What is the main purpose of the Transportation Services Agreement?

The agreement establishes the terms under which Marathon Pipe Line LLC (MPL) will provide transportation services for Marathon Petroleum Company LP (MPCLP) on the Cornerstone pipeline system and associated Utica build-out projects. It details the fees, minimum volume commitments, and deficiency payment provisions.

What is the duration of this agreement?

The Transportation Services Agreement has a primary term of fifteen years, commencing effective June 11, 2015. It also includes provisions for automatic renewal for up to two additional five-year terms, unless terminated by either party with sufficient notice.

What are the implications of the minimum volume commitment and deficiency payment for MPLX?

The minimum volume commitment provides MPLX with a baseline level of contracted transportation revenue, contributing to revenue stability. The deficiency payment mechanism for MPCLP ensures that MPLX receives a minimum payment even if volumes fall short, although the ability for MPCLP to credit these payments against future volumes introduces some variability in actual revenue realization.

Is this a transaction between independent parties?

No, this is a related-party transaction. MPLX indirectly owns 99.5% of MPL, and both MPL and MPCLP are indirect subsidiaries of Marathon Petroleum Corporation (MPC). MPC also holds a significant limited partnership interest in MPLX. This structure is common in master limited partnership (MLP) ecosystems where the parent company's midstream assets are often housed within the MLP.

MPLX/MPLXP 8-K: Material Agreements

Summary

This 8-K filing from MPLX LP, dated June 17, 2015, announces a material definitive agreement entered into on June 11, 2015, between Marathon Pipe Line LLC (MPL) and Marathon Petroleum Company LP (MPCLP). This transportation services agreement governs the use of the Cornerstone pipeline system and related Utica build-out projects. Under the agreement, MPL will charge MPCLP FERC tariff rates for transporting products, with MPCLP committed to minimum quarterly volumes. A key feature is the deficiency payment mechanism, where any shortfall in minimum volume by MPCLP can be credited against future excess volumes within a specified period, providing flexibility for MPCLP. The agreement has a substantial initial term of fifteen years, with automatic five-year renewal options, indicating a long-term strategic commitment between these affiliated entities. The filing also clarifies MPLX's ownership structure, noting that MPLX indirectly owns 99.5% of MPL, and that both MPLX and MPCLP are indirect wholly-owned subsidiaries of Marathon Petroleum Corporation (MPC). This related-party nature of the agreement is important for investors to understand the operational and financial interdependencies within the Marathon Petroleum ecosystem.

Key Highlights

1MPLX LP's subsidiary, Marathon Pipe Line LLC (MPL), entered into a Transportation Services Agreement with Marathon Petroleum Company LP (MPCLP).
2The agreement covers transportation services on the Cornerstone pipeline system and related Utica build-out projects, effective June 11, 2015.
3MPCLP is committed to minimum quarterly transportation volumes and will pay deficiency payments for any shortfalls, which can be credited against future excess volumes.
4The agreement has a primary term of 15 years, with potential for two 5-year renewal terms, signaling long-term operational commitment.
5MPLX indirectly owns 99.5% of MPL, and both entities are indirectly owned by Marathon Petroleum Corporation (MPC), highlighting a related-party transaction.
6The agreement utilizes Federal Energy Regulatory Commission (FERC) tariff rates for charging transportation fees.

MPLX LP 8-K Report, Material Agreement (Jun 17, 2015)

Summary

Key Highlights

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