Annual report pursuant to Section 13 and 15(d)


12 Months Ended
Dec. 31, 2020
Property, Plant and Equipment [Abstract]  



On May 7, 2020 through its subsidiary BKRF OCB, LLC, the Company purchased all of the outstanding equity interests of Alon Bakersfield Property, Inc. a company that owned a refinery in Bakersfield, California from Alon Paramount Holdings, Inc. (“Alon Paramount”) for a total consideration of $89.4 million (excluding acquisition costs). Immediately prior to the purchase, Alon Bakersfield Property Inc. was converted into a limited liability company and renamed as “Bakersfield Renewable Fuels, LLC.” The Company is now retooling the acquired refinery into a biorefinery. In accordance with ASC Topic 805, Business Combinations, the Company determined that the purchase is an asset purchase and not a business combination based the following a) substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset group, b) that the existing crude oil based (very high carbon) refinery is not able to produce renewable diesel (very low carbon) fuel, c) no refinery in the U.S. has been designed specifically around the plant oil feedstock extracted from Camelina seeds, thus the technical aspect is new and unique to the Bakersfield Biorefinery and d) the Company did not acquire an assembled workforce. Thus, the acquired asset group does not have the full inputs or substantive process to produce outputs and does not have any acquired revenue generating contractual arrangements.


The total consideration for the purchase of the Bakersfield Biorefinery was $89.4 million, and consisted of $40 million of cash, an option right valued at $5.5 million granted to the seller, and an assumption of $43.9 million of liabilities. The liabilities assumed consist of $21.9 million of asset retirement obligations (ARO) and $22 million of other environmental remediation liabilities. These liabilities are the estimated costs of clean-up, remediation and associated costs of the acquired assets in accordance with current regulations. The option right was valued using various inputs, including a volatility of 116%, a risk free rate of 0.14% and a marketability discount of 25%. The total consideration of the purchase was allocated to the asset categories acquired based upon their relative fair value, except that the fair value of the asset retirement obligations were allocated to the specific assets to which they relate to. The Company made a preliminary analysis of its ARO and environmental remediation liabilities based on the documentation received in the acquisition. As of December 31, 2020, the Company re-analyzed these liabilities in detail and determined that its actual ARO and environmental remediation liabilities were substantially lower based on a more thorough analysis of actual cost data, recent work completed, and the Company’s estimates of the work necessary to fulfill its obligations and timing of the work to be performed. The combined ARO and environmental liabilities were originally determined to be $74.7 million which resulted in an acquisition cost of $120.2 million. The following summarizes this revised allocation of the purchase price and also the reclassification of the pre-acquisition costs:


Asset Category   Capitalized Costs
Based on
  Allocated Pre-
  Total Capitalized
Costs on
Property, Plant and Equipment                        
Land   $ 7,584,961       —       $ 7,584,961  
Buildings     2,053,570       —         2,053,570  
Refinery     77,845,201       3,222,449       81,067,650  
Intangible Assets     1,921,082       —         1,921,082  
Total   $ 89,404,814     $ 3,222,449     $ 92,627,263  


Property, plant and equipment as of December 31, 2020 and December 31, 2019 are as follows:


    December 31, 2020   December 31, 2019
Land   $ 7,584,961       —    
Office Equipment     61,078       61,078  
Buildings     2,053,570       —    
Refinery Equipment     86,019,130       —    
Construction in Process     33,212,695       2,588,441  
Construction period interest     10,220,766       —    
Total Cost   $ 139,152,200       2,649,519  
Less accumulated depreciation     (179,525 )     (61,078 )
Property, plant and equipment, net   $ 138,972,675       2,588,441  


Depreciation expense for property, plant and equipment was approximately $118,447 for the year ended December 31, 2020. There was no depreciation for the year ended December 31, 2019.