chairman of the Board of Holly Corporation from April 2007 until the merger with Frontier Oil Corporation in July 2011 and as President of Holly Corporation from 1995 until 2006.

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Additional Directorships:	Mr. Clifton served as a director of HFC from 1995 through December 2012.

Qualifications:	Mr. Clifton has extensive knowledge of the operations of HLS and HEP, the refining industry and macro-economic conditions, as well as valuable industry relationships throughout the country. Mr. Clifton brings a unique and valuable perspective as well as an understanding of HLS’s and HEP’s history, culture, vision and strategy to the Board.

George J. Damiris	Director since February 2016. Age 56.

Principal Occupation:	Chief Executive Officer and President of HFC and Chief Executive Officer and President of HLS

Business Experience:

Mr. Damiris has served as the Chief Executive Officer of HLS since November 2016, as President of HLS since February 2017 and as Chief Executive Officer and President of HFC since January 2016. He previously served as Executive Vice President and Chief Operating Officer of HFC from September 2014 until January 2016 and as Senior Vice President, Supply and Marketing of HFC from January 2008 until September 2014. Mr. Damiris joined HFC in 2007 as Vice President, Corporate Development after an 18-year career with Koch Industries, where he was responsible for managing various refining, chemical, trading, and financial businesses.

Additional Directorships:	Mr. Damiris currently serves as a director of Eagle Materials Inc. and HFC.

Qualifications:	Mr. Damiris has extensive industry experience and significant insight into issues facing the industry. His knowledge of the day-to-day operations of HFC provides a significant resource for the Board and facilitates discussions between the Board and HFC management.

Larry R. Baldwin	Director since May 2016. Age 64.

Principal Occupation:	Retired

Business Experience:	Mr. Baldwin was employed for 41 years as an auditor by Deloitte LLP and predecessor firms, including 31 years as a partner, prior to retiring from such position in May 2015. While he was a partner at Deloitte LLP, Mr. Baldwin held a number of practice management positions.

Qualifications:	Mr. Baldwin brings to the Board of Directors of the Company his audit, accounting and financial reporting expertise, which also qualify him as an audit committee financial expert. Due to his audit and practice management experience with Deloitte LLP, Mr. Baldwin possesses business, industry and management expertise that provide valuable insight to the Board and the management of the Company.

Charles M. Darling, IV	Director since July 2004. Age 68.

Principal Occupation:	President of DQ Holdings, L.L.C.

Business Experience:

Mr. Darling has served as President of DQ Holdings, L.L.C., a venture capital investment and consulting firm focused primarily on opportunities in the energy industry and on the development and sale of medical devices and other manufactured products, since August 1998. Mr. Darling was previously the General Manager of Desert Power, LP and of its general partner, Desert Power, LLC, which was an indirect affiliate of DQ Holdings, L.L.C. In late 2006, Desert Power, LLC and Desert Power, LP, along with certain of their subsidiaries, filed for bankruptcy in Nevada. In late 2007, the bankruptcy court approved the plan of reorganization, which became final in accordance with its terms in early 2008. Mr. Darling also previously practiced law at the law firm of Baker Botts, L.L.P. for over 20 years.

Qualifications:	Mr. Darling has significant experience addressing financial, legal, regulatory and risk matters affecting HLS and HEP. His service as a partner of a major international law firm practicing energy

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Michael C. Jennings	Director since October 2011. Age 51.

Principal Occupation:	Chairman of the Board of HFC

Business Experience:

Mr. Jennings has served as Chairman of the Board of HFC since January 2017, a position he previously held from January 2013 until January 2016. Mr. Jennings served as Executive Chairman of HFC from January 2016 until January 2017 and as the Chief Executive Officer and President of HFC from the merger of Holly Corporation and Frontier Oil Corporation in July 2011 until January 2016. Mr. Jennings served as Chief Executive Officer of HLS from January 2014 to November 2016 and as President of HLS from October 2015 to February 2016. Mr. Jennings previously served as the President and Chief Executive Officer of Frontier Oil Corporation from 2009 until the merger in July 2011 and as the Executive Vice President and Chief Financial Officer of Frontier Oil Corporation from 2005 until 2009.

Additional Directorships:	Mr. Jennings currently serves as the Chairman and a director of HFC and a director of ION Geophysical Corporation. Mr. Jennings served as a director of Frontier Oil Corporation from 2008 until the merger in July 2011 and as Chairman of the board of directors of Frontier Oil Corporation from 2010 until the merger in July 2011.

Qualifications:	Mr. Jennings provides valuable and extensive industry knowledge and experience. His knowledge of the day-to-day operations of HFC provides a significant resource for the Board and facilitates discussions between the Board and HFC management.

Jerry W. Pinkerton	Director since July 2004. Age 76.

Principal Occupation:	Retired

Business Experience:

Mr. Pinkerton retired in December 2003. From December 2000 to December 2003, Mr. Pinkerton served as a consultant to TXU Corp. (now Vista Energy), and from August 1997 to December 2000, Mr. Pinkerton served as Controller of TXU Corp. and its U.S. subsidiaries. Mr. Pinkerton previously served as the Vice President and Chief Accounting Officer of ENSERCH Corporation and was employed for 26 years as an auditor by Deloitte Haskins & Sells, a predecessor firm of Deloitte & Touche, LLP, including 15 years as an audit partner.

Additional Directorships:

Since April 2012, Mr. Pinkerton has served on the board of directors of Southcross Energy Partners GP, LLC, the general partner of Southcross Energy Partners, L.P., and serves as the chair of the audit and conflicts committees of the board of directors of Southcross Energy Partners GP, LLC. Mr. Pinkerton served on the board of directors of Animal Health International, Inc., and served as chair of its audit committee, from May 2008 to June 2011.

Qualifications:

Mr. Pinkerton brings to the Board his audit, accounting and financial reporting expertise and a level of financial sophistication that qualifies him as an audit committee financial expert. Due to his executive management experience with public companies and public accounting firms, Mr. Pinkerton possesses business and management expertise that provide an invaluable insight into HLS’s and HEP’s business.

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William P. Stengel	Director since July 2004. Age 68.

Principal Occupation:	Retired

Business Experience:	Mr. Stengel retired from Citigroup/Citibank, N.A. in May 2003. From 1997 to May 2003, Mr. Stengel served as Managing Director and Senior Credit Officer of the global energy and mining group at Citigroup/Citibank, N.A.

