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Hess Midstream LP

Hess Midstream LPHESMEarnings & Financial Report

NYSE · Energy · Crude Petroleum & Natural Gas

Hess Corporation is an American global independent energy company involved in the exploration and production of crude oil and natural gas. It was formed by the merger of Hess Oil and Chemical and Amerada Petroleum in 1968. Leon Hess was CEO from the early 1960s until 1995, after which his son John B Hess succeeded him as chairman and CEO. The company agreed to be acquired by rival oil company Chevron in October 2023, and the acquisition closed in July 2025.

What changed in Hess Midstream LP's 10-K — 2022 vs 2023

Top changes in Hess Midstream LP's 2023 10-K

246 paragraphs added · 388 removed · 173 edited across 5 sections

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

83 edited+52 added−28 removed213 unchanged
These measures include programs that require the crude oil and natural gas industry to report and to control greenhouse gas emissions, and for states to develop statewide or regional programs to address greenhouse gas emissions.
These measures include programs that require the crude oil and natural gas industry to report and/or control greenhouse gas emissions, and for states to develop statewide or regional programs to address greenhouse gas emissions.
Our operations are subject to all of the risks and operational hazards inherent in gathering, compressing, processing, fractionating, terminaling, storing, loading and transporting crude oil, natural gas and NGLs and gathering and disposing of produced water, including: • damages to pipelines, terminals and facilities, related equipment and surrounding properties caused by earthquakes, tornados, floods, fires, severe weather, explosions and other natural disasters, the frequency and severity of which may be impacted by climate change, and acts of terrorism; • maintenance, repairs, mechanical or structural failures at our or Hess’ facilities or at third‑party facilities on which our or Hess’ operations are dependent, including electrical shortages, power disruptions and power grid failures; • damages to and loss of availability of interconnecting third‑party pipelines, railroads, terminals and other means of delivering crude oil, natural gas and NGLs; • crude oil rail car derailments, fires, explosions and spills; 26 Table of Contents • disruption or failure of information technology systems and network infrastructure due to various causes, including unauthorized access or attack; • curtailments of operations due to severe seasonal weather; • protests, riots, strikes, lockouts or other industrial disturbances; and • other hazards.
Our operations are subject to all of the risks and operational hazards inherent in gathering, compressing, processing, fractionating, terminaling, storing, loading and transporting crude oil, natural gas and NGLs and gathering and disposing of produced water, including: • damages to pipelines, terminals and facilities, related equipment and surrounding properties caused by earthquakes, tornados, floods, fires, severe weather, explosions and other natural disasters, the frequency and severity of which may be impacted by climate change, and acts of terrorism; • maintenance, repairs, mechanical or structural failures at our or Hess’ facilities or at third‑party facilities on which our or Hess’ operations are dependent, including electrical shortages, power disruptions and power grid failures; • damages to and loss of availability of interconnecting third‑party pipelines, railroads, terminals and other means of delivering crude oil, natural gas and NGLs; • crude oil rail car derailments, fires, explosions and spills; • disruption or failure of information technology systems and network infrastructure due to various causes, including unauthorized 27 Table of Contents access or attack; • curtailments of operations due to severe seasonal weather; • protests, riots, strikes, lockouts or other industrial disturbances; and • other hazards.
While significant uncertainty exists as to the specifics on any future regulation of methane or other greenhouse gas emissions under federal regulations such as the Clean Air Act or other local, regional, or international regulatory regimes, their impact, if enacted, is likely to result in increased compliance costs, increased utility costs, additional operating restrictions on our business and an increase in the cost of products generally.
While significant uncertainty exists as to the specifics on any regulation of methane or other greenhouse gas emissions under federal regulations such as the Clean Air Act or other local, regional or international regulatory regimes, their impact, if enacted, is likely to result in increased compliance costs, increased utility costs, additional operating restrictions on our business and an increase in the cost of products generally.
Hess’ directors and officers have a fiduciary duty to make these decisions in the best interests of the stockholders of Hess; • our partnership agreement replaces the fiduciary duties that would otherwise be owed by our general partner with contractual standards governing its duties, limiting our general partner’s liabilities and restricting the remedies available to the shareholders of the Company for actions that, without the limitations, might constitute breaches of fiduciary duty; • except in limited circumstances, our general partner has the power and authority to conduct the Company’s business without shareholder approval; • our general partner determines the amount and timing of asset purchases and sales, borrowings, issuance of additional partnership securities and the creation, reduction or increase of cash reserves, each of which can affect the amount of cash that is distributed to the shareholders of the Company; • our general partner determines which costs incurred by it are reimbursable by the Company; • our general partner may cause the Company to borrow funds in order to permit the payment of cash distributions; • our partnership agreement does not restrict our general partner from causing the Company to pay it or its affiliates for any services rendered to the Company or entering into additional contractual arrangements with any of these entities on behalf of the Company; • our general partner intends to limit its liability regarding the Company’s contractual and other obligations; • our general partner may exercise its right to call and purchase all of the Company’s shares not owned by it and its affiliates if it and its affiliates own sufficient shares to exercise the call right; • our general partner controls the enforcement of obligations owed to the Company by our general partner and its affiliates, including the commercial agreements between the Company and Hess; and 37 Table of Contents • our general partner decides whether to retain separate counsel, accountants or others to perform services for the Company.
Hess’ directors and officers have a fiduciary duty to make these decisions in the best interests of the stockholders of Hess; • our partnership agreement replaces the fiduciary duties that would otherwise be owed by our general partner with contractual standards governing its duties, limiting our general partner’s liabilities and restricting the remedies available to the shareholders of the Company for actions that, without the limitations, might constitute breaches of fiduciary duty; • except in limited circumstances, our general partner has the power and authority to conduct the Company’s business without shareholder approval; • our general partner determines the amount and timing of asset purchases and sales, borrowings, issuance of additional partnership securities and the creation, reduction or increase of cash reserves, each of which can affect the amount of cash that is distributed to the shareholders of the Company; • our general partner determines which costs incurred by it are reimbursable by the Company; • our general partner may cause the Company to borrow funds in order to permit the payment of cash distributions; • our partnership agreement does not restrict our general partner from causing the Company to pay it or its affiliates for any services rendered to the Company or entering into additional contractual arrangements with any of these entities on behalf of the Company; • our general partner intends to limit its liability regarding the Company’s contractual and other obligations; • our general partner may exercise its right to call and purchase all of the Company’s shares not owned by it and its affiliates if it and its affiliates own sufficient shares to exercise the call right; • our general partner controls the enforcement of obligations owed to the Company by our general partner and its affiliates, including the commercial agreements between the Company and Hess; and • our general partner decides whether to retain separate counsel, accountants or others to perform services for the Company.
If a court were to find this choice of forum provision inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition and results of operations and our ability to make cash distributions to our shareholders. 38 Table of Contents Our partnership agreement provides that our shareholders irrevocably waive the right to trial by jury in any claim, suit, action or proceeding under either state or federal laws, including any claim under U.S. federal securities laws, which could result in less favorable outcomes to our shareholders in any such action.
If a court were to find this choice of forum provision inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition and results of operations and our ability to make cash distributions to our shareholders. 39 Table of Contents Our partnership agreement provides that our shareholders irrevocably waive the right to trial by jury in any claim, suit, action or proceeding under either state or federal laws, including any claim under U.S. federal securities laws, which could result in less favorable outcomes to our shareholders in any such action.
Those national commitments by themselves create no binding requirements on individual companies or facilities, but they do provide indications of the current administration’s policy direction and the types of legislative and regulatory requirements—such as the EPA’s proposed methane rules—that may be needed to achieve those commitments.
Those national commitments by themselves create no binding requirements on individual companies or facilities, but they do provide indications of the current administration’s policy direction and the types of legislative and regulatory requirements—such as the EPA’s methane rules—that may be needed to achieve those commitments.
For example, our partnership agreement: • provides that whenever our general partner makes a determination or takes, or declines to take, any other action in its capacity as our general partner, our general partner is required to make such determination, or take or decline to take such other action, in good faith, meaning that it subjectively believed that the determination or the decision to take or decline to take such action was in the best interests of us, and will not be subject to any other or different standard imposed by our partnership agreement, Delaware law, or any other law, rule or regulation, or at equity; • provides that our general partner will not have any liability to us or our limited partners for decisions made in its capacity as a general partner so long as it acted in good faith; • provides that our general partner and our officers and directors will not be liable for monetary damages to us or our limited partners resulting from any act or omission unless there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining that our general partner or our officers and directors, as the case may be, acted in bad faith or engaged in fraud or willful misconduct or, in the case of a criminal matter, acted with knowledge that the conduct was criminal; and • provides that our general partner will not be in breach of its obligations under our partnership agreement or its fiduciary duties to us or its limited partners if a transaction with an affiliate or the resolution of a conflict of interest is approved in accordance with, or otherwise meets the standards set forth in, our partnership agreement.
For example, our partnership agreement: • provides that whenever our general partner makes a determination or takes, or declines to take, any other action in its capacity as our general partner, our general partner is required to make such determination, or take or decline to take such other action, in good faith, meaning that it subjectively believed that the determination or the decision to take or decline to take such action was in the best interests of us, and will not be subject to any other or different standard imposed by our partnership agreement, Delaware law, or any other law, rule or regulation, or at equity; • provides that our general partner will not have any liability to us or our limited partners for decisions made in its capacity as a general partner so long as it acted in good faith; 41 Table of Contents • provides that our general partner and our officers and directors will not be liable for monetary damages to us or our limited partners resulting from any act or omission unless there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining that our general partner or our officers and directors, as the case may be, acted in bad faith or engaged in fraud or willful misconduct or, in the case of a criminal matter, acted with knowledge that the conduct was criminal; and • provides that our general partner will not be in breach of its obligations under our partnership agreement or its fiduciary duties to us or its limited partners if a transaction with an affiliate or the resolution of a conflict of interest is approved in accordance with, or otherwise meets the standards set forth in, our partnership agreement.
Terrorist attacks and threats, cyber‑attacks, escalation of military activity or acts of war may have significant effects on general economic conditions, fluctuations in consumer confidence and spending and market liquidity, each of which could materially and adversely affect our business.
Terrorist attacks and threats, escalation of military activity or acts of war may have significant effects on general economic conditions, fluctuations in consumer confidence and spending and market liquidity, each of which could materially and adversely affect our business.
Regulatory, Legal and Environmental Risks • Our assets and operations are subject to federal, state, and local laws and regulations relating to environmental protection and health and safety, including those relating to pipeline integrity, and may become subject to FERC regulation. • Evolving environmental laws and regulations, including on crude oil stabilization, transportation, hydraulic fracturing and climate change, could have an adverse effect on our business. • Climate change and sustainability initiatives may adversely affect our business, including significant operational changes and expenditures, reduce demand for our services and an increase our cost of capital. • We or Hess may be unable to obtain or renew permits or approvals necessary for our respective operations, including our produced water facilities. • Certain plant or animal species could be designated as endangered or threatened, which could limit our ability to expand some or limit our customers’ ability to develop new crude oil and natural gas wells.
Regulatory, Legal and Environmental Risks • Our assets and operations are subject to federal, state, and local laws and regulations relating to environmental protection and health and safety, including those relating to pipeline integrity, and may become subject to FERC regulation. • Evolving environmental laws and regulations, including on crude oil stabilization, transportation, hydraulic fracturing and climate change, could have an adverse effect on our business. 21 Table of Contents • Climate change and sustainability initiatives may adversely affect our business, including significant operational changes and expenditures, reduce demand for our services and an increase our cost of capital. • We or Hess may be unable to obtain or renew permits or approvals necessary for our respective operations, including our produced water facilities. • Certain plant or animal species could be designated as endangered or threatened, which could limit our ability to expand some or limit our customers’ ability to develop new crude oil and natural gas wells.
Our loss of these rights, through our inability to renew right‑of‑way contracts or otherwise, could have a material adverse effect on our business, results of operations, financial condition and ability to make cash distributions to our shareholders. 27 Table of Contents We utilize contract operator services at certain of our assets, and we may face higher costs associated with terminal services in the future.
Our loss of these rights, through our inability to renew right‑of‑way contracts or otherwise, could have a material adverse effect on our business, results of operations, financial condition and ability to make cash distributions to our shareholders. 28 Table of Contents We utilize contract operator services at certain of our assets, and we may face higher costs associated with terminal services in the future.
Terrorist or cyber-attacks and threats, or escalation of military activity in response to these attacks, could have a material adverse effect on our business, financial condition or results of operations.
Terrorist attacks and threats, or escalation of military activity in response to these attacks, could have a material adverse effect on our business, financial condition or results of operations.
By purchasing a Class A Share, a shareholder is treated as having consented to the provisions in our partnership agreement, including the provisions discussed above. 39 Table of Contents Holders of our Class A Shares have very limited voting rights and, even if they are dissatisfied, they cannot currently remove our general partner without its consent.
By purchasing a Class A Share, a shareholder is treated as having consented to the provisions in our partnership agreement, including the provisions discussed above. 40 Table of Contents Holders of our Class A Shares have very limited voting rights and, even if they are dissatisfied, they cannot currently remove our general partner without its consent.
Risk Factors Summary Risks Related to Our Relationship with Hess • We are substantially dependent on Hess and subject to many of the same risks facing Hess. • Hess may suspend, reduce or terminate its obligations under our commercial agreements if we fail to perform or if a force majeure event prevents us from performing required services under the applicable agreement. • Our success depends, in part, on Hess replacing declining production, and if Hess does not maintain its drilling activities, or if we do not pursue third-party customer contracts, the demand for our services could be reduced. • We may not be able to significantly increase our third-party revenues, which could limit our ability to grow and extend our dependence on Hess. • The level and terms of Hess’ indebtedness and any reduction in Hess’ credit ratings could adversely affect our business and our ability to obtain credit in the future.
Risk Factors Summary Risks Related to Our Relationship with Hess • We are substantially dependent on Hess and subject to many of the same risks facing Hess. • Hess may suspend, reduce or terminate its obligations under our commercial agreements if we fail to perform or if a force majeure event prevents us from performing required services under the applicable agreement. • Our success depends, in part, on Hess replacing declining production, and if Hess does not maintain its drilling activities, the demand for our services could be reduced. • We may not be able to significantly increase our third-party revenues, which could limit our ability to grow and extend our dependence on Hess. • The level and terms of Hess’ indebtedness and any reduction in Hess’ credit ratings could adversely affect our business and our ability to obtain credit in the future.
While hydraulic fracturing is typically regulated by state agencies, federal agencies have also asserted regulatory authority over the process. In addition, Congress may in the future further consider legislation giving the U.S. Environmental Protection Agency ("EPA"), direct authority to regulate and require federal permitting of hydraulic fracturing under the Safe Drinking Water Act.
While hydraulic fracturing is typically regulated by state agencies, federal agencies have also asserted regulatory authority over the process. In addition, Congress may in the future further consider legislation giving the U.S. Environmental Protection Agency (“EPA”), direct authority to regulate and require federal permitting of hydraulic fracturing under the Safe Drinking Water Act.
However, the extent and magnitude of that impact cannot currently be reliably or accurately estimated. 34 Table of Contents Climate change and sustainability initiatives may result in significant operational changes and expenditures, reduced demand for our services and adversely affect our business. We recognize that climate change and sustainability are growing global environmental concerns.
However, the extent and magnitude of that impact cannot currently be reliably or accurately estimated. 35 Table of Contents Climate change and sustainability initiatives may result in significant operational changes and expenditures, reduced demand for our services and adversely affect our business. We recognize that climate change and sustainability are growing global environmental concerns.
In addition, if any of our facilities were found to have violated the NGA or the Natural Gas Policy Act, or the NGPA, FERC has civil penalty authority under the NGA and NGPA to impose penalties for current violations of up to $1,388,496 per violation per day and disgorgement of profits associated with any violation.
