filings.toolsItem 1. BUSINESS
82K characters. Original on sec.gov · Markdown
Item 1. BUSINESS
OVERVIEW
Marathon Petroleum Corporation (“MPC”) has over 130 years of experience in the energy business, and is the largest independent petroleum product refining, marketing, retail and midstream business in the United States. We operate the nation's largest refining system with more than 3 million barrels per day of crude oil refining capacity and believe we are one of the largest wholesale suppliers of gasoline and distillates to resellers in the United States. We believe we operate the second largest chain of company-owned and operated retail gasoline and convenience stores in the United States. We distribute our refined products through one of the largest terminal operations in the United States and one of the largest private domestic fleets of inland petroleum product barges. In addition, our integrated midstream energy asset network links producers of natural gas and NGLs from some of the largest supply basins in the United States to domestic and international markets.
Our operations consist of three reportable operating segments: Refining & Marketing, Retail and Midstream. Each of these segments is organized and managed based upon the nature of the products and services it offers.
| • | Refining & Marketing – refines crude oil and other feedstocks at our 16 refineries in the Gulf Coast, Mid-Continent and West Coast regions of the United States, purchases refined products and ethanol for resale and distributes refined products through transportation, storage, distribution and marketing services provided largely by our Midstream segment. We sell refined products to wholesale marketing customers domestically and internationally, to buyers on the spot market, to our Retail business segment and to independent entrepreneurs who operate primarily Marathon® branded outlets. |
| • | Retail – sells transportation fuels and convenience products in the retail market across the United States through company-owned and operated convenience stores, primarily under the Speedway® brand, and long-term fuel supply contracts with direct dealers who operate locations mainly under the ARCO® brand. |
| • | Midstream – transports, stores, distributes and markets crude oil and refined products principally for the Refining & Marketing segment via refining logistics assets, pipelines, terminals, towboats and barges; gathers, processes and transports natural gas; and gathers, transports, fractionates, stores and markets NGLs. The Midstream segment primarily reflects the results of MPLX LP (“MPLX”). MPLX is a diversified, large-cap master limited partnership (“MLP”) formed in 2012 that owns and operates midstream energy infrastructure and logistics assets and provides fuels distribution services. As of December 31, 2019, we owned the general partner and approximately 63 percent of the outstanding MPLX common units. |
On October 1, 2018, we completed the Andeavor acquisition. Andeavor shareholders received in the aggregate approximately 239.8 million shares of MPC common stock valued at $19.8 billion and $3.5 billion in cash.
Andeavor was a highly integrated marketing, logistics and refining company operating primarily in the Western and Mid-Continent United States. Our acquisition of Andeavor in 2018 substantially increased our geographic diversification and the scale of our assets, which provides increased opportunities to optimize our system.
Corporate History and Structure
MPC was incorporated in Delaware on November 9, 2009 in connection with an internal restructuring of Marathon Oil Corporation (“Marathon Oil”). On May 25, 2011, the Marathon Oil board of directors approved the spinoff of its Refining, Marketing & Transportation Business into an independent, publicly traded company, MPC, through the distribution of MPC common stock to the stockholders of Marathon Oil on June 30, 2011. Our common stock trades on the NYSE under the ticker symbol “MPC.”
Recent Developments
Strategic Actions to Enhance Shareholder Value
On October 31, 2019, we announced our intention to separate our retail transportation fuel and convenience store business, which is operated primarily under the Speedway brand, into an independent, publicly traded company through a tax-free distribution to MPC shareholders of publicly traded stock in the new independent retail transportation fuel and convenience store company. This transaction is targeted to be completed in the fourth quarter of 2020, subject to market, regulatory and certain other conditions, including final approval by MPC’s board of directors, receipt of customary assurances regarding the intended tax-free nature of the transaction, and the effectiveness of a registration statement to be filed with the SEC. The Speedway business is currently a reporting unit within our Retail segment. MPC will retain its direct dealer business, which is also included in the Retail segment as currently reported.
MPC’s board of directors also formed a special committee to evaluate strategies to enhance shareholder value through a review of the Midstream business and to analyze, among other things, the strategic fit of assets with MPC, the ability to realize full valuation credit for midstream earnings and cash flow, balance sheet impacts including liquidity and credit ratings, transaction tax impacts, separation costs, and overall complexity.
MPLX Acquisition of ANDX
On July 30, 2019, MPLX completed its acquisition of Andeavor Logistics LP (“ANDX”), and ANDX survived as a wholly-owned subsidiary of MPLX. At the effective time of the merger, each common unit held by ANDX’s public unitholders was converted into the right to receive 1.135 MPLX common units. ANDX common units held by certain affiliates of MPC were converted into the right to receive 1.0328 MPLX common units. Additionally, 600,000 ANDX preferred units were converted into 600,000 preferred units of MPLX (the “Series B preferred units”). Series B preferred unitholders are entitled to receive, when and if declared by the MPLX board, a fixed distribution of $68.75 per unit, per annum, payable semi-annually in arrears on February 15 and August 15, or the first business day thereafter, up to and including February 15, 2023. After February 15, 2023, the holders of Series B preferred units are entitled to receive cumulative, quarterly distributions payable in arrears on the 15th day of February, May, August and November of each year, or the first business day thereafter, based on a floating annual rate equal to the three month LIBOR plus 4.652 percent.
The transaction simplified our two sponsored MLPs, MPLX and ANDX, into a single listed entity to create a leading, large-scale, diversified midstream company anchored by fee-based cash flows. The combined entity has an expanded geographic footprint that is expected to enhance its long-term growth opportunities and the sustainable cash flow profile of the business.
OUR VISION, VALUES AND BUSINESS STRATEGIES
We are committed to creating a valued, dynamic energy company that enhances life’s possibilities. Underpinning this vision are our core values of integrity, respect, inclusion, collaboration, and safety and environmental stewardship.
Our business strategy is based on five strategic pillars designed to define how we create value through competitive advantages: superior execution, integrated value chain, growth through innovation, strong financial discipline and sustainability. These strategic pillars are supported by our commitment to maintaining a high-performing culture and workforce. We continuously strive to enhance our workforce through active recruitment of the best candidates, including those from diverse backgrounds. We develop our high quality workforce through coaching, mentoring and the delivery of robust training programs focused on leadership, commercial skills, safety, environmental stewardship, diversity and inclusion and other professional and technical skills. We describe our strategic pillars more fully below.
Superior Execution
We are committed to superior execution in everything we do across our organization.
Our Refining & Marketing segment focuses on maintaining and enhancing the reliability and availability of our refining assets, while improving our overall cost structure. Actions to improve our refining cost structure include reducing turnaround costs, improving energy efficiency, and driving operational improvements across our 16 refineries.
Our Midstream segment concentrates on achieving operational excellence by operating its assets safely and efficiently, while capturing synergies across our various systems.
Our Retail segment is expanding existing technology and utilizing data analytics to support and embrace consumer convenience trends, while improving profitability through operational excellence.
Integrated Value Chain
We believe the scale of our operations distinguishes us from our competitors. Our nationwide footprint enables connectivity to key supply sources and demand hubs. We have access to advantaged feedstocks and our logistics system lowers crude acquisition costs, increases optionality, and increases our speed to market. Our broad market presence creates superior product placement options and our nationwide marketing channels create significant optimization opportunities. Our substantial refining capacity and dock infrastructure on the West Coast and Gulf Coast and our marine assets, uniquely position us to provide reliable supply while allowing for international product placement and marine transportation cost optimization.
Growth Through Innovation
We intend to leverage technology to enhance margins system wide and develop new opportunities for industry leading solutions.
In the Refining & Marketing segment, we are focused on increasing upgrading capability at our refineries to provide yield flexibility and conversion capacity. We continue investing in high return capital projects that increase export capacity, resid destruction and diesel production. We also leverage technology and the expertise of our employees and business partners to optimize catalyst formulations and other refining processes to produce higher valued products.
In our Midstream segment, we are alleviating in-basin bottlenecks and connecting supply to global demand markets through investments in our marine fleet, export opportunities and long-haul crude oil, natural gas and NGL pipelines. We continue our efforts to leverage existing assets for incremental third-party business. We also prioritize our growth in strategic basins, such as the Permian and Marcellus.
