
4.	IMPAIRMENT ANALYSIS

In late 2008, the U.S. and worldwide economies experienced severe disruptions in their capital and commodities markets resulting in a significant economic slowdown that negatively impacted refining industry fundamentals and the demand and price for our refined products. Because of this negative impact, we decided to shut down our Aruba Refinery temporarily in July 2009. We also decided to shut down our Delaware City Refinery permanently in late 2009 and ultimately sold that refinery in June 2010, and we sold our Paulsboro Refinery in December 2010, as discussed in Note 3. In addition, we temporarily suspended construction activity on various capital projects and permanently cancelled other projects. These permanent cancellations resulted in asset impairment losses of $2 million and $222 million for the years ended December 31, 2010 and 2009, respectively.

The U.S. and worldwide economies and refining industry fundamentals improved throughout 2010 and most of 2011, resulting in a significant improvement in the operating results of all of our refining segment assets. These improvements led to our decision to restart our Aruba Refinery and resume construction activities on the majority of the previously suspended capital projects. However, we analyzed our Aruba Refinery for potential impairment as of December 31, 2011 because of its recent temporary shutdown, its inability to generate positive cash flows on a sustained basis subsequent to its restart, and the sensitivity of its profitability to sour crude oil differentials, which narrowed significantly in the fourth quarter of 2011. In addition, we are exploring strategic alternatives for the refinery, including alternative feedstocks, configuration changes, and a temporary or permanent shutdown of the refinery facilities.

We considered all of these matters in our impairment analysis and concluded that our Aruba Refinery was not impaired as of December 31, 2011. Our future cash flow estimates for the refinery are based on our expectation that refining industry fundamentals will continue to improve in connection with an increase in the demand for refined products. However, should refining industry fundamentals fail to continue to improve, our future cash flow estimates will be negatively impacted. In addition, as discussed above, we are exploring strategic alternatives for the refinery and expect to conclude our evaluation of these strategic alternatives in the first quarter of 2012. A decision to temporarily or permanently shut down the refinery or a revision to the future operating plans for the refinery that results in a decrease in future expected cash flows could result in the refinery being impaired. The Aruba Refinery had a net book value of $958 million as of December 31, 2011; therefore, an impairment loss would be material to our results of operations.