What changed in this filing

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Item 1A. Risk Factors

2021-03-01 compared with 2020-02-28 · 142 added, 90 removed, 656 unchanged (26% of the section changed)

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Risks Relating to Our Industries

The current COVID-19 Pandemic, any related subsequent waves of the COVID-19 Pandemic or an additional regional or global disease outbreak, and certain developments in the global oil markets have had, may continue to have, or may have an adverse impact on our business, our future results of operations and our overall financial performance.

The COVID-19 Pandemic could materially adversely affect our business and operations beyond 2020.

In early 2020, global health care systems and economies began to experience strain from the spread of the COVID-19 Pandemic.

As the virus spread, global economic activity began to slow and future economic activity was forecast to slow with a resulting forecast of a decline in oil and gas demand.

The global pandemic has resulted in a dramatic reduction in airline flights and has reduced the number of vehicles on the road.

Governmental actions in response to the COVID-19 Pandemic have resulted in significant business and operational disruptions, including business closures, supply chain disruptions, travel restrictions, stay-at-home orders, and limitations on the availability and effectiveness of the workforce.

These impacts have negatively impacted and will likely continue to negatively impact worldwide economic and commercial activity, financial markets, and demand for and prices of oil and gas products for the foreseeable future.

These impacts may also precipitate a prolonged economic slowdown and recession.

In response to the decline in demand, OPEC participating countries agreed to adjust downwards their overall production of crude oil through April 30, 2022, with the agreement to be reassessed in December 2021.

The impact of the declines in demand have been exacerbated by a production dispute between Russia and the members of OPEC, particularly Saudi Arabia, and the subsequent actions taken by such countries as a result thereof.

Despite an expected rise in global crude oil demand in 2021, there remains considerable tension in the OPEC-Russia relationship and uncertainty in the global oil markets.

A sustained reduction in crude oil production will potentially affect the global supply of oil and the prices of oil and refined products in our market.

Additionally, a significant reduction or freeze in crude oil production in the United States will adversely affect our suppliers and source of crude oil.

Global economic growth drives demand for energy from all sources, including fossil fuels.

Should the U.S.

and global economies experience weakness, demand for energy may decline.

Similarly, should growth in global energy production outstrip demand, excess supplies may arise.

Declines in demand and excess supplies may result in accompanying declines in commodity prices and deterioration of our financial position along with our ability to operate profitably and our ability to obtain financing to support operations.

With respect to our business, we have experienced periodic declines in demand thought to be associated with slowing economic growth in certain markets, including the effects of the COVID-19 Pandemic, coupled with new oil and gas supplies coming on line and other circumstances beyond our control that resulted in oil and gas supply exceeding global demand which, in turn, resulted in steep declines in prices of oil and natural gas.

There can be no assurance as to how long the current price decline will persist or that a recurrence of price weakness will not arise in the future.

The COVID-19 Pandemic has resulted in modifications to our business practices, including limiting employee and contractor presence at certain work locations, limiting travel, and reducing capital expenditures.

We may take further actions as required by government authorities or that we determine are in the best interests of our employees, contractors, customers, suppliers and communities.

However, there is no assurance that such measures will be sufficient to mitigate the risks posed by the virus, and our ability to successfully execute our business operations could be adversely impacted.

In addition, while we have recorded goodwill impairment of $126.0 million to date, the continued effects of the COVID-19 Pandemic could result in additional impairments of long-lived or indefinite-lived assets, including goodwill, at some point in the future.

Such impairment charges could be material.

The full impact of the ongoing COVID-19 Pandemic is unknown and continues to rapidly evolve.

It is difficult to predict how significant the impact of the COVID-19 Pandemic, any related subsequent waves of the COVID-19 Pandemic, an additional regional or global disease outbreak, and any responses to such events, will be on the United States and global economies and our business or for how long disruptions are likely to continue.

The extent of such impact will depend on future developments and factors outside of our control, including new information which may emerge concerning the severity or duration of the COVID-19 Pandemic, the evolving governmental and private sector actions to contain the pandemic or treat its health, economic, and other impacts, and the timing and effectiveness of the ongoing rollout of currently available vaccines.

The ultimate extent of the impact of the volatile conditions in the oil and gas industry on our business, financial condition, results of operation and liquidity will also depend largely on future developments, including the extent and duration of any price reductions, any additional decisions by OPEC and disputes between the members of OPEC+.

To the extent COVID-19 and the developments in the global oil markets adversely affects our business, financial condition, results of operation and liquidity, they may also have the effect of heightening many of the other risks described below.

A substantial or extended decline in refining margins would reduce our operating results and cash flows and could materially and adversely impact our future rate of growth and the carrying value of our assets.

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These factors include:

changes in global and local economic conditions, e.g., as a result of the recent outbreak of the novel coronavirus;

• changes in global and local economic conditions, e.g., as a result of the outbreak of the COVID-19 Pandemic;

• domestic and foreign supply and demand for crude oil and refined products;

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• worldwide political conditions, particularly in significant oil producing regions such as the Middle East, Africa, the former Soviet Union and South America;

the ability or inability of the members of the Organization of Petroleum Exporting Countries to maintain oil price and production controls;

• the ability or inability of the members of OPEC to maintain oil price and production controls;

• pricing and other actions taken by competitors that impact the market;

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however, we cannot assure that these favorable conditions will continue.

A substantial or prolonged narrowing in (or inversion to) the price differential between the WTI and Brent benchmarks for any reason, including, without limitation, increased crude oil distribution capacity from the Permian Basin, crude oil exports from the United States or actual or perceived reductions in Mid-Continent crude oil inventories, could negatively impact our earnings and cash flows, which could have a material adverse effect on our business, financial condition and results of operations.