Qualifications:	Mr. Stengel’s executive management experience in public companies, banking and financial expertise, and general business and management expertise provides him with significant insight into our operations, management and finance.

James G. Townsend	Director since January 2012. Age 62.

Principal Occupation:	Member of the New Mexico House of Representatives

Business Experience:

Mr. Townsend has served as a member of the New Mexico House of Representatives since January 2015. Mr. Townsend retired from HFC in December 2011. He was employed by Holly Corporation (and HFC) and/or HLS for more than 25 years. From 2008 until his retirement, Mr. Townsend served as Senior Vice President of UNEV Pipeline, LLC, a joint venture between Sinclair Oil Corporation and a subsidiary of HEP. Mr. Townsend served as Vice President, Operations for HLS from 2004 to 2007 and was responsible for all pipeline and terminal operations for Holly Corporation prior to the formation of HEP. Prior to such time, Mr. Townsend served in positions of increasing seniority at Holly Corporation.

Qualifications:	Mr. Townsend brings to the Board his knowledge of the operations of HFC, HLS and their subsidiaries, his 25 years of experience in the industry, and his business expertise.

•	an Audit Committee;

•	a Compensation Committee;

•	a Conflicts Committee; and

•	an Executive Committee.

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(1)	Mr. Darling serves as the chairman of the subcommittee of the Compensation Committee.

•	selecting, compensating, retaining and overseeing our independent registered public accounting firm and conducting an annual review of the independence and performance of that firm;

•	reviewing the scope and the planning of the annual audit performed by the independent registered public accounting firm;

•	overseeing matters related to the internal audit function;

•	reviewing the audit report issued by the independent registered public accounting firm;

•	reviewing HEP’s annual and quarterly financial statements with management and the independent registered public accounting firm;

•	discussing with management HEP’s significant financial risk exposures and the actions management has taken to monitor and control such exposures;

•	reviewing and, if appropriate, approving transactions involving conflicts of interest, including related party transactions, when required by HEP’s Code of Business Conduct and Ethics;

•	reviewing and discussing HEP’s internal controls over financial reporting with management and the independent registered public accounting firm;

•	establishing procedures for the receipt, retention and treatment of complaints received by HEP regarding accounting, internal accounting controls or accounting matters, potential violations of applicable laws, rules and regulations or of our codes, policies and procedures;

•	reviewing the type and extent of any non-audit work to be performed by the independent registered public accounting firm and its compatibility with their continued objectivity and independence, and to the extent consistent, pre-approving all non-audit services to be performed;

•	reviewing and approving the Audit Committee Report to be included in the Annual Report of Form 10-K; and

•	reviewing the adequacy of the Audit Committee charter on an annual basis.

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•	reviewing and approving the goals and objectives of HLS and HEP relevant to the compensation of the officers of HLS for whom the Compensation Committee determines compensation;

•	determining compensation for the officers of HLS for whom the Compensation Committee determines compensation;

•	reviewing director compensation and making recommendations to the Board regarding the same;

•	overseeing the preparation of the Compensation Discussion and Analysis to be included in the Annual Report and preparing the Compensation Committee Report to be included in the Annual Report;

•	reviewing the Company’s executive compensation plans with respect to behavioral, operational and other risks;

•	administering and making recommendations to the Board with respect to HEP’s equity plan and HLS’s annual incentive plan; and

•	reviewing the adequacy of the Compensation Committee charter on an annual basis

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reviewed and discussed Holly Energy Partners, L.P.’s quarterly unaudited consolidated financial statements and its audited annual consolidated financial statements for the year ended December 31, 2016 with management and Ernst & Young LLP, including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments and the clarity of disclosures in the financial statements, including those in management’s discussion and analysis thereof;

•	discussed with Ernst & Young LLP the matters required to be discussed by Auditing Standard No. 16, Communications with Audit Committees, as adopted by the Public Company Accounting Oversight Board;

•	discussed with Ernst & Young LLP matters relating to its independence and received the written disclosures and letter from Ernst & Young required by applicable requirements of PCAOB regarding the independent accountant’s communications with the Audit Committee concerning the firm’s independence;

•

discussed with Holly Energy Partners, L.P.’s internal auditors and Ernst & Young LLP the overall scope and plans for their respective audits and met with the internal auditors and Ernst & Young LLP, with and without management present, to discuss the results of their examinations, their evaluations of our internal controls and the overall quality of Holly Energy Partners, L.P.’s financial reporting; and

•	considered whether Ernst & Young LLP’s provision of non-audit services to Holly Energy Partners, L.P. is compatible with the auditor’s independence

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(1)

Mr. Damiris and Jennings are not included in this table because they received no additional compensation for their service on the Board since, during 2016, Messrs. Damiris and Jennings were executive officers of HFC and HLS. The compensation paid by HFC to Messrs. Damiris and Jennings in 2016 will be shown in HFC’s 2017 Proxy Statement. A portion of the compensation paid to each of Messrs. Damiris and Jennings by HFC in 2016 is allocated to the services he performed for us in his capacity as an executive officer of HLS and is disclosed in the “Summary Compensation Table” below.

(2)

Reflects the aggregate grant date fair value of restricted units granted to non-employee directors on October 27, 2016, computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 (“FASB ASC Topic 718”), determined without regard to forfeitures. See Note 6 to our consolidated financial statements for the fiscal year ended December 31, 2016, for a discussion of the assumptions used in determining the FASB ASC Topic 718 grant date fair value of these awards.

(3)	Mr. Baldwin was appointed as a director of the Board effective as of May 20, 2016.

(4)

In April 2016, HLS paid Mr. Clifton a lump sum payment of $125,000 to compensate him for a Chairman of the Board retainer and other fees he should have received in 2015 for his Board service. These amounts were in addition to the $75,000 annual cash retainer for the Chairman of the Board and other cash retainers received by Mr. Clifton with respect to 2016 Board service, which amounts are reported in the “Fees Earned or Paid in Cash” column of the table above.

(5)	In accordance with our director retirement policy, Messrs. Gray and Ridenour resigned from the Board effective December 31, 2016; however, each of them is included in the table since he served as a non-employee director during 2016.

(6)	Represents fees for consulting services provided by Mr. Gray to HFC during 2016. None of the consulting fees were paid by us.

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(1)	Effective November 1, 2016, Mr. Jennings resigned as Chief Executive Officer of HLS, and Mr. Damiris was appointed to that position.

