What changed in this filing

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Item 1. Business

2023-02-27 compared with 2022-02-25 · 119 added, 133 removed, 399 unchanged (39% of the section changed)

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Our Hawaii retail network includes Hele and “76” branded fuel retail sites, “nomnom” branded company-operated convenience stores, 7-Eleven operated convenience stores, other sites operated by third parties, and unattended cardlock stations.

Our retail outlets in Washington and Idaho sell gasoline, diesel, and retail merchandise.

Through December 31, 2021, we completed the rebranding of all 29 company-operated convenience stores in Washington and Idaho to “nomnom,” our proprietary brand.

Our nomnom-branded convenience stores in Washington and Idaho sell gasoline, diesel, and retail merchandise.

3) Logistics - We operate an extensive multi-modal logistics network spanning the Pacific, the Northwest, and the Rocky Mountain regions.

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In 2020, we completed a project at our Tacoma, Washington, location to allow for the storage and shipment of ethanol through our unit train and marine terminals.

We also own a 46.0% equity investment in Laramie Energy, LLC (“Laramie Energy”), a joint venture entity focused on producing natural gas in Garfield, Mesa, and Rio Blanco counties, Colorado.

On November 26, 2018, we entered into a Purchase and Sale Agreement to acquire U.S.

Oil & Refining Co.

and certain affiliated entities (collectively, “U.S.

Oil”), a privately-held downstream business (the “Washington Acquisition”).

The Washington Acquisition included a 42 Mbpd refinery, a marine terminal, a unit train-capable rail loading terminal, and 2.9 MMbbls of refined product and crude oil storage.

The refinery and associated logistics system are strategically located in Tacoma, Washington, and currently serve the Pacific Northwest market.

On January 11, 2019, we completed the Washington Acquisition for a total purchase price of $326.5 million, including acquired working capital, consisting of cash consideration of $289.5 million and approximately 2.4 million shares of our common stock with a fair value of $37.0 million issued to the seller of U.S.

The Washington refinery’s results of operations are included in our refining and logistics segments commencing January 11, 2019.

We also own a 46.0% equity investment in Laramie Energy, LLC (“Laramie Energy”), an entity focused on developing and producing natural gas in Garfield, Mesa, and Rio Blanco counties, Colorado.

Our Corporate and Other reportable segment primarily includes general and administrative costs.

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Impacts of the COVID-19 Pandemic

including the global demand for crude oil and refined products, the movement of people and goods in the United States, and the global supply chain for industrial and commercial production, all of which have in turn disrupted our businesses and operations and impacted our financial performance in 2021 and 2020.

The spread and severity of the coronavirus (“COVID-19”) pandemic, in conjunction with government and other preventative measures taken to mitigate the spread of the virus, have caused severe disruptions in the worldwide economy, including the global demand for crude oil and refined products, the movement of people and goods in the United States, and the global supply chain for industrial and commercial production, all of which have in turn disrupted our businesses and operations and impacted our financial performance in 2022, 2021 and 2020.

As of December 2022, the epidemiological conditions in regions in which we operate had improved significantly and most restrictions have been relaxed.

This, combined with widespread vaccine availability, has lessened the perceived severity of the pandemic, leading to higher risk tolerance for individuals and increased travel and public contact in the regions in which we operate.

However, a resurgence of the virus or another pandemic event could cause a return to severe restrictions, leading to a deterioration of macroeconomic conditions and our industry.

We continue to actively monitor the impact of the global situation on our people, operations, financial condition, liquidity, suppliers, customers, and industry, and are actively responding to the impacts that these matters have on our business.

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— Risk Factors” and “Item 7.

— Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview” for further discussion of the risks, uncertainties, and actions we have taken in response to the global COVID-19 pandemic and resulting economic impact.

— Management’s Discussion and Analysis of Financial Condition and

Results of Operations — Overview” for further discussion of the risks, uncertainties, and actions we have taken in response to the global COVID-19 pandemic and resulting economic impact.

Corporate Information

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Hawaii Refinery

Our Hawaii refinery is located in Kapolei, Hawaii, on the island of Oahu, and is rated at 94 Mbpd operating throughput capacity.

The Hawaii refinery’s major processing units, listed in the table below, produce liquified petroleum gas (“LPG”), naptha, gasoline, jet fuel, USLD, marine fuel, LSFO, high sulfur fuel oil (“HSFO”), asphalt, and other associated refined products.

Our Hawaii refinery is located in Kapolei, Hawaii, on the island of Oahu, and is rated at 94 Mbpd of Crude unit operating throughput capacity.

The Hawaii refinery’s major processing units, listed in the table below, produce liquified petroleum gas (“LPG”), naphtha, gasoline, jet fuel, ULSD, marine fuel, LSFO, high sulfur fuel oil (“HSFO”), asphalt, and other associated refined products.

We believe the configuration of our Hawaii refinery uniquely fits the demands of the Hawaii market.

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Catalytic Reformer 13

Visbreaker 11

Visbreaker / Crude Oil Distillation 11

Naphtha Hydrotreater 13

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We source our crude oil for the Hawaii refinery from North America, Asia, Latin America, Africa, the Middle East, and other sources.

Effective March 3, 2022, we suspended purchases of Russian crude oil as a response to the Russia-Ukraine conflict.

Crude oil is received into the Hawaii refinery’s tank farm, which includes 3.4 MMbbls of total owned crude oil storage and/or third-party crude oil storage.

We process the crude oil through various refining units into products and store them in the

Hawaii refinery’s owned 3.3 MMbbls of refined product storage and additional third-party product storage.

We process the crude oil through various refining units into products and store them in the Hawaii refinery’s owned 3.3 MMbbls of refined product storage and additional third-party product storage.

This storage capacity allows us to manage the various product requirements of our customers.

We finance our Hawaii refinery’s hydrocarbon inventories through our Supply and Offtake Agreement with J.