The narrowing, and in some cases inversion, in the price differential between WTI and Brent benchmarks in 2020 and 2019 has negatively impacted our results of operations.

Continued narrowing or inversion in the price differential between the WTI and Brent benchmarks for any reason, including, without limitation, increased crude oil distribution capacity from the Permian Basin, crude oil exports from the United States or

actual or perceived reductions in Mid-Continent crude oil inventories, could further negatively impact our earnings and cash flows, which could have a material adverse effect on our business, financial condition and results of operations.

In addition, because the premium or discount we pay for a portion of the crude oil processed at our refineries is established based upon this differential during the month prior to the month in which the crude oil is processed, rapid decreases in the differential may negatively affect our results of operations and cash flows.

Additionally, governmental and regulatory actions, including continued resolutions by the Organization of the Petroleum Exporting Countries to restrict crude oil production levels and executive actions by the current U.S.

Additionally, governmental and regulatory actions, including continued resolutions by OPEC to restrict crude oil production levels and executive actions by the immediately past U.S.

presidential administration to advance certain energy infrastructure projects may continue to impact crude oil prices and crude oil differentials.

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Additionally, certain of our other facilities, such as terminals and biodiesel plants, generate lesser quantities of hazardous wastes.

Under RCRA, the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA") and other federal, state and local environmental laws, as the owner or operator of refineries, biodiesel plants, bulk terminals, pipelines, tank farms, rail cars, trucks and retail locations, we may be liable for the costs of removal or remediation of contamination at our existing or former locations, whether we knew of, or were responsible for, the presence of such contamination.

Under RCRA, CERCLA and other federal, state and local environmental laws, as the owner or operator of refineries, biodiesel plants, bulk terminals, pipelines, tank farms, rail cars, trucks and retail locations, we may be liable for the costs of removal or remediation of contamination at our existing or former locations, whether we knew of, or were responsible for, the presence of such contamination.

We have incurred such liability in the past, and several of our current and former locations are the subject of ongoing remediation projects.

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Additionally, persons who arrange for the disposal or treatment of hazardous substances also may be liable for the costs of removal or remediation of these substances at sites where they are located, regardless of whether the site is owned or operated by that person.

We typically arrange for the treatment or disposal of hazardous

substances generated by our refining and other operations.

We typically arrange for the treatment or disposal of hazardous substances generated by our refining and other operations.

Therefore, we may be liable for removal or remediation costs associated with releases of these substances at third party locations, as well as other related costs, including fines, penalties and damages resulting from injuries to persons, property and natural resources.

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Certain CAA regulatory programs applicable to our refineries, terminals and other operations require capital expenditures for the installation of air pollution control devices, operational procedures to minimize emissions and monitoring and reporting of emissions.

In 2012, the EPA announced an industry-wide enforcement initiative directed at flaring operations and performance at refineries and petrochemical plants and finalized revisions to NSPS Subpart Ja that primarily affects flares and process heaters.

We completed capital and other projects at our refineries related to flare compliance with NSPS Ja in 2015 and 2016.

A consent decree was entered in the United States District Court for the Northern District of Texas in June 2019 resolving alleged historical violations of the CAA at our Big Spring refinery.

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According to the EPA, approximately 95% of the nation's refining capacity has entered into "global" settlements under the EPA National Refinery Initiative.

Our El Dorado and Tyler refineries entered into similar global settlements in 2002 and 2009.

A similar consent decree covering the Krotz Springs refinery entered into in 2005 by a previous owner was terminated by the court in October 2017.

In 2015, the EPA finalized reductions in the NAAQS for ozone, from 75 ppb to 70 ppb.

Our Tyler refinery is located near areas that have been reclassified as being in non-attainment with the new standard.

Our Tyler refinery is located near areas classified as being in non-attainment with the new standard.

However, the refinery area has not been classified as being in non-attainment with the new standard.

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Even though the concentrations are not expected to exceed regulatory or health-based standards, the availability of such data may increase the likelihood of lawsuits against our refineries by the local public or organized public interest groups.

Delek has obtained 1-year compliance extensions to certain provisions of the rule.

Most of the capital cost needed to comply with these new rules has already been spent.

We do not anticipate that any additional capital costs or future operating costs will be material, and do not believe compliance will affect our production capacities or have a material adverse effect upon our business, financial condition or results of operations.

In addition to our operations, many of the fuel products we manufacture are subject to requirements of the CAA, as well as related state and local laws and regulations.

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Although credits have been readily available, there can be no assurance that such credits will continue to be available for purchase at reasonable prices, or at all, and we could have to implement capital projects in the future to reduce benzene levels.

In March 2014, the EPA issued final Tier 3 gasoline rules that require a reduction in annual average gasoline sulfur content from 30 ppm to 10 ppm by January 1, 2017 for "large refineries" and retains the current maximum per-gallon sulfur content limit of 80 ppm.

In April 2016, the EPA finalized a change to the Tier 3 standard, requiring small volume refineries that increase their annual average crude processing rate above 75,000 bpd to meet the Tier 3 sulfur limits 30 months from that “disqualifying” date.

Under the final rules, all of our refineries are considered “small refineries” and are exempt until January 1, 2020.

We anticipate that our refineries will meet these new limits when they become effective and that capital spending at our refineries to achieve compliance by the effective date were $12.0 million through 2019.

We do not anticipate that this rule change will affect our refineries.

