regulatory considerations relevant to DCRC

s acquisition and operation of the Delaware City

Refinery in Delaware City, Delaware (the “Refinery”).

WHEREAS, The Premcor Refining Group Inc., a wholly-owned subsidiary of Valero

Energy Corporation (“Premcor”), currently owns and operates the Refinery;

WHEREAS, Premcor has currently discontinued operations of equipment at the Refinery,

and such equipment is undergoing preservation and maintenance activity;

WHEREAS, DCRC has executed an agreement with Premcor pursuant to which DCRC

would acquire from Premcor the assets comprising the Refinery, and the Delaware City Pipeline

Company, a corporate entity affiliated with DCRC (“DCPC”), has executed an agreement with a

Premcor-related entity pursuant to which DCPC would acquire the assets comprising Premcor’s

pipeline operations associated with the Refinery, with both agreements subject to certain

contingencies specified in such agreements (the “Premcor Agreements of Sale”), and DCRC and

Premcor desire to complete these asset transfers upon closing ofsuch transactions (the

“Closing”);

WHEREAS, DNREC and DCRC recognize that DCRC’s future operation ofthe Refmery

requires the transfer from Premcor to DCRC of existing permits, authorizations and other

regulatory approvals under various environmental statutes and regulations, and the Parties desire

to ensure the prompt and lawful transfer of all such Permits within timeframes necessary to allow

DCRC to resume operations ofthe Refinery following the current maintenance turnaround;
by DCRC upon the event of Closing and following the maintenance turnaround.

NOW THEREFORE, DNREC and DCRC execute this Agreement to pursue these

environmental and economic objectives.

I. Facility-wide NOx Emission Limit

A. Basis for Facility-wide NOx Emission Limitations

1. In accordance with the Federal CleanAir Act, 42 U.S.C. § 7401 et sq.

(the “CAA”) and the Delaware Environmental Control Statute, 7 Del. C., Ch. 60, the State of

Delaware, through DNREC, has promulgated regulations: (a) governing the permitting of certain

new sources of air emissions and certain modifications to existing sources of air emissions,. 7

Del. Code Regs § 1102 (Regulation 1102), (b) establishing comprehensive air quality operating

permit requirements, referred to as “Title V Permits,” for major stationary sources of air

emissions, 7 Del. Code Regs §1130 (Regulation 1130), and (c) establishing special permitting

requirements for the review of proposed new major stationary sources or major modifications at

existing major stationary sources of emissions of oxides ofnitrogen (“NOx”) or volatile organic

compounds (“VOCs”), identified as nonattaimnent “New Source Review” requirements, 7 Del.

Code Regs §1125 (Regulation 1125).

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air quality control regions in Delaware designated as nonattainment for the National Ambient Air

Quality Standard (“NAAQS”) for ground-level ozone, in accordance with the CAA.

4. Regulation 1125 also includes provisions governing implementation ofthe

New Source Review program in those air quality control regions for which the relevant criteria

pollutant is designated as in attaimnent with the NAAQS, and thereby provides for the

prevention ofsignificant deterioration (“PSD’7 ofsuch air quality controls consistent with

standards established under the CAA.

5. Consistent with federal New Source Review regulatory provisions

promulgated by EPA under the CAA, DNREC has interpreted Regulation 1125 as affording

DNREC the authority to establish facility-wide emission limitations for specific pollutants as the

permitting mechanism for ensuring a facility’s compliance with New Source Review

requirements.

6. The Parties intend to establish facility-wide emission limitations for NOx

emissions from the Refmery (the “NOx Cap”) as the basis for evaluating the applicability of

New Source Review related to NOx emissions under Regulation 1125.

7. The Refinery is currently subject to Title V air quality operating permits

which impose emission limitations governing numerous parameters, including NOx, for specific

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the twelve month rolling period comprised by CY2O 11. The NOx Cap will be further reduced to

2225 tons per year, evaluated over each 12 consecutive month rolling period, commencing with

the 12 month rolling period beginning on December 31, 2013 and ending on December 31, 2014.

The NOx Cap will be further reduced to 1650 tons per year, evaluated over each 12 consecutive

month rolling period, commencing with the 12 month rolling period beginning on December 31,

2014 and ending on December 31, 2015.

9. The Parties have also agreed to establish a plantwide applicability limit

(“PAL”) for the attainment pollutant, nitrogen dioxide (“NO 2”), in accordance with applicable

PSD requirements under the CAA and Regulation 1125 (the “NO 2PAL”). DCRC will provide

information to DNREC sufficient to establish the NO2PAL in accordance with applicable PSD

requirements.

10. The Parties acknowledge and agree that the compliance ofthe Refmery

with Regulation 1125 and New Source Review standards with respect to NOx emissions shall be

based upon the facility’s compliance with the applicable NOx Cap and NO2PAL, as more

specifically addressed herein.

