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Commitments and Contingencies | 3 Months Ended
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Mar. 31, 2022
Commitments and Contingencies Disclosure [Abstract] |
Commitments and Contingencies | (12) Commitments and Contingencies Except as described below, there have been no material changes in the Company’s commitments and contingencies disclosed in the 2021 Form 10-K. In the ordinary course of business, the Company may become party to lawsuits, administrative proceedings, and governmental investigations, including environmental, regulatory, and other matters. The outcome of these matters cannot always be predicted accurately, but the Company accrues liabilities for these matters if the Company has determined that it is probable a loss has been incurred and the loss can be reasonably estimated. While it is not possible to predict the outcome of such proceedings, if one or more of them were decided against us, the Company believes there would be no material impact on its consolidated financial statements. The Company continues to monitor its contractual arrangements and customer, vendor, and supplier relationships to determine whether and to what extent, if any, the impacts of the COVID-19 pandemic, the Russia-Ukraine conflict, or ongoing crude oil or refined product price volatility will impair or excuse the performance of the Company or its subsidiaries or their customers, vendors, or suppliers under existing agreements. As of March 31, 2022, the Company had not experienced a material financial impact from any actual or threatened impairment of or excuse in its or others’ performance under such agreements. Crude Oil Supply Agreement Effective on August 4, 2021, an indirect, wholly owned subsidiary of CVR Refining entered into the Second Amended and Restated Crude Oil Supply Agreement (the “2021 Supply Agreement”) with Vitol Inc. (“Vitol”) which superseded, in its entirety, the August 31, 2012 Amended and Restated Crude Oil Supply Agreement (the “2012 Supply Agreement” and collectively with the 2021 Supply Agreement, the “Crude Oil Supply Agreement”) between the parties. The 2021 Supply Agreement is on substantially similar terms as the 2012 Supply Agreement, other than revisions to certain inventory turnover and insurance provisions. 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 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), were approximately 39% and 37% for the three months ended March 31, 2022 and 2021, respectively. The Crude Oil Supply Agreement, which currently extends through December 31, 2022, automatically renews for successive one-year terms (each such term, a “Renewal Term”) unless either party provides the other with notice of non-renewal at least 180 days prior to expiration of the term or any Renewal Term. Renewable Fuel Standards The Company’s Petroleum Segment is subject to the RFS, implemented by the Environmental Protection Agency (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. The Petroleum Segment is not able to blend the substantial majority of its transportation fuels and must either purchase RINs on the open market or obtain waiver credits for cellulosic biofuels, or other exemptions from the EPA, in order to comply with the RFS. For the three months ended March 31, 2022 and 2021, the Company recognized an expense of approximately $107 million and $178 million, respectively, for the Petroleum Segment’s compliance with the RFS (based on the 2020 renewable volume obligation (“RVO”) and proposed preliminary 2021 and 2022 RVO range, for the respective periods, excluding the impacts of any exemptions or waivers to which the Petroleum Segment may be entitled). The recognized amounts are included within Cost of materials and other in the condensed 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 and generated through blending are less than the RFS obligation (excluding the impact of exemptions or waivers to which the Petroleum Segment may be entitled), the remaining position is marked-to-market using RIN market prices at period end. As of March 31, 2022 and December 31, 2021, the Petroleum Segment’s RFS position was approximately $585 million and $494 million, respectively, which is recorded in Other current liabilities in the condensed consolidated balance sheets. Litigation The U.S. Attorney’s office for the Southern District of New York contacted CVR Energy in September 2017 seeking production of information pertaining to CVR Refining’s, CVR Energy’s and Mr. Carl C. Icahn’s activities relating to the RFS and Mr. Icahn’s former role as an advisor to former President Trump. CVR Energy cooperated with the request and provided information in response to the subpoena. The U.S. Attorney’s office has not made any claims or allegations against CVR Energy or Mr. Icahn. CVR Energy believes it maintains a strong compliance program and, while no assurances can be made, CVR Energy does not believe this inquiry will have a material impact on its business, financial condition, results of operations or cash flows. Call Option Lawsuits – The Company continues to engage in post-trial proceedings relating to the lawsuits filed in 2019 against the Company, CVR Refining and its general partner, CVR Refining Holdings, IEP, and certain directors and affiliates (collectively, the “Call Defendants”) 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 (collectively, the “Call Option Lawsuits”), which 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. The plaintiffs filed their Opening Post-Trial Brief on December 22, 2021, now quantifying alleged damages in excess of $300 million. The Call Defendants filed their Post-Trial Answering Brief on February 22, 2022, and the plaintiffs filed their Reply Post-Trial Brief on April 1, 2022. The Call Defendants strongly dispute the plaintiffs’ claims. Accordingly, the Company cannot determine at this time the outcome of the Call Option Lawsuits. However, while we firmly believe the Call Option Lawsuits are without merit, if concluded in a manner adverse to the Company, they could have a material effect on the Company’s financial position, results of operations, or cash flows. The 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 a declaratory judgment 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 and fair dealing (the “Delaware Coverage Case”), remain pending, and pre-trial proceedings are in process. As both lawsuits are in their early stages, the Company cannot determine at this time the outcome of these lawsuits, including whether the outcome would have a material impact on the Company’s financial position, results of operations, or cash flows. RFS Disputes – The EPA has yet to respond to Wynnewood Refining Company, LLC’s (“WRC”) September 15, 2021, demand that the EPA return the status of WRC’s 2017 small refinery exemption (“SRE”) to “granted” following the June 25, 2021, decision of the Supreme Court of the United States overturning a decision of the 10 th Circuit Court of Appeals (the “10 th Circuit”) vacating three SREs under the RFS, including one issued to the 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, as well as the subsequent actions by the 10 th Circuit vacating its prior judgment, recalling its previous mandate denying WRC’s 2017 SRE, entering into a new judgment, issuing a new mandate transferring jurisdiction back to the EPA, and denying the EPA’s Motion for Clarification. Given the EPA’s failure to respond, we cannot currently estimate the outcome, impact or timing of resolution of this matter. On April 7, 2022, the EPA notified WRC that it was denying WRC’s SRE for 2018, despite having previously granted such SRE and despite litigation by WRC against the EPA for damages WRC sustained in connection with EPA’s failure to rule on its SRE within the time period required under the RFS. The EPA is not requiring 31 small refineries, including WRC, to purchase or redeem additional RFS credits as a result of its denial. The Company is evaluating its response to the EPA’s actions relating to WRC’s 2018 SRE. The Company continues to urge the EPA to reconsider its Proposed RFS Small Refinery Exemption Decision dated December 7, 2021 (the “Proposed Denial”), in which the EPA announced its intention to change its statutory interpretation of the Federal Clean Air Act (“CAA”) and deny 65 pending SRE petitions, including those submitted by WRC for 2019, 2020, and 2021, and expects to file litigation against the EPA should it finalize its Proposed Denial. Given the early stages of these matters, the Company cannot determine at this time the outcomes of these matters. However, while we firmly believe the EPA’s actions are unlawful and violate the RFS, and while we intend to pursue all available legal remedies, if these matters are ultimately concluded in a manner adverse to the Company, they could have a material effect on the Company’s financial position, results of operations, or cash flows. Environmental, Health, and Safety (“EHS”) Matters Clean Air Act Matter - On March 30, 2022, the United States District Court for the District of Kansas (“D. Kan.”) denied CRRM’s petition for judicial review of approximately $6.8 million in stipulated penalties (the “Stipulated Claims”) being sought by the United States (on behalf of the EPA) and the State of Kansas, through the Kansas Department of Health and Environment (“KDHE”) in connection with their allegations that CRRM violated the CAA and a 2012 Consent Decree (the “CD”) between CRRM, the United States (on behalf of the EPA) and KDHE at CRRM’s Coffeyville refinery, primarily relating to flares. CRRM previously deposited funds into a commercial escrow account relating to the Stipulated Claims, and is currently evaluating its response to this denial, including its appeal rights. The escrowed funds are legally restricted for use and are included within Prepaid expenses and other current assets on the condensed consolidated balance sheets. On March 21, 2022, CRRM filed a Motion to Dismiss certain claims in the first amended supplemental complaint filed by United States (on behalf of the EPA) and KDHE on February 17, 2022, alleging violations of the CAA, the Kansas State Implementation Plan, Kansas law, 40 C.F.R. Part 63 and CRRM’s permits relating to flares, heaters, and related matters and seeking civil penalties, injunctive and related relief (collectively, the “Statutory Claims”). CRRM’s Motion to Dismiss remains pending before the D. Kan. As negotiations and proceedings relating to the Stipulated Claims and the Statutory Claims are ongoing, 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.

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