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Derivative Financial Instruments, Investments and Fair Value Measurements | 9 Months Ended
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Sep. 30, 2021
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Financial Instruments, Investments and Fair Value Measurements | (10) Derivative Financial Instruments, Investments and Fair Value Measurements Derivative Financial Instruments The Petroleum Segment from time to time enters into various commodity derivative transactions to manage price risk on crude oil and other inventories and to fix margins on certain future production. On a regular basis, the Company enters into commodity contracts with counterparties for the purchases or sale of crude oil, blendstocks, various finished products, and RINs. The contracts usually qualify for the normal purchase normal sale exception and follow the accrual method of accounting. All other derivative instruments are recorded at fair value using mark-to-market accounting on a periodic basis utilizing third-party pricing. The Petroleum Segment holds derivative instruments, such as exchange-traded crude oil futures and over-the-counter forward swap agreements, which it believes provide an economic hedge on future transactions, but such instruments are not designated as hedges under GAAP. There are no premiums paid or received at inception of the derivative contracts or upon settlement. The Petroleum Segment may enter into forward purchase or sale contracts associated with RINs. As of September 30, 2021, the Petroleum Segment had open fixed-price commitments to purchase 17 million RINs. Commodity derivatives include commodity swaps and forward purchase and sale commitments. There were 2 million outstanding commodity swap positions as of September 30, 2021. There were approximately 1 million forward purchase commitments and 1 million forward sale commitments as of September 30, 2021. The following outlines the gains (losses) recognized on the Company’s derivative activities, all of which are recorded in Cost of materials and other on the condensed consolidated statements of operations:
Gain (loss) on Derivatives |  |  |  |  |  |  |
| Three Months Ended September 30, |  | Nine Months Ended September 30,
(in millions) | 2021 |  | 2020 |  | 2021 |  | 2020
Forward purchases and sales contracts, net | $ | 2 |  |  | $ | 4 |  |  | $ | 24 |  |  | $ | 55 |
Commodity swap instruments | (13) |  |  | 1 |  |  | (68) |  |  | 5 |
Futures contracts | (1) |  |  | — |  |  | (2) |  |  | 10 |
Total (loss) gain on derivatives, net | $ | (12) |  |  | $ | 5 |  |  | $ | (46) |  |  | $ | 70 |
Offsetting Assets and Liabilities The Company elected to offset the fair value amounts recognized for multiple derivative contracts executed with the same counterparty. These amounts are recognized as current assets and current liabilities within the Prepaid expenses and other current assets and Other current liabilities financial statement line items, respectively, in the condensed consolidated balance sheets as follows:
| Derivative Assets |  | Derivative Liabilities
(in millions) | September 30, 2021 |  | December 31, 2020 |  | September 30, 2021 |  | December 31, 2020
Commodity derivatives | $ | 1 |  |  | $ | 1 |  |  | $ | (1) |  |  | $ | (5) |
Less: Counterparty netting | (1) |  |  | (1) |  |  | 1 |  |  | 1 |
Total net fair value of derivatives | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | (4) |
Investments Investments consist of equity securities, which are reported at fair value in our condensed consolidated balance sheets. These investments are considered trading securities. Investment (loss) income on marketable securities consists of the following:
| Three Months Ended September 30, |  | Nine Months Ended September 30,
(in millions) | 2021 |  | 2020 |  | 2021 |  | 2020
Dividend income | $ | — |  |  | $ | 3 |  |  | $ | — |  |  | $ | 7 |
(Loss) gain on marketable securities | (1) |  |  | (68) |  |  | 82 |  |  | (20) |
Investment (loss) income on marketable securities | $ | (1) |  |  | $ | (65) |  |  | $ | 82 |  |  | $ | (13) |
On June 10, 2021, the Company distributed its investment of 10,539,880 shares of common stock of Delek US Holdings, Inc. (“Delek”) in the form of a special dividend to its stockholders (the “Stock Distribution”). Following the Stock Distribution, the Company continues to hold $4 million in other marketable securities of Delek as of September 30, 2021. See further discussion of the distribution in Note 15 (“Related Party Transactions”). Fair Value Measurements In accordance with FASB ASC Topic 820 — Fair Value Measurements and Disclosures (“ASC 820”), the Company utilizes the market approach to measure fair value for its financial assets and liabilities. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets, liabilities or a group of assets or liabilities, such as a business. ASC 820 utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels: •Level 1 — Quoted prices in active markets for identical assets or liabilities •Level 2 — Other significant observable inputs (including quoted prices in active markets for similar assets or liabilities) •Level 3 — Significant unobservable inputs (including the Company’s own assumptions in determining the fair value) As of September 30, 2021 and December 31, 2020, the only financial assets and liabilities that are measured at fair value on a recurring basis are the Company’s investments, derivative instruments, long-term debt, and the RFS obligation. The estimated fair value of cash equivalents, including amounts invested in short-term money market funds, and restricted cash approximate their carrying amounts. The Petroleum Segment’s commodity derivative contracts and RFS obligation, which use fair value measurements and are valued using broker quoted market prices of similar instruments, are considered Level 2 inputs. The Company had no transfers of assets or liabilities between any of the above levels during the nine months ended September 30, 2021. The following tables set forth the assets and liabilities measured or disclosed at fair value on a recurring basis, by input level, as of September 30, 2021 and December 31, 2020:
| September 30, 2021
(in millions) | Level 1 |  | Level 2 |  | Level 3 |  | Total
Location and Description |  |  |  |  |  |  |
Prepaid expenses and other current assets (investments) | $ | 4 |  |  | $ | — |  |  | $ | — |  |  | $ | 4 |
Prepaid expenses and other current assets (commodity derivatives) | — |  |  | 3 |  |  | — |  |  | 3 |
Total Assets | $ | 4 |  |  | $ | 3 |  |  | $ | — |  |  | $ | 7 |
Other current liabilities (commodity swaps) | $ | — |  |  | $ | (3) |  |  | $ | — |  |  | $ | (3) |
Other current liabilities (RFS position) | — |  |  | (442) |  |  | — |  |  | (442) |
Long-term debt and finance lease obligations, net of current portion | — |  |  | (1,650) |  |  | — |  |  | (1,650) |
Total Liabilities | $ | — |  |  | $ | (2,095) |  |  | $ | — |  |  | $ | (2,095) |
| December 31, 2020
(in millions) | Level 1 |  | Level 2 |  | Level 3 |  | Total
Location and Description |  |  |  |  |  |  |
Prepaid expenses and other current assets (investments) | $ | 173 |  |  | $ | — |  |  | $ | — |  |  | $ | 173 |
Total Assets | $ | 173 |  |  | $ | — |  |  | $ | — |  |  | $ | 173 |
Current portion of long-term debt | $ | — |  |  | $ | (2) |  |  | $ | — |  |  | $ | (2) |
Other current liabilities (commodity derivatives) | — |  |  | (17) |  |  | — |  |  | (17) |
Other current liabilities (RFS position) | — |  |  | (214) |  |  | — |  |  | (214) |
Long-term debt and finance lease obligations, net of current portion | — |  |  | (1,604) |  |  | — |  |  | (1,604) |
Total Liabilities | $ | — |  |  | $ | (1,837) |  |  | $ | — |  |  | $ | (1,837) |

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI http://asc.fasb.org/topic&trid=2229140 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 40 -Section 50 -Paragraph 5 -Subparagraph (f) -URI http://asc.fasb.org/extlink&oid=123477628&loc=d3e90205-114008 + Details
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