In addition, if any of our facilities were found to have violated the NGA or the Natural Gas Policy Act, or the NGPA, FERC has civil penalty authority under the NGA and NGPA to impose penalties for current violations of up to $1,496,035 per violation per day and disgorgement of profits associated with any violation.
For the year ended December 31, 2022, substantially all of our revenues were attributable to our fee‑based commercial agreements with Hess, including revenues from third‑party volumes delivered under these agreements. We expect that we will continue to derive substantially all of our revenues in the near term under multiple commercial agreements with Hess.
For the year ended December 31, 2023, substantially all of our revenues were attributable to our fee‑based commercial agreements with Hess, including revenues from third‑party volumes delivered under these agreements. We expect that we will continue to derive substantially all of our revenues in the near term under multiple commercial agreements with Hess.
In addition, we have no control over Hess or other producers or their drilling or production decisions, which are affected by, among other things: • the availability and cost of capital; • prevailing and projected crude oil, natural gas and NGL prices; • demand for crude oil, natural gas and NGLs; • levels of reserves; • geological considerations; • environmental or other governmental regulations, including the timely availability of drilling permits and the regulation of hydraulic fracturing and flaring; and • the availability of drilling rigs and other costs of production and equipment.
In addition, we have no control over Hess or other producers or their drilling or production decisions, which are affected by, among other things: • the availability and cost of capital; • prevailing and projected crude oil, natural gas and NGL prices; • demand for crude oil, natural gas and NGLs; • levels of reserves; • geological considerations; • environmental or other governmental regulations, including the timely availability of drilling permits and the regulation of hydraulic fracturing and flaring; and 23 Table of Contents • the availability of drilling rigs and other costs of production and equipment.
In addition to potential domestic regulation of greenhouse gases, there continues to be international interest in a global framework for greenhouse gas reductions. For example, the Paris Agreement seeks to combat climate change through the establishment of nationally-determined greenhouse gas emissions reduction goals.
In addition to recent and potential domestic regulation of greenhouse gases, there continues to be international interest in a global framework for greenhouse gas reductions. For example, the Paris Agreement seeks to combat climate change through the establishment of nationally-determined greenhouse gas emissions reduction goals.
In January 2019, the NDIC issued revisions to the order giving operators more flexibility for evaluating and demonstrating compliance with the state’s vapor pressure requirements. 32 Table of Contents Furthermore, rail car derailments in Canada and the United States several years ago led to increased regulatory scrutiny over the safety of transporting Bakken crude oil by rail.
In January 2019, the NDIC issued revisions to the order giving operators more flexibility for evaluating and demonstrating compliance with the state’s vapor pressure requirements. Furthermore, rail car derailments in Canada and the United States several years ago led to increased regulatory scrutiny over the safety of transporting Bakken crude oil by rail.
Shareholder activism in relation to environmental, social and governance ("ESG") matters, including climate change and sustainability issues, has been increasing in our industry in recent times, and shareholders may attempt to effect changes to our business or governance.
Shareholder activism in relation to environmental, social and governance (“ESG”) matters, including climate change and sustainability issues, has been increasing in our industry in recent times, and shareholders may attempt to effect changes to our business or governance.
The final rule establishes two new types of onshore gas gathering pipelines subject to varying degrees of regulation: all onshore gathering line operators are now subject to PHMSA’s annual reporting and incident reporting requirements, and certain previously unregulated rural gas gathering lines must now comply with PHMSA damage prevention and, depending on the size of the pipeline, construction and operational requirements.
The rule established two new types of onshore gas gathering pipelines subject to varying degrees of regulation: all onshore gathering line operators are now subject to PHMSA’s annual reporting and incident reporting requirements, and certain previously unregulated rural gas gathering lines must now comply with PHMSA damage prevention and, depending on the size of the pipeline, construction and operational requirements.
Risks Inherent in an Investment in Us • We may not generate sufficient distributable cash flow to support the payment of the minimum quarterly distribution to our shareholders. • Our general partner and its affiliates, including our Sponsors, have conflicts of interest with us and limited fiduciary duties and they may favor their own interests to our detriment. 22 Table of Contents • Our partnership agreement requires that we distribute all of our available cash, which could limit our ability to grow. • Our partnership agreement designates the Court of Chancery of the State of Delaware as the exclusive forum for certain types of actions by our shareholders for disputes with us or our general partner’s directors, officers or other employees. • Our partnership agreement provides that our shareholders irrevocably waive the right to trial by jury. • Our general partner and its affiliates, including our Sponsors, may compete with us and have no obligation to present business opportunities to us. • Holders of our Class A Shares have very limited voting rights. • Our general partner can transfer its interests and may require our shareholders to sell their Class A Shares at an undesirable time or price. • Our partnership agreement restricts the remedies available to shareholders for actions taken by our general partner. • Our Sponsors may sell Class A Shares in the public or private markets, and such sales could have an adverse impact on the trading price of the Class A Shares. • We may issue an unlimited number of additional equity interests without shareholder approval, including equity interests with preferences senior to the Class A Shares. • The NYSE does not require us to comply with certain of its corporate governance requirements. • We are treated as a corporation for U.S. federal and state income tax purposes.
Risks Inherent in an Investment in Us • We may not generate sufficient available cash to support the payment of the minimum quarterly distribution to our shareholders. • Our general partner and its affiliates, including our Sponsors, have conflicts of interest with us and limited fiduciary duties and they may favor their own interests to our detriment. • Our partnership agreement requires that we distribute all of our available cash, which could limit our ability to grow. • Our partnership agreement designates the Court of Chancery of the State of Delaware as the exclusive forum for certain types of actions by our shareholders for disputes with us or our general partner’s directors, officers or other employees. • Our partnership agreement provides that our shareholders irrevocably waive the right to trial by jury. • Our general partner and its affiliates, including our Sponsors, may compete with us and have no obligation to present business opportunities to us. • Our partnership agreement replaces our general partner’s fiduciary duties to holders of the Company’s shares with contractual standards governing its duties. • Holders of our Class A Shares have very limited voting rights. • Our general partner can transfer its interests and may require our shareholders to sell their Class A Shares at an undesirable time or price. • Our partnership agreement restricts the remedies available to shareholders for actions taken by our general partner. • Our Sponsors may sell Class A Shares in the public or private markets, and such sales could have an adverse impact on the trading price of the Class A Shares. • We may issue an unlimited number of additional equity interests without shareholder approval, including equity interests with preferences senior to the Class A Shares. • The NYSE does not require us to comply with certain of its corporate governance requirements. • We are treated as a corporation for U.S. federal and state income tax purposes.
This may create actual and potential conflicts of interest between the Company and affiliates of our general partner and result in less than favorable treatment of the Company and its shareholders. Our partnership agreement requires that we distribute all of our available cash, which could limit our ability to grow and make acquisitions.
This may create actual and potential conflicts of interest between the Company and affiliates of our general partner and result in less than favorable treatment of the Company and its shareholders. 38 Table of Contents Our partnership agreement requires that we distribute all of our available cash, which could limit our ability to grow and make acquisitions.
Accordingly, we are indirectly subject to the operational and business risks of Hess, the most significant of which include the following: • adverse effects of COVID-19; • the effects of changing commodity prices and production margins; • Hess’ ability to successfully increase its Bakken production; • the inherent uncertainties in estimating quantities of proved reserves and the possibility that actual Bakken production may be lower than estimated; • Hess’ ability to control decisions made under joint operating agreements and failure of the parties under such agreements to meet their obligations; • changing laws and regulations and other governmental actions; • substantial capital requirements and Hess’ ability to obtain needed financing on satisfactory terms, if at all; • political instability in areas where Hess operates that can adversely affect Hess’ business; • environmental risks and environmental laws and regulations that can result in significant costs and liabilities; • climate change and sustainability initiatives and changes in laws and regulations may adversely affect Hess' business including significant operational changes and expenditures, reduce demand for Hess’ products or increase cost of capital for Hess; • highly competitive environment where many of Hess’ competitors are larger and have greater resources and a more diverse portfolio than Hess; • catastrophic and other events, whether naturally occurring or man-made, may materially affect Hess’ operations and financial condition; 23 Table of Contents • significant time delays between the estimated and actual occurrence of critical events associated with Hess’ development projects may result in material negative economic consequences; • departure of key members from Hess’ senior management team, and/or difficulty in recruiting and retaining adequate numbers of experienced technical personnel, could negatively impact Hess’ ability to deliver on its strategic goals; • Hess’ dependency on oilfield service companies for items including drilling rigs, equipment, supplies and skilled labor and its ability to secure these services, or a high cost thereof, may result in material negative economic consequences; and • disruption, failure or cyber security breaches affecting or targeting computer, telecommunication systems, and infrastructure used by Hess or its business partners that may materially impact Hess’ business and operations.
Accordingly, we are indirectly subject to the operational and business risks of Hess, the most significant of which include the following: • the effects of changing commodity prices and production margins; • Hess’ ability to successfully increase its Bakken production; • the inherent uncertainties in estimating quantities of proved reserves and the possibility that actual Bakken production may be lower than estimated; • Hess’ ability to control decisions made under joint operating agreements and failure of the parties under such agreements to meet their obligations; 22 Table of Contents • changing laws and regulations and other governmental actions; • substantial capital requirements and Hess’ ability to obtain needed financing on satisfactory terms, if at all; • political instability in areas where Hess operates that can adversely affect Hess’ business; • environmental risks and environmental laws and regulations that can result in significant costs and liabilities; • climate change and sustainability initiatives and changes in laws and regulations may adversely affect Hess’ business including significant operational changes and expenditures, reduce demand for Hess’ products or increase cost of capital for Hess; • highly competitive environment where many of Hess’ competitors are larger and have greater resources and a more diverse portfolio than Hess; • catastrophic and other events, whether naturally occurring or man-made, may materially affect Hess’ operations and financial condition; • significant time delays between the estimated and actual occurrence of critical events associated with Hess’ development projects may result in material negative economic consequences; • departure of key members from Hess’ senior management team, and/or difficulty in recruiting and retaining adequate numbers of experienced technical personnel, could negatively impact Hess’ ability to deliver on its strategic goals; • Hess’ dependency on oilfield service companies for items including drilling rigs, equipment, supplies and skilled labor and its ability to secure these services, or a high cost thereof, may result in material negative economic consequences; and • disruption, failure or cybersecurity attacks affecting or targeting information technology systems and infrastructure used by Hess or its business partners may materially impact Hess’ business and operations.
Our partnership agreement requires that we distribute all of our available cash to our shareholders. As a result, we expect to rely primarily upon external financing sources, including borrowings under our revolving credit facility and the issuance of debt and equity securities, to fund our acquisitions and expansion capital expenditures.
Our partnership agreement requires that we distribute all of our available cash to our shareholders. As a result, we expect to rely primarily upon external financing sources, including borrowings under our revolving credit facility and the issuance of debt and equity securities, to fund our acquisitions and expansion projects.
Management’s Discussion and Analysis of Financial Condition and Results of Operations—Capital Resources and Liquidity ” for additional information about our credit facilities. 28 Table of Contents We have a significant amount of consolidated indebtedness that may adversely affect our business, results of operations and ability to make quarterly distributions. We have a significant amount of consolidated indebtedness.
Management’s Discussion and Analysis of Financial Condition and Results of Operations—Capital Resources and Liquidity ” for additional information about our credit facilities. We have a significant amount of consolidated indebtedness that may adversely affect our business, results of operations and ability to make quarterly distributions. We have a significant amount of consolidated indebtedness.
Currently, various federal and state legislative and regulatory bodies are considering measures to address greenhouse gas emissions, and some have recently proposed climate-related rules and regulations.
Currently, various federal and state legislative and regulatory bodies have, or are considering, measures to address greenhouse gas emissions, and some have recently passed or proposed climate-related rules and regulations.
In November 2021, the international community gathered again in Glasgow at COP26, during which multiple announcements were made, including a call for parties to eliminate certain fossil fuel subsidies and pursue further action on non-carbon dioxide GHGs.
In November 2021, the international community gathered again in Glasgow at COP26, during which multiple announcements were made, including a call for parties to eliminate certain fossil fuel subsidies and pursue further action on non-carbon dioxide greenhouse gases.
As a result, competition from the Sponsors and other affiliates of our general partner could materially and adversely impact the Company’s results of operations and distributable cash flow. Our partnership agreement replaces our general partner’s fiduciary duties to holders of the Company’s shares with contractual standards governing its duties.
As a result, competition from the Sponsors and other affiliates of our general partner could materially and adversely impact the Company’s results of operations and available cash. Our partnership agreement replaces our general partner’s fiduciary duties to holders of the Company’s shares with contractual standards governing its duties.
In addition, issuing additional partner interests may result in significant 29 Table of Contents shareholder dilution and increase the aggregate amount of cash required to maintain the then-current distribution rates, which could materially decrease our ability to pay distributions at the then-current distribution rates.
In addition, issuing additional partner interests may result in significant shareholder dilution and increase the aggregate amount of cash required to maintain the then-current distribution rates, which could materially decrease our ability to pay distributions at the then-current distribution rates.
Furthermore, a higher level of indebtedness at Hess in the future would increase the risk that it may default on its obligations to us under our commercial agreements. As of December 31, 2022, Hess had total consolidated indebtedness of approximately $8.3 billion, including our indebtedness of $2.9 billion, which is non-recourse to Hess.
Furthermore, a higher level of indebtedness at Hess in the future would increase the risk that it may default on its obligations to us under our commercial agreements. As of December 31, 2023, Hess had total consolidated indebtedness of approximately $8.6 billion, including our indebtedness of $3.2 billion, which is non‑recourse to Hess.
To the extent we issue additional shares in connection with any acquisitions or expansion capital expenditures, the payment of distributions on those additional shares may increase the risk that we will be unable to maintain or increase our per share distribution level.
To the extent we issue additional shares in connection with any acquisitions or expansion projects, the payment of distributions on those additional shares may increase the risk that we will be unable to maintain or increase our per share distribution level.
Because an entity-level tax is imposed on us due to our status as a corporation for U.S. federal and state income tax purposes, distributable cash flow will be reduced by any tax liabilities.
Because an entity-level tax is imposed on us due to our status as a corporation for U.S. federal and state income tax purposes, available cash will be reduced by any tax liabilities.
To the extent any such effects were to occur, the resulting impacts could have a material adverse effect on our business, results of operations, financial condition and our ability to make cash distributions to our shareholders. Our success depends on our ability to attract and maintain customers in a limited number of geographic areas.
To the extent any of these events were to occur, the resulting impacts could have a material adverse effect on our business, results of operations, financial condition and our ability to make cash distributions to our shareholders. Our success depends on our ability to attract and maintain customers in a limited number of geographic areas.
Such negative perceptions and reputational risks may in the future adversely affect our ability to successfully carry out our business strategy, for example, by adversely affecting the availability of and cost to us of obtaining capital. 33 Table of Contents In addition, potential regulations regarding climate change could affect our operations.
Such negative perceptions and reputational risks may in the future adversely affect our ability to successfully carry out our business strategy, for example, by adversely affecting the availability of and cost to us of obtaining capital. In addition, recent and potential regulations regarding climate change could adversely affect our operations.
If at any time our general partner and its affiliates own more than a designated percentage of the issued and outstanding limited partner interests of any class, our general partner will have the right, but not the obligation, which it may assign to any of its affiliates or to us, to acquire all, but not less than all, of the limited partner interests of such class held by unaffiliated persons at a price not less than their then-current market price.
If at any time our general partner and its affiliates, including our Sponsors, own more than 80% of the issued and outstanding limited partner interests of any class, our general partner will have the right, but not the obligation, which it may assign to any of its affiliates or to us, to acquire all, but not less than all, of the limited partner interests of such class held by unaffiliated persons at a price not less than their then-current market price.
We are treated as a corporation for U.S. federal and state income tax purposes. We are subject to U.S. federal income tax as a corporation at the current corporate tax rate of 21% and to state income tax in various states at various rates.
We are treated as a corporation for U.S. federal and state income tax purposes. 42 Table of Contents We are subject to U.S. federal income tax as a corporation at the current corporate tax rate of 21% and to state income tax in various states at various rates.
