2.2.0.25falsefalse006130 - Disclosure - Environmentaltruefalsefalse1falsefalseUSDfalsefalse1/1/2011 - 3/31/2011
USD ($)
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$c00007http://www.sec.gov/CIK0000110430duration2011-01-01T00:00:002011-03-31T00:00:00u000Standardhttp://www.xbrl.org/2003/iso4217USDiso42170u002Dividehttp://www.xbrl.org/2003/iso4217USDiso4217http://www.xbrl.org/2003/instancesharesxbrli0USDUSD$2true0fto_NotesToFinancialStatementsAbstractftofalsenadurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalse1falsefalsefalse00falsefalsefalsefalsefalseOtherxbrli:stringItemTypestringNo definition available.falsefalse3false0us-gaap_EnvironmentalLossContingencyDisclosureTextBlockus-gaaptruenadurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseterselabel1falsefalsefalse00<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">13.      Environmental</font></div><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold"></font><br /> </div><div style="TEXT-INDENT: 18pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The Company's operations and many of its manufactured products are specifically subject to certain requirements of the Clean Air Act ("CAA") and related state and local regulations.  The 1990 amendments to the CAA contain provisions that will require capital expenditures for the production of cleaner transportation fuels and the installation of certain air pollution control devices at the Refineries during the next several years as discussed below.</font></div><div style="TEXT-INDENT: 18pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The Environmental Protection Agency ("EPA") has promulgated regulations requiring the phase-in of gasoline sulfur standards, which began January 1, 2004 and continued through 2008, with special provisions for small business refiners such as Frontier.  As allowed by subsequent regulation, Frontier elected to extend its small refinery interim gasoline sulfur standard at each of the Refineries until January 1, 2011 by complying with the highway ultra low sulfur diesel standard by June 2006.  The Company has reevaluated its initial strategy of capital investment at its Cheyenne Refinery to meet the new gasoline sulfur standard and is now planning to comply with these requirements starting January 1, 2011 for approximately five years through the redemption of gasoline sulfur credits.  For long-term compliance, the Company expects to utilize internally generated credits and purchased credits and spend approximately $40.0 million ($18.5 million incurred as of March 31, 2011) for the FCCU gasoline hydrotreater project comprised of new process unit capacity and intermediate inventory handling equipment.  In addition, new federal benzene regulations and anticipated state requirements for reduction in gasoline Reid Vapor Pressure ("RVP") suggest that additional capital expenditures may be required for environmental compliance projects.  The Company is presently evaluating projects and the total potential cost in connection with an overall compliance strategy for the Cheyenne Refinery.  Total capital expenditures for the El Dorado Refinery to comply with the final gasoline sulfur standard were $95.0 million, including capitalized interest, and were completed in the fourth quarter of 2010.  The $95.0 million of expenditures primarily related to the El Dorado Refinery's gasoil hydrotreater revamp project.  The gasoil hydrotreater revamp project addressed most of the El Dorado Refinery's modifications needed to achieve gasoline sulfur compliance.</font></div><div style="TEXT-INDENT: 18pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The Company is a holder of gasoline sulfur credits retained from prior generation years at both the Cheyenne and the El Dorado Refineries.  There were no sulfur credit sales during the three months ended March 31, 2011 and 2010.</font></div><div style="TEXT-INDENT: 18pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">In March 2009, settlement agreements associated with the EPA's National Petroleum Refining Enforcement Initiative were finalized and are now in effect.  The Company currently estimates that, in addition to the flare gas recovery systems previously installed at each facility, capital expenditures totaling approximately $37.0 million ($697,000 incurred as of March 31, 2011) at the Cheyenne Refinery and $6.0 million ($1.5 million incurred as of March 31, 2011) at the El Dorado Refinery will need to be incurred prior to 2017.  The Company may also choose to incur additional costs at the Cheyenne Refinery and at the El Dorado Refinery to comply with certain requirements of the agreement if such projects are determined to be the most cost effective compliance strategy.  Notwithstanding these settlements, many of these same expenditures are required for the Company to comply with preexisting regulatory requirements or to implement its planned facility expansions.  Consequently, the costs associated with these other projects are not included in the totals above.  In addition, the settlement agreement provides for stipulated penalties for violations, which are periodically reported by the Company.  Stipulated penalties under the decree are not automatic but must be requested by one of the agency signatories.  As stipulated penalties are requested, the Company will separately report that matter and the amount of the proposed penalty, if material.</font></div><div style="TEXT-INDENT: 18pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The EPA has promulgated regulations to enact the provisions of the Energy Policy Act of 2005 regarding mandated blending of renewable fuels in gasoline.  The Energy Independence and Security Act of 2007 significantly increased the amount of renewable fuels that had been required by the 2005 legislation.  The Company, as a small refiner, was exempt until January 1, 2011 from these requirements at which time it began incurring additional costs in order to meet the new requirements.  The Company has renewable fuels blending facilities and purchases ethanol with Renewable Identification Numbers (RINs) credits attached.  Ethanol RINs were created to assist in tracking compliance with these EPA regulations for the blending of renewable fuels.  