PBF Energy 2013 Annual Report Download - page 134

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- 38
The Company is aware that the EPA has drafted the proposed Tier 3 Motor Vehicle Emission and Fuel Standards.
The draft Standards are in the formal public comment period at this time. The gasoline currently manufactured
by the Company's refineries does not meet a portion of the proposed requirements, specifically as related to meeting
the proposed 10 ppm annual average gasoline sulfur requirement. The EPA has included potential options in other
portions of the proposed Standards that the Company's gasoline products may meet if adopted in the final
rulemaking. The Company is continuing to evaluate the potential impact of these proposed Standards.
On June 14, 2013, two administrative appeals were filed by the Sierra Club and Delaware Audubon regarding a
permit Delaware City Refining Company LLC (“Delaware City Refining”) obtained to allow loading of crude oil
onto barges. The appeals allege that both the loading of crude oil onto barges and the operation of the Delaware
City rail unloading terminal violate Delaware’s Coastal Zone Act. The first appeal is Number 2013-1 before the
State Coastal Zone Industrial Control Board (the “CZ Board”), and the second appeal is before the Environmental
Appeals Board and appeals Secretary’s Order No. 2013-A-0020. The CZ Board held a hearing on the first appeal
on July 16, 2013, and ruled in favor of Delaware City Refining and the State of Delaware and dismissed Appellants’
appeal for lack of standing. Sierra Club and Delaware Audubon have appealed that decision to the Delaware
Superior Court, New Castle County, Case No. N13A-09-001 ALR, and Delaware City Refining and the State have
filed cross-appeals. Briefs are due to be filed in this appeal in the first quarter of 2014 but no date has been set for
a decision by the Superior Court. A hearing on the second appeal before the Environmental Appeals Board, case
no. 2013-06, was held on January 13, 2014, and the Board ruled in favor of Delaware City Refining and the State
and dismissed the appeal for lack of jurisdiction. A written decision from the Board is pending, after which the
Appellants will again have the right to appeal the decision to Superior Court. If the Appellants in one or both of
these matters ultimately prevail, the outcome may have an adverse material effect on the Company's earnings.
The Company is also currently subject to certain other existing environmental claims and proceedings. The
Company believes that there is only a remote possibility that future costs related to any of these other known
contingent liability exposures would have a material impact on its financial position, results of operations or cash
flows.
PBF LLC Limited Liability Company Agreement
The holders of limited liability company interests in PBF LLC, including PBF Energy, generally have to include
for purposes of calculating their U.S. federal, state and local income taxes their share of any taxable income of
PBF LLC. Taxable income of PBF LLC generally is allocated to the holders of PBF LLC units (including PBF
Energy) pro rata in accordance with their respective share of the net profits and net losses of PBF LLC. In general,
PBF LLC is required to make periodic tax distributions to the members of PBF LLC, including PBF Energy, pro
rata in accordance with their respective percentage interests for such period (as determined under the amended and
restated limited liability company agreement of PBF LLC), subject to available cash and applicable law and
contractual restrictions (including pursuant to our debt instruments) and based on certain assumptions. Generally,
these tax distributions will be an amount equal to our estimate of the taxable income of PBF LLC for the year
multiplied by an assumed tax rate equal to the highest effective marginal combined U.S. federal, state and local
income tax rate prescribed for an individual or corporate resident in New York, New York (taking into account the
nondeductibility of certain expenses). If, with respect to any given calendar year, the aggregate periodic tax
distributions were less than the actual taxable income of PBF LLC multiplied by the assumed tax rate, PBF LLC
will make a “true up” tax distribution, no later than March 15 of the following year, equal to such difference, subject
to the available cash and borrowings of PBF LLC.
Tax Receivable Agreement
PBF Energy entered into a tax receivable agreement with the PBF LLC Series A and PBF LLC Series B Unit
holders (the “Tax Receivable Agreement”) that provides for the payment by PBF Energy to such persons of an
amount equal to 85% of the amount of the benefits, if any, that PBF Energy is deemed to realize as a result of (i)
increases in tax basis, as described below, and (ii) certain other tax benefits related to entering into the Tax