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DERIVATIVES | 9 Months Ended
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Sep. 30, 2013
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
DERIVATIVES | DERIVATIVES The Company uses derivative instruments to mitigate certain exposures to commodity price risk. The Company’s crude supply agreements contain purchase obligations for certain volumes of crude oil and other feedstocks. In addition, the Company entered into Intermediation Agreements commencing in July 2013 that contain purchase obligations for certain volumes of intermediates and refined products. The Company was also party to an agreement that contained purchase obligations for certain volumes of stored intermediates inventory during the nine months ended September 30, 2012, which was terminated during the first quarter of 2012. The purchase obligations related to crude oil, feedstocks, intermediates and refined products under these agreements are derivative instruments that have been designated as fair value hedges in order to hedge the commodity price volatility of certain refinery inventory. The fair value of these purchase obligation derivatives is based on market prices of crude oil and refined products in the future. The level of activity for these derivatives is based on the level of operating inventories. As of September 30, 2013, there were 928,846 barrels of crude oil and feedstocks (2,529,447 barrels at December 31, 2012) outstanding under these derivative instruments designated as fair value hedges and no barrels (no barrels at December 31, 2012) outstanding under these derivative instruments not designated as hedges. As of September 30, 2013, there were 3,240,579 barrels of intermediates and refined products (no barrels at December 31, 2012) outstanding under these derivative instruments designated as fair value hedges and no barrels (no barrels at December 31, 2012) outstanding under these derivative instruments not designated as hedges. These volumes represent the notional value of the contract. The Company also enters into economic hedges primarily consisting of commodity derivative contracts that are not designated as hedges and are used to manage price volatility in certain crude oil and feedstock inventories as well as crude oil, feedstock, and refined product sales or purchases. The objective in entering into economic hedges is consistent with the objectives discussed above for fair value hedges. As of September 30, 2013, there were 38,156,010 barrels of crude oil and no barrels of refined products (9,234,000 and 1,310,000, respectively, as of December 31, 2012), outstanding under short and long term commodity derivative contracts not designated as hedges representing the notional value of the contracts. The following tables provide information about the fair values of these derivative instruments as of September 30, 2013 and December 31, 2012 and the line items in the consolidated balance sheet in which the fair values are reflected.
Description | Balance Sheet Location | Fair Value Asset/(Liability)
Derivatives designated as hedging instruments: |  |
September 30, 2013: |  |
Derivatives included with inventory supply arrangement obligations | Accrued expenses | $ | (1,291 | )
Derivatives included with the intermediation agreement obligations | Accrued expenses | $ | 29,563 |
December 31, 2012: |  |
Derivatives included with inventory supply arrangement obligations | Accrued expenses | $ | 5,595 |
Derivatives included with the intermediation agreement obligations | Accrued expenses | $ | — |
Derivatives not designated as hedging instruments: |  |
September 30, 2013: |  |
Commodity contracts | Accrued expenses | $ | (6,269 | )
December 31, 2012: |  |
Commodity contracts | Accounts receivable | $ | 1,431 |
The Company’s policy is to net the fair value of the derivatives included with inventory supply arrangement obligations and inventory intermediation agreement obligations against the liabilities related to inventory supply arrangements and intermediation agreements with the same counterparty as the legal right of offset exists. The following tables provide information about the gain or loss recognized in income on these derivative instruments and the line items in the consolidated financial statements in which such gains and losses are reflected.
Description | Location of Gain or (Loss) Recognized in Income on Derivatives | Gain or (Loss) Recognized in Income on Derivatives
Derivatives designated as hedging instruments: |  |
For the three months ended September 30, 2013: |  |
Derivatives included with inventory supply arrangement obligations | Cost of sales | $ | (4,015 | )
Derivatives included with the intermediation agreement obligations | Cost of sales | $ | 29,563 |
For the three months ended September 30, 2012: |  |
Derivatives included with inventory supply arrangement obligations | Cost of sales | $ | 12,519 |
Derivatives included with the intermediation agreement obligations | Cost of sales | $ | — |
For the nine months ended September 30, 2013: |  |
Derivatives included with inventory supply arrangement obligations | Cost of sales | $ | (6,886 | )
Derivatives included with the intermediation agreement obligations | Cost of sales | $ | 29,563 |
For the nine months ended September 30, 2012: |  |
Derivatives included with inventory supply arrangement obligations | Cost of sales | $ | 12,192 |
Derivatives included with the intermediation agreement obligations | Cost of sales | $ | — |
Derivatives not designated as hedging instruments: |  |
For the three months ended September 30, 2013: |  |
Derivatives included with inventory supply arrangement obligations | Cost of sales | $ | — |
Commodity contracts | Cost of sales | $ | (23,843 | )
For the three months ended September 30, 2012: |  |
Derivatives included with inventory supply arrangement obligations | Cost of sales | $ | — |
Commodity contracts | Cost of sales | $ | 3,029 |
For the nine months ended September 30, 2013: |  |
Derivatives included with inventory supply arrangement obligations | Cost of sales | $ | — |
Commodity contracts | Cost of sales | $ | (9,894 | )
For the nine months ended September 30, 2012: |  |
Derivatives included with inventory supply arrangement obligations | Cost of sales | $ | (8 | )
Commodity contracts | Cost of sales | $ | 30,636 |
Hedged items designated in fair value hedges: |  |
For the three months ended September 30, 2013: |  |
Crude oil and feedstock inventory | Cost of sales | $ | 3,127 |
Intermediate and refined product inventory | Cost of sales | $ | (29,563 | )
For the three months ended September 30, 2012: |  |
Crude oil and feedstock inventory | Cost of sales | $ | (4,196 | )
Intermediate and refined product inventory | Cost of sales | $ | — |
For the nine months ended September 30, 2013: |  |
Crude oil and feedstock inventory | Cost of sales | $ | (378 | )
Intermediate and refined product inventory | Cost of sales | $ | (29,563 | )
For the nine months ended September 30, 2012: |  |
Crude oil and feedstock inventory | Cost of sales | $ | (4,590 | )
Intermediate and refined product inventory | Cost of sales | $ | — |
Ineffectiveness related to the Company's fair value hedges resulted in a loss of $888 and $7,264 for the three and nine months ended September 30, 2013 and loss of $8,127 and $7,602 for the three and nine months ended September 30, 2012, respectively, recorded in cost of sales. Gains and losses due to ineffectiveness were excluded from the assessment of hedge effectiveness.

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- Definition The entire disclosure for the entity's entire derivative instruments and hedging activities. Describes an entity's risk management strategies, derivatives in hedging activities and non-hedging derivative instruments, the assets, obligations, liabilities, revenues and expenses arising therefrom, and the amounts of and methodologies and assumptions used in determining the amounts of such items. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=7668309&loc=d3e80748-113994 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=7476318&loc=d3e41638-113959 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4E -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624181-113959 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=7476318&loc=d3e41635-113959 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 45 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6441202&loc=d3e80720-113993 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4J -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5708773-113959 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4H -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624258-113959 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(n)) -URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4A -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5618551-113959 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4B -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624163-113959 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 133 -Paragraph 44 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. 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