At March 31, 2011, the Company had a liability of $3.6 million related to the expected additional costs for compliance.  There were no RIN sales during the three months ended March 31, 2011 and 2010.  While not yet proposed or promulgated, other pending regulation regarding the mandated use of alternative or renewable fuels and/or the reduction of greenhouse gas emissions from either transportation fuels or manufacturing processes is under consideration by the EPA.  In addition, the EPA has recently determined that greenhouse gases, including carbon dioxide, present a danger to human health and the environment, which may result in future regulation of such gases.  If greenhouse gas control regulations are promulgated, these requirements could materially impact the operations and financial position of the Company (see "Other Future Environmental Considerations" below).</font></div><div style="TEXT-INDENT: 18pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">On February 26, 2007, the EPA promulgated regulations limiting the amount of benzene in gasoline.  These regulations take effect for large refiners on January 1, 2011 and for small refiners, such as Frontier, on January 1, 2015.  While not yet estimable, the Company anticipates that potentially material capital expenditures may be necessary to achieve compliance with the new regulation at its Cheyenne Refinery.  Gasoline manufactured at the El Dorado Refinery typically contains benzene concentrations near the new standard.  The Company therefore believes that necessary benzene compliance expenditures at the El Dorado Refinery will be substantially less than those at its Cheyenne Refinery.  The Company's recently announced merger with Holly Corporation, if completed, will likely result in the loss of small refiner status for the Company and will result in an earlier compliance deadline for these benzene limits.</font></div><div style="TEXT-INDENT: 18pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The Company owns terminals and pipelines in which various groundwater remediation and monitoring activities are underway and as of March 31, 2011 and December 31, 2010, the Company had a total accrual of $558,000.  As is the case with companies engaged in similar industries, the Company faces potential exposure from future claims and lawsuits involving environmental matters, including soil and water contamination, air pollution, personal injury and property damage allegedly caused by substances that the Company may have manufactured, handled, used, released or disposed.</font></div><div style="TEXT-INDENT: 18pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Cheyenne Refinery.</font>  The Company is party to an agreement with the State of Wyoming requiring investigation and interim remediation actions at the Cheyenne Refinery's property that may have been impacted by past operational activities.  As a result of past and ongoing investigative efforts, capital expenditures and remediation of conditions found to exist have already taken place, including the completion of surface impoundment closures, waste stabilization activities and other site remediation projects.  As of March 31, 2011 and December 31, 2010, the Company had a $4.8 million accrual, included on the Condensed Consolidated Balance Sheets related to the remediation program.  The accrual at March 31, 2011 reflects the estimated present value of a $705,000 cost in 2011 and $690,000 in annual costs for 2012 through 2020, assuming a 3% inflation rate, ten more years of the ongoing groundwater remediation program, and discounted at a rate of 7.9%.  The Company estimates a total cost of $7.8 million ($7.3 million incurred as of March 31, 2011) for the cleanup and on-going monitoring activities of a waste water treatment pond located on land adjacent to the Cheyenne Refinery which the Company had historically leased from the landowner.  Cleanup of the waste water pond pursuant to the aforementioned agreement with the State of Wyoming was completed in 2010 with various on-going monitoring for approximately two years.  Depending upon information collected during the on-going monitoring, or by a subsequent administrative order or permit, additional remedial action and costs could be required.</font></div><div style="TEXT-INDENT: 18pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">In October 2009, Frontier Refining Inc. (which owns the Cheyenne Refinery) was served with a Complaint from Region 8 of the EPA alleging unlawful storage of untreated or partially treated refinery wastewater in an on-site surface impoundment.  To resolve this issue, the Company has entered into a negotiated settlement agreement with the EPA.  Based on this agreement, the total settlement expense was $2.8 million.  This comprised of a $900,000 penalty (paid in June 2010) and $1.0 million for the first phase of the pond cleaning expenses related to injunctive relief with the remaining costs being for legal expenses.  Initially, the Company expected that capital costs for injunctive relief related to the removal and repair of the liner would have been incurred after June 1, 2011.  However, after further analysis and review, the Company has decided to close the on-site surface impoundment by third quarter 2011 for an estimated cost of $1.0 million, which was accrued at March 31, 2011 and December 31, 2010.  An alternative capital project related to storm water overflow, estimated at $2.8 million, is currently under development.</font></div><div style="TEXT-INDENT: 18pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The Company completed in 2007 the negotiation of a settlement of a Notice of Violation ("NOV") from the Wyoming Department of Environmental Quality ("WDEQ") alleging non-compliance with certain refinery waste management requirements.  The Company has estimated that the minimum capital cost for required corrective measures will be approximately $4.4 million and is estimated to be completed in early 2011.  In addition, the Company incurred a total of $2.3 million for additional work related to the corrective measures, which was substantially completed in 2010.</font></div><div style="TEXT-INDENT: 18pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The Company has received a draft wastewater discharge permit from the WDEQ designed to renew the existing permit.  