For example, in 2022, our Hawaii refinery

leased 0.3-0.4 MMBbls of capacity to the Defense Logistics Agency (“DLA”) until April 2024.

Revenue from this agreement is reported in our Hawaii Logistics segment.

We finance our Hawaii refinery’s hydrocarbon inventories through a supply and offtake agreement (the “Supply and Offtake Agreement”) with J.

Aron & Company LLC (“J.

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The Hawaii refinery operated at an average combined crude oil throughput of 81.8 Mbpd, or 87% of crude oil utilization, to meet local demand for the year ended December 31, 2022.

Our Par West refinery was idled in March 2020 for economic reasons and we are evaluating alternative uses for the site.

In 2020, we executed a turnaround in Hawaii, which resulted in lower throughput and utilization outside of market conditions.

Our Par West refinery has been shut down and is not expected to restart.

For further operational statistics regarding our Hawaii refining operations, please read “Item 7.

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This market reflects the closest liquid market alternative to source refined products for Hawaii.

Prior to 2020, the 4-1-2-1 Singapore crack spread (or four barrels of Brent crude oil converted into one barrel of gasoline, two barrels of distillates (diesel and jet fuel) and one barrel of fuel oil) best reflected a market indicator for our Hawaii refinery’s operations.

The 4-1-2-1 Singapore crack spread averaged $6.68 per barrel during 2019 with a low of $4.34 per barrel average in the fourth quarter and a high of $9.36 per barrel average in the third quarter.

In 2020, we began shifting our Hawaii production profile to supply the local utilities with low sulfur fuel oil and significantly reduced our high sulfur fuel oil yield.

Following the implementation of new standards by the International Marine Organization (“IMO”) beginning in 2020, we established the 3-1-2 Singapore Crack Spread (or three barrels of Brent crude oil converted into one barrel of gasoline and two barrels of distillates (diesel and jet fuel)) as a new benchmark for our Hawaii operations.

The 3-1-2 Singapore Crack Spread averaged $6.22 per barrel during the year ended December 31, 2021 with a low of $3.80 per barrel average in the first quarter and a high of $10.49 per barrel average in the fourth quarter.

We believe the 3-1-2 Singapore Crack Spread is the best market indicator for our Hawaii operations.

The 3-1-2 Singapore Crack Spread is computed by taking one barrel of gasoline and two barrels of distillates (diesel and jet fuel) from three barrels of Brent crude oil.

The 3-1-2 Singapore Crack Spread averaged $25.43 per barrel during the year ended December 31, 2022, with a low of $16.21 per barrel average in the first quarter and a high of $36.80 per barrel average in the second quarter.

Below is a summary of average crack spreads for the years ended December 31, 2022, 2021, and 2020:

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The Washington refinery’s major processing units include crude oil distillation, vacuum, jet treating, diesel hydrotreating, isomerization, and reforming units, which produce ULSD, jet fuel, gasoline, asphalt, and other associated refined products that are primarily marketed in the Pacific Northwest.

For further operational statistics regarding our Washington refining operations, please read “Item 7.

— Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations.”

We source our crude oil for the Washington refinery primarily from Canadian and Bakken producers as well as other North American sources.

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The Washington refinery operated at an average throughput of 35.5 Mbpd, or 85% utilization, for the year ended December 31, 2022.

In 2021, we executed the first phase of a turnaround in Washington, which resulted in lower throughput and utilization outside of market conditions.

In 2021 and 2022, we executed turnaround activities in Washington, which resulted in lower throughput and utilization outside of market conditions.

For further operational statistics regarding our Washington refining operations, please read “Item 7.

— Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations.”

Our Washington refining business transports crude oil and refined products through our logistics network and sells refined products to wholesale, bulk, and retail customers primarily in the Pacific Northwest.

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The Pacific Northwest 5-2-2-1 Index is computed by taking two parts gasoline (sub-octane), two parts middle distillates (ULSD and jet fuel), and one part fuel oil as created from five barrels of Alaskan North Slope (“ANS”) crude oil.

The Pacific Northwest 5-2-2-1 Index averaged $15.95 per barrel during the year ended December 31, 2021 with a low of $11.46 per barrel average in the first quarter and a high of $18.59 per barrel average in the third quarter.

The Pacific Northwest 5-2-2-1 Index averaged $32.40 per barrel during the year ended December 31, 2022, with a low of $21.88 per barrel average in the first quarter and a high of $46.16 per barrel average in the second quarter.

Below is a summary of average crack spreads and crude oil prices per barrel for the years ended December 31, 2022, 2021, and 2020:

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ANS 102.56 71.49 41.77

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(1) The 2019 prices for the year ended December 31, 2019 represent the price averaged over the period from January 11, 2019 to December 31, 2019.

Wyoming Refinery

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The Wyoming refinery’s major processing units include crude oil distillation, catalytic cracker, naphtha hydrotreating, and reforming units, which produce gasoline, ULSD, jet fuel, and other associated refined products.

In 2022, our Wyoming operations set a new crude production record of processing 19.2 Mbpd.

We source our crude oil for the Wyoming refinery from local producers in the Rocky Mountain region of the United States and North Dakota as well as other North American sources.

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Crude oil is received into the refinery tank farm and crude oil terminals, which include 267 Mbbls of total crude oil storage.

We process the crude oil through various refining units into products and store them in the Wyoming refinery’s 513

Mbbls of refined product tankage.

We process the crude oil through various refining units into products and store them in the Wyoming refinery’s 490 Mbbls of refined product tankage.

The Wyoming refinery’s storage capacity allows us to manage the various product requirements of our customers in the states of Wyoming and South Dakota and other targeted market destinations.

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We believe the Wyoming 3-2-1 crack spread, a 50%/50% blend of Rapid City 3-2-1 and Denver 3-2-1 (WTI based) crack spreads, best reflects a market indicator for our Wyoming refining and fuel distribution operations.

