HollyFrontier 2015 Annual Report Download - page 33

Table of Content
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We may incur significant costs to comply with new or changing environmental, energy, health and safety laws and regulations,
and face potential exposure for environmental matters.
Refinery and pipeline operations are subject to federal, state and local laws regulating, among other things, the generation, storage,
handling, use and transportation of petroleum and hazardous substances by pipeline, truck, rail and barge, the emission and discharge
of materials into the environment, waste management, and characteristics and composition of gasoline and diesel fuels, and other
matters otherwise relating to the protection of the environment. Permits or other authorizations are required under these laws for
the operation of our refineries, pipelines and related operations, and these permits and authorizations are subject to revocation,
modification and renewal or may require operational changes, which may involve significant costs. Furthermore, a violation of
permit conditions or other legal or regulatory requirements could result in substantial fines, criminal sanctions, permit revocations,
injunctions, and/or refinery shutdowns. In addition, major modifications of our operations due to changes in the law could require
changes to our existing permits or expensive upgrades to our existing pollution control equipment, which could have a material
adverse effect on our business, financial condition, or results of operations. For example, in October 2015, the EPA lowered the
NAAQS for ozone from 75 to 70 parts per billion for both the 8-hour primary and secondary standards. State implementation of
the revised NAAQS could result in stricter permitting requirements, delay or prohibit our ability to obtain such permits, and result
in increased expenditures for pollution control equipment, the costs of which could be significant. Also, in December 2015, the
EPA issued a final rule, effective February 2016, that amends three refinery standards already in effect, imposing additional or, in
some cases, new emission control requirements on subject refineries. The final rule requires, among other things, benzene
monitoring at the refinery fence line and submittal of fence line monitoring data to the EPA on a quarterly basis; upgraded storage
tank controls requirements, including new applicability thresholds; enhanced performance requirements for flares, continuous
monitoring of flares and pressure release devices and analysis and remedy of flare release events; and compliance with emissions
standards for delayed coking units. Over the years, there have been ongoing communications, including notices of violations,
about environmental matters between us and federal and state authorities, some of which have resulted or will result in changes
to operating procedures and in capital expenditures. Compliance with applicable environmental laws, regulations and permits will
continue to have an impact on our operations, results of our operations and capital requirements.
As is the case with all companies engaged in industries similar to ours, we face potential exposure to future claims and lawsuits
involving environmental matters. The matters include, but are not limited to, soil, groundwater and waterway contamination, air
pollution, personal injury and property damage allegedly caused by substances which we manufactured, handled, used, released
or disposed.
We are and have been the subject of various state, federal and private proceedings relating to environmental regulations, conditions
and inquiries. Current and future environmental regulations are expected to require additional expenditures, including expenditures
for investigation and remediation, which may be significant, at our facilities. To the extent that future expenditures for these
purposes are material and can be reasonably determined, these costs are disclosed and accrued.
Our operations are also subject to various laws and regulations relating to occupational health and safety. We maintain safety,
training and maintenance programs as part of our ongoing efforts to ensure compliance with applicable laws and regulations.
Compliance with applicable health and safety laws and regulations has required and continues to require substantial expenditures.
Failure to appropriately manage occupational health and safety risks associated with our business could also adversely impact our
employees, communities, stakeholders, reputation and results of operations.
The costs of environmental and safety regulations are already significant and compliance with more stringent laws or regulations
or adverse changes in the interpretation of existing regulations by government agencies could have an adverse effect on the financial
position and the results of our operations and could require substantial expenditures for the installation and operation of systems
and equipment that we do not currently possess.
From time to time, new federal energy policy legislation is enacted by the U.S. Congress. For example, in December 2007, the
U.S. Congress passed the Energy Independence and Security Act, which, among other provisions, mandates annually increasing
levels for the use of renewable fuels such as ethanol, commencing in 2008 and escalating for 15 years, as well as increasing energy
efficiency goals, including higher fuel economy standards for motor vehicles, among other steps. These statutory mandates may
have the impact over time of offsetting projected increases in the demand for refined petroleum products in certain markets,
particularly gasoline. In the near term, the new renewable fuel standard presents ethanol production and logistics challenges for
both the ethanol and refining industries and may require additional capital expenditures or expenses by us to accommodate increased
ethanol use. Other legislative changes may similarly alter the expected demand and supply projections for refined petroleum
products in ways that cannot be predicted.
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.”