Commitments and Contingencies

12 Months Ended

Dec. 31, 2020

Commitments and Contingencies Disclosure [Abstract]

(11) Commitments and Contingencies

Supply Commitments

The minimum required payments for unconditional purchase obligations are as follows:


Year Ended December 31,	Unconditional Purchase Obligations
(in millions)
2021	$	127
2022	83
2023	81
2024	77
2025	73
Thereafter	325
	$	766

Supply Commitments - The Company is a party to various supply agreements with both related and third parties which commit the Company to purchase minimum volumes of crude oil, hydrogen, oxygen, nitrogen, pet coke, and natural gas to run its facilities’ operations. For the years ended December 31, 2020, 2019, and 2018, amounts purchased under these supply agreements totaled approximately $153 million, $167 million, and $214 million, respectively.

Crude Oil Supply Agreement

On August 31, 2012, an indirect, wholly-owned subsidiary of CVR Refining entered into an Amended and Restated Crude Oil Supply Agreement (as amended, the “Crude Oil Supply Agreement”) with Vitol Inc. (“Vitol”). Under the Crude Oil Supply Agreement, Vitol supplies the Petroleum Segment with crude oil and intermediation logistics helping to reduce the amount of inventory held at a certain locations and mitigate crude oil pricing risk. Volumes contracted under the Crude Oil Supply Agreement, as a percentage of the total crude oil purchases (in barrels), was approximately 33%, 36% and 42% for the years ended December 31, 2020, 2019, and 2018, respectively. The Crude Oil Supply Agreement, which currently extends through December 31, 2021, automatically renews for successive one-year terms (each such term, a “Renewal Term”) unless either party provides the other with notice of nonrenewal at least 180 days prior to expiration of any Renewal Term.

Contingencies

Call Option - In 2019, the Company, CVR Refining and its general partner, CVR Refining Holdings, IEP, and certain directors and affiliates were named in at least one of nine lawsuits filed in the Delaware Court of Chancery by purported former unitholders of CVR Refining, on behalf of themselves and an alleged class of similarly situated unitholders relating to the Company’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 Delaware 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 Delaware Lawsuits, though permitted some or all of the claims to proceed against each remaining defendant. On April 6, 2020, a lawsuit was filed in the United States District Court for the Southern District of New York against the Company, CVR Refining and its general partner, CVR Refining Holdings, IEP, and the Company’s Chief Executive Officer by purported former unitholders of CVR Refining on behalf of themselves and an alleged class of similarly situated unitholders (the “New York Lawsuit” and together with the Delaware Lawsuits, the “Call Option Lawsuits”) primarily alleging violations of Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 thereunder and seeking monetary damages and attorney’s fees, among other remedies. The Company believes the Call Option Lawsuits are without merit and intends to vigorously defend against them. Discovery is currently on-going. Accordingly, the Company cannot determine at this time the outcome of the Call Option Lawsuits, including whether such outcome would have a material impact on the Company’s financial position, results of operations, or cash flows.

On January 27, 2021, a lawsuit was filed against the Company, CVR Refining and its general partner, CVR Refining Holdings, IEP, and certain directors and affiliates in the 434th Judicial District Court of Fort Bend County, Texas by their primary and excess insurers (the “Insurers”) seeking a 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. The Company believes this lawsuit is without merit and intends to vigorously defend the claims against them. The lawsuit is in the early stages of litigation. Accordingly, the Company cannot determine at this time the outcome of the litigation, including whether the outcome of this matter would have a material impact on the Company’s financial position, results of operations, or cash flows.

Wynnewood Small Refinery Exemption - During 2019, WRC intervened in a lawsuit filed by four ethanol and biofuels trade associations against the Environmental Protection Agency (“EPA”), claiming the EPA exceeded its authority in granting WRC’s Wynnewood Refinery’s 2017 small refinery exemption (“SRE”) under the RFS program under the CAA, as well as the SREs of two other unrelated refineries. In January 2020, the 10th Circuit vacated the three SREs and remanded the matter to the EPA for further proceedings, holding, in part, that the “extension” language in the CAA requires a small refinery to have received an SRE continuously in every year since inception of the program to be eligible. After the 10th Circuit refused to rehear the case, WRC and others filed a petition for writ of certiorari in the Supreme Court of the United States (the “Supreme Court”) on September 4, 2020, which was granted by the Supreme Court on January 8, 2021. The case is currently expected to be argued in April 2021. As it is not yet clear how the Supreme Court will rule, or what steps the EPA will take with respect to SREs, we cannot currently estimate the outcome, impact, or timing of resolution of this matter.

Environmental, Health, and Safety (“EHS”) Matters

Clean Air Act Matter - On August 21, 2018, CRRM received a letter from the United States Department of Justice (“DOJ”) on behalf of the EPA and KDHE alleging violations of the CAA and a 2012 Consent Decree (the “CD”) between Coffeyville Resources Refining & Marketing, LLC (“CRRM”), the United States (on behalf of the EPA) and the Kansas Department of Health and Environment (“KDHE”) at CRRM’s Coffeyville refinery. In June 2020, a tolling agreement between the parties relating to such allegations expired, and the DOJ and KDHE sent demand letters relating to the allegations (the “Stipulated Claims”) and seeking stipulated penalties. In February 2021, the DOJ and KDHE sent CRRM a statement of position under the CD regarding its demand for Stipulated Claims. As CRRM disputes most claims asserted by the government, in accordance with the CD, CRRM deposited funds into a commercial escrow account pending resolution of disputed claims. The escrowed funds are legally restricted for use and are included within Prepaid expenses and other current assets on the consolidated balance sheets. In December 2020, the DOJ and KDHE filed a supplement complaint in the United States District Court for the District of Kansas (“D. Kan”) asserting nine counts for alleged violations of the Clean Air Act, the Kansas State Implementation Plan and Kansas law (“the Statutory Claims”) and seeking civil penalties, injunctive and related relief. Negotiations relating to the Stipulated Claims and the Statutory Claims are ongoing and the Company cannot determine at this time the outcome of these matters, including whether such outcome, or any subsequent enforcement or litigation relating thereto would have a material impact on the Company’s financial position, results of operations, or cash flows.

Renewable Fuel Standards - The Company’s Petroleum Segment is subject to the RFS of the EPA that require refiners to either blend renewable fuels in with their transportation fuels or purchase renewable fuel credits, known as RINs, in lieu of blending. The Petroleum Segment 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 from the EPA, in order to comply with the RFS.

The Company recognized an expense of approximately $190 million, $43 million, and $60 million for the years ended December 31, 2020, 2019, and 2018, respectively, for the Petroleum Segment’s compliance with the RFS. The recognized amounts are included within Cost of materials and other in the Consolidated Statements of Operations and represent costs to comply with the RFS obligation through purchasing of RINs not otherwise reduced by blending of ethanol or biodiesel. At each reporting period, to the extent RINs purchased or generated through blending are less than the RFS obligation, the remaining obligation is marked-to-market using RIN market prices at period end. As of December 31, 2020 and 2019, the Petroleum Segment’s RFS obligation was approximately $214 million and $7 million, respectively, which is recorded in Other current liabilities in the Consolidated Balance Sheets.

Environmental Remediation - As of December 31, 2020 and 2019, environmental accruals representing estimated costs for future remediation efforts at certain Petroleum Segment sites totaled approximately $11 million and $6 million, respectively. These amounts are reflected in Other current liabilities or Other long-term liabilities depending on when the Company expects to expend such amounts.

Wynnewood Refinery Incident - In October 2020, the 10th Circuit affirmed a 2019 decision of the Occupational Safety and Health Review Commission which (a) upheld citations issued by the Occupational Safety and Health Administration (“OSHA”) to WRC in 2013 for violations of the OSHA arising from a September 2012 explosion in a boiler unit at the Wynnewood Refinery, but (b) found that such violations were not “repeat violations” under the OSHA. As a result of the decision, WRC is obligated to pay a penalty by March 2021, the amount of which is not material. In addition, WRC has been removed from the OSHA Severe Violators Enforcement Program.