(2)	Effective February 15, 2016, Mr. Jennings resigned as President of HLS, and Mr. Plake was appointed to that position.

(3)	Mr. Damiris was appointed President of HLS, effective as of February 2017, which was the closing date of HFC’s acquisition of Petro-Canada Lubricants Inc. Mr. Plake, who served as President of HLS until that date, resigned from that position to accept the position of President of Petro-Canada Lubricants Inc.

•	Messrs. Plake (after he was appointed President of HLS in February 2016) and Cunningham, who we generally refer to as the “HLS Dedicated Officers,” spent all of their professional time managing our business and affairs and did not provide any services to HFC.

•

Messrs. Damiris, Jennings and Voliva (following his appointment as an officer of HFC in June 2016) and Ms. McWatters, who we generally refer to as the “HFC Shared Officers,” also served as officers of HFC and devoted as much of their professional time as was necessary to oversee the management of our business and affairs. All compensation paid to such executive officers is paid and determined by HFC, without input from the Compensation Committee.

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•

Administrative Fee Covers HFC Shared Officers. Under the terms of the Omnibus Agreement we pay an annual administrative fee to HFC (currently $2.5 million) for the provision of general and administrative services for our benefit, which may be increased or decreased as permitted under the Omnibus Agreement. The administrative services covered by the Omnibus Agreement include, without limitation, the costs of corporate services provided to us by HFC such as accounting, tax, information technology, human resources, in-house legal support, and office space, furnishings and equipment. None of the services covered by the administrative fee is assigned any particular value individually. Although the administrative fee covers the services provided to us by the Named Executive Officers who are HFC Shared Officers, no portion of the administrative fee is specifically allocated to services provided by those Named Executive Officers to us. Rather, the administrative fee generally covers services provided to us by HFC and, except as described below, there is no reimbursement by us for the specific costs of such services. See Item 13, “Certain Relationships and Related Transactions, and Director Independence” of this Annual Report on Form 10-K for additional discussion of our relationships and transactions with HFC.

•

Reimbursements For Compensation of HLS Dedicated Officers. Under the Omnibus Agreement, we also reimburse HFC for certain expenses incurred on our behalf, such as for salaries and employee benefits for certain personnel employed by HFC who perform services for us on behalf of HLS, including the HLS Dedicated Officers, as described in greater detail below. The partnership agreement provides that our general partner will determine the expenses that are allocable to us. In 2016, we reimbursed HFC for 100% of the compensation expenses incurred by HFC for salary, bonus, retirement and other benefits provided to Messrs. Plake (after he was appointed President of HLS) and Cunningham. With respect to equity compensation paid by us to certain of the Named Executive Officers, HLS purchases the units delivered pursuant to awards under our Long-Term Incentive Plan, and we reimburse HLS for the purchase price of the units.

•

2016 Arrangement for Mr. Voliva. In June 2016, in connection with Mr. Voliva’s appointment as an officer of HFC, Mr. Voliva ceased to be a HLS Dedicated Officer and became a HFC Shared Officer. Prior to June 2016, we reimbursed HFC for 100% of the compensation expenses incurred by HFC for salary, bonus, retirement and other benefits provided to Mr. Voliva. Once Mr. Voliva became a HFC Shared Officer, the Compensation Committee determined that HLS and HEP would specifically reimburse HFC for one-third of Mr. Voliva’s 2016 salary, bonus and retirement benefits for the remainder of the year since, in addition to serving as the Chief Financial Officer of HLS, Mr. Voliva also performs the business development function for HLS and HEP.

•

Generally. The Compensation Committee generally makes compensation decisions for the HLS Dedicated Officers, other than with respect to pension and retirement benefits as described below. For 2016, compensation decisions for Messrs. Plake (after he was appointed President of HLS) and Cunningham were made by the Compensation Committee. All compensation provided to Messrs. Plake and Cunningham for 2016 is discussed and reported, in accordance with SEC rules, in the narratives and tables that follow.

•

Pension and Retirement Benefits. The Compensation Committee does not review or approve pension or retirement benefits for any of the Named Executive Officers. Rather, all pension and retirement benefits provided to the executives are the same pension and retirement benefits that are provided to employees of HFC generally, and such benefits are sponsored and administered entirely by HFC without input from HLS or the Compensation Committee. The pension and retirement benefits provided to Messrs. Plake (after he was appointed President of HLS), Voliva (until he became a HFC Shared Officer) and Cunningham in 2016 are described below and were charged to us monthly in accordance with the Omnibus Agreement.

•	2016 Decisions for Mr. Voliva. Compensation decisions for Mr. Voliva for 2016 were made by the Compensation Committee prior to Mr. Voliva becoming a HFC Shared Officer in June 2016, at which time HFC began making compensation decisions for Mr. Voliva.

•

Generally. HFC makes all decisions regarding the compensation paid to the HFC Shared Officers, which compensation is covered by the administrative fee under the Omnibus Agreement (and therefore not subject to reimbursement by us); however, in accordance with SEC rules, for purposes of these disclosures, a portion of the compensation paid by HFC to the HFC Shared Officers for 2016 is allocated to the services they performed for us during 2016. The allocation was

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(1)	Mr. Damiris served as an executive officer of HLS for only two months in 2016.

(2)	Assumes Mr. Jennings spent 20% of his professional time on our business and affairs until his resignation as President of HLS on February 15, 2016 and 10% of his professional time on our business and affairs until his resignation as Chief Executive Officer of HLS on November 1, 2016.

•

2016 Allocation for Mr. Voliva. As described above under “Fees and Reimbursements for Compensation of Named Executive Officers-2016 Arrangement for Mr. Voliva,” we reimbursed HFC for 100% of the compensation expenses incurred by HFC for salary, bonus, retirement and other benefits provided to Mr. Voliva prior to June 2016 and, for the remainder of the year, for one-third of Mr. Voliva’s 2016 salary, bonus and retirement benefits. Nevertheless, 100% of the compensation Mr. Voliva received for the entirety of 2016 is discussed and disclosed in the narratives and tables that follow (except that, because HFC made all decisions regarding the compensation paid to Mr. Voliva following his appointment as an officer of HFC, compensation decisions made for Mr. Voliva after June 2016 are not discussed in this Compensation Discussion and Analysis).