In our Retail segment, we are focused on high value growth opportunities, utilizing superior technology, capturing key market opportunities, and leveraging our buying power. Our plans include the continued conversion of acquired locations to the Speedway brand and systems, growth in existing and new markets, dealer sites, commercial diesel fueling expansion, food service through store remodels and high quality acquisitions.
Strong Financial Discipline
We are committed to maintaining an investment grade credit profile and providing through business cycle financial flexibility and protection. We employ a disciplined and balanced approach to capital allocation, including a focus on only the highest returning capital projects in our respective business segments. In our midstream segment, MPLX is targeting positive free cash flow, after capital investments and distributions, in 2021. Achieving this would allow MPLX to fund both its distribution and capital program entirely from internally generated cash flow.
Since becoming a stand-alone company in June 2011, our dividend has increased by a 23 percent compound annual growth rate and our board of directors has authorized share repurchases totaling $18.0 billion. Through open market purchases and two ASR programs, we have repurchased 327 million shares of our common stock for approximately $15.0 billion, representing approximately 46 percent of our outstanding common shares when we became a stand-alone company in June 2011. We achieved these shareholder returns while meaningfully investing in the business and maintaining an investment-grade credit profile. As of December 31, 2019, $3.0 billion of authorization remains available for future share repurchases.
Sustainability
We view sustainability as our environmental, social and economic responsibility. We believe that sustainability is a fundamental process of shared value creation, in which strategic investment and innovation help our society achieve economic growth, environmental preservation and resource conservation. This shared value helps ensure the social and economic needs of future generations are met.
Our operations, assets and processes require specialized knowledge, advanced operating procedures and a commitment to excellence to ensure safety and maximize environmental stewardship. Our approach to sustainability is defined by not only the work we do to conform and comply with all laws and regulations, but also by our drive to meet or exceed our own rigorous environmental and safety targets.
We are committed to investing in sustainable solutions for energy demand by increasing our renewable diesel production and minimizing carbon intensity. We are in the process of converting our Dickinson refinery into an approximately 180 million gallon per year renewable diesel facility by the end of 2020.
In 2019, the EPA recognized Marathon Petroleum Corporation as an ENERGY STAR® Partner of the Year for the second year, the only oil and gas company to receive such honor. This award recognized the significant energy efficiency gains achieved since we established our “Focus on Energy” program at our refineries nearly a decade ago. Through the implementation of this program, we have earned approximately two-thirds of the total ENERGY STAR certifications awarded to the U.S. refining sector since 2006. Overall, we have realized considerable savings in energy costs and our energy efficiency efforts have enabled us to significantly lower our greenhouse gas intensity.
We remain committed to operating our assets in a safe and reliable manner and targeting continual improvement in our safety and environmental record across our operations through the use of a rigorous, independently audited management system, RC14001®:2015. This management system integrates health, environmental stewardship, safety and security to ensure compliance and continual improvement. Six of our 16 refineries and our Marathon Pipe Line, Terminals and Transport and Rail organizations maintain RC14001 certification. Additionally, our Marine organization maintains management system certification through the American Waterways Operators Responsible Carrier Program. We are continuing to align our recently acquired assets with our internal management system requirements.
We proactively address our regulatory requirements and encourage our operations to continually improve their environmental performance through our DEI program, which establishes goals and measures performance. DEI is a metric adopted by MPC to capture several categories simultaneously. It includes three categories of environmental incidents: releases to the environment (air, land or water), environmental permit exceedances and agency enforcement actions. We rank DEIs in terms of their severity, with Tier 4 being the most severe, and Tier 1 being the least. We continually strive for improvements in our environmental performance. In 2019, we fully implemented the DEI program across all of the assets we acquired from Andeavor in October 2018. As a result of implementing the program, we achieved a 37 percent reduction in Tier 3 and Tier 4 DEIs from our 2018 baseline.
OUR OPERATIONS
Our operations consist of three reportable operating segments: Refining & Marketing, Retail and Midstream.
REFINING & MARKETING
Refineries
We currently own and operate 16 refineries in the Gulf Coast, Mid-Continent and West Coast regions of the United States with an aggregate crude oil refining capacity of 3,067 mbpcd. During 2019, our refineries processed 2,902 mbpd of crude oil and 210 mbpd of other charge and blendstocks. During 2018, our refineries processed 2,081 mbpd of crude oil and 193 mbpd of other charge and blendstocks.
Our refineries include crude oil atmospheric and vacuum distillation, fluid catalytic cracking, hydrocracking, catalytic reforming, coking, desulfurization and sulfur recovery units. The refineries process a wide variety of condensate and light and heavy crude oils purchased from various domestic and foreign suppliers. We produce numerous refined products, ranging from transportation fuels, such as reformulated gasolines, blend-grade gasolines intended for blending with ethanol and ULSD fuel, to heavy fuel oil and asphalt. Additionally, we manufacture aromatics, propane, propylene and sulfur. See the Refined Product Marketing section for further information about the products we produce.
Our refineries are integrated with each other via pipelines, terminals and barges to maximize operating efficiency. The transportation links that connect our refineries allow the movement of intermediate products between refineries to optimize operations, produce higher margin products and efficiently utilize our processing capacity. For example, naphtha may be moved from Dickinson to Garyville where excess reforming capacity is available. Also, shipping intermediate products between facilities during partial refinery shutdowns allows us to utilize processing capacity that is not directly affected by the shutdown work.
Following is a description of each of our refineries and their capacity by region.
**Gulf Coast Region (**1,163 mbpcd)
*Galveston Bay, Texas City, Texas Refinery (*585 mbpcd). Our Galveston Bay refinery is a world-class refining complex resulting from the combination of our former Texas City refinery and Galveston Bay refinery. The refinery is located on the Texas Gulf Coast approximately 30 miles southeast of Houston, Texas and can process a wide variety of crude oils into gasoline, feedstocks, distillates, petrochemicals, propane and heavy fuel oil. The refinery has access to the export market and multiple options to sell refined products. Our cogeneration facility, which supplies the Galveston Bay refinery, currently has 1,055 megawatts of electrical production capacity and can produce 4.3 million pounds of steam per hour. Approximately 46 percent of the power generated in 2019 was used at the refinery, with the remaining electricity being sold into the electricity grid.
*Garyville, Louisiana Refinery (*578 mbpcd). Our Garyville refinery, which is one of the largest refineries in the U.S., is located along the Mississippi River in southeastern Louisiana between New Orleans, Louisiana and Baton Rouge, Louisiana. The Garyville refinery is configured to process a wide variety of crude oils into gasoline, distillates, petrochemicals, feedstocks, asphalt, propane and heavy fuel oil. The refinery has access to the export market and multiple options to sell refined products. Our Garyville refinery has earned designation as an OSHA VPP Star site.
**Mid-Continent Region (**1,193 mbpcd)
*Catlettsburg, Kentucky Refinery (*291 mbpcd). Our Catlettsburg refinery is located in northeastern Kentucky on the western bank of the Big Sandy River, near the confluence with the Ohio River. The Catlettsburg refinery processes sweet and sour crude oils, including production from the nearby Utica Shale, into gasoline, distillates, asphalt, petrochemicals, heavy fuel oil, propane and feedstocks. Our Catlettsburg refinery has earned designation as an OSHA VPP Star site.
*Robinson, Illinois Refinery (*253 mbpcd). Our Robinson refinery is located in southeastern Illinois. The Robinson refinery processes sweet and sour crude oils into gasoline, distillates, feedstocks, petrochemicals, propane and heavy fuel oil. The Robinson refinery has earned designation as an OSHA VPP Star site.
*Detroit, Michigan Refinery (*140 mbpcd). Our Detroit refinery is located in southwest Detroit. It is the only petroleum refinery currently operating in Michigan. The Detroit refinery processes sweet and heavy sour crude oils, including Canadian crude oils, into gasoline, distillates, asphalt, feedstocks, petrochemicals, propane and heavy fuel oil. Our Detroit refinery has earned designation as an OSHA VPP Star site.