Such federal regulation, as well as uncertainty regarding the future course of federal regulation and associated litigation, could indirectly affect our business and our results of operations by reducing demand for our services. At both the federal and state-level, there are also an increasing number of legislative initiatives and proposals that may lead to reduced demand for oil and gas.
Such executive actions, as well as uncertainty regarding the future course of federal regulation, legislation and associated litigation, could indirectly affect our business and our results of operations by reducing demand for our services. 34 Table of Contents At both the federal and state-level, there are also an increasing number of legislative initiatives and proposals that may lead to reduced demand for oil and gas.
Risks Inherent in an Investment in Us We may not generate sufficient distributable cash flow to support the payment of the minimum quarterly distribution to our shareholders.
Risks Inherent in an Investment in Us We may not generate sufficient available cash to support the payment of the minimum quarterly distribution to our shareholders.
Additionally, the SEC issued a proposed rule in March 2022 that would mandate extensive disclosure of climate-related data, risks, and opportunities, including financial impacts, physical and transition risks, related governance and strategy, and GHG emissions, for certain public companies.
For example, the SEC issued a proposed rule in March 2022 that would mandate extensive disclosure for certain public companies of climate-related data, risks and opportunities, including financial impacts, physical and transition risks, related governance and strategy, and greenhouse gas emissions.
In November 2021, PHMSA issued a final rule that expands certain federal pipeline safety requirements to all onshore gas gathering pipelines, regardless of size or location.
In November 2021, PHMSA issued a final rule (the second part of the Mega Rule) that expands certain federal pipeline safety requirements to all onshore gas gathering pipelines, regardless of size or location.
In addition, computers control oil and gas distribution systems globally and are necessary to deliver our customers’ products to market.
In addition, computers control oil and gas production, processing equipment, and distribution systems globally and are necessary to deliver our customers’ products to market.
The IRA, signed by President Biden in August 2022, provides significant funding and incentives for research and development of low-carbon energy production methods, carbon capture, and other programs directed at addressing climate change.
The Inflation Reduction Act (“IRA”), signed by President Biden in August 2022, provides significant funding and incentives for research and development of low-carbon energy production methods, carbon capture, and other programs directed at addressing climate change.
We continue to evaluate the effect of the new law and any additional guidance on our future cash flows and financial results, including if we become a taxpayer for the alternative minimum tax in the future. ITEM 1B. UNRESOLVE D STAFF COMMENTS None.
We continue to evaluate the effect of the new law and any additional guidance on our future cash flows and financial results, including if we become a taxpayer subject to the alternative minimum tax. 43 Table of Contents ITEM 1B. UNRESOLVE D STAFF COMMENTS None.
The degree to which we are leveraged, combined with lease and other financial obligations and contractual commitments, could have important consequences to us, including the following: • our ability to obtain additional financing, if necessary, for working capital, capital expenditures, acquisitions or other purposes may be impaired or such financing may not be available on favorable terms; • satisfying our obligations with respect to indebtedness may be more difficult and any failure to comply with the obligations of any debt instruments could result in an event of default under the agreements governing such indebtedness; • we will need a portion of cash flow to make interest payments on debt, reducing the funds that would otherwise be available for operations, future business opportunities or making cash distributions; • our debt level will make us more vulnerable to competitive pressures or a downturn in our business or the economy generally; and • our debt level may limit flexibility in planning for, or responding to, changing business and economic conditions.
The degree to which we are leveraged, combined with lease and other financial obligations and contractual commitments, could have important consequences to us, including the following: • our ability to obtain additional financing, if necessary, for working capital, capital expenditures, acquisitions or other purposes may be impaired or such financing may not be available on favorable terms; • satisfying our obligations with respect to indebtedness may be more difficult and any failure to comply with the obligations of any debt instruments could result in an event of default under the agreements governing such indebtedness; • we will need a portion of cash flow to make interest payments on debt, reducing the funds that would otherwise be available for operations, future business opportunities or making cash distributions; • our debt level will make us more vulnerable to competitive pressures or a downturn in our business or the economy generally; and • our debt level may limit flexibility in planning for, or responding to, changing business and economic conditions. 29 Table of Contents Our ability to service our indebtedness will depend upon, among other things, our future financial and operating performance, which will be affected by prevailing economic conditions and financial, business, regulatory and other factors, some of which are beyond our control.
The extent and magnitude of costs to comply with this new rule cannot currently be reliably or accurately estimated due to the uncertainty regarding the additional measures to be taken and how they will be implemented.
The extent and magnitude of costs to comply with these new and future rules cannot currently be reliably or accurately estimated due to the uncertainty regarding the additional measures to be taken and how they will be implemented.
We may not generate sufficient distributable cash flow each quarter to support the payment of the minimum quarterly distribution.
We may not generate sufficient available cash each quarter to support the payment of the minimum quarterly distribution.
Army Corps of Engineers (“Corps”) for pipelines and utility projects. In May 2020, the court narrowed its ruling, vacating and enjoining the use of NWP 12 only as it relates to construction of new oil and gas pipelines. In July 2020, the U.S. Supreme Court stayed the lower court order except as it applies to the Keystone XL pipeline.
In May 2020, the court narrowed its ruling, vacating and enjoining the use of NWP 12 only as it relates to construction of new oil and gas pipelines. In July 2020, the U.S. Supreme Court stayed the lower court order except as it applies to the Keystone XL pipeline.
As of December 31, 2022, our general partner and its affiliates collectively owned approximately 82% of the outstanding Class B Shares and the Class A Shares, considered as a single class.
As of December 31, 2023, our general partner and its affiliates collectively owned approximately 70% of the outstanding Class B Shares and the Class A Shares, considered as a single class.
Declines in crude oil and natural gas prices could have a negative impact on exploration, development and production activity, and if sustained, could lead to a material decrease in such activity.
Declines in crude oil and natural gas prices could have a negative impact on exploration, development and production activity, and if sustained, could lead to a material decrease in such activity and reduced utilization of our assets.
A cyber‑attack impacting these distribution systems, or the networks and infrastructure on which they rely, could damage critical production, processing, distribution and/or storage assets, delay or prevent delivery to markets and make it difficult or impossible to accurately account for our services and settle transactions.
A disruption, failure or a cyber breach of these operating systems, or of the networks and infrastructure on which they rely, could damage critical processing, distribution and/or storage assets, delay or prevent delivery to markets, and make it difficult or impossible to accurately account for our services and settle transactions.
As of December 31, 2022, our Sponsors and their affiliates, including our general partner, collectively held 898,000 Class A Shares, 195,847,606 Class B Shares, and 195,847,606 Class B Units in the Partnership. The Class B Units in the Partnership are exchangeable, together with an equal number of Class B Shares, into Class A Shares on a one-to-one basis.
As of December 31, 2023, our Sponsors and their affiliates, including our general partner, collectively held 898,000 Class A Shares, 157,941,441 Class B Shares, and 157,941,441 Class B Units in the Partnership. The Class B Units in the Partnership are exchangeable, together with an equal number of Class B Shares, into Class A Shares on a one-to-one basis.
Additionally, noncompliance or incomplete documentation of our compliance status with respect to our existing permits or approvals may result in the imposition of fines, penalties and injunctive relief. 35 Table of Contents In April 2020, a federal district court vacated Nationwide Permit (“NWP”) 12, the general permit issued by the U.S.
Additionally, noncompliance or incomplete documentation of our compliance status with respect to our existing permits or approvals may result in the imposition of fines, penalties and injunctive relief. In April 2020, a federal district court vacated Nationwide Permit (“NWP”) 12, the general permit issued by the U.S. Army Corps of Engineers (“Corps”) for pipelines and utility projects.
If new or more stringent federal, state or local legal and regulatory restrictions relating to the hydraulic fracturing process are adopted in areas where Hess and our other customers operate, Hess and our other customers could incur potentially significant added costs to comply with such requirements and experience delays or curtailment in the pursuit of production or development activities, which could reduce demand for our midstream services.
If new or more stringent federal, state or local legal and regulatory restrictions relating to the hydraulic fracturing process are adopted in areas where Hess and our other customers operate, Hess and our other customers could incur potentially significant added costs to comply with such requirements and experience delays or curtailment in the pursuit of production or development activities, which could reduce demand for our midstream services. 33 Table of Contents Developments related to climate change including evolving laws and regulations could adversely affect us and our financial performance.
For example, in November 2021, the EPA proposed new regulations to establish comprehensive standards of performance and emission guidelines for methane and volatile organic compound emissions from existing operations in the oil and gas sector, including the exploration and production, transmission, processing, and storage segments.
For example, in December 2023, the EPA issued a final rule to establish comprehensive standards of performance and emission guidelines for methane and volatile organic compound emissions from existing operations in the oil and gas sector, including the exploration and production, transmission, processing, and storage segments.
Risks Related to Our Business and Industry • Any decrease in the volumes of natural gas or crude oil that we handle, including due to competition and seasonal weather conditions in our limited geographic areas, could adversely affect our business. • Our operations and Hess’ Bakken production operations are subject to many risks and operational hazards as well as commodity price risks. • We do not own all of the land on which certain of the pipelines connecting our facilities are located and utilize contract operator services, which may result in disruptions and increased costs in the future. • Our business and operations were and could in the future be adversely affected by an epidemic or outbreak of an infectious disease, such as COVID-19. • We have a significant amount of consolidated indebtedness with terms that may restrict our business. • We may be unable to make acquisitions on economically acceptable terms from third parties and the completion of capital projects by us are subject to risks and may not result in revenue increases. • Terrorist or cyber-attacks and threats could have a material adverse effect on us.
Risks Related to Our Business and Industry • Any decrease in the volumes of natural gas or crude oil that we handle, including due to competition and seasonal weather conditions in our limited geographic areas as well as natural disasters, local and global public health emergencies, political crises, and other catastrophic events or other events outside of our control, could adversely affect our business. • Our operations and Hess’ Bakken production operations are subject to many risks and operational hazards as well as commodity price risks. • We do not own all of the land on which certain of the pipelines connecting our facilities are located and utilize contract operator services, which may result in disruptions and increased costs in the future. • We have a significant amount of consolidated indebtedness with terms that may restrict our business. • We may be unable to make acquisitions on economically acceptable terms from third parties and the completion of capital projects by us are subject to risks and may not result in revenue increases. • Terrorist attacks and threats could have a material adverse effect on us. • Disruption, failure or cybersecurity attacks affecting or targeting information technology systems and infrastructure used by us, Hess or our business partners may materially impact our business and operations.
For example, in October 2019, PHMSA submitted three major rules to the Federal Register, including rules focused on: the safety of gas transmission pipelines, the safety of hazardous liquid pipelines, and enhanced emergency order procedures.
For example, in October 2019, PHMSA published three major rules focused on: the safety of gas transmission pipelines (the first of three parts of the Mega Rule), the safety of hazardous liquid pipelines, and enhanced emergency order procedures.
In the Bakken, drilling and other crude oil and natural gas activities can be adversely affected during the winter months. Severe winter weather conditions limit and may reduce or temporarily halt our customers’ ability to operate during such conditions, leading to the decrease in drilling activity and the potential shut‑in of producing wells which the producers are unable to service.
Severe winter weather conditions limit and may reduce or temporarily halt our customers’ ability to operate during such conditions, leading to the decrease in drilling activity and the potential shut‑in of producing wells which the producers are unable to service. This could result in a decrease in the volumes of crude oil, natural gas and NGLs supplied to our assets.
Such a development could adversely affect our ability to grow our business and to make cash distributions to our shareholders. 25 Table of Contents Risks Related to Our Business and Industry Our industry is highly competitive and increased competitive pressure could adversely affect our business and operating results. We compete with other midstream companies in our areas of operation.
Risks Related to Our Business and Industry Our industry is highly competitive and increased competitive pressure could adversely affect our business and operating results. We compete with other midstream companies in our areas of operation.
This could result in a decrease in the volumes of crude oil, natural gas and NGLs supplied to our assets. In addition, seasonal weather conditions during the winter months may adversely impact the operations of our assets and our ability to construct additional facilities, by causing temporary delays and shutdowns.
In addition, seasonal weather conditions during the winter months may adversely impact the operations of our assets and our ability to construct additional facilities, by causing temporary delays and shutdowns.
Although such attempts to date have not resulted in any material breaches, disruptions, financial loss, or loss of business-critical information, our systems and procedures for protecting against such attacks and mitigating such risks may prove to be insufficient in the future and such attacks could have an adverse impact on our business and operations, including damage to our reputation and competitiveness, remediation costs, litigation or regulatory actions.
Although such attempts to date have not resulted in any material breaches, disruptions, financial loss, or loss of business-critical information, our and Hess’ systems and procedures for protecting against such attacks and mitigating such risks may prove to be insufficient in the future.
As of December 31, 2022, we had $2,471.9 million carrying value of outstanding senior notes of the Partnership, $18.0 million carrying value of borrowings outstanding under the Partnership’s senior secured revolving credit facility and $395.7 million carrying value of borrowings outstanding under the Partnership’s senior secured term loan facility.
As of December 31, 2023, we had $2,477.3 million carrying value of outstanding senior notes of the Partnership, $340.0 million carrying value of borrowings outstanding under the Partnership’s senior secured revolving credit facility and $394.1 million carrying value of borrowings outstanding under the Partnership’s senior secured term loan facility.
Sustained reductions in exploration or production activity in our areas of operation could lead to reduced utilization of our assets. 24 Table of Contents Because of these and other factors, even if crude oil and natural gas reserves are known to exist in areas served by our assets, producers may choose not to develop those reserves.
Because of these and other factors, even if crude oil and natural gas reserves are known to exist in areas served by our assets, producers may choose not to develop those reserves.
Cyber‑attacks or phishing-attacks, unauthorized access, malicious software, data privacy breaches by employees or others with authorized access, ransomware, and other cyber security issues could compromise our computer and telecommunications systems and result in disruptions to our business operations, the loss or corruption of our data and proprietary information and communications interruptions.
Technical system flaws, power loss and cybersecurity risks, including cyber or phishing-attacks, unauthorized access, malicious software, data privacy breaches by employees or others with authorized access, ransomware and other cybersecurity issues, could compromise our Digital Systems or those of our business partners and result in disruptions to our business operations or the access, disclosure or loss of our Confidential Information and communications.
Our general partner and its affiliates currently own approximately 82% of the Class B Shares and the Class A Shares, considered as a single class. 40 Table of Contents Our partnership agreement restricts the remedies available to shareholders for actions taken by our general partner that might otherwise constitute breaches of fiduciary duty.
For purposes of this calculation, the Class B Shares will be considered collectively with the Class A Shares as a single class. Our partnership agreement restricts the remedies available to shareholders for actions taken by our general partner that might otherwise constitute breaches of fiduciary duty.
The amount of cash we can distribute on our Class A Shares principally depends upon the amount of cash we generate from our operations, which will fluctuate from quarter to quarter based on, among other things: • the volumes of crude oil, natural gas, NGLs and produced water that we handle on our assets; • the fees with respect to volumes that we handle on our assets; • the level of competition from other midstream energy companies in our geographic markets; and • outages at our facilities caused by mechanical failure, maintenance, construction and other similar activities. 36 Table of Contents In addition, the actual amount of distributable cash flow we generate will also depend on other factors, some of which are beyond our control, including: • the amount of our operating expenses and general and administrative expenses, including reimbursements to Hess, which are not subject to any caps or other limits, in respect of those expenses; • the level of capital expenditures we make; • the cost of acquisitions, if any; • fluctuations in our working capital needs; • our ability to borrow funds and access capital markets; • restrictions contained in our credit facilities and other debt instruments; • our debt service requirements and other liabilities; • the amount of cash reserves established by our general partner; • federal and state income taxes; • changes in commodity prices; and • other business risks affecting our cash levels.