The Wyoming 3-2-1 Index, or three barrels of WTI converted into two barrels of gasoline and one barrel of distillates (jet fuel and diesel), averaged $29.00 per barrel during 2021 with a low of $20.97 per barrel average in the first quarter and a high of $41.78 per barrel average in the third quarter.

The Wyoming 3-2-1 Index, or three barrels of WTI converted into two barrels of gasoline and one barrel of distillates (jet fuel and diesel), averaged $41.32 per barrel during 2022 with a low of $26.53 per barrel average in the first quarter and a high of $54.55 per barrel average in the second quarter.

Below is a summary of average crack spreads for the years ended December 31, 2022, 2021, and 2020:

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Our Hawaii refinery, through our facility with J.

Aron, has access to a large variety of markets for crude oil imports and product exports.

Aron, has access to a large variety of markets for crude oil imports and product exports and sources its crude oil from the Americas, Africa, Asia, and to a lesser extent other sources worldwide throughout 2022.

Effective March 3, 2022, we suspended purchases of Russian crude oil as a response to the Russia-Ukraine conflict.

Please read Note 11—Inventory Financing Agreements to our consolidated financial statements under Item 8 of this Form 10-K for further information.

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The retail segment includes 90 locations in Hawaii and 31 locations in Washington and Idaho where we set the price to the retail consumer.

Of these, 34 of the Hawaii locations and all 29 Washington and Idaho locations are operated by our personnel and include various sizes of convenience stores, snack shops, and kiosks.

Of these, 34 of the Hawaii locations and all 31 Washington and Idaho locations are operated by our

personnel and include various sizes of convenience stores, snack shops, and kiosks.

The remaining 56 Hawaii locations are cardlocks or sites operated by third parties where we retain ownership of the fuel and set retail pricing.

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All 34 company-operated convenience stores in Hawaii are branded “nomnom,” our proprietary brand.

In 2023, we plan to convert all of our convenience stores in Hawaii to our Hele brand.

We operate convenience stores at all 31 of our retail fuel outlets in Washington and Idaho.

As part of our 2018 acquisition of these retail outlets, we entered into a multi-year branded petroleum marketing agreement for the continued supply of Cenex®-branded refined products to the acquired Cenex® Zip Trip convenience stores.

As of December 31, 2021, we had completed the rebranding of all of our retail outlets in Washington and Idaho from the “Cenex®” and “Zip Trip®” brand names to our proprietary “nomnom” brand.

As these stores were rebranded, we began self-supplying the fuel with equity barrels and/or unbranded fuels procured in the open market.

We use our proprietary “nomnom” brand at both the fueling facilities and stores.

Our current store count includes the acquisition and rebranding in 2022 of three new convenience store locations in Washington acquired in December 2, 2022.

Additionally, we broke ground on a new to industry site in a growth area of Spokane, Washington, which is scheduled to open during the second half of 2023.

Competitive factors that affect our retail performance include product price, station appearance, location, customer service, and brand awareness.

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a 30-inch line for crude oil, a 20-inch line, and a 16-inch line, both for the import or export of refined products.

We also have an on-shore pipeline manifold which allows for crude oil to be transferred from an undersea pipeline owned by IES Downstream, LLC (“IES”) to the SPM and from the SPM to the Hawaii refinery.

We also have an on-shore pipeline manifold which allows for crude oil to be transferred between the Hawaii refinery and the IES Downstream, LLC (“IES”) storage facility located approximately 2 miles away.

The manifold also allows for transfer of crude oil between the SPM and the IES facility.

From the Hawaii refinery’s gates, we distribute refined products through our logistics network throughout the islands of Oahu, Maui, Hawaii, Molokai, and Kauai and for export to the U.S.

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The Oahu logistics network includes a 27-mile wholly owned and operated pipeline network that transports refined products from our Hawaii refinery to delivery locations.

The majority of our Oahu refined product volumes are distributed through a multi-product pipeline (the “Honolulu Products Pipeline”) to (i) our leased and operated Sand Island terminal, (ii) the Honolulu International Airport, (iii) interconnections to Navy and Air Force fuel facilities, and (iv) two third-party terminals in Honolulu Harbor.

A significant portion of our Oahu refined product volumes are distributed through a multi-product pipeline (the “Honolulu Products Pipeline”) to (i) our leased and operated Sand Island terminal, (ii) the Honolulu International Airport, (iii) interconnections to Navy and Air Force fuel facilities, and (iv) two third-party terminals in Honolulu Harbor.

In addition to the Honolulu Products Pipeline, we own four proprietary pipelines connecting our Hawaii refinery to Kalaeloa Barbers Point Harbor, approximately three miles from the Hawaii refinery.

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The Oahu pipeline network is generally configured to be bidirectional, allowing for both delivery and receipt of products.

We also operate a proprietary trucking business on Oahu to distribute gasoline and road diesel to the final point of sale.

We also operate a proprietary trucking business on Oahu to distribute gasoline and road diesel to our customers.

We have a long-term agreement with IES for storage and throughput at the Hawaii refinery which provides for the right to utilize 2 MMbbls of dedicated crude oil and refined product storage, as well as certain IES logistics assets, including its off-shore mooring and Honolulu pipeline system.

Our terminal facilities on Oahu include our Sand Island facility that

comprises two tanks with a total capacity of 30 Mbbls, as well as contractual rights to utilize strategically located third-party facilities both near the Hawaii refinery and at Honolulu Harbor.

Our terminal facilities on Oahu include our Sand Island facility that comprises two tanks with a total capacity of 30 Mbbls, as well as contractual rights to utilize strategically located third-party facilities both near the Hawaii refinery and at Honolulu Harbor.

Our logistics network for the islands neighboring Oahu consists of leased barge equipment, refined product tankage, and proprietary trucking operations on the islands of Maui, Hawaii, Molokai, and Kauai.