This draft includes new discharge limits for selenium and chloride in addition to a requirement for more rigorous toxicity testing of the wastewater discharge.  The Company is currently evaluating options to achieve compliance with the proposed limits.  Costs for compliance with the new limits, which are currently proposed to become effective on January 1, 2013, are currently not estimable.</font></div><div style="TEXT-INDENT: 18pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; FONT-WEIGHT: bold">El Dorado Refinery.</font>  The El Dorado Refinery is subject to a 1988 consent order with the Kansas Department of Health and Environment ("KDHE").  Subject to the terms of the purchase and sale agreement for the El Dorado Refinery entered into between the Company and Shell Oil Products US ("Shell"), Shell is responsible for the costs of continued compliance with this order.  This order, including various subsequent modifications, requires the El Dorado Refinery to continue the implementation of a groundwater management program with oversight provided by the KDHE Bureau of Environmental Remediation.  More specifically, the El Dorado Refinery must continue to operate the hydrocarbon recovery well systems and containment barriers at the site and conduct sampling from monitoring wells and surface water stations.  Quarterly and annual reports must also be submitted to the KDHE.  The order requires that remediation activities continue until KDHE-established groundwater criteria or other criteria agreed to by the KDHE and the Refinery are met.</font></div><div style="TEXT-INDENT: 18pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">In addition to the State order described above, on March 9, 2011, EPA Region 7 issued a draft Administrative Order on Consent jointly to the Company and to Shell that will eventually require investigation and potential corrective measures at the facility related to possible past releases of hazardous materials or historical waste management activities.  The Company and Shell have initiated preliminary discussions with the EPA to clarify requirements, responsibilities and coordination with the pre-existing State order.</font></div><div style="TEXT-INDENT: 18pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; FONT-WEIGHT: bold">Other Future Environmental Considerations.</font>  Recent scientific studies have suggested that emissions of certain gases commonly referred to as "greenhouse gases" and including carbon dioxide and methane, may be contributing to warming of the earth's atmosphere.  On April 2, 2007, in Massachusetts, et al. v. EPA, the U.S. Supreme Court held that carbon dioxide may be regulated as an "air pollutant" under the federal Clean Air Act and that the EPA must consider whether it is required to regulate greenhouse gas emissions from mobile sources such as cars and trucks.  On April 17, 2009, the EPA proposed that certain greenhouse gases, including carbon dioxide, present a danger to public health or welfare.  The proposed "endangerment finding" was promulgated on December 7, 2009, opening the door to direct regulation of such greenhouse gases under the provisions and programs of the existing Clean Air Act.  Thus, the EPA can impose restrictions on the emission of greenhouse gases even if the U.S. Congress does not adopt new legislation specifically addressing emissions of greenhouse gases.  In October 2009, the EPA published a final rule requiring large emitters of greenhouse gases and certain industrial sectors to monitor and report their greenhouse gas emissions to the EPA beginning in 2011 for emissions in 2010.  On November 30, 2010, the EPA published a final rule expanding its existing GHG emission reporting rule to include onshore oil and natural gas production facilities beginning for 2012 for emissions occurring after January 1, 2011.  In May 2010, the EPA issued a final rule that determines which stationary sources of greenhouse gas emissions need to obtain a construction or operating permit and install the best available control technology for greenhouse gas emissions.  The regulation did not identify such technologies.  In response to the endangerment finding, the EPA adopted regulations that require a reduction in emissions of GHGs from motor vehicles and also could trigger permit review for GHG emission from certain stationary sources.  The EPA has determined that the motor vehicle GHG emission standards triggered Clean Air Act construction and operating permit requirements for stationary sources beginning on January 2, 2011 when the motor vehicle standards took effect.  In addition, the EPA has stated its intent to propose regulations in 2011 that would require utilities and refineries to limit incremental greenhouse gas emissions resulting from future facility expansions.   The Agency further stated their intent to promulgate such regulations in 2012.  Although it is not possible at this time to predict how legislation or new regulations that may be adopted to address greenhouse gas emissions would impact the Company's business, any such future laws and regulations will most likely result in increased compliance costs or additional operating restrictions, and could have a material adverse effect on the Company's business, financial condition and results of operations, including demand for the refined petroleum products that it produces.</font></div>13.      Environmental The Company's operations and many of its manufactured products are specifically subject to certainfalsefalsefalsefalsefalseOtherus-types:textBlockItemTypestringDisclosures of environmental loss contingencies, such as presence of hazardous waste, relevant information from reports issued by regulators, and estimated costs to achieve compliance with regulatory requirements. This element may be used for all of an entity's disclosures about environmental loss contingencies. This element may be used as a single block of text to encapsulate the entire inventory disclosure including data and tables.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher AICPA
-Name Statement of Position (SOP)
-Number 96-1
-Paragraph 152, 163, 172
Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Staff Accounting Bulletin (SAB)
-Number Topic 5
-Section Y
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