In addition, the actual amount of available cash we generate will also depend on other factors, some of which are beyond our control, including: • the amount of our operating expenses and general and administrative expenses, including reimbursements to Hess, which are not subject to any caps or other limits, in respect of those expenses; • the level of capital expenditures we make; • the cost of acquisitions, if any; • fluctuations in our working capital needs; • our ability to borrow funds and access capital markets; 37 Table of Contents • restrictions contained in our credit facilities and other debt instruments; • our debt service requirements and other liabilities; • the amount of cash reserves established by our general partner; • federal and state income taxes; • changes in commodity prices; and • other business risks affecting our cash levels.
The completion of capital projects by us may not result in revenue increases and will be subject to regulatory, environmental, political, legal and economic risks, which could adversely affect our operations and financial condition.
If we consummate any future acquisitions, shareholders will not have the opportunity to evaluate the economic, financial and other relevant information that we will consider in evaluating any such acquisitions. 30 Table of Contents The completion of capital projects by us may not result in revenue increases and will be subject to regulatory, environmental, political, legal and economic risks, which could adversely affect our operations and financial condition.
In addition, as technologies evolve and these cyber security attacks become more sophisticated, we may incur significant costs to upgrade or enhance our security measures to protect against such attacks and we may face difficulties in fully anticipating or implementing adequate preventive measures or mitigating potential harm.
As technologies evolve and these cybersecurity attacks become more sophisticated, we or Hess may incur significant costs to upgrade or enhance our security measures to protect against such attacks.
This program requires the EPA to impose a “waste emissions charge” on certain natural gas and oil sources that are already required to report under EPA’s Greenhouse Gas Reporting Program.
This program requires the EPA to impose a “waste emissions charge” on certain natural gas and oil sources that are already required to report under EPA’s Greenhouse Gas Reporting Program. In January of 2024, the EPA released its proposed rule to implement the methane emissions fee with a proposed effective date in 2025 for reporting year 2024 emissions.
Effective March 21, 2022, those maximum civil penalties were increased by PHMSA to $239,142 per violation per day, with a maximum of $2,391,412 for a series of violations, to account for inflation.
Effective December 28, 2023, those maximum civil penalties were increased by PHMSA to $266,015 per violation per day, with a maximum of $2,660,135 for a series of violations, to account for inflation.
Although the FERC has not made any formal determinations with respect to our natural gas gathering facilities upstream of the Tioga Gas Plant and LM4, we believe that the natural gas pipelines in our gathering systems meet the traditional tests FERC has used to establish whether a pipeline is not subject to tariff requirements under the NGA.
If our assets become subject to FERC regulation, or if federal, state or local regulations or policies change, or if we fail to comply with such regulations, our financial condition, results of operations and cash flows could be materially and adversely affected. 32 Table of Contents Although the FERC has not made any formal determinations with respect to our natural gas gathering facilities upstream of the Tioga Gas Plant and LM4, we believe that the natural gas pipelines in our gathering systems meet the traditional tests FERC has used to establish whether a pipeline is not subject to tariff requirements under the NGA.
In order to support the payment of the minimum quarterly distribution of $0.30 per Class A Share per quarter, or $1.20 per Class A Share on an annualized basis, we must generate distributable cash flow of approximately $72.0 million per quarter, or approximately $287.8 million per year, based on Hess’ and GIP’s noncontrolling interest in us and the number of Class A Shares outstanding as of December 31, 2022.
In order to support the payment of the minimum quarterly distribution, we must generate available cash (as defined in our partnership agreement) of approximately $67.9 million per quarter, or approximately $271.6 million per year, based on Hess’ and GIP’s noncontrolling interest in us and the number of Class A Shares outstanding as of December 31, 2023.
There is no guarantee that our insurance policies will be sufficient to cover our losses resulting from a terrorist attack or cyber attack on our assets that may shut down all or part of our business.
Strategic targets, such as energy‑related assets and transportation assets, may be at greater risk of future terrorist attacks than other targets in the United States. There is no guarantee that our insurance policies will be sufficient to cover our losses resulting from a terrorist attack on our assets that may shut down all or part of our business.
The issuance by us of additional Class A Shares or other equity securities of equal or senior rank will have the following effects: • our shareholders’ proportionate ownership interest in us will decrease; • the amount of cash we have available to distribute on each Class A Share may decrease; • the relative voting strength of each previously outstanding Class A Share may be diminished; and • the market price of our Class A Shares may decline. 41 Table of Contents The issuance by us of additional general partner interests may have the following effects, among others, if such general partner interests are issued to a person who is not an affiliate of our general partner: • management of our business may no longer reside solely with our current general partner; and • affiliates of the newly admitted general partner may compete with us, and neither that general partner nor such affiliates will have any obligation to present business opportunities to us.
The issuance by us of additional general partner interests may have the following effects, among others, if such general partner interests are issued to a person who is not an affiliate of our general partner: • management of our business may no longer reside solely with our current general partner; and • affiliates of the newly admitted general partner may compete with us, and neither that general partner nor such affiliates will have any obligation to present business opportunities to us.
Regulatory, Legal and Environmental Risks Our assets and operations are subject to federal, state, and local laws and regulations relating to environmental protection and health and safety that could require us to make substantial expenditures.
We and Hess may also face difficulties in fully anticipating or implementing adequate preventive measures or mitigating potential harm. 31 Table of Contents Regulatory, Legal and Environmental Risks Our assets and operations are subject to federal, state, and local laws and regulations relating to environmental protection and health and safety that could require us to make substantial expenditures.
If new oil and gas pipeline projects are unable to utilize NWP 12 or identify an alternate means of CWA compliance, such projects could be significantly delayed, which could have an adverse impact on our operations.
If new oil and gas pipeline projects are unable to utilize NWP 12 or identify an alternate means of CWA compliance, such projects could be significantly delayed, which could have an adverse impact on our operations. 36 Table of Contents In the future we may face increased obligations relating to our produced water facilities and may be required to provide an increased level of financial assurance to guarantee the appropriate closure activities occur for our produced water facilities.
Developments related to climate change including evolving laws and regulations could adversely affect us and our financial performance. Governmental and regulatory bodies, investors, consumers, industry and other stakeholders have been increasingly focused on climate change matters.
Governmental and regulatory bodies, investors, consumers, industry and other stakeholders have been increasingly focused on climate change matters.
As a result, a cyber breach of these operating systems, or of the networks and infrastructure on which they rely and any resulting investigation or remediation costs, litigation or regulatory action could have a material adverse impact on our cash flows and results of operations, reputation and competitiveness.
As a result, any such disruption, failure or cyber breach and any resulting investigation or remediation costs, reputational harm, litigation or regulatory action could have a material adverse impact on our cash flows and results of operations, reputation and competitiveness. We and Hess routinely experience attempts by external parties to penetrate and attack our Digital Systems.
Seasonal weather conditions, which may be impacted by climate change, may adversely affect our customers’ ability to conduct drilling activities in some of the areas where we operate and our ability to operate our assets and to construct additional facilities. Crude oil and natural gas operations in North Dakota are adversely affected by seasonal weather conditions.
All of these competitive pressures could have a material adverse effect on our business, results of operations, financial condition and our ability to make cash distributions to our shareholders. 26 Table of Contents Seasonal weather conditions, which may be impacted by climate change, may adversely affect our customers’ ability to conduct drilling activities in some of the areas where we operate and our ability to operate our assets and to construct additional facilities.

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Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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ITEM 3. LEGAL PROCEEDINGS Although we may, from time to time, be involved in litigation and claims arising out of our operations in the normal course of business, we are not a party to any litigation or governmental or other proceeding that we believe will have a material adverse impact on our financial condition or results of operations. ITEM 4.
ITEM 3. LEGAL PROCEEDINGS Although we may, from time to time, be involved in litigation and claims arising out of our operations in the normal course of business, we are not a party to any litigation or governmental or other proceeding that we believe will have a material adverse impact on our financial condition or results of operations.
MINE SAF ETY DISCLOSURES Not Applicable 42 Table of Contents PAR T II
See Note 11. Commitments and Contingencies for additional details. ITEM 4. MINE SAF ETY DISCLOSURES Not Applicable 45 Table of Contents PAR T II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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However, our general partner may in the future own other equity interests in us and may be entitled to receive distributions on any such interests. 44 Table of Contents Adjustment of the Minimum Quarterly Distribution If we combine our shares or other interests in us (“Company Interests”) into fewer shares or Company Interests (commonly referred to as a “reverse split”) or subdivide our shares or Company Interests into a greater number of shares or Company Interests (commonly referred to as a “split”), we will proportionately adjust the minimum quarterly distribution.
However, our general partner may in the future own other equity interests in us and may be entitled to receive distributions on any such interests. 47 Table of Contents Adjustment of the Minimum Quarterly Distribution If we combine our shares or other interests in us (“Company Interests”) into fewer shares or Company Interests (commonly referred to as a “reverse split”) or subdivide our shares or Company Interests into a greater number of shares or Company Interests (commonly referred to as a “split”), we will proportionately adjust the minimum quarterly distribution.
(2) The amount includes 145,701 phantom unit awards that vest ratably over a three-year period for officers and employees, and vest after one year for directors following the date of grant. Upon vesting, each phantom unit is paid in the form of a Class A Share in us, or an equivalent amount of cash, subject to applicable tax withholdings.
(2) The amount includes 103,377 phantom unit awards that vest ratably over a three-year period for officers and employees, and vest after one year for directors following the date of grant. Upon vesting, each phantom unit is paid in the form of a Class A Share in us, or an equivalent amount of cash, subject to applicable tax withholdings.
Equity Compensation Plan Information The following table summarizes information about our equity compensation plan as of December 31, 2022: Number of securities to be Weighted-average Number of securities issued upon exercise of exercise price of remaining available for outstanding options, outstanding options future issuance under Plan category warrants, and rights warrants, and rights equity compensation plans Equity compensation plans not approved by security holders (1) - - - Hess Midstream LP 2017 Long Term Incentive Plan 145,701 (2) $ - 2,506,453 Total 145,701 $ - 2,506,453 (1) The general partner of our predecessor adopted the Long-Term Incentive Plan in connection with the IPO.
Equity Compensation Plan Information The following table summarizes information about our equity compensation plan as of December 31, 2023: Number of securities to be Weighted-average Number of securities issued upon exercise of exercise price of remaining available for outstanding options, outstanding options future issuance under Plan category warrants, and rights warrants, and rights equity compensation plans Equity compensation plans not approved by security holders (1) - - - Hess Midstream LP 2017 Long Term Incentive Plan 103,377 (2) $ - 2,448,976 Total 103,377 $ - 2,448,976 (1) The general partner of our predecessor adopted the Long-Term Incentive Plan in connection with the IPO.
Except for splits and combinations as contemplated by our partnership agreement, no distribution shall be made under any circumstances in respect of any Class B Shares or our general partner interest. 43 Table of Contents The following table sets forth the cash distributions per share declared on the Class A Shares, for the three most recent years through December 31, 2022: Quarterly Cash Three most recent years Distribution per Share (1) March 31, 2020 $ 0.4310 June 30, 2020 $ 0.4363 September 30, 2020 $ 0.4417 December 31, 2020 $ 0.4471 March 31, 2021 $ 0.4526 June 30, 2021 (2) $ 0.5042 September 30, 2021 $ 0.5104 December 31, 2021 $ 0.5167 March 31, 2022 (3) $ 0.5492 June 30, 2022 $ 0.5559 September 30, 2022 $ 0.5627 December 31, 2022 $ 0.5696 (1) Represents a cash distribution attributable to the quarter-end pursuant to our partnership agreement.
Except for splits and combinations as contemplated by our partnership agreement, no distribution shall be made under any circumstances in respect of any Class B Shares or our general partner interest. 46 Table of Contents The following table sets forth the cash distributions per share declared on the Class A Shares, for the three most recent years through December 31, 2023: Quarterly Cash Three most recent years Distribution per Share (1) March 31, 2021 $ 0.4526 June 30, 2021 $ 0.5042 September 30, 2021 $ 0.5104 December 31, 2021 $ 0.5167 March 31, 2022 $ 0.5492 June 30, 2022 $ 0.5559 September 30, 2022 $ 0.5627 December 31, 2022 $ 0.5696 March 31, 2023 $ 0.5851 June 30, 2023 $ 0.6011 September 30, 2023 $ 0.6175 December 31, 2023 $ 0.6343 (1) Represents a cash distribution attributable to the quarter-end pursuant to our partnership agreement.
Holders As of December 31, 2022, there were 5 shareholders of record who owned a total of 44,002,846 of our Class A Shares, one of which is Hess Midstream GP LP. The number of holders does not include the holders for whom shares are held in a “nominee” or “street” name.
Holders As of December 31, 2023, there were 10 shareholders of record who owned a total of 68,367,647 of our Class A Shares, one of which is Hess Midstream GP LP. The number of holders does not include the holders for whom shares are held in a “nominee” or “street” name.
General Partner Interest Our general partner owns a non-economic general partner interest in us and, as of December 31, 2022, 898,000 Class A Shares and 195,847,606 Class B Shares.
General Partner Interest Our general partner owns a non-economic general partner interest in us and, as of December 31, 2023, 898,000 Class A Shares and 145,620,222 Class B Shares.
Pursuant to the Restructuring, the Company assumed the Hess Midstream Partners LP 2017 Long-Term Incentive Plan and all obligations with respect to outstanding awards thereunder.
Securities Authorized for Issuance Under Equity Compensation Plans In 2017, the Partnership adopted the Hess Midstream Partners LP 2017 Long-Term Incentive Plan. Pursuant to the Restructuring, the Company assumed the Hess Midstream Partners LP 2017 Long-Term Incentive Plan and all obligations with respect to outstanding awards thereunder.
See Note 9 , Equity‑Based Compensation in Notes to Consolidated Financial Statements for further discussion of our equity compensation plans. Distributions of Available Cash General Our partnership agreement requires that, within 45 days after the end of each quarter, we distribute all of our available cash to shareholders of record on the applicable record date.
Distributions of Available Cash General Our partnership agreement requires that, within 45 days after the end of each quarter, we distribute all of our available cash to shareholders of record on the applicable record date.
In addition, as of December 31, 2022, Hess Midstream GP LP owned an aggregate of 195,847,606 Class B Shares. Hess and GIP indirectly own the Class A Shares and Class B Shares owned by Hess Midstream GP LP. Securities Authorized for Issuance Under Equity Compensation Plans In 2017, the Partnership adopted the Hess Midstream Partners LP 2017 Long-Term Incentive Plan.
In addition, as of December 31, 2023, Hess Midstream GP LP owned an aggregate of 145,620,222 Class B Shares and Hess owned directly an aggregate of 12,321,219 Class B Shares. Hess and GIP indirectly own the Class A Shares and Class B Shares owned by Hess Midstream GP LP.
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See definition of Available Cash below. (2) The distribution represents an approximate 11% increase compared to the distribution for the quarter ended March 31, 2021, consisting of a 10% announced increase in addition to a quarterly increase consistent with the Company’s targeted 5% growth in annual distributions per Class A share.
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(3) The distribution represents an approximate 6.3% increase compared to the distribution for the quarter ended December 31, 2021, consisting of a 5% announced increase in addition to a quarterly increase consistent with the Company's targeted 5% growth in annual distributions per Class A share.
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ITEM 6. [RESERVED] 45 Table of Contents ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the consolidated financial statements and notes thereto included in Item 8 of this Annual Report on Form 10‑K.
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Unless otherwise stated or the context otherwise indicates, references in this report to “Hess Midstream Operations LP,” “the Partnership,” “us,” “we” or similar terms, when referring to periods between the IPO date on April 10, 2017 and December 16, 2019, refer to Hess Midstream Operations LP (formerly known as Hess Midstream Partners LP, the predecessor registrant to Hess Midstream LP), including its consolidated subsidiaries.
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All references to “Hess Midstream LP,” “the Company,” “us,” “our,” “we” or similar terms, when referring to periods subsequent to December 16, 2019, refer to Hess Midstream LP, including its consolidated subsidiaries. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below.
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Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the section entitled “Risk Factors” included elsewhere in this report.