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Washington Logistics

Our Washington logistics network includes 2.8 MMbbls of storage capacity, a proprietary 14-mile jet fuel pipeline that serves Joint Base Lewis McChord, a marine terminal with 15 acres of waterfront property, a unit train-capable rail loading terminal with 107 unloading spots, a manifest rail siding with 32 spots including asphalt, butane, and biodiesel loading and unloading facilities, and a truck rack with six truck lanes and 10 loading arms.

These assets provide connectivity to Bakken, Canadian, and Alaskan crude oil, renewable fuels, and the Pacific, West Coast, Pacific Northwest, and Rockies product markets.

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Hawaii Market

The COVID-19 pandemic continued to have an impact on Hawaii’s communities and economy in 2021.

In the summer of 2021, however, there was a strong rebound in domestic tourists visiting Hawaii.

Through the Hawaii Safe Travels program, visitors were able to provide proof of vaccination or a negative COVID-19 test to avoid the 14-day quarantine period.

Restrictions that were in place in 2020 on travel, business closures, and in-person gatherings began to be lifted, which allowed for the beginning of an economic recovery.

While domestic tourism has been near or at pre-pandemic levels since the summer of 2021, international tourism has yet to return.

State economists expect a slow but steady multi-year road to recovery.

According to the University of Hawaii Economic Research Organization’s (“UHERO”) fourth quarter 2021 report, unemployment dropped from 11.8% at the end of 2020 to 7.7% at the end of 2021, which is still well above Hawaii’s pre-pandemic level of 2.6%.

Many workers who left the labor force during the pandemic have yet to return.

This has led to a tight labor market and upward pressure on wages.

Unit labor costs increased by 5% year-over-year nationally and inflation increased by more than 5% in both Hawaii and the U.S., reducing purchasing power.

While the payroll job count is expected to expand at a moderate pace over the next two years, the job base in 2023 is expected to be about 5% lower than its 2019 level.

The emergence of the Omicron variant in late 2021 presented additional uncertainty.

Renewed international travel restrictions have reduced the near-term visitor outlook.

Once the situation eases, the return of international tourists is expected to permit a broader industry recovery in 2022.

Moderate job gains are expected heading into 2022, but several factors will weigh on progress, including continuing labor shortages, the end of pandemic fiscal and monetary support, and higher inflation.

Despite the challenges mentioned above, we expect our business to continue to recover in 2022.

The tourism industry continued to rebound in 2022 with visitor counts at 90% of 2019 levels at the end of the year.

Despite having slightly fewer visitors, visitor spend was nearly 14% higher near the end of 2022 compared to the same time period in 2019.

Domestic arrivals continue to outpace international visitors with domestic travel higher than pre-pandemic levels as international tourism has yet to fully recover.

According to the State Department of Business, Economic Development and Tourism (“DBEDT”), labor market conditions improved in 2022 with unemployment at 4.0% in 2022.

Many workers who left the labor force during the pandemic have returned.

The Honolulu consumer inflation rate declined in 2022 from 7.5% in March to 6.6% in September.

In an effort to curb inflation, the Federal Reserve Bank implemented a series of interest rate hikes which negatively impacted home sales and construction activity also slowed as a result.

The DBEDT economic growth projection for Hawaii in 2023 is 1.7%.

Pacific Northwest and Rockies Markets

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Census Bureau noted that the population increased 14.6% in Washington and 17.3% in Idaho from 2010 to 2020 versus a national increase of only 7.4%.

Spokane is a regional hub in eastern Washington, with a population of over a half million and a variety of employers in health

care, retail, and other industries.

According to the U.S.

Bureau of Economic Analysis (the “BEA”), personal income for the Spokane metro area grew by 13.4% between 2018 and 2020, continuing the trend of positive growth since the 2008-2009 recession.

Spokane is a regional hub in eastern Washington, with a population of over a half million and a variety of employers in health care, retail, and other industries.

According to the Spokane City Department of Economic Development, the unemployment rate was 4.1% through October 2022, and the average annual wage was $57 thousand in 2021 in positions covered by unemployment insurance.

A significant portion of the products produced by our Washington refinery stay within the Puget Sound region.

Washington is one of the fastest growing states in the union and most of this growth is occurring in the Puget Sound area due to large information industry companies like Microsoft Corporation, Amazon.com, Inc., and Expedia Group, Inc.

According to the BEA, gross domestic product (“GDP”) for the State of Washington grew by 6.3% from 2019 to 2020.

Washington is one of the fastest growing states in the union and most of this growth is occurring in the Puget Sound area due to large technology and information industry companies.

According to the U.S.

Bureau of Economic Analysis (the “BEA”), gross domestic product (“GDP”) for the State of Washington grew by 6.7% from 2020 to 2021.

The primary market for our Wyoming refined products is the Black Hills Region in South Dakota, driven largely by Pennington, Lawrence, and Meade counties, which represents nearly half of the state’s taxable tourism sales.

According to the U.S.

Census Bureau, the population in Pennington County, the state’s second largest county, increased by 8.2% from 2010 to 2020 compared to 7.4% nationally over the same period.

According to the BEA, personal income in South Dakota grew by 8.7% from 2019 to 2020.

Census Bureau, the population in Pennington County, the state’s second largest county, increased by 8.2% from 2010 to

2020 compared to 7.4% nationally over the same period.

Additionally, the South Dakota economy expects to get a boost from additional development at Ellsworth Air Force Base as the main operating base for the B-21 Raider and the home for the training unit and an operational squadron.

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The South Dakota economy is anchored by tourism, including visitors to Mount Rushmore and the Black Hills, as well as government and health care spending.

According to the South Dakota Department of Tourism, despite limitations on mobility and economic disruption caused by the COVID-19 pandemic, South Dakota welcomed 13.5 million visitors in 2021, a 26.0% increase as compared to 2020, resulting in visitor spending of approximately $4.4 billion in 2021, an increase of 29.7% over 2020.