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•	base salary;

•	annual incentive cash bonus compensation;

•	long-term equity incentive compensation;

•	severance and change in control benefits;

•	health and retirement benefits; and

•	perquisites.

(1)

Represents salaries effective February 15, 2016 for Mr. Plake and January 1, 2016 for Mr. Cunningham. Mr. Voliva’s salary rate originally became effective October 29, 2015 in connection with his promotion to an executive officer of HLS, and the Compensation Committee determined not to otherwise increase his salary rate for 2016. Mr. Plake’s base salary was determined in connection with his appointment as President of HLS, taking into account his experience and position, internal pay equities and market data.

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•	Actual Distributable Cash Flow vs. Budget: Half of the target award may be earned based upon our actual distributable cash flow during the performance period compared to the budgeted distributable cash flow for the performance period, adjusted for differences in estimated and actual Producers Price Index adjustments and differences in the timing of known acquisitions.

(1)	The percentages are interpolated between percentage points and rounded to the nearest hundredth percent.

•

Individual Performance: The other half of the target award may be earned based on the employee’s individual performance during the performance period, as determined in the discretion of the employee’s immediate supervisor. The employee’s individual performance is evaluated through a performance review by the employee’s immediate supervisor, which includes a written assessment. The assessment reviews several criteria, including how well the employee performed his or her pre-established individual goals during the performance period and the employee’s interpersonal effectiveness, integrity, and business conduct.

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•	promoting our interests by providing equity incentive compensation awards to eligible individuals,

•	enhancing our ability to attract and retain the services of individuals who are essential for our growth and profitability,

•	encouraging those individuals to devote their best efforts to advancing our business, and

•	aligning the interests of those individuals with the interests of our unitholders.

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(1)	In connection with Mr. Voliva’s appointment as an officer of HFC in June 2016, Mr. Voliva forfeited 2,679 of these restricted units.

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(1)	In connection with Mr. Voliva’s appointment as an officer of HFC in June 2016, Mr. Voliva forfeited 2,679 of these performance units.

(1)	The percentages above are interpolated between points up to a maximum of 150% but no less than 50%. The result is rounded to the nearest whole percentage, but not to a number in excess of 150%.

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(1)	In connection with Mr. Plake’s resignation from the position of President of HLS, effective February 1, 2017, Mr. Plake forfeited all of these restricted units.

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(1)	In connection with Mr. Plake’s resignation from the position of President of HLS, effective February 1, 2017, Mr. Plake forfeited all of these performance units.

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(1)

Effective February 15, 2016, Mr. Jennings resigned as President of HLS, and Mr. Plake was appointed as President of HLS. Effective November 1, 2016, Mr. Jennings resigned as Chief Executive Officer of HLS, and Mr. Damiris was appointed as Chief Executive Officer of HLS. Mr. Damiris was appointed President of HLS, effective as of February 1, 2017, which was the closing date of HFC’s acquisition of Petro-Canada Lubricants Inc. Mr. Plake, who served as President of HLS until that date, resigned from that position in order to accept the position of President of Petro-Canada Lubricants Inc.

(2)

Represents the discretionary bonus amount, if any, paid pursuant to the individual performance metric under our Annual Incentive Plan and any other bonus paid outside our Annual Incentive Plan. Other payments made under our Annual Incentive Plan are included in the “Non-Equity Incentive Plan Compensation” column. See note 7 to the Summary Compensation Table for a discussion of the amounts reported as “Bonus” with respect to Mr. Voliva for 2016.

(3)

Represents the aggregate grant date fair value of awards of restricted units and performance units made in the year indicated computed in accordance with FASB ASC Topic 718, determined without regard to forfeitures, and does not reflect the actual value that may be recognized by the executive. See Note 6 to our consolidated financial statements for the fiscal year ended December 31, 2016 for a discussion of the assumptions used in determining the FASB ASC Topic 718 grant date fair value of these awards.

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(4)

Represents the bonus amount, if any, paid under our Annual Incentive Plan, other than with respect to the individual performance metric (which amounts are reported in the “Bonus” column). The 2016 bonus amounts under our Annual Incentive Plan are described above in greater detail under “Compensation Discussion and Analysis-Overview of 2016 Executive Compensation Components and Decisions-Annual Incentive Cash Bonus Compensation.” See note 6 to the Summary Compensation Table for a discussion of the amounts reported as “Non-Equity Incentive Plan Compensation” with respect to Messrs. Damiris and Jennings and Ms. McWatters and note 7 to the Summary Compensation Table for a discussion of the amounts reported as “Non-Equity Incentive Plan Compensation” in 2016 with respect to Mr. Voliva.

(5)	For 2016, includes the compensation as described under “All Other Compensation” below.

(6)

During 2016, each of these officers split his or her professional time between HFC and us, and all compensation paid to him or her for 2016 was determined and paid by HFC. In accordance with SEC rules, for purposes of these disclosures, a portion of the total compensation paid by HFC to these officers for 2016 is allocated to the services he or she performed for us during 2016. The allocation was made based on the assumption that each officer spent, in the aggregate, approximately the following percentage of his or her professional time in 2016 on our business and affairs:

(7)

In June 2016, in connection with Mr. Voliva’s appointment as an officer of HFC, Mr. Voliva ceased to be a HLS Dedicated Officer and became a HFC Shared Officer, at which time HFC began making compensation decisions for Mr. Voliva. Although we reimbursed HFC for only one-third of Mr. Voliva’s 2016 salary, bonus and retirement benefits after that time, the amounts included in the table above for Mr. Voliva for 2016 reflect the total amount of compensation received by him during 2016 from both HLS and HFC including as follows: (i) the “Salary” column reflects the full amount of base salary received by Mr. Voliva for the entirety of 2016, (ii) the “Bonus” column reflects the discretionary bonus amount actually paid to Mr. Voliva pursuant to the individual performance metric under HFC’s annual incentive cash compensation program and an additional

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(8)

Mr. Plake was appointed President of HLS in February 2016. Prior to that time, his compensation was determined by HFC and was not reimbursed by or otherwise allocable to us. Nevertheless, the amounts included in the table above for Mr. Plake for 2016 reflect the total amount of compensation received by him during 2016 from both HFC (prior to his appointment as President of HLS) and from HLS (following his appointment as President of HLS and including amounts reimbursed by HLS to HFC). Because the full amount of compensation received by Mr. Plake during 2016 is included, the amount disclosed overstates the compensation allocated to the services Mr. Plake actually performed for us during 2016.

