PBF Energy 2015 Annual Report Download - page 155

PBF ENERGY INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)
F- 38
“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 $10,367 recorded as of December 31, 2015 ($10,476 as of December 31,
2014) represents the present value of expected future costs discounted at a rate of 8%. At December 31, 2015 the
undiscounted liability is $15,646 and the Company expects to make aggregate payments for this liability of $5,998
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. As of December 31, 2015 and December 31, 2014,
this liability is self-guaranteed by the Company.
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 for twenty years from March 1, 2011 subject to certain
limitations.
In connection with the acquisition of the Chalmette refinery, the Company obtained $3,936 in 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. The estimated cost assumes remedial activities will continue for
a minimum of 30 years. Further, in connection with the acquisition of the Chalmette refinery, the Company
purchased a ten year, $100,000 environmental insurance policy to insure against unknown environmental liabilities
at the refinery.
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 parts per million ("PPM") sulfur. Since July 1, 2012,
other states in the Northeast market began requiring heating oil sold in their state to contain no more than 15 PPM
sulfur. Currently, six Northeastern states require heating oil with 15 PPM or less sulfur. By July 1, 2016, two more
states are expected to adopt this requirement and by July 1, 2018 most of the remaining Northeastern states (except
for Pennsylvania and New Hampshire) will require heating oil with 15 PPM or less sulfur. All of the heating oil
the Company currently produces meets these specifications. The mandate and other requirements do not currently
have a material impact on the Company's financial position, results of operations or cash flows.
The EPA issued the final Tier 3 Gasoline standards on March 3, 2014 under the Clean Air Act. This final rule
establishes more stringent vehicle emission standards and further reduces the sulfur content of gasoline starting in
January of 2017. The new standard is set at 10 PPM sulfur in gasoline on an annual average basis starting January
1, 2017, with a credit trading program to provide compliance flexibility. The EPA responded to industry comments
on the proposed rule and maintained the per gallon sulfur cap on gasoline at the existing 80 PPM cap. The standards
set by the new rule are not expected to have a material impact on the Company’s financial position, results of
operations or cash flows.