In 2021, $832 million, or 19.1%, of tourism dollars were spent on transportation services, an increase of 29% from 2020, when $644 million, or 19.2%, of tourism dollars were spent on transportation services.

According to the South Dakota Department of Tourism, visitor spending has increased in 2022, above pre-pandemic levels.

South Dakota welcomed 14.4 million visitors for the year, resulting in visitor spending of approximately $4.7 billion in 2022, an increase of 15% over the pre-pandemic spending heights reached in 2019.

Additionally, $1.0 billion, or 21% of tourism dollars, were spent on transportation services, representing an increase of 10% over pre-pandemic transportation spending.

We also distribute refined products to customers in central and northeastern Wyoming.

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Coal production increased 4.2% in 2022 and the U.S.

Energy Information Administration forecasts that coal production will increase in both 2022 and 2023.

Energy Information Administration forecasts that coal production will decrease in 2023.

OTHER OPERATIONS

Laramie Energy

As of December 31, 2021, we owned a 46.0% equity investment in Laramie Energy, a joint venture entity focused on producing natural gas in Garfield, Mesa, and Rio Blanco counties, Colorado.

As of December 31, 2022, we owned a 46.0% equity investment in Laramie Energy, an entity focused on developing and producing natural gas in Garfield, Mesa, and Rio Blanco counties, Colorado.

We have discontinued the application of the equity method of accounting for our investment in Laramie Energy because the book value of such investment has been reduced to zero.

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Government for approximately $22.4 million relating to ongoing litigation concerning a plugging and abandonment obligation in Pacific Outer Continental Shelf Lease OCS-P 0320, comprising part of the Sword Unit in the Santa Barbara Channel, California.

The second unliquidated claim, which is related to the same plugging and abandonment

obligation, was filed by Noble Energy Inc., the operator and majority interest owner of the Sword Unit.

The second unliquidated claim, which is related to the same plugging and abandonment obligation, was filed by Noble Energy Inc., the operator and majority interest owner of the Sword Unit.

We believe the probability of issuing shares to satisfy the full claim amount is remote, as the obligations upon which such proof of claim is asserted are joint and several among all working interest owners and Delta, our predecessor, owned an approximate 3.4% aggregate working interest in the unit.

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Refining activities

Like other petroleum refiners, our operations are subject to extensive and periodically-changing federal and state environmental regulations governing air emissions, wastewater discharges, and solid and hazardous waste management activities.

Like other petroleum refiners, our operations are subject to extensive and evolving federal and state environmental regulations governing air emissions, wastewater discharges, and solid and hazardous waste management activities.

Many of these regulations are becoming increasingly stringent, and the cost of compliance can be expected to increase over time.

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Reports are being made in connection with our refining business.

Sources subject to these reporting requirements also include on and offshore petroleum

and natural gas production and onshore natural gas processing and distribution facilities that emit 25,000 metric tons or more of CO 2 equivalent per year in aggregate emissions from all site sources.

Sources subject to these reporting requirements also include on and offshore petroleum and natural gas production and onshore natural gas processing and distribution facilities that emit 25,000 metric tons or more of CO 2 equivalent per year in aggregate emissions from all site sources.

In 2007, the State of Hawaii passed Act 234, which required that GHG emissions be rolled back on a statewide basis to 1990 levels by the year 2020.

In June of 2014, the Hawaii Department of Health (“DOH”) adopted regulations that require each major facility to reduce CO 2 emissions by 16% by 2020 relative to a calendar year 2010 baseline (the first year in which GHG emissions were reported to the EPA under 40 CFR Part 98).

The GHG rules include an alternative for facilities to demonstrate that further GHG reductions are not economically viable and an additional provision that authorized the DOH to issue a waiver if GHGs are being effectively controlled as a consequence of other state initiatives and regulations such as the Renewable Portfolio Standard.

Portfolio Standard.

The Hawaii GHG regulation allows for “partnering” with other facilities that have or are expected to make more significant CO 2 /GHG reductions.

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The DOH issued a GHG permit, which caps GHG emissions from both refineries at 904,945 metric tons per year which (as required by regulation) is 16% below the combined facility GHG emission levels of 2010.

In 2020, the year in which operation of the Par West crude unit was suspended, both refineries reported a combined GHG emission total of 619,609 metric tons (which is 32% below the Title V permit limit).

In 2021, after essentially all processing and fuel use at the Par West refinery had been suspended, the combined GHG emissions for both refineries in Hawaii totaled 604,673 metric tons (which is 33% below the Title V permit limit).

Consequently, no additional operating constraints nor capital for modifications will be required to comply with the State’s current GHG regulation.

In addition to the Hawaii GHG legislation, the State of Washington and its political subdivisions have passed several climate-focused laws in 2021 that are relevant to our Tacoma, Washington location.

These include a low-carbon fuel standard designed to reduce the carbon intensity of transportation fuels by twenty percent by 2038 and a “cap and trade”-style program for GHG emissions covering industrial facilities starting in 2023.

As both legislative programs are presently undergoing rulemaking processes at the Washington Department of Ecology, the contours of both sets of requirements are not yet clear.

The State of Washington and its political subdivisions passed several climate-focused laws in 2021 that are relevant to our Tacoma, Washington location.

These include a low-carbon fuel standard (“LCFS”) designed to reduce the carbon intensity of transportation fuels by twenty percent by 2038 and a “cap and trade”-style program for GHG emissions covering industrial facilities starting in 2023.

The Washington Department of Ecology (“WDOE”) has issued final rules implementing the LCFS effective on January 1, 2023, implementing requirements that are now in effect and will gradually reduce the carbon intensity of fuels sold in the state over time by annually lowering that limit.