(1)	For Mr. Plake, represents $25,064 in club dues and $300 for a Company-paid reserved parking spot. The value of the perquisites provided by us to our other Named Executive Officers in 2016 did not exceed $10,000 in the aggregate, and therefore, in accordance with SEC rules, are not included in the table above or described in this footnote.

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(1)

Represents the potential payouts for the awards under our Annual Incentive Plan, which were subject to the achievement of certain performance metrics. The performance metrics and awards are described under “Compensation Discussion and Analysis-Overview of 2016 Executive Compensation Components and Decisions-Annual Incentive Cash Bonus Compensation.” Although these awards were granted (for Messrs. Voliva and Cunningham) in the fourth quarter of 2015, they represent the 2016 Annual Incentive Plan awards and any payouts with respect to these awards are reported in the Summary Compensation Table for 2016. Amounts reported do not include amounts potentially payable pursuant to the discretionary individual performance portion of the award. The amount actually paid with respect to the individual performance portion of the award is reported in the “Bonus” column of the Summary Compensation Table for 2016, and the amount actually paid with respect to the portion of the award reported in this table is reported in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table for 2016. Upon being appointed as an officer of HFC, Mr. Voliva became a participant in HFC’s annual incentive cash compensation program and was ineligible to receive a payout under the Annual Incentive Plan.

(2)

Represents the potential number of performance units payable under the Long-Term Incentive Plan. The number of units paid at the end of the performance period may vary from the target amount, based on our achievement of specified performance measures. The terms of the performance unit awards granted in February 2016 for the 2016 fiscal year are described above under “Compensation Discussion and Analysis - 2016 Compensation Decisions - Long-Term Equity Incentive Compensation - Performance Unit Awards.” The terms of the performance unit awards granted in October 2016 for the 2017 fiscal year are described above under “Compensation Discussion and Analysis - 2017 Compensation Decisions - Long-Term Equity Incentive Compensation - Performance Unit Awards.” Mr. Voliva did not receive any grants of performance units from us in 2016. In connection with Mr. Plake’s resignation from the position of President of HLS, effective February 1, 2017, Mr. Plake forfeited all of these performance units and received restricted unit awards in exchange for the February 2016 performance units. See “Compensation Discussion and Analysis - Overview of 2016 Compensation Components and Decisions - Long-Term Equity Incentive Compensation - Performance Unit Awards.”

(3)

Represents awards of restricted units. The terms of the restricted unit awards granted in February 2016 for the 2016 fiscal year are described above under “Compensation Discussion and Analysis - 2016 Compensation Decisions - Long-Term Equity Incentive Compensation - Restricted Unit Awards.” The terms of the restricted unit awards granted in October 2016 for the 2017 fiscal year are described above under “Compensation Discussion and Analysis - 2017 Compensation Decisions - Long-Term Equity Incentive Compensation - Restricted Unit Awards.” Mr. Voliva did not receive any grants of restricted units from us in 2016.

(4)

Represents the grant date fair value determined pursuant to FASB ASC Topic 718, based on a closing price of our common units of $24.48 on February 16, 2016 (February 15, 2016 was a market holiday) and $33.33 on October 26, 2016. The value of performance units granted on February 15, 2016 and October 26, 2016 reflect a probable payout percentage of 100%. See note (3) to the Summary Compensation Table for additional information regarding the aggregate probable settlement percentage calculation.

(5)	Although Mr. Voliva did not receive any grants of performance units or restricted units from us in 2016, he did receive restricted stock and performance share units from HFC in June 2016 (3,990 restricted shares and 2,659 performance share units, in each case, based on a grant date closing price of $27.53 for HFC’s common stock) and November 2016 (15,861 restricted shares

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(1)	Includes the following restricted unit awards granted by us:

•	in October 2014 to Mr. Voliva (2,979) and Mr. Cunningham (6,705), of which one third vested on December 15, 2015, one third vested on December 15, 2016 and the remaining one third vests on December 15, 2017;

•	in October 2015 to Mr. Voliva (1,341, after giving effect to the forfeiture by Mr. Voliva on June 1, 2016 of 2,679 of the total 4,020 restricted units originally granted) and Mr. Cunningham (4,752), of which one third vested on December 15, 2016, one third vests on December 15, 2017 and the remaining one third vests on December 15, 2018;

•	in February 2016 to Mr. Plake (10,725), of which one third vested on December 15, 2016, one third vests on December 15, 2017 and the remaining one third vests on December 15, 2018; and

•	in October 2016 to Mr. Plake (10,503) and Mr. Cunningham (4,128), of which one third vests on December 15, 2017, one third vests on December 15, 2018 and the remaining one third vests on December 15, 2019.

(2)	Includes the following performance unit awards granted by us (the amounts included in the parentheticals reflect the target number of performance units subject to each award):

•	in October 2014 to Mr. Cunningham (2,235), with a performance period that ends on December 31, 2017;

•	in October 2015 to Mr. Voliva (1,341, after giving effect to the forfeiture by Mr. Voliva on June 1, 2016 of 2,679 of the total 4,020 performance units originally granted) and Mr. Cunningham (4,752), in each case, with a performance period that ends on December 31, 2018;

•	in February 2016 to Mr. Plake (10,725), with a performance period that ends on December 31, 2018; and

•	in October 2016 to Mr. Plake (10,503) and Mr. Cunningham (4,128), in each case, with a performance period that ends on December 31, 2019.

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(1)

Includes 3,393 units that became payable to Mr. Cunningham on February 8, 2017 upon the determination by the subcommittee of the Compensation Committee that the performance percentage applicable to the target number of 2,262 performance units granted to Mr. Cunningham in November 2013 with a performance period that ended on December 31, 2016 was 150%, which performance units are treated, in accordance with SEC rules, as vesting during 2016. The value realized with respect to such award is calculated based on the closing price of our common units on the date of payment.

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(1)	The amounts reported were deferred at the election of the Named Executive Officer and are also included in the amounts reported in the “Salary,” “Bonus” and/or “Non-Equity Incentive Plan Compensation” columns of the Summary Compensation Table for 2017.

(2)	These amounts are also included in the “All Other Compensation” column of the Summary Compensation Table for 2016.

