Item 3. LEGAL PROCEEDINGS

Litigation

We incorporate by reference into this Item our disclosures made in Part II, Item 8 of this report included in Note 12 of Notes to Consolidated Financial Statements under the caption “Litigation Matters.”

Environmental Enforcement Matters

While it is not possible to predict the outcome of the following environmental proceedings, if any one or more of them were decided against us, we believe that there would be no material effect on our financial position, results of operations, or liquidity. We are reporting these proceedings to comply with SEC regulations, which require us to disclose certain information about proceedings arising under federal, state, or local provisions regulating the discharge of materials into the environment or protecting the environment if we reasonably believe that such proceedings will result in monetary sanctions of $100,000 or more.

EPA (Linden ethanol plant). In the third quarter of 2012, the EPA issued a notice of violation (NOV) to our Linden, Indiana ethanol plant. The EPA seeks penalties of $205,000, alleging excess air emissions. We are evaluating our response to the NOV.

EPA (Port Arthur Refinery). In our annual report on Form 10-K for the year ended December 31, 2011, and in our quarterly report on Form 10-Q for the quarter ended March 31, 2012, we reported potential stipulated penalties payable to the EPA and the Texas Commission on Environmental Quality (TCEQ) relating to certain flaring events at our Port Arthur Refinery. In the third quarter of 2012, we received a total stipulated penalty demand of $5,197,500 for the flaring events. In the fourth quarter of 2012, we paid the demanded amount resolving this matter with the EPA.

Bay Area Air Quality Management District (BAAQMD) (Benicia Refinery). We currently have 104 outstanding Violation Notices (VNs) issued by the BAAQMD. These VNs are for various alleged air regulation and air permit violations at our Benicia Refinery and asphalt plant.

People of the State of Illinois, ex rel. v. The Premcor Refining Group Inc., et al., Third Judicial Circuit Court, Madison County (Case No. 03-CH-00459, filed May 29, 2003) (Hartford Refinery and terminal). The Illinois Environmental Protection Agency has issued several NOVs alleging violations of air and waste regulations at Premcor’s Hartford, Illinois terminal and closed refinery. We are negotiating the terms of a consent order for corrective action.

South Coast Air Quality Management District (SCAQMD) (Wilmington Refinery). In our annual report on Form 10-K for the year ended December 31, 2011, we reported that our Wilmington Refinery received a penalty demand from the SCAQMD due to excess flare related emissions in 2011. In 2012, we paid mitigation fees under SCAQMD Rule 1118 to resolve the matter.

SCAQMD (Wilmington Refinery). In the fourth quarter of 2012, the SCAQMD issued three NOVs to our Wilmington Refinery for alleged reporting violations and excess emissions, which we reasonably believe may result in penalties of $100,000 or more. We are evaluating the NOVs.

TCEQ (Port Arthur Refinery). In our quarterly report on Form 10-Q for the quarter ended March 31, 2012, we reported that our Port Arthur Refinery received a proposed agreed order from the TCEQ that assessed a penalty of $180,911 for various alleged air emission and reporting violations. We are working with the TCEQ to resolve this matter.

TCEQ (Port Arthur Refinery). In the fourth quarter of 2012, the TCEQ issued a Notice of Enforcement (NOE) for unauthorized flare emissions. We are evaluating the NOE. Potential stipulated penalties under our EPA §114 Clean Air Act Consent Decree for these three incidents are expected to be $166,000 if the EPA issues a stipulated penalty demand letter for these events.