HollyFrontier 2013 Annual Report Download - page 32

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For additional information on regulations and related liabilities or potential liabilities affecting our business, see “Regulation”
under Items 1 and 2, “Business and Properties,” and Item 3, “Legal Proceedings.”
The adoption of climate change legislation by Congress could result in increased operating costs and reduced demand for the
refined products we produce.
In December 2009, the EPA determined that emissions of carbon dioxide, methane and other GHGs present an endangerment to
public health and the environment because emissions of such gases are, according to the EPA, contributing to warming of the
earth's atmosphere and other climatic changes. Based on these findings, the EPA has begun adopting and implementing regulations
to restrict emissions of GHGs under existing provisions of the federal CAA. The EPA also adopted two sets of rules regulating
GHG emissions under the CAA, one of which requires a reduction in emissions of GHGs from motor vehicles and the other of
which may require permits for emissions of GHGs from certain large stationary sources. The EPA’s rules relating to emissions of
GHGs from large stationary sources of emissions were upheld by the D.C. Circuit, but the U.S. Supreme Court has agreed to
review that decision in response to petitions by numerous parties. The EPA has also adopted rules requiring the reporting of GHG
emissions from specified large GHG emission sources in the United States, including petroleum refineries, on an annual basis.
The EPA has also announced its intention to issue a New Source Performance Standard directly regulating GHG emissions from
refineries.
In addition, the U.S. Congress has from time to time considered adopting legislation to reduce emissions of GHGs and almost
one-half of the states have already taken legal measures to reduce emissions of GHGs primarily through the planned development
of GHG emission inventories and/or regional GHG cap and trade programs. These cap and trade programs generally work by
requiring major sources of emissions, such as electric power plants, or major producers of fuels, such as refineries and gas processing
plants, to acquire and on an annual basis surrender emission allowances. The number of allowances available for purchase is
reduced over time in an effort to achieve the overall GHG emission reduction goal.
The adoption of legislation or regulatory programs to reduce emissions of GHGs could require us to incur increased operating
costs, such as costs to purchase and operate emissions control systems, to acquire emissions allowances or comply with new
regulatory or reporting requirements. Any such legislation or regulatory programs could also increase the cost of consuming, and
thereby reduce demand for, the refined products that we produce. Consequently, legislation and regulatory programs to reduce
emissions of GHGs could have an adverse effect on our business, financial condition and results of operations.
In addition, some scientists have concluded that increasing concentrations of GHGs in the Earth's atmosphere may produce climate
changes that have significant physical effects, such as increased frequency and severity of storms, droughts, floods and other
climatic events. If any such events were to occur, they could have an adverse effect on our financial condition and results of
operations.
Our operations are subject to operational hazards and unforeseen interruptions for which we may not be adequately insured.
Our operations are subject to operational hazards and unforeseen interruptions such as natural disasters, adverse weather, accidents,
fires, explosions, hazardous materials releases, power failures, mechanical failures and other events beyond our control. These
events might result in a loss of equipment or life, injury, or extensive property damage or destruction of property, as well as a
curtailment or an interruption in our operations and may affect our ability to meet marketing commitments. We maintain significant
insurance coverage, but it does not cover all potential losses, costs or liabilities, and our business interruption insurance coverage
generally does not apply unless a business interruption exceeds 45 days. If any refinery were to experience an interruption in
operations, earnings from the refinery could be materially adversely affected (to the extent not recoverable through insurance)
because of lost production and repair costs.
The availability of adequate insurance may be affected by conditions in the insurance market over which we have no control,
resulting in the inability to maintain or obtain insurance of the type and amount we desire at reasonable rates. As a result of market
conditions, premiums and deductibles for certain of our insurance policies could increase or, in some instances, certain insurance
could become unavailable or available only for reduced amounts of coverage. We could suffer losses for uninsurable or uninsured
risks or in amounts in excess of our existing insurance coverage. The occurrence of an event that is not fully covered by insurance
could have a material adverse effect on our business, financial condition and results of operations.
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