(3)

The aggregate balance for each Named Executive Officer reflects the cumulative value, as of December 31, 2016, of the employee and employer-provided contributions to the NQDC Plan for the Named Executive Officer’s account, and any earnings on these amounts, since the Named Executive Officer began participating in the NQDC Plan in 2012. We reported executive and company contributions for Messrs. Voliva and Cunningham in the Summary Compensation Table in the following aggregate amounts:

•	an amount equal to his accrued and unpaid salary, unreimbursed expenses and accrued vacation pay, and

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•

a lump sum amount equal to a designated multiplier times (i) the executive’s annual base salary as of the date of termination or the date immediately prior to the “Change in Control,” whichever is greater, and (ii) the executive’s annual bonus amount, calculated as the average annual bonus paid to him for the prior three years. The severance multiplier is 2.0 for Mr. Plake and 1.0 for Mr. Cunningham.

•	a person or group of persons (other than HFC or any of its wholly-owned subsidiaries or HLS, HEP, HEP Logistics or any of their subsidiaries) becomes the beneficial owner of more than 50% of the combined voting power of the then outstanding securities of HFC, HLS, HEP or HEP Logistics or more than 50% of the outstanding common stock or membership interests, as applicable or HFC or HLS;

•	a majority of HFC’s Board of Directors is replaced during a 12-month period by directors who were not endorsed by a majority of the previous board members;

•

the consummation of a merger, consolidation or recapitalization of HFC, HLS, HEP or HEP Logistics resulting in the holders of voting securities of HFC, HLS, HEP or HEP Logistics, as applicable, prior to the merger or consolidation owning less than 50% of the combined voting power of the voting securities of HFC, HLS, HEP or HEP Logistics, as applicable, or a recapitalization of HFC, HLS, HEP or HEP Logistics in which a person or group becomes the beneficial owner of securities of HFC, HLS, HEP or HEP Logistics, as applicable, representing more than 50% of the combined voting power of the then outstanding securities of HFC, HLS, HEP or HEP Logistics, as applicable;

•	the holders of voting securities of HFC or HEP approve a plan of complete liquidation or dissolution of HFC or HEP, as applicable; or

•	the holders of voting securities of HFC or HEP approve the sale or disposition of all or substantially all of the assets of HFC or HEP, as applicable, other than to an entity holding at least 60% of the combined voting power of the voting securities immediately prior to such sale or disposition.

•	the engagement in any act of willful gross negligence or willful misconduct on a matter that is not inconsequential; or

•	conviction of a felony.

•	a material reduction in the executive’s (or his supervisor’s) authority, duties or responsibilities;

•	a material reduction in the executive’s base compensation; or

•	the relocation of the executive to an office or location more than 50 miles from the location at which the executive normally performed the executive’s services, except for travel reasonably required in the performance of the executive’s responsibilities.

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•	the executive’s employment is terminated, other than for “Cause,” or

•	the executive resigns within 90 days following an “Adverse Change.”

•	Restricted Units: The executive will vest with respect to a pro rata number of units attributable to the period of service completed during the applicable vesting period and will forfeit any unvested units.

•

Performance Units: The executive will remain eligible to vest with respect to a pro rata number of units attributable to the period of service completed during the applicable performance period (rounded up to include the month of termination) and will forfeit any unvested units. The Compensation Committee will determine the number of remaining performance units earned and the amount to be paid to the executive as soon as administratively possible after the end of the performance period based upon the performance actually attained for the entire performance period (provided that executives will earn and receive payment with respect to no less than 50% of the performance units awarded). The foregoing also applies if the executive separates from employment for any other reason other than a voluntary separation, Special Involuntary Separation or for “Cause.”

•	a person or group of persons (other than HFC or any of its wholly-owned subsidiaries or HLS, HEP, HEP Logistics or any of their subsidiaries) becomes the beneficial owner of more than 40% of the combined voting power of the then outstanding securities of HFC, HLS, HEP or HEP Logistics;

•	the individuals who as of the date of grant constituted a majority of HFC’s Board of Directors cease for any reason to constitute a majority of HFC’s Board of Directors;

•

the consummation of a merger, consolidation or recapitalization of HFC, HLS, HEP or HEP Logistics resulting in the holders of voting securities of HFC, HLS, HEP or HEP Logistics, as applicable, prior to the merger or consolidation owning less than 60% of the combined voting power of the voting securities of HFC, HLS, HEP or HEP Logistics, as applicable, or a recapitalization of HFC, HLS, HEP, or HEP Logistics in which a person or group becomes the beneficial owner of securities of HFC, HLS, HEP or HEP Logistics, as applicable, representing more than 40% of the combined voting power of the then outstanding securities of HFC, HLS, HEP or HEP Logistics, as applicable;

•	the holders of voting securities of HFC, HLS, HEP or HEP Logistics approve a plan of complete liquidation or dissolution of HFC, HLS, HEP or HEP Logistics, as applicable; or

•	the holders of voting securities of HFC, HLS, HEP or HEP Logistics approve the sale or disposition of all or substantially all of the assets of HFC, HLS, HEP or HEP Logistics, as applicable, other than to an entity holding at least 60% of the combined voting power of the voting securities immediately prior to such sale or disposition.

•	a change in the city in which the executive is required to work;

•	a substantial increase in travel requirements of employment;

•	a substantial reduction in the duties of the type previously performed by the executive; or

•	a significant reduction in compensation or benefits (other than bonuses and other discretionary items of compensation) that does not apply generally to executives.

•	a change in the executive’s principal office of employment of more than 25 miles from the executive’s work address at the time of grant of the award;

•	a material increase (without adequate consideration) or material reduction in the duties to be performed by the executive; or

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•	a material reduction in the executive’s base compensation (other than bonuses and other discretionary items of compensation) that does not apply generally to employees.

•	an act of dishonesty constituting a felony or serious misdemeanor and resulting (or intended to result in) gain or personal enrichment to the executive at the expense of HLS;

•	gross or willful and wanton negligence in the performance of the executive’s material and substantial duties; or

•	conviction of a felony involving moral turpitude.

•	Accrued vacation for a specific year is not allowed to be carried over to a subsequent year, so we assumed all accrued vacation for the 2016 year was taken prior to December 31, 2016. Because we accrue vacation in any given year for the following year, amounts reported as “Cash Payments” include vacation amounts accrued in 2016 for the 2017 year.

