PBF Energy 2015 Annual Report Download - page 101

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In connection with the acquisition of the Delaware City assets, the prior owners remain responsible, subject
to certain limitations, for certain pre-acquisition environmental obligations, including ongoing soil and groundwater
remediation at the site.
In connection with the Delaware City assets and Paulsboro refinery acquisitions, we, along with the seller,
purchased two individual ten-year, $75.0 million environmental insurance policies to insure against unknown
environmental liabilities at each site.
In connection with the acquisition of Toledo, the seller initially retains, subject to certain limitations,
remediation obligations which will transition to us over a 20-year period.
In connection with the acquisition of the Chalmette refinery, the sellers provided $3.9 million financial
assurance in the form of a surety bond to cover estimated potential site remediation costs associated with an agreed
to Administrative Order of Consent with the EPA. Additionally, the Company purchased a ten year $100.0 million
environmental insurance policy to insure against unknown environmental liabilities at the site.
In connection with the acquisition of all four of our refineries, we assumed certain environmental obligations
under regulatory orders unique to each site, including orders regulating air emissions from each facility.
(f) Pension and Post-retirement Obligations
Pension and post-retirement obligations include only those amounts we expect to pay out in benefit payments
and are further explained at the Employee Benefit Plans footnote to our financial statements, “Item 8. Financial
Statements and Supplementary Data.”
(g) Tax Receivable Agreement Obligations
We used a portion of the proceeds from our IPO to purchase PBF LLC Series A Units from the members
of PBF LLC other than PBF Energy. In addition, the members of PBF LLC other than PBF Energy may (subject
to the terms of the exchange agreement) exchange their PBF LLC Series A Units for shares of Class A common
stock of PBF Energy on a one-for-one basis. As a result of both the purchase of PBF LLC Series A Units and
subsequent the secondary offerings and exchanges, PBF Energy is entitled to a proportionate share of the existing
tax basis of the assets of PBF LLC. Such transactions have resulted in increases in the tax basis of the assets of
PBF LLC that otherwise would not have been available. Both this proportionate share and these increases in tax
basis have reduced the amount of the tax that PBF Energy would have otherwise been required to pay and may
reduce the amount of tax that PBF Energy would otherwise be required to pay in the future. These increases in tax
basis may also decrease gains (or increase losses) on the future disposition of certain capital assets to the extent
tax basis is allocated to those capital assets. We have entered into a tax receivable agreement with the current and
former members of PBF LLC other than PBF Energy that provides for the payment by PBF Energy to such members
of 85% of the amount of the benefits, if any, that PBF Energy is deemed to realize as a result of (i) these increases
in tax basis and (ii) certain other tax benefits related to entering into the tax receivable agreement, including tax
benefits attributable to payments under the tax receivable agreement. These payment obligations are obligations
of PBF Energy and not of PBF LLC or any of its subsidiaries.
PBF Energy expects to obtain funding for these payments by causing its subsidiaries to make cash
distributions to PBF LLC, which, in turn, will distribute such amounts, generally as tax distributions, on a pro-rata
basis to its owners, which as of December 31, 2015 include the members of PBF LLC other than PBF Energy
holding a 4.9% interest and PBF Energy holding a 95.1% interest. The members of PBF LLC other than PBF
Energy may continue to reduce their ownership in PBF LLC by exchanging their PBF LLC Series A Units for
shares of PBF Energy Class A common stock. Such exchanges may result in additional increases in the tax basis
of PBF Energy’s investment in PBF LLC and require PBF Energy to make increased payments under the tax
receivable agreement. Required payments under the tax receivable agreement also may increase or become
accelerated in certain circumstances, including certain changes of control. See “Item 1A. Risk Factors—Risks
Related to Our Organizational Structure and Our Class A Common Stock—In certain cases, payments by us under
the tax receivable agreement may be accelerated and/or significantly exceed the actual benefits we realize in respect