B. Implementation of the NOx Cap

11. On or before August 15, 2010, DCRC shall submit to DNREC an

application to modify the existing Title V operating permits for the Refmery to establish a NOx

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specific sources at the Refinery consistent with the criteria established below. DNREC may

determine to retain an individual NOx emission limitation or operational requirement for a

specific source to the extent that:

a. the limitation or requirement is specifically required for an

emission source at the Refinery by an applicable federal New

Source Performance Standard, promulgated at 40 CFR Part 60

(“NSPS”), or Maximum Achievable Control Technology

requirement, promulgated at 40 CFR Part 61 or Part 63

(“MACT’);

b. the limitation or requirement was imposed upon the source as a

requirement ofNew Source Review for NOx emissions, applicable

to the source through a prior permitting determination;

c the limitation or requirement was imposed upon the source to

avoid applicability ofNew Source Review for NOx emissions,

specified for the source through a prior permitting determination;

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modeled exceedance by that source of an ambient air quality

standard (“AAQS”) or an increment violation.

13. The Title V Permit Application shall also include the following

information:

a. Designation ofthe existing conditions ofthe Title V Permits for

which DCRC requests revisions through the application for permit

modification, as well as DCRC’s proposed revisions to such

provisions.

b. Proposed methods for evaluating NOx emissions from individual

sources, in accordance with Section I.C., below.

c. Request to establish an initial NOx Cap of 2525 tons per year

commencing with the rolling twelve consecutive month period

comprised by CY2O11, applicable to all sources ofNOx emissions

identified in the Title V permit, and to further reduce such NOx

Cap for the Refinery to 2225 tons per year, commencing with the

twelve month rolling period ending December 2014, and to 1650

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during the period ofMay 1 through September 30 of each calendar

year (the “Ozone Season Cap”). DCRC shall propose the quantity

ofNOx emissions reflected by the Ozone Season Cap based on

consideration ofthe quantity of NOx emissions for the applicable

NOx Cap, the variability ofproduction rates at the Refinery, and

the higher production rates anticipated during the May 1 through

September 30 time period.

V 14. DCRC shall submit to DNREC a non-binding plan for achieving NOx

emission reductions consistent with the emission limits reflected by each NOx Cap for the V

Refmery, according to the following schedule:

a. On or before January 1, 2011, DCRC shall submit to DNREC a

non-binding plan reflecting DCRC’s then-current intentions to

limit aggregate NOx emissions from permitted sources at the

Refinery to 2225 tons per year, commencing with the twelve

month rolling period ending in December 2014; and

b. On or before January 1, 2013, DCRC shall submit to DNREC a

non-binding plan reflecting DCRC’s then-current intentions to

limit aggregate NOx emissions from permitted sources at the

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sources, along with a statement ofthe anticipated control measures

to be utilized and timelines for achieving such emission reductions.

The Parties expressly recognize that the non-binding plans

V submitted by DCRC under this provision are intended only to

V

V reflect DCRC’s evaluation of available methods for limiting NOx

V

V V emissions from permitted sources at the Refinery to the level

V approved by the relevant NOx Cap, and that such plans are neither

V

- binding nor enforceable. Instead, DCRC may determine to achieve

compliance within the NOx Caps specified by means that are

V

V

inconsistentVwith or contrary to methods identified in plans

submitted to DNREC by DCRC under this paragraph, by all legal V

means.

15. DCRC may elect to implement any lawful means to limit NOx emissions

from permitted sources at the Refmery to a sufficient extent to satisfy the NOx Caps and NO2

PAL established in accordance with this Agreement; provided however that DCRC shall not

remove any NOx emission control device, nor eliminate practices that are designed to reduce

NOx emissions, existing as ofthe Effective Date, except in the event that DCRC installs a

replacement NOx emission control device or practices designed to reduce NOx emissions for the

source (after undertaking any appropriate permit process for any modification ofthe source), or

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16. To the extent that DCRC determines to implement any activity relevant to

its compliance with any NOx Cap, and such activity requires prior authorization (“Approval”)

from DNREC or any other federal, state or local agency, authority, board or other governmental

instrumentality (“Government Authority”), then DCRC will timely apply for and make all

reasonable efforts to obtain in a timely manner all appropriate Approvals (or determinations that

no such Approvals are necessary or will be waived) for the construction or implementation ofthe

activity relevant to DCRC’s compliance with the NOx Cap. Following submittal ofits

application for the necessary Approval(s), DCRC shall cooperate with the appropriate

Government Authority by promptly submitting any additional information reasonably required

by such Government Authority to process the pending application.

17. In the event that, notwithstanding DCRC’s compliance with paragraph 16,

a relevant Government Authority does not issue to DCRC, in a final form, any Approval

determined by DCRC or such Government Authority to be necessary for DCRC’s lawful

construction andlor operation ofthe relevant activity, then DCRC’s obligation to comply with

the relevant NOx Cap shall be extended to the extent ofthe delay in securing the relevant

Approval. For purposes ofthis paragraph, DCRC shall not be relieved ofthe compliance dates

otherwise established for NOx Caps addressed herein by objecting to an Approval except to the

extent that DCRC files a timely challenge or appeal, as applicable (“Appeal”), to such Approval,

9
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18. Following its review ofthe Title V Permit Application, DNREC will

provide to DCRC a proposed draft modified Title V permit consistent with the provisions ofthis

Agreement. The Parties commit to work cooperatively to secure the expeditious issuance ofthe

final revised Title V Permit (the “Modified Title V Permit”).

