PHILADELPHIA ENERGY SOLUTIONS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(in thousands, except unit and volume data)
to meet the various existing legal requirements, the availability of insurance coverage, the recovery under any available indemnity, the nature and extent of future environmental laws and
regulations, inflation rates, and terms of consent agreements or remediation permits with regulatory agencies, among other things.
ursuant to the Energy Policy Act of 2005 and the Energy Independence and Security Act of 2007, the EPA has issued Renewable Fuel Standards
(RFS), implementing mandates to blend renewable fuels into the petroleum fuels produced and sold in the United States. Under RFS, the volume of renewable fuels that obligated refineries must blend into their finished petroleum fuels increases
annually over time until 2022. In addition, certain states have passed legislation that requires minimum biodiesel blending in finished distillates. Existing laws and regulations could change, and the minimum volumes of renewable fuels that must be
blended with refined petroleum fuels may change. In addition, in order to meet certain of these and future EPA requirements, we must purchase credits, known as RINS. Some of these contracts are derivative instruments; however, we elect the normal
purchase and sale exception and do not record these contracts at their fair values. RINS expense was $124,095, $130,408, and $116,282 for the years ended December 31, 2015, 2014, and 2013 respectively.
On March 4, 2014, the EPA finalized its Tier 3 Motor Vehicle Emission and Fuel Standards (Standards). The Standards establish more stringent
vehicle emissions standards and will reduce the sulfur content of gasoline beginning in 2017. The gasoline currently manufactured by the Philadelphia refining complex does not fully meet the requirements. The Standard requires additional capital
investment to install new technologies and could materially increase compliance costs, which could have an adverse effect on our financial position, results of operations, and liquidity.
currently has outstanding employment or severance agreements with certain executive management. Under the agreements, the executives would receive a lump-sum payment upon termination by the Company without cause, or by the employee for good reason,
as defined in the agreements. Upon death or disability, these executives or their estates, would receive a lump-sum payment for their prorated bonus based on the number of days employed during the year of death or disability.
The Company is
involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Companys consolidated financial
position, results of operations, or liquidity.
12. MEMBERS EQUITY
Preferred A Units
The Company issued 25
million Preferred A units as part of the purchase transaction on September 8, 2012 for $25,000. The units were nonvoting and provided for cumulative preferred dividends of 10% annually on the amount of unreturned capital. On September 9, 2013, the
Company redeemed all of the Preferred A units for $25,000 and paid the cumulative unpaid preferred dividends of $2,594.
There are 235,625 Common Units of PES LLC (Common Units) issued and outstanding as of December 31, 2015, 2014 and 2013. The allocation of
profits and losses and distributions to Common Unit holders is governed by the Amended and Restated Limited Liability Company Agreement of PES LLC.