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• our fuel requirements for our refineries.
−Removed: All of our futures and OTC swaps are executed to economically hedge our physical commodity purchases, sales, and inventory.
−Removed: Our open futures and OTC swaps will expire in April 2024.
+Added: Substantially all of our futures and OTC swaps are executed to economically hedge our physical commodity purchases, sales, and inventory.
+Added: Our open futures and OTC swaps will expire in March 2025.
Based on our net open futures positions at December 31, 2023, a $1 change in the price of crude oil, assuming all other factors remain constant, would result in $6.1 million change to the fair value of our derivative instruments and Cost of revenues (excluding depreciation).
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We internally consumed approximately 4% of this throughput in the refining process, which is accounted for as a fuel cost.
−Removed: We have executed option
−Removed: collars to economically hedge our internally consumed fuel cost at all our refineries.
+Added: We have executed option collars to economically hedge our internally consumed fuel cost at all our refineries.
Please read Note 15—Derivatives to our consolidated financial statements under Item 8 of this Form 10-K for more information.
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We are exposed to market risks related to the volatility in the price of RINs required to comply with the Renewable Fuel Standard.
−Removed: Our renewable volume obligation (“RVO”) is based on a percentage of our Hawaii, Wyoming, and Washington refineries’ production of on-road transportation fuel.
+Added: Our renewable volume obligation (“RVO”) is based on a percentage of our Hawaii, Wyoming, Washington and Montanta refineries’ production of on-road transportation fuel.
The EPA sets the RVO percentages annually.
On June 3, 2022, the EPA finalized the 2021 and 2022 RVOs, reduced the existing 2020 RVO, denied 69 small refinery exemption petitions including ours, and proposed that certain small refineries be permitted to use an alternative RIN retirement schedule for their 2019-2020 compliance obligations.
+Added: On June 21, 2023, the EPA finalized the 2023, 2024, and 2025 RVOs.
To the degree we are unable to blend the required amount of biofuels to satisfy our RVO, we must purchase RINs on the open market.
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Some of these contracts are derivative instruments, however, we elect the normal purchases normal sales exception and do not record these contracts at their fair values.
+Added: Additionally, we are exposed to market risks related to the volatility in the price of compliance credits required to comply with the Washington Climate Commitment Act and Clean Fuel Standard.
+Added: To the extent we are unable to reduce the amount of greenhouse gas emissions in the transportation fuels we sell in Washington, we must purchase compliance credits at auction or in the open market.
+Added: The number of credits required to comply with the Washington Climate Commitment Act and Clean Fuel Standard is based on the amount of greenhouse gas emissions in the transportation fuels we sell in Washington compared to certain regulatory limits.
+Added: To mitigate the impact of this risk on our results of operations and cash flows, we may purchase credits when we deem the price to be favorable.
+Added: Some of these contracts may be derivative instruments and recorded at their fair value.
+Added: Please read Note 15—Derivatives to our consolidated financial statements under Item 8 of this Form 10-K for more information.
Interest Rate Risk
As of December 31, 2023, we had $665.6 million of indebtedness that was subject to floating interest rates.
−Removed: We also had interest rate exposure in connection with our liability under the J.
−Removed: Aron Supply and Offtake Agreement and the MLC Washington Refinery Intermediation Agreement for which we pay charges based on three-month LIBOR.
+Added: We also had interest rate exposure in connection with our liabilities under the J.
+Added: Aron Supply and Offtake Agreement for which we pay charges based on three-month Secured Overnight Financing Rate (“SOFR”).
An increase of 1% in the variable rate on our indebtedness, after considering the instruments subject to minimum interest rates, would result in an increase to our Cost of revenues (excluding depreciation) and Interest expense and financing costs, net of approximately $0.6 million and $7.3 million per year, respectively.
We may utilize interest rate swaps to manage our interest rate risk.
−Removed: As of December 31, 2020, we had entered into an interest rate swap at an average fixed rate of 3.91% in exchange for the floating interest rate on the notional amounts due under the Retail Property Term Loan.
−Removed: This swap was set to expire on April 1, 2024, the maturity date of the Retail Property Term Loan.
−Removed: On February 23, 2021, we terminated and repaid all amounts outstanding under the Retail Property Term Loan and the related interest rate swap.
−Removed: We may utilize interest rate swaps to manage our interest rate risk.
−Removed: As of December 31, 2022, we did not hold any open interest rate swaps.
−Removed: We have several contracts that reference London Interbank Offered Rate (“LIBOR”), some of which terminate after LIBOR is anticipated to cease being reported in 2023.
−Removed: Our facilities that currently reference LIBOR include transition language consistent with the scheduled transition.
−Removed: We do not expect the transition away from LIBOR to have a material impact on our financial condition, results of operations, or cash flows.
+Added: As of December 31, 2023 we had entered into an interest rate collar at a cap of 5.50% and floor of 2.30%, based on the three month SOFR as of the fixing date.
+Added: This swap expires on May 31, 2026.
+Added: Please read Note 15—Derivatives for more information.
We are subject to the risk of loss resulting from nonpayment or nonperformance by our counterparties.
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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.