Our operations are also subject to the CWA, the OPA-90 and comparable state and local requirements.

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The OPA-90 prohibits the discharge of oil into "Waters of the U.S." and requires that affected facilities have plans in place to respond to spills and other discharges.

The CWA also regulates filling or discharges to wetlands and other "Waters of the U.S." In 2015, the EPA, in conjunction with the Army Corps of Engineers, issued a final rule expanding the definition of “Waters of the U.S.” The rule, which was subject to litigation and judicial stays, was repealed in December 2019 and the EPA and the Army Corps of Engineers have published a proposed rule containing an alternative definition of “Waters of the U.S.” that is intended to increase predictability and consistency and generally adopts a narrower definition than the 2015 rule.

On April 21, 2020 the EPA and U.S.

Army Corps of Engineers published the Navigable Waters Protection Rule to finalize a revised definition of “Waters of the U.S.,” and the rule became effective on June 22, 2020 resulting in a more streamlined definition which narrows regulatory reach.

However, legal challenges continue and the ultimate resolution is uncertain at this time.

To the extent a final rule expands the scope of the CWA’s jurisdiction, we could face increased operating costs

or other impediments that could alter the way we conduct our business, which could in turn have a material adverse effect on our business, financial condition and results of operations.

To the extent a final rule expands the scope of the CWA’s jurisdiction, we could face increased operating costs or other impediments that could alter the way we conduct our business, which could in turn have a material adverse effect on our business, financial condition and results of operations.

We are subject to regulation by the DOT and various state agencies in connection with our pipeline, trucking and rail transportation operations.

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In January 2017, PHMSA announced they were considering limits on the volatility of crude oil that could be shipped by rail and other modes of transportation.

These rules could limit the availability of tank cars to transport crude to our refineries and increase the cost of crude oil transported by rail or truck.

On May 20, 2020, PHMSA withdrew its advance notice of proposed rulemaking ("ANPRM") relating to the January 18, 2017 ANPRM concerning vapor pressure for crude oil transported by rail.

Additionally, the PHMSA announced that it is no longer considering vapor pressure limits for the transportation of crude oil, other unrefined petroleum-based products, and Class 3 flammables products, by rail or any other mode.

In addition to the substantial remediation costs that could be caused by leaks or spills from our pipelines, regulators could prohibit our use of affected portions of the pipeline for extended periods, thereby interrupting the delivery of crude oil to, or the distribution of refined products from, our refineries.

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Such regulations could have a significant negative effect on our operations and profitability.

For example, in response to Executive Order 13650, Improving Chemical Facility Safety and Security, OSHA announced it intends to propose comprehensive changes to the process safety requirements, although they have not yet formally proposed any revisions.

In January 2017, the EPA finalized changes to process safety requirements in its Risk Management Program rules that require evaluation of safer alternatives and technologies, expanded routine audits, independent third-party audits following certain process safety events and increased sharing of information with the public and emergency response organizations.

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There can be no assurance that product liability claims against us would not have a material adverse effect on our business or results of operations or our ability to maintain existing customers or retain new customers.

The Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act") is comprehensive financial reform legislation that, among other things, establishes comprehensive federal oversight and regulation of over-the-counter derivatives and many of the entities that participate

in that market.

Although the Dodd-Frank Act was enacted on July 21, 2010, the Commodity Futures Trading Commission ("CFTC") and the SEC, along with certain other regulators, must promulgate final rules and regulations to implement many of the Dodd-Frank Act's provisions relating to over-the-counter derivatives.

While some of these rules have been finalized, others have not;

and, as a result, the final form and timing of the implementation of the new regulatory regime affecting commodity derivatives remains uncertain.

The availability and cost of RINs could have a material adverse effect on our financial condition and results of operations.

The RFS-2, issued by the EPA, requires refiners to add annually increasing amounts of “renewable fuels” to their petroleum products or to purchase credits, known as “RINs,” in lieu of such blending.

Due to regulatory uncertainty and in part due to the nation’s fuel supply approaching the “blend wall” (the 10% ethanol limit prescribed by most automobile warranties), the price and availability of RINs has been volatile.

If we are unable to pass the costs of compliance with RFS-2 on to our customers, our profits will be adversely impacted.

If we have to pay a significantly higher price for RINs, if sufficient RINs are unavailable for purchase or if we are otherwise unable to meet the RFS-2 mandates, our business, financial condition and results of operations could be materially and adversely affected.

The availability and cost of RINs and other required credits could have an adverse effect on our financial condition and results of operations.

Pursuant to the 2007 Energy Independence and Security Act, the EPA promulgated the RFS-2 regulations reflecting the increased volume of renewable fuels mandated to be blended into the nation's fuel supply.

The regulations, in part, require refiners to add annually increasing amounts of “renewable fuels” to their petroleum products or purchase RINs in lieu of such blending.

We currently purchase RINs for some fuel categories on the open market in order to comply with the quantity of renewable fuels we are required to blend under the RFS-2 regulations.

The regulations, in part, require refiners to add annually increasing amounts of “renewable fuels” to their petroleum products or purchase credits, known as "RINs" in lieu of such blending.

While we are able to obtain many of the RINs required for compliance by blending renewable fuels manufactured by third parties or by our own biodiesel plants, we must also purchase RINs on the open market in order to comply with the quantity of renewable fuels we are required to blend under the RFS-2 regulations.

Since the EPA first began mandating biofuels in excess of the “blend wall” (the 10% ethanol limit prescribed by most automobile warranties), the price of RINs has been extremely volatile.

