PBF Energy 2012 Annual Report Download - page 131

PBF ENERGY INC. AND SUBSIDIARIES
(COMBINED AND CONSOLIDATED WITH PBF ENERGY COMPANY LLC AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT AND BARREL DATA)
15 - COMMITMENTS AND CONTINGENCIES (Continued)
Employment Agreements
Concurrent with the PBF Energy IPO in December 2012, PBFI entered into amended and restated employment
agreements with members of executive management and certain other key personnel that include automatic
annual renewals, unless canceled. Under some of the agreements, certain of the executives would receive a lump
sum payment of between one and a half to 2.99 times of their base salary and continuation of certain employee
benefits for the same period upon termination by the Company “Without Cause”, or by the employee “For Good
Reason”, or upon a “Change in Control”, as defined in the agreements. Upon death or disability, certain of the
Company’s executives, or their estates, would receive a lump sum payment of at least one half of their base
salary.
Remediation Liabilities
The Company’s refineries are subject to extensive and frequently changing federal, state and local laws and
regulations, including, but not limited to, those relating to the discharge of materials into the environment or that
otherwise relate to the protection of the environment, waste management and the characteristics and the
compositions of fuels. Compliance with existing and anticipated laws and regulations can increase the overall
cost of operating the refineries, including remediation, operating costs and capital costs to construct, maintain
and upgrade equipment and facilities.
In connection with the Paulsboro acquisition, the Company assumed certain environmental remediation
obligations. The environmental liability of $9,669 recorded as of December 31, 2012 ($12,086 as of
December 31, 2011) represents the present value of expected future costs discounted at a rate of 8%. At
December 31, 2012 the undiscounted liability is $15,287 and the Company expects to make aggregate payments
for this liability of $6,168 over the next five years. The current portion of the environmental liability is recorded
in accrued expenses and the non-current portion is recorded in other long-term liabilities. A trust fund related to
this liability in the amount of $12,114 and $12,104, acquired in the Paulsboro acquisition, is recorded as
restricted cash in deferred charges and other assets, net as of December 31, 2012 and 2011, respectively.
In connection with the acquisition of the Delaware City assets, Valero remains responsible for certain pre-
acquisition environmental obligations up to $20,000 and the predecessor to Valero in ownership of the refinery
retains other historical obligations.
In connection with the Delaware City assets and Paulsboro refinery acquisitions, the Company and Valero
purchased ten year, $75,000 environmental insurance policies to insure against unknown environmental liabilities
at each site. In connection with the Toledo refinery acquisition, Sunoco remains responsible for environmental
remediation for conditions that existed on the closing date for twenty years from March 1, 2011.
In 2010, the State of New York adopted a Low-Sulfur Heating Oil mandate that beginning July 1, 2012 requires
all heating oil sold in New York State to contain no more than 15 parts per million of sulfur. Not all of the
heating oil we produce meets this specification. In addition, on June 1, 2012, the Environmental Protection
Agency issued final amendments to the New Source Performance Standards (“NSPS”) for petroleum refineries,
including standards for emissions of nitrogen oxides from process heaters and work practice standards and
monitoring requirements for flares. The Company is evaluating the impact of the regulation and amended
standards on its refinery operations. The Company cannot currently estimate the cost that may be incurred, if any,
to comply by July 1, 2015 with the amended NSPS.
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