•

For amounts payable to the Named Executive Officers with respect to performance units upon a termination due to death, disability, retirement, or other separation (other than a voluntary separation, a for “Cause” separation or a Special Involuntary Termination), we assumed the performance units would be settled at the maximum level based on performance through December 31, 2016. The number of units paid at the end of the performance period may vary from the amounts reflected in the following tables, based on our actual achievement compared to the performance targets.

•

With respect to the treatment of restricted unit awards upon termination due to death, disability or retirement, we have reflected accelerated vesting based on the length of employment during the vesting period for each award. Because a tranche of each award vested on December 15, 2016, the executive officers would receive additional vesting for 16 days for a termination on December 31, 2016 with respect to any award.

•	The amount shown for “Value of Welfare Benefits” represents amounts equal to the monthly premium payable pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), for medical and dental premiums, multiplied by 24 months for Mr. Plake and 12 months for Mr. Cunningham.

•

In calculating whether any tax reimbursements were owed to the Named Executive Officers, we used the following assumptions: (a)  no amounts will be discounted as attributable to reasonable compensation, (b) all cash severance payments are contingent upon a change in control, and (c) the presumption required under applicable regulations that the equity awards granted in 2016 were contingent upon a change in control could be rebutted. Based on these assumptions, none of the Named Executive Officers would receive any tax reimbursement or “gross-up” payments with respect to any amounts reported in the table below.

•	No amounts potentially payable pursuant to the NQDC Plan are included in the table below since neither the form nor amount of any such benefits would be enhanced nor vesting or other provisions accelerated in connection with any of the triggering events disclosed below. Please refer to the section titled “Nonqualified Deferred Compensation” for additional information regarding these benefits.

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•	each person known to us to be a beneficial owner of 5% or more of the common units;

•	directors of HLS, the general partner of our general partner;

•	each Named Executive Officer of HLS; and

•	all directors and executive officers of HLS as a group.

(1)

HollyFrontier Corporation directly holds 5,006 common units over which it has sole voting and dispositive power and 22,375,024 common units over which it has shared voting and dispositive power. HollyFrontier Corporation is the record holder of 140,000 common units as nominee for Navajo Pipeline Co., L.P. The 22,375,024 common units over which HollyFrontier Corporation has shared voting and dispositive power are held as follows: Holly Logistics Limited LLC directly holds 21,615,230 common units; HollyFrontier Holdings LLC directly holds 184,800 common units; Navajo Pipeline Co., L.P. directly holds 254,880 common units; and other wholly-owned subsidiaries of HollyFrontier Corporation directly own 180,114 common units. HollyFrontier Corporation is the ultimate parent company of each such entity and may therefore be deemed to beneficially own the units held by each such entity. HollyFrontier Corporation files information with or furnishes information to, the Securities and Exchange Commission pursuant to the information requirements of the Exchange Act. This percentage, which represents HollyFrontier Corporation’s percentage ownership of HEP as a whole, not limited to its ownership of outstanding common units, includes a 2% general partner interest held by HEP Logistics Holdings, L.P. which is HEP’s general partner and an indirect wholly-owned subsidiary of HollyFrontier Corporation. The address of HollyFrontier Corporation is 2828 N. Harwood, Suite 1300, Dallas, Texas 75201-1507.

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(2)	Based on a Schedule 13G/A filed with the Securities and Exchange Commission on January 31, 2017, Oppenheimer Funds, Inc. has shared voting power and shared dispositive power with respect to 6,547,306 units. The address of Oppenheimer Funds, Inc. is Two World Financial Center, 225 Liberty Street, New York, NY 10281.

(3)

Based on the Schedule 13G/A filed with the Securities and Exchange Commission on February 15, 2017 by Energy Income Partners, LLC, James J. Murchie, Eva Pao, Linda A. Longville and Saul Ballesteros. James J. Murchie and Eva Pao are the Portfolio Managers with respect to the portfolios managed by Energy Income Partners, LLC. Linda A. Longville and Saul Ballesteros are control persons of Energy Income Partners, LLC. Each of the foregoing report shared voting and dispositive power over 6,008,995 common units. The address of each of the foregoing is 10 Wright Street, Westport, Connecticut 06880.

(4)

The Charger Corporation, First Trust Portfolios L.P. and First Trust Advisors L.P. jointly filed with the Securities and Exchange Commission a Schedule 13G on January 24, 2017. Based on this Schedule 13G, First Trust Advisors L.P. and The Charger Corporation have shared voting power with respect to 3,790,647 units and shared dispositive power with respect to 3,794,226 units. The address of each of the foregoing is 120 East Liberty Drive, Suite 400, Wheaton, Illinois 60187.

(5)	Other than with respect to Mr. Jennings, the number reported includes 2,453 restricted units for which the non-employee director has sole voting power but no dispositive power. For Mr. Jennings, includes 2,473 restricted units for which he has sole voting power but no dispositive power.

(6)	Messrs. Jennings, Damiris, Clifton, Townsend, Voliva, Darling and Plake and Ms. McWatters each own common stock of HFC. Each of these individuals own common stock of HFC as set forth in the following table:

(a)

The number reported includes shares of HFC restricted stock for which the individual has sole voting power but no dispositive power, as follows: Mr. Damiris (173,677 shares), Ms. McWatters (27,114 shares), Mr. Voliva (18,521 shares) and Mr. Plake (1,347 shares). The number does not include unvested performance share units. For Mr. Jennings includes 5,149 HFC restricted stock units for which Mr. Jennings has no voting power or dispositive power.

(b)	The number reported includes 6,624 shares of HFC restricted stock held by Mr. Voliva’s wife for which Mr. Voliva disclaims beneficial ownership except to the extent of his pecuniary interest therein.

(c)	The number reported represents shares of HFC common stock owned by a trust whose beneficiaries are Mr. Townsend’s children and grandchildren and for which Mr. Townsend and his spouse serve as trustees.

(d)	Mr. Darling is an owner and general manager of DQ Holdings, L.L.C. The number reported represents shares of HFC common stock owned by DQ Holdings, L.L.C. for which Mr. Darling has shared voting and dispositive power. Mr. Darling disclaims beneficial ownership as to the shares of HFC common stock held by DQ Holdings, L.L.C. except to the extent of his pecuniary interest therein.

(7)	Mr. Darling is an owner and general manager of DQ Holdings, L.L.C. The number reported includes 22,400 common units owned by DQ Holdings, L.L.C. for which Mr. Darling has shared voting and dispositive power. Mr. Darling disclaims beneficial ownership as to the common units held by DQ Holdings, L.L.C. except to the extent of his pecuniary interest therein.