19. In the event that DCRC proposes to construct a new source ofNOx

emissions or modify an existing source, as such terms are defined under Regulation 1102, then

DCRC shall submit to DNREC an application to construct or modify an air emission source, to

the extent otherwise required by RegulatIon 1102.

C. Source-Specific NOx Emission Determinations

20. In order to demonstrate compliance with the NOx Caps, DCRC shall

determine, on a monthly basis, NOx emission rates for each NOx emission source at the

Refinery with emissions above relevant thresholds identified in Regulation 1102, in accordance

with the provisions ofthis subpart.

21. To the extent that an applicable federal regulatory standard specifies that

NOx emissions from specific sources at the Refinery must be measured by continuous emission

monitoring systems (“CEMS”), DCRC shall utilize CEMS in accordance with the applicable

federal regulatory standards to measure the quantity ofNOx emissions from such sources for

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period ofCEMS outage or out-of-control periods, if DCRC can identify an alternative basis for

estimating NOx emissions from such source during such period ofCEMS outage or out-ofcontrol.

22. To the extent that a NOx emission source at the Refinery is currently

equipped with a CEMS to monitor NOx emissions, then DCRC shall continue to operate such

CEMS in accordance with applicable standards to measure the quantity ofNOx emissions from

such source for purposes of demonstrating compliance with the NOx Cap. For purposes of

demonstrating compliance with the NOx Caps, the Parties do not currently anticipate that any

additional CEMS shall be required for any existing NOx emission source at the Refinery, absent

a new requirement for NOx CEMS imposed through a change in regulation or a modification to

an existing NOx source at the Refinery.

23. For each emissions unit at the Refinery currently equipped with a CEMS

for NOx and required to operate such CEMS pursuant to paragraph 21 or 22, within 150 days of

re-starting such emission unit, DCRC shall take such action as may be necessary and appropriate

to ensure the continued accuracy ofthe NOx emissions monitored and recorded by the relevant

CEMS data acquisition and handling system (“DAHS”). Thereafter, DCRC shall satisfy the

QA/QC requirements specified for CEMS in the Refinery’s Title V permit.

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testing in addition to that required by applicable standards to establish a lower NOx emission

factor for such source to be used in demonstrating compliance with the NOx Caps, provided

however that DCRC must secure advanced approval from DNREC of any proposed adjusted

NOx emission factor. DNREC shall approve or disapprove any request made by DCRC for an

adjusted emission factor within 90 days ofreceiving information from DCRC sufficient to allow

DNREC to determine the acceptability ofsuch adjusted emission factor.

25. For any permitted NOx emission source at the Refinery that is not required

to determine NOx emission rates by operations of a CEMS or by conducting performance testing

pursuant to paragraphs 21, 22 or 24, DCRC shall determine NOx emissions for such source in

accordance with the Modified Title V Pennit, for purposes of demonstrating compliance with the

NOx Caps. DCRC shall propose through its Title V Application one ofthe following

compliance demonstration methods:

a. Installation and operation of CEMS;

b. Determination and use ofNOx emission factor based upon the results

ofthe most recent performance testing conducted in accordance with a

protocol approved by DNREC, or performed in accordance with

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d. Any other method approvable by DNREC.

26. For purposes of demonstrating compliance with the NOx Caps, DCRC

shall account for NOx emissions from permitted sources during all periods ofstartup, shutdown

or malfunction ofsuch equipment. To the extent that such emission rates are not measured by

CEMS during such periods ofstartup, shutdown or malfunction, and to the further extent that

performance testing for such source did not establish emission factors for such equipment

reflective of operations during periods ofstartup, shutdown or malfunction, then DCRC shall

estimate suqh emission rates from such source during any periods ofstartup, shutdown or

malfunction in accordance with best engineering judgment, provided however that DCRC must

report to DNREC the basis for DCRC’s emission projections in such instance, and DNREC may

object to DCRC’s emission estimation methodology. In such event, the Parties shall work

cooperatively to resolve any such dispute concerning the propriety ofsuch emission calculation

method. Nothing in this paragraph shall be construed to waive, limit or otherwise restrict

DNRFC’s ability to bring an enforcement action against DCRC for compliance with the NOx

Cap should DCRC operate prior to resolving any dispute with DNREC regarding the propriety of

any emission calculation method, but subsequent to DNREC’s notification to DCRC of

DNREC’s objection to DCRC’s emission calculation method, where DCRC would not have

complied with the applicable NOx Cap but for its reliance on such emission calculation method.

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28. On or before January 31, 2012, and every six months thereafter, or in

accordance with a similar schedule established in the modified Title V permit, DCRC shall

submit to DNREC a report ofthe annual NOx emissions for NOx emission sources at the

Refinery, determined in accordance with the methods identified in Section I.C., above for each

rolling twelve (12) month period concluding during the prior semiannual period.

