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 (St. Charles Refinery). In our quarterly report on Form 10-Q for the quarter ended June 30, 2013, we reported that the EPA had issued to our St. Charles Refinery a draft Compliance Agreement and Final Order assessing a penalty of $440,000 for various alleged violations under the Clean Air Act’s Section 112(r) and the EPA’s Risk Management Program. Recently, we resolved the matter with the EPA.

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 Notices of Violation (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.

Bay Area Air Quality Management District (BAAQMD) (Benicia Refinery). We currently have multiple outstanding Violation Notices (VNs) issued by the BAAQMD in 2011, 2012, and 2013, which we reasonably believe may result in penalties of $100,000 or more. These VNs are for various alleged air regulation and air permit violations at our Benicia Refinery and asphalt plant. We continue to work with the BAAQMD to resolve these VNs.

South Coast Air Quality Management District (SCAQMD) (Wilmington Refinery). We currently have multiple NOVs issued by the SCAQMD, which we reasonably believe may result in penalties of $100,000 or more. These NOVs are for alleged reporting violations and excess emissions at our Wilmington Refinery. We continue to work with the SCAQMD to resolve these NOVs.

Texas Commission on Environmental Quality (TCEQ) (Port Arthur Refinery). In our annual report on Form 10-K for the year ended December 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. The Port Arthur Refinery has also received additional Notices of Enforcement (NOEs), for which we have not received proposed penalty amounts but reasonably believe may result in penalties of $100,000 or more. We are working with the TCEQ to resolve all of these outstanding violations.

TCEQ (Port Arthur Refinery). In our annual report on Form 10-K for the year ended December 31, 2012, we reported that the TCEQ issued an NOE for unauthorized flare emissions. Potential stipulated penalties under our EPA §114 Clean Air Act Consent Decree for these incidents are expected to be $166,000 should the EPA issue a stipulated penalty demand letter for these events.