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Overview We are a fee-based, growth-oriented, limited partnership formed by Hess Infrastructure Partners GP LLC (“HIP GP LLC”) and our general partner to own, operate, develop and acquire a diverse set of midstream assets and provide fee-based services to Hess and third-party customers. We are managed and controlled by Hess Midstream GP LLC, the general partner of our general partner.
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Our assets are primarily located in the Bakken and Three Forks shale plays in the Williston Basin area of North Dakota, which we collectively refer to as the Bakken.
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Significant Activities In 2022, we brought online two new greenfield compressor stations that, in aggregate, provide an additional 85 MMcf/d of installed capacity and can be expanded up to 130 MMcf/d in the future.
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In 2023, we plan to complete two more greenfield compressor stations that are expected to provide, in aggregate, an additional 100 MMcf/d of gas compression capacity when brought online. 2021 - 2022 Equity Transactions During 2021 and 2022, the Company, the Partnership and the Sponsors completed the following equity transactions: • On March 15, 2021, the Sponsors sold an aggregate of 6,900,000 of our Class A shares representing limited partner interests (“Class A Shares”), inclusive of the underwriters’ option to purchase up to 900,000 of additional shares, which was fully exercised, in an underwritten public offering at a price of $21.00 per Class A share, less underwriting discounts. • On October 8, 2021, the Sponsors sold an aggregate of 8,625,000 of our Class A Shares, inclusive of the underwriters’ option to purchase up to 1,125,000 of additional shares, which was fully exercised, in an underwritten public offering at a price of $26.00 per Class A share, less underwriting discounts. • On April 4, 2022, the Sponsors sold an aggregate of 10,235,000 of our Class A Shares, inclusive of the underwriters’ option to purchase up to 1,335,000 of additional shares, which was fully exercised, in an underwritten public offering at a price of $29.50 per Class A Share, less underwriting discounts.
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In 2022, the Sponsors received net proceeds from the offerings of approximately $291.7 million (2021: $356.5 million), after deducting underwriting discounts.
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The Company did not receive any proceeds in the offerings. • On August 10, 2021, the Partnership repurchased an aggregate of 31,250,000 Class B units representing limited partner interests in the Partnership (“Class B Units”) from the Sponsors at a purchase price of $24.00 per Class B unit, for total consideration of $750.0 million, which was funded through issuance by the Partnership of $750.0 million aggregate principal amount of 4.25% senior unsecured notes due 2030. • On April 4, 2022, the Partnership repurchased an aggregate of 13,559,322 Class B Units from the Sponsors at a purchase price of $29.50 per Class B unit, for total consideration of $400.0 million, which was funded using borrowings under the Partnership’s revolving credit facility, which were subsequently repaid with proceeds from an issuance by the Partnership of $400.0 million aggregate principal amount of 5.50% senior unsecured notes due 2030.
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See Item 8. Financial Statements and Supplementary Data.
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Note 3, Equity Transactions, Note 7, Debt and Interest Expense, and Note 8, Partners' Capital and Distributions for additional details. 46 Table of Contents At December 31, 2022: • the Company held an 18.3% controlling interest in the Partnership and the Sponsors held an 81.7% noncontrolling economic interest in the Partnership; • public limited partners held an 18.0% voting interest and a 98.0% economic interest in the Company, which represents an indirect 18.0% economic interest in the Partnership; • the Sponsors and their respective affiliates held an 82.0% voting interest and a 2.0% economic interest in the Company, which, taken with their direct limited partnership interest in the Partnership, represents an indirect 82.0% economic interest in the Partnership.
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See Organizational Structure. Business Strategies Our principal business objective is to grow our business and distributable cash flow supported by fee-based contracts and disciplined financial strategy. We expect to achieve this objective through the following business strategies: • Focus on Cash Flow Stability and Growth Supported by Long-Term, Fee-Based Contracts and a Disciplined Financial Strategy .
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We seek to grow our distributable cash flow to be able to fund our expansion capital and provide consistent and ongoing return of capital to shareholders while maintaining balance sheet strength.
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Our commercial agreements include dedications covering substantially all of Hess’ existing and future owned or controlled production in the Bakken, minimum volume commitments, inflation escalators and fee recalculation mechanisms, all of which are intended to provide us with cash flow stability and downside risk protection. • Capitalize on Hess’ Bakken Production Growth.
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Our midstream infrastructure footprint services Hess’ leading acreage position in the Bakken. We believe our volumes and investment opportunities will continue to expand as Hess drills new wells in the Bakken.
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We intend to invest additional capital to continue extending and expanding our strategically positioned infrastructure, including additional gas capture capabilities, to meet Hess’ current and future production growth and to reduce flaring from upstream production operations. • Leverage Core Asset Base to Attract Additional Third‑Party Business.
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We currently handle volumes from third‑party producers and midstream companies under our commercial agreements with Hess, and we are pursuing both additional projects and strategic relationships with third‑party customers with operations in the Bakken in order to maximize our utilization rates. • Grow Through Accretive Acquisitions from Our Sponsors and Third Parties.
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We evaluate potential acquisitions of complementary midstream assets from our Sponsors as well as from third parties. Climate Change and Energy Transition We are aligned with Hess in its aim to help meet the world's growing energy needs while working towards reducing its greenhouse gas (“GHG”) emissions.
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We play an important part in Hess' emissions reduction efforts by providing the infrastructure to move oil, natural gas liquids and natural gas to market and reduce wellhead flaring as well as through efforts to reduce our own GHG emissions, which are included in Hess’ overall emissions footprint.
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We are focused on identifying GHG reduction opportunities, evaluating and implementing technologies as appropriate and evaluating capital and infrastructure requirements.
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In collaboration with Hess, we have prioritized the following emissions reduction initiatives: • Continuing to optimize field development and infrastructure plans for our Bakken operations through installing additional compression capacity in 2023, with more planned for the future; • Examining and implementing alternatives to flaring, such as utilizing natural gas that would have been flared for onsite power generation or conversion to liquified natural gas; • Pursuing studies to improve energy efficiency and assess carbon capture; • Implementing operational improvements in our facilities to reduce energy consumption.
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Segments Our assets and operations are organized into the following three reportable segments: (i) gathering, (ii) processing and storage and (iii) terminaling and export. 47 Table of Contents Gathering Our gathering segment includes Hess North Dakota Pipeline Operations LP, or Gathering Opco, and Hess Water Services Holdings LLC, which own the following assets: • Natural Gas Gathering and Compression .
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A natural gas gathering and compression system located primarily in McKenzie, Williams and Mountrail Counties, North Dakota connecting Hess and third‑party owned or operated wells to the Tioga Gas Plant, Little Missouri 4 (“LM4”) gas processing plant and third‑party pipeline facilities. The system also includes the Hawkeye Gas Facility. • Crude Oil Gathering.
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A crude oil gathering system located primarily in McKenzie, Williams and Mountrail Counties, North Dakota, connecting Hess and third-party owned or operated wells to the Ramberg Terminal Facility, the Tioga Rail Terminal and the Johnson’s Corner Header System. The system also includes the Hawkeye Oil Facility. • Produced Water Gathering and Disposal .
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A produced water gathering system and disposal facilities located primarily in Williams and Mountrail counties, North Dakota. Processing and Storage Our processing and storage segment includes Hess TGP Operations LP, or HTGP Opco, and Hess Mentor Storage Holdings LLC, or Mentor Holdings, which own the following assets, respectively: • Tioga Gas Plant .
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A natural gas processing and fractionation plant located in Tioga, North Dakota. • Equity Investment in LM4 Joint Venture. A 50% equity method investment in LM4 joint venture that owns a natural gas processing plant located in McKenzie County, North Dakota, that was placed in service in the third quarter of 2019.
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Targa Resources Corp. is the operator of the plant. • Mentor Storage Terminal . A propane storage cavern and rail and truck loading and unloading facility located in Mentor, Minnesota.
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Terminaling and Export Our terminaling and export segment includes Hess North Dakota Export Logistics Operations LP, or Logistics Opco, which owns each of the following assets: • Ramberg Terminal Facility .
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A crude oil pipeline and truck receipt terminal located in Williams County, North Dakota that is capable of delivering crude oil into an interconnecting pipeline for transportation to the Tioga Rail Terminal and to multiple third‑party pipelines and storage facilities. • Tioga Rail Terminal.
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A crude oil and NGL rail loading terminal in Tioga, North Dakota that is connected to the Tioga Gas Plant, the Ramberg Terminal Facility and our crude oil gathering system. • Crude Oil Rail Cars.
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A total of 550 crude oil rail cars, constructed to DOT‑117 safety standards, which we operate as unit trains consisting of approximately 100 to 110 crude oil rail cars. • Johnson’s Corner Header System.
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An approximately six‑mile crude oil pipeline header system located in McKenzie County, North Dakota that receives crude oil by pipeline from Hess and third parties and delivers crude oil to third‑party interstate pipeline systems.
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Significant 2022 Financial and Operating Results Significant financial and operating results for the year ended December 31, 2022 include: • Completed the repurchase of an aggregate of 13,559,322 Class B Units of the Partnership from the Sponsors for $400 million. • Consolidated net income of $620.6 million. • Net income attributable to Hess Midstream LP after deduction for noncontrolling interest of $83.9 million, or $2.03 basic earnings per Class A Share. • Net cash provided by operating activities of $861.1 million. • Adjusted EBITDA of $982.9 million. • Distributable cash flow of $835.2 million. • Paid cash distributions of $1.6678 per Class A share in total for the first three quarters of 2022 and declared a cash distribution of $0.5696 per Class A share for the fourth quarter of 2022, which was paid in February 2023. 48 Table of Contents Revenues and other income in 2022 were $1,275.2 million compared with $1,203.8 million in 2021.
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Current year revenues and other income were up $71.4 million compared with the prior year, of which $77.4 million is primarily due to slightly higher tariff rates and generally higher MVC levels in gas gathering and processing, partially offset by generally lower MVC levels in oil gathering and terminaling.
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This increase is partially offset by lower pass-through revenues, including electricity, produced water trucking and disposal costs, rail transportation and certain other fees of $6.0 million. Total operating costs and expenses in 2022 were $484.0 million, up from $476.6 million in the prior year.
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The increase was attributable to higher depreciation of $15.7 million and slightly higher general and administrative expenses of $0.4 million, partially offset by lower operating and maintenance expenses of $8.7 million primarily attributable to the TGP turnaround in 2021 and lower pass-through costs, for which we recognize revenues in the same amount, as described above.
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Interest expense, net of interest income, increased $43.9 million primarily attributable to the $750.0 million 4.25% fixed-rate senior notes issued in August 2021, the $400.0 million 5.50% fixed-rate senior notes issued in April 2022 and higher interest rates on the Term Loan A credit facility.
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Income tax expense in 2022 was $26.6 million, up from $14.6 million in 2021, which was primarily driven by increased ownership of the Partnership by Hess Midstream LP following the equity offering and unit repurchase transactions in 2021 and 2022.
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As a result, consolidated net income increased $2.8 million and Adjusted EBITDA increased $74.4 million during the year ended December 31, 2022 compared with the year ended December 31, 2021.
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Throughput volumes increased 5% for gas processing and 3% for gas gathering in 2022 compared with 2021 primarily due to higher gas capture in the current year despite weather challenges and downtime due to the TGP turnaround in the prior year.
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Throughput volumes decreased 13% for crude oil gathering and 11% for crude oil terminaling in 2022 compared with 2021 primarily due to severe weather and lower gross production volumes from Hess and third parties.
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The impact of the reduction in crude oil physical volumes in 2022 compared with 2021 was partially offset by slightly higher tariff rates and MVC shortfall fee payments. For additional discussion of the results of operations at the segment level, see “ Results of Operations ” below.
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For additional information regarding Adjusted EBITDA and distributable cash flow, our non‑GAAP financial measures, see “ How We Evaluate Our Operations ” and “ Reconciliation of Non‑GAAP Financial Measures ” below. 49 Table of Contents How We Generate Revenues We generate substantially all of our revenues by charging fees for gathering, compressing and processing natural gas and fractionating NGLs; gathering, terminaling, loading and transporting crude oil and NGLs; storing and terminaling propane; and gathering and disposing of produced water.
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We have entered into long-term, fee-based commercial agreements with Hess dated effective January 1, 2014, for oil and gas services agreements, and effective January 1, 2019, for water services agreements.
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Except for the water services agreements and except for a certain gathering sub-system, as described below, each of our commercial agreements with Hess has an initial 10-year term and we have the unilateral right to renew each of these agreements for one additional 10-year term.
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In September 2018, we amended our gas gathering and gas processing and fractionation agreements to enable us to provide certain services to Hess in respect of volumes to be delivered to and processed at the LM4 plant.
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The amended and restated gas gathering agreement also extends the initial term of the gathering agreement with respect to a certain gathering sub-system by five years to provide for a 15-year initial term and decreases the secondary term for that gathering sub-system by five years to provide for a five-year secondary term.
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Initial term for the water services agreements is 14 years and the secondary term is 10 years. On December 30, 2020, we exercised our renewal options to extend the terms of certain crude oil gathering, terminaling, storage, gas processing and gas gathering commercial agreements with Hess for the Secondary Term through December 31, 2033.
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There were no changes to any provisions of the existing commercial agreements as a result of the exercise of the renewal options. For the remaining water gathering and disposal agreements as well as the remaining gas gathering agreement, we have the sole option to renew these agreements for an additional term that is exercisable at a later date.
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These agreements include dedications covering substantially all of Hess’ existing and future owned or controlled production in the Bakken, minimum volume commitments, inflation escalators and fee recalculation mechanisms, all of which are intended to provide us with cash flow stability and growth, as well as downside risk protection.
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In particular, Hess’ minimum volume commitments under our commercial agreements provide minimum levels of cash flows and the fee recalculation mechanisms under the agreements allow fees to be adjusted annually to provide us with cash flow stability during the initial term of the agreements.
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During the secondary term of the agreements, the fee recalculation model will be replaced by an inflation-based fee structure. See Item 8. Financial Statements and Supplementary Data. Note 4, Related Party Transactions for additional description of our commercial agreements.
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Our revenues also include revenues from third-party volumes contracted with Hess and delivered to us under these commercial agreements with Hess, as well as pass-through third-party rail transportation costs, third-party produced water trucking and disposal costs, electricity fees and certain other third-party fees, for which we recognize revenues in an amount equal to the costs.
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For the year ended December 31, 2022, our gas gathering and gas processing revenues comprised approximately 75% of total affiliate revenues, excluding passthrough revenues. Together with Hess, we are pursuing strategic relationships with third-party producers and other midstream companies with operations in the Bakken in order to maximize our utilization rates.
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How We Evaluate Our Operations Our management uses a variety of financial and operating metrics to analyze our operating results and profitability. These metrics include (i) volumes, (ii) operating and maintenance expenses, (iii) Adjusted EBITDA, and (iv) distributable cash flow. Volumes .
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The amount of revenues we generate primarily depends on the volumes of crude oil, natural gas, NGLs and produced water that we handle at our gathering, processing, terminaling, storage and disposal facilities.
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These volumes are affected primarily by the supply of and demand for crude oil, natural gas and NGLs in the markets served directly or indirectly by our assets, including changes in crude oil prices, which may further affect volumes delivered by Hess.
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Although Hess has committed to minimum volumes under our commercial agreements described above, our results of operations will be impacted by our ability to: • utilize the remaining uncommitted capacity on, or add additional capacity to, our existing assets, and optimize our existing assets; • identify and execute expansion projects, and capture incremental throughput volumes from Hess and third parties for these expanded facilities; • increase throughput volumes at our Ramberg Terminal Facility, Tioga Rail Terminal and the Johnson’s Corner Header System by interconnecting with new or existing third‑party gathering pipelines; and • increase gas processing throughput volumes by interconnecting with new or existing third‑party gathering pipelines. 50 Table of Contents Operating and Maintenance Expenses.
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Our management seeks to maximize the profitability of our operations by effectively managing operating and maintenance expenses.