The WDOE has also issued final rules with respect to the “cap and trade”-style program with an effective date of November 1, 2022, with credit allocations and auctions commencing during 2023.

While these programs are not expected to result in a material impact to earnings in the immediate term, both programs involve gradual tightening of standards over time and will likely require us to take additional actions or credit purchases, some of which may eventually be material.

In addition to action by the State, on November 16, 2021, the Tacoma City Council adopted its Tideflats and Industrial Land Use Regulations, which prohibits new petroleum storage and allows for only limited additions of clean fuel infrastructure.

Further regulatory, legislative, and judicial developments are likely to occur in the future.

The new Administration’s Executive Orders signaling a return to the Paris Climate Accord and voiding the prior Administration’s orders on the social cost of carbon suggest the imminence of such changes.

Additional regulatory, legislative, and judicial developments are likely to occur in the future.

The Administration’s return to the Paris Climate Accord, actions voiding the prior Administration’s orders on the social cost of carbon, and efforts to develop a “whole of government” strategy to aggressively address climate change issues suggest the imminence of such changes.

Such developments may affect how these GHG initiatives will impact us.

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Power plants on the Big Island, where SO 2 levels are already elevated due to volcanic activity, are switching from LSFO to diesel fuel.

On Oahu, the state’s largest utility frequently cites compliance with NAAQS as one of its justifications for moving towards a cleaner bridge fuel, potentially diesel or liquefied natural gas, before reaching its renewable goals.

On Oahu, the state’s largest utility frequently cites compliance with NAAQS as one of its justifications for moving towards a cleaner bridge fuel before reaching its renewable goals.

On October 1, 2015, the EPA adopted rules, which were reaffirmed in December 2020, that substantially tightened the NAAQS for ground-level ozone.

These rules are causing many areas of the country to develop requirements for additional controls and limits on combustion emissions and emissions of volatile organic compounds.

In October 2021, EPA announced that it intends to revisit the December 2020 decision to retain the 2015 NAAQS standard, opening the door to potential additional tightening of those standards and additional requirements for states around the country to adopt more stringent controls.

We do not currently anticipate that the more stringent NAAQS will materially impact our Hawaii, Washington, or Wyoming operations, but the risk of impact will increase in Washington as the standard is lowered.

In October 2021, the EPA announced its intent to revisit the December 2020 decision retaining the 2015 NAAQS standard, opening the door to potential additional tightening of those standards and additional requirements for states around the country to adopt more stringent controls, but no action has been taken in that respect to date.

We do not currently anticipate that a more stringent NAAQS will materially impact our Hawaii, Washington, or Wyoming operations, but the risk of impact will increase in Washington if and when the standard is lowered.

Fuel Standards

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by model year 2020 and contained an expanded Renewable Fuel Standard (the “RFS”).

In August 2012, the EPA and National Highway Traffic Safety Administration (“NHTSA”) jointly adopted regulations that establish vehicle carbon dioxide emissions standards

and an average industry fuel economy of 54.5 miles per gallon by model year 2025.

In August 2012, the EPA and National Highway Traffic Safety Administration (“NHTSA”) jointly adopted regulations that establish vehicle carbon dioxide emissions standards and an average industry fuel economy of 54.5 miles per gallon by model year 2025.

On August 8, 2018, the EPA and NHTSA jointly proposed to revise existing fuel economy standards for model years 2021-2025 and to set standards for 2026 for the first time.

On March 31, 2020, the agencies released updated fuel economy and vehicle emissions standards, which provide for an increase in stringency by 1.5% each year through model year 2026, as compared with the standards issued in 2012 that required 5% annual increases.

On December 30, 2021, the EPA and NHTSA published a final rule containing additional fuel efficiency standards for cars and light trucks that include 5-10% reductions of GHG emissions annually through model year 2026.

5% annual increases.

On March 31, 2022, the EPA and NHTSA published a final rule containing additional fuel efficiency standards for cars and light trucks that include 8-10% reductions of GHG emissions annually through model year 2026.

Higher fuel economy standards have the potential to reduce demand for our refined transportation fuel products.

Under EISA, the RFS requires an increasing amount of renewable fuel to be blended into the nation’s transportation fuel supply, up to 36 billion gallons by 2022.

Under EISA, the RFS requires an increasing amount of renewable fuel to be blended into the nation’s transportation fuel supply.

Over time, higher annual RFS requirements have the potential to reduce demand for our refined transportation fuel products.

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To the extent that we exceed the minimum volumetric requirements for blending of renewable fuels, we can retain these RINs for current or future RFS compliance or sell those on the open market.

On December 21, 2021, the EPA published proposed RFS that include retroactive cuts to earlier 2020 quotas, set 2021 targets at levels of renewable fuels that were actually used, and would establish significantly higher volume requirements for 2022.

Whether that rule will be finalized as proposed and how the final rule will fare in the courts may significantly alter our obligations to blend renewable fuels or purchase RINs.

The RFS may present production and logistics challenges for both the renewable fuels and petroleum refining and marketing industries in that we may have to enter into arrangements to purchase RINs with other parties or purchase cellulosic biofuels RINs (“D3”) waivers from the EPA to meet our obligations to use advanced biofuels, including biomass-based diesel and cellulosic biofuel, with potentially uncertain supplies of these new fuels.

As of December 31, 2022, our estimate of the renewable volume obligation (“RVO”) liability for the 2021 and 2022 compliance years is based on the RFS volumetric requirements which the EPA finalized on June 3, 2022.

Those EPA final rules adopted revised deadlines for compliance with RFS standards for prior compliance years, along with new guidelines for compliance in the future.

Additionally, the RFS enables the EPA to exempt certain small refineries from the renewable fuels blending requirements in the event such requirements would cause disproportionate economic hardship to that refinery.

In prior years, we have petitioned the EPA for a small refinery waiver for certain of our refineries.

However, in 2022, EPA generally denied all small refinery exemption petitions, including ours.