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Additionally, recent decisions by the U.S.

Court of Appeals for the 10th Circuit have vacated small refinery exemptions granted in past years for other refiners.

These decisions have been remanded to the EPA for further proceedings, and it is not clear at this time what steps the EPA will take with respect to those vacated small refinery exemptions, or how the case will impact small refinery exemptions granted to other refineries or future small refinery exemptions.

Court of Appeals for the 10th Circuit have vacated small refinery exemptions granted in

past years for other refiners.

On January 24, 2021, the U.S.

Supreme Court agreed to hear the appeal.

Arguments are expected in April 2021 and a decision as soon as June 2021.

It is not clear at this time what steps the EPA will take with respect to those vacated small refinery exemptions, or how the case will impact small refinery exemptions granted to other refineries or future small refinery exemptions.

In addition, the RFS-2 regulations are highly complex and evolving, requiring us to periodically update our compliance systems.

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The EPA has initiated several enforcement actions against refiners who purchase fraudulent RINs, resulting in substantial costs to the refiner.

We cannot predict with certainty our exposure to increased RINs costs in the future, nor can we predict the extent by which costs associated with RFS-2 regulations will impact our future results of operations.

While the EPA promulgated a rule in June 2019 aiming to improve transparency in the market for RINs, we cannot predict with certainty our exposure to increased RINs costs in the future, nor can we predict the extent by which costs associated with RFS-2 regulations will impact our future results of operations.

Increased supply of and demand for alternative transportation fuels, increased fuel economy standards and increased use of alternative means of transportation could lead to a decrease in transportation fuel prices and/or a reduction in demand for petroleum-based transportation fuels.

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RFS-2 and widespread use of E-15 or E-85 could cause decreased crude runs and materially affect our profitability, unless fuel demand rises at a comparable rate or other outlets are found for the displaced petroleum products.

On October 11, 2018, the White House announced the President has signed a memorandum directing the EPA to conduct a rulemaking that is intended to increase the utilization of E-15 during the summer months.

In its regulatory agenda, the EPA projects publication of a proposed rule in February 2019 and a final rule in May 2019.

Notwithstanding this timeline, the Office of Management and Budget's Office of Information and Regulatory Affairs has not yet announced that it has received a draft proposal for interagency review.

In 2012, the EPA and the National Highway Traffic Safety Administration finalized rules raising the required Corporate Average Fuel Economy and GHG standards for passenger vehicles beginning with 2017 model year vehicles and increasing to the equivalent of 54.5 mpg by 2025.

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Increased security measures taken by us as a precaution against possible terrorist attacks or vandalism could result in increased costs to our business.

In addition, disruption or significant increases in energy prices could result in government-imposed price controls.

In addition, disruption or significant increases in energy prices could result

in government-imposed price controls.

Any one of, or a combination of, these occurrences could have a material adverse effect on our business, financial condition and results of operations.

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Various legislative and regulatory measures to address climate change and GHG emissions (including carbon dioxide, methane and nitrous oxides) are in various phases of discussion or implementation and could affect our operations.

They include proposed and recently enacted federal regulation and state actions to develop statewide, regional or nationwide programs designed to control and reduce GHG emissions from fixed sources, such as our refineries, coal-fired power plants and oil and gas production operations, as well as mobile transportation sources and fuels.

Many states and regions have implemented, or are in the process of implementing, measures to reduce emissions of GHGs, primarily through cap and trade programs or low carbon fuel standards, but other than in California where we have limited operations, we do not currently operate in states that have their own GHG reduction programs.

They include proposed and enacted federal regulation and state actions to develop statewide, regional or nationwide programs designed to control and reduce GHG emissions from fixed sources, such as our refineries, coal-fired power plants and oil and gas production operations, as well as mobile transportation sources and fuels.

Many states and regions have implemented, or are in the process of implementing, measures to reduce emissions of GHGs, primarily through cap and trade programs or low carbon fuel standards.

In December 2009, the EPA published its findings that emissions of GHGs present a danger to public health and the environment because emissions of such gases are, according to the EPA, contributing to the warming of the Earth’s atmosphere and other climatic conditions.

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In April 2016, the United States became a signatory to the 2015 United Nations Conference on Climate Change, which led to the creation of the Paris Agreement.

The Paris Agreement, which became effective by its terms on November 4, 2016, will require countries to review and "represent a progression" in their intended nationally determined contributions, which set GHG emission reduction

goals, every five years, beginning in 2020.

On August 4, 2017, the United States formally communicated to the United Nations its intent to withdraw from participating in the Paris Agreement, which entails a four-year process.

In response to the announced withdrawal plan, a number of state and local governments in the United States have expressed intentions to take GHG-related actions.

In December 2020, President-elect Biden announced plans for the U.S.

to rejoin the Paris Agreement.

Effective as of February 19, 2021, the U.

rejoined the Paris Agreement.

Although it is not possible to predict the requirements of any GHG legislation that may be enacted, any laws or regulations that have been or may be adopted to restrict or reduce GHG emissions will likely require us to incur increased operating and capital costs and/or increased taxes on GHG emissions and petroleum fuels, and any increase in the prices of refined products resulting from such increased costs, GHG cap and trade programs or taxes on GHGs, could result in reduced demand for our petroleum fuels.

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Because all of our refining operations are concentrated in the Tyler, El Dorado, Big Spring and Krotz Springs refineries, significant disruptions at one of these facilities could have a material adverse effect on our consolidated financial results.