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These expenses are comprised primarily of costs charged to us under our omnibus agreement and employee secondment agreement, third‑party contractor costs, utility costs, insurance premiums, third‑party service provider costs, related property taxes and other non‑income taxes and maintenance expenses, such as expenditures to repair, refurbish and replace storage facilities and to maintain equipment reliability, integrity and safety.
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These expenses generally remain relatively stable across broad ranges of throughput volumes but can fluctuate from period to period depending on the mix of activities performed during that period and the timing of substantial expenses, such as gas plant turnarounds.
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We seek to manage our maintenance expenditures by scheduling periodic maintenance on our assets in order to minimize significant variability in these expenditures and minimize their impact on our cash flow. Adjusted EBITDA and Distributable Cash Flow .
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We define Adjusted EBITDA as net income (loss) before net interest expense, income tax expense (benefit), depreciation and amortization and our proportional share of depreciation of our equity affiliates, as further adjusted to eliminate the impact of certain items that we do not consider indicative of our ongoing operating performance, such as transaction costs, other income and other non‑cash and non‑recurring items, if applicable.
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We define distributable cash flow as Adjusted EBITDA less net interest, excluding amortization of deferred financing costs, cash paid for federal and state income taxes and maintenance capital expenditures. Distributable cash flow does not reflect changes in working capital balances. We use Adjusted EBITDA and distributable cash flow to analyze our performance and liquidity.
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Adjusted EBITDA and distributable cash flow are non‑GAAP supplemental financial measures that management and external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies, may use to assess: • our operating performance as compared to other publicly traded companies in the midstream energy industry, without regard to historical cost basis or, in the case of Adjusted EBITDA, financing methods; • the ability of our assets to generate sufficient cash flow to make distributions to our shareholders; • our ability to incur and service debt and fund capital expenditures; and • the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities.
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We believe that the presentation of Adjusted EBITDA and distributable cash flow provides useful information to investors in assessing our financial condition and results of operations. The GAAP measures most directly comparable to Adjusted EBITDA and distributable cash flow are net income (loss) and net cash provided by (used in) operating activities.
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Adjusted EBITDA and distributable cash flow should not be considered as alternatives to GAAP net income (loss), income (loss) from operations, net cash provided by (used in) operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP.
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Adjusted EBITDA and distributable cash flow have important limitations as analytical tools because they exclude some but not all items that affect net income and net cash provided by operating activities. You should not consider Adjusted EBITDA and distributable cash flow in isolation or as a substitute for analysis of our results as reported under GAAP.

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Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

75 edited+21 added−11 removed109 unchanged
While significant uncertainty exists as to future regulation of methane or other greenhouse gas emissions under the Clean Air Act or other local, regional, or international regulatory regimes, the impact of future regulatory and legislative developments, if adopted or enacted, is likely to result in increased compliance costs, increased utility costs, additional operating restrictions on our business and an increase in the cost of products generally.
While significant uncertainty exists as to regulation of methane or other greenhouse gas emissions under the Clean Air Act or other local, regional, or international regulatory regimes, the impact of future regulatory and legislative developments, if adopted or enacted, is likely to result in increased compliance costs, increased utility costs, additional operating restrictions on our business and an increase in the cost of products generally.
Website Access to Our Reports We make available free of charge through our website, at www.hessmidstream.com , our annual report on Form 10‑K, quarterly reports on Form 10‑Q, current reports on Form 8‑K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC.
Website Access to Our Reports We make available free of charge through our website, at www.hessmidstream.com , our annual reports on Form 10‑K, quarterly reports on Form 10‑Q, current reports on Form 8‑K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC.
The United States is one of almost 200 nations that, in December 2015, agreed to the Paris Agreement, an international climate change agreement reached in Paris, France that calls for countries to set their own GHG emissions targets and be transparent about the measures each country will take to achieve its GHG emissions targets through the establishment of nationally-determined GHG emissions reduction goals.
The United States is one of almost 200 nations that, in December 2015, agreed to the Paris Agreement, an international climate change agreement reached in Paris, France that calls for countries to set their own emissions targets and be transparent about the measures each country will take to achieve its emissions targets through the establishment of nationally-determined emissions reduction goals.
As with the industry generally, compliance with existing and anticipated environmental laws and regulations increases our overall cost of business, including our costs to construct, maintain, operate and upgrade equipment and facilities. While these laws and regulations affect our maintenance capital expenditures and net income, we believe they do not currently affect our competitive position.
As with the industry generally, compliance with existing and anticipated environmental laws and regulations increases our overall cost of business, including our costs to construct, maintain, operate and upgrade equipment and facilities. While these laws and regulations affect our capital expenditures and net income, we believe they do not currently affect our competitive position.
Any changes in the regulations for treatment, storage or disposal of RCRA‑regulated waste could increase our maintenance capital expenditures and operating expenses. We continue to seek methods to minimize the generation of hazardous wastes in our operations. Hydrocarbon wastes .
Any changes in the regulations for treatment, storage or disposal of RCRA‑regulated waste could increase our capital expenditures and operating expenses. We continue to seek methods to minimize the generation of hazardous wastes in our operations. Hydrocarbon wastes .
The facility has a combined pipeline and truck receipt capability of approximately 200 MBbl/d. Up to approximately 130 MBbl/d of crude oil can enter the facility through our crude oil gathering system. Crude oil can also enter the facility through fourteen truck unloading bays with a combined truck unloading capacity of approximately 70 MBbl/d.
The facility has a combined pipeline and truck receipt capability of approximately 200 MBbl/d. Up to approximately 130 MBbl/d of crude oil can enter the facility through our crude oil gathering system. Crude oil can also enter the facility through truck unloading bays with a combined truck unloading capacity of approximately 70 MBbl/d.
In addition, if any of our facilities were found to have violated the NGA or the Natural Gas Policy Act (“NGPA”), FERC has civil penalty authority under the NGA and NGPA to impose penalties for current violations of up to $1,388,496 per violation per day and disgorgement of profits associated with any violation.
In addition, if any of our facilities were found to have violated the NGA or the Natural Gas Policy Act (“NGPA”), FERC has civil penalty authority under the NGA and NGPA to impose penalties for current violations of up to $1,496,035 per violation per day and disgorgement of profits associated with any violation.
Ramberg Terminal Facility Our Ramberg Terminal Facility is a crude oil pipeline and truck unloading facility located in Williams County, North Dakota that receives crude oil by pipeline and truck from Hess and third parties and exports crude oil by transporting it by pipeline to our Tioga Rail Terminal for loading onto crude oil rail cars or by injecting it directly into third‑party interstate pipeline systems.
Ramberg Terminal Facility Our Ramberg Terminal Facility is a crude oil pipeline and truck unloading facility located in Williams County, North Dakota that receives crude oil by pipeline and truck from Hess and third parties and exports crude oil by transporting it by pipeline to our Tioga Rail Terminal for loading onto crude oil rail cars or by injecting it directly into DAPL and other third‑party interstate pipeline systems.
For the year ended December 31, 2022, substantially all of our revenues were attributable to our fee‑based commercial agreements with Hess, including revenues from third‑party volumes delivered under these agreements. Our gas gathering and gas processing revenues comprised approximately 75% of total affiliate revenues, excluding passthrough revenues.
For the year ended December 31, 2023, substantially all of our revenues were attributable to our fee‑based commercial agreements with Hess, including revenues from third‑party volumes delivered under these agreements. Our gas gathering and gas processing revenues comprised approximately 75% of total affiliate revenues, excluding passthrough revenues.
PHMSA requires pipeline operators to implement integrity management programs, including more frequent inspections and other measures to ensure pipeline safety in high‑consequence areas, or HCAs, defined as those areas that are unusually sensitive to environmental damage, that cross a navigable waterway, or that have a high population density.
PHMSA requires pipeline operators to implement integrity management programs, including more frequent inspections and other measures to ensure pipeline safety in high‑consequence areas (“HCAs”), defined as those areas that are unusually sensitive to environmental damage, that cross a navigable waterway, or that have a high population density.
Our crude oil rail cars have been constructed to DOT‑117 standards. (5) For the year ended December 31, 2022, the average round‑trip duration was approximately 11 days and, based on this, the aggregate working capacity of our crude oil rail cars was approximately 32 Mbbl/d.
Our crude oil rail cars have been constructed to DOT‑117 standards. (5) For the year ended December 31, 2023, the average round‑trip duration was approximately 11 days and, based on this, the aggregate working capacity of our crude oil rail cars was approximately 32 Mbbl/d.
In addition, many of these properties have been operated by third parties whose treatment and disposal or release of hydrocarbons or other wastes was not under our control. These properties and wastes disposed thereon may be subject to CERCLA, RCRA and analogous state laws.
In addition, many of these properties have been operated by third parties whose treatment and disposal or release of hydrocarbons or other wastes was not under our control. These properties and wastes disposed thereon may be subject to CERCLA, RCRA and comparable state laws.
There is also increasing interest in nature-related matters beyond protected species, such as general biodiversity, which may similarly require us or our customers to incur costs or take other measures which may adversely impact our and our customers’ business or operations. Other Regulation Rail Regulation We believe all of our rail cars in crude oil service meet the current U.S.
There is also increasing interest in nature-related matters beyond protected species, such as general biodiversity, which may similarly require us or our customers to incur costs or take other measures which may adversely impact our and our customers’ business or operations. 17 Table of Contents Other Regulation Rail Regulation We believe all of our rail cars in crude oil service meet the current U.S.
For the year ended December 31, 2022, the average round‑trip duration was approximately 11 days and, based on this, the aggregate working capacity of our crude oil rail cars was approximately 32 MBbl/d.
For the year ended December 31, 2023, the average round‑trip duration was approximately 11 days and, based on this, the aggregate working capacity of our crude oil rail cars was approximately 32 MBbl/d.
In November 2021, the international community gathered again in Glasgow at the 26th Conference of the Parties on the UN Framework Convention on Climate Change (“COP26”), during which multiple announcements were made, including a call for parties to eliminate certain fossil fuel subsidies and pursue further action on non-carbon dioxide GHGs.
In November 2021, the international community gathered again in Glasgow at the 26th Conference of the Parties on the UN Framework Convention on Climate Change (“COP26”), during which multiple announcements were made, including a call for parties to eliminate certain fossil fuel subsidies and pursue further action on non-carbon dioxide greenhouse gases.
Since the United States’ re-entry into the Paris Agreement, President Biden has announced, in April 2021, a goal of reducing the United States’ emissions by at least 50% below 2005 levels by 2030.
Since the United States’ re-entry into the Paris Agreement, President Biden has announced, in April 2021, a goal of reducing the United States’ greenhouse gas emissions by at least 50% below 2005 levels by 2030.
We also file with the New York Stock Exchange (the “NYSE”) an annual certification that our Chief Executive Officer is unaware of any violation of the NYSE’s corporate governance standards. 21 Table of Contents
We also file with the New York Stock Exchange (the “NYSE”) an annual certification that our Chief Executive Officer is unaware of any violation of the NYSE’s corporate governance standards. 20 Table of Contents
We expect that such costs will include initial expenses for compliance, and lower on-going expenses that are not expected to be material to our overall financial results. 19 Table of Contents Security The Department of Homeland Security’s (“DHS”), Chemical Facility Anti‑Terrorism Standards are designed to regulate the security of high‑risk chemical facilities.
We expect that such costs will include initial expenses for compliance, and lower on-going expenses that are not expected to be material to our overall financial results. Security The Department of Homeland Security’s (“DHS”), Chemical Facility Anti‑Terrorism Standards are designed to regulate the security of high‑risk chemical facilities.
However, we believe that many effects of seasonality on our revenues are substantially mitigated through the use of our fee-based commercial agreements with Hess that include minimum volume commitments. 20 Table of Contents Insurance Our assets may experience physical damage as a result of an accident or natural disaster.
However, we believe that many effects of seasonality on our revenues are substantially mitigated through the use of our fee-based commercial agreements with Hess that include minimum volume commitments. Insurance Our assets may experience physical damage as a result of an accident or natural disaster.
See “Risk Factors–Regulatory, Legal and Environmental Risks—Developments related to climate change including evolving laws and regulations could adversely affect us and our financial performance.” Further, the EPA has proposed regulations under the Clean Air Act addressing greenhouse gases, to which some of our facilities may become subject.
See “Risk Factors—Regulatory, Legal and Environmental Risks—Developments related to climate change including evolving laws and regulations could adversely affect us and our financial performance.” Further, the EPA has new and proposed regulations under the Clean Air Act addressing greenhouse gases, to which some of our 15 Table of Contents facilities may become subject.
The terminal receives up to 30 MBbl/d of crude oil directly from our crude oil gathering system and through a 14‑inch crude oil pipeline connected to, and included as part of, our Ramberg Terminal Facility.
The terminal receives up to 30 MBbl/d of crude oil directly from a 14‑inch crude oil pipeline connected to, and included as part of, our Ramberg Terminal Facility.
The SEC issued a proposed rule in March 2022 that would mandate extensive disclosure of climate-related data, risks, and opportunities, including financial impacts, physical and transition risks, related governance and strategy, and GHG emissions, for certain public companies.
For example, the SEC issued a proposed rule in March 2022 that would mandate extensive disclosure of climate-related data, risks, and opportunities, including financial impacts, physical and transition risks, related governance and strategy, and greenhouse gas emissions, for certain public companies.
The final rule represents the final part of the Mega Rule, and establishes two new types of onshore gas gathering pipelines subject to varying degrees of regulation: all onshore gathering line operators are now subject to PHMSA’s annual reporting and incident reporting requirements as “Type R” onshore gas gathering lines; and certain previously unregulated rural gas gathering lines must now comply with PHMSA damage prevention and, depending on the size of the pipeline, construction and operational requirements as “Type C” onshore gas gathering lines.
The rule established two new types of onshore gas gathering pipelines subject to varying degrees of regulation: all onshore gathering line operators are now subject to PHMSA’s annual reporting and incident reporting requirements as “Type R” onshore gas gathering lines; and certain previously unregulated rural gas gathering lines must now comply with PHMSA damage prevention and, depending on the size of the pipeline, construction and operational requirements as “Type C” onshore gas gathering lines.
The crude oil gathering system consists of approximately 560 miles of crude oil gathering pipelines with a current capacity of up to approximately 240 MBbl/d. Our crude oil gathering system includes approximately 75 miles of crude oil gathering pipelines that we acquired from Summit Midstream Partners, LP in 2019.
The crude oil gathering system consists of approximately 570 miles of crude oil gathering pipelines with a current capacity of up to approximately 290 MBbl/d. Our crude oil gathering system includes approximately 75 miles of crude oil gathering pipelines that we acquired from Summit Midstream Partners, LP in 2019.
In November 2021, PHMSA issued a final rule that expands certain federal pipeline safety requirements to all onshore gas gathering pipelines, regardless of size or location.
In November 2021, PHMSA issued a final rule (the second part of the Mega Rule) that expands certain federal pipeline safety requirements to all onshore gas gathering pipelines, regardless of size or location.
Our produced water gathering system includes approximately 75 miles of water gathering pipelines that we acquired from Summit Midstream Partners, LP in 2019. As of December 31, 2022, we had 8 water handling and disposal facilities in service, with a combined permitted disposal capacity of 110 MBbl/d.
Our produced water gathering system includes approximately 75 miles of water gathering pipelines that we acquired from Summit Midstream Partners, LP in 2019. As of December 31, 2023, we had 11 water handling and disposal facilities in service, with a combined permitted disposal capacity of 170 MBbl/d.
As of December 31, 2022, Hess Midstream GP LLC and its affiliates had approximately 199 full‑time equivalent employees supporting our operations, including employees in the field performing services and support staff from other offices. Office The principal office of our Company is located at 1501 McKinney Street, Houston, Texas 77010.
As of December 31, 2023, Hess Midstream GP LLC and its affiliates had approximately 211 full‑time employee equivalents supporting our operations, including employees in the field performing services and support staff from other offices. Office The principal office of our Company is located at 1501 McKinney Street, Houston, Texas 77010.