*El Paso, Texas Refinery (*131 mbpcd). Our El Paso refinery is located approximately three miles east of downtown El Paso, Texas. The El Paso refinery processes sweet and sour crudes into gasoline, distillates, asphalt, heavy fuel oil, propane, feedstocks and petrochemicals.
*St. Paul Park, Minnesota Refinery (*103 mbpcd). Our St. Paul Park refinery is located along the Mississippi River southeast of St. Paul Park, Minnesota. The St. Paul Park refinery primarily processes sweet crude from the Bakken region in North Dakota as well as various grades of Canadian sweet and heavy sour crude and manufactures gasoline, distillates, asphalt, feedstocks, propane, petrochemicals and heavy fuel oil.
*Canton, Ohio Refinery (*95 mbpcd). Our Canton refinery is located approximately 60 miles south of Cleveland, Ohio. The Canton refinery processes sweet and sour crude oils, including production from the nearby Utica Shale, into gasoline, distillates, asphalt, feedstocks, propane, petrochemicals and heavy fuel oil. The Canton refinery has earned designation as an OSHA VPP Star site.
*Mandan, North Dakota Refinery (*71 mbpcd). The Mandan refinery processes primarily sweet domestic crude oil from North Dakota and manufactures gasoline, distillates, propane, heavy fuel oil, feedstocks and petrochemicals.
*Salt Lake City, Utah Refinery (*63 mbpcd). Our Salt Lake City refinery is now the largest in Utah. The Salt Lake City refinery processes crude oil from Utah, Colorado, Wyoming and Canada to manufacture gasoline, distillates, feedstocks, propane, heavy fuel oil and petrochemicals.
*Gallup, New Mexico Refinery (*27 mbpcd). Our Gallup refinery is located near Gallup, New Mexico and is the only active refinery in the Four Corners area. The Gallup refinery primarily processes high-quality crude known as Four Corners Sweet into gasoline, distillates, feedstocks, heavy fuel oil and propane.
*Dickinson, North Dakota Refinery (*19 mbpcd). Our Dickinson refinery is located four miles west of Dickinson, North Dakota. The Dickinson refinery primarily processes domestic crude oil from North Dakota and manufactures ultra-low sulfur diesel and feedstocks. We are in the process of converting this refinery into an approximately 180 million gallon per year renewable diesel facility by December 2020.
**West Coast Region (**711 mbpcd)
*Los Angeles, California Refinery (*363 mbpcd). Our Los Angeles refinery is located in Los Angeles County, near the Los Angeles Harbor. The Los Angeles refinery is the largest refinery on the West Coast and is a major producer of clean fuels. The Los Angeles refinery processes heavy crude from California’s San Joaquin Valley and Los Angeles Basin as well as crudes from the Alaska North Slope, South America, West Africa and other international sources and manufactures cleaner-burning CARB gasoline and CARB diesel fuel, as well as conventional gasoline, distillates, feedstocks, petrochemicals, propane and heavy fuel oil.
*Martinez, California Refinery (*161 mbpcd). Our Martinez refinery is located in Martinez, California. The Martinez refinery processes crude oils from California and other domestic and foreign sources and manufactures cleaner-burning CARB gasoline and CARB diesel fuel, as well as conventional gasoline and distillates, feedstocks, petrochemicals, propane and heavy fuel oil.
*Anacortes, Washington Refinery (*119 mbpcd). Our Anacortes refinery is located about 70 miles north of Seattle on Puget Sound. The Anacortes refinery processes Canadian crude, domestic crude from North Dakota and Alaska North Slope and international crudes to manufacture gasoline, distillates, heavy fuel oil, feedstocks, propane and petrochemicals.
*Kenai, Alaska Refinery (*68 mbpcd). Our Kenai refinery is located on the Cook Inlet, 60 miles southwest of Anchorage. The Kenai refinery processes mainly Alaska domestic crude, domestic crude from North Dakota, along with limited international crude and manufactures distillates, gasoline, heavy fuel oil, feedstocks, asphalt, propane and petrochemicals.
Planned maintenance activities, or turnarounds, requiring temporary shutdown of certain refinery operating units, are periodically performed at each refinery. See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations for additional detail.
Refined Product Yields
The following table sets forth our refinery production by product group for each of the last three years including production from the refineries acquired in the Andeavor acquisition from October 1, 2018 forward.
| (mbpd) | 2019 | 2018 | 2017 | ||||||
| Gasoline | 1,560 | 1,107 | 932 | ||||||
| Distillates | 1,087 | 773 | 641 | ||||||
| Feedstocks and petrochemicals | 315 | 288 | 277 | ||||||
| Asphalt | 87 | 69 | 63 | ||||||
| Propane | 55 | 41 | 36 | ||||||
| Heavy fuel oil | 49 | 38 | 37 | ||||||
| Total | 3,153 | 2,316 | 1,986 |
Crude Oil Supply
We obtain the crude oil we refine through negotiated term contracts and purchases or exchanges on the spot market. Our term contracts generally have market-related pricing provisions. The following table provides information on our sources of crude oil for each of the last three years. It includes crude sourced for the refineries acquired in the Andeavor acquisition from October 1, 2018 forward. The crude oil sourced outside of North America was acquired from various foreign national oil companies, production companies and trading companies.
| (mbpd) | 2019 | 2018 | 2017 | ||||||
| United States | 1,962 | 1,319 | 999 | ||||||
| Canada | 541 | 465 | 381 | ||||||
| Middle East and other international | 399 | 297 | 385 | ||||||
| Total | 2,902 | 2,081 | 1,765 |
Our refineries receive crude oil and other feedstocks and distribute our refined products through a variety of channels, including pipelines, trucks, railcars, ships and barges.
Renewable Fuels
We in the process of converting our Dickinson, North Dakota refinery into an approximately 180 million gallon per year renewable diesel facility by December 2020.
We own a biofuel production facility in Cincinnati, Ohio that produces biodiesel, glycerin and other by-products. The capacity of the plant is approximately 80 million gallons per year.
Our wholly-owned subsidiary, Virent, is an advanced biofuels facility in Madison, Wisconsin that is working to commercialize a process for converting biobased feedstocks into renewable fuels and chemicals.
We hold an ownership interest in ethanol production facilities in Albion, Michigan; Logansport, Indiana; Greenville, Ohio and Denison, Iowa. These plants have a combined ethanol production capacity of approximately 475 million gallons per year (31 mbpd) and are managed by our joint venture partner, The Andersons.
Refined Product Marketing
Our refined products are sold to independent retailers, wholesale customers, our brand jobbers and our Retail segment. In addition, we sell refined products for export to international customers. As of December 31, 2019, there were 6,901 branded outlets in 35 states, the District of Columbia and Mexico where independent entrepreneurs primarily maintain Marathon-branded outlets. We believe we are one of the largest wholesale suppliers of gasoline and distillates to resellers and consumers within our 41-state market area.
The following table sets forth our refined product sales volumes by product group for each of the last three years including sales from the refineries acquired in the Andeavor acquisition from October 1, 2018 forward.
| (mbpd) | 2019 | 2018 | 2017 | |||||
| Gasoline | 1,967 | 1,416 | 1,201 | |||||
| Distillates | 1,205 | 847 | 691 | |||||
| Feedstocks and petrochemicals | 345 | 289 | 265 | |||||
| Asphalt | 93 | 70 | 68 | |||||
| Propane | 72 | 44 | 37 | |||||
| Heavy fuel oil | 53 | 37 | 39 | |||||
| Total | 3,735 | 2,703 | 2,301 |
Refined Product Sales Destined for Export
We sell gasoline, distillates and asphalt for export, primarily out of our Garyville, Galveston Bay, Anacortes, Martinez, Los Angeles and Kenai refineries. The following table sets forth our refined product sales destined for export by product group for the past three years including sales from the refineries acquired in the Andeavor acquisition from October 1, 2018 forward.
| (mbpd) | 2019 | 2018 | 2017 | |||||
| Gasoline | 131 | 117 | 96 | |||||
| Distillates | 215 | 193 | 192 | |||||
| Asphalt and other | 51 | 24 | 9 | |||||
| Total | 397 | 334 | 297 |
Gasoline and Distillates**.** We sell gasoline, gasoline blendstocks and distillates (including No. 1 and No. 2 fuel oils, jet fuel, kerosene and diesel fuel) to wholesale customers, Marathon-branded independent entrepreneurs, our Retail segment and on the spot market. In addition, we sell diesel fuel and gasoline for export to international customers. The demand for gasoline and distillates is seasonal in many of our markets, with demand typically at its highest levels during the summer months.