Litigation surrounding the 2022 RFS volumetric requirements and other aspects of those final rules, including the EPA’s denial of small refinery relief, is ongoing in Wynnewood Ref.

Co., LLC v EPA.

The RFS may present production and logistics challenges for both the renewable fuels and the petroleum refining and marketing industries in that we may have to enter into arrangements to purchase RINs with other parties or purchase cellulosic biofuels RINs (“D3”) waivers from the EPA to meet our obligations to use advanced biofuels, including biomass-based diesel and cellulosic biofuel, with potentially uncertain supplies of these new fuels.

In October 2010, the EPA issued a partial waiver decision under the federal CAA to allow for an increase in the amount of ethanol permitted to be blended into gasoline from 10% (“E10”) to 15% (“E15”) for 2007 and newer light duty motor vehicles.

In 2019, the EPA approved year-round sales of E15 but that approval has been overturned by the courts and, as of January 10, 2022, the Supreme Court has declined to review further appeals on that subject.

On July 2, 2021, a three-judge panel of the U.S.

Court of Appeals for the District of Columbia Circuit vacated the EPA’s approval of year-round E15 sales.

However, on April 29, 2022, in response to supply challenges caused in part by Russia’s invasion of Ukraine, the EPA issued an emergency waiver to permit E15 sales through the summer of 2022.

There are numerous issues, including state and federal regulatory issues, that need to be addressed before E15 can be marketed on a large scale for use in traditional gasoline engines;

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On March 19, 2015, the EPA confirmed the small refinery status of our Wyoming refinery.

The Hawaii refinery, our Wyoming refinery, and our Washington refinery, acquired in January 2019, were all granted extensions of small refinery exemptions by the EPA for 2018.

The Hawaii refinery, our Wyoming refinery, and our Washington refinery, acquired in January 2019, were all granted extensions of small refinery exemptions by the EPA for 2018, but not thereafter.

All our refineries are Tier 3 compliant.

Beginning on June 30, 2014, new sulfur standards for fuel oil used by marine vessels operating within 200 miles of the U.S.

coastline (which includes the entire Hawaiian Island chain) were lowered from 10,000 ppm (1%) to 1,000 ppm (0.1%).

The sulfur standards began at the Hawaii refinery and were phased in so that by January 1, 2015, they were fully aligned with the IMO standards and deadline.

The more stringent standards apply universally to both U.S.

and foreign flagged ships.

Although the marine fuel regulations provided vessel operators with a few compliance options such as installation of on-board pollution controls and demonstration unavailability, many vessel operators were forced to switch to a distillate fuel while operating within the Emission Control Area (“ECA”).

Beyond the 200 mile ECA, large ocean vessels are still allowed to burn marine fuel with up to 3.5% sulfur.

Our Hawaii refinery is capable of producing the 1% sulfur residual fuel oil that was previously required within the ECA.

Although our Hawaii refinery remains in a position to supply vessels traveling to and through Hawaii, the market for 0.1% sulfur distillate fuel and 3.5% sulfur residual fuel is much more competitive.

In addition to U.S.

fuels requirements, the IMO has adopted newer standards that further reduce the global limit on sulfur content in maritime fuels to 0.5% beginning in 2020 (“IMO 2020”).

In addition to federal requirements, several states, including Washington, have proposed or enacted low carbon fuel standards applicable to transportation fuels.

The Washington proposal would create a carbon intensity score for transportation fuels, and require fuel producers and importers who fall short of carbon intensity goals to purchase credits.

The Washington LCFS creates a carbon intensity score for transportation fuels and require fuel producers and importers who fall short of increasingly stringent annual carbon intensity goals to purchase credits.

There will be compliance costs and uncertainties regarding how we will comply with the various requirements contained in the EISA, RFS, and other fuel-related regulations.

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Several of our businesses generate wastes, including hazardous wastes, that are subject to regulation under the federal Resource Conservation and Recovery Act (“RCRA”) and state statutes.

The EPA has limited the disposal options for certain hazardous wastes and state regulation of the handling and disposal of refining and natural gas and oil exploration and production wastes and solid wastes is becoming more stringent.

The EPA has limited the disposal options for certain

hazardous wastes and state regulation of the handling and disposal of refining and natural gas and oil exploration and production wastes and solid wastes is becoming more stringent.

Naturally Occurring Radioactive Materials (“NORM”) are radioactive materials that accumulate on production equipment or area soils during oil and natural gas extraction or processing.

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We are required to prepare and comply with such plans and to obtain and comply with discharge permits.

We believe we are in substantial compliance with these requirements and that any noncompliance would not have a material adverse effect on us.

The CWA also prohibits spills of oil and hazardous substances to waters of the U.S.

in excess of levels set by regulations and imposes liability in the event of a spill.

We believe we are in substantial compliance with these requirements and that any noncompliance would not have a material adverse effect on us.

Other statutes provide protection to animal and plant species.

These laws and regulations may require the acquisition of a permit or other authorization before drilling or construction related to the oil and gas industry commences and may limit or prohibit construction, drilling, and other activities on certain lands lying within wilderness or wetlands and other protected areas and impose substantial liabilities for pollution resulting from our operations.

For example, the Magnuson amendment to the

Marine Mammal Protection Act may limit or restrict certain new oil terminals and oil-by-rail infrastructure in the state of Washington.

For example, the Magnuson amendment to the Marine Mammal Protection Act may limit or restrict certain new oil terminals and oil-by-rail infrastructure in the state of Washington.

State laws further regulate discharges of pollutants to surface and groundwaters, require permits that set limits on discharges to such waters, and provide civil and criminal penalties and liabilities for spills to both surface and groundwaters.

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The EPA continues to review and, in many cases, tighten ambient air quality standards, which standards, along with the advancement of pollution control technologies, could result in new regulatory and permit requirements that will impact our refining activities and involve additional costs.

