1283140--2/15/2008--HOLLY_ENERGY_PARTNERS

related topics

{tax, income, asset}

{debt, indebtedness, cash}

{gas, price, oil}

{stock, price, operating}

{customer, product, revenue}

{investment, property, distribution}

{acquisition, growth, future}

{operation, natural, condition}

{cost, contract, operation}

{cost, regulation, environmental}

{regulation, change, law}

We depend on Alon and particularly its Big Spring Refinery for a substantial portion of our revenues; if those revenues were significantly reduced, there would be a material adverse effect on our results of operations. We are exposed to the credit risks of our key customers. Competition from other pipelines that may be able to supply our shippers customers with refined products at a lower price could cause us to reduce our rates or could reduce our revenues. A material decrease in the supply, or a material increase in the price, of crude oil available to Holly s and Alon s refineries, could materially reduce our revenues. We may not be able to retain existing customers or acquire new customers. Our operations are subject to federal, state, and local laws and regulations relating to environmental protection and operational safety that could require us to make substantial expenditures. Our operations are subject to operational hazards and unforeseen interruptions for which we may not be adequately insured. Any reduction in the capacity of, or the allocations to, our shippers on interconnecting, third-party pipelines could cause a reduction of volumes transported in our pipelines and through our terminals. If our assumptions concerning population growth are inaccurate or if Holly s growth strategy is not successful, our ability to grow may be adversely affected. Growing our business by constructing new pipelines and terminals, or expanding existing ones, subjects us to construction risks. Rate regulation may not allow us to recover the full amount of increases in our costs. If our interstate or intrastate tariff rates are successfully challenged, we could be required to reduce our tariff rates, which would reduce our revenues. Potential changes to current petroleum pipeline rate-making methods and procedures may impact the federal and state regulations under which we will operate in the future. Terrorist attacks, and the threat of terrorist attacks or domestic vandalism, have resulted in increased costs to our business. Continued hostilities in the Middle East or other sustained military campaigns may adversely impact our results of operations. Our leverage may limit our ability to borrow additional funds, comply with the terms of our indebtedness or capitalize on business opportunities. Our growth through acquisitions may be limited by future market considerations. Holly and its affiliates have conflicts of interest and limited fiduciary duties, which may permit them to favor their own interests. Cost reimbursements, which will be determined by our general partner, and fees due our general partner and its affiliates for services provided, are substantial. Even if unitholders are dissatisfied, they cannot remove our general partner without its consent. The control of our general partner may be transferred to a third party without unitholder consent. We may issue additional common units without unitholder approval, which would dilute an existing unitholder s ownership interests. In establishing cash reserves, our general partner may reduce the amount of cash available for distribution to unitholders. Holly and its affiliates may engage in limited competition with us. Our general partner may cause us to borrow funds in order to make cash distributions, even where the purpose or effect of the borrowing benefits our general partner or its affiliates. Our general partner has a limited call right that may require a holder of units to sell its common units at an undesirable time or price. A unitholder may not have limited liability if a court finds that unitholder actions constitute control of our business. Tax Risks to Common Unitholders Our tax treatment depends on our status as a partnership for federal income tax purposes, as well as our not being subject to entity-level taxation by states. If the IRS were to treat us as a corporation or if we were to become subject to entity-level taxation for state tax purposes, then our cash available for distribution to unitholders would be substantially reduced. A successful IRS contest of the federal income tax positions we take may adversely impact the market for our common units, and the costs of any contest will be borne by our unitholders and our general partner. Unitholders may be required to pay taxes on their share of taxable income even if they do not receive any cash distributions from us. Tax gain or loss on the disposition of our common units could be different than expected. Tax-exempt entities, regulated investment companies or foreign persons may have adverse tax consequences from owning common units. We treat each purchaser of common units as having the same tax benefits without regard to the units purchased. The IRS may challenge this treatment, which could adversely affect the value of the common units.

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1283140--2/15/2008--HOLLY_ENERGY_PARTNERS_LP