Feedstocks and Petrochemicals**.** We are a producer and marketer of feedstocks and petrochemicals. Product availability varies by refinery and includes, among others, propylene, naphtha, alkylate, xylene, butane, benzene, raffinate, dry gas, cumene, toluene and platformate. We market these products domestically to customers in the chemical, agricultural and fuel-blending industries. In addition, we produce fuel-grade coke at our Garyville, Detroit, Galveston Bay and Los Angeles refineries, which is used for power generation and in miscellaneous industrial applications, and anode-grade coke at our Los Angeles and Robinson refineries, which is used to make carbon anodes for the aluminum smelting industry.
Asphalt**.** We have refinery-based asphalt production capacity of up to 136 mbpcd, which includes asphalt cements, polymer-modified asphalt, emulsified asphalt, industrial asphalts and roofing flux. We have a broad customer base, including asphalt-paving contractors, government entities (states, counties, cities and townships) and asphalt roofing shingle manufacturers. We sell asphalt in the domestic and export wholesale markets via rail, barge and vessel.
Propane**.** We produce propane at all of our refineries except Dickinson. Propane is primarily used for home heating and cooking, as a feedstock within the petrochemical industry, for grain drying and as a fuel for trucks and other vehicles. Our propane sales are split approximately 80 percent and 20 percent between the home heating market and petrochemical consumers, respectively.
Heavy Fuel Oil**.** We produce and market heavy residual fuel oil or related components, including slurry, at all of our refineries except Dickinson. Heavy residual fuel oil is primarily used in the utility and ship bunkering (fuel) industries, though there are other more specialized uses of the product.
Terminals and Transportation
We transport, store and distribute crude oil, feedstocks and refined products through pipelines, terminals and marine fleets owned by MPLX and third parties in our market areas.
We own a fleet of transport trucks and trailers for the movement of refined products and crude oil. In addition, we maintain a fleet of leased and owned railcars for the movement and storage of refined products.
The locations and detailed information about our Refining & Marketing assets are included under Item 2. Properties and are incorporated herein by reference.
Competition, Market Conditions and Seasonality
The downstream petroleum business is highly competitive, particularly with regard to accessing crude oil and other feedstock supply and the marketing of refined products. We compete with a number of other companies to acquire crude oil for refinery processing and in the distribution and marketing of a full array of refined products. Based upon company data as reported in the “The Oil & Gas Journal 2019 Worldwide Refinery Survey,” we ranked first among U.S. petroleum companies on the basis of U.S. crude oil refining capacity.
We compete in four distinct markets for the sale of refined products—wholesale, including exports, spot, branded and retail distribution. Our marketing operations compete with numerous other independent marketers, integrated oil companies and high-volume retailers. We compete with companies in the sale of refined products to wholesale marketing customers, including private-brand marketers and large commercial and industrial consumers; companies in the sale of refined products in the spot market; and refiners or marketers in the supply of refined products to refiner-branded independent entrepreneurs. In addition, we compete with producers and marketers in other industries that supply alternative forms of energy and fuels to satisfy the requirements of our industrial, commercial and retail consumers.
Market conditions in the oil and gas industry are cyclical and subject to global economic and political events and new and changing governmental regulations. Our operating results are affected by price changes in crude oil, natural gas and refined products, as well as changes in competitive conditions in the markets we serve. Price differentials between sweet and sour crude oils, ANS, WTI and LLS crude oils and other market structure impacts also affect our operating results.
Demand for gasoline, diesel fuel and asphalt is higher during the spring and summer months than during the winter months in most of our markets, primarily due to seasonal increases in highway traffic and construction. As a result, the operating results for our Refining & Marketing segment for the first and fourth quarters may be lower than for those in the second and third quarters of each calendar year.
RETAIL
Our Retail segment sells gasoline, diesel and merchandise through convenience stores that it owns and operates, primarily under the Speedway brand, and gasoline and diesel through direct dealer locations. Our company-owned and operated convenience stores offer a wide variety of merchandise, including prepared foods, beverages and non-food items. Speedway’s Speedy Rewards® loyalty program has been a highly successful loyalty program since its inception in 2004, which averaged approximately 6.3 million active members in 2019. Speedway’s ability to capture and analyze member-specific transactional data enables us to offer Speedy Rewards® members discounts and promotions specific to their buying behavior. We believe Speedy Rewards® is a key reason customers choose Speedway over competitors and it continues to drive significant value for both Speedway and our Speedy Rewards® members.
As of December 31, 2019, our Retail segment had 3,898 company-owned and operated convenience stores across the United States and we have long-term supply contracts for 1,068 direct dealer locations primarily in Southern California, largely under the ARCO® brand.
Speedway also owns a 29 percent interest in PFJ Southeast LLC (“PFJ Southeast”), which is a joint venture between Speedway and Pilot Flying J with 125 travel center locations primarily in the Southeast United States as of December 31, 2019. Additionally, Speedway and Pilot Travel Centers LLC (“PTC”) entered into an agreement effective October 1, 2019 in which PTC will supply, price and sell diesel fuel at certain Speedway and PTC locations with both companies sharing in the diesel fuel margins. At December 31, 2019, this agreement included approximately 330 Speedway and PTC fueling locations across 13 states, including approximately 180 Speedway commercial fueling locations.
The locations and detailed information about our Retail assets are included under Item 2. Properties and are incorporated herein by reference.
Competition, Market Conditions and Seasonality
We face strong competition for sales of retail gasoline, diesel fuel and merchandise. Our competitors include service stations and convenience stores operated by fully integrated major oil companies, independent entrepreneurs and other well-recognized national or regional convenience stores and travel centers, often selling gasoline, diesel fuel and merchandise at competitive prices. Non-traditional transportation fuel retailers, such as supermarkets, club stores and mass merchants, have affected the convenience store industry with their
entrance into sales of retail gasoline and diesel fuel. Energy Analysts International, Inc. estimated such retailers had approximately 16 percent of the U.S. gasoline market in 2019.
Demand for gasoline and diesel fuel is higher during the spring and summer months than during the winter months in most of our markets, primarily due to seasonal increases in highway traffic. As a result, the operating results for our Retail segment for the first and fourth quarters may be lower than for those in the second and third quarters of each calendar year. Margins from the sale of merchandise tend to be less volatile than margins from the retail sale of gasoline and diesel fuel.
MIDSTREAM
The Midstream segment primarily includes the operations of MPLX, our sponsored MLP, and certain related operations retained by MPC.
MPLX
MPLX owns and operates a network of crude oil, natural gas and refined product pipelines and has joint ownership interests in other crude oil and refined products pipelines. MPLX also owns and operates light products terminals, storage assets and maintains a fleet of owned and leased towboats and barges. MPLX’s assets also include natural gas gathering systems and natural gas processing and NGL fractionation complexes.
MPC-Retained Midstream Assets and Investments
We have ownership interests in several crude oil and refined products pipeline systems and pipeline companies and have indirect ownership interests in two ocean vessel joint ventures through our investment in Crowley Coastal Partners.
The locations and detailed information about our Midstream assets are included under Item 2. Properties and are incorporated herein by reference.
Competition, Market Conditions and Seasonality
Our Midstream operations face competition for natural gas gathering, crude oil transportation and in obtaining natural gas supplies for our processing and related services; in obtaining unprocessed NGLs for gathering and fractionation; and in marketing our products and services. Competition for natural gas supplies is based primarily on the location of gas gathering facilities and gas processing plants, operating efficiency and reliability and the ability to obtain a satisfactory price for products recovered. Competitive factors affecting our fractionation services include availability of capacity, proximity to supply and industry marketing centers and cost efficiency and reliability of service. Competition for customers to purchase our natural gas and NGLs is based primarily on price, delivery capabilities, flexibility and maintenance of high-quality customer relationships. In addition, certain of our Midstream operations are highly regulated, which affects the rates that our common carrier pipelines can charge for transportation services and the return we obtain from such pipelines.
