We sell refined products from our refinery in both the wholesale rack and bulk
markets. Our marketing of transportation fuels produced at our refinery is focused
on Central and West Texas, Oklahoma, New Mexico and Arizona. We refer to our
operations in these regions as our “physically integrated system”
because we primarily supply our customers in this region with motor fuels produced
at our refinery and distributed through a network of pipelines and terminals
that we own or access through leases or long-term throughput agreements.
Branded Transportation Fuel Marketing. We sell motor fuels under the Alon brand
through various terminals to supply 639 locations, including Alon Energy’s
retail convenience stores. We provide substantially all of our branded customers
motor fuels, brand support and payment processing services in addition to the
license of the Alon brand name and associated trade dress.
We have a fuel supply agreement with a subsidiary of Alon Energy, under which
we supply substantially all of the motor fuel requirements of Alon Energy’s
retail convenience stores.
Unbranded Transportation Fuel Marketing. We sell motor fuels on an unbranded
basis through terminals. Including purchases for resale, in 2016, we sold 139.9
million gallons of gasoline and 245.4 million gallons of diesel as unbranded
fuels, which were largely sold through our physically integrated system. These
unbranded fuel sales represented 26% of the gasoline and 72% of the diesel produced
at the refinery.
Jet Fuel Marketing. We market substantially all the jet fuel produced at our
refinery as JP-8 grade to the Defense Energy Supply Center (“DESC”).
All DESC contracts are for a one-year term and are awarded through a competitive
bidding process. We have traditionally bid for contracts to supply Dyess Air
Force Base in Abilene, Texas, and Sheppard Air Force Base in Wichita Falls,
Texas. Jet fuel production in excess of existing contracts is sold through unbranded
terminal sales.
Product Supply Sales. We sell transportation fuel production in excess of our
branded and unbranded marketing needs through bulk sales and exchange channels.
These bulk sales and exchange arrangements are entered into with various oil
companies and trading companies and are transported through a product pipeline
network or truck deliveries. The petrochemical feedstocks and other petroleum
products we produce are sold to a wide customer base and transported by truck
and railcars.
Distribution Network and Distributor Arrangements. We sell motor fuel to Alon
Energy’s retail locations and to 21 third-party distributors, who then
supply and sell to retail outlets. The supply agreements we maintain with our
third-party distributors are generally for three-year terms and usually include
10-day payment terms and contain incentives and penalties based on the consistency
of their purchases.