29. DCRC shall maintain, for a period of five (5) years from the date ofthe

compliance demonstration for each NOx Cap, records necessary to demonstrate compliance with

the NOx Caps established in accordance with this Agreement. To the extent that DCRC

determines NOx emission rates by use of CEMS, then such records shall consist ofthe data

generated by the DAHS associated with the CEMS. Where NOx emissions are determined in

accordance with emission factors derived from perfonnance testing, DCRC shall maintain copies

of all performance tests, as well as the hours of operation and throughput rate for relevant

sources, to the extent applicable to determining NOx emissions for such sources. To the extent

that DCRC determines NOx emissions for a specific source based upon published emission

factors, then DCRC shall maintain copies ofthe information constituting the source ofsuch

emission factors, as well as records ofthe operating hours and/or throughput rate for such

equipment, to the extent applicable to the determination ofNOx emission rates for such source.

DCRC shall maintain records of all periods ofstartup, shutdown and malfunction of permitted

NOx emission sources at the Refinery, in addition to such other information concerning such

14
Agreement shall establish the compliance obligations applicable to the Refinery relative to NOx

emissions from permitted emission units at the Refinery. However, no NOx Cap or NO2PAL

shall become applicable to the Refinery prior to issuance ofthe Modified Title V Permit.

DCRC’s compliance with the NOx Caps established under this Agreement and the Modified

Title V Permit shall ensure DCRC’s compliance with nonattainment-New Source Review, PSD

requirements and Regulation 1125 relative to NOx emissions. For purposes ofimplementing

the NOx Caps, the Parties agree that no change to Delaware regulations other than Regulation

1142 will be required.

31. DCRC’s compliance with each NOx Cap shall be determined based upon

the aggregate NOx emission rates reported by DCRC for relevant sources during each twelve

month rolling period, determined in accordance with Section I.C. ofthis Agreement.

32. To the extent Premcor has generated and/or preserved at the Refinery net

emission reductions for any regulated pollutant other than NOx, and such net emission

reductions have either been established as creditable emission reductions, or otherwise meet the

criteria to be established as creditable emission reductions, pursuant to Regulation 1125, then

such net emission reductions are preserved and transferred to DCRC for use in accordance with

Regulation 1125, including in the context of any permitting and/or new source review[PSD

15
promulgated Specific Emission Control Requirements for NOx emissions from identified sources

at the Refmery, at Title 7, Regulation No. 1142 (“Regulation 1142”). Consistent with the

objective of establishing a NOx Cap for the Refinery, the Parties agree that Regulation 1142

should be revised to reflect that the owner or operator of a refmery source ofNOx emissions

listed in Regulation 1142 may elect to comply with an NOx Cap established by DNREC for such

Refinery, in lieu of complying with certain specific NOx emission limitations otherwise

established through Regulation, 1142.

34. DNREC therefore agrees to propose and promulgate in accordance with

Delaware law revisions to Regulation No. 1142 consistent with the provisions ofthis Agreement.

On or before September 1, 2010, DNREC will initiate any applicable procedural requirements to

promulgate revisions to Regulation No. 1142 consistent with the provisions ofthis Agreement.

35. DNREC will submit to EPA a request to modify the Delaware SIP to

reflect the revised version ofRegulation No. 1142 identified in paragraph 34, and take all actions

necessary to support and secure the requested SIP revision. DCRC agrees that it will not file any

legal objection or challenge to DNREC’s proposed revised version ofRegulation No. 1142 or

corresponding proposed SIP revision, ifsuch proposed revisions are consistent with the

provisions ofthis Agreement.

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A. Coke Storage

37. DCRC’s future operation ofthe Refinery in substantially the same manner

as operated by Premcor would result in the production ofpetroleum coke from the Fluidized

Coking Unit (“FCU”). DCRC will undertake to construct and/or modify a coke management

control system with the objectives ofminimizing the generation offugitive coke dust and

preventing migration of any airborne fugitive coke dust beyond the property boundary ofthe

Refinery in a quantity and form that would otherwise cause air pollution, as defined at 7 Del.

Code Regs §1101, or cause or contribute to monitored exceedances ofthe State’s AAQS for total

suspended particulates (“TSP”).

38. As and to the extent required by applicable regulatory standards, DCRC

will submit to DNREC an application for air quality construction and/or operating permit

authorizing the construction and modification of equipment to effectuate the purposes of

paragraph 37. DNREC will thereafter undertake all actions necessary to issue the fmal air

quality permit authorizing DCRC to proceed with the actions contemplated for implementation

of enhanced coke management at the Refinery (the “Coke Storage Permit”) in accordance with

Delaware law.

39. DCRC will not operate the FCU in a production mode in a manner that

produces material quantities of petroleum coke prior to receiving the Coke Storage Permit from

17
maintenance turnaround ofthe Refinery, DCRC shall not be required to continue to operate or

maintain such ambient air quality monitors. In addition, DCRC may propose, for DNREC

review and approval, a new location for any existing ambient air quality monitor. Following

resumption of operation ofthe FCU and associated production of petroleum coke, DCRC.will

resume operation ofthe ambient TSP monitors. DCRC will continue to operate the existing

ambient TSP monitors until the date on which DCRC has collected data that demonstrates

attainment for one year at the ambient TSP monitors with the Delaware AAQS for TSP.

