XML 50 R26.htm IDEA: XBRL DOCUMENT
v3.22.4

Derivatives | 12 Months Ended
--- | ---
Dec. 31, 2022
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivatives | Derivatives Commodity Derivatives We have exposure to commodity price changes related to our inventory and purchase commitments. We utilize derivative instruments (exchange-traded futures, options and swap contracts) to hedge our exposure to commodity prices, primarily of crude oil, fuel oil, natural gas and petroleum products. Our decision as to whether to designate derivative instruments as fair value hedges for accounting purposes relates to our expectations of the length of time we expect to have the commodity price exposure and our expectations as to whether the derivative contract will qualify as highly effective under accounting guidance in limiting our exposure to commodity price risk. Most of the petroleum products, including fuel oil that we supply, cannot be hedged with a high degree of effectiveness with exchange-traded derivative contracts; therefore, we do not designate derivative contracts utilized to limit our price risk related to petroleum products as hedges for accounting purposes. Typically we utilize crude oil and other petroleum products futures and option contracts to limit our exposure to the effect of fluctuations in petroleum products prices on the future sale of our inventory or commitments to purchase petroleum products, and we recognize any changes in fair value of the derivative contracts as increases or decreases in our cost of sales. The recognition of changes in fair value of the derivative contracts not designated as hedges for accounting purposes can occur in reporting periods that do not coincide with the recognition of gain or loss on the actual transaction being hedged. Therefore we will, on occasion, report gains or losses in one period that will be partially offset by gains or losses in a future period when the hedged transaction is completed. We have designated certain crude oil futures contracts as hedges of crude oil inventory due to our expectation that these contracts will be highly effective in hedging our exposure to fluctuations in crude oil prices during the period that we expect to hold that inventory. We account for these derivative instruments as fair value hedges under the accounting guidance. Changes in the fair value of these derivative instruments designated as fair value hedges are used to offset related changes in the fair value of the hedged crude oil inventory. Any hedge ineffectiveness in these fair value hedges and any amounts excluded from effectiveness testing are recorded as a gain or loss within “Onshore facilities and transportation costs - product costs” in the Consolidated Statements of Operations. In accordance with exchange requirements, we fund the margin associated with our exchange-traded commodity derivative contracts. The amount of the margin is adjusted daily based on the fair value of the commodity derivative contracts. Margin requirements are intended to mitigate a party’s exposure to market volatility and counterparty credit risk. We offset fair value amounts recorded for our exchange-traded derivative contracts against margin funding in “Current Assets - Other” in our Consolidated Balance Sheets. Additionally, we utilize swap arrangements. Our Alkali Business relies on natural gas to generate heat and electricity for operations. We use a combination of commodity price swap contracts, future purchase contracts and option contracts to manage our exposure to fluctuations in natural gas prices. The swap contracts fix the basis differential between NYMEX Henry Hub and NW Rocky Mountain posted prices. We do not designate these contracts as hedges for accounting purposes. We recognize any changes in fair value of natural gas derivative contracts as increases or decreases within “Sodium minerals and sulfur services operating costs” in the Consolidated Statements of Operations. At December 31, 2022, we had the following outstanding commodity derivative commodity contracts that were entered into to economically hedge inventory, fixed price purchase commitments or forecasted purchases.
|  | Sell (Short) Contracts |  | Buy (Long) Contracts
Not qualifying or not designated as hedges under accounting rules: |  |  |  |
Crude oil futures: |  |  |  |
Contract volumes (1,000 Bbls) |  | 93 |  |  | 90 |
Weighted average contract price per Bbl |  | $ | 78.31 |  |  | $ | 76.43 |
Natural gas swaps: |  |  |  |
Contract volumes (10,000 MMBtu) |  | — |  |  | 976.5 |
Weighted average price differential per MMBtu |  | $ | — |  |  | $ | 0.64 |
Natural gas futures: |  |  |  |
Contract volumes (10,000 MMBtu) |  | 148 |  |  | 806 |
Weighted average contract price per MMBtu |  | $ | 5.27 |  |  | $ | 5.36 |
Petroleum products (#6 fuel oil) futures: |  |  |  |
Contract volumes (1,000 Bbls) |  | 25 |  |  | — |
Weighted average contract price per Bbl |  | $ | 56.15 |  |  | $ | — |
Natural gas options: |  |  |  |
Contract volumes (10,000 MMBtu) |  | 191 |  |  | 34 |
Weighted average premium received/paid |  | $ | 0.70 |  |  | $ | 0.03 |
Financial Statement Impacts The following table summarizes the accounting treatment and classification of our derivative instruments on our Consolidated Financial Statements.
