What changed in this filing

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Item 1A. Risk Factors

2022-02-25 compared with 2021-03-08 · 47 added, 38 removed, 381 unchanged (18% of the section changed)

8 unchanged sentences

Our operations are subject to potential operational hazards and risks inherent in refining operations, in transporting and storing crude oil and refined products, and in producing natural gas and oil.

Any of these risks, such as fires, explosions, maritime disasters, security breaches, pipeline ruptures and spills, mechanical failure of equipment, and severe weather and natural disasters at our or third-party facilities could result in business interruptions or shutdowns and damage to our properties and the properties of others.

Any of these risks, such as fires, explosions, maritime disasters, security breaches, cyber threats, pipeline ruptures and spills, mechanical failure of equipment, and severe weather and natural disasters at our or third-party facilities could result in business interruptions or shutdowns and damage to our properties and the properties of others.

The scientific consensus suggests that some of these physical risks to our facilities and third party facilities, especially risks associated with extreme weather, may increase as a result of climate change.

8 unchanged sentences

• local factors, including market conditions, the level of operations of other refineries in our markets, and the volume and price of refined products imported;

• threatened or actual terrorist incidents, acts of war, and other global political conditions;

• threatened or actual terrorist incidents (including cyber-attacks), acts of war, and other global political conditions;

• changes in the availability or cost of maritime shipping;

2 unchanged sentences

• weather conditions, hurricanes, or other natural disasters.

For example, the COVID-19 pandemic has resulted in significant demand reduction for crude oil and refined products, particularly in the Hawaii market, and abnormal volatility in oil commodity prices, which may continue for the foreseeable future.

For example, the COVID-19 pandemic resulted in significant demand reduction for crude oil and refined products, particularly in the Hawaii market, and abnormal volatility in oil commodity prices, which may continue for the foreseeable future.

In addition, the Organization of the Petroleum Exporting Countries (“OPEC”) has agreed to adjust downwards their overall production of crude oil through April 30, 2022, with the agreement to be reassessed in December 2021, to support crude oil prices.

6 unchanged sentences

Because the severity, magnitude, and duration of the COVID-19 pandemic and its economic consequences are uncertain, rapidly changing, and difficult to predict, the impact on our business, results of operations, financial condition, and liquidity remains uncertain and difficult to predict.

As a result of the COVID-19 pandemic and the accompanying significant demand reduction for crude oil and refined products, particularly in the Hawaii market, our revenues have decreased from $5.4 billion in the year ended December 31, 2019 to $3.1 billion in the year ended December 31, 2020.

The ultimate impact of the COVID-19 pandemic on our results of operations and financial condition remains uncertain and depends on numerous evolving factors, many of which are not within our control, and which we may not be able to effectively respond to, including, but not limited to:

30 unchanged sentences

We operate fueling stations with underground storage tanks used primarily for storing and dispensing refined fuels.

In addition, some fueling stations where we sell fuel are owned or operated by third parties who are not under our control.

In addition, some fueling stations where we sell fuel are owned or operated by third parties who are

not under our control.

Federal and state regulations and legislation govern the storage tanks and compliance with these requirements can be costly.

16 unchanged sentences

The Wyoming and Washington refineries’ financial and operating results for the first and fourth calendar quarters may be lower than those for the second and third calendar quarters of each year as a result of this seasonality.

Conversely, the demand for the products the Hawaii refineries refine and sell, and the financial and operating results for the Hawaii refineries, are often strongest in the first and fourth calendar quarters.

Conversely, the demand for the products the Hawaii refinery refines and sells, and the financial and operating results for the Hawaii refinery, are often strongest in the first and fourth calendar quarters.

We rely upon certain critical information systems for the operation of our business and the failure of any critical information system, including a cyber security breach, may result in harm to our business.

6 unchanged sentences

However, security measures for information systems cannot be guaranteed to be failsafe.

Our systems and procedures for protecting against such attacks and mitigating such risks may prove to be insufficient in the future and such attacks could have an adverse impact on our business and operations, including damage to our reputation and competitiveness, remediation costs, litigation, or regulatory.

Any compromise of our data security or our inability to use or access these information systems at critical points in time could unfavorably impact the timely and efficient operation of our business and subject us to additional costs and liabilities, which could adversely affect our business, financial condition, and results of operations.

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.

Finally, federal legislation relating to cyber security threats could impose additional requirements on our operations.

26 unchanged sentences

During 2021, we incurred $118.8 million of RINs expense for our Hawaii, Wyoming, and Washington refineries.

The EPA did not meet its November 30, 2020 statutory deadline to set 2021 renewable volume obligations (“RVO”), and to date, has not issued a proposed rule for the 2021 RVO other than biomass-based diesel.

While there are statutory targets still in place, the ultimate RVO for 2021 and the potential associated expense remain uncertain until the RVO is set.

On December 21, 2021, the EPA published proposed renewable volume obligations (“RVO”) for 2021 consistent with amounts of renewable fuels actually blended that year.

Until that rule is finalized and the RVO is set, however, the potential associated expense associated with meeting the 2021 obligations remains uncertain.

In addition, as a result of the annual volume mandates, we may experience a decrease in demand for refined products due to refined products being replaced by renewable fuels.

3 unchanged sentences

If sufficient RINs are unavailable for purchase, if we have to pay a significantly higher price for RINs, or if we are otherwise unable to meet the EPA’s RFS mandates, our results of operations and cash flows could be adversely affected.

The current administration has also been critical of exemptions from the RFS mandates granted to small

refineries during the previous administration.

The current administration has also been critical of exemptions from the RFS mandates granted to small refineries during the previous administration.

While litigation over the issue is currently before the U.S.

Supreme Court, the EPA under the current administration may be less willing to grant such waivers going forward and may increase the RVO in future years.

Supreme Court, the

EPA under the current administration may be less willing to grant such waivers going forward and may increase the RVO in future years.

To the extent fewer waivers are granted in the future or the RVO is increased, the demand for and the price of RINs would likely also increase, and our results of operations and cash flows could be adversely affected.

9 unchanged sentences

Since 2006, the State of Washington has required that denatured ethanol make up at least 2% of total gasoline sold in the state and that biodiesel comprise at least 2% of total diesel sold in the state, and the Washington Department of Ecology is authorized to increase these requirements if certain conditions are met.

Although the Washington State Legislature failed to pass a clean fuels program that would have limited GHG emissions per unit of transportation fuel energy, the State of Washington continues to pursue additional clean fuels legislation, including a stringent low carbon fuel standard.

In 2020 and 2021 the State of Washington adopted several statutes that are relevant to our Tacoma, Washington location including a law approving new regulatory requirements regarding zero emission vehicles and a low-carbon fuel standard designed to reduce the carbon intensity of transportation fuels by twenty percent by 2038.

Legislation signed in March of 2020 directed the Washington Department of Ecology to adopt California’s vehicle emission standards including requirements to increase zero emission vehicles sold in the state.

Washington Department of Ecology adopted by reference California’s zero emission vehicle standard starting with model year 2025 in a rule issued on November 29, 2021.

In 2014, the State of Hawaii signed a memorandum of understanding with the U.S.

18 unchanged sentences

In response, the EPA has adopted regulations under existing provisions of the federal Clean Air Act that, among other things, establish Prevention of Significant Deterioration (“PSD”) construction and Title V operating permit program requiring reviews for GHG emissions from certain large stationary sources.

Facilities required to obtain PSD permits for their GHG emissions will also be required to meet “best available control technology” standards, which will be established by the states or, in some instances, by the EPA on a case-by-case basis.

In addition, the EPA has adopted rules requiring the monitoring and reporting of GHG emissions from specified large GHG emission sources in the U.S.,

including petroleum refineries and certain onshore petroleum and natural gas production activities, on an annual basis.

Facilities required to obtain PSD permits for their GHG emissions will also be required to meet “best available control technology” standards,

which will be established by the states or, in some instances, by the EPA on a case-by-case basis.

In addition, the EPA has adopted rules requiring the monitoring and reporting of GHG emissions from specified large GHG emission sources in the U.S., including petroleum refineries and certain onshore petroleum and natural gas production activities, on an annual basis.

We monitor for GHG emissions at our refineries and believe we are in substantial compliance with the applicable GHG reporting requirements.

8 unchanged sentences

At the state level, the State of Hawaii has announced its intention to reduce statewide GHG emissions to 1990 levels by 2020.

Other states, including Washington, are proposing, or have already promulgated, low carbon fuel standards or similar initiatives to reduce emissions from the transportation sector.

Other states, including Washington, have passed low carbon fuel standard legislation and other initiatives to reduce emissions from the transportation sector.

We could also face increased climate-related litigation with respect to our operations or products.

13 unchanged sentences

As is typical of older, small refineries like the Wyoming refinery, the largest cost component arising from these various decrees relates to the investigation, monitoring, and remediation of soil, groundwater, surface water, and sediment contamination associated with the facility’s historic operations.

