HollyFrontier 2014 Annual Report Download - page 38

Table of Content
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Item 3. Legal Proceedings
Commitment and Contingency Reserves
We periodically establish reserves for certain legal proceedings. The establishment of a reserve involves an estimation process
that includes the advice of legal counsel and subjective judgment of management. While management believes these reserves to
be adequate, future changes in the facts and circumstances could result in the actual liability exceeding the estimated ranges of
loss and amounts accrued.
While the outcome and impact on us cannot be predicted with certainty, based on advice of counsel, management believes that
the resolution of these proceedings through settlement or adverse judgment will not either individually or in the aggregate have
a materially adverse effect on our financial condition, results of operations or cash flows.
Environmental Matters
We are reporting the following proceedings to comply with SEC regulations which require us to disclose proceedings arising under
federal, state or local provisions regulating the discharge of materials into the environment or protecting the environment if we
reasonably believe that such proceedings may result in monetary sanctions of $100,000 or more. Our respective subsidiaries have
or will develop corrective action plans regarding these disclosures that will be implemented in consultation with the respective
federal and state agencies. It is not possible to predict the ultimate outcome of these proceedings, although none are currently
expected to have a material effect on our financial condition, results of operations or cash flows.
Frontier Refining LLC (“FR”), our wholly-owned subsidiary, completed certain environmental audits at the Cheyenne Refinery
regarding compliance with federal and state environmental requirements. By letters dated October 5, 2012, November 7, 2012,
and January 10, 2013, and pursuant to EPA's audit policy to the extent applicable, FR submitted reports to the EPA voluntarily
disclosing non-compliance with certain emission limitations, reporting requirements, and provisions of a 2009 federal consent
decree. By letters dated October 31, 2012, February 6, 2013, June 21, 2013, July 9, 2013 and July 25, 2013, and pursuant to
applicable Wyoming audit statutes, FR submitted environmental audit reports to the Wyoming Department of Environmental
Quality (“WDEQ”) voluntarily disclosing non-compliance with certain notification, reporting, and other provisions of the refinery's
state air permit and other environmental regulatory requirements. Additional self-disclosures and follow-up correspondence are
anticipated as the audit activities are completed. No further action has been taken by either agency at this time. The Cheyenne
Refinery also has one outstanding Notice of Violations issued in January 2013 that is subject to ongoing settlement negotiations
with the WDEQ.
The Cheyenne Refinery received a letter from the EPA dated December 22, 2014, reviewing air emission incident reports submitted
to the EPA during the period 2011 to 2013 and assessing a penalty for a number of these incidents. The Cheyenne Refinery reviewed
the EPA's penalty assessment with legal counsel and has paid the penalty.
Between November 2010 and February 2012, certain of our subsidiaries submitted multiple reports to the EPA to voluntarily
disclose non-compliance with fuels regulations at the Cheyenne, El Dorado, Navajo, Tulsa and Woods Cross refineries and at the
Cedar City, Utah and Henderson, Colorado terminals. Our subsidiaries have complied with all EPA requests for additional
information regarding the voluntary disclosures. The EPA and our subsidiaries are now engaged in settlement discussions with
the EPA that may resolve the voluntarily disclosed non-compliance events.
On July 2, 2014, the Woods Cross Refinery received a letter issued by the U.S. EPA Region 8 dated June 26, 2014 describing
certain instances where the Woods Cross Refinery may not be in compliance with the refinery's 2008 Consent Decree and calculating
proposed stipulated penalties in accordance with that decree. The letter requested information and documentation setting forth
Woods Cross's position on the EPA's assessment and further requested that Woods Cross provide reasons why the EPA's assessment
may be incorrect. Woods Cross evaluated the EPA letter and submitted a response on July 29, 2014, explaining that many of the
instances of apparent noncompliance are unwarranted and for those no penalty should be assessed. By letter dated February 10,
2015, the EPA considered the information provided by the Woods Cross Refinery and assessed a stipulated penalty that is less
than $100,000.