Direct support for our operations is provided by HLS, which utilizes personnel employed by HF Sinclair who are dedicated to performing services for us. Their costs, including salaries, bonuses, payroll taxes, benefits and other direct costs, are charged to us monthly in accordance with an omnibus agreement we have with HF Sinclair (the “Omnibus Agreement”). These employees participate in the retirement and benefit plans of HF Sinclair. Our share of retirement and benefit plan costs was $2.8 million and $2.1 million for the three months ended September 30, 2022 and 2021, respectively, and $7.9 million and $6.2 million for the nine months ended September 30, 2022 and 2021, respectively.

Under HLS’s secondment agreement with HF Sinclair (the “Secondment Agreement”), certain employees of HF Sinclair are seconded to HLS to provide operational and maintenance services for certain of our processing, refining, pipeline and tankage assets, and HLS reimburses HF Sinclair for its prorated portion of the wages, benefits, and other costs related to these employees.

We have a Long-Term Incentive Plan for employees and non-employee directors who perform services for us. The Long-Term Incentive Plan consists of five components: restricted or phantom units, performance units, unit options, unit appreciation rights and cash awards. Our accounting policy for the recognition of compensation expense for awards with pro-rata vesting (a significant proportion of our awards) is to expense the costs ratably over the vesting periods.

As of September 30, 2022, we had two types of unit-based awards outstanding, which are described below. The compensation cost charged against income was $0.3 million and $0.6 million for the three months ended September 30, 2022 and 2021, respectively, and $1.5 million and $1.9 million for the nine months ended September 30, 2022 and 2021, respectively. We currently purchase units in the open market instead of issuing new units for settlement of all unit awards under our Long-Term Incentive Plan. As of September 30, 2022, 2,500,000 units were authorized to be granted under our Long-Term Incentive Plan, of which 848,570 were available to be granted, assuming no forfeitures of the unvested units and full achievement of goals for the unvested performance units.

Under our Long-Term Incentive Plan, we grant phantom units to our non-employee directors and selected employees who perform services for us, with most awards vesting over a period of one to three years. Although full ownership of the units does not transfer to the recipients until the units vest, the recipients have distribution rights on these units from the date of grant.

The fair value of each phantom unit award is measured at the market price as of the date of grant and is amortized on a straight-line basis over the requisite service period for each separately vesting portion of the award.


Phantom Units	Units	Weighted Average Grant-Date Fair Value
Outstanding at January 1, 2022 (nonvested)	203,263	$	14.85
Granted	19,269	18.15
Vesting and transfer of full ownership to recipients	(18,789)	17.78
Forfeited	(66,484)	13.27
Outstanding at September 30, 2022 (nonvested)	137,259	15.68

The grant date fair values of phantom units that were vested and transferred to recipients during the nine months ended September 30, 2022 and 2021 were $0.3 million and $13 thousand, respectively. The grant date fair values of phantom units that were granted during the nine months ended September 30, 2022 were $0.4 million. No units were granted during the nine months ended September 30, 2021. As of September 30, 2022, $0.5 million of total unrecognized compensation expense related to unvested phantom unit grants is expected to be recognized over a weighted-average period of 0.8 years.

Under our Long-Term Incentive Plan, we grant performance units to selected officers who perform services for us. Performance units granted are payable in common units at the end of a three-year performance period based upon meeting certain criteria over the performance period. Under the terms of our performance unit grants, some awards are subject to the growth in our distributable cash flow per common unit over the performance period while other awards are subject to "financial performance" and "market performance." Financial performance is based on meeting certain earnings before interest, taxes, depreciation and amortization ("EBITDA") targets, while market performance is based on the relative standing of total unitholder return achieved by HEP compared to peer group companies. The number of units ultimately issued under these awards can range from 0% to 200%.

We did not grant any performance units during the nine months ended September 30, 2022. Although common units are not transferred to the recipients until the performance units vest, the recipients have distribution rights with respect to the target number of performance units subject to the award from the date of grant at the same rate as distributions paid on our common units.


Performance Units						Units
Outstanding at January 1, 2022 (nonvested)						76,719

Vesting and transfer of common units to recipients						(24,809)
Forfeited						(9,124)
Outstanding at September 30, 2022 (nonvested)						42,786

The grant date fair value of performance units vested and transferred to recipients during both the nine months ended September 30, 2022 and 2021 was $0.6 million and $0.4 million, respectively. Based on the weighted-average fair value of performance units outstanding at September 30, 2022, of $0.7 million, there was $0.4 million of total unrecognized compensation expense related to nonvested performance units, which is expected to be recognized over a weighted-average period of 1.2 years.

During the nine months ended September 30, 2022, we paid $0.3 million for the purchase of our common units in the open market for the issuance and settlement of unit awards under our Long-Term Incentive Plan.