Investigative work by Wyoming Refining and negotiations with the relevant agencies as to remedial approaches remain ongoing on a number of aspects of the contamination, meaning that investigation, monitoring, and remediation costs are not reasonably estimable for some elements of these efforts.

As of December 31, 2020, we have accrued $16.3 million for the well-understood components of these efforts based on current

information, approximately one-third of which we expect to incur in the next five years and the remainder to be incurred over approximately 30 years.

Investigative work by Wyoming Refining and negotiations with the relevant agencies as to remedial approaches remain ongoing on a number of aspects of the contamination, meaning that

investigation, monitoring, and remediation costs are not reasonably estimable for some elements of these efforts.

As of December 31, 2021, we have accrued $15.6 million for the well-understood components of these efforts based on current information, approximately one-third of which we expect to incur in the next five years and the remainder to be incurred over approximately 30 years.

Additionally, we believe the Wyoming refinery will need to modify or close a series of wastewater impoundments in the next several years and to replace those impoundments with a new wastewater treatment system.

13 unchanged sentences

Moreover, changes to pipeline safety laws by Congress and regulations by PHMSA that result in more stringent or costly safety standards could result in our incurring increased operating costs that could have a material adverse effect on our financial position or results of operations.

Compliance with and changes in tax laws could materially and adversely affect our financial condition, results of operations and cash flows.

We are subject to extensive tax liabilities imposed by multiple jurisdictions including, without limitation, income taxes, indirect taxes (excise/duty, sales/use, gross receipts), payroll taxes, franchise taxes, withholding taxes, and ad valorem taxes.

New tax laws and regulations and changes in existing tax laws and regulations are continuously being enacted or proposed that could result in increased expenditures for tax liabilities in the future.

Many of these liabilities are subject to periodic audits by the respective taxing authority.

Although we believe we have used reasonable interpretations and assumptions in calculating our tax liabilities, the final determination of these tax audits and any related proceedings cannot be predicted with certainty.

Any adverse outcome of such tax audits or related proceedings could result in unforeseen tax-related liabilities that may, individually or in the aggregate, materially affect our cash tax liabilities, results of operations, and financial condition.

Additionally, tax rates or tax interpretations in the various jurisdictions in which we operate may change significantly as a result of political or economic factors beyond our control.

BUSINESS RISKS

32 unchanged sentences

If we are unable to obtain crude oil supplies for our refineries without the benefit of certain intermediation agreements, the capital required to finance our crude oil supply could negatively impact our liquidity.

All of the crude oil delivered at our Hawaii refineries is subject to our Supply and Offtake Agreements with J.

All of the crude oil delivered at our Hawaii refinery is subject to our Supply and Offtake Agreement with J.

Aron and certain deliveries of crude oil at our Washington refinery are subject to the Washington Refinery Intermediation Agreement (together, the “Intermediation Agreements”).

2 unchanged sentences

The Intermediation Agreements expose us to counterparty credit and performance risk.

We have Supply and Offtake Agreements with J.

We have the Supply and Offtake Agreement with J.

Aron, pursuant to which J.

Aron will intermediate crude oil supplies and refined product inventories at our Hawaii refineries.

Aron will intermediate crude oil supplies and refined product inventories at our Hawaii refinery.

Aron will own all of the crude oil in our tanks and substantially all of our refined product inventories prior to our sale of the inventories.

Upon termination of the Supply and Offtake Agreements, which terminates on May 31, 2021 unless extended by mutual agreement for an additional one year term, we are obligated to repurchase all crude oil and refined product inventories then owned by J.

Upon termination of the Supply and Offtake Agreement, which terminates on May 31, 2024 unless extended by mutual agreement for an additional one year term, we are obligated to repurchase all crude oil and refined product inventories then owned by J.

Aron and located at the specified storage facilities at then current market prices.

1 unchanged sentence

We also have the Washington Refinery Intermediation Agreement with MLC whereby our Washington refinery purchases certain crude oil supplies from third-party suppliers and MLC provides credit support for such purchases in exchange for our pledge of all crude oil and refined products inventories from such refinery.

An adverse change in

the business, results of operations, liquidity, or financial condition of our intermediation counterparties could adversely affect the ability of such counterparties to perform their obligations, which could consequently have a material adverse effect on our business, results of operations, or liquidity and, as a result, our business and operating results.

An adverse change in the business, results of operations, liquidity, or financial condition of our intermediation counterparties could adversely affect the ability of such counterparties to perform their obligations, which could consequently have a material adverse effect on our business, results of operations, or liquidity and, as a result, our business and operating results.

Inadequate liquidity could materially and adversely affect our business operations in the future.

