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Commitments and Contingencies

12 Months Ended

Dec. 31, 2021

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

17. Commitments and Contingencies

Environmental Matters

Due to the nature of our business, certain of our subsidiaries’ operations are subject to numerous existing and proposed laws and governmental regulations designed to protect the environment, particularly regarding plant wastes and emissions and solid waste disposal. Our consolidated environmental liabilities on an undiscounted basis were $13 million and $37 million as of December 31, 2021 and 2020, respectively, primarily within our Energy segment and, prior to our sale of PSC Metals in December 2021, our Metals segment as well, and which are included in accrued expenses and other liabilities in our consolidated balance sheets. We do not believe that environmental matters will have a material adverse impact on our consolidated results of operations and financial condition.

Energy

On August 21, 2018, CVR Refining received a letter from the United States Department of Justice (the “DOJ”) on behalf of the U.S. Environmental Protection Agency (the “EPA”) and the Kansas Department of Health and Environment (“KDHE”) alleging violations of the Clean Air Act and a 2012 Consent Decree (“CD”) between CVR Refining, the United States (on behalf of the EPA) and KDHE at its Coffeyville refinery, primarily relating to flares. In June 2020, a tolling agreement between the parties relating to such allegations expired, and the United States and KDHE sent demand letters relating to the allegations (the “Stipulated Claims”) and seeking stipulated penalties under the CD. In February 2021, the DOJ and KDHE sent CVR Refining a statement of position under the CD regarding its demand for Stipulated Claims. As CVR Refining disputes most claims asserted by the government, in accordance with the CD, CVR Refining deposited funds into a commercial escrow account pending resolution of disputed claims. The escrowed funds are legally restricted for use and are included within cash held at consolidated affiliated partnership and restricted cash on the consolidated balance sheets. In April 2021, CVR Refining filed a petition for judicial review of the Stipulated Claims with the United States District Court for the District of Kansas (“Kansas Federal District Court”), in accordance with the dispute resolution provisions of the CD. On September 23, 2021, the court ordered briefing on CVR Refining’s petition, which was completed in December 2021. Separately, in December 2020, the DOJ and KDHE filed a supplemental complaint in the Kansas Federal District Court asserting nine counts for alleged violations of the Clean Air Act, the Kansas State Implementation Plan and Kansas law seeking civil penalties, injunctive and related relief, which they sought leave to amend on February 10, 2022, to add an additional eight counts under Part 63 of the National Emissions Standards for Hazardous Air Pollutants from Petroleum Refineries Subparts CC and R (“NESHAP”), Kansas Law and CVR Refining’s permits relating to flares, heaters and related matters (collectively, the “Statutory Claims”). In March 2021, CVR Refining filed a partial motion to dismiss certain Statutory Claims, which is still pending with the Kansas Federal District Court. Negotiations relating to the Stipulated Claims and the Statutory Claims are ongoing and CVR Energy cannot at this time determine the outcome of these matters, including whether such outcome, or any subsequent enforcement or litigation relating thereto would have a material impact on our Energy segment’s financial position, results of operations, or cash flows.

As of December 31, 2021 and 2020, our Energy segment had environmental accruals of $12 million and $11 million, respectively, representing estimated costs for future remediation efforts at certain sites.

Renewable Fuel Standard

CVR Refining is subject to the Renewable Fuel Standard (“RFS”) implemented primarily by the EPA which requires refiners to either blend renewable fuels into their transportation fuels or purchase renewable fuel credits, known as RINs, in lieu of blending. CVR Refining is not able to blend the substantial majority of its transportation fuels and has to purchase RINs on the open market and may have to obtain waiver credits for cellulosic biofuels or other exemptions from the EPA, to the extent available, in order to comply with the RFS.

For the years ended December 31, 2021, 2020 and 2019, our Energy segment recognized an expense of $435 million, $190 million and $43 million, respectively, for CVR Refining’s compliance with the RFS (based on our Energy segment’s 2020 annual renewal volume obligation (“RVO”) and proposed preliminary 2021 RVO range, for the respective periods, and excluding the impacts of any exemptions or waivers to which our Energy segment may be entitled ). These expenses are included in cost of goods sold in our consolidated statements of operations and represent costs to comply with the RFS obligation through purchasing of RINs not otherwise reduced by blending of ethanol and biodiesel. At each reporting period, to the extent RINs purchased or generated through blending are less than the RFS obligation (excluding the impact of exemptions or waivers to which our Energy segment may be entitled), the remaining position is marked-to-market using RIN market prices at period end. As of December 31, 2021 and 2020, CVR Refining’s biofuel blending obligation was $494 million and $214 million, respectively, which is included in accrued expenses and other liabilities in our consolidated balance sheets.

Litigation

From time to time, we and our subsidiaries are involved in various lawsuits arising in the normal course of business. We do not believe that such normal routine litigation will have a material effect on our financial condition or results of operations.

Energy

In 2019, CVR Energy, CVR Refining and its general partner, CVR Refining Holdings, Icahn Enterprises and certain directors and affiliates (collectively, the “Call Defendants”) were named in at least one of nine now consolidated lawsuits filed by purported former unitholders of CVR Refining, on behalf of themselves and an alleged class of similarly situated unitholders relating to CVR Energy’s exercise of the call option (“Call Option”) under the CVR Refining Amended and Restated Agreement of Limited Partnership assigned to it by CVR Refining’s general partner (the “Delaware Lawsuits”). The Call Option Lawsuits primarily allege breach of contract, tortious interference and breach of the implied covenant of good faith and fair dealing and seek monetary damages and attorneys’ fees, among other remedies. In January 2020, the court dismissed CVR Holdings and certain former directors of CVR Refining’s general partner from the Call Option Lawsuits, though permitted some or all of the claims to proceed against each remaining defendant. Trial of the Call Option Lawsuits concluded in July 2021, and the parties are currently in post-trial proceedings. CVR Energy believes the Call Option Lawsuits are without merit and intends to vigorously defend against them. Plaintiffs filed their Opening Post-Trial Brief on December 22, 2021, now quantifying alleged damages in excess of $300 million; the Call Defendants strongly dispute Plaintiff’s claims and are preparing responsive briefings. Accordingly, CVR Energy cannot determine at this time the outcome of the Call Option Lawsuits, including whether the outcome of this matter would have a material impact on our Energy segment’s financial position, results of operations, or cash flows. However, while CVR Energy firmly believes this matter is without merit, if it is concluded in a manner adverse to CVR Energy, it could have a material effect on our Energy segment’s financial position, results of operations, or cash flows.

The Call Defendants are also parties to two lawsuits relating to insurance coverage for the Call Option Lawsuits, one filed on January 27, 2021, in the 434th Judicial District Court of Fort Bend County, Texas by the Call Defendants primary and excess insurers (the “Insurers”) seeking declaratory judgement determining that they owe no indemnity coverage for the Call Option Lawsuits in relation to insurance policies that have coverage limits of $50 million, and another filed on January 30, 2022 in the Superior Court of the State of Delaware by the Call Defendants against the Insurers for anticipatory breach of contract and breach of the implied covenant of good faith dealing (the “Delaware Coverage Case”). On November 3, 2021, the court in the Delaware Coverage Case granted partial summary judgment in favor of the Call Defendants relating to the deductible. As both lawsuits are in their early states, CVR Energy cannot determine at this time the outcome of the lawsuits, including whether the outcome would have a material impact on our Energy segment’s financial position, results of operations, or cash flows.

On June 25, 2021, the Supreme Court of the United States (the “Supreme Court”) overturned a decision of the 10th Circuit Court of Appeals (“10th Circuit”) vacating three small refinery exemptions (“SREs”) under the RFS, including one issued to CVR Refining’s Wynnewood Refinery for 2017, to the extent such SREs were vacated based on failure to have continuously received an SRE in all applicable preceding years. Following the Supreme Court ruling, the EPA notified CVR Refining that it would reconsider the 2017 SRE on other grounds referenced in the 10th Circuit decision. On July 20, 2021, after remand from the Supreme Court, the 10th Circuit vacated its prior judgment, recalled its previous mandate denying the 2017 SRE, entered a new judgment and issued a new mandate transferring jurisdiction back to the EPA. On August 26, 2021, the EPA filed a Motion for Clarification asking the 10th Circuit whether the alternative holdings that supported the 10th Circuit’s prior judgment remain in effect and whether the new mandate returns the agency actions back to the EPA, which Motion for Clarification was denied. On September 15, 2021, CVR Refining advised the EPA it considered its 2017 SRE intact and demanded that the EPA return the status of its 2017 SRE to “granted.” The EPA has not yet responded to CVR Refining’s demand. Given the EPA’s failure to respond, we cannot currently estimate the outcome, impact or timing of resolution of this matter.

Other Matters

Pension Obligations

Mr. Icahn, through certain affiliates, owns 100% of Icahn Enterprises GP and approximately 88% of our outstanding depositary units as of December 31, 2021. Applicable pension and tax laws make each member of a “controlled group” of entities, generally defined as entities in which there is at least an 80% common ownership interest, jointly and severally liable for certain pension plan obligations of any member of the controlled group. These pension obligations include ongoing contributions to fund the plan, as well as liability for any unfunded liabilities that may exist at the time the plan is terminated. In addition, the failure to pay these pension obligations when due may result in the creation of liens in favor of the pension plan or the Pension Benefit Guaranty Corporation (the “PBGC”) against the assets of each member of the controlled group.

As a result of the more than 80% ownership interest in us by Mr. Icahn’s affiliates, we and our subsidiaries are subject to the pension liabilities of entities in which Mr. Icahn has a direct or indirect ownership interest of at least 80%, which includes the liabilities of pension plans sponsored by Viskase and ACF Industries LLC (“ACF”), an affiliate of Mr. Icahn. All the minimum funding requirements of the Internal Revenue Code, as amended, and the Employee Retirement Income Security Act of 1974, as amended, for the Viskase and ACF plans have been met as of December 31, 2021. If the plans were voluntarily terminated, they would be underfunded by an aggregate of approximately $66 million as of December 31, 2021. These results are based on the most recent information provided by the plans’ actuaries. These liabilities could increase or decrease, depending on a number of factors, including future changes in benefits, investment returns, and the assumptions used to calculate the liability. As members of the controlled group, we would be liable for any failure of Viskase or ACF to make ongoing pension contributions or to pay the unfunded liabilities upon a termination of the Viskase or ACF pension plans. In addition, other entities now or in the future within the controlled group in which we are included may have pension plan obligations that are, or may become, underfunded and we would be liable for any failure of such entities to make ongoing pension contributions or to pay the unfunded liabilities upon termination of such plans.

The current underfunded status of the pension plans of Viskase and ACF requires them to notify the PBGC of certain “reportable events,” such as if we cease to be a member of the Viskase or ACF controlled group, or if we make certain extraordinary dividends or stock redemptions. The obligation to report could cause us to seek to delay or reconsider the occurrence of such reportable events.

Starfire Holding Corporation (“Starfire”), which is 99.6% owned by Mr. Icahn, has undertaken to indemnify us and our subsidiaries from losses resulting from any imposition of certain pension funding or termination liabilities that may be imposed on us and our subsidiaries or our assets as a result of being a member of the Icahn controlled group. The Starfire indemnity provides, among other things, that so long as such contingent liabilities exist and could be imposed on

us, Starfire will not make any distributions to its stockholders that would reduce its net worth to below $250 million. Nonetheless, Starfire may not be able to fund its indemnification obligations to us.

Other

The U.S. Attorney’s office for the Southern District of New York contacted Icahn Enterprises L.P. in September 2017 seeking production of information pertaining to our and Mr. Icahn’s activities relating to the Renewable Fuels Standard and Mr. Icahn’s former role as an advisor to the former President of the United States. We cooperated with the request and provided information in response to the subpoena. The U.S. Attorney’s office for the Southern District of New York contacted Icahn Enterprises L.P. in June 2018 seeking production of information pertaining to trading in Manitowoc Company, Inc. securities. We cooperated with the request and provided documents in response to the subpoena. The U.S. Attorney’s office has not made any claims or allegations against us or Mr. Icahn with respect to either of the foregoing inquiries. We believe that we maintain a strong compliance program and, while no assurances can be made, we do not believe these inquiries will have a material impact on our business, financial condition, results of operations or cash flows.

Unconditional Purchase Obligations

Unconditional purchase obligations are primarily within our Energy and Pharma segments. Our Energy segment’s unconditional purchase obligations relate to commitments for petroleum products storage and transportation, electricity supply agreements, product supply agreements, commitments related to CVR Energy’s biofuel blending obligation and various agreements for gas and gas transportation. Our Pharma segment’s unconditional purchase obligations relate to agreements to purchase goods or services from suppliers for the manufacture of its products. The minimum required payments for our Energy and Pharma segments’ unconditional purchase obligations are as follows:


Year		Energy			Pharma

		(in millions)
2022		$	136		$	19
2023			85			13
2024			82			13
2025			82			13
2026			77			13
Thereafter			252			40
		$	714		$	111

CVR Energy is a party to various supply agreements which commit it to purchase minimum volumes of crude oil, hydrogen, oxygen, nitrogen, petroleum coke and natural gas to run its facilities’ operations. For the years ended December 31, 2021, 2020 and 2019, amounts purchased under these supply agreements totaled approximately $176 million, $153 million and $167 million, respectively.