B. Propane Storage

41. DCRC will not introduce any propane gas produced at the Refinery into

the existing underground Frozen Earth Storage (“FES”) unit at the Refmeiy, which is currently

undergoing closure activities undertaken by Premcor. The completion of closure ofthe FES unit

will remain the responsibility ofPremcor. DCRC will ensure adequate capacity for propane

storage, exclusive ofthe FES unit, for the quantity of propane gas that DCRC intends to produce

and store at the Refinery.

C. Completion of Repair of LDAR Components

42. Certain pumps, valves and flanges in gaseous or light liquid service at the

Refinery are subject to federal and/or state regulatory standards governing leak detection and

repair (“LDAR”). In the course ofimplementing its LDAR program for regulated components at

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to DCRC that such component remained on the delay ofrepair list as of Closing, and to the

further extent that DCRC would resume the use ofsuch component in a manner that would

subject it to federal or state regulatory standards under applicable LDAR regulations.

III. Water Quality and Discharge Matters

A. Discharge Permit

43. DNREC previously issued to the Refmery National Pollutant Discharge

Elimination System (“NPDES”) permits designated by permit numbers DE005061 and

DE0000256, authorizing the operation ofwater intake structures and the discharge of process

and non-process wastewater from the Refmery (the “Discharge Permits”).

44. More than six months prior to the expiration date identified for the

NPDES permit applicable to primary Refinery operations, the then-current owner ofthe

Refinery, Motiva Enterprises LLC (“Motiva”), had submitted to DNREC an application for

renewal ofthe discharge permit. More than six months prior to the expiration date identified for

the NPDES permit applicable to operations ofthe power plant at the Refinery, Premcor hadsubmitted to DNREC an application for renewal ofthe discharge permit. The Refinery’s

applications for reissuance ofthe Discharge Permits remain pending before DNREC.

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Discharge Permits will be transferred to DCRC, and continue to authorize the operation ofintake

structures at, and the discharge ofprocess and non-process wastewater from, the Refmery in

accordance with the terms ofthe Discharge Permits, until such time as DNREC reissues the

Discharge Permits for the Refmery in accordance with the process described in the following

paragraphs.

46. Five months before the date that DCRC intends to resume normal

operations ofthe Refinery, DCRC will endeavor to submit, and in any event on or before

December 31, 2010, DCRC will submit, to DNRFC an update to the pending applications for the

renewal ofthe Discharge Permits, to the extent required by applicable law and necessitated by

DCRC’s intended changes to operation ofthe Refinery, relative to that reflected in the pending

application for renewal ofthe Discharge Permits (the “Updated Application”).

47. Prior to issuing any new Discharge Permits, DNREC shall provide to

DCRC a proposed draft permit (the “Draft New Discharge Permit”). The Draft New Discharge

Permit will be based upon information in the existing applications for renewal ofthe Discharge

permits, information provided by DCRC through the Updated Application, relevant information

provided to DNREC and applicable federal and state guidance and law.

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address cost considerations when making the determination. The Draft New Discharge Permit

will include a compliance schedule for implementation ofthe BTA determination which will

require DCRC to take such actions as necessary to construct the BTA during the five year period

following the first five years ofthe New Discharge Permit term, as defined below. The Draft

New Discharge Permit compliance schedule will also authorize DCRC to undertake a

study/evaluation, during the five year term ofthe New Discharge Permit, to analyze site-specific,

environmental and technology-based factors relevant to the benefits of alternatives to the BTA

determination (“DCRC’s BTA Evaluation”). To the extent that DCRC determines that an

alternative BTA standard is supported by DCRC’s BTA Evaluation, conducted during the first

five years ofthe New Discharge Permit, then DCRC may submit to DNREC, as an attachment to

its application for renewal ofthe New Discharge Permit, its proposal for, and the basis of, an

alternative BTA determination. DCRC shall not be required to construct the BTA as determined

in the New Discharge Permit, until DNREC notifies DCRC ofthe conclusions ofDNREC’s

reevaluation ofthe BTA determination, given consideration ofDCRC’s alternative BTA

standard.

49. Within 30 calendar days ofreceiving the Draft New Discharge Permit

from DNREC, DCRC will provide to DNREC any comments, corrections, questions or proposed

revisions concerning the Draft New Discharge Permit. The Parties will address such comments,

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process such as comments from EPA, the public or DCRC, as required by law.

50. DCRC shall comply with requirements ofthe Delaware River Basin

Commission Docket No. D-93-4-6 for taking any such actions necessary to reduce, by December

31, 2013, the quantity ofsurface water drawn from the Delaware River at the primary cooling

water intake structure from 452 million gallons per day (“mgd”) to 303 mgd, measured as a 12

month rolling average.

51. To the extent otherwise enforceable under applicable state and federal

laws and regulations, DCRC shall comply with all obligations ofthe Delaware River Basin

Commission (“DRBC”) and the Delaware River Estuary PCB Total Maximum Daily Loads

(“TMDLs”). These requirements include, but are not limited to, implementing and annually

updating the PCB Pollutant Minimization Plan and PCB Congener Monitoring with the objective

ofidentifying any sources of PCB discharge, in accordance with the “Implementation Plan for

Polychlorinated Biphenyls (“PCBs”) For Zones 2-6 ofthe Delaware Estuary.”