58 unchanged sentences

The availability of NOLs to offset taxable income would be substantially reduced or eliminated if we were to undergo an “ownership change” within the meaning of Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”).

stock transfer restrictions designed to reduce the risk of an ownership change for purposes of Section 382 of the Code.

We will be treated as having had an “ownership change” if there is more than a 50% increase in stock ownership during any three year “testing period” by “5% shareholders.” In order to help us preserve our NOLs, our certificate of incorporation contains stock transfer restrictions designed to reduce the risk of an ownership change for purposes of Section 382 of the Code.

We expect that the restrictions will remain in place for the foreseeable future.

13 unchanged sentences

Acquisitions may prove to be worth less than we paid because of uncertainties in evaluating potential liabilities.

Our recent growth is due in large part to acquisitions, such as the acquisitions of Wyoming Refining, Northwest Retail, U.S.

Oil, and the assets related to the Par West Acquisition.

We expect acquisitions to be instrumental to our future growth.

Our recent growth is due in large part to acquisitions, such as the acquisitions of our Wyoming refining business, our Pacific Northwest retail business, and U.S.

Oil and assets related to the Hawaii refinery.

We expect acquisitions to be

instrumental to our future growth.

Successful acquisitions require an assessment of a number of factors, including estimates of potential unknown and contingent liabilities.

7 unchanged sentences

As of December 31, 2021, we employed approximately 1,336 people, 226 of whom are covered by collective bargaining agreements.

At our Hawaii and Washington refineries, 243 employees are represented by the USW with collective bargaining agreements expiring on January 31, 2022.

At our Hawaii and Washington refineries, all 226 employees covered by collective bargaining agreements are represented by the USW with collective bargaining agreements which expired on January 31, 2022 and are currently subject to automatic extension periods while the parties continue negotiations.

However, we may not be able to prevent a strike or work stoppage in the future and any such work stoppage could cause disruptions in our business and have a material adverse effect on our business, financial condition, results of operations, and cash flows.

15 unchanged sentences

This volatility may affect the price at which you could sell your common stock.

The market price for our common stock has varied between a high of $23.12 on January 2, 2020, and a low of $6.00 on March 18, 2020, during the year ended December 31, 2020.

The market price for our common stock has varied between a high of $19.74 on March 11, 2021, and a low of $12.91 on May 19, 2021, during the year ended December 31, 2021.

This volatility may affect the price at which you could sell your common stock.

Our stock price is likely to continue to be volatile and subject to significant price and volume fluctuations in response to market and other factors;

variations in our quarterly operating results from our expectations or those of securities analysts or investors;

variations in our quarterly operating results from our expectations or those of securities

analysts or investors;

downward revisions in securities analysts’ estimates;

7 unchanged sentences

Additionally, as a result of our impairment evaluations of our investment in Laramie Energy, we recorded impairment charges of $45.3 million and $81.5 million on our consolidated statement of operations for the years ended December 31, 2020 and 2019, respectively.

These impairment charges or any additional impairment charges could have a negative impact on the price of our common stock.

Any additional impairment charges could have a negative impact on the price of our common stock.

Additionally, there can be no assurance that no future impairment charge will be made with respect to our equity investments, goodwill, and long-lived assets.

4 unchanged sentences

There is no guarantee that an active trading market for our common stock will develop or be maintained on the NYSE, or that the volume of trading will be sufficient to allow for timely trades.

Investors may not be able to sell their shares quickly or at the latest market price if trading in our stock is not active or if trading

volume is limited.

Investors may not be able to sell their shares quickly or at the latest market price if trading in our stock is not active or if trading volume is limited.

In addition, if trading volume in our common stock is limited, trades of relatively small numbers of shares may have a disproportionate effect on the market price of our common stock.

16 unchanged sentences

As a result, some financial intermediaries, investors, and other capital markets participants have reduced or ceased lending to, or investing in, companies that operate in industries with higher perceived environmental exposure, such as the energy industry.

For example, in December 2020, the State of New York announced that it will be divesting the state’s Common Retirement Fund from fossil fuels.

If this or similar divestment efforts are continued, the price of our common stock or debt securities, and our ability to access capital markets or to otherwise obtain new investment or financing, may be negatively impacted.

If divestment efforts are continued, the price of our common stock or debt securities, and our ability to access capital markets or to otherwise obtain new investment or financing, may be negatively impacted.

Members of the investment community are also increasing their focus on ESG practices and disclosures, including practices and disclosures related to GHGs and climate change in the energy industry in particular, and diversity and inclusion initiatives and governance standards among companies more generally.

6 unchanged sentences

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