Terminaling and Export Our terminaling and export business consists of the Partnership’s 100% interest in Hess North Dakota Export Logistics Operations LP (“Logistics Opco”), which owns the Ramberg Terminal Facility, the Tioga Rail Terminal, our crude oil rail cars and the Johnson’s Corner Header System.
Terminaling and Export Our terminaling and export business consists of the Partnership’s 100% interest in Hess North Dakota Export Logistics Operations LP (“Logistics Opco”), which owns the Ramberg Terminal Facility, the Tioga Rail Terminal, our crude oil rail cars, the Johnson’s Corner Header System and various connections into the Dakota Access Pipeline (“DAPL”).
Other Items Competition As a result of our contractual relationship with Hess under our commercial agreements and our direct connections to Hess’ production operations in the Williston Basin, we believe that we will not face significant competition from other midstream service providers for Hess’ crude oil, natural gas or NGL gathering, processing or terminaling services or for other midstream services relating to Hess’ production operations in the Bakken.
We also believe that we have satisfactory title to all of our assets. 19 Table of Contents Other Items Competition As a result of our contractual relationship with Hess under our commercial agreements and our direct connections to Hess’ production operations in the Williston Basin, we believe that we will not face significant competition from other midstream service providers for Hess’ crude oil, natural gas or NGL gathering, processing or terminaling services or for other midstream services relating to Hess’ production operations in the Bakken.
These include requirements to report emissions of greenhouse gases (“GHG”) to the Environmental Protection Agency (the “EPA”), or potentially in future public disclosures to the SEC, and state actions to develop and implement statewide or regional programs, each of which require or could require reductions in our greenhouse gas emissions or those of Hess.
These include requirements to report emissions of greenhouse gases to the Environmental Protection Agency (the “EPA”), or potentially in future public disclosures to the SEC, and state actions to develop and implement statewide or regional carbon reduction or climate-related disclosure programs, each of which require or could require reductions in our greenhouse gas emissions or those of Hess or disclosure of climate-related matters.
The extent and magnitude of costs to comply with this new rule cannot currently be reliably or accurately estimated due to the uncertainty regarding the additional measures to be taken and how they will be implemented.
The extent and magnitude of costs to comply with these new and future rules cannot currently be reliably or accurately estimated due to the uncertainty regarding the additional measures to be taken and how they will be implemented.
Our gathering system capacity can be increased through the installation of additional pumping equipment. Produced Water Gathering and Disposal A produced water gathering system located primarily in Williams and Mountrail counties, North Dakota that transports produced water from wellsites by approximately 290 miles of pipelines in gathering systems or by third-party trucking to water handling facilities for disposal.
Our gathering system capacity can be increased through the installation of additional pumping equipment. 8 Table of Contents Produced Water Gathering and Disposal A produced water gathering system located primarily in Williams and Mountrail counties, North Dakota that transports produced water from well sites by approximately 300 miles of pipelines in gathering systems or by third-party trucking to water handling facilities for disposal.
We believe we have satisfactory permits and/or title to all our rights-of-way. We also believe that we have satisfactory title to all of our assets.
We believe we have satisfactory permits and/or title to all our rights-of-way.
The facility has six truck unloading bays with an aggregate capacity of approximately 30 MBbl/d. The facility has a redelivery capability of approximately 75 MBbl/d through a pipeline system connected to Hess Midstream's crude oil export terminals. The facility also has two crude oil storage tanks with a combined working storage capacity of approximately 10 MBbls.
The facility has a redelivery capability of approximately 75 MBbl/d through a pipeline system connected to Hess Midstream's crude oil export terminals. The facility also has two crude oil storage tanks with a combined working storage capacity of approximately 10 MBbls.
In October 2019, PHMSA submitted three major rules to the Federal Register, including rules focused on: the safety of gas transmission pipelines (the first of three parts of the Mega Rule), the safety of hazardous liquid pipelines, and enhanced emergency order procedures.
In October 2019, PHMSA published three major rules focused on: the safety of gas transmission pipelines (the first of three parts of the Mega Rule), the safety of hazardous liquid pipelines, and enhanced emergency order procedures.
The following table sets forth certain information regarding our terminaling and export assets, which operate under a long‑term, fee‑based commercial agreement with Hess: Terminaling and Export Assets Asset Commodity Description Approximate Throughput Capacity Approximate Storage Capacity Third-Party and Affiliate Connections Ramberg Terminal Facility Crude oil Truck unloading bays; pipeline connections 285 MBbl/d (1) 40 MBbls (2) Upstream: Crude oil gathering system Downstream : Tioga Rail Terminal connection; third-party long-haul pipelines Tioga Rail Terminal Crude oil NGLs Dual loop Ladder track 140 MBbl/d 30 MBbl/d 290 MBbls (3) Upstream : Crude oil gathering system; Tioga Gas Plant; Ramberg Terminal Facility Downstream : BNSF Railway Crude oil rail cars Crude oil Rail cars (4) 32 MBbl/d (5) - Johnson's Corner Header System Crude oil Pipeline connections 100 MBbl/d (6) - Upstream : Crude oil gathering system; third-party gathering systems Downstream : Third-party long-haul pipelines (1) Represents the aggregate redelivery capacity of the Ramberg Terminal Facility.
Other DAPL Connections In addition to the connections at the Ramberg Terminal Facility and the Johnson’s Corner Header System, we also have other DAPL connections, which are crude oil delivery points within our terminal system located in Williams and Mountrail Counties, North Dakota that receive crude oil by pipeline from our crude oil gathering system for delivery into DAPL. 12 Table of Contents The following table sets forth certain information regarding our terminaling and export assets, which operate under a long‑term, fee‑based commercial agreement with Hess: Terminaling and Export Assets Asset Commodity Description Approximate Throughput Capacity Approximate Storage Capacity Third-Party and Affiliate Connections Ramberg Terminal Facility Crude oil Truck unloading bays; pipeline connections 285 MBbl/d (1) 40 MBbls (2) Upstream: Crude oil gathering system Downstream : Tioga Rail Terminal connection; third-party long-haul pipelines Tioga Rail Terminal Crude oil NGLs Dual loop Ladder track 140 MBbl/d 30 MBbl/d 290 MBbls (3) Upstream : Crude oil gathering system; Tioga Gas Plant; Ramberg Terminal Facility Downstream : BNSF Railway Crude oil rail cars Crude oil Rail cars (4) 32 MBbl/d (5) - Johnson's Corner Header System Crude oil Pipeline connections 100 MBbl/d (6) - Upstream : Crude oil gathering system; third-party gathering systems Downstream : Third-party long-haul pipelines Other DAPL Connections Crude oil Pipeline connections 120 MBbl/d (7) - Upstream : Crude oil gathering systems; third-party gathering systems Downstream : Third-party long-haul pipeline (1) Represents the aggregate redelivery capacity of the Ramberg Terminal Facility.
Our gathering system capacity can be increased via installation of additional compression equipment. Crude Oil Gathering A crude oil gathering system located primarily in McKenzie, Williams and Mountrail Counties, North Dakota, connecting Hess and third‑party owned or operated wells to the Ramberg Terminal Facility, the Tioga Rail Terminal and the Johnson’s Corner Header System.
Crude Oil Gathering A crude oil gathering system located primarily in McKenzie, Williams and Mountrail Counties, North Dakota, connecting Hess and third‑party owned or operated wells to the Ramberg Terminal Facility, the Tioga Rail Terminal and the Johnson’s Corner Header System.
In November 2021, the EPA proposed new regulations to establish comprehensive standards of performance and emission guidelines for methane and volatile organic compound emissions from existing operations in the oil and gas sector, including the exploration and production, transmission, processing, and storage segments.
In December 2023, the EPA issued a final rule to establish comprehensive standards of performance and emission guidelines for methane and volatile organic compound emissions from existing operations in the oil and gas sector, including the exploration and production, transmission, processing, and storage segments.
Our internal review of our assets and operations revealed small pipelines or sections of facilities that may be subject to PHMSA regulation. PHMSA may initiate proceedings with respect to any non-compliance at a future date. Nevertheless, we do not expect these developments to have a material effect on our operations or revenues.
Our internal review of our assets and operations revealed small pipelines or sections of facilities that may be subject to PHMSA regulation. PHMSA may initiate proceedings with respect to any non-compliance at a future date.
The definition of “waters of the United States” and, relatedly, the scope of CWA jurisdiction, have been the subject of notable rulemaking efforts and judicial challenges over several decades.
The definition of “waters of the United States” and, relatedly, the scope of CWA jurisdiction, are, and have been for many years, subject to notable rulemaking efforts and judicial challenges.
We inspect our pipelines to determine their condition and use the inspection information to evaluate appropriate preventative maintenance activities to validate line integrity and safety. Our inspections sometimes include the use of internal line inspection tools that provide information on the physical condition of our pipelines. State regulations and our commercial agreements with Hess contain product quality specification limits.
Our inspections sometimes include the use of internal line inspection tools that provide information on the physical condition of our pipelines. State regulations and our commercial agreements with Hess contain product quality specification limits.
Our Commercial Agreements with Hess Effective January 1, 2014, we entered into fee-based commercial agreements with certain subsidiaries of Hess to provide (i) gas gathering, (ii) crude oil gathering, (iii) gas processing and fractionation, (iv) storage services and (v) terminal and export services.
Our Commercial Agreements with Hess We have long-term fee-based commercial agreements with certain subsidiaries of Hess to provide (i) gas gathering, (ii) crude oil gathering, (iii) gas processing and fractionation, (iv) storage services, (v) terminaling and export services, and (vi) water handling services.
Hess has been required in the past, and may be required in the future, to incur significant capital expenditures to comply with new legislative and regulatory requirements relating to its operations.
Hess has been required in the past, and may be required in the future, to incur significant capital expenditures to comply with new legislative and regulatory requirements relating to its operations. To the extent these capital expenditures have a material effect on Hess, they could have a material effect on our business and results of operations.
Each of our commercial agreements other than our storage services agreement includes an inflation escalator and a fee recalculation mechanism that allows fees to be adjusted annually during the Initial Term for updated estimates of cumulative throughput volumes and our capital and operating expenditures in order to target a return on capital deployed over the Initial Term of the applicable commercial agreement (or, with respect to the crude oil services fee under our terminal and export services agreement, the 20-year period commencing on the effective date of the agreement).
Each of our commercial agreements other than our storage services agreement includes an inflation escalator capped at 3% in any calendar year and a fee recalculation mechanism that allows fees to be adjusted annually during the Initial Term for updated estimates of cumulative throughput volumes and our capital and operating expenditures in order to target a return on capital deployed over the Initial Term of the applicable commercial agreement (or, with respect to the crude oil services fee under our terminal and export services agreement, the 20-year period commencing on the effective date of the agreement). 13 Table of Contents For certain crude oil gathering, terminaling, storage, gas processing and gas gathering commercial agreements with Hess, we exercised our renewal options to extend each of these commercial agreement for one additional 10-year term (“Secondary Term”) effective January 1, 2024, through December 31, 2033.
We also transport produced water to 14 water handling and disposal facilities operated by third parties that have a combined permitted disposal capacity of approximately 180 MBbl/d. 8 Table of Contents The following table sets forth certain information regarding our gathering assets, which operate under long‑term, fee‑based commercial agreements with Hess: Gathering Assets Asset Commodity Description Approximate Miles of Pipelines Approximate Throughput Capacity Third-Party and Affiliate Connections Natural gas gathering pipelines Natural gas NGLs Natural gas and NGL gathering 1,380 miles 590 MMcf/d (1) Upstream : Hess and third-party wells Downstream : Tioga Gas Plant; LM4 plant; third-party facilities Natural gas compression Natural gas NGLs Gas compression; NGL extraction - 410 MMcf/d (1) Crude oil gathering pipelines Crude oil Crude oil gathering 560 miles 240 MBbl/d (2) Upstream : Hess and third-party wells Downstream : Ramberg Terminal Facility; Tioga Rail Terminal; Johnson's Corner Header System Hawkeye Oil Facility Crude oil Pump station; truck unloading - 75 MBbl/d Water gathering pipelines Water Produced water gathering 290 miles 210 MBbl/d Upstream : Hess and third-party wells Downstream : Hess and third-party water disposal facilities Water disposal facilities Water Produced water disposal - 110 MBbl/d (1) The natural gas gathering system has a current capacity of up to approximately 590 MMcf/d, including an aggregate compression capacity of approximately 410 MMcf/d.
The following table sets forth certain information regarding our gathering assets, which operate under long‑term, fee‑based commercial agreements with Hess: Gathering Assets Asset Commodity Description Approximate Miles of Pipelines Approximate Throughput Capacity Third-Party and Affiliate Connections Natural gas gathering pipelines Natural gas NGLs Natural gas and NGL gathering 1,410 miles 660 MMcf/d Upstream : Hess and third-party wells Downstream : Tioga Gas Plant; LM4 plant; third-party facilities Natural gas compression Natural gas NGLs Gas compression; NGL extraction - 480 MMcf/d Crude oil gathering pipelines Crude oil Crude oil gathering 570 miles 290 MBbl/d (1) Upstream : Hess and third-party wells Downstream : Ramberg Terminal Facility; Tioga Rail Terminal; Johnson's Corner Header System Hawkeye Oil Facility Crude oil Pump station; truck unloading - 75 MBbl/d Water gathering pipelines Water Produced water gathering 300 miles 250 MBbl/d Upstream : Hess and third-party wells Downstream : Hess and third-party water disposal facilities Water disposal facilities Water Produced water disposal - 170 MBbl/d (1) Includes 75 MBbl/d of capacity at the Hawkeye Oil Facility.
OPA‑90 also provides for civil penalties and imposes criminal sanctions for violations of its provisions. We operate facilities at which releases of oil or other hazardous substances could occur.
OPA‑90 also provides for civil penalties and imposes criminal sanctions for violations of its provisions. We operate facilities at which releases of oil or other hazardous substances could occur. We have implemented emergency oil response plans for our components and facilities covered by OPA‑90, and we have established SPCC plans for facilities subject to CWA SPCC requirements.
Y-grade liquids are shipped on the Elk Creek Pipeline from the ONEOK NGL lateral to Bushton, KS with access to Mont Belvieu, TX. 9 Table of Contents The plant also includes four NGL truck loading racks with an aggregate loading capacity of approximately 10 MBbl/d of propane to serve the local propane market, as well as 14 NGL bullet storage tanks and 5 NGL storage tanks with a combined shell capacity of approximately 35 MBbls of propane, 10 MBbls of butane and 35 MBbls of natural gasoline.
The plant also includes four NGL truck loading racks with an aggregate loading capacity of approximately 10 MBbl/d of propane to serve the local propane market, as well as 14 NGL bullet storage tanks and 5 NGL storage tanks with a combined shell capacity of approximately 35 MBbls of propane, 10 MBbls of butane and 35 MBbls of natural gasoline.
We believe these commercial agreements provide us with stable and predictable cash flows, an element of downside risk protection and minimal direct exposure to commodity price fluctuations. 14 Table of Contents The following table sets forth additional information regarding Hess’ MVCs: Hess Minimum Volume Commitment (1) Agreement 2023 2024 2025 Gas Gathering Agreement - MMcf/d of gas 320 364 357 Crude Oil Gathering Agreement - MBbl/d of crude oil 100 101 94 Gas Processing and Fractionation Agreement - MMcf/d of gas 302 340 343 Terminaling and Export Services Agreement (2) - MBbl/d of crude oil 113 114 108 Water Services Agreement (3) - MBbl/d of water 75 89 99 (1) Under each of our commercial agreements other than our storage services agreement, Hess is obligated to provide minimum volumes of crude oil, natural gas, NGLs and produced water, as applicable, to our assets on a quarterly basis and such volumes are reflected in the table above as annual averages of each year’s quarterly MVCs.