B. Dredging Activity

52. DNREC previously issued to Premcor a permit (the “Dredging Permit”)

authorizing the maintenance dredging ofsediment both in the berthing area and the navigation

channel located within the Delaware River adjacent to the Refmery (the “Berthing Area and

22
DNREC.

54. Within five days ofthe Effective Date, DCRC shall submit to DNREC

information confirming that DCRC requests issuance ofthe dredging permit in a form materially

consistent with the terms ofthe pending application submitted by Premcor, including a request

for a 10 year permit. In accordance with this Agreement, the Refinery’s pending application to

conduct maintenance dredging in the Berthing Area and Navigation Channel and associated with

the Cooling Water Intake Channel shall then be transferred to DCRC.

55. On or before June 15, 2010, DNREC will conclude its administrative

process and take action on the permit application referenced in the foregoing paragraphs for the

dredging activity in the Berthing Area and Navigation Channel and the area associated with the

Cooling Water Intake Channel (the “DCRC Dredging Permit”).

56. DNREC anticipates that the DCRC Dredging Permit will authorize

requested dredging activity for a period often years, and require the payment by DCRC of fees

or compensation, as follOws:

a. To the extent that dredging during any event authorized under this

DCRC Dredging Permit exceeds the depths previously authorized under

Subaqueous Lands Permit SP-320/04 and Water Quality Certification

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Q

; 

b. DCRC shall pay a one-time amount of $247,500 (for the creation and

restoration of wetland habitat), by September 1, 2012, as compensation

based on DNREC’s determination of adverse environmental impacts to

benthic organisms and habitat that DNREC believes could result from

the proposed dredging activity in the Berthing Area and Navigation

Channel during the ten year term ofthe DCRC Dredging Permit; and

c. During each year in which dredging is conducted in the Cooling Water

Intake Channel,DCRC shall be obligated to pay $135,000 per year, as

compensation, based on DNREC’s determination ofsecondary adverse

impacts to aquatic resources that DNREC believes could result from the

proposed dredging activity in the Cooling Water Intake Channel the

(“Aquatic Resources Mitigation Compensation”). DCRC may remit the

Aquatic Resources Mitigation Compensation to DNREC following the

end ofthe first five years ofthe DCRC Dredging Permit (i.e., years six

through ten ofthe term ofthe DCRC Dredging Permit) in increments of

$270,000 annually. Without limitation to its option to remit payments

during years six through ten rather than years one through ten, DCRC

may elect to remit its payments to a dedicated account controlled by

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Dredging Permit or the transfer ofthe controlling interest in the Refinery

from DCRC to any independent third party, whichever occurs first; and

d. By execution ofthis Agreement, DCRC does not thereby concur that the

proposed dredging activity would cause adverse environmental impacts,

that any adverse environmental impacts resulting from such dredging

warrant or require compensation under applicable law, that any dredging

activity would cause indirect adverse environmental impact or that any

such indirect adverse environmental impact implicates the need for or

requirement ofmitigation under applicable law.

57. On or before June 15, 2010, DNREC will conclude its administrative

process and take action on the Federal Consistency Certification concerning the dredging activity

authorized by the DCRC Dredging Permit.

IV. Regulatory Status ofRefinery During Maintenance Activities

58. Premcor had stated its intention to permanently cease operations of

primary refinery operations at the Refinery. Prior to reaching agreement with DCRC for the sale

ofthe assets comprising the Refinery, Premcor initiated the temporary cessation of operations at

the Refinery, pending implementation of a program to permanently cease operations. In the

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59. DNREC interprets the existing Title V Permits for the Facility, and will

interpret the Modified Title V Permit for the Refinery, not to require compliance with

monitoring, reporting, recordkeeping or operational standards identified for emission sources at

the Refinery during the periods that such sources are not operating, on the basis that such

requirements are intended to apply during operation ofthe relevant emission units.

60. DNREC characterizes the on-going activity at the Refmery initiated by

Premcor and to be continued by DCRC as not inconsistent with historic practices at the Refmery.

61. In this context, raw materials, product, feedstock and other materials

associated with production operations at the Refmery (collectively, “Materials”) shall not be

deemed to constitute waste material, pending a determination by DCRC (to be made within 3

months of Closing) that any such Materials do not constitute usable product or raw materials.

Upon any such determination, regulatory standards applicable to the proper characterization of

the waste material would be initially triggered, including the commencement of waste

accumulation periods under applicable standards.

62. Similarly, material transfers among tanks and tank systems at the Refinery

will be deemed to continue during the maintenance turnaround operations for purposes offederal

and state storage tank regulatory standards. Accordingly, except as addressed in separate

notifications or registrations submitted to DNREC by Premcor since Premcor’s initiation ofthe

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63. Based upon the State’s characterization ofthe status of activities at the

Refmery, Premcor’s temporary cessation of operations shall not constitute an abandonment of

the pre-existing industrial operation, and the equipment and operations at the Refinery will be

deemed as a pre-existing use for purposes ofthe Delaware Coastal Zone Act, 7 Del. C., Ch. 70.

Therefore, assuming that DCRC restarts refming operations prior to March 1, 2012, the re-start

ofsuch operations by DCRC following the maintenance turnaiound shall not constitute a new

activity in the Delaware Coastal Zone requiring the need for any Coas1a1 Zone Act approvals or

status decisions.

V. Resolution of Outstanding Compliance Orders and Agreements Relevant to the

Refmery

64. The Parties recognize that DNREC has initiated certain enforcement

actions alleging non-compliance at the Refinery under various state and federal environmental

statutes and/or regulations, and otherwise identified conditions ofpotential non-compliance

based upon activities of owners and/or operators ofthe Refinery other than DCRC. DNREC

acknowledges that any such enforcement activity, whether or not formally initiated, does not

relate to any operations or activities by or on behalfofDCRC. This provision does not relieve

DCRC ofliability for any alleged noncompliance that may result from DCRC’s operations at the

refinery after Closing.

27
(

y

), 

g 

y 

pp

y 

operations at the Refinery, is not transferred in any manner to DCRC, and does not impose any

continuing obligations applicable to DCRC, except as expressly identified below:

a. Conciliation Order in the matter ofthe Premcor Refming Group Inc. — Frozen Earth Storage, Secretary’s Order No. 2008-A-0051 (September 25,

2008);

b. Consent Order in Nicholas A. Di Pasquale v. Motiva Enterprises, LLC;

Civil Action No. 18750 NC in the Court ofChancery ofthe State of

Delaware in and for New Castle County (3/26/01) (the “18750 Order”).

With respect to the 18750 Order, the Parties acknowledge that the substantive obligations under

such Consent Order have been satisfied, and DNREC will file a motion requesting the Court to

terminate the 18750 Order within approximately 30 days ofthe Effective Date.

66. Consistent with the foregoing, DNREC acknowledges that, to the extent

allowable by law, any alleged non-compliance at the Refmery prior to Closing would not bear

upon the evaluation ofthe status ofDCRC relative to the “chronic violator” designation

identified in 7 Del. C., Cli. 79.

28
Federal Consent Decrees and, pursuant to the express terms ofthe Federal Consent Decrees,

DCRC may become a party through addenda to the Federal Consent Decrees, and thereby be

bound by any residual obligations imposed thereby.

68. The Parties believe that any obligations otherwise applicable to the

Refmery under the Federal Consent Decrees have been substantively satisfied. Therefore,

shortly following the Closing, DCRC intends to work with Premcor and, as appropriate, Motiva,,

to petition the Court for termination ofthe Federal Consent Decrees. DNREC will use its best

efforts to support DCRC’s efforts in this context.

VI. Transfers of Applicable Permits and Authorizations

69. Operation ofthe Refinery is governed by numerous permits, licenses and

other authorizations relevant to specific equipment, media and regulatory programs.

70. The Parties intend to accomplish the prompt transfer from Premcor to

DCRC of all existing permits, authorizations, approval, licenses, and other sources or grants of

authority relevant to the operation or status ofthe Refinery (collectively, the “Authorizations”).

In order to accomplish this prompt transfer of all relevant Authorizations, the Parties have

‘United States v. Motiva Enterprises. LLC, Civil Action No. H-01-0978, S.D.Tx. (Consent Decree originally

entered August 20, 2001), as amended. - 29
Parties acknowledge that such list may not be fuliy complete and accurate. To the extent

necessary for completeness and accuracy, DNREC will amend the table ofAuthorizations

included within Attachment A within 30 days ofClosing.

71. Based on its knowledge ofthe operations at the Refinery conducted by

Premcor, DNREC has not identified any additional permit, authorization, approval, license,

status decision or other sources or grants of authority, other than the Authorizations, required by

DCRC to own or operate the Refinery in a manner substantially similar to the operations

conducted by Premcor. To the extent that either Party identifies any additional requisite license,

authorization, permit, approval, status decision, or other source or grant of authority,

(collectively, “Other Necessary Approval”), then the Parties shall work càoperatively to secure

issuance or transfer ofsuch Other Necessary Approval as promptly as possible.

72. For purposes ofsatisfying any requirements as to the Environmental

Permit Application Background Statement under 7 Del. C., Ch. 79 (“Chapter 79”) relevant or

applicable to the transfer to DCRC or DCPC of Authorizations or Other Necessary Approvals,

2 United States v. Motiva Enterprises. LLC, Civil Action No. 02- l292-SLR, and Department ofNatural Resourcesand Environmental Control v. Motiva Enterprises. LLC. Civil Action No. 02-1 293-SLR, D.Del. (Consent Decree

entered January 12, 2006.)

The table included within Attachment A identifies certain subaqueous land leases. As ofthe Effective Date,

Premcor continues to pursue certain modifications and clarifications ofthese subaqueous land leases. Following

Premcor’s appropriate modification, clarification or reinstatement ofsuch subaqueous land leases, Premcor will

30
73. To the extent that the transfer from Premcor to DCRC of any

Authorization requires notification to the State, or DNREC, such notice shall be deemed to have

been completed as ofthe date that DCRC provided notice to DNREC ofthe Premcor Agreement

ofSale.

74. To the extent that any appeal, hearing request or challenge filed by

Premcor of any Authorization remains pending as ofthe Effective Date, the Parties agree to the

transfer to DCRC from Premcor ofsuch appeal, and the preservation of any challenges raised by

Premcor through such Appeals. This provision is not intended nor shall have the effect of

expanding the scope of any such appeal.

VII. General Provisions

75. This Agreement shall be governed by, and interpreted under, the laws of

the State of Delaware.

76. The Parties agree to cooperate and make all reasonable efforts to secure

issuance in a timely maimer of all appropriate Authorizations or Other Necessary Approvals

required by DCRC to implement the objectives ofthis Agreement. Consistent with this

work with the State and DCRC to accomplish the prompt transfer from Premcor to DCRC ofsuch subaqueous land

31
p

y 

p

p

p

y 

y 

g

concerning specific terms and conditions for inclusion in any permit.

77. Nothing in this Agreement shall limit or affect the rights ofDCRC to

contest, appeal or otherwise challenge any permit, andJor any other Authorization or Secretary’s

Order issued by the Secretary, related to any permit identified by this Agreement. In the event

that DCRC contests, appeals or otherwise challenges any permit and/or any other Order or

Authorization issued by the Secretary related to any permit contemplated by this Agreement,

then the Parties agree to attempt to cooperatively resolve any differences concerning the permit

and/or request expedited review ofsuch appeal or challenge before the Delaware Environmental

Appeals Board.

78. This Agreement identifies the methods and processes by which DCRC

shall ensure the compliance ofRefinery Operations with certain applicable environmental,

regulatory and statutory standards by satisfying standards or operating practices identified in this

Agreement and, where appropriate, Authorizations granted to DCRC. Nothing in this

Agreement shall relieve DCRC ofits obligation to comply with all applicable federal, state and

local laws and regulations.

leases.

32
DCRC waives or otherwise limits, in any way, its rights, claims, positions or available defenses

concerning applicability or interpretation of any specific regulatory or statutory provision

potentially relevant to the compliance ofDCRC’s operations at the Refmery.

81. By execution ofthis Agreement, DCRC does not waive or limit in any

way its rights to contest any action by the State, including DNREC, including without limitation

relative to DCRC’s rights to defend against, and available claims, positions and defenses in

responding to, any compliance action initiated by the State, including DNREC.

82. Upon issuance to DCRC of any Authorization or Other Necessary

Approval, including without limitation the Modified Title V Permit, which incorporates or

applies any obligation ofthe Parties under this Agreement, the obligation will no longer be

separately enforceable under this Agreement.

83. Third Parties. This Agreement does not limit or affect the rights of

DCRC or DNREC against any person or entity not party to this Agreement, nor does it create or

expand any rights of any person or entity not party to this Agreement concerning or against

DCRC or DNREC. In addition, this Agreement shall not be considered to create rights in, or

grant any cause of action to, any third party not party to this Agreement.

33
As to DCRC:

James Fedena

Delaware City Refining Company, LLC

Delaware City Refinery

2000 Wrangle Hill Road

Delaware City, DE 19706

and

Jeffrey Dill, EsquireGeneral Counsel

PBF Investments LLC

One Sound Shore Drive, Suite 303

• Greenwich, CT 06830

• AstoDNREC:

David Small, Deputy Secretary

DNREC

89 Kings Highway

Dover, DE 19901

Kathy Bunting-Howarth

Director of Water Resources

DNREC

89 Kings Highway

Dover, DE 19901

and

Valerie Satterfield

Deputy Attorney General

Department ofJustice 3rd Floor

102 W. Water Street

Dover, DE 19001

34
86. Binding Agreement. This Agreement shall be binding upon the Parties.

DCRC shall not assign or otherwise transfer this Agreement without the prior written consent of

the Secretary ofDNREC. The undersigned representative of each Party to this Agreement

represents that he or she is authorized by the Party whom he or she represents to enter into the

terms ofthis Agreement and bind that Party to them.

87. Effective Date. This Agreement shall be effective upon the later date of

execution by the authorized representatives of both Parties (the “Effective Date”).

88. Closing as Prerequisite to Obligations Under the Agreement. This

Agreement, and the commitments, obligations and understandings reflected herein, are

dependent upon the successful completion of Closing between DCRC and Premcor regarding the

transfer of assets comprising the Refinery. No obligation undertaken by DCRC or DNREC

hereunder shall be binding in the event that the closing does not occur.

89. Modification. This Agreement may be modified only by the written

consent ofDNREC and DCRC.

90. Severability of Terms. If any part ofthis Agreement is for any reason

found to be unenforceable, all other portions shall nevertheless remain enforceable.

91. This Agreement constitutes the entire agreement between the Parties.

35
By: (. Date: May31, 2010

Collin O’Mara, Secretary

Department ofNatural Resources

and Environmental Control

36
By: 

Date:____

Thomas J. Nimbly

Executive Vice President and

Chief Operating Officer

37