PBF Energy 2013 Annual Report Download - page 133

PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)
F- 37
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 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.
Environmental Matters
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 refinery acquisition, the Company assumed certain environmental remediation
obligations. The environmental liability of $9,869 recorded as of December 31, 2013 ($9,669 as of December 31,
2012) represents the present value of expected future costs discounted at a rate of 8%. At December 31, 2013 the
undiscounted liability is $14,874 and the Company expects to make aggregate payments for this liability of $5,838
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 $12,117 and $12,114, acquired in the Paulsboro acquisition, is recorded as restricted cash in deferred charges
and other assets, net as of December 31, 2013 and December 31, 2012, respectively.
In connection with the acquisition of the Delaware City assets, Valero Energy Corporation ("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 acquisition of the Delaware City assets and the Paulsboro refinery, 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 and the obligations transition to us over twenty years
from March 1, 2011.
In 2010, New York State 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 PPM sulfur. Other states have laws with various
implementation dates that also require lower levels of sulfur in heating oils. Not all of the heating oil we currently
produce meets these specifications. The Company has made and is continuing to make certain processing
improvements to shift conventional heating oil production to ultra-low sulfur heating oil and ultra-low sulfur diesel
in order to comply with these new mandates. The Company plans to continue increasing ultra-low sulfur distillate
production over the next several years while marketing conventional heating oil in states where regulations have
not changed. The mandate and other requirements do not currently have a material impact on the Company's
financial position, results of operations or cash flows.
In addition, on June 1, 2012, the EPA 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 has evaluated the impact of the regulation
and amended standards on its refinery operations and currently does not expect the cost to comply by July 1, 2015
with the amended NSPS to be material.