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Risks Related to Our Business
+Added: The COVID-19 pandemic, and actions taken in response thereto, could materially adversely affect our business, operations, financial condition, liquidity, and results of operations.
+Added: The COVID-19 pandemic and actions of governments and others in response thereto is negatively impacting worldwide economic and commercial activity and financial markets.
+Added: The COVID-19 pandemic has also resulted in significant business and operational disruptions, including closures, supply chain disruptions, travel restrictions, stay-at-home orders, and limitations on the availability and effectiveness of the workforce.
+Added: Further, if general economic conditions continue to remain uncertain for an extended period of time, our liquidity and ability to repay our outstanding debt may be harmed.
+Added: The full impact of the COVID-19 pandemic is unknown and is rapidly evolving.
+Added: The extent to which the COVID-19 pandemic negatively impacts our business and operations, including the availability and pricing of feedstocks, will depend on the severity, location, and duration of the effects and spread of COVID-19, the actions undertaken by national, regional, and local governments and health officials to contain such virus or remedy its effects, and if, how quickly and to what extent economic conditions recover and normal business and operating conditions resume.
Our business is, and nitrogen fertilizer prices are, cyclical and highly volatile, which could have a material adverse effect on our results of operations, financial condition and cash flows.
−Removed: Our business is exposed to fluctuations in nitrogen fertilizer demand in the agricultural industry.
+Added: Demand for nitrogen fertilizer products is dependent on fluctuating demand for crop nutrients by the global agricultural industry.
These fluctuations historically have had and could in the future have significant effects on prices across all nitrogen fertilizer products and, in turn, our results of operations, financial condition and cash flows.
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If seasonal demand is less than expected, we may be left with excess inventory that will have to be stored or liquidated.
−Removed: Demand for nitrogen fertilizer products is dependent on demand for crop nutrients by the global agricultural industry.
The international market for nitrogen fertilizers is influenced by such factors as the relative value of the U.S.
−Removed: dollar and its impact upon the cost of importing nitrogen fertilizers, foreign agricultural policies, the existence of, or changes in, import or foreign currency exchange barriers in certain foreign markets, changes in the hard currency demands of certain countries and other regulatory policies of foreign governments, as well as the laws and policies of the United States affecting foreign trade and investment.
−Removed: Nitrogen-based fertilizers remain solidly in demand, driven by a growing world population, changes in dietary habits and an expanded use of corn for the production of ethanol.
+Added: dollar and its impact upon the cost of importing nitrogen fertilizers, foreign agricultural policies, the existence of, or changes in, import or foreign currency exchange barriers in certain foreign markets, changes in the hard currency demands of certain countries and other regulatory policies of foreign governments, as well as the laws and policies of the U.S.
+Added: affecting foreign trade and investment.
Supply is affected by available capacity and operating rates, raw material costs, government policies and global trade.
A decrease in nitrogen fertilizer prices would have a material adverse effect on our business, cash flow and ability to make distributions.
−Removed: Nitrogen fertilizer products are global commodities, and our business faces intense competition from other nitrogen fertilizer producers, which may have more resources and scale.
+Added: Nitrogen fertilizer products and our business face intense competition.
Our business is subject to intense price competition from both U.S.
and foreign sources.
−Removed: Fertilizers are global commodities, with little or no product differentiation, and customers make their purchasing decisions principally on the basis of delivered price and availability of the product.
+Added: With little or no product differentiation, customers make their purchasing decisions principally on the basis of delivered price and availability of the product.
Increased global supply or decreases in transportation costs for foreign sources of fertilizer may put downward pressure on fertilizer prices.
−Removed: Furthermore, in recent years the price of nitrogen fertilizer in the United States has been substantially driven by pricing in the global fertilizer market.
We compete with a number of U.S.
−Removed: producers and producers in other countries, including state-owned and government-subsidized entities.
−Removed: Some competitors have greater total resources and are less dependent on earnings from fertilizer sales, which make them less vulnerable to industry downturns and better positioned to pursue new expansion and development opportunities.
−Removed: Additionally, our competitors utilizing different corporate structures may be better able to withstand lower cash flows than we can as a limited partnership.
−Removed: Our competitive position could suffer to the extent we are unable to expand resources either through investments in new or existing operations or through acquisitions, joint ventures or partnerships.
−Removed: An inability to compete successfully could result in a loss of customers, which could adversely affect our sales, profitability and cash flows and, therefore, have a material adverse effect on our results of operations, financial condition and cash flows.
+Added: producers and producers in other countries, including state-owned and government-subsidized entities that may have greater total resources and are less dependent on earnings from fertilizer sales, which make them less vulnerable to industry downturns and better positioned to pursue new expansion and development opportunities.
+Added: An inability to compete successfully could result in a loss of customers, which could adversely affect our sales, profitability and cash flows and, therefore, have a material adverse effect on our results of operations and financial condition.
+Added: December 31, 2020 | 13
Our business is geographically concentrated and is therefore subject to regional economic downturns and seasonal variations, which may affect our production levels, transportation costs and inventory and working capital levels.
Our sales to agricultural customers are concentrated in the Great Plains and Midwest states, and nitrogen fertilizer demand is seasonal.
−Removed: Our quarterly results may vary significantly from one year to the next due largely to weather-related shifts in
−Removed: December 31, 2019 | 10
−Removed: planting schedules and purchase patterns.
−Removed: Farmers tend to apply nitrogen fertilizer during two short application periods, one in the spring and the other in the fall.
−Removed: In contrast, we, along with other nitrogen fertilizer producers, generally produce products throughout the year.
−Removed: As a result, we and our customers generally build inventories during the low demand periods of the year to ensure timely product availability during peak sales seasons.
−Removed: Variations in the proportion of product sold through prepaid sales contracts and the terms of such contracts can increase the seasonal volatility of our cash flows and cause changes in the patterns of seasonal volatility from year-to-year.
−Removed: Additionally, the accumulation of inventory to be available for seasonal sales creates significant seasonal working capital and storage capacity requirements.
+Added: Our quarterly results may vary significantly from one year to the next due largely to weather-related shifts in planting schedules and purchase patterns.
+Added: Because we build inventory during low demand periods, the accumulation of inventory to be available for seasonal sales creates significant seasonal working capital and storage capacity requirements.
The degree of seasonality can change significantly from year-to-year due to conditions in the agricultural industry and other factors.
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agricultural industry can be affected by a number of factors, including weather patterns and field conditions, current and projected grain inventories and prices, domestic and international population changes, demand for U.S.
−Removed: agricultural products and U.S.
−Removed: and foreign policies regarding trade in agricultural products.
−Removed: For example, a major factor underlying the solid level of demand for nitrogen-based fertilizer products we produce is the use of corn for the production of ethanol in the U.S.
−Removed: Changes in governmental incentives for ethanol production could affect future ethanol demand and production.
+Added: agricultural products, U.S., state and foreign policies regarding trade in agricultural products, and changes in governmental regulations and incentives for corn-based ethanol production that could affect future ethanol demand and production.
State and federal governmental policies, including farm and biofuel subsidies and commodity support programs, as well as the prices of fertilizer products, may also directly or indirectly influence the number of acres planted, the mix of crops planted and the use of fertilizers for particular agricultural applications.
Developments in crop technology could also reduce the use of chemical fertilizers and adversely affect the demand for nitrogen fertilizer.
−Removed: In addition, from time to time various state legislatures have considered limitations on the use and application of chemical fertilizers due to concerns about the impact of these products on the environment.
Unfavorable state and federal governmental policies could negatively affect nitrogen fertilizer prices and therefore have a material adverse effect on our results of operations, financial condition and cash flows.
−Removed: Ethanol production in the United States is highly dependent upon a myriad of federal statutes and regulations, and is made significantly more competitive by various federal and state incentives and mandated usage of renewable fuels pursuant to the EPA’s Renewable Fuel Standard (“RFS”).
−Removed: To date, the RFS has been satisfied primarily with corn-based fuel ethanol blended into gasoline.
−Removed: However, a number of factors, including the continuing “food versus fuel” debate and studies showing that expanded ethanol usage may increase the level of greenhouse gases in the environment, cause harmful conversion of uncultivated land for biofuel crop production, and be unsuitable for small engine use, have resulted in calls to reduce subsidies for ethanol, allow increased ethanol imports and to repeal or waive (in whole or in part) the current RFS.
−Removed: Changes within the RFS program also could affect future ethanol demand and production.
−Removed: Further, while most ethanol is currently produced from corn and other raw grains, such as milo or sorghum, the RFS requires that a portion of the overall RFS renewable fuel mandate come from advanced biofuels, including cellulose-based biomass, such as agricultural waste, forest residue, and municipal solid waste.
−Removed: In addition, there is a continuing trend to encourage the use of products other than corn and raw grains for ethanol production.
−Removed: The repeal of, or reduction in the benefits to ethanol producers under, ethanol incentive programs, an increase in ethanol imports, a substantial decrease in future renewable volume obligations under the RFS program, or a significant increase in the use of products other than corn and raw grains for ethanol production could affect the demand for corn-based ethanol and result in a decrease in planted corn acreage and in the demand for nitrogen fertilizer products and have a material adverse effect on our results of operations, financial condition and cash flows.
−Removed: December 31, 2019 | 11
−Removed: The acquisition and expansion strategy of our business involves significant risks.
−Removed: From time to time, we may consider pursuing acquisitions and expansion projects to continue to grow and increase profitability.
−Removed: However, we may not be able to consummate such acquisitions or expansions, due to intense competition for suitable acquisition targets, the potential unavailability of financial resources necessary to consummate acquisitions and expansions, difficulties in identifying suitable acquisition targets and expansion projects or in completing any transactions identified on sufficiently favorable terms, and the failure to obtain requisite regulatory or other governmental approvals.
−Removed: In addition, any future acquisitions and expansions may entail significant transaction costs and risks associated with entry into new markets and lines of business, including but not limited to, new regulatory obligations and risks.
−Removed: Even when acquisitions are completed, integration of acquired entities can involve significant difficulties, such as:
−Removed: • Unforeseen difficulties in the integration of the acquired operations and disruption of the ongoing operations of our business;
−Removed: • Failure to achieve cost savings or other financial or operating objectives contributing to the accretive nature of an acquisition;
−Removed: • Strain on the operational and managerial controls and procedures and the need to modify systems or to add management resources;
−Removed: • Difficulties in the integration and retention of customers or personnel and the integration and effective deployment of operations or technologies;
−Removed: • Assumption of unknown material liabilities or regulatory non-compliance issues;
−Removed: • Amortization of acquired assets, which would reduce future reported earnings;
−Removed: • Possible adverse short-term effects on our cash flows or operating results;
−Removed: • Diversion of management’s attention from the ongoing operations of our business.
−Removed: In addition, in connection with any potential acquisition or expansion project, we will need to consider whether a business we intend to acquire or expansion project we intend to pursue could affect our tax treatment as a partnership for federal income tax purposes.
−Removed: If we are otherwise unable to conclude that the activities of the business being acquired or the expansion project would not affect our treatment as a partnership for federal income tax purposes, we may elect to seek a ruling from the Internal Revenue Service (“IRS”).
−Removed: Seeking such a ruling could be costly or, in the case of competitive acquisitions, place the business in a competitive disadvantage compared to other potential acquirers who do not seek such a ruling.
−Removed: If we are unable to conclude that an activity would not affect our treatment as a partnership for federal income tax purposes and are unable or unwilling to obtain an IRS ruling, we may choose to acquire such business or develop such expansion project in a corporate subsidiary, which would subject the income related to such activity to entity-level taxation, which would reduce the amount of cash available for distribution to its common unitholders and could likely cause a substantial reduction in the value of its common units.
−Removed: Failure to manage these acquisition and expansion growth risks could have a material adverse effect on our results of operations, financial condition and cash flows.
−Removed: Our joint ventures involve similar risks.
−Removed: There can be no assurance that we will be able to consummate any acquisitions or expansions, successfully integrate acquired entities, or generate positive cash flow at any acquired company or expansion project.
We are subject to cybersecurity risks and other cyber incidents resulting in disruption to our business.
−Removed: We depend on internal and third-party information technology systems to manage and support our operations.
−Removed: In addition, we collect, process, and retain sensitive and confidential customer information in the normal course of business.
+Added: We depend on internal and third-party information technology systems to manage and support our operations, and we collect, process, and retain sensitive and confidential customer information in the normal course of business.
Despite the security measures we have in place and any additional measures we may implement in the future, our facilities and these systems could be vulnerable to security breaches, computer viruses, lost or misplaced data, programming errors, human errors, acts of vandalism, or other events.
Any disruption of these systems or security breach or event resulting in the misappropriation, loss or other unauthorized disclosure of confidential information, whether by us directly or our third-party service providers, could damage our reputation, expose us to the risks of litigation and liability, disrupt our business, or otherwise affect our results of operations.
−Removed: In addition, new laws and regulations governing data privacy and the unauthorized disclosure of confidential information pose increasingly complex compliance challenges and potentially elevate our costs.
−Removed: Any failure to comply with these laws and regulations, including as a result of a security or privacy breach, could result in significant penalties and liabilities for us.
−Removed: December 31, 2019 | 12
Risks Related to Our Plant Operations
−Removed: Our Coffeyville Facility may be adversely affected by the supply and price levels of pet coke.
−Removed: Failure by CVR Energy’s Coffeyville refinery to continue to supply us with pet coke and the availability of third-party pet coke at higher prices could negatively impact our results of operations.
+Added: Failure by CVR Energy’s Coffeyville refinery to continue to supply us with pet coke could negatively impact our results of operations.
Unlike our competitors, whose primary costs are related to the purchase of natural gas and whose costs are therefore largely variable, our Coffeyville Facility uses a pet coke gasification process to produce nitrogen fertilizer.
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Our Coffeyville Facility has obtained the majority of its pet coke from CVR Energy’s Coffeyville refinery over the past five years, although this percentage has decreased to 33% in 2020.
−Removed: However, should CVR Energy’s Coffeyville refinery fail to perform in accordance with the existing agreement or to the extent pet coke from CVR Energy’s Coffeyville refinery is insufficient, we would need to purchase pet coke from third parties on the open market, which could negatively impact our results of operations to the extent third-party pet coke is unavailable or available only at higher prices.
+Added: However, should CVR Energy’s Coffeyville refinery
+Added: December 31, 2020 | 14
+Added: fail to perform in accordance with the existing agreement or to the extent pet coke from CVR Energy’s Coffeyville refinery is insufficient, we would need to purchase pet coke from third parties on the open market, which could negatively impact our results of operations to the extent third-party pet coke is unavailable or available only at higher prices.
Currently, we purchase 100% of the pet coke CVR Energy’s Coffeyville refinery produces.
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An increase in natural gas prices could make it less competitive with producers who do not use natural gas as their primary feedstock.
−Removed: In addition, an increase in natural gas prices in the United States relative to prices of natural gas paid by foreign nitrogen fertilizer producers may negatively affect our competitive position in the corn belt, and such changes could have a material adverse effect on our results of operations, financial condition and cash flows.
+Added: In addition, an increase in natural gas prices in the U.S.
+Added: relative to prices of natural gas paid by foreign nitrogen fertilizer producers may negatively affect our competitive position in the corn belt, and such changes could have a material adverse effect on our results of operations, financial condition and cash flows.
We expect to purchase a portion of our natural gas for use in the East Dubuque Facility on the spot market.
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Our East Dubuque Facility depends on the availability of natural gas.
−Removed: We have an agreement with Nicor Gas (“Nicor”) pursuant to which we access natural gas from the ANR Pipeline Company and Northern Natural Gas pipelines.
−Removed: Our access to satisfactory supplies of natural gas through Nicor could be disrupted due to a number of causes, including volume limitations under the agreement, pipeline malfunctions, service interruptions, mechanical failures or other reasons.
−Removed: The agreement currently extends through February 29, 2020.
−Removed: Upon expiration of the agreement, we may be unable to extend the service under the terms of the existing agreement or renew the agreement on satisfactory terms, or at all.
−Removed: Any disruption in the supply of natural gas to our East Dubuque Facility could restrict our ability to continue to make products at the facility.
−Removed: In the event we need to obtain natural gas from another source, we may need to build a new connection from that source to the East Dubuque Facility and negotiate related easement rights, which would be costly, disruptive and/or may be unfeasible.
−Removed: As a result, any interruption in the supply of natural gas through Nicor could have a material adverse effect on our results of operations and financial condition.
−Removed: December 31, 2019 | 13
+Added: We have two agreements for pipeline transportation of natural gas with expiration dates in 2021 and 2022.
+Added: We typically purchase natural gas from third parties on a spot basis and, from time to time, may enter into fixed-price forward purchase contracts.
+Added: Upon expiration of the agreements, we may be unable to extend the service under the terms of the existing agreements or renew the agreements on satisfactory terms, or at all, necessitating construction of a new connection that could be costly and disruptive.
+Added: Any disruption in the supply of natural gas to our East Dubuque Facility could restrict our ability to continue to make products at the facility and have a material adverse effect on our results of operations and financial condition.
If licensed technology were no longer available, our business may be adversely affected.
We have licensed, and may in the future license, a combination of patent, trade secret, and other intellectual property rights of third parties for use in our plant operations.
−Removed: If any license agreement on which our operations rely were to be terminated, licenses to alternative technology may not be available, or may only be available on terms that are not commercially reasonable or acceptable.
−Removed: In addition, any substitution of new technology for currently-licensed technology may require substantial changes to manufacturing processes or equipment and may have a material adverse effect on our results of operations, financial condition and cash flows.
−Removed: Additionally, we may face claims of infringement that could interfere with our ability to use technology that is material to our plant operations.
−Removed: Any litigation of this type could result in substantial costs and diversions of resources, either of which could have a material adverse effect on our results of operations, financial condition and cash flows.
−Removed: In the event a claim of infringement against us is successful, we may be required to pay royalties or license fees for past or continued use of the infringing technology, or we may be prohibited from using the infringing technology altogether.
−Removed: If we are prohibited from using any technology as a result of such a claim, we may not be able to obtain licenses to alternative technology adequate to substitute for the technology we can no longer use, or licenses for such alternative technology may only be available on terms that are not commercially reasonable or acceptable.
−Removed: In addition, any substitution of new technology for currently-licensed technology may require us to make substantial changes to our manufacturing processes or equipment or to our products, and could have a material adverse effect on our results of operations, financial condition and cash flows.
+Added: If our use of technology on which our operations rely were to be terminated or face infringement claims, licenses to alternative technology may not be available, or may only be available on terms that are not commercially reasonable or acceptable, or in the case of infringement, may result in substantial costs, all of which could have a material adverse effect on our results of operations, financial condition and cash flows.
Compliance with and changes in environmental laws and regulations, including those related to climate change, could require us to make substantial capital expenditures and adversely affect our performance.
Our operations are subject to extensive federal, state and local environmental laws and regulations relating to the protection of the environment, including those governing the emission or discharge of pollutants into the environment, product use and specifications and the generation, treatment, storage, transportation, disposal and remediation of solid and hazardous wastes.
−Removed: Violations of applicable environmental laws and regulations, or of the conditions of permits issued thereunder, can result in substantial penalties, injunctive orders compelling installation of additional controls, civil and criminal sanctions, operating restrictions, injunctive relief, permit revocations and/or facility shutdowns, which may have a material adverse effect on our ability to operate our facilities and accordingly our financial performance.
−Removed: Capital expenditures and operating costs for current and future environmental compliance may be substantial and could have a material adverse effect on our results of operations, financial condition and profitability.
−Removed: In addition, new environmental laws and regulations, new interpretations of existing laws and regulations, increased governmental enforcement of laws and regulations or other developments could require us to make additional unforeseen expenditures.
−Removed: These laws and regulations are generally expected to impose increasingly stringent and costly requirements over time.
−Removed: 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.
−Removed: 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 plants.
−Removed: Many states and regions have implemented, or are in the process of implementing, measures to reduce emissions of GHGs, but other than Kansas, we do not currently operate in states that have their own GHG reduction programs.
−Removed: 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 result in reduced demand for our fertilizer products.
−Removed: If we are unable to maintain sales of our products at a price that reflects such increased costs, there could be a material adverse effect on our business, financial condition and results of operations.
−Removed: Further, any increase in the prices of our products resulting from such increased costs could have a material adverse effect on our operations, financial condition and cash flows.
−Removed: In addition, climate change legislation and regulations may result in increased costs not only for our business but also users of our fertilizer products, thereby potentially decreasing demand for our products.
−Removed: Further, changes in environmental laws and regulations or their interpretation relating to the end-use and application of fertilizers could cause changes in demand for our products or limit our ability to market and sell products to end users.
+Added: Violations of applicable environmental laws and regulations, or of the conditions of permits issued thereunder, can result in
+Added: December 31, 2020 | 15
+Added: substantial penalties, injunctive orders compelling installation of additional controls, civil and criminal sanctions, operating restrictions, injunctive relief, permit revocations and/or facility shutdowns, which may have a material adverse effect on our ability to operate our facilities and accordingly our financial performance.
+Added: In addition, new environmental laws and regulations, new interpretations of existing laws and regulations, or increased governmental enforcement of laws and regulations could require us to make additional unforeseen expenditures.
+Added: It is unclear the impact of the new federal administration will have on the laws and regulations applicable to us, however, measures to address climate change and reduce GHG emissions (including carbon dioxide, methane and nitrous oxides) are in various phases of discussion or implementation and could affect our operations by requiring increased operating and capital costs and/or increasing taxes on GHG emissions.
+Added: If we are unable to maintain sales of our products at a price that reflects such increased costs or have to increase the prices of our products because of such increased costs, there could be a material adverse effect on our business, financial condition, results of operations and cash flows.
+Added: End user demand for our products may also be adversely impacted by climate change legislation and other changes to or new interpretations of environmental laws, due to increased costs or application restrictions.
From time to time, various state legislatures have proposed bans or other limitations on fertilizer products.
Decreased demand for our products may have a material adverse effect on our results of operations, financial condition and cash flows.
−Removed: December 31, 2019 | 14
Our operations are dependent on third-party suppliers, which could have a material adverse effect on our results of operations, financial condition and cash flows.
−Removed: Operations of our Coffeyville Facility depend in large part on the performance of third-party suppliers, and the operations of the Coffeyville Facility could be adversely affected if the operation of the third-party air separation plant located adjacent to it were disrupted.
−Removed: Additionally, this air separation plant has experienced numerous short-term interruptions in the past, causing interruptions in our gasifier operations.
−Removed: With respect to electricity, we are party to an electric services agreement with a third-party supplier through June 30, 2029.
−Removed: Our East Dubuque Facility operations also depend in large part on the performance of third-party suppliers, including for the purchase of electricity.
−Removed: We entered into a utility service agreement, which terminates on June 1, 2022 and will continue year-to-year thereafter unless either party provides 12-month advance written notice of termination.
−Removed: Should any of our other third-party suppliers fail to perform in accordance with existing contractual arrangements, or should we otherwise lose the service of any third-party suppliers, our operations (or a portion thereof) could be forced to halt.
+Added: Operations of our Coffeyville Facility depend in large part on the performance of third-party suppliers, including the adjacent third-party air separation plant and a third-party electric service provider under a contract through June 30, 2029.
+Added: Our East Dubuque Facility operations also depend in large part on the performance of third-party suppliers, including for the purchase of electricity, which we purchase under a utility service agreement that terminates on June 1, 2022 and will continue year-to-year thereafter unless either party provides 12-month advance written notice of termination.
+Added: Should these, or any of our other third-party suppliers fail to perform in accordance with existing contractual arrangements, or should we lose the service of any third-party suppliers, our operations (or a portion thereof) could be forced to halt.
Alternative sources of supply could be difficult to obtain.
Any shutdown of our operations (or a portion thereof), even for a limited period, could have a material adverse effect on our results of operations, financial condition and ability to make cash distributions.
−Removed: We rely on third-party providers of transportation services and equipment, which subjects us to risks and uncertainties beyond our control that may have a material adverse effect on our results of operations, financial condition and ability to make distributions.
−Removed: Our business relies on railroad and trucking companies to ship finished products to customers of the Coffeyville Facility.
−Removed: We also lease railcars from railcar owners to ship its finished products.
−Removed: Additionally, although customers of the East Dubuque Facility generally pick up products at the facility, the facility occasionally relies on barge, truck and railroad companies to ship products to customers.
−Removed: These transportation operations, equipment and services are subject to various hazards, including extreme weather conditions, work stoppages, delays, spills, derailments and other accidents, and other operating hazards.
+Added: We rely on third-party providers of transportation services and equipment, which subjects us to risks and uncertainties beyond our control and that may have a material adverse effect on our results of operations, financial condition and ability to make distributions.
+Added: Our business also relies on third-party railroad, trucking, and barge companies to ship finished products to customers.
+Added: These transportation services are subject to various hazards, including extreme weather conditions, work stoppages, delays, spills, derailments and other accidents, and other operating hazards.
Further, the limited number of towing companies and barges available for ammonia transport may also impact the availability of transportation for our products.
3 unchanged sentences
Any delay in our ability to ship our finished products as a result of these transportation companies’ failure to operate properly, the implementation of new and more stringent regulatory requirements affecting transportation operations or equipment, or significant increases in the cost of these services or equipment could have a material adverse effect on our results of operations, financial condition and ability to make cash distributions.
−Removed: Ammonia can be very volatile and extremely hazardous.
Any liability for accidents involving ammonia or other products we produce or transport that cause severe damage to property or injury to the environment and human health could have a material adverse effect on our results of operations, financial condition and ability to make cash distributions.
−Removed: In addition, the costs of transporting ammonia could increase significantly in the future.
Our business manufactures, processes, stores, handles, distributes and transports ammonia, which can be very volatile and extremely hazardous.
2 unchanged sentences
Any damage or injury to persons, equipment, or property or other disruption of our ability to produce or distribute products could result in a significant decrease in operating revenues and significant additional costs to replace or repair and insure our assets, which could have a material adverse effect on our results of operations, financial condition and ability to make cash distributions.
−Removed: Our facilities periodically experience minor releases of ammonia related to leaks from our facilities’ equipment.
−Removed: Similar events may occur in the future.
−Removed: In addition, we may incur significant losses or costs relating to the operation of railcars used for the purpose of carrying various products, including ammonia.
−Removed: Due to the dangerous and potentially hazardous nature of the cargo, in particular
December 31, 2020 | 16
−Removed: ammonia, a railcar accident may result in fires, explosions, and releases of material which could lead to sudden, severe damage or injury to property, the environment, and human health.
+Added: facilities periodically experience minor releases of ammonia related to leaks from our facilities’ equipment.
+Added: Similar events may occur in the future.
+Added: In addition, we may incur significant losses or increased costs relating to the operation of railcars used for the purpose of carrying various products, including ammonia.
+Added: Due to the dangerous and potentially hazardous nature of the cargo, in particular ammonia, a railcar accident may result in fires, explosions, and releases of material which could lead to sudden, severe damage or injury to property, the environment, and human health.
In the event of contamination, under environmental law, we may be held responsible even if we are not at fault, and we complied with the laws and regulations in effect at the time of the accident.
Litigation arising from accidents involving ammonia and other products we produce or transport may result in us being named as a defendant in lawsuits asserting claims for substantial damages, which could have a material adverse effect on our results of operations, financial condition and ability to make cash distributions.
−Removed: We could incur significant costs in cleaning up contamination at our fertilizer plants and off-site locations.
−Removed: Our businesses handle hazardous substances which may result in spills, discharges or other releases of hazardous substances into the environment.
−Removed: Past or future spills related to any of our current or former operations, including fertilizer plants, or transportation of products or hazardous substances from those facilities, may give rise to liability (including strict liability, or liability without fault, and potential cleanup responsibility) to governmental entities or private parties under federal, state or local environmental laws, as well as under common law.
−Removed: For example, we could be held strictly liable under CERCLA, and similar state statutes, for past or future spills without regard to fault or whether our actions were in compliance with the law at the time of the spills.
−Removed: Pursuant to CERCLA and similar state statutes, we could be held liable for contamination associated with facilities we currently own or operate (whether such contamination occurred prior to or during our ownership), facilities we formerly owned or operated, and facilities to which we transported or arranged for the transportation of wastes or byproducts containing hazardous substances for treatment, storage, or disposal.
−Removed: If significant unknown contamination is identified at or migrating from any of our facilities, the associated liability could have a material adverse effect on our results of operations, financial condition and cash flows and may not be covered by insurance.
−Removed: The potential penalties and cleanup costs for past or future releases or spills, liability to third parties for damage to their property or exposure to hazardous substances, or the need to address newly discovered information or conditions that may require response actions could be significant and could have a material adverse effect on our results of operations, financial condition and cash flows.
−Removed: In addition, we may incur liability for alleged personal injury or property damage due to exposure to chemicals or other hazardous substances located at or released from our facilities.
−Removed: We may also face liability for personal injury, property damage, natural resource damage, or cleanup costs for the alleged migration of contamination or other hazardous substances from our facilities to adjacent and other nearby properties.
+Added: We could incur significant costs in cleaning up contamination.
+Added: We handle hazardous substances which may result in spills, discharges or other releases of hazardous substances into the environment.
+Added: Past or future spills related to or migrating from any of our current or former operations and solid or hazardous waste disposal, may give rise to liability (including for personal injury, property damage, penalties, strict liability, and potential cleanup responsibility) to governmental entities or private parties under federal, state or local environmental laws, as well as under common law.
+Added: For example, we could be held strictly liable under CERCLA, and similar state statutes, for past or future spills without regard to fault or whether our actions were in compliance with the law at the time of the spills, including in connection with contamination associated with our current and former facilities, and facilities to which we transported or arranged for the transportation of wastes or byproducts containing hazardous substances for treatment, storage, or disposal.
+Added: Such liability could have a material adverse effect on our results of operations, financial condition and cash flows and may not be covered by insurance.
We have assumed the previous owner’s responsibilities under certain administrative orders under the Resource Conservation and Recovery Act (“RCRA”) related to contamination that migrated from CVR Energy’s Coffeyville refinery onto the nitrogen fertilizer plant property while the previous owner owned and operated the properties.
We continue to work with the applicable governmental authorities to implement remediation of these sites on a timely basis.
−Removed: We may incur future liability relating to the off-site disposal of hazardous waste from our facilities.
−Removed: Companies that dispose of, or arrange for the treatment, transportation or disposal of, hazardous substances at off-site locations may be held jointly and severally liable for the costs of investigation and remediation of contamination at those off-site locations, regardless of fault.
−Removed: We could become involved in litigation or other proceedings involving off-site waste disposal and the damages or costs in any such proceedings could be material.
We may be unable to obtain or renew permits or approvals necessary for our operations, which could inhibit our ability to do business.
−Removed: Our business holds numerous environmental and other governmental permits and approvals authorizing operations at our facilities.
−Removed: Future expansion of our operations is predicated upon securing the necessary environmental or other permits or approvals.
+Added: Our business holds numerous environmental and other governmental permits and approvals authorizing operations at our facilities and future expansion of our operations is predicated upon the ability to secure approvals therefore.
A decision by a government agency to deny or delay issuing a new or renewed material permit or approval, or to revoke or substantially modify an existing permit or approval, could have a material adverse effect on our ability to continue operations and on our financial condition, results of operations and cash flows.
New regulations concerning the transportation, storage and handling of hazardous chemicals, risks of terrorism, and the security of chemical manufacturing facilities could result in higher operating and/or capital costs.
−Removed: The costs of complying with future regulations relating to the transportation, storage, and handling of hazardous chemicals and security associated with our facilities may have a material adverse effect on our results of operations, financial condition and cash flows.
−Removed: Targets such as chemical manufacturing facilities may be at greater risk of future terrorist attacks than other
−Removed: December 31, 2019 | 16
−Removed: targets in the United States.
−Removed: As a result, the chemical industry has initiatives relating to the security of chemical industry facilities and the transportation of hazardous chemicals in the United States.
−Removed: Future terrorist attacks could lead to even stronger, more costly initiatives that could result in a material adverse effect on our results of operations, financial condition and cash flows.
−Removed: Changes to regulations or requirements for the transportation, storage, and handling of hazardous chemicals could also require additional capital investments, which could have a material adverse effect on our financial condition.
−Removed: Our facilities face significant risks due to physical damage hazards, environmental liability risk exposure, and unplanned or emergency partial or total plant shutdowns resulting in business interruptions.
−Removed: We could incur potentially significant costs to the extent there are unforeseen events which cause property damage and a material decline in production which are not fully insured.
−Removed: The commercial insurance industry engaged in underwriting energy industry risk is specialized and there is finite capacity;
−Removed: therefore, the industry may limit or curtail coverage, may modify the coverage provided, or may substantially increase premiums in the future.
−Removed: If any of our plants, logistics assets, or key suppliers sustains a catastrophic loss and operations are shutdown or significantly impaired, it would have a material adverse impact on our operations, financial condition and cash flows.
−Removed: In addition, the risk exposures we have at the Coffeyville, Kansas plant complex are greater due to production facilities for CVR Energy’s refinery and our fertilizer production, distribution, and storage being in relatively close proximity and potentially exposed to damage from one incident.
+Added: Targets such as chemical manufacturing facilities may be at greater risk of future terrorist attacks than other targets in the U.S.
+Added: As a result, the chemical industry has initiatives relating to the security of chemical industry facilities and the transportation of hazardous chemicals in the U.S., and the costs of compliance therewith may have a material adverse effect on our financial condition.
+Added: Our facilities face significant risks due to physical damage hazards, environmental liability risk exposure, and unplanned or emergency partial or total plant shutdowns which could cause property damage and a material decline in production which are not fully insured.
+Added: If any of our plants, logistics assets, or key suppliers sustain a catastrophic loss and operations are shutdown or significantly impaired, it would have a material adverse impact on our operations, financial condition and cash flows.
Operations at our plant could be curtailed, limited or completely shut down for an extended period of time as the result of one or more unforeseen events and circumstances, which may not be within our control, including:
2 unchanged sentences
labor supply shortages or labor difficulties that result in a work stoppage or slowdown;
−Removed: • cessation or suspension of a plant or specific operations dictated by environmental authorities;
+Added: cessation or suspension of a plant or specific operations dictated by
+Added: December 31, 2020 | 17
+Added: environmental authorities;
acts of terrorism or other deliberate malicious acts;
−Removed: • an event or incident involving a large clean-up, decontamination, or the imposition of laws and ordinances regulating the cost and schedule of demolition or reconstruction, which can cause significant delays in restoring property to its pre-event condition.
−Removed: We have sustained losses over the past ten-year period at our facilities, which are illustrative of the types of risks and hazards that exist.
−Removed: These losses or events resulted in costs assumed by us that were not fully insured due to policy retention or applicable exclusions.
+Added: and an event or incident involving a large clean-up, decontamination, or the imposition of laws and ordinances regulating the cost and schedule of demolition or reconstruction, which can cause significant delays in restoring property to its pre-event condition.
We are insured under casualty, environmental, property and business interruption insurance policies.
−Removed: The property and business interruption policies insure real and personal property, including property located at our plants.
−Removed: There is potential for a common occurrence to impact both our Coffeyville Facility and CVR Energy’s Coffeyville refinery in which case the insurance limits and applicable sub-limits would apply to all damages combined.
+Added: The property and business interruption policies insure our real and personal property.
These policies are subject to limits, sub-limits, retention (financial and time-based), and deductibles.
+Added: There is potential for a common occurrence to impact both our Coffeyville Facility and CVR Energy’s Coffeyville refinery in which case the insurance limits and applicable sub-limits would apply to all damages combined.
The application of these and other policy conditions could materially impact insurance recoveries and potentially cause us to assume losses which could impair earnings.
1 unchanged sentence
Factors that impact insurance cost and availability include, but are not limited to:
−Removed: losses in our industry and other industries, such as chemical and petroleum refining, natural disasters, specific losses incurred by us, and low or inadequate investment returns earned by the insurance industry.
+Added: losses in our industry and other industries, natural disasters, specific losses incurred by us, and low or inadequate investment returns earned by the insurance industry.
If the supply of commercial insurance is curtailed due to highly adverse financial results, we may not be able to continue our present limits of insurance coverage or obtain sufficient insurance capacity to adequately insure our risks for property damage or business interruption.
We are subject to strict laws and regulations regarding employee and process safety, and failure to comply with these laws and regulations could have a material adverse effect on our results of operations, financial condition and profitability.
−Removed: December 31, 2019 | 17
We are subject to the requirements of OSHA and comparable state statutes that regulate the protection of the health and safety of workers, the proper design, operation, and maintenance of our equipment, and require us to provide information about hazardous materials used in our operations.
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Risks Related to Our Capital Structure
−Removed: Internally generated cash flows and other sources of liquidity may not be adequate for the capital needs of our business.
−Removed: Our business is capital intensive, and working capital needs may vary significantly over relatively short periods of time.
−Removed: For instance, nitrogen fertilizer demand volatility can significantly impact working capital on a week-to-week and month-to-month basis.
−Removed: If we cannot generate adequate cash flow or otherwise secure sufficient liquidity to meet our working capital needs or support our short-term and long-term capital requirements, we may be unable to meet our debt obligations, pursue our business strategies, or comply with certain environmental standards, which would have a material adverse effect on our business and results of operations.
Instability and volatility in the capital, credit, and commodity markets in the global economy could negatively impact our business, financial condition, results of operations and cash flows.
Our business, financial condition and results of operations could be negatively impacted by difficult conditions and volatility in the capital, credit, and commodities markets and in the global economy.
−Removed: • Although we believe we have sufficient liquidity under our AB credit facility to run the business, there can be no assurance that such funds would be available or sufficient, and in such a case, we may not be able to successfully obtain additional financing on favorable terms, or at all.
+Added: there can be no assurance that funds under our credit facilities will be available or sufficient, and in such a case, we may not be able to successfully obtain additional financing on favorable terms, or at all;
market volatility could exert downward pressure on our common units, which may make it more difficult for us to raise additional capital and thereby limit our ability to grow, which could in turn cause our unit price to drop;
−Removed: • Market conditions could result in significant customers experiencing financial difficulties.
−Removed: We are exposed to the credit risk of our customers, and their failure to meet their financial obligations when due because of bankruptcy, lack of liquidity, operational failure or other reasons could result in decreased sales and earnings for us.
−Removed: Our level of indebtedness, including the restrictive covenants therein, may affect our ability to operate our business, and may have a material adverse effect on our financial condition and results of operations.
+Added: or customers experiencing financial difficulties may fail to meet their financial obligations when due because of bankruptcy, lack of liquidity, operational failure or other reasons could result in decreased sales and earnings for us.
+Added: Our level of indebtedness may affect our ability to operate our business and may have a material adverse effect on our financial condition and results of operations.
We have incurred significant indebtedness, and we may be able to incur significant additional indebtedness in the future.
1 unchanged sentence
Our level of indebtedness could have important consequences, such as:
−Removed: • limiting our ability to obtain additional financing to fund our working capital needs, capital expenditures, debt service requirements, acquisitions, or other purposes;
−Removed: • requiring us to utilize a significant portion of our cash flows to service our indebtedness, thereby reducing available cash and our ability to make distributions on our common units;
−Removed: • limiting our ability to use operating cash flow in other areas of the business because we must dedicate a substantial portion of additional funds to service debt;
−Removed: • limiting our ability to compete with other companies who are not as highly leveraged, as we may be less capable of responding to adverse economic and industry conditions;
−Removed: • limiting our ability to make certain payments on debt that is subordinated or secured on a junior basis;
+Added: (i) limiting our ability to obtain additional financing to fund our working capital needs, capital expenditures, debt service requirements, acquisitions, or other purposes;
+Added: (ii) requiring us to utilize a significant portion of our cash flows to service our indebtedness, thereby reducing available cash and our ability to make distributions on
December 31, 2020 | 18
−Removed: • restricting us from making strategic acquisitions or investments, introducing new technologies, or exploiting business opportunities;
−Removed: • restricting the way in which we conduct business because of financial and operating covenants in the agreements governing our and our respective subsidiaries’ existing and future indebtedness, including, in the case of certain indebtedness of subsidiaries, certain covenants that restrict the ability of subsidiaries to pay dividends or make other distributions;
−Removed: • limiting our ability to enter into certain transactions with our affiliates;
−Removed: • limiting our ability to designate our subsidiaries as unrestricted subsidiaries;
−Removed: • exposing us to potential events of default (if not cured or waived) under financial and operating covenants contained in our or our respective subsidiaries’ debt instruments that could have a material adverse effect on our business, financial condition and operating results;
−Removed: • increasing our vulnerability to a downturn in general economic conditions or in pricing of products;
−Removed: • limiting our ability to react to changing market conditions in our respective industries and in respective customers’ industries.
+Added: our common units;
+Added: (iii) limiting our ability to use operating cash flow in other areas of the business because we must dedicate a substantial portion of additional funds to service debt;
+Added: (iv) limiting our ability to compete with other companies who are not as highly leveraged, as we may be less capable of responding to adverse economic and industry conditions;
+Added: (v) limiting our ability to make certain payments on debt that is subordinated or secured on a junior basis;
+Added: (vi) restricting the way in which we conduct business because of financial and operating covenants, including regarding the ability of subsidiaries to pay dividends or make other distributions;
+Added: (vii) limiting our ability to enter into certain transactions with our affiliates;
+Added: (viii) limiting our ability to designate our subsidiaries as unrestricted subsidiaries;
+Added: (ix) exposing us to potential events of default (if not cured or waived) under financial and operating covenants contained in our or our respective subsidiaries’ debt instruments;
+Added: and (x) limiting our ability to react to changing market conditions.
Further, we are and will be subject to covenants contained in agreements governing present and future indebtedness.
2 unchanged sentences
We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other actions to satisfy our debt obligations that may not be successful.
−Removed: Our ability to satisfy debt obligations will depend upon, among other things:
−Removed: • our future financial and operating performance, which will be affected by prevailing economic conditions and financial, business, regulatory, and other factors, many of which are beyond our control;
−Removed: • our future ability to obtain other financing.
−Removed: We cannot offer any assurance that our business will generate sufficient cash flow from operations or that we will be able to draw funds under our AB credit facility or otherwise, or from other sources of financing, in an amount sufficient to fund our respective liquidity needs.
+Added: Our ability to satisfy debt obligations will depend upon, among other things our future financial and operating performance, which will be affected by prevailing economic conditions and financial, business, regulatory, and other factors, many of which are beyond our control;
+Added: and our future ability to obtain other financing.
+Added: We cannot offer any assurance that our business will generate sufficient cash flow from operations or that we will be able to draw funds under our ABL Credit Facility or from other sources of financing, in an amount sufficient to fund our respective liquidity needs.
If cash flows and capital resources are insufficient to service our indebtedness, we could face substantial liquidity problems and may be forced to reduce or delay capital expenditures, sell assets, seek additional capital, restructure or refinance indebtedness, or seek bankruptcy protection.
2 unchanged sentences
Any refinancing of debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict business operations, and the terms of existing or future debt agreements may restrict us from adopting some of these alternatives.
−Removed: Further, our AB credit facility bears interest at variable rates and other debt we incur could likewise be variable-rate debt.
+Added: Further, our ABL Credit Facility bears interest at variable rates and other debt we incur could likewise be variable-rate debt.
If market interest rates increase, variable-rate debt will create higher debt service requirements, which could adversely affect our ability to fund our liquidity needs, capital investments, and distributions to our unitholders.
1 unchanged sentence
Icahn exerts significant influence over the Partnership through his controlling ownership of CVR Energy, and his interests may conflict with the interests of the Partnership and our unitholders.
−Removed: Icahn indirectly controls approximately 71% of the voting power of CVR Energy’s common stock and, by virtue of such ownership, is able to control or exert substantial influence over the Partnership through CVR Energy’s ownership of our general partner and its sole member, including:
+Added: Icahn indirectly controls approximately 71% of the voting power of CVR Energy’s common stock and, by virtue of such ownership, is able to control the Partnership through CVR Energy’s ownership of our general partner and its sole member, including:
the election and appointment of directors;
1 unchanged sentence
mergers or other business combinations;
−Removed: December 31, 2019 | 19
acquisition or disposition of assets;
1 unchanged sentence
incurrence of debt or obtaining other sources of financing;
−Removed: • the payment of distributions on our common units.
+Added: and the payment of distributions on our common units.
The existence of a controlling stockholder may have the effect of making it difficult for, or may discourage or delay, a third-party from seeking to acquire a majority of our common units, which may adversely affect the market price of such common units.
4 unchanged sentences
Icahn and his affiliates, those conflicts may be resolved in a manner adverse to us and our common unitholders.
+Added: December 31, 2020 | 19
Risks Related to Our Limited Partnership Structure
−Removed: We have a policy to distribute an amount equal to the “available cash” we generate each quarter, which could limit our ability to grow and make acquisitions .
−Removed: However, w e may not have sufficient available cash to pay any quarterly distribution on common units or the board of directors of our general partner may elect to distribute less than all of our available cash.
−Removed: The current policy of the board of directors of our general partner is to distribute an amount equal to the available cash generated by our business each quarter to our common unitholders.
−Removed: As a result of its cash distribution policy, we will likely need to rely primarily upon external financing sources, including commercial bank borrowings and the issuance of debt and equity securities, to fund acquisitions and expansion capital expenditures.
+Added: We may not have sufficient “available cash” to pay any quarterly distribution on common units or the Board may elect to distribute less than all of our available cash.
+Added: The current policy of the board of directors of our general partner (“Board”) is to distribute an amount equal to the available cash generated by our business each quarter to our common unitholders.
+Added: As a result of its cash distribution policy, we will likely need to rely primarily upon external financing sources, including commercial bank borrowings and the issuance of debt and equity securities, to fund acquisitions and expansion capital expenditures, and our growth, if any, may not be as robust as that of businesses that reinvest available cash to expand ongoing operations.
We may not have sufficient available cash each quarter to enable the payment of distributions to common unitholders.
Furthermore, the partnership agreement does not require us to pay distributions on a quarterly basis or otherwise.
−Removed: As such, the board of directors of our general partner may modify or revoke its cash distribution policy at any time at its discretion, including in such a manner that would result in an elimination of cash distributions regardless of the amount of available cash our business generates.
−Removed: In addition, because of its distribution policy, our growth, if any, may not be as robust as that of businesses that reinvest their available cash to expand ongoing operations.
+Added: As such, the Board may modify or revoke its cash distribution policy at any time at its discretion, including in such a manner that would result in an elimination of cash distributions regardless of the amount of available cash our business generates.
To the extent we issue additional units in connection with any acquisitions or expansion capital expenditures or as in-kind distributions, current unitholders would experience dilution and the payment of distributions on those additional units may decrease the amount we distribute in respect of its outstanding units.
5 unchanged sentences
the relative voting strength of each previously outstanding common unit will be diminished;
−Removed: • the market price of the common units may decline.
+Added: and the market price of the common units may decline.
In addition, our partnership agreement does not prohibit the issuance by our subsidiaries of equity interests, which may effectively rank senior to the common units.
1 unchanged sentence
Our partnership agreement has limited our general partner’s liability, replaces default fiduciary duties, and restricts the remedies available to common unitholders for actions that, without these limitations and reductions, might otherwise constitute breaches of fiduciary duty.
−Removed: December 31, 2019 | 20
−Removed: Our partnership agreement limits the liability and replaces the fiduciary duties of our general partner, while also restricting the remedies available to our common unitholders for actions that, without these limitations and reductions, might constitute breaches of fiduciary duty.
−Removed: Delaware partnership law permits such contractual reductions of fiduciary duty.
+Added: As permitted under Delaware law, our partnership agreement, which applies to and binds common unitholders, limits the liability and replaces the fiduciary duties of our general partner, while also restricting the remedies available to our common unitholders for actions that, without these limitations and reductions, might constitute breaches of fiduciary duty.
The partnership agreement contains provisions that replace the standards to which our general partner would otherwise be held by state fiduciary duty law.
−Removed: • The partnership agreement permits our general partner to make a number of decisions in its individual capacity, as opposed to its capacity as general partner.
−Removed: This entitles our general partner to consider only the interests and factors that it desires and means that it has no duty or obligation to give any consideration to any interest of, or factors affecting, any limited partner.
−Removed: • The partnership agreement provides that our general partner will not have any liability to unitholders for decisions made in its capacity as general partner so long as it acted in good faith, meaning it believed the decision was in our best interest.
−Removed: • The partnership agreement provides that our general partner and the officers and directors of its general partner will not be liable for monetary damages to common unitholders, including us, for any acts or omissions unless there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining that the general partner or its officers or directors acted in bad faith or engaged in fraud or willful misconduct, or in the case of a criminal matter, acted with knowledge that the conduct was criminal.
−Removed: • The partnership agreement generally provides that affiliated transactions and resolutions of conflicts of interest not approved by the conflicts committee of the board of directors of its general partner and not involving a vote of unitholders must be on terms no less favorable to us than those generally being provided to or available from unrelated third parties or be “fair and reasonable” to us, as determined by its general partner in good faith, and that, in determining whether a transaction or resolution is “fair and reasonable,” the general partner may consider the totality of the relationships between the parties involved, including other transactions that may be particularly advantageous or beneficial to affiliated parties, including us.
−Removed: • The partnership agreement provides that in resolving conflicts of interest, it will be presumed that in making its decision, the general partner or its conflicts committee acted in good faith, and in any proceeding brought by or on behalf of any holder of common units, the person bringing or prosecuting such proceeding will have the burden of overcoming such presumption.
−Removed: By purchasing a common unit, a common unitholder agrees to be bound by the provisions set forth in the partnership agreement, including the provisions described above.
+Added: (i) the partnership agreement permits our general partner to make a number of decisions in its individual capacity, as opposed to its capacity as general partner, which entitles our general partner to consider only the interests and factors that it desires and means that it has no duty or obligation to give any consideration to any interest of, or factors affecting, any limited partner;
+Added: (ii) the partnership agreement provides that our general partner will not have any liability to unitholders for decisions made in its capacity as general partner so long as it acted in good faith, meaning it believed the decision was in our best interest;
+Added: (iii) the partnership agreement provides that our general partner and the officers and directors of its general partner will not be liable for monetary damages to common unitholders, including us, for any acts or omissions unless there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining that the general partner or its officers or directors acted in bad faith or engaged in fraud or willful misconduct, or in the case of a criminal matter, acted with knowledge that the conduct was criminal;
+Added: (iv) the partnership agreement generally provides that affiliated transactions and resolutions of conflicts of interest not approved by the conflicts committee of the board of directors of its general partner and not involving a vote of unitholders must be on terms no less favorable to us than those generally being provided to or available from unrelated third parties or be “fair and reasonable” to us, as determined by its general partner in good faith, and that, in determining whether a transaction or resolution is “fair and reasonable,” the general partner may consider the totality of the relationships between the parties involved, including other transactions that may be particularly advantageous or beneficial to affiliated parties, including us;
+Added: and (v) the partnership agreement provides that in resolving conflicts of interest, it will be presumed that in making its decision, the general partner or its conflicts committee acted in good faith, and in any proceeding brought by or on behalf of any holder of common units, the person bringing or prosecuting such proceeding will have the burden of overcoming such presumption.
+Added: December 31, 2020 | 20
Our general partner, an indirect wholly-owned subsidiary of CVR Energy, has fiduciary duties to CVR Energy and its stockholders, and the interests of CVR Energy and its stockholders may differ significantly from, or conflict with, the interests of our public common unitholders.
1 unchanged sentence
Although our general partner has fiduciary duties to manage us in a manner that is in our best interests, the fiduciary duties are specifically limited by the express terms of our partnership agreement, and the directors and officers of our general partner also have fiduciary duties to manage our general partner in a manner beneficial to CVR Energy and its stockholders.
−Removed: The interests of CVR Energy and its stockholders may differ from, or conflict with, the interests of our public common unitholders.
−Removed: In resolving these conflicts, our general partner may favor its own interests, the interests of CRLLC, its sole member, or the interests of CVR Energy and holders of CVR Energy’s common stock, including its majority stockholder, an affiliate of Icahn Enterprises L.P., over our interests and those of our common unitholders.
+Added: The interests of CVR Energy and its stockholders may conflict with, the interests of our public common unitholders.
+Added: In resolving these conflicts, our general partner may favor its own interests, the interests of CVR Services, its sole member, or the interests of CVR Energy and holders of CVR Energy’s common stock, including its majority stockholder, an affiliate of Icahn Enterprises L.P., over our interests and those of our common unitholders..
