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Fair Value Measurements | 3 Months Ended
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Mar. 31, 2013
Fair Value Disclosures [Abstract] |
FAIR VALUE MEASUREMENTS |
12. | FAIR VALUE MEASUREMENTS
General GAAP requires that certain financial instruments, such as derivative instruments, be recognized at their fair values in our balance sheets. However, other financial instruments, such as debt obligations, are not required to be recognized at their fair values, but GAAP provides an option to elect fair value accounting for these instruments. GAAP requires the disclosure of the fair values of all financial instruments, regardless of whether they are recognized at their fair values or carrying amounts in our balance sheets. For financial instruments recognized at fair value, GAAP requires the disclosure of their fair values by type of instrument, along with other information, including changes in the fair values of certain financial instruments recognized in income or other comprehensive income, and this information is provided below under “Recurring Fair Value Measurements.” For financial instruments not recognized at fair value, the disclosure of their fair values is provided below under “Other Financial Instruments.” Nonfinancial assets, such as property, plant and equipment, and nonfinancial liabilities are recognized at their carrying amounts in our balance sheets. GAAP does not permit nonfinancial assets and liabilities to be remeasured at their fair values. However, GAAP requires the remeasurement of such assets and liabilities to their fair values upon the occurrence of certain events, such as the impairment of property, plant and equipment. In addition, if such an event occurs, GAAP requires the disclosure of the fair value of the asset or liability along with other information, including the gain or loss recognized in income in the period the remeasurement occurred. This information is provided below under “Nonrecurring Fair Value Measurements.” GAAP provides a framework for measuring fair value and establishes a three-level fair value hierarchy that prioritizes inputs to valuation techniques based on the degree to which objective prices in external active markets are available to measure fair value. Following is a description of each of the levels of the fair value hierarchy.
• | Level 1 - Observable inputs, such as unadjusted quoted prices in active markets for identical assets or liabilities.
• | Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
• | Level 3 - Unobservable inputs for the asset or liability for which there is little, if any, market activity at the measurement date. Unobservable inputs reflect our own assumptions about what market participants would use to price the asset or liability. The inputs are developed based on the best information available in the circumstances, which might include occasional market quotes or sales of similar instruments or our own financial data such as internally developed pricing models, discounted cash flow methodologies, as well as instruments for which the fair value determination requires significant judgment.
The financial instruments and nonfinancial assets and liabilities included in our disclosure of recurring and nonrecurring fair value measurements are categorized according to the fair value hierarchy based on the inputs used to measure their fair values. Recurring Fair Value Measurements The tables below present information (in millions) about our financial instruments recognized at their fair values in our balance sheets categorized according to the fair value hierarchy of the inputs utilized by us to determine the fair values as of March 31, 2013 and December 31, 2012. We have elected to offset the fair value amounts recognized for multiple similar derivative contracts executed with the same counterparty, including any related cash collateral assets or obligations as shown below; however, fair value amounts by hierarchy level are presented on a gross basis in the tables below. We have no derivative contracts that are subject to master netting arrangements that are reflected gross on the balance sheet.
| March 31, 2013
| Fair Value Hierarchy |  | Total Gross Fair Value |  | Effect of Counter- party Netting |  | Effect of Collateral Netting |  | Net Carrying Value on Balance Sheet |  | Cash Collateral Paid or Received Not Offset
| Level 1 |  | Level 2 |  | Level 3 |
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commodity derivative contracts | $ | 1,036 |  |  | $ | 30 |  |  | $ | — |  |  | $ | 1,066 |  |  | $ | (989 | ) |  | $ | — |  |  | $ | 77 |  |  | $ | — |
Physical purchase contracts | — |  |  | 8 |  |  | — |  |  | 8 |  |  | N/A |  |  | N/A |  |  | 8 |  |  | N/A |
RINs fixed-price contracts | — |  |  | (12 | ) |  | — |  |  | (12 | ) |  | N/A |  |  | N/A |  |  | (12 | ) |  | N/A |
Investments of certain benefit plans | 91 |  |  | — |  |  | 11 |  |  | 102 |  |  | N/A |  |  | N/A |  |  | 102 |  |  | N/A |
Total | $ | 1,127 |  |  | $ | 26 |  |  | $ | 11 |  |  | $ | 1,164 |  |  | $ | (989 | ) |  | $ | — |  |  | $ | 175 |  |  |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commodity derivative contracts | $ | 983 |  |  | $ | 30 |  |  | $ | — |  |  | $ | 1,013 |  |  | $ | (989 | ) |  | $ | (17 | ) |  | $ | 7 |  |  | $ | (82 | )
Foreign currency contracts | 3 |  |  | — |  |  | — |  |  | 3 |  |  | N/A |  |  | N/A |  |  | 3 |  |  | N/A |
Total | $ | 986 |  |  | $ | 30 |  |  | $ | — |  |  | $ | 1,016 |  |  | $ | (989 | ) |  | $ | (17 | ) |  | $ | 10 |  |  |
| December 31, 2012
| Fair Value Hierarchy |  | Total Gross Fair Value |  | Effect of Counter- party Netting |  | Effect of Collateral Netting |  | Net Carrying Value on Balance Sheet |  | Cash Collateral Paid or Received Not Offset
| Level 1 |  | Level 2 |  | Level 3 |  |  |  |  |
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commodity derivative contracts | $ | 1,143 |  |  | $ | 60 |  |  | $ | — |  |  | $ | 1,203 |  |  | $ | (1,189 | ) |  | $ | — |  |  | $ | 14 |  |  | $ | — |
Physical purchase contracts | — |  |  | 11 |  |  | — |  |  | 11 |  |  | N/A |  |  | N/A |  |  | 11 |  |  | N/A |
Investments of certain benefit plans | 87 |  |  | — |  |  | 11 |  |  | 98 |  |  | N/A |  |  | N/A |  |  | 98 |  |  | N/A |
Foreign currency contracts | 1 |  |  | — |  |  | — |  |  | 1 |  |  | N/A |  |  | N/A |  |  | 1 |  |  | N/A |
Total | $ | 1,231 |  |  | $ | 71 |  |  | $ | 11 |  |  | $ | 1,313 |  |  | $ | (1,189 | ) |  | $ | — |  |  | $ | 124 |  |  |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commodity derivative contracts | $ | 1,138 |  |  | $ | 70 |  |  | $ | — |  |  | $ | 1,208 |  |  | $ | (1,189 | ) |  | $ | (13 | ) |  | $ | 6 |  |  | $ | (114 | )
Biofuels blending obligation | — |  |  | 10 |  |  | — |  |  | 10 |  |  | N/A |  |  | N/A |  |  | 10 |  |  | N/A |
Foreign currency contracts | 1 |  |  | — |  |  | — |  |  | 1 |  |  | N/A |  |  | N/A |  |  | 1 |  |  | N/A |
Total | $ | 1,139 |  |  | $ | 80 |  |  | $ | — |  |  | $ | 1,219 |  |  | $ | (1,189 | ) |  | $ | (13 | ) |  | $ | 17 |  |  |
A description of our financial instruments and the valuation methods used to measure those instruments at fair value are as follows:
• | Commodity derivative contracts consist primarily of exchange-traded futures and swaps, and as disclosed in Note 13, some of these contracts are designated as hedging instruments. These contracts are measured at fair value using the market approach. Exchange-traded futures are valued based on quoted prices from the exchange and are categorized in Level 1 of the fair value hierarchy. Swaps are priced using third-party broker quotes, industry pricing services, and exchange-traded curves, with appropriate consideration of counterparty credit risk, but because they have contractual terms that are not identical to exchange-traded futures instruments with a comparable market price, these financial instruments are categorized in Level 2 of the fair value hierarchy.
• | Physical purchase contracts to purchase inventories represent the fair value of firm commitments to purchase crude oil feedstocks and the fair value of fixed-price corn purchase contracts, and as disclosed in Note 13, some of these contracts are designated as hedging instruments. The fair values of these firm commitments and purchase contracts are measured using a market approach based on quoted prices from the commodity exchange or an independent pricing service and are categorized in Level 2 of the fair value hierarchy.
• | RINs fixed-price contracts represent the fair value of fixed-price purchase and sale contracts of RINs. (RINs are defined and described in Note 13 under “Compliance Program Price Risk.”) The fair values of these contracts are measured using a market approach based on quoted prices from an independent pricing service and are categorized in Level 2 of the fair value hierarchy.
• | Investments of certain benefit plans consist of investment securities held by trusts for the purpose of satisfying a portion of our obligations under certain U.S. nonqualified benefit plans. The assets categorized in Level 1 of the fair value hierarchy are measured at fair value using a market approach based on quoted prices from national securities exchanges. The assets categorized in Level 3 of the fair value hierarchy represent insurance contracts, the fair value of which is provided by the insurer.
• | Foreign currency contracts consist of foreign currency exchange and purchase contracts entered into by our international operations to manage our exposure to exchange rate fluctuations on transactions denominated in currencies other than the local (functional) currencies of those operations. These contracts are valued based on quoted prices from the exchange and are categorized in Level 1 of the fair value hierarchy.
• | Our biofuels blending obligation represents a liability for the purchase of RINs and RTFCs, as defined and described in Note 13 under “Compliance Program Price Risk,” to satisfy our obligation to blend biofuels into the products we produce. Our obligation is based on our deficiency in RINs and RTFCs and the price of these instruments as of the balance sheet date. Our obligation is categorized in Level 2 of the fair value hierarchy and is measured at fair value using the market approach based on quoted prices from an independent pricing service.
During the three months ended March 31, 2013 and 2012, there were no transfers between assets classified as Level 1 and Level 2. The following is a reconciliation of the beginning and ending balances (in millions) for fair value measurements developed using significant unobservable inputs (Level 3).
| 2013 |  | 2012
| Investments of Certain Benefit Plans |  | Investments of Certain Benefit Plans
Three months ended March 31: |  |  |
Balance as of beginning of period | $ | 11 |  |  | $ | 11 |
Purchases | — |  |  | — |
Total gains (losses) included in refining operating expenses | — |  |  | — |
Transfers in and/or out of Level 3 | — |  |  | — |
Balance as of end of period | $ | 11 |  |  | $ | 11 |
The amount of total gains (losses) included in income attributable to the change in unrealized gains (losses) relating to assets still held at end of period | $ | — |  |  | $ | — |
Nonrecurring Fair Value Measurements There were no assets or liabilities that were measured at fair value on a nonrecurring basis during the three months ended March 31, 2013. The table below presents the fair value (in millions) of our nonfinancial assets measured on a nonrecurring basis during the three months ended March 31, 2012 and categorized according to the fair value hierarchy of the inputs utilized by us to determine the fair values as of March 31, 2012.
| Fair Value Measurements Using |  |  |  | Total Loss Recognized During the Three Months Ended March 31, 2012
| Level 1 |  | Level 2 |  | Level 3 |  | Total Fair Value as of March 31, 2012 |
Assets: |  |  |  |  |  |  |  |  |
Long-lived assets of the Aruba Refinery | $ | — |  |  | $ | — |  |  | $ | 350 |  |  | $ | 350 |  |  | $ | 595 |
Cancelled capital project | — |  |  | — |  |  | 2 |  |  | 2 |  |  | 16 |
There were no liabilities that were measured at fair value on a nonrecurring basis during the three months ended March 31, 2012. Aruba Refinery As discussed in Note 3, we concluded that the Aruba Refinery was impaired as of March 31, 2012. As a result, we were required to determine the fair value of the Aruba Refinery and to write down its carrying value to that amount. We determined that the best measure of the refinery’s fair value at that time was the $350 million offer received and accepted. The fair value of the Aruba Refinery was measured using the market approach and was categorized in Level 3 within the fair value hierarchy. The carrying value of the Aruba Refinery’s long-lived assets as of March 31, 2012 was $945 million; therefore, we recognized an asset impairment loss of $595 million in March 2012. Cancelled Capital Project In March 2012, we wrote down the carrying value of equipment associated with a permanently cancelled capital project at one of our refineries and recognized an asset impairment loss of $16 million. Other Financial Instruments Financial instruments that we recognize in our balance sheets at their carrying amounts are shown in the table below (in millions):
| March 31, 2013 |  | December 31, 2012
| Carrying Amount |  | Fair Value |  | Carrying Amount |  |  | Fair Value |
Financial assets: |  |  |  |  |  |  |
Cash and temporary cash investments | $ | 1,857 |  |  | $ | 1,857 |  |  | $ | 1,723 |  |  | $ | 1,723 |
Financial liabilities: |  |  |  |  |  |  |
Debt (excluding capital leases) | 6,821 |  |  | 8,414 |  |  | 7,000 |  |  | 8,621 |
The methods and significant assumptions used to estimate the fair value of these financial instruments are as follows:
• | The fair value of cash and temporary cash investments approximates the carrying value due to the low level of credit risk of these assets combined with their short maturities and market interest rates (Level 1).
• | The fair value of debt is determined primarily using the market approach based on quoted prices provided by third-party brokers and vendor pricing services, but are not exchange-traded (Level 2).

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 16 -URI http://asc.fasb.org/extlink&oid=7491637&loc=d3e13504-108611 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 107 -Paragraph 15C, 15D -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 133 -Paragraph 44A, 44B -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 107 -Paragraph 15A -Subparagraph a-d -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 107 -Paragraph 3, 10, 14, 15 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=7491637&loc=d3e13433-108611 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 159 -Paragraph 17-22, 27, 28 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=7491637&loc=d3e13537-108611 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 107 -Paragraph 15B -Subparagraph a, b -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 157 -Paragraph 32, 33, 34 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=7578670&loc=d3e19207-110258 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 28 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14064-108612 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 30 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14172-108612 + Details
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