Refining segment contribution margin comprised approximately 79.4% , 84.2% and 88.3% of our consolidated contribution margin for the 2019 , 2018 and 2017 fiscal years, respectively.

Our refineries consist of many processing units, a number of which have been in operation for many years.

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Depending on which units are affected, all or a portion of a refinery's production may be halted or disrupted during a maintenance turnaround.

We completed a maintenance turnaround at our El Dorado refinery in 2014 and a shortened turnaround that allowed work to be completed on the majority of the process units in March 2019.

In addition, we completed a maintenance turnaround at our Tyler refinery in 2015 and plan for a maintenance turnaround for our Big Spring refinery beginning January of 2020.

In March 2019, we completed a shortened maintenance turnaround at our El Dorado refinery that allowed work to be completed on the majority of the process units, and a maintenance turnaround is scheduled to begin March 1, 2021.

We completed a maintenance turnaround at our Tyler refinery in 2015.

In addition, we began our planned maintenance turnaround for our Big Spring refinery

January 1, 2020 which was completed during 2020, and we began our Krotz Springs maintenance turnaround in the fourth quarter of 2020.

We are also subject to unscheduled down time for unanticipated maintenance or repairs.

Refinery operations may also be disrupted by external factors, such as a suspension of feedstock deliveries, cyber-attacks, or an interruption of electricity, natural gas, water treatment or other utilities.

A large number of positive COVID-19 cases at one or more of our refineries could substantially impact our business, financial condition, results of operations and liquidity.

Other potentially disruptive factors include natural disasters, severe weather conditions, workplace or environmental accidents, interruptions of supply, work stoppages, losses of permits or authorizations or acts of terrorism.

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Our logistics segment consists of Delek Logistics, a publicly-traded master limited partnership, and our consolidated financial statements include its consolidated financial results.

As of December 31, 2019 , we owned a 61.4% limited partner interest in Delek Logistics, and a 94.6% interest in Logistics GP, which owns the entire 2.0% general partner interest in Delek Logistics.

As of December 31, 2020, we owned an 80.0% limited partner interest in Delek Logistics, consisting of 34,745,868 common limited partner units and the non-economic general partner interest.

Delek Logistics operates a system of crude oil and refined product pipelines, distribution terminals and tankage in Arkansas, Louisiana, Tennessee and Texas.

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The occurrence of any of these factors could directly or indirectly affect Delek Logistics' financial condition, results of operations and cash flows.

Because Delek Logistics is our consolidated subsidiary, the occurrence of any of these risks could also affect our financial condition, results of

operations and cash flows.

Because Delek Logistics is our consolidated subsidiary, the occurrence of any of these risks could also affect our financial condition, results of operations and cash flows.

Additionally, if any of these risks affect Delek Logistics' viability, its ability to serve our supply and distribution needs may be jeopardized.

For additional information about Delek Logistics, see "Logistics Segment" under Item 1 & 2, Business and Properties, of this Annual Report on Form 10-K.

For additional information about Delek Logistics, see "Logistics Segment" under Item 1 & 2.

Business and Properties, of this Annual Report on Form 10-K.

Interruptions or limitations in the supply and delivery of crude oil, or the supply and distribution of refined products, may negatively affect our refining operations and inhibit the growth of our refining operations.

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These projects typically require significant development periods, during which time demand for such infrastructure may change, production in the Permian Basin may decrease, or additional investments by competitors may be made.

Lower production in the Permian Basin, or further investments by us or others in new pipelines, storage or dock capacity could result in capacity that exceeds demand, which could reduce the utilization of our gathering system and midstream assets and the related services or the prices we are able to charge for those services.

Lower production in the Permian Basin, or further investments by us or others in new pipelines, storage or dock capacity could result

in capacity that exceeds demand, which could reduce the utilization of our gathering system and midstream assets and the related services or the prices we are able to charge for those services.

There are several projects currently underway that are expected to increase pipeline capacity from the Permian Basin beyond current production.

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When infrastructure investments in the markets we serve result in capacity that exceeds the demand in those markets, our facilities or investments could be underutilized, and rates could be unfavorably impacted, which could materially adversely affect our results of operations, financial position or cash flows, as well as our ability to pay cash distributions.

We have made investments in joint ventures which subject us to additional risks, over which we do not have full control and which have unique risks.

We have made investments in several joint ventures, and we may enter into other joint venture arrangements in the future.

Generally, we have limited control over the activities of the joint venture, including the cash distribution policies of each of the joint ventures.

We also have financial obligations related to our joint venture investments, some of which may be contingent on the activities of the joint ventures and the abilities of the joint ventures to obtain their own financing for their activities.

Construction delays, cost increases, changes in market conditions, and other factors may result in a change in our expectations for the results of our investments in these joint ventures, and may require additional contributions from us to a joint venture.

Additionally, the partners that we share ownership within these joint ventures may not always share our goals and objectives.

Differences in views among the partners may result in delayed decisions or failures to agree on major matters, such as large expenditures or contractual commitments, the construction of assets or the borrowing of money, among others.

Delay or failure to agree may prevent action with respect to such matters, even though such action may not serve our best interest or that of the joint venture.

Accordingly, delayed decisions and disagreements could adversely affect the business and operations of the joint ventures and, in turn, our business and operations.

From time to time, our joint ventures may be involved in disputes or legal proceedings which may negatively affect our investments.

Accordingly, any such occurrences could adversely affect our financial condition, results of operations or cash flows.

Our retail segment is dependent on fuel sales, which makes us susceptible to increases in the cost of gasoline and interruptions in fuel supply.

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Some of the factors affecting consumer spending include general economic conditions, unemployment, consumer debt, reductions in net worth based on declines in equity markets and residential real estate values, adverse developments in mortgage markets, taxation, energy prices, interest rates, consumer confidence and other macroeconomic factors.

Political instability and global health crises, such as the recent outbreak of the novel coronavirus, can also impact the global economy and decrease worldwide demand for oil and refined products.

Political instability and global health crises, such as the COVID-19 Pandemic, can also impact the global economy and decrease worldwide demand for oil and refined products.

During a period of economic weakness or uncertainty, current or potential customers may travel less, reduce or defer purchases, go out of business or have insufficient funds to buy or pay for our products and services.

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As a result, we are more susceptible to regional economic conditions compared to our more geographically diversified competitors, and any unforeseen events or circumstances that affect the Gulf Coast Region could also materially and adversely affect our revenues and cash flows.

The primary factors include, among other things, changes in the economy, weather conditions, demographics and population, increased supply of refined products from competitors and reductions in the supply of crude oil or other feedstocks.

The primary factors include, among other things, changes in the economy, weather conditions, demographics and

population, increased supply of refined products from competitors and reductions in the supply of crude oil or other feedstocks.

In the event of a shift in the supply/demand balance in the Gulf Coast Region due to changes in the local economy, an increase in aggregate refining capacity or other reasons, resulting in supply exceeding the demand in the region, our refineries may have to deliver refined products to more customers outside of the Gulf Coast Region and thus incur considerably higher transportation costs, resulting in lower refining margins, if any.

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If crude oil prices fall below certain dollar per barrel thresholds, economic activity in the region may slow down, which could have a material adverse impact on the profitability of our business in West Texas.

The termination or expiration of our supply and offtake agreements could have a material adverse effect on our liquidity.

Our supply and offtake agreements with J.

Aron & Company ("J.

Aron") have expiration dates ranging from April 2020 to May 2021.

The termination or expiration of, or periodic price adjustment settlements in, the J.

Aron Supply and Offtake Agreements could have a material adverse effect on our liquidity.

In April 2020, we amended and restated our three supply and offtake agreements with J.

Aron to renew and extend the terms to December 30, 2022, with J.

Aron having the sole discretion to further extend to May 30, 2025 by providing at least six months prior notice to the current maturity date.

Pursuant to the agreements, J.

Aron purchases a substantial portion of the crude oil and refined products in our refineries' inventory at market prices.

Aron purchases a substantial portion of the crude oil and refined products for three of our refineries' inventory at market prices.

Upon any termination of the agreements, including at expiration or in connection with a force majeure or default, the parties are required to negotiate with third parties for the assignment to us of certain contracts, commitments and arrangements, including procurement contracts, commitments for the sale of product and pipeline, terminalling, storage and shipping arrangements.

As part of the amendment, there were changes to the underlying market index, annual fee, the crude purchase fee, crude roll fees and timing of cash settlements related to periodic price adjustments ("PPA") on the differentials.

The PPA are calculated semi-annually on October 1 and May 1 ("Re-pricing dates") and will result in cash settlements, (either payments to J.

Aron or receipts of additional funds from J.

Aron), based on the market value of the underlying commodity differential compared to the contractual differential, subject to a set threshold amount.

In the event that the periodic price adjustments are triggered on the Re-pricing dates, we may be required to make earlier cash payments within three months following the Re-pricing date.

If there is negative publicity concerning our brand names or the brand names of our suppliers, fuel and merchandise sales in our retail segment may suffer.

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In addition, major cigarette manufacturers currently offer substantial rebates to us;

however, there can be no assurance that such rebate programs

will continue.

however, there can be no assurance that such rebate programs will continue.

We include these rebates as a component of our gross margin from sales of cigarettes.

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Certain of these liabilities are subject to periodic audits by the respective taxing authority, which could increase or otherwise alter our tax liabilities.

Though we have applied reasonable interpretations and assumptions in determining our tax liabilities, it is possible that the IRS could issue subsequent guidance or take positions on audit that differ from our prior interpretations and assumptions, which could adversely impact our cash tax liabilities, results of operations, and financial condition.

Subsequent changes to our tax liabilities as a result of these audits may also subject us to interest and penalties, and could have a material adverse effect on our business, financial condition and results of operations.

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In such case, the logistics segment would likely experience a material reduction in its anticipated cash flow and after-tax return to its unitholders, and we would likely experience a substantial reduction in its value.

On December 22, 2017, tax legislation commonly known as the Tax Cuts and Jobs Act ("Tax Reform Act") was enacted.

In the absence of guidance on various uncertainties and ambiguities in the application of certain provisions of the Tax Reform Act, we will use what we believe are reasonable interpretations and assumptions in applying the Tax Reform Act, but it is possible that the IRS could issue subsequent guidance or take positions on audit that differ from our prior interpretations and assumptions, which could adversely impact our cash tax liabilities, results of operations, and financial condition.

Adverse weather conditions or other unforeseen developments could damage our facilities, reduce customer traffic and impair our ability to produce and deliver refined petroleum products or receive supplies for our retail fuel and convenience stores.

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In addition, as technologies evolve, and cyber-attacks become more sophisticated, we may incur significant costs to upgrade or enhance our security measures to protect against such attacks and we may face difficulties in fully anticipating or implementing adequate preventive measures or mitigating potential harm.

We could also be liable under laws that protect the privacy of personal information, subject to

regulatory penalties, experience damage to our reputation or a loss of consumer confidence, or incur additional costs for remediation and modification or enhancement of our information systems to prevent future occurrences, all of which could adversely affect our reputation, business, operations or financial results.

We could also be liable under laws that protect the privacy of personal information, subject to regulatory penalties, experience damage to our reputation or a loss of consumer confidence, or incur additional costs for remediation and modification or enhancement of our information systems to prevent future occurrences, all of which could adversely affect our reputation, business, operations or financial results.

If we lose any of our key personnel, our ability to manage our business and continue our growth could be negatively impacted.

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The blender's tax credit was re-enacted in December 2019 for the years 2020 through 2022 and was retroactively reinstated for 2018 and 2019.

Previously, the blender's tax credit expired on December 31, 2016, but was retroactively reinstated during the first quarter of 2018 to extend through December 31, 2017.

See Note 4 of the consolidated financial statements included in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K for further information regarding the extension of this tax credit.

It is uncertain what action, if any, Congress may take with respect to reinstating the blender's tax credit beyond 2022 or when such action might be effective.

If Congress does not reinstate the credit for future years, it may result in a material adverse effect on the earnings, profitability and cash flows relating to our renewable fuels facilities.

See Note 4 of the consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K for further information regarding the extension of this tax credit.

It is uncertain what action, if any, Congress may take with respect to enacting or reinstating the blender's tax credit beyond 2022 or when such action might be effective.

If Congress does not enact or reinstate the credit for future years, it may result in a material adverse effect on the earnings, profitability and cash flows relating to our renewable fuels facilities.

Risks Related to Ownership of Our Common Stock

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This volatility has had a significant impact on the market price of securities issued by many companies, including companies in our industry.

The trading price of Delek common stock and, prior to the Delek/Alon Merger, Old Delek common stock, has been volatile over the past three years.

The trading price of Delek common stock has been volatile over the past three years.

The changes often occur without any apparent regard to the operating performance of these companies, and these fluctuations could materially reduce our stock price.

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Responding to proxy contests and other actions by activist stockholders can be costly and time-consuming, disrupting our operations and diverting the attention of our Board of Directors and senior management from the pursuit of business strategies.

If individuals are elected or appointed to our Board of Directors who do not agree with our strategic plans, it may adversely affect the ability of our Board of Directors to function effectively and our ability to effectively and timely implement our strategic plans and create additional value for our stockholders.

As a result, stockholder campaigns could adversely affect our results of operations, financial condition and cash flows.

On January 14, 2021, we received formal notice from CVR Energy, Inc.

("CVR Energy"), the owner of approximately 15% of our outstanding common stock, of their intention to propose three director candidates at our 2021 Annual Meeting.

CVR Energy also proposed, among other things, that we cease refining operations at the Krotz Springs and El Dorado refineries, stop dropping down core refining assets to Delek Logistics, sell our retail business, exit non-core supply and trading activities, and simplify our corporate structure.

Any perceived uncertainties as to our future direction and control, our ability to execute on our strategy, or changes to the composition of our board of directors or senior management team arising from the proposals by CVR Energy or others could lead to the perception of a change in the direction of our business or instability which may be exploited by our competitors, result in the loss of potential business opportunities, and make it more difficult to pursue our strategic initiatives or attract and retain qualified personnel and business partners, any of which could have an adverse effect, which may be material, on our business and operating results.

In addition, actions such as those described above could cause significant fluctuations in the trading prices of our common stock based on temporary or speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals and prospects of our business.

As we continue to engage in discussions with CVR Energy, the trading price of our common stock may be subject to significant fluctuations.

Likewise, to the extent that we implement any proposals made by CVR Energy or other proposals made by any of our shareholders, the resulting changes in our business, assets, results of operations and financial condition could be material and could have an impact, which may be material, on the market price of our common stock.

As a result of the contested director election, we expect to incur significant costs during 2021.

Future sales of shares of our common stock could depress the price of our common stock, and could result in substantial dilution to our stockholders.

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Our subsidiaries' ability to make any payments will depend on many factors, including their earnings, cash flows, the terms of any applicable credit facilities, tax considerations and legal restrictions.

We may be unable to pay future regular dividends in the anticipated amounts and frequency set forth herein.

We will only be able to pay regular dividends from our available cash on hand and funds received from our subsidiaries.

Our ability to receive dividends and other cash payments from our subsidiaries may be restricted under the terms of any applicable credit facilities.

For example, under the terms of their credit facilities, Delek Logistics and its subsidiaries are subject to certain customary covenants that limit their ability to, subject to certain exceptions as defined in their respective credit agreements, remit cash to, distribute assets to, or make investments in us as the parent company.

Specifically, these covenants limit the payment, in the form of cash or other assets, of dividends or other cash payments to us.

The declaration of future regular dividends on our common stock will be at the discretion of our Board of Directors and will depend upon many factors, including our results of operations, financial condition, earnings, capital requirements, restrictions in our debt agreements and legal requirements.

Although we currently intend to pay regular quarterly cash dividends on our common stock, we cannot provide any assurances that any regular dividends will be paid in the anticipated amounts and frequency set forth herein, if at all.

We have suspended our quarterly dividend and cannot assure our shareholders when we will declare dividends in the future.

In the fourth quarter of 2020, we suspended our quarterly dividend on our common stock in order to conserve capital in response to the impact of the COVID-19 Pandemic and related market activity.

We are not obligated to declare or pay any dividend.

Any future declaration, amount and payment of dividends will be at the sole discretion of our Board of Directors;

however, because the impact of the COVID-19 Pandemic and related market activity is difficult to predict, we cannot provide assurance as to when our Board of Directors will declare a dividend in the future.

The declaration of future dividends on our common stock will be at the discretion of our Board of Directors and will depend upon many factors, including our results of operations, financial condition, earnings, capital requirements, restrictions in our debt agreements and legal requirements.

As a result, if our Board of Directors does not declare or pay dividends, a shareholder may not receive any return on an investment in our common stock unless they sell our common stock for a price greater than that which they paid for it.

The stockholder rights plan adopted by our Board of Directors may impair an attempt to acquire control of Delek.

On March 20, 2020, our Board of Directors adopted a stockholder rights plan and declared a dividend of one preferred share purchase right for each outstanding share of our common stock to stockholders of record on March 30, 2020.

In the event that a person or group acquires beneficial ownership of 15% or more of our then-outstanding common stock, subject to certain exceptions, each right would entitle its holder (other than such person or members of such group) to purchase one one-thousandth of a share of Series A Junior Participating Preferred Stock.

In addition, at any time after a person or group acquires 15% or more of our common stock (unless such person or group acquires 50% or more), the Board may exchange one share of our common stock for each outstanding right (other than rights owned by such person or group, which would have become void).

Unless extended by the Board of Directors prior to expiration, the rights will expire on March 19, 2021.

The stockholder rights plan could make it more difficult for a third party to acquire control of Delek or a large block of our common stock without the approval of our Board of Directors.

Provisions of Delaware law and our organizational documents may discourage takeovers and business combinations that our stockholders may consider in their best interests, which could negatively affect our stock price.

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As a result, the effectiveness of our risk management policies could have a material adverse impact on our business, results of operations and cash flows.

For additional information about the nature and volume of these transactions, see Item 7A, Quantitative and Qualitative Disclosures about Market Risk, of this Annual Report on Form 10-K.

For additional information about the nature and volume of these transactions, see Item 7A.

Quantitative and Qualitative Disclosures about Market Risk, of this Annual Report on Form 10-K.

Additionally, it continues to be a strategic and operational objective to manage supply risk related to crude oil that is used in refinery production, and to develop strategic sourcing relationships.

For that purpose, we often enter into purchase and sale contracts with vendors and customers or take financial commodity positions for crude oil that may not be used immediately in production, but that may be used to manage the overall supply and availability of crude expected to ultimately be needed for production and/or to meet minimum requirements under strategic pipeline arrangements, and also to optimize and hedge availability risks associated with crude that we ultimately expect to use in production.

For that purpose, we often enter into purchase and sale contracts with vendors and customers or take physical or financial commodity positions for crude oil that may not be used immediately in production, but that may be used to manage the overall supply and availability of crude expected to ultimately be needed for production and/or to meet minimum requirements under strategic pipeline arrangements, and also to optimize and hedge availability risks associated with crude that we ultimately expect to use in production.

Such transactions are inherently based on certain assumptions and judgments made about the current and possible future availability of crude.

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As a result of the risks described above, the effectiveness of our risk management policies over these types of transactions and positions could have a material adverse impact on our business, results of operations and cash flows.

For additional information about the nature and volume of these transactions, see Item 7A, Quantitative and Qualitative Disclosures about Market Risk, of this Annual Report on Form 10-K and in Note 12 of our consolidated financial statements included in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.

For additional information about the nature and volume of these transactions, see Item 7A.

Quantitative and Qualitative Disclosures about Market Risk, of this Annual Report on Form 10-K and in Note 12 of our consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.

We are exposed to certain counterparty risks which may adversely impact our results of operations.

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• engage in mergers, acquisitions and asset sales;

enter into certain intercompany arrangements or make certain intercompany payments, which in some instances could restrict our ability to use the assets, cash flows or earnings of one operating segment to support another operating segment or Holdings.

• enter into certain intercompany arrangements or make certain intercompany payments, which in some instances could restrict our ability to use the assets, cash flows or earnings of one operating segment to support another operating segment or Delek.

Other restrictive covenants require that we meet certain financial covenants, including leverage coverage, fixed charge coverage and net worth tests, as described in the applicable credit agreements.

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These reforms may cause such benchmarks to perform differently than in the past or have other consequences which cannot be predicted.

The United Kingdom’s Financial Conduct Authority, which regulates LIBOR, has publicly announced that it intends to discontinue the reporting of LIBOR rates after 2021.

Certain of our agreements use LIBOR as a “benchmark” or “reference rate” for various terms.

The United Kingdom’s Financial Conduct Authority, which regulates LIBOR, has publicly announced that it intends to discontinue the reporting of certain LIBOR rates after 2021, with a complete cessation for all USD LIBOR rates after June 2023.

Certain of our agreements

use LIBOR as a “benchmark” or “reference rate” for various terms.

Some agreements contain an existing LIBOR alternative.

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Under the acquisition method of accounting, the total purchase price has been allocated to Alon’s tangible assets and liabilities and identifiable intangible assets based on their estimated fair values as of the date of completion of the Delek/Alon Merger.

The excess of the purchase price over those estimated fair values has been recorded as goodwill.

The excess of the purchase price over the estimated fair values of reporting units has been recorded as goodwill, which was further allocated to other reporting units as permitted under GAAP.

To the extent the value of goodwill or intangibles becomes impaired, we may be required to incur material non-cash charges relating to such impairment.

Our financial condition and operating results may be significantly impacted from both the impairment and the underlying trends in the business that triggered the impairment.

We recorded goodwill impairment of $126.0 million during the year ended December 31, 2020.

UNRESOLVED STAFF COMMENTS

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors