Fair Value Measurements

9 Months Ended

Sep. 30, 2022

Our financial instruments measured at fair value on a recurring basis consist of derivative instruments and RINs receivable and credit obligations.

Fair value measurements are derived using inputs (assumptions that market participants would use in pricing an asset or liability, including assumptions about risk). GAAP categorizes inputs used in fair value measurements into three broad levels as follows:

•(Level 1) Quoted prices in active markets for identical assets or liabilities.

•(Level 2) Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, similar assets and liabilities in markets that are not active or can be corroborated by observable market data.

•(Level 3) Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes valuation techniques that involve significant unobservable inputs.

The carrying amounts of derivative instruments and RINs receivable and credit obligations at September 30, 2022 and December 31, 2021 were as follows:


			Fair Value by Input Level
	Carrying Amount		Level 1		Level 2		Level 3
	(In thousands)
September 30, 2022
Assets:
NYMEX futures contracts	$	9,082	$	9,082	$	—	$	—

Commodity forward contracts	190		—		190		—
RINs receivable (1)	81,232		—		81,232		—
Foreign currency forward contracts	33,454		—		33,454		—
Total assets	$	123,958	$	9,082	$	114,876	$	—

Liabilities:


Commodity forward contracts	$	90	$	—	$	90	$	—

RINs credit obligations (1)	81,232		—		81,232		—
Total liabilities	$	81,322	$	—	$	81,322	$	—





			Fair Value by Input Level
	Carrying Amount		Level 1		Level 2		Level 3
	(In thousands)
December 31, 2021
Assets:

Commodity forward contracts	$	286	$	—	$	286	$	—
Foreign currency forward contracts	6,177		—		6,177		—
Total assets	$	6,463	$	—	$	6,463	$	—

Liabilities:
NYMEX futures contracts	$	1,269	$	1,269	$	—	$	—

Commodity forward contracts	566		—		566		—

RINs credit obligations (2)	9,429		—		9,429		—
Total liabilities	$	11,264	$	1,269	$	9,995	$	—

(1)Sinclair HoldCo is financially responsible for satisfaction of RINs credit obligations for all periods prior to the closing of the Sinclair Transactions. See Note 2 for additional information on RINs credit obligations assumed in the Sinclair Transactions.

(2)Represents obligations for RINs credits for which we did not have sufficient quantities at December 31, 2021 to satisfy our Environmental Protection Agency (“EPA”) regulatory blending requirements.

Level 1 Instruments

Our NYMEX futures contracts are exchange traded and are measured and recorded at fair value using quoted market prices, a Level 1 input.

Level 2 Instruments

Derivative instruments consisting of forward sales and purchase contracts and foreign currency forward contracts are measured and recorded at fair value using Level 2 inputs. The fair value of the forward sales and purchase contracts are computed using quoted forward commodity prices. The fair value of foreign currency forward contracts are based on values provided by a third party, which were derived using market quotes for similar type instruments, a Level 2 input. RINs receivable and RINs credit obligations are valued based on current market RINs prices.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details