PBF Energy 2013 Annual Report Download - page 86

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for Paulsboro terminated effective March 31, 2013, at which time we began to source crude oil and feedstocks
internally.
For the period from March 1, 2011 through May 31, 2011, our Toledo refinery acquired substantially all of
its crude oil from MSCG under a crude oil acquisition agreement whereby we took title to the crude oil as it was
delivered to the refinery processing units. We had custody and risk of loss for MSCG’s crude oil stored on the
refinery premises. As a result, we recorded the crude oil in the Toledo refinery’s storage facilities as inventory with
a corresponding accrued liability. Effective June 1, 2011 we entered into a new supply agreement with MSCG
under which we take legal title to the crude oil at certain interstate pipeline delivery locations. We record an accrued
liability at each period-end for the amount we owe MSCG for the crude oil that we own but have not processed.
The accrued liability is based on the period-end market value, as it represents our best estimate of what we will
pay for the crude oil.
Environmental Matters
Liabilities for future clean-up costs are recorded when environmental assessments and/or clean-up efforts
are probable and the costs can be reasonably estimated. Other than for assessments, the timing and magnitude of
these accruals generally are based on the completion of investigations or other studies or a commitment to a formal
plan of action. Environmental liabilities are based on best estimates of probable future costs using currently available
technology and applying current regulations, as well as our own internal environmental policies. The actual
settlement of our liability for environmental matters could materially differ from our estimates due to a number of
uncertainties such as the extent of contamination, changes in environmental laws and regulations, potential
improvements in remediation technologies and the participation of other responsible parties.
Long-Lived Assets and Definite-Lived Intangibles
We review our long and finite lived assets for impairment whenever events or changes in circumstances
indicate their carrying value may not be recoverable. Impairment is evaluated by comparing the carrying value of
the long and finite lived assets to the estimated undiscounted future cash flows expected to result from the use of
the assets and their ultimate disposition. If such analysis indicates that the carrying value of the long and finite
lived assets is not considered to be recoverable, the carrying value is reduced to the fair value.
Impairment assessments inherently involve judgment as to assumptions about expected future cash flows
and the impact of market conditions on those assumptions. Although management would utilize assumptions that
it believes are reasonable, future events and changing market conditions may impact management’s assumptions,
which could produce different results.
Indefinite-lived Assets
We consider precious metals catalyst and linefill to be indefinite-lived assets as they are not expected to
deteriorate in their prescribed functions. These assets are not depreciated, but are assessed for impairment.
Deferred Turnaround Costs
Refinery turnaround costs, which are incurred in connection with planned major maintenance activities at
our refineries, are capitalized when incurred and amortized on a straight-line basis over the period of time estimated
until the next turnaround occurs (generally three to five years).
Derivative Instruments
We are exposed to market risk, primarily related to changes in commodity prices for the crude oil and
feedstocks we use in the refining process as well as the prices of the refined products we sell. The accounting
treatment for commodity contracts depends on the intended use of the particular contract and on whether or not
the contract meets the definition of a derivative. Non-derivative contracts are recorded at the time of delivery.