Derivative Instrument |  | Hedged Risk |  | Impact of Unrealized Gains and Losses
Consolidated Balance Sheets |  | Consolidated Statements of Operations
Designated as hedges under accounting guidance:
Crude oil futures contracts (fair value hedge) |  | Volatility in crude oil prices - effect on market value of inventory |  | Derivative is recorded in “Current Assets - Other” (offset against margin deposits) and offsetting change in fair value of inventory is recorded in Inventories |  | Excess, if any, over effective portion of hedge is recorded in “Onshore facilities and transportation costs - product costs” Effective portion is offset in cost of sales against change in value of inventory being hedged
Not qualifying or not designated as hedges under accounting guidance:
Commodity hedges consisting of crude oil, heating oil, fuel oil, petroleum products and natural gas futures, forward contracts, swaps and put and call options |  | Volatility in crude oil, natural gas and petroleum products prices - effect on market value of inventory, fixed price purchase commitments or forecasted purchases |  | Derivative is recorded in “Current Assets - Other” (offset against margin deposits) or Accrued liabilities |  | Entire amount of change in fair value of derivative is recorded in “Onshore facilities and transportation costs - product costs” and “Sodium minerals and sulfur services operating costs”
Preferred Distribution Rate Reset Election |  | This instrument is not related to a risk, but is rather part of a host contract with the issuance of our Class A Convertible Preferred Units |  | Derivative is recorded in “Other long-term liabilities” |  | Entire amount of change in fair value of derivative is recorded in “Other expense, net”
Unrealized gains are subtracted from net income and unrealized losses are added to net income in determining cash flows from operating activities. To the extent that we have fair value hedges outstanding, the offsetting change recorded in the fair value of inventory is also eliminated from net income in determining cash flows from operating activities. Changes in margin deposits necessary to fund unrealized losses also affect cash flows from operating activities. The following tables reflect the estimated fair value position of our derivatives at December 31, 2022 and 2021: Fair Value of Derivative Assets and Liabilities
|  |  | Fair Value
| Consolidated Balance Sheets Location |  | December 31, 2022 |  |  | December 31, 2021
Asset Derivatives: |  |  |  |  |  |
Natural Gas Swap (undesignated hedge) | Current Assets - Other |  | 36,844 |  |  |  | 1,867 |
Commodity derivatives—futures and put and call options (undesignated hedges): |  |  |  |  |  |
Gross amount of recognized assets | Current Assets - Other |  | $ | 1,238 |  |  |  | $ | 310 |
Gross amount offset in the Consolidated Balance Sheets | Current Assets - Other |  | (1,238) |  |  |  | (310) |
Net amount of assets presented in the Consolidated Balance Sheets |  |  | $ | — |  |  |  | $ | — |
Commodity derivatives—futures (designated hedges): |  |  |  |  |  |
Gross amount of recognized assets | Current Assets - Other |  | $ | — |  |  |  | $ | 49 |
Gross amount offset in the Consolidated Balance Sheets | Current Assets - Other |  | — |  |  |  | (49) |
Net amount of assets presented in the Consolidated Balance Sheets |  |  | $ | — |  |  |  | $ | — |
Liability Derivatives: |  |  |  |  |  |
Preferred Distribution Rate Reset Election(2) | Other Long-Term Liabilities(2) |  | $ | — |  |  |  | $ | (83,210) |
Natural Gas Swap (undesignated hedge) | Current Liabilities - Accrued Liabilities |  | (4,692) |  |  |  | (608) |
Commodity derivatives—futures and put and call options (undesignated hedges): |  |  |  |  |  |
Gross amount of recognized liabilities | Current Assets - Other(1) |  | $ | (11,061) |  |  |  | $ | (2,380) |
Gross amount offset in the Consolidated Balance Sheets | Current Assets - Other(1) |  | 5,217 |  |  |  | 2,380 |
Net amount of liabilities presented in the Consolidated Balance Sheets |  |  | $ | (5,844) |  |  |  | $ | — |
Commodity derivatives—futures (designated hedges): |  |  |  |  |  |
Gross amount of recognized liabilities | Current Assets - Other(1) |  | $ | — |  |  |  | $ | (209) |
Gross amount offset in the Consolidated Balance Sheets | Current Assets - Other(1) |  | — |  |  |  | 209 |
Net amount of liabilities presented in the Consolidated Balance Sheets |  |  | $ | — |  |  |  | $ | — |
