On April 30, 2020, GCE Acquisitions entered into an Engineering, Procurement and Construction Agreement with a national engineering firm pursuant to which this firm agreed to provide services for the engineering, procurement, construction, (“EPC”) start-up and testing of the Bakersfield Biorefinery. The agreement, which was assigned by GCE Acquisitions to BKRF OCB, LLC, the borrower under the Senior Credit Facility, provides for this engineering firm to be paid on a cost-plus fee basis subject to a guaranteed maximum price of $201.4 million, subject to increase for approved change orders. As of May 17, 2021, the remaining balance of the contract was approximately $151 million. On May 19, 2021 we notified our original EPC firm that we were terminating the EPC Agreement, effective immediately. The cumulative billing on the EPC contract through June 30, 2021 was $63.2 million. The two major subcontracts for the Bakersfield Biorefinery were not terminated and were subsumed in the new replacement EPC agreement (see below). Accordingly, the two major subcontractors will continue to provide their services for the Bakersfield Biorefinery.

 

On May 18, 2021 our BKRF subsidiary and CTCI Americas, Inc., a Texas corporation (“CTCI”), entered into a Turnkey Agreement with a Guaranteed Maximum Price for the Engineering, Procurement and Construction of the Bakersfield Renewable Fuels Project (the “CTCI EPC Agreement”). CTCI Americas is a worldwide leading provider of reliable engineering, procurement and construction services, including for the refinery market. Under the CTCI EPC Agreement, CTCI has agreed to provide services to complete the engineering, procurement, construction, pre-commissioning, commissioning, start-up and testing of our renewable diesel production facility under construction in Bakersfield, California. CTCI’s fees and costs, including direct costs, overhead fees and the contractor’s fee, are guaranteed not to exceed $178 million (which maximum price is subject to adjustment for certain change orders). The obligations of CTCI have been guaranteed by CTCI Corporation, the Taiwanese parent company of CTCI

 

The Company recognizes its asset retirement obligation and environmental remediation liabilities and has estimated such liabilities as of its acquisition date. It is the Company’s policy to accrue environmental and clean-up related costs of a non-capital nature when it is both probable that a liability has been incurred and the amount can be reasonably estimated. Environmental remediation liabilities represent the current estimated costs to investigate and remediate contamination at our properties. This estimate is based on internal and third-party assessments of the extent of the contamination, the selected remediation technology and review of applicable environmental regulations, typically considering estimated activities and costs for 20 years, and up to 30 years if a longer period is believed reasonably necessary. Accruals for estimated costs from environmental remediation obligations generally are recognized no later than completion of the remedial feasibility study and include, but are not limited to, costs to perform remedial actions and costs of machinery and equipment that are dedicated to the remedial actions and that do not have an alternative use. Such accruals are adjusted as further information develops or circumstances change. We discount environmental remediation liabilities to their present value if payments are fixed and determinable. However, as the timing and amount of these costs were undeterminable as of September 30, 2021, these costs have not been discounted. Expenditures for equipment necessary for environmental issues relating to ongoing operations are capitalized. Changes in laws and regulations and actual remediation expenses compared to historical experience could significantly impact our results of operations and financial position. We believe the estimates selected, in each instance, represent our best estimate of future outcomes, but the actual outcomes could differ from the estimates selected. At September 30 2021, accrued environmental remediation liability costs totaled $21.0 million of which $1.5 million have been classified as current liabilities. At December 31, 2020, accrued environmental liabilities totaled $21.3 million of which $0.9 million have been classified as current liabilities.

 

On May 7, 2020 through BKRF OCB, LLC, one of the Company’s indirect subsidiaries, the Company purchased all of the outstanding equity interests of Bakersfield Renewable Fuels, LLC from Alon Paramount for a total consideration of $89.4 million, including $40 million in cash and assumption of liabilities of $43.9 million. Bakersfield Renewable Fuels, LLC owns an oil refinery in Bakersfield, California that the Company is retooling into a biorefinery. In connection with the acquisition, BKRF OCB, LLC agreed to undertake certain cleanup activities at the refinery and provide a guarantee for liabilities arising from the cleanup. The Company has assumed significant environmental and clean-up liabilities associated with the purchase of the Bakersfield Refinery.

 

 

On May 1, 2019, the Company amended its Torrance, California office lease to extend the lease term to July 31, 2022.

 

On January 1, 2021, the Company entered into a lease agreement for a storage facility in Montana. The storage facility will be used for SusOils operations and runs through December 31, 2022.

 

On April 20, 2021, the Company entered into a 36 month lease agreement for two Zephir electric railcar movers for use at the Bakersfield Biorefinery.

The table below represents the amounts due through the end of lease terms.

 

 

On April 20, 2021, BKRF entered into a three-year lease beginning upon delivery of two railcar movers.  The equipment was delivered in August and the first monthly payment was made in September 2021.  The monthly payment is $13,551 and has an interest rate of 3%.

 

On September 24, 2021, SusOils entered into a five-year lease beginning on November 1, 2021 for its North American headquarters, a new state-of-the-art facility located in Great Falls, Montana. This new facility will consolidate SusOils crop innovation programs, commercial grower support and executive and administrative activities at one location and will be fully operational by November 1, 2021 Under the lease, we will have to pay monthly rental payments of $18,531. In addition, we have the right to purchase the facility at any time during the lease. In order to maintain the purchase option, we will have to make annual payments of $186,000

 

BKRF, formerly Alon Bakersfield Property, Inc., is one of the parties to an action pending in the United States Court of Appeals for the Ninth Circuit. In June 2019, the jury awarded the plaintiffs approximately $6.7 million against Alon Bakersfield Property, Inc. and Paramount Petroleum Corporation (a parent company of Alon Bakersfield Property, Inc. at the time of the award in 2019). Under the agreements pursuant to which we purchased BKRF,AlonParamountagreedtoassumeandbeliablefor(andtoindemnify,defend,andhold BKRF harmless from) this litigation. In addition, Paramount Petroleum Corporation has posted a bond to cover this judgmentamount. All legal fees in this matter are being paid by Alon Paramount. As Paramount Petroleum Corporation and the Company arejointly and severally liable for the judgement, and Paramount Petroleum Corporation has agreed to absorb all of the liability and hasposted a bond to cover the judgement amount, no loss has been accrued by the Company with respect to this matter. In August 2021,the Ninth Circuit entered a limited remand to the district court to determine whether it properly exercised jurisdiction over AlonBakersfield Property, Inc. and Paramount Petroleum Corporation, and the district court has authorized jurisdictional discovery toresolvethatmatter.

 

In August, 2020, Wood Warren & Co. Securities, LLC (“Wood Warren”) filed a complaint in the Superior Court of California,Alameda County, against GCEH Acquisitions titled , CaseNo. RG 20072242, alleging that GCEH Acquisitions breached a consulting agreement with it.Wood Warren seeks damages of $1.2million plus interest.On October 14, 2020, GCEH Acquisitions filed an answer to Wood Warren’s complaint.The parties arecurrentlyengagedindiscoveryandnotrialdatehasyetbeenset.Weareunabletopredicttheoutcomeofthematter.

Roll Energy Investments LLC v. Global Clean Energy Holdings, Inc.,