(8)	The number reported includes restricted units for which the executive has sole voting power but no dispositive power, as follows: Mr. Plake (17,875 units), Mr. Voliva (1,887 units) and Mr. Cunningham (9,531 units). The number does not include performance units held by the executive.

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(9)

The number reported includes 11,418 restricted units held by executive officers for which they have sole voting power but no dispositive power and 17,191 restricted units held by non-employee directors for which they have sole voting power but no dispositive power. The number reported also includes 22,400 common units as to which Mr. Darling disclaims beneficial ownership, except to the extent of his pecuniary interest therein and 840 common units for which Mr. Aron disclaims beneficial ownership.

(1)	All stock-based compensation plans are described in Note 6 to our consolidated financial statements for the fiscal year ended December 31, 2016.

(2)

On April 25, 2012, at a Special Meeting of the Unitholders of the Partnership, the unitholders approved the Amended and Restated Long-Term Incentive Plan, which, among other things, provided for an increase in the maximum number of common units reserved for delivery with respect to awards under the Long-Term Incentive Plan to 2,500,000 common units (as adjusted to reflect the two-for-one common unit split that occurred on January 16, 2013). All securities reported as available for future issuances are available from the additional common units approved by unitholders under the Amended and Restated Long-Term Incentive Plan. At the time the Long-Term Incentive Plan was originally adopted in 2004, it was not required to be approved by the Partnership’s unitholders.

(3)

Represents units subject to performance units granted to key individuals under the Long-Term Incentive Plan assuming the maximum payout level. If the performance units are paid at the target payout level, 47,258 units would be issued upon the vesting of such performance units. Performance units granted in November 2013 with a performance period that ended on December 31, 2016 were not settled until certification by the subcommittee of the Compensation Committee in February 2017 that a performance percentage of 150% was attained for performance units granted to Mr. Cunningham; however, such awards are not included in this column as outstanding since they are treated for purposes of the preceding executive compensation tables as vesting during 2016 in accordance with SEC rules.

Item 13.	Certain Relationships and Related Transactions, and Director Independence

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•	our obligation to pay HFC an annual administrative fee, in the amount of $2.5 million currently, for the provision by HFC of certain general and administrative services;

•	HFC’s and its affiliates’ agreement not to compete with us under certain circumstances and our right to notice of, and right of first offer to purchase, certain logistics assets constructed by HFC and acquired as part of an acquisition by HFC of refining assets;

•	an indemnity by HFC for certain potential environmental liabilities;

•	our obligation to indemnify HFC for environmental liabilities related to our assets existing on the date of our initial public offering to the extent HFC is not required to indemnify us; and

•	HFC’s right of first refusal to purchase our assets that serve HFC’s refineries.

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•	any business operated by HFC or any of its affiliates at the time of the closing of our initial public offering;

•	any business conducted by HFC with the approval of our general partner;

•	any business or asset that HFC or any of its affiliates acquires or constructs that has a fair market value or construction cost of less than $5 million; and

•	any business or asset that HFC or any of its affiliates acquires or constructs that has a fair market value or construction cost of $5 million or more if we have been offered the opportunity to purchase the business or asset at fair market value, and we decline to do so.

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•

On February 22, 2016, HFC obtained a 50% membership interest in Osage in a non-monetary exchange for a 20-year terminalling services agreement, whereby a subsidiary of Magellan Midstream Partners (“Magellan”) will provide terminalling services for all HFC products originating in Artesia, New Mexico requiring terminalling in or through El Paso, Texas. Osage is the owner of the Osage Pipeline, the primary pipeline supplying HFC’s El Dorado refinery with crude oil. Concurrent with this transaction, we entered into a non-monetary exchange with HFC, whereby we received HFC’s interest in Osage in exchange for our El Paso terminal. Since we are a consolidated Variable Interest Entity ("VIE") of HFC, this transaction was recorded as a transfer between entities under common control and reflects HFC’s carrying basis of its 50% membership interest in Osage of $44.5 million offset by our net carrying basis in the El Paso terminal of $12.1 million with the difference treated as a contribution from HFC.

•

On March 31, 2016, we acquired crude oil tanks located at HFC’s Tulsa refinery from an affiliate of Plains for $39.5 million. In 2009, HFC sold these tanks to Plains and leased them back, and due to HFC’s continuing interest in the tanks, HFC accounted for the transaction as a financing arrangement. Accordingly, the tanks remained on HFC’s balance sheet and were depreciated for accounting purposes.

•	Effective October 1, 2016, we acquired all the membership interests of Woods Cross Operating, a wholly owned subsidiary of HFC, which owns the newly constructed atmospheric distillation tower, fluid catalytic cracking unit, and polymerization unit located at HFC’s Woods Cross refinery, for cash consideration of $278 million.

•	See “Acquisitions” under Item 1, “Business” of this Annual Report on Form 10-K for additional information on this acquisition from HFC.

•	Revenues received from HFC were $333.1 million, $292.2 million and $275.2 million for the years ended December 31, 2016, 2015 and 2014, respectively.

•	HFC charged us general and administrative services under the Omnibus Agreement of $2.5 million for the year ended December 31, 2016, $2.4 million for the year ended December 31, 2015, and $2.3 million for the year ended December 31, 2014.

•	We reimbursed HFC for costs of employees supporting our operations of $40.9 million, $34.5 million and $38.9 million for the years ended December 31, 2016, 2015 and 2014, respectively.

•	HFC reimbursed us $14.0 million, $13.5 million and $16.8 million for certain reimbursable costs and capital projects for the years ended December 31, 2016, 2015 and 2014, respectively.

•	We distributed $105.2 million, $90.4 million and $80.5 million for the years ended December 31, 2016, 2015 and 2014, respectively, to HFC as regular distributions on its common units, subordinated units and general partner interest, including general partner incentive distributions.

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Item 14.	Principal Accounting Fees and Services

(1)	Represents fees for professional services provided in connection with the audit of our annual financial statements and internal controls over financial reporting, review of our quarterly financial statements, and procedures performed as part of our securities filings.

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Item 15.	Exhibits and Financial Statement Schedules

(a)	Documents filed as part of this report

(1)	Index to Consolidated Financial Statements

(2)	Index to Consolidated Financial Statement Schedules

(3)	Exhibits

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