On September 29, 2015, the EPA announced a final rule updating standards that control toxic air emissions from petroleum refineries, addressing, among other things, flaring operations, fenceline air quality monitoring, and additional emission reductions from storage tanks and delayed coking units.

On September 29, 2015, the EPA announced a final rule updating standards that control toxic air emissions from petroleum refineries, addressing, among other things, flaring operations, fence line air quality monitoring, and additional emission reductions from storage tanks and delayed coking units.

Compliance with this rule has not had a material impact on our financial condition, results of operations, or cash flows to date.

However, new operating and other regulatory standards could involve additional costs, and failure to comply with such standards could involve penalties, each of which could be material.

Coastal Coordination

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The CZMA provides for federal grants for state management programs that regulate land use, water use, and coastal development.

Environmental Agreement

On September 25, 2013, Par Petroleum, LLC (formerly known as Hawaii Pacific Energy;

a wholly owned subsidiary of Par created for purposes of acquiring Par Hawaii Refining, LLC (“PHR”)), Tesoro Corporation (“Tesoro,” which changed its name to Andeavor Corporation before being purchased by Marathon Petroleum Company in October 2018), and PHR entered into an Environmental Agreement (“Environmental Agreement”) that allocated responsibility for known and contingent environmental liabilities related to the acquisition of PHR, including a consent decree.

Other Government Regulation

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The CFTC has re-proposed new rules that would place limits on certain core futures and equivalent swap contracts for or linked to certain physical commodities, subject to exceptions for certain bona fide hedging transactions.

As these new positions limit rules are not yet final, the impact of those provisions on us is uncertain at this time.

It is possible that the CFTC, in conjunction with prudential regulators, may mandate that financial counterparties entering into swap transactions with end users must do so with credit support agreements in place, which could result in

negotiated credit thresholds above which an end user must post collateral.

If this should occur, we intend to manage our credit relationships to minimize collateral requirements.

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The majority of our refined products are primarily sold through short-term contracts or on the spot market.

For each of the years ended December 31, 2021 and 2020, we had one customer in our refining segment that accounted for 13% of our consolidated revenue.

For each of the years ended December 31, 2022, 2021, and 2020, we had one customer in our refining segment that accounted for 17%, 13%, and 13%, respectively, of our consolidated revenue.

No other customer accounted for more than 10% of our consolidated revenues during the years ended December 31, 2022, 2021, and 2020.

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Workforce Composition

At Par, we believe our employees are our most valuable asset.

We believe our employees are our most valuable asset.

By investing in our employees, we are able to achieve success and continue to execute on our mission and vision.

At December 31, 2021, our workforce consisted of 1,336 employees, including 226 employees, or 17% of our total workforce, at our Hawaii and Washington refineries represented by the United Steelworkers Union (“USW”) with collective bargaining agreements which expired on January 31, 2022 and are currently subject to automatic extension periods while the parties continue negotiations.

At December 31, 2022, our workforce consisted of 1,397 employees, including 226 employees, or 16% of our total workforce, at our Hawaii and Washington refineries represented by the United Steelworkers Union (“USW”) with collective bargaining agreements effective through January 31, 2026.

We value all our employees, represented and non-represented, and constantly strive to maintain and improve satisfactory relationships with them.

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Refining and Logistics

Diversity and Inclusion

Par is focused on recruiting and developing a diverse workforce.

We prioritize outreach activities that increase the diversity of applicants for open positions and actively ensure that all open positions are posted on job boards that target female, minority, disabled, and military veteran candidates.

We are developing relationships with local organizations that provide services to historically underserved populations and make them aware of career opportunities at Par.

As of December 31, 2021, our workforce consisted of 49% minorities and 6% protected veterans.

We work to develop relationships with local organizations that provide services to historically underserved populations and make them aware of career opportunities at Par.

As of December 31, 2022, our workforce consisted of 48% minorities, 36% women, 6% protected veterans, and 6% employees with disabilities.

Par is committed to maintaining a safe, respectful, and inclusive workplace.

A work environment that values all employees and their contributions is critical to our success in that it enables each employee to bring their unique perspectives to work each day.

By embracing our differences and viewing diversity and inclusion as assets, we are able to realize our full and creative potential.

We actively train our management on why diversity and inclusion are critical in the workplace, enabling them to demonstrate allyship and embrace the differences of others, whether cultural or simply diversity of thought.

Par is proud to foster an environment where all employees feel safe, heard, and valued and where there is a commitment to creating a greater representation of opinions, backgrounds, and experiences.

Culture and Values

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We value the unique heritage, experiences, and contributions of everyone we get to work with and serve.

Our commitment to doing

the good and right thing with the highest ethical standards helps us to achieve our best results.

Our commitment to doing the right thing with the highest ethical standards enables us to achieve our best results.

As we pursue growth and success, we believe it is important to keep our people safe, to value our diversity, and to protect our environment.

We offer highly competitive compensation, be nefit, and time-off packages to promote employee fulfillment and work-life balance.

Our benefits include our employee stock purchase plan, extensive health and wellness benefits, generous time off allowance, and a tuition reimbursement program.

Our benefits include our retirement savings plan with company match, employee stock purchase plan, extensive health and wellness benefits, generous time off allowance, and a tuition reimbursement program.

Health and Safety

Safety is paramount to every operation and activity we undertake.

Safety is paramount to every operation and activity we undertake at Par.

We recognize that our responsible stewardship impacts every employee, every contractor, and every member of the community, and we embrace that responsibility.

We promote a culture of continual safety improvement with a keen eye for evaluating and managing risk.

We continually monitor the implementation of programs, policy, and procedures to achieve this objective.

We promote a culture of continuous safety improvement with a keen eye for evaluating and managing risk.

We continually monitor and improve the effectiveness of our health and safety programs, policies, and procedures to achieve this objective.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

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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 1. Business