The following table sets forth additional information regarding Hess’ MVCs: Hess Minimum Volume Commitment (1) Agreement 2024 2025 2026 Gas Gathering Agreement - MMcf/d of gas 365 380 412 Crude Oil Gathering Agreement - MBbl/d of crude oil 101 100 105 Gas Processing and Fractionation Agreement - MMcf/d of gas 340 364 396 Terminaling and Export Services Agreement (2) - MBbl/d of crude oil 114 111 117 Water Services Agreement (3) - MBbl/d of water 92 99 101 (1) Under each of our commercial agreements other than our storage services agreement, Hess is obligated to provide minimum volumes of crude oil, natural gas, NGLs and produced water, as applicable, to our assets on a quarterly basis and such volumes are reflected in the table above as annual averages of each year’s quarterly MVCs.
These laws generally regulate the generation, storage, treatment, transportation and disposal of solid and hazardous waste. They also require corrective action, including investigation and remediation, at a facility where such waste may have been released or disposed. CERCLA .
They also require corrective action, including investigation and remediation, at a facility where such waste may have been released or disposed. CERCLA .
Our terminal facilities have response plans, spill prevention and control plans and other programs to respond to emergencies. Generally, rail operations are subject to federal regulations and the Association of American Railroad rules.
The tanks designed for crude oil storage at our terminals are equipped with appropriate controls that minimize emissions and promote safety. Our terminal facilities have response plans, spill prevention and control plans and other programs to respond to emergencies. Generally, rail operations are subject to federal regulations and the Association of American Railroad rules.
The facility receives crude oil through pipeline and truck deliveries from Hess and third parties and transports it by pipeline to the Ramberg Terminal Facility. Total receipt capacity of the facility is approximately 75 MBbl/d which can be filled solely through our crude oil gathering system or through a combination of our crude oil gathering system and truck unloading bays.
Total receipt capacity of the facility is approximately 75 MBbl/d, which can be filled solely through our crude oil gathering system or through a combination of our crude oil gathering system and truck unloading bays. The facility has six truck unloading bays with an aggregate capacity of approximately 30 MBbl/d.
It subsequently underwent a large‑scale expansion, refurbishment and optimization project that was completed in 2014, during which a new cryogenic processing train with a nameplate processing capacity of 250 MMcf/d was installed. In 2021, the TGP de-bottlenecking project was completed and commissioned, increasing total plant processing to 400 MMcf/d and adding y-grade liquids recovery of up to approximately 25 MBbl/d.
It subsequently underwent a large‑scale expansion, refurbishment and optimization project that was completed in 2014, during which a new cryogenic processing train with a nameplate processing capacity of 250 MMcf/d was installed.
Army Corps of Engineers. Regulatory requirements governing wetlands (including associated mitigation projects) may result in the delay of our pipeline projects while we obtain necessary permits and may increase the costs of new projects and maintenance activities. Considerable legal uncertainty exists surrounding the standard for what constitutes jurisdictional waters and wetlands subject to the protections and requirements of the CWA.
Regulatory requirements governing wetlands (including associated mitigation projects) may result in the delay of our pipeline projects while we obtain necessary permits and may increase the costs of new projects and maintenance activities.
For all of our systems, MVCs will continue to be set at 80% of Hess’ nominated volumes in each development plan set three years in advance, providing downside protection through 2033.
During the Secondary Term, MVCs will continue to be set at 80% of Hess’ nominated volumes in each development plan set three years in advance.
Year 2023 is the final year of the annual rate redetermination process for the majority of our systems that represented approximately 85% of our 2022 revenues. At the end of 2023, the base rate for 2024 will be set based on the average of the tariff rates from the years 2021 through 2023, adjusted for inflation, as described above.
At the end of 2023, the base rate for 2024 was set based on the average of the tariff rates from the years 2021 through 2023, adjusted for inflation, as described above. Rates will then be adjusted each year based on an inflation escalator, as described above.
To the extent these capital expenditures have a material effect on Hess, they could have a material effect on our business and results of operations. 15 Table of Contents Legislative and regulatory measures to address greenhouse gas emissions (including carbon dioxide, methane and other gases) are in various phases of discussion or implementation, and some regulatory bodies have recently proposed climate-related rules and regulations.
Legislative and regulatory measures to address greenhouse gas emissions (including carbon dioxide, methane and other gases) are in various phases of discussion or implementation, and some regulatory bodies have proposed or passed climate-related laws, rules and/or regulations.
Although such costs may impact our business directly or indirectly by impacting Hess’ facilities or operations, the extent and magnitude of that impact cannot be reliably or accurately estimated due to the present uncertainty regarding the additional measures and how they will be implemented. 16 Table of Contents Waste Management and Related Liabilities Many of the environmental laws and regulations affecting our operations relate to the release of hazardous substances or solid wastes into soils, groundwater and surface water, and include measures to control pollution of the environment.
Although such costs may impact our business directly or indirectly by impacting Hess’ facilities or operations, the extent and magnitude of that impact cannot be reliably or accurately estimated due to the present uncertainty regarding the additional measures and how they will be implemented.
Additionally, it is possible that emerging contaminants, like per- and polyfluoroalkyl substances such as PFAS and PFOA compounds, could become subject to CERCLA regulation. We cannot provide any assurance that the costs and liabilities associated with the future imposition of such remedial obligations upon us would not have a material adverse effect on our operations or financial position. RCRA.
We cannot provide any assurance that the costs and liabilities associated with the future imposition of such remedial or regulatory compliance obligations upon us would not have a material adverse effect on our operations or financial position. 16 Table of Contents RCRA.
Effective January 1, 2019, Hess pays us a combined processing fee per Mcf of natural gas, or Mcf equivalent of NGLs, as applicable, for aggregate volumes processed at LM4 and TGP. 13 Table of Contents Except for the water services agreements and except for a certain gathering sub-system as described below, each of our commercial agreements with Hess has an initial 10-year term effective January 1, 2014 (“Initial Term”).
Except for the water services agreements and except for a certain gathering sub-system as described below, each of our commercial agreements with Hess had an initial 10-year term effective January 1, 2014 (“Initial Term”).
This gathering system consists of approximately 1,380 miles of high and low pressure natural gas and NGL gathering pipelines with a current capacity of up to approximately 590 MMcf/d. The system has an aggregate compression capacity of approximately 410 MMcf/d, including approximately 85 MMcf/d of compression capacity added in 2022 by constructing two new greenfield compressor stations.
This gathering system consists of approximately 1,410 miles of high and low pressure natural gas and NGL gathering pipelines with a current capacity of up to approximately 660 MMcf/d.
Our crude oil rail cars have a shell capacity of 728 Bbls per car and an effective loading capacity of approximately 92%, or approximately 670 Bbls per car. 12 Table of Contents Johnson’s Corner Header System The Johnson’s Corner Header System is a crude oil pipeline header system located in McKenzie County, North Dakota that receives crude oil by pipeline from Hess and third parties and delivers crude oil to third‑party interstate pipeline systems.
Johnson’s Corner Header System The Johnson’s Corner Header System is a crude oil pipeline header system located in McKenzie County, North Dakota that receives crude oil by pipeline from Hess and third parties and delivers crude oil to DAPL and other third‑party interstate pipeline systems. It has a delivery capacity of approximately 100 MBbl/d of crude oil.
State regulation of gathering facilities and intrastate transportation pipelines generally includes various safety, environmental and, in some circumstances, nondiscriminatory take and common purchaser requirements, as well as complaint‑based rate regulation.
State regulation of gathering facilities and intrastate transportation pipelines generally includes various safety, environmental and, in some circumstances, nondiscriminatory take and common purchaser requirements, as well as complaint‑based rate regulation. Other state regulations may not directly apply to our business, but may nonetheless affect the availability of natural gas, crude oil and NGLs for purchase, compression and sale.
We have implemented cyber security programs and protocols. While we cannot guarantee their effectiveness, we continually seek to improve these protocols. A significant cyber‑attack could have a material adverse effect on our operations and those of our customers.
We and Hess have implemented a cybersecurity risk management program (see Item 1C. Cybersecurity ). While we continually seek to improve our cybersecurity risk management program, we cannot guarantee it will be fully implemented, complied with or effective. A significant cyber‑attack could have a material adverse effect on our operations and those of our customers.
In addition to potential domestic regulation of greenhouse gases, there continues to be international interest in a global framework for greenhouse gas reductions.
Congress periodically considers legislation on greenhouse gas emissions, although the ultimate adoption and form of any federal legislation cannot presently be predicted. In addition to recent and potential domestic regulation of greenhouse gases, there continues to be international interest in a global framework for greenhouse gas reductions.
Other fractionated products such as propane, butane and natural gasoline can be shipped via truck or rail to local and regional markets.
Other fractionated products such as propane, butane and natural gasoline can be shipped via truck or rail to local and regional markets. Y-grade liquids are shipped on the Elk Creek Pipeline from the ONEOK NGL lateral to Bushton, KS with access to Mont Belvieu, TX.
Regulation of Our Operations Environmental Regulation General Our operations are subject to extensive and frequently‑changing federal, state and local laws, regulations and ordinances relating to the protection of the environment.
During the year ended December 31, 2023, we began providing our services directly to third-party customers and we plan to increase our services to third parties in the future. 14 Table of Contents Regulation of Our Operations Environmental Regulation General Our operations are subject to extensive and frequently‑changing federal, state and local laws, regulations and ordinances relating to the protection of the environment.
We have implemented emergency oil response plans for our components and facilities covered by OPA‑90, and we have established SPCC plans for facilities subject to CWA SPCC requirements. 17 Table of Contents Construction or maintenance of our pipelines, terminals and storage facilities may impact wetlands, which are also regulated under the CWA by the EPA and the U.S.
Construction or maintenance of our pipelines, terminals and storage facilities may impact wetlands, which are also regulated under the CWA by the EPA and the U.S. Army Corps of Engineers.
Our natural gas gathering system includes approximately 80 miles of gas gathering pipelines that we acquired from Summit Midstream Partners, LP in 2019. The compressed gas and mixed NGLs are transported to the Tioga Gas Plant and the LM4 plant either as separate or combined streams for processing.
The compressed gas and mixed NGLs are transported to the Tioga Gas Plant and the LM4 plant either as separate or combined streams for processing. Our gathering system capacity can be increased via installation of additional compression equipment.
These water handling and disposal facilities are owned and operated by Hess Water Services and primarily service the water pipeline gathering systems.
These water handling and disposal facilities are owned and operated by Hess Water Services and primarily service the water pipeline gathering systems. We also transport produced water to 13 water handling and disposal facilities operated by third parties that have a combined permitted disposal capacity of approximately 180 MBbl/d.
We believe our terminal facilities are operated in a manner consistent with industry safe practices and standards and have fire protection in compliance with local, state and federal regulations. The tanks designed for crude oil storage at our terminals are equipped with appropriate controls that minimize emissions and promote safety.
Safety and Maintenance Our terminal operations, including associated pipelines, are subject to strict safety laws and regulations, including regulations under OSHA and comparable state and local regulations. We believe our terminal facilities are operated in a manner consistent with industry safe practices and standards and have fire protection in compliance with local, state and federal regulations.
Rates will then be increased each year based on an inflation escalator capped at 3%. For our terminaling and water gathering systems that represented approximately 15% of our 2022 revenues, the rates will continue to be reset through our annual rate redetermination process through 2033.
For our terminaling and water gathering systems, the rates will continue to be reset through our annual rate redetermination process through 2033. For all of our systems, MVCs will continue to provide downside protection through 2033.
Growth Drivers We intend to expand our business and have multiple potential alternatives to pursue, including capitalizing on organic growth from Hess and third parties in the Bakken and utilizing our existing capacity, as well as pursuing opportunities to add additional Hess and third‑party throughput volumes in the future. 6 Table of Contents Organizational Structure The following chart summarizes our corporate structure as of December 31, 2022. 7 Table of Contents Our Business and Properties Gathering Our gathering business consists of the Partnership’s 100% interest in (i) Hess North Dakota Pipelines Operations LP (“Gathering Opco”), which owns our North Dakota natural gas, NGL and crude oil gathering systems, and (ii) Hess Water Services, which owns our produced water gathering and disposal facilities.
Growth Drivers We intend to expand our business and have multiple potential alternatives to pursue, including capitalizing on organic growth from Hess and third parties in the Bakken and utilizing our existing capacity, as well as pursuing opportunities to add additional Hess and third‑party throughput volumes in the future.
This program requires the EPA to impose a “waste emissions charge” on certain natural gas and oil sources that are already required to report under EPA’s Greenhouse Gas Reporting Program. Congress periodically considers legislation on greenhouse gas emissions, although the ultimate adoption and form of any federal legislation cannot presently be predicted.
This program requires the EPA to impose a “waste emissions charge” on certain natural gas and oil sources that are already required to report under EPA’s Greenhouse Gas Reporting Program. In January 2024, the EPA released its proposed rule to implement the methane waste emissions charge with a proposed effective date in 2025 for reporting year 2024 emissions.
It has a delivery capacity of approximately 100 MBbl/d of crude oil. The Johnson’s Corner Header System entered into service in 2017.
The Johnson’s Corner Header System entered into service in 2017.
There were no changes to any provisions of the existing commercial agreements as a result of the exercise of the renewal options. For the remaining water gathering and disposal agreements as well as the remaining gas gathering agreement, we have the sole option to renew these agreements for an additional term that is exercisable at a later date.
For the remaining gathering sub-system, the Secondary Term is 5 years, and for the water services agreements the Secondary Term is 10 years, and we have the sole option to renew these remaining agreements for their Secondary Term that is exercisable at a later date.
Removed
(2) Includes 75 MBbl/d of capacity at the Hawkeye Oil Facility.
Added
Our Business and Properties Gathering Our gathering business consists of the Partnership’s 100% interest in (i) Hess North Dakota Pipelines Operations LP (“Gathering Opco”), which owns our North Dakota natural gas, NGL and crude oil gathering systems, and (ii) Hess Water Services, which owns our produced water gathering and disposal facilities.
Removed
The TGP has a multitude of residue gas and natural gas liquid export options.
Added
The system has an aggregate compression capacity of approximately 480 MMcf/d, including approximately 70 MMcf/d of compression capacity added in 2023 by constructing one new greenfield compressor station and expanding an existing compressor station.
Removed
Effective January 1, 2019, in connection with the acquisition of Hess Water Services, we entered into long-term fee-based water services agreements with a subsidiary of Hess.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Our financial risk management activities may include transactions designed to reduce risk by reducing our exposure to interest rate movements. Interest rate swaps may be used to convert interest payments on certain long‑term debt. At December 31, 2022, we did not have in place any derivative instruments to hedge any exposure to changes in interest rates.
Our financial risk management activities may include transactions designed to reduce risk by reducing our exposure to interest rate movements. Interest rate swaps may be used to convert interest payments on certain long‑term debt. At December 31, 2023, we did not have in place any derivative instruments to hedge any exposure to changes in interest rates.
A 15% increase or decrease in interest rates would decrease or increase the fair value of our fixed rate debt by approximately $103.6 million or $110.4 million, respectively. The carrying value of the amounts under our Term Loan A facility and revolving credit facility at the year-end approximated their fair value.
A 15% increase or decrease in interest rates would decrease or increase the fair value of our fixed rate debt by approximately $81.5 million or $85.6 million, respectively. The carrying value of the amounts under our Term Loan A facility and revolving credit facility at the year-end approximated their fair value.
A hypothetical change of 100 basis points in the rate of our variable interest rate debt would impact annual interest expense by $4.2 million based on our December 31, 2022, debt balances. 62 Table of Contents
A hypothetical change of 100 basis points in the rate of our variable interest rate debt would impact annual interest expense by $7.4 million based on our December 31, 2023, debt balances. 66 Table of Contents
At December 31, 2022, our total debt had a carrying value of $2,885.6 million and a fair value of approximately $2,720.7 million, based on Level 2 inputs in the fair value measurement hierarchy.
At December 31, 2023, our total debt had a carrying value of $3,211.4 million and a fair value of approximately $3,143.3 million, based on Level 2 inputs in the fair value measurement hierarchy.

Other HESM 10-K year-over-year comparisons