Our Midstream segment can be affected by seasonal fluctuations in the demand for natural gas and NGLs and the related fluctuations in commodity prices caused by various factors such as changes in transportation and travel patterns and variations in weather patterns from year to year.
ENVIRONMENTAL MATTERS
Our management is responsible for ensuring that our operating organizations maintain environmental compliance systems that support and foster our compliance with applicable laws and regulations, and for reviewing our overall environmental performance. We also have a Corporate Emergency Response Team that oversees our response to any major environmental or other emergency incident involving us or any of our facilities.
We believe it is likely that the scientific and political attention to greenhouse gas emissions, climate change, and climate adaptation will continue, with the potential for further regulations that could affect our operations. Currently, legislative and regulatory measures to address greenhouse gas emissions are in various phases of review, discussion or implementation. The cost to comply with these laws and regulations cannot be estimated at this time, but could be significant. For additional information, see Item 1A. Risk Factors. We estimate and publicly report greenhouse gas emissions from our operations. Additionally, we continuously strive to improve operational and energy efficiencies through resource and energy conservation where practicable.
Our operations are subject to numerous laws and regulations relating to the protection of the environment. Such laws and regulations include, among others, the Clean Air Act (“CAA”) with respect to air emissions, the Clean Water Act (“CWA”) with respect to water discharges, the Resource Conservation and Recovery Act (“RCRA”) with respect to solid and hazardous waste treatment, storage and disposal, the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”) with respect to releases and remediation of hazardous substances and the Oil Pollution Act of 1990 (“OPA-90”) with respect to oil pollution and response. In addition, many states where we operate have similar laws. New laws are being enacted and regulations are being adopted on a continuing basis, and the costs of compliance with such new laws and regulations are very difficult to estimate until finalized.
For a discussion of environmental capital expenditures and costs of compliance, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations-Environmental Matters and Compliance Costs.
Air
Greenhouse Gas Emissions
We are subject to many requirements in connection with air emissions from our operations. Internationally and domestically, emphasis has been placed on reducing greenhouse gas emissions. In July 2019, the Trump Administration continued its shift in climate-related policy away from the Obama Administration’s policies by repealing the “Clean Power Plan” and replacing it with the Affordable Clean Energy rule, which establishes guidelines for states to develop plans to address greenhouse gas emissions from existing coal-fired power plants. President Trump also announced the United States’ intention to withdraw from the 2015 Paris UN Climate Change Conference Agreement, which aims to hold the increase in the global average temperature to well below two degrees Celsius as compared to pre-industrial levels. Many of the policies and regulations rescinded through Executive Order 13783 had been adopted to meet the United States’ pledge under the Paris Agreement. The U.S. climate change strategy and implementation of that strategy through legislation and regulation may change under future administrations; therefore, the impact to our industry and operations due to greenhouse gas regulation is unknown at this time.
In the absence of federal legislation or regulation of greenhouse gas emissions, states are becoming active in regulating greenhouse gas emissions. These measures may include state actions to develop statewide or regional programs to impose emission reductions. These measures may also include low-carbon fuel standards, such as the California program, or a state carbon tax. These measures could result in increased costs to operate and maintain our facilities, capital expenditures to install new emission controls and costs to administer any carbon trading or tax programs implemented. For example, in 2017, the California state legislature adopted AB 398, which provides direction and parameters on utilizing cap and trade after 2020 to meet the 40% reduction target from 1990 levels by 2030 specified in SB 32. Compliance with the cap and trade program is demonstrated through a market-based credit system. The CARB is now exploring the potential for additional greenhouse gas reductions by 2045 via a yet undefined carbon neutrality standard. Much of the compliance costs associated with these California regulations are ultimately passed on to the consumer in the form of higher fuel costs. We cannot currently predict the impact of these regulations on our liquidity, financial position, or results of operations, but we do not believe such impact will be material.
In sum, requiring reductions in greenhouse gas emissions could result in increased costs to (i) operate and maintain our facilities, (ii) install new emission controls at our facilities and (iii) administer and manage any greenhouse gas emissions programs, including acquiring emission credits or allotments. These requirements may also significantly affect MPC’s refinery operations and may have an indirect effect on our business, financial condition and results of operations. The extent and magnitude of the impact from greenhouse gas regulation or legislation cannot be reasonably estimated due to the uncertainty regarding the additional measures and how they will be implemented.
Regardless of whether legislation or regulation is enacted, given the continuing global demand for oil and gas - even under different hypothetical carbon-constrained scenarios - MPC has taken actions that have resulted in lower greenhouse gas emission intensity and we believe we are positioned to remain a successful company well into the future. We have instituted a program to improve energy efficiency of our refineries and other assets which will continue to pay dividends in reducing our environmental footprint as well as making us more cost-competitive. We believe our mature governance and risk-management processes enable the company to effectively monitor and adjust to any transitional, reputational or physical climate-related risks.
Other Air Emissions
In 2015, United States Environmental Protection Agency (“EPA”) finalized a revision to the National Ambient Air Quality Standards (“NAAQS”) for ozone. The EPA lowered the primary ozone NAAQS from 75 ppb to 70 ppb. This revision initiated a multi-year process in which nonattainment designations will be made based on more recent ozone measurements that includes data from 2016. On November 6, 2017, the EPA finalized ozone attainment/unclassifiable designations for certain areas under the new standard. In actions dated April 30, 2018 and July 25, 2018, the EPA finalized nonattainment designations for certain areas under the lower primary ozone standard. In some areas, these nonattainment designations could result in increased costs associated with, or result in cancellation or delay of, capital projects at our facilities. For areas designated nonattainment, states will be required to adopt State Implementation Plans (“SIPs”) for nonattainment areas. These SIPs may include NOx and/or volatile organic compound (“VOC”) reductions that could result in increased costs to our facilities. We cannot predict the effects of the various SIPs requirements at this time.
In California, the Board for the South Coast Air Quality Management District (“SCAQMD”) passed amendments to the Regional Clean Air Incentives Market (“RECLAIM”) that became effective in 2016, requiring a staged reduction of nitrogen oxide emissions through 2022. In 2017, the State of California passed AB 617, which requires each air district that is a nonattainment area for one or more air pollutants to adopt an expedited schedule for implementation of best available retrofit control technology (“BARCT”) on specific facilities. BARCT applies to all facilities subject to RECLAIM. In response to AB 617, the SCAQMD is currently working to “sunset” the existing RECLAIM program and replace it with applicable BARCT regulations. A “sunset” of the RECLAIM program and application of BARCT could result in increased costs to operate and maintain our facilities or install emissions controls at our facilities in the SCAQMD.
Water
We maintain numerous discharge permits as required under the National Pollutant Discharge Elimination System program of the CWA and have implemented systems to oversee our compliance with these permits. In addition, we are regulated under OPA-90, which, among other things, requires the owner or operator of a tank vessel or a facility to maintain an emergency plan to respond to releases of oil or hazardous substances. OPA-90 also requires the responsible company to pay resulting removal costs and damages and provides for civil penalties and criminal sanctions for violations of its provisions. We operate tank vessels and facilities from which spills of oil and hazardous substances could occur. We have implemented emergency oil response plans for all of our components and facilities covered by OPA-90 and we have established Spill Prevention, Control and Countermeasures plans for all facilities subject to such requirements.
Additionally, OPA-90 requires that new tank vessels entering or operating in U.S. waters be double-hulled and that existing tank vessels that are not double-hulled be retrofitted or removed from U.S. service. All barges used for river transport of our raw materials and refined products meet the double-hulled requirements of OPA-90. Some coastal states in which we operate have passed state laws similar to OPA-90, but with expanded liability provisions, that include provisions for cargo owner responsibility as well as ship owner and operator responsibility.
On October 22, 2019, the EPA and the United States Army Corps of Engineers (“Army Corps”) published a final rule to repeal the 2015 “Clean Water Rule: Definition of Waters of the United States” (“2015 Rule”), which amended portions of the Code of Federal Regulations (“CFR”) to restore the regulatory text that existed prior to the 2015 Rule, effective December 23, 2019. The rule repealing the 2015 Clean Water Rule has been challenged in multiple federal courts. On January 23, 2020, the EPA and the Army Corps finalized the Navigable Waters Protection Rule (“2020 Rule”) to define “waters of the United States.” This rule will become effective 60 days after publication in the Federal Register and will replace the pre-2015 regulatory text that had been restored by the October 2019 Rule. The 2020 Rule will likely be challenged in court. A broader definition of “waters of the United States,” such as that included in the 2015 Rule, could result in increased cost of compliance or increased capital costs for construction of new facilities or expansion of existing facilities.
In 2015, the EPA issued its intent to review the CWA categorical effluent limitation guidelines (“ELG”) for the petroleum refining sector. During 2017, the EPA prepared and issued an information request (“ICR”) requesting significant wastewater and treatment process details from select refineries, seven of which were ours. Responses to the ICR were submitted to the EPA in early 2018. In September 2019, the EPA issued its “Detailed Study of the Petroleum Refining Category - 2019 Report” which concluded the EPA’s review. In October 2019, the EPA published its “Preliminary Effluent Guidelines Program Plan 14” (“Plan 14”) and requested comments. Plan 14 indicated that the EPA was proposing to conclude the study of the Petroleum
Refinery Category and not take further action at this time, however, it also indicated that it intended a future review or study of the category but did not elaborate on scope or timing of such review or study. Changes in the ELG could result in increased costs of compliance, including capital improvement projects at our facilities.
As part of our emergency response activities, we have used aqueous film forming foam (“AFFF”) containing per- and polyfluoroalkyl substances (“PFAS”) chemicals as a fire suppressant. At this time, AFFFs containing PFAS are the only proven foams that can prevent and control most flammable petroleum-based liquid fires.
In May 2016, the EPA issued lifetime health advisories (“HAs”) and health effects support documents for two PFAS substances - Perfluorooctanoic Acid (“PFOA”) and Perfluorooctane Sulfonate (“PFOS”). The EPA’s HAs, which identify the concentration of PFOA and PFOS in drinking water at or below which adverse health effects are not anticipated to occur over a lifetime of exposure, are 0.07 parts per billion (70 parts per trillion) for PFOA and PFOS. HAs are non-regulatory and reflect the EPA’s assessment of the best available peer-reviewed science.
In February 2019, EPA issued a PFAS Action Plan identifying actions the EPA is planning to take to study and regulate various PFAS chemicals. The EPA identified that it would evaluate, among other actions, (1) proposing national drinking water standards for PFOA and PFOS, (2) develop cleanup recommendations for PFOA and PFOS, (3) evaluate listing PFOA and PFOS as hazardous substances under CERCLA, and (4) conduct toxicity assessments for other PFAS chemicals. In February 2020, the EPA announced its preliminary determinations to regulate PFOS and PFOA in drinking water and is taking public comment on such preliminary determinations. If the preliminary determinations become final, the EPA will set drinking water limits for PFOS and PFOA.
Congress has introduced multiple bills in the House and Senate proposing to regulate PFAS. To date, only one such Bill has been signed into law. The National Defense Authorization Act includes provisions that added certain PFAS to the Toxics Release Inventory under the Emergency Planning and Community Right-to-Know Act. Facilities that manufacture, process or produce listed PFAS in quantities of more than 100 pounds per year will be required to report their releases of PFAS. We expect further congressional action or EPA action in the future, however, it is unknown at this time what future legislation and/or regulation will entail.
In addition, many states are actively proposing and adopting legislation and regulations relating to the use of AFFF. Additionally, some states are adopting and proposing state-specific drinking water and cleanup standards for various PFAS. We cannot currently predict the impact of these regulations on our liquidity, financial position, or results of operations.
Solid Waste
We continue to seek methods to minimize the generation of hazardous wastes in our operations. RCRA establishes standards for the management of solid and hazardous wastes. Besides affecting waste disposal practices, RCRA also addresses the environmental effects of certain past waste disposal operations, the recycling of wastes and the regulation of USTs containing regulated substances.
Remediation
We own or operate, or have owned or operated, certain convenience stores and other locations where, during the normal course of operations, releases of refined products from USTs have occurred. Federal and state laws require that contamination caused by such releases at these sites be assessed and remediated to meet applicable standards. Penalties or other sanctions may be imposed for noncompliance. The enforcement of the UST regulations under RCRA has been delegated to the states, which administer their own UST programs. Our obligation to remediate such contamination varies, depending on the extent of the releases and the applicable state laws and regulations. A portion of these remediation costs may be recoverable from the appropriate state UST reimbursement funds once the applicable deductibles have been satisfied. We also have ongoing remediation projects at a number of our current and former refinery, terminal and pipeline locations.
Claims under CERCLA and similar state acts have been raised with respect to the clean-up of various waste disposal and other sites. CERCLA is intended to facilitate the clean-up of hazardous substances without regard to fault. Potentially responsible parties for each site include present and former owners and operators of, transporters to and generators of the hazardous substances at the site. Liability is strict and can be joint and several. Because of various factors including the difficulty of identifying the responsible parties for any particular site, the complexity of determining the relative liability among them, the uncertainty as to the most desirable remediation techniques and the amount of damages and clean-up costs and the time period during
which such costs may be incurred, we are unable to reasonably estimate our ultimate cost of compliance with CERCLA; however, we do not believe such costs will be material to our business, financial condition, results of operations or cash flows.
Renewable Fuels and Other Fuels Requirements
The U.S. Congress passed the Energy Independence and Security Act of 2007 (“EISA”), which, among other things, set a target of 35 miles per gallon for the combined fleet of cars and light trucks in the United States by model year 2020. In August 2012, the EPA and the National Highway Traffic Safety Administration (“NHTSA”) jointly adopted regulations that increased the mile per gallon standards for passenger cars and light trucks through model year 2025. In 2018, the EPA and the NHTSA jointly proposed the Safer Affordable Fuel-Efficient Vehicles Rules for Model Years 2021-2026, which would propose new Corporate Average Fuel Economy (“CAFE”) standards for model years 2022 through 2026, amend the 2021 model year CAFE standards, amend the EPA’s carbon dioxide emission standards for model years 2021 through 2025, and establish new carbon dioxide emission standards for model year 2026. The EPA’s preferred alternative is to retain the model year 2020 standards for both programs through model year 2026. The standards established by the final regulation may differ. Higher CAFE standards for cars and light trucks have the potential to reduce demand for our transportation fuels.
In addition, the NHTSA and the EPA issued rules providing that the Energy Policy and Conservation Act (“EPCA”) preempts state regulations of tailpipe carbon dioxide emissions, withdrew the waiver granted to California for its Advanced Clean Car program and determined that the Clean Air Act permits other states to adopt only those California standards that are designed to control traditional “criteria pollutants.” California may establish per its Clean Air Act waiver authority different standards that could apply in multiple states. New or alternative transportation fuels such as compressed natural gas could also pose a competitive threat to our operations.
Pursuant to the Energy Policy Act of 2005 and the EISA, the EPA has promulgated a Renewable Fuel Standard (“RFS”) program that requires certain volumes of renewable fuel be blended with our products. EISA requires the total volume of renewable transportation fuels sold or introduced annually in the U.S. to reach 36.0 billion gallons by 2022. Within the total volume of renewable fuel, EISA established nested categories of renewable fuel: advanced biofuel; biomass-based diesel; and cellulosic biofuel.
By November 30 of each year, the EPA is required to promulgate the annual renewable fuel standards for the following compliance year. In a legal challenge to the 2014-2016 volumes, the D.C. Circuit Court of Appeals vacated the total renewable volume for 2016 and remanded to the EPA for reconsideration consistent with the court’s opinion. A rule that increases the total renewable volume for any compliance year to make up for the 2016 shortfall could increase our cost of compliance with the RFS program, require us to use carryover RINs and be detrimental to the RIN market.
The EPA has finalized the annual renewable fuel standards for the year 2020. For the first time, the EPA has proposed to reallocate to non-exempt obligated parties the renewable volume obligations of the refiners that were granted a small refinery exemption. Also, the Tenth Circuit Court of Appeals recently held that a small refinery is eligible for an exemption from the RFS only if it is applying for an extension of its original exemption. According to the EPA’s data, seven refineries were granted the small refinery exemption in 2015. The EPA granted 19 small refinery exemptions in 2016, 35 exemptions in 2017, and 31 exemptions in 2018. A lawsuit challenging the 2018 small refinery exemption letter is currently pending in the D.C. Circuit Court of Appeals, and similar additional lawsuits may be filed in the future. The reallocation of volumes under the 2020 rule or the invalidation of past small refinery exemptions granted to us or other refiners could result in a decrease in the RIN bank, an increase in the price of RINs or an increase in the amount of renewable fuel we are required to blend, any of which could increase MPC’s RFS cost of compliance.
The RFS is satisfied primarily with ethanol blended into gasoline. Vehicle, regulatory and infrastructure constraints limit the blending of significantly more than 10 percent ethanol into gasoline (“E10”). Since 2016, the volume requirements have resulted in the ethanol content of gasoline exceeding the E10 blendwall, which will require obligated parties to either sell E15 or ethanol flex fuel at levels that exceed historical levels or retire carryover RINs.
There is currently no regulatory method for verifying the validity of the RINs sold on the open market. We have developed a RIN integrity program to vet the RINs that we purchase, and we incur costs to audit RIN
generators. Nevertheless, if any of the RINs that we purchase and use for compliance are found to be invalid, we could incur costs and penalties for replacing the invalid RINs.
In addition to the federal Renewable Fuel Standards, certain states have, or are considering, promulgation of state renewable or low carbon fuel standards. For example, California began implementing its Low Carbon Fuel Standard (“LCFS”) in January 2011. In September 2015, the CARB approved the re-adoption of the LCFS, which became effective on January 1, 2016, to address procedural deficiencies in the way the original regulation was adopted. The LCFS was amended again in 2018 with the current version targeting a 20 percent reduction in fuel carbon intensity from a 2010 baseline by 2030. The CARB is now exploring the imposition of a 50% renewable fuel requirement for diesel (Low Emission Diesel) sold in California by 2030. We incur costs to comply with the California LCFS, and these costs may increase if the cost of LCFS credits increases.
In sum, the RFS has required, and may in the future continue to require, additional capital expenditures or expenses by us to accommodate increased renewable fuels use. We may experience a decrease in demand for refined products due to an increase in combined fleet mileage or due to refined products being replaced by renewable fuels. Demand for our refined products also may decrease as a result of low carbon fuel standard programs or electric vehicle mandates.
Tribal Lands
Various federal agencies, including the EPA and the Department of the Interior, along with certain Native American tribes, promulgate and enforce regulations pertaining to oil and gas operations on Native American tribal lands where we operate. These regulations include such matters as lease provisions, drilling and production requirements, and standards to protect environmental quality and cultural resources. For example, the EPA has established a preconstruction permitting program for new and modified minor sources throughout Native American tribal lands, and new and modified major sources in nonattainment areas in those areas. In addition, each Native American tribe is a sovereign nation having the right to enforce certain laws and regulations and to grant approvals independent from federal, state and local statutes and regulations. These laws and regulations may increase our costs of doing business on Native American tribal lands and impact the viability of, or prevent or delay our ability to conduct, our operations on such lands.
TRADEMARKS, PATENTS AND LICENSES
Our Marathon trademark is material to the conduct of our refining and marketing operations, and our Speedway and ARCO trademarks are material to the conduct of our retail operations. Additionally, the retail and marketing businesses we acquired in the Andeavor acquisition primarily use the Shell® and Mobil® brands for fuel sales and ampm® and Giant® brands for convenience store merchandise. We currently hold a number of U.S. and foreign patents and have various pending patent applications. Although in the aggregate our patents and licenses are important to us, we do not regard any single patent or license or group of related patents or licenses as critical or essential to our business as a whole. In general, we depend on our technological capabilities and the application of know-how rather than patents and licenses in the conduct of our operations.
EMPLOYEES
We had approximately 60,910 regular full-time and part-time employees as of December 31, 2019, which includes approximately 40,390 employees of our Retail segment.
Approximately 4,650 of our employees are covered by collective bargaining agreements. Of these employees, approximately 190 employees at our St. Paul Park refinery are covered by a collective bargaining agreement scheduled to expire on December 31, 2020. Approximately 280 employees at our El Paso refinery are covered by a collective bargaining agreement scheduled to expire in April 2021. Approximately 3,425 employees at our Anacortes, Canton, Catlettsburg, Galveston Bay, Los Angeles, Mandan, Martinez and Salt Lake City refineries are covered by collective bargaining agreements that are due to expire in early 2022. The remaining 750 hourly represented employees are covered by collective bargaining agreements with expiration dates ranging from 2021 to 2024.
Information about our Executive and Corporate Officers
The executive and corporate officers of MPC are as follows:
| Name | Age as of February 1, 2020 | Position with MPC | ||
| Gary R. Heminger | 66 | Chairman and Chief Executive Officer | ||
| Donald C. Templin | 56 | Executive Vice President and Chief Financial Officer | ||
| Timothy T. Griffith | 50 | President, Speedway LLC | ||
| Michael J. Hennigan | 60 | MPLX President and Chief Executive Officer | ||
| Raymond L. Brooks | 59 | Executive Vice President, Refining | ||
| Glenn M. Plumby* | 60 | Executive Vice President and Chief Operating Officer, Speedway LLC | ||
| Suzanne Gagle | 54 | General Counsel | ||
| Fiona C. Laird* | 58 | Chief Human Resources Officer | ||
| C. Tracy Case* | 59 | Senior Vice President, Western Refining Operations | ||
| Richard A. Hernandez* | 60 | Senior Vice President, Eastern Refining Operations | ||
| Rick D. Hessling* | 53 | Senior Vice President, Crude Oil Supply and Logistics | ||
| Brian K. Partee* | 46 | Senior Vice President, Marketing | ||
| David R. Sauber* | 56 | Senior Vice President, Labor Relations, Operations, Health and Administrative Services | ||
| David L. Whikehart* | 60 | Senior Vice President, Light Products, Supply and Logistics | ||
| Molly R. Benson* | 53 | Vice President, Chief Securities, Governance & Compliance Officer and Corporate Secretary | ||
| David R. Heppner* | 53 | Vice President, Commercial and Business Development | ||
| Thomas Kaczynski | 58 | Vice President, Finance and Treasurer | ||
| Kristina A. Kazarian* | 37 | Vice President, Investor Relations | ||
| D. Rick Linhardt* | 61 | Vice President, Tax | ||
| John J. Quaid | 48 | Vice President and Controller, Principal Accounting Officer | ||
| Karma M. Thomson* | 52 | Vice President, Corporate Affairs | ||
| Donald W. Wehrly* | 60 | Vice President and Chief Information Officer | ||
| James R. Wilkins* | 53 | Vice President, Environment, Safety and Security |
- Corporate officer.
Mr. Heminger is Chairman of the Board and Chief Executive Officer. He has served as the Chairman of the Board since April 2016 and as Chief Executive Officer since June 2011. Mr. Heminger also served as President from July 2011 until June 2017. He has served as MPLX’s Chairman of the Board since June 2012 and as Chief Executive Officer from June 2012 through October 2019. Mr. Heminger began his career with Marathon in 1975 and has served in roles in finance and administration, auditing, marketing and commercial, and business development, including as President of Marathon Pipe Line Company; Manager, Business Development and Joint Interest of Marathon Oil Company; and Vice President and Senior Vice President, Business Development, Marathon Ashland Petroleum LLC. In 2001, he was named Executive Vice President, Supply, Transportation and Marketing, and was appointed President of Marathon Petroleum Company LLC and Executive Vice President-Downstream of Marathon Oil Corporation later that year. Mr. Heminger has announced his plans to retire as Chairman of the Board and Chief Executive Officer effective April 29, 2020. He will also retire from MPLX’s board of directors on that date.
Mr. Templin was appointed Executive Vice President and Chief Financial Officer effective July 2019. Prior to this appointment, he served as President, Refining, Marketing and Supply beginning in October 2018, President beginning in July 2017, Executive Vice President of MPC and President of MPLX beginning in January 2016, Executive Vice President, Supply, Transportation and Marketing beginning in March 2015, Vice President and Chief Financial Officer of MPLX beginning in 2012, and Senior Vice President and Chief Financial Officer of MPC beginning in June 2011.
Mr. Griffith was appointed President of Speedway LLC effective July 2019. Prior to this appointment, he served as Senior Vice President and Chief Financial Officer beginning in March 2015, Vice President, Finance and Investor Relations, and Treasurer beginning in January 2014, and Vice President of Finance and Treasurer beginning in August 2011.
Mr. Hennigan was appointed Chief Executive Officer of MPLX effective November 2019 and has served as President since June 2017. Before joining MPLX, Mr. Hennigan was President, Crude, NGL and Refined Products of the general partner of Energy Transfer Partners L.P., an energy service provider. He was President and Chief Executive Officer of Sunoco Logistics Partners L.P., an oil and gas transportation, terminalling and storage company, from 2012 to 2017, President and Chief Operating Officer beginning in 2010, and Vice President, Business Development beginning in 2009.
Mr. Brooks was appointed Executive Vice President, Refining effective October 2018. Prior to this appointment, he served as Senior Vice President, Refining beginning in March 2016, General Manager of the Galveston Bay refinery beginning in February 2013, General Manager of the Robinson refinery beginning in 2010, and General Manager of the St. Paul Park, Minnesota refinery beginning in 2006.
Mr. Plumby was appointed Executive Vice President and Chief Operating Officer, Speedway LLC effective August 2019. Prior to this appointment, he served as Senior Vice President and Chief Operating Officer, Speedway LLC beginning in January 2018, Senior Vice President of Operations, Speedway LLC beginning in September 2013, and Vice President of Operations, Speedway LLC beginning in December 2010.
Ms. Gagle was appointed General Counsel effective March 2016. Prior to this appointment, she served as Assistant General Counsel, Litigation and Human Resources beginning in April 2011, Senior Group Counsel, Downstream Operations beginning in 2010, and Group Counsel, Litigation beginning in 2003.
Ms. Laird was appointed Chief Human Resources Officer effective October 2018. Prior to this appointment, she was Chief Human Resources Officer at Andeavor beginning in February 2018. Before joining Andeavor, Ms. Laird was Chief Human Resources and Communications Officer for Newell Brands, a global consumer goods company, beginning in May 2016 and Executive Vice President, Human Resources for Unilever, a global consumer goods company, beginning in July 2011.
Mr. Case was appointed Senior Vice President, Western Refining Operations effective October 2018. Prior to this appointment, he served as General Manager of the Garyville refinery beginning in December 2014, and General Manager of the Detroit refinery beginning in June 2010.
Mr. Hernandez was appointed Senior Vice President, Eastern Refining Operations effective October 2018. Prior to this appointment, he served as General Manager of the Galveston Bay refinery beginning in February 2016, and General Manager of the Catlettsburg refinery beginning in June 2013.
Mr. Hessling was appointed Senior Vice President, Crude Oil Supply and Logistics effective October 2018. Prior to this appointment, he served as Manager, Crude Oil & Natural Gas Supply and Trading beginning in September 2014, and Crude Oil Logistics & Analysis Manager beginning in July 2011.
Mr. Partee was appointed Senior Vice President, Marketing effective October 2018. Prior to this appointment, he served as Vice President, Business Development beginning in February 2018, Director of Business Development beginning in January 2017, Manager of Crude Oil Logistics beginning in September 2014, and Vice President, Business Development and Franchise at Speedway beginning in November 2012.
Mr. Sauber was appointed Senior Vice President, Labor Relations, Operations, Health and Administrative Services effective October 2018. Prior to this appointment, he served as Senior Vice President, Human Resources, Health and Administrative Services beginning in January 2018, and Vice President, Human Resources and Labor Relations beginning in February 2017. Before joining MPC, Mr. Sauber was Vice President, Human Resources Policy, Benefits and Services of Shell Oil Company, a global energy and petrochemical company, beginning in 2013.
Mr. Whikehart was appointed Senior Vice President, Light Products, Supply and Logistics effective October 2018. Prior to this appointment, he served as Vice President, Environment, Safety and Corporate Affairs beginning in February 2016, Vice President, Corporate Planning, Government & Public Affairs beginning in January 2016, and Director, Product Supply and Optimization beginning in March 2011.
Ms. Benson was appointed Vice President, Chief Compliance Officer and Corporate Secretary effective March 2016 and as Chief Securities and Governance Officer effective June 2018. Prior to her 2016 appointment, she served as Assistant General Counsel, Corporate and Finance beginning in April 2012.
Mr. Heppner was appointed Vice President, Commercial and Business Development effective October 2018. Prior to this appointment, he served as Senior Vice President of Engineering Services and Corporate Support of Speedway LLC beginning in September 2014, and Director, Wholesale Marketing beginning in January 2010.
Mr. Kaczynski was appointed Vice President, Finance and Treasurer effective August 2015. Prior to this appointment, he was Vice President and Treasurer of Goodyear Tire and Rubber Company, one of the world’s largest tire manufacturers, beginning in 2014, and Vice President, Investor Relations beginning in 2013.
Ms. Kazarian was appointed Vice President, Investor Relations effective April 2018. Prior to this appointment, she was Managing Director and head of the MLP, Midstream and Refining Equity Research teams at Credit Suisse, a global investment bank and financial services company, beginning in September 2017. Previously, Ms. Kazarian was Managing Director of MLP, Midstream and Natural Gas Equity Research at Deutsche Bank, a global investment bank and financial services company, beginning in September 2014, and an analyst specializing on various energy industry subsectors with Fidelity Management & Research Company, a privately held investment manager, beginning in 2005.
Mr. Linhardt was appointed Vice President, Tax effective February 2018. Prior to this appointment, he served as Director of Tax beginning in June 2017, and Manager of Tax Compliance beginning in May 2013.
Mr. Quaid was appointed Vice President and Controller effective June 2014. Prior to this appointment, he was Vice President of Iron Ore at United States Steel Corporation, an integrated steel producer, beginning in January 2014, and Vice President and Treasurer beginning in August 2011.
Ms. Thomson was appointed Vice President, Corporate Affairs effective October 2018. Prior to this appointment, she was Vice President of Andeavor Logistics beginning in June 2017, and Andeavor’s Vice President, Salt Lake City refinery beginning in October 2012.
Mr. Wehrly was appointed Vice President and Chief Information Officer effective June 2011.
Mr. Wilkins was appointed Vice President, Environment, Safety and Security effective October 2018. Prior to this appointment, he served as Director, Environment, Safety, Security and Product Quality beginning in February 2016, and Director, Refining Environmental, Safety, Security and Process Safety Management beginning in June 2013.
Available Information
General information about MPC, including Corporate Governance Principles and Charters for the Audit Committee, Compensation Committee, Corporate Governance and Nominating Committee and Sustainability Committee, can be found at www.marathonpetroleum.com by selecting “Investors” under “Corporate Governance” and “Board of Directors”. In addition, our Code of Business Conduct and Code of Ethics for Senior Financial Officers are also available in this same location. We will post on our website any amendments to, or waivers from, either of our codes requiring disclosure under applicable rules within four business days of the amendment or waiver.
MPC uses its website, www.marathonpetroleum.com, as a channel for routine distribution of important information, including news releases, analyst presentations, financial information and market data. Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as well as any amendments and exhibits to those reports, are available free of charge through our website as soon as reasonably practicable after the reports are filed or furnished with the SEC. These documents are also available in hard copy, free of charge, by contacting our Investor Relations office. In addition, our website allows investors and other interested persons to sign up to automatically receive email alerts when we post news releases and financial information on our website. Information contained on our website is not incorporated into this Annual Report on Form 10-K or other securities filings.
Previous: Cover and table of contents · Next: Item 1A. RISK FACTORS