The potential conflicts of interest include, among others, the following:
−Removed: • Neither our partnership agreement nor any other agreement requires the owners of our general partner, including CVR Energy, to pursue a business strategy that favors us.
−Removed: The affiliates of our general partner, including CVR Energy, have fiduciary duties to make decisions in their own best interests and in the best interest of holders of CVR Energy’s common stock, which may be contrary to our interests.
−Removed: In addition, our general partner is allowed to take into account the interests of parties other than us or our common unitholders, such as its owners or CVR Energy, in resolving conflicts of interest, which has the effect of limiting its fiduciary duty to our common unitholders.
−Removed: • Our general partner has limited its liability and reduced its fiduciary duties under our partnership agreement and has also restricted the remedies available to our common unitholders for actions that, without the limitations, might
−Removed: December 31, 2019 | 21
−Removed: constitute breaches of fiduciary duty.
−Removed: As a result of purchasing common units, common unitholders consent to some actions and conflicts of interest that might otherwise constitute a breach of fiduciary or other duties under applicable state law.
−Removed: • The board of directors of our general partner determines the amount and timing of asset purchases and sales, capital expenditures, borrowings, repayment of indebtedness, and issuances of additional partnership interests, each of which can affect the amount of cash that is available for distribution to our common unitholders.
−Removed: • Our partnership agreement does not restrict our general partner from causing us to pay it or its affiliates for any services rendered to us or entering into additional contractual arrangements with any of these entities on our behalf.
−Removed: There is no limitation on the amounts our general partner can cause us to pay it or its affiliates.
−Removed: • Our general partner controls the enforcement of obligations owed to us by it and its affiliates.
−Removed: In addition, our general partner decides whether to retain separate counsel or others to perform services for us.
−Removed: • Our general partner determines which costs incurred by it and its affiliates are reimbursable by us.
−Removed: • Certain of the executive officers of our general partner also serve as executive officers of CVR Energy, and our executive chairman is the chief executive officer of CVR Energy.
−Removed: The executive officers who work for both CVR Energy and our general partner, including our chief financial officer, chief accounting officer, and general counsel, divide their time between our business and the business of CVR Energy.
−Removed: These executive officers will face conflicts of interest from time to time in making decisions which may benefit either us or CVR Energy.
+Added: (i) neither our partnership agreement nor any other agreement requires the owners of our general partner, including CVR Energy, to pursue a business strategy that favors us and the affiliates of our general partner, including CVR Energy, have fiduciary duties to make decisions in their own best interests and in the best interest of holders of CVR Energy’s common stock, which may be contrary to our interests (ii) our general partner is allowed to take into account the interests of parties other than us or our common unitholders, such as its owners or CVR Energy, in resolving conflicts of interest, which has the effect of limiting its fiduciary duty to our common unitholders;
+Added: (iii) our general partner has limited its liability and reduced its fiduciary duties under our partnership agreement and has also restricted the remedies available to our common unitholders for actions that, without the limitations, might constitute breaches of fiduciary duty;
+Added: (iv) the Board determines the amount and timing of asset purchases and sales, capital expenditures, borrowings, repayment of indebtedness, and issuances of additional partnership interests, each of which can affect the amount of cash that is available for distribution to our common unitholders;
+Added: (v) our partnership agreement does not restrict our general partner from causing us to pay it or its affiliates for any services rendered to us or entering into additional contractual arrangements with any of these entities on our behalf and there is no limitation on the amounts that can be paid;
+Added: (vi) our general partner controls the enforcement of obligations owed to us by it and its affiliates, and decides whether to retain separate counsel or others to perform services for us;
+Added: (vii) our general partner determines which costs incurred by it and its affiliates are reimbursable by us;
+Added: and (viii) certain of the executive officers of our general partner also serve as executive officers of CVR Energy, including our executive chairman, who will face conflicts of interest when making decisions which may benefit either us or CVR Energy.
Additionally, the compensation of such executive officers is set by CVR Energy, and we have no control over the amount paid to such officers.
−Removed: CVR Energy has the power to elect all of the members of the board of directors of our general partner.
+Added: CVR Energy has the power to elect all of the members of the Board.
Our general partner has control over all decisions related to our operations.
Our public common unitholders do not have an ability to influence any operating decisions and will not be able to prevent us from entering into any transactions.
−Removed: Furthermore, the goals and objectives of CVR Energy, as the indirect owner of our general partner, may not be consistent with those of our public common unitholders.
Certain subsidiaries of CVR Energy perform certain corporate services for us, including finance, accounting, legal, information technology, auditing, and cash management activities, and we could be impacted by any failure of those entities to adequately perform these services.
If at any time our general partner and its affiliates own more than 80% of the common units, our general partner will have the right, which it may assign to any of its affiliates or to us, but not the obligation, to acquire all, but not less than all, of the common units held by public common unitholders at a price not less than their then-current market price, as calculated pursuant to the terms of our partnership agreement.
−Removed: As a result, each holder of our common units may be required to sell such holder’s common units at an undesirable time or price and may not receive any return on investment.
−Removed: A common unitholder may also incur a tax liability upon a sale of its common units.
+Added: As a result, each holder of our common units may be required to sell such holder’s common units at an undesirable time or price and may not receive any return on investment, and may also incur a tax liability upon a sale of its common units.
Our general partner is not obligated to obtain a fairness opinion regarding the value of the common units to be repurchased by it upon exercise of the call right.
1 unchanged sentence
Our general partner may use its own discretion, free of fiduciary duty restrictions, in determining whether to exercise this right..
−Removed: Our general partner may transfer its general partner interest in us to a third-party in a merger or in a sale of all or substantially all of its assets without the consent of our common unitholders.
−Removed: Furthermore, there is no restriction in our partnership agreement on the ability of CVR Energy to transfer its equity interest in our general partner to a third-party.
−Removed: The new equity owner of our general partner would then be in a position to replace the board of directors and the officers of our general partner with its own choices and to influence the decisions taken by the board of directors and officers of our general partner.
−Removed: If control of our general partner were transferred to an unrelated third-party, the new owner of the general partner would have no interest in CVR Energy.
−Removed: We rely on the senior management team of CVR Energy and are party to a services agreement pursuant to which CVR Energy provides us with the services of its senior management team.
−Removed: If our general partner were no longer controlled by CVR Energy, CVR Energy could be more likely to terminate the services agreement, which it may do upon 180 days’ notice.
−Removed: As a publicly traded partnership we qualify for certain exemptions from many of the NYSE’s corporate governance requirements.
−Removed: As a publicly traded partnership, we qualify for certain exemptions from the NYSE’s corporate governance requirements, which include the requirements that (i) a majority of the board of directors of our general partner consist of independent
+Added: Our general partner may transfer its general partner interest in us to a third-party, including in a merger or in a sale of all or substantially all of its assets without the consent of our common unitholders.
+Added: The new equity owner of our general partner would then be in a position to replace the board of directors and the officers of our general partner with its own choices and to influence their decisions.
+Added: If control of our general partner were transferred to an unrelated third-party, the new owner would have no interest in CVR Energy and CVR Energy could, upon 90 days’ notice, terminate the services agreement pursuant to which it provides us with the services of its senior management team.
December 31, 2020 | 21
−Removed: directors and (ii) the requirement that the board of directors of our general partner have a nominating/corporate governance committee and compensation committee that are composed entirely of independent directors.
−Removed: Our general partner’s board of directors has not and does not currently intend to establish a nominating/corporate governance committee.
−Removed: Additionally, we could avail ourselves of the additional exemptions available to publicly traded partnerships listed above at any time in the future.
+Added: As a publicly traded partnership we qualify for certain exemptions from many of the NYSE’s corporate governance requirements.
+Added: As a publicly traded partnership, we qualify for certain exemptions from the NYSE’s corporate governance requirements, which include the requirements that (i) a majority of the Board consist of independent directors and (ii) the Board have a nominating/corporate governance committee and compensation committee that are composed entirely of independent directors.
+Added: Our general partner’s board of directors has not and does not currently intend to establish a nominating/corporate governance committee and we could avail ourselves of the additional exemptions available to publicly traded partnerships at any time in the future.
Accordingly, common unitholders do not have the same protections afforded to equity holders of companies that are subject to all of the corporate governance requirements of the NYSE.
Our public common unitholders have limited voting rights and are not entitled to elect our general partner or our general partner’s directors and do not have sufficient voting power to remove our general partner without CVR Energy’s consent.
−Removed: Unlike the holders of common stock in a corporation, our common unitholders have only limited voting rights on matters affecting our business and, therefore, limited ability to influence management’s decisions regarding our business.
−Removed: The board of directors of our general partner, including the independent directors, is chosen entirely by CVR Energy as the indirect owner of the general partner and not by our common unitholders.
−Removed: Unlike publicly traded corporations, we do not hold annual meetings of our common unitholders to elect directors or conduct other matters routinely conducted at annual meetings of stockholders.
−Removed: Furthermore, even if our common unitholders are dissatisfied with the performance of our general partner, they have no practical ability to remove our general partner.
−Removed: As of the date of this Report, CVR Energy indirectly owns approximately 34% of our common units, which means holders of common units other than CVR Energy will not be able to remove the general partner, under any circumstances, without its consent.
+Added: Unlike the holders of common stock in a corporation, our common unitholders have only limited voting rights on matters affecting our business and, therefore, limited ability to influence management’s decisions.
+Added: Our common unit holders do not choose the Members of the Board do not elect directors or participate in other matters routinely conducted at annual meetings of stockholders, and have no practical ability to remove our general partner without the consent of CVR Energy.
As a result of these limitations, the price at which the common units will trade could be diminished.
−Removed: Our partnership agreement restricts common unitholders’ voting rights by providing that any units held by a person that owns 20% or more of any class of units then outstanding, other than our general partner, its affiliates, their transferees, and persons who acquired such units with the prior approval of the board of directors of our general partner, may not vote on any matter.
−Removed: Our partnership agreement also contains provisions limiting the ability of common unitholders to call meetings or to acquire information about our operations, as well as other provisions limiting the ability of our common unitholders to influence the manner or direction of management.
+Added: Our partnership agreement restricts common unitholders’ voting rights by providing that any units held by a person that owns 20% or more of any class of units then outstanding, other than our general partner, its affiliates, their transferees, and persons who acquired such units with the prior approval of the Board, may not vote on any matter.
+Added: Our partnership agreement also contains provisions limiting the ability of common unitholders to call meetings or to acquire information about our operations, and to influence the manner or direction of management.
Common unitholders may have liability to repay distributions.
8 unchanged sentences
Tax Risks Related to Common Unitholders
−Removed: Our tax treatment depends on our status as a partnership for U.S.
−Removed: federal income tax purposes, and not being subject to a material amount of entity-level taxation.
If the IRS were to treat us as a corporation for U.S.
4 unchanged sentences
federal income tax purposes unless we satisfy a “qualifying income” requirement.
−Removed: Based upon our current operations,
−Removed: December 31, 2019 | 23
−Removed: we believe we satisfy the qualifying income requirement.
+Added: Based upon our current operations, we believe we satisfy the qualifying income requirement.
Although we have received favorable private letter rulings from the IRS with respect to certain of our operations, no ruling has been or will be requested regarding our treatment as a partnership for U.S.
federal income tax purposes.
−Removed: Failing to meet the qualifying income requirement or a change in current law could cause us to be treated as a corporation for U.S.
−Removed: federal income tax purposes or otherwise subject us to taxation as an entity.
−Removed: If we were to be treated as a corporation for U.S.
−Removed: federal income tax purposes, we would pay U.S.
−Removed: federal income tax on all of our taxable income at the corporate tax rate.
−Removed: Distributions to our common unitholders would generally be taxed again as corporate distributions, and no income, gains, losses, or deductions would flow through to our common unitholders.
−Removed: Because a tax would be imposed upon us as a corporation, our cash available for distribution to our common unitholders would be substantially reduced.
−Removed: Therefore, treatment of us as a corporation would result in a material reduction in the anticipated cash flow and after-tax return to our common unitholders, likely causing a substantial reduction in the value of our common units.
−Removed: At the state level, several states have been evaluating ways to subject partnerships to entity-level taxation through the imposition of state income, franchise, or other forms of taxation.
+Added: Failing to meet the qualifying income requirement or a change in current law (which could be retroactive) could cause us to be treated as a corporation for U.S.
+Added: federal income tax purposes or otherwise subject us to taxation at the corporate tax rate and distributions to our common unitholders would generally be taxed again as corporate distributions, and no income, gains, losses, or deductions would flow through to our common unitholders.
+Added: Because a tax would be imposed upon us as a corporation, our cash available for distribution to our common unitholders would be substantially reduced and result in a material reduction in the anticipated cash flow and after-tax return to our common unitholders, likely causing a substantial reduction in the value of our common units.
+Added: At the state level, several states have been evaluating ways to subject partnerships to entity-level taxation through the imposition of
+Added: December 31, 2020 | 22
+Added: state income, franchise, or other forms of taxation.
We currently own assets and conduct business in several states, many of which impose a margin or franchise tax.
1 unchanged sentence
Imposition of a similar tax on us in other jurisdictions that we may expand to could substantially reduce our cash available for distribution to our common unitholders.
−Removed: The tax treatment of publicly traded partnerships or an investment in our common units could be subject to potential legislative, judicial or administrative changes or differing interpretations, possibly applied on a retroactive basis.
−Removed: The present U.S.
−Removed: federal income tax treatment of publicly traded partnerships, including us, or an investment in our common units may be modified by administrative, legislative or judicial changes or differing interpretations at any time.
−Removed: From time to time, members of Congress propose and consider substantive changes to the existing U.S.
−Removed: federal income tax laws that affect publicly traded partnerships.
−Removed: Such change could eliminate the qualifying income exception to the treatment of all publicly traded partnerships as corporations upon which we rely for our treatment as a partnership for U.S.
−Removed: federal income tax purposes.
−Removed: Any modification to the U.S.
−Removed: federal income tax laws may be applied retroactively and could make it more difficult or impossible for us to meet the exception for certain publicly traded partnerships to be treated as partnerships for U.S.
−Removed: federal income tax purposes.
−Removed: We are unable to predict whether any of these changes or other proposals will ultimately be adopted or enacted.
−Removed: Any similar or future legislative or administrative changes could negatively impact the value of an investment in our common units.
If the IRS makes audit adjustments to our income tax returns for tax years beginning after December 31, 2017, it may assess and collect any taxes (including any applicable penalties and interest) resulting from such audit adjustments directly from us, in which case our cash available for distribution to our common unitholders might be substantially reduced and our current and former common unitholders may be required to indemnify us for any taxes (including any applicable penalties and interest) resulting from such audit adjustments that were paid on such common unitholders’ behalf.
For tax years beginning after December 31, 2017, the IRS (and some states) may assess and collect from us taxes (including any applicable penalties and interest) resulting from audit adjustments to our income tax returns.
−Removed: To the extent possible, our general partner may elect to either pay the taxes (including any applicable penalties and interest) directly to the IRS or, if we are eligible, issue a revised information statement to each common unitholder and former common unitholder with respect to an audited and adjusted return.
−Removed: Although our general partner may elect to have our common unitholders and former common unitholders take such audit adjustment into account and pay any resulting taxes (including applicable penalties or interest) in accordance with their interests in us during the tax year under audit, there can be no assurance that such election will be practical, permissible, or effective in all circumstances.
−Removed: As a result, our current common unitholders may bear some or all of the tax liability resulting from such audit adjustment, even if such common unitholders did not own common units in us during the tax year under audit.
+Added: Our general partner may elect to either pay the taxes (including any applicable penalties and interest) directly to the IRS or, if we are eligible, issue a revised information statement to each common unitholder and former common unitholder with respect to an audited and adjusted return.
+Added: There can be no assurance that such an election to allocate the audit adjustment and tax payment obligation to our current and former common unitholders will be practical, permissible, or effective in all circumstances.
+Added: As a result, our current common unitholders may bear some or all of the tax liability resulting from such audit adjustment, even if they did not own common units in us during the tax year under audit.
If, as a result of any such audit adjustment, we are required to make payments of taxes, penalties, and interest, our cash available for distribution to our common unitholders might be substantially reduced and our current and former unitholders may be required to indemnify us for any taxes (including any applicable penalties and interest) resulting from such audit adjustments that were paid on such unitholders behalf.
Our unitholders are required to pay income taxes on their share of our taxable income even if they do not receive any cash distributions from us.
−Removed: December 31, 2019 | 24
A unitholder’s allocable share of our taxable income will be taxable to it, which may require the unitholder to pay federal income taxes and, in some cases, state and local income taxes, even if the unitholder receives no cash distributions or cash distributions from us that are less than the actual tax liability that results from that income.
1 unchanged sentence
Similarly, taking advantage of opportunities to reduce our existing debt, such as debt exchanges, debt repurchases, or modifications of our existing debt could result in “cancellation of indebtedness income” being allocated to our common unitholders as taxable income without any increase in our cash available for distribution.
−Removed: Our common unitholders may not receive cash distributions from us equal to their share of our taxable income or even equal to the actual tax liability that results from that income.
−Removed: Tax gain or loss on the disposition of our common units could be more or less than expected.
−Removed: If a common unitholder sells common units, the common unitholder will recognize a gain or loss equal to the difference between the amount realized and that common unitholder’s tax basis in those common units.
−Removed: Because distributions in excess of a common unitholder’s allocable share of our net taxable income decrease such common unitholder’s tax basis in its common units, the amount, if any, of such prior excess distributions with respect to the common units a common unitholder sells will, in effect, become taxable income to a common unitholder if it sells such common units at a price greater than its tax basis in those common units, even if the price such common unitholder receives is less than its original cost for such common units.
−Removed: In addition, because the amount realized includes a common unitholder’s share of our nonrecourse liabilities, if a common unitholder sells its common units, a common unitholder may incur a tax liability in excess of the amount of cash received from the sale.
−Removed: A substantial portion of the amount realized from a common unitholder’s sale of our common units, whether or not representing gain, may be taxed as ordinary income to such common unitholder due to potential recapture items, including depreciation recapture.
−Removed: Thus, a common unitholder may recognize both ordinary income and capital loss from the sale of common units if the amount realized on a sale of such common units is less than such common unitholder’s adjusted basis in the common units.
−Removed: Net capital loss may only offset capital gains and, in the case of individuals, up to $3,000 of ordinary income per year.
−Removed: In the taxable period in which a common unitholder sells its common units, such common unitholder may recognize ordinary income from our allocations of income and gain to such common unitholder prior to the sale and from recapture items that generally cannot be offset by any capital loss recognized upon the sale of common units.
Common unitholders may be subject to limitation on their ability to deduct interest expense incurred by us.
1 unchanged sentence
However, for taxable years beginning after December 31, 2017, our deduction for “business interest” is limited to the sum of our business interest income and 30% of our “adjusted taxable income.” For the purposes of this limitation, our adjusted taxable income is computed without regard to any business interest expense or business interest income, and in the case of taxable years beginning before January 1, 2022, any deduction allowable for depreciation, amortization, or depletion.
−Removed: Tax-exempt entities face unique tax issues from owning our common units that may result in adverse tax consequences to them.
−Removed: Investment in our common units by tax-exempt entities, such as employee benefit plans and individual retirement accounts (known as IRAs), raises issues unique to them.
−Removed: For example, virtually all of our income allocated to organizations that are exempt from U.S.
−Removed: federal income tax, including IRAs and other retirement plans, will be unrelated business taxable income and will be taxable to them.
−Removed: Further, with respect to taxable years beginning after December 31, 2017, a tax-exempt entity with more than one unrelated trade or business (including by attribution from investment in a partnership such as ours that is engaged in one or more unrelated trade or business) is required to compute the unrelated business taxable income of such tax-exempt entity separately with respect to each such trade or business (including for purposes of determining any net operating loss deduction).
−Removed: As a result, for years beginning after December 31, 2017, it may not be possible for tax-exempt entities to utilize losses from an investment in our partnership to offset unrelated business taxable income from another unrelated trade or business and vice versa.
−Removed: Tax-exempt entities should consult a tax advisor before investing in our common units.
+Added: On March 27, 2020, the Coronavirus Aid, Relieve and Economic Security (“CARES”) Act was signed into law.
+Added: The CARES Act, among other things, increased the limitation on the deductibility of business interest to 50% of adjusted taxable income for partnerships in taxable year December 31, 2020.
+Added: The CARES Act also allows taxpayers to elect to compute the limitation on business interest expense for taxable year December 31, 2020 by using its adjusted taxable income from taxable year December 31, 2019.
common unitholders will be subject to U.S.
taxes and withholding with respect to their income and gain from owning our common units.
−Removed: December 31, 2019 | 25
common unitholders are generally taxed and subject to income tax filing requirements by the United States on income effectively connected with a U.S.
6 unchanged sentences
federal income tax on the gain realized from the sale or disposition of that common unit.
+Added: December 31, 2020 | 23
The Tax Cuts and Jobs Act imposes a withholding obligation of 10% of the amount realized upon a Non-U.S.
−Removed: common unitholder’s sale or exchange of an interest in a partnership that is engaged in a U.S.
−Removed: trade or business.
−Removed: However, due to challenges of administering a withholding obligation applicable to open market trading and other complications, the IRS has temporarily suspended the application of this withholding rule to open market transfers of interest in publicly traded partnerships pending promulgation of regulations or other guidance that resolves the challenges.
−Removed: It is not clear if or when such regulations or other guidance will be issued.
+Added: common witholder’s sale or exchange of an interest in a partnership that is engaged in a U.S.
+Added: trade or business, effective January 1, 2022 per final Regulations.
common unitholders should consult a tax advisor before investing in our common units.
−Removed: We treat each purchaser of our common units as having the same tax benefits without regard to the common units actually purchased.
−Removed: The IRS may challenge this treatment, which could adversely affect the value of our common units.
+Added: Tax-exempt entities face unique tax issues from owning our common units that may result in adverse tax consequences.
+Added: Investment in our common units by tax-exempt entities, such as employee benefit plans and individual retirement accounts, raises unique issues.
+Added: For example, virtually all of our income allocated to organizations that are exempt from U.S.
+Added: federal income tax will be unrelated business taxable income and will be taxable.
+Added: Further, with respect to taxable years beginning after December 31, 2017, a tax-exempt entity with more than one unrelated trade or business (including by attribution from investment in a partnership such as ours that is engaged in one or more unrelated trade or business) is required to compute the unrelated business taxable income of such tax-exempt entity separately with respect to each such trade or business (including for purposes of determining any net operating loss deduction).
+Added: As a result, for years beginning after December 31, 2017, it may not be possible for tax-exempt entities to utilize losses from an investment in our partnership to offset unrelated business taxable income from another unrelated trade or business and vice versa.
+Added: The IRS may challenge our treatment of each purchaser of our common units as having the same tax benefits without regard to the common units actually purchased, which could adversely affect the value of our common units.
Because we cannot match transferors and transferees of common units, we have adopted certain methods for allocating depreciation and amortization deductions that may not conform to all aspects of existing Treasury Regulations.
1 unchanged sentence
It also could affect the timing of these tax benefits or the amount of gain from any sale of common units and could have a negative impact on the value of our common units or result in audit adjustments to a common unitholder’s tax returns.
−Removed: We generally prorate our items of income, gain, loss, and deduction between transferors and transferees of our common units each month based upon the ownership of our common units on the first day of each month, instead of on the basis of the date a particular unit is transferred.
−Removed: The IRS may challenge this treatment, which could change the allocation of items of income, gain, loss, and deduction among our common unitholders.
−Removed: We generally prorate our items of income, gain, loss, and deduction between transferors and transferees of our common units each month based upon the ownership of our units on the first day of each month (the “Allocation Date”), instead of on the basis of the date a particular common unit is transferred.
−Removed: Similarly, we generally allocate certain deductions for depreciation of capital additions, gain or loss realized on a sale or other disposition of our assets, and, in the discretion of the general partner, any other extraordinary item of income, gain, loss, or deduction based upon ownership on the Allocation Date.
+Added: Our proration methods may be challenged by the IRS, which could change the allocation of items of income, gain, loss, and deduction among our common unitholders.
+Added: We generally (i) prorate our items of income, gain, loss, and deduction between transferors and transferees of our common units;
+Added: and (ii) allocate certain deductions for depreciation of capital additions, gain or loss realized on a sale or other disposition of our assets, and, in the discretion of the general partner, any other extraordinary item of income, gain, loss, or deduction, each month based upon the ownership of our units on the first day of each month (the “Allocation Date”), instead of on the basis of the date a particular common unit is transferred.
Treasury Regulations allow a similar monthly simplifying convention, but such regulations do not specifically authorize all aspects of our proration method.
If the IRS were to challenge our proration method, we may be required to change the allocation of items of income, gain, loss, and deduction among our common unitholders.
−Removed: A common unitholder whose common units are the subject of a securities loan (e.g., a loan to a “short seller” to cover a short sale of common units) may be considered to have disposed of those common units.
−Removed: If so, such common unitholder would no longer be treated for tax purposes as a partner with respect to those common units during the period of the loan and may recognize gain or loss from the disposition.
−Removed: Because there are no specific rules governing the U.S.
−Removed: federal income tax consequence of loaning a partnership interest, a common unitholder whose common units are the subject of a securities loan may be considered to have disposed of the loaned common units.
−Removed: In that case, the common unitholder may no longer be treated for tax purposes as a partner with respect to those common units during the period of the loan to the short seller and the common unitholder may recognize gain or loss from such disposition.
−Removed: Moreover, during the period of the loan, any of our income, gain, loss, or deduction with respect to those common units may not be reportable by the common unitholder, and any cash distributions received by the common unitholder as to those common units could be fully taxable as ordinary income.
−Removed: Common unitholders desiring to assure their status as partners and avoid the risk of gain recognition from a securities loan are urged to consult a tax advisor to determine whether it is advisable to modify any applicable brokerage account agreements to prohibit their brokers from borrowing their common units.
−Removed: We have adopted certain valuation methodologies in determining a unitholder’s allocations of income, gain, loss, and deduction.
−Removed: The IRS may challenge these methodologies, which could adversely affect the value of the common units.
−Removed: December 31, 2019 | 26
+Added: IRS challenge of certain valuation methodologies we have adopted to determine a unitholder’s allocations of income, gain, loss, and deduction, could adversely affect the value of our common units.
In determining the items of income, gain, loss, and deduction allocable to our unitholders, we must routinely determine the fair market value of our assets and allocate any unrealized gain or loss attributable to our assets to the capital accounts of our unitholders.
−Removed: The IRS may challenge our valuation methods and allocations of taxable income, gain, loss and deduction between our general partner and certain of our unitholders.
−Removed: A successful IRS challenge to these methods or allocations could adversely affect the amount of taxable income or loss being allocated to our unitholders.
−Removed: It also could affect the amount of taxable gain from our unitholders’ sale of common units and could have a negative impact on the value of the common units or result in audit adjustments to our unitholders’ tax returns without the benefit of additional deductions.
+Added: The IRS may challenge our valuation methods and allocations.
+Added: A successful IRS challenge to these methods or allocations could adversely affect the amount of taxable income or loss being allocated to our unitholders, the amount of taxable gain from our unitholders’ sale of common units, and the value of the common units or result in audit adjustments to our unitholders’ tax returns without the benefit of additional deductions.
Our common unitholders will likely be subject to state and local taxes, as well as income tax return filing requirements, in jurisdictions where they do not live as a result of investing in our common units.
In addition to U.S.
−Removed: federal income taxes, our common unitholders may be subject to other taxes, including foreign, state, and local taxes, unincorporated business taxes, and estate, inheritance, or intangible taxes that are imposed by the various jurisdictions in which we conduct business or own property now or in the future, even if they do not live in any of those jurisdictions.
−Removed: Our common unitholders will likely be required to file foreign, state, and local income tax returns and pay state and local income taxes in some or all of these various jurisdictions.
−Removed: Further, our common unitholders may be subject to penalties for failure to comply with those requirements.
−Removed: As we make acquisitions or expand our business, we may own or control assets or conduct business in additional states or foreign jurisdictions that impose a personal income tax.
−Removed: It is our common unitholders’ responsibility to file all United States federal, foreign, state, and local income tax returns.
+Added: federal income taxes, our common unitholders may be subject to other taxes, including foreign, state, and local taxes, unincorporated business taxes, and estate, inheritance, or intangible taxes that are imposed by the various jurisdictions in which we conduct business or own property now or in the future, even if they do not live in any of those jurisdictions, will likely be required to file foreign, state, and local income tax returns and pay state and local income taxes in some or all of these various jurisdictions, and may be subject to penalties for failure to comply with those requirements.
+Added: December 31, 2020 | 24
+Added: General Risks Related to the Partnership
+Added: The acquisition and expansion strategy of our business involves significant risks that could have a material adverse effect on our results of operations, financial condition and cash flows.
+Added: From time to time, we may consider pursuing acquisitions and expansion projects (“Expansion Projects”) to continue to grow and increase profitability.
+Added: However, we may not be able to consummate such Expansion Projects due to intense competition for suitable acquisition targets;
+Added: the potential unavailability of financial resources necessary;
+Added: difficulties in identifying suitable Expansion Projects or in completing them on sufficiently favorable terms;
+Added: and the failure to obtain requisite regulatory approvals.
+Added: In addition, any Expansion Projects may entail significant transaction costs and risks associated with entry into new markets and lines of business, including but not limited to, new regulatory obligations and risks.
+Added: In the case of an acquisition, integration of acquired entities can involve significant difficulties, such as:
+Added: disruption of the ongoing operations;
+Added: failure to achieve cost savings or other financial or operating objectives contributing to the accretive nature of an acquisition;
+Added: strain on operational and managerial controls, procedures and management;
+Added: difficulties in the integration and retention of customers or personnel;
+Added: assumption of unknown material liabilities or regulatory non-compliance issues;
+Added: amortization of acquired assets, which would reduce future reported earnings;
+Added: and possible adverse short-term effects on our cash flows or operating results.
+Added: When considering potential Expansion Projects, will also consider impact on our tax treatment as a partnership for federal income tax purposes.
+Added: If we are unable to conclude that the activities of the Expansion Project would not affect our treatment as a partnership for federal income tax purposes, we may elect to seek a ruling from the Internal Revenue Service (“IRS”).
+Added: Seeking such a ruling could be costly or, in the case of competitive acquisitions, place the business in a competitive disadvantage compared to other potential acquirers who do not seek such a ruling.
+Added: If we are unable to conclude that an activity would not affect our treatment as a partnership for federal income tax purposes and are unable or unwilling to obtain an IRS ruling, we may choose to acquire such business or develop such expansion project in a corporate subsidiary, which would subject the income related to such activity to entity-level taxation, which would reduce the amount of cash available for distribution to our common unitholders and could likely cause a substantial reduction in the value of our common units.
+Added: Internally generated cash flows and other sources of liquidity may not be adequate for our capital needs.
+Added: Our business is capital intensive and working capital needs may vary significantly over relatively short periods of time.
+Added: For instance, nitrogen fertilizer demand volatility can significantly impact working capital on a week-to-week and month-to-month basis.
+Added: If we cannot generate adequate cash flow or otherwise secure sufficient liquidity to meet our working capital needs or support our short-term and long-term capital requirements, we may be unable to meet our debt obligations, pursue our business strategies, or comply with certain environmental standards, which would have a material adverse effect on our business and results of operations.
Unresolved Staff Comments
Refer to Item 1, “Facilities” for more information on our core business properties.
−Removed: CVR Energy also leases property for our executive office in Sugar Land, Texas.
+Added: CVR Energy also leases property for our executive and marketing offices in Sugar Land, Texas and Kansas City, Kansas, respectively.
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.