(1)These derivative liabilities have been funded with margin deposits recorded in our Consolidated Balance Sheets under “Current Assets - Other.” (2)Refer to Note 11 and Note 19 for additional discussion surrounding the Preferred Distribution Rate Reset Election derivative. Our accounting policy is to offset derivative assets and liabilities executed with the same counterparty when a master netting arrangement exists. Accordingly, we also offset derivative assets and liabilities with our cash margin balance. Our exchange-traded derivatives are transacted through brokerage accounts and are subject to margin requirements as established by the respective exchange. On a daily basis, our account equity (consisting of the sum of our cash margin balance and the fair value of our open derivatives) is compared to our initial margin requirement resulting in the payment or return of variation margin. As of December 31, 2022, we had a net broker receivable of approximately $4.0 million (consisting of initial margin of $3.8 million increased by $0.2 million of variation margin). As of December 31, 2021, we had a net broker receivable of approximately $2.9 million (consisting of initial margin of $2.1 million increased by $0.8 million of variation margin). At December 31, 2022 and December 31, 2021, none of our outstanding derivatives contained credit-risk related contingent features that would result in a material adverse impact to us upon any change in our credit ratings. Preferred Distribution Rate Reset Election A derivative feature embedded in a contract that does not meet the definition of a derivative in its entirety must be bifurcated and accounted for separately if the economic characteristics and risks of the embedded derivative are not clearly and closely related to those of the host contract. For a period of 30 days following (i) September 1, 2022 and (ii) each subsequent anniversary thereof, the holders of our Class A Convertible Preferred Units may make a Rate Reset Election to a cash amount per preferred unit equal to the amount that would be payable per quarter if a preferred unit accrued interest on the Issue Price at an annualized rate equal to three-month LIBOR plus 750 basis points; provided, however, that such reset rate shall be equal to 10.75% if (i) such alternative rate is higher than the LIBOR-based rate and (ii) the then market price for our common units is then less than 110% of the Issue Price. The Rate Reset Election of our Class A Convertible Preferred Units represents an embedded derivative that must be bifurcated from the related host contract and recorded at fair value on our Unaudited Condensed Consolidated Balance Sheets. Corresponding changes in fair value are recognized in “Other income (expense)” in our Unaudited Condensed Consolidated Statement of Operations. On the election date, the holders of the Class A Convertible Preferred Units elected to reset the rate to 11.24%, the sum of the three-month LIBOR of 3.74% plus 750 basis points. The fair value of the embedded derivative at the time of election was a liability of $101.8 million. As of the election date, the feature within the Class A Convertible Preferred Units that required bifurcation no longer existed and we have adjusted the carrying value of the Class A Convertible Preferred Units to include the fair value of the previously bifurcated amount at the election date See Note 11 for additional information regarding our Class A Convertible Preferred Units and the Rate Reset Election. Effect on Operating Results
|  |  | Amount of Gain (Loss) Recognized in Income |  |  |  |  |  |  |  |  |  |  |
|  |  | Year Ended December 31, |  |  |
| Consolidated Statements of Operations Location |  | 2022 |  | 2021 |  | 2020 |  |  |  |  |  |  |  |  |  |  |
Commodity derivatives—futures and options: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Contracts designated as hedges under accounting guidance | Onshore facilities and transportation product costs |  | $ | 1,403 |  |  | $ | (7,634) |  |  | $ | (14,454) |  |  |  |  |  |  |  |  |  |  |  |
Contracts not considered hedges under accounting guidance | Onshore facilities and transportation product costs, sodium minerals and sulfur services operating costs |  | 6,013 |  |  | (8,891) |  |  | (5,475) |  |  |  |  |  |  |  |  |  |  |  |
Total commodity derivatives |  |  | $ | 7,416 |  |  | $ | (16,525) |  |  | $ | (19,929) |  |  |  |  |  |  |  |  |  |  |  |
Natural gas swaps | Sodium minerals and sulfur services operating costs |  | 31,904 |  |  | $ | 1,174 |  |  | $ | 1,186 |  |  |  |  |  |  |  |  |  |  |  |
Preferred Distribution Rate Reset Election | Other expense, net |  | $ | (18,584) |  |  | $ | (30,838) |  |  | $ | (857) |  |  |  |  |  |  |  |  |  |  |  |
We have no derivative contracts with credit contingent features.

X
- References No definition available. + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- 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
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration