PBF Energy 2012 Annual Report Download - page 34

The adoption of derivatives legislation by the United States Congress could have an adverse effect on our
ability to use derivatives contracts to reduce the effect of commodity price, interest rate and other risks
associated with our business.
The United States Congress in 2010 adopted the Dodd-Frank Wall Street Reform and Consumer Protection
Act, or the Dodd-Frank Act, which, among other things, established federal oversight and regulation of the over-
the-counter derivatives market and entities that participate in that market. In connection with the Dodd-Frank
Act, the Commodity Futures Trading Commission, or the CFTC, adopted regulations to set position limits for
certain futures and option contracts in the major energy markets. Although these regulations were recently
vacated by the U.S. District Court for the District of Columbia, the court remanded the matter to the CFTC and
the CFTC voted on November 15, 2012 to appeal the District Court’s decision. The legislation may also require
us to comply with margin requirements, and with certain clearing and trade-execution requirements if we do not
satisfy certain specific exceptions. The legislation may also require the counterparties to our derivatives contracts
to transfer or assign some of their derivatives contracts to a separate entity, which may not be as creditworthy as
the current counterparty. The legislation and any new regulations could significantly increase the cost of
derivatives contracts (including through requirements to post collateral), materially alter the terms of derivatives
contracts, reduce the availability of derivatives to protect against risks we encounter, reduce our ability to
monetize or restructure our existing derivatives contracts, and increase our exposure to less creditworthy
counterparties. If we reduce our use of derivatives as a result of the legislation and regulations, our results of
operations may become more volatile and our cash flows may be less predictable, which could adversely affect
our ability to plan for and fund capital expenditures. Any of these consequences could have a material adverse
effect on us, our financial condition and our results of operations.
Our operations could be disrupted if our information systems fail, causing increased expenses and loss of
sales.
Our business is highly dependent on financial, accounting and other data processing systems and other
communications and information systems, including our enterprise resource planning tools. We process a large
number of transactions on a daily basis and rely upon the proper functioning of computer systems. If a key system
was to fail or experience unscheduled downtime for any reason, even if only for a short period, our operations and
financial results could be affected adversely. Our systems could be damaged or interrupted by a security breach,
fire, flood, power loss, telecommunications failure or similar event. We have a formal disaster recovery plan in
place, but this plan may not prevent delays or other complications that could arise from an information systems
failure. Further, our business interruption insurance may not compensate us adequately for losses that may occur.
Product liability claims and litigation could adversely affect our business and results of operations.
Product liability is a significant commercial risk. Substantial damage awards have been made in certain
jurisdictions against manufacturers and resellers based upon claims for injuries and property damage caused by
the use of or exposure to various products. Failure of our products to meet required specifications or claims that a
product is inherently defective could result in product liability claims from our shippers and customers, and also
arise from contaminated or off-specification product in commingled pipelines and storage tanks and/or defective
fuels. Product liability claims against us could have a material adverse effect on our business or results of
operations.
We may incur significant liability under or costs and capital expenditures to comply with environmental,
product specification, health and safety regulations, which are complex and change frequently.
Our 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 other regulated materials, the
emission and discharge of materials into the environment, waste management, remediation of contaminated sites,
characteristics and composition of gasoline and distillates and other matters otherwise relating to the protection
of the environment. Our operations are also subject to various laws and regulations relating to occupational
health and safety.
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