HollyFrontier 2013 Annual Report Download - page 43
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35
Pursuant to the 2007 Energy Independence and Security Act, the EPA promulgated the RFS2 regulations reflecting the increased
volume of renewable fuels mandated to be blended into the nation's fuel supply. The regulations, in part, require refiners to add
annually increasing amounts of “renewable fuels” to their petroleum products or purchase credits, known as RINs, in lieu of such
blending. As of December 2013, we are purchasing RINs in order to meet approximately half of our renewable fuel requirements.
Recently, due in part to the nation's fuel supply approaching the “blend wall” (the 10% ethanol limit prescribed by most automobile
warranties), the price of RINs has been extremely volatile with the price dramatically increasing due to real or perceived future
shortages in RINs. As a result, we expect to continue to experience higher than historical costs to comply with the renewable fuel
mandate. In the wholesale markets we serve, we are seeing price adjustments to indicate that the cost of RINs is being largely
borne by the consumer at the pump. However, we continue to use various approaches to mitigate our exposure to the increasing
cost of RINs, which include additional renewable fuel blending, shifts in our refined product slate and changes in the way we
conduct marketing operations. We cannot predict with certainty whether and to what extent we will be successful in mitigating
our exposure to increased RINs costs, and anticipate that increased compliance costs may negatively impact our future results of
operations. In 2013, our ethanol RINs purchases from third parties totaled approximately 215 million RINs.
A more detailed discussion of our financial and operating results for the years ended December 31, 2013, 2012 and 2011 is presented
in the following sections.
Table of Content