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(a)	We are integrating the operations of our Wilmington and Carson refineries and refer to the combined facility as the Los Angeles refinery. The 2013 throughput includes processing at the Carson refinery beginning on June 1, 2013, the date of acquisition.

(b)	See discussion regarding changes in total refining throughput in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7.

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(a)	We define heavy crude oil as crude oil with an American Petroleum Institute gravity of 24 degrees or less.

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(a)	The majority of internally produced fuel is consumed during the refining process.

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•	the High Plains System in the Bakken Shale/Williston Basin area of North Dakota and Montana (the “Bakken Region”);

•	trucking operations in the Bakken Region that gather and transport crude oil from well sites or nearby collection points in the Bakken Region and deliver it to TLLP’s High Plains pipeline and third-party destinations;

•	a regulated common carrier products pipeline running from Salt Lake City, Utah to Spokane, Washington and a jet fuel pipeline to the Salt Lake City International Airport (the “Northwest Products Pipeline”);

•	20 refined products terminals and storage facilities in the western and midwestern United States;

•	four marine terminals in California;

•	a rail-car unloading facility in Washington;

•	a petroleum coke handling and storage facility in Los Angeles; and

•	other pipelines which transport products and crude oil from our refineries to nearby facilities in Salt Lake City and Los Angeles.

•	Immediately subsequent to our closing of the Los Angeles Acquisition on June 1, 2013, TLLP acquired from us six marketing terminals and storage facilities located in southern California and certain properties related thereto, with a total combined throughput capacity of 225 Mbpd and approximately 6.4 million barrels of storage capacity.

•	TLLP completed its acquisition of Chevron Pipe Line Company’s and Northwest Terminalling Company’s (collectively, “Chevron”) northwest products system (the “Northwest Products System”) effective June 19, 2013. The Northwest Products System consists of the Northwest Products Pipeline and three refined products terminals in Idaho and Washington.

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TLLP acquired the majority of the remaining logistics assets (the “Los Angeles Logistics Assets”) initially acquired by us as part of the Los Angeles Acquisition effective December 6, 2013. The Los Angeles Logistics Assets, located near our Los Angeles refinery, include two marine terminals, over 100 miles of an active crude oil and refined products pipeline system connecting our Los Angeles refining complex with the acquired marine terminal facilities and TLLP’s Los Angeles area refined products terminal and storage facilities, dedicated crude oil and refined products storage terminals with capacity of 2.0 million barrels, a petroleum coke handling and storage facility, and a refined products terminal.

•	picking up and transporting crude oil, dispatching and scheduling proprietary and third-party trucks and providing bulk storage in its High Plains System based on per-barrel tariffs and service fees;

•	transferring refined products from terminals to trucks, barges and pipelines;

•	delivering crude oil and intermediate feedstocks from third-party vessels to refineries and third-party terminals;

•	transporting refined products;

•	unloading crude oil transported by unit train to our Washington refinery;

•	providing ancillary services, including ethanol blending and additive injection, and for barge loading or unloading fees;

•	storing crude oil and refined products primarily in support of our Utah and Los Angeles refineries; and

•	providing operational services at TLLP’s petroleum coke handling and storage facility at our Los Angeles refinery.

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•	Our Martinez, Los Angeles and Washington refineries compete with several refiners in the contiguous West Coast states. We periodically export products, with our exports to foreign markets increasing over the last three years.

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Our Alaska refinery competes with three other in-state refineries along with refineries on the West Coast and in Asia. Our jet fuel sales in Alaska are concentrated in Anchorage, where we are one of the principal suppliers at the Anchorage International Airport. In February 2014, Flint Hills Resources Alaska, LLC announced it would cease processing at its North Pole refinery beginning in May 2014, making our Alaska refinery the largest remaining refinery in the state.

•	Our North Dakota refinery is the only refinery in the state and primarily competes with refineries in Wyoming, Montana, the Midwest and with pipeline supply from the Gulf Coast region. The Midwest region ranks second among the regions in crude oil refining throughput in the United States. This region processes crude oil from the Bakken Formation and imports crude oil from Canada.

•	Our Utah refinery is the largest of five refineries located in Utah. The other refineries have a combined capacity to process approximately 114 Mbpd of crude oil. These five refineries collectively supply a high proportion of the gasoline and distillate products consumed in the states of Utah and Idaho, with additional supplies provided from refineries in surrounding states.

•

The U.S. Environmental Protection Agency (“EPA”) is in the process of proposing multiple regulations to control greenhouse gas emissions under the Federal Clean Air Act. The first of these regulations, finalized on April 1, 2010, sets standards for the control of greenhouse gas emissions from light trucks and cars. The U.S. Congress may also consider legislation regarding greenhouse gas emissions in the future.

•

The Energy Independence and Security Act of 2007 mandates the blending of increasing amounts of renewable fuels in the supply of transportation fuels used domestically. This use of renewable fuels is required of all manufacturers and importers of transportation fuels sold domestically. The EPA implements the second renewable fuel standard (“RFS2”) through regulation and requires transportation fuel manufacturers to provide proof of purchase of these renewable fuels. The costs associated with RFS2 compliance are uncertain and fluctuate with market dynamics.

•	In California, Assembly Bill 32 (“AB 32”), created a statewide cap on greenhouse gas emissions and requires that the state return to 1990 emission levels by 2020. AB 32 also created a low carbon fuel standard, which requires a 10% reduction in the carbon intensity of fuels by 2020.

•	The EPA is expected to issue a final rule in March 2014, requiring, among other things, the reduction of the concentration of sulfur in gasoline.

•	The U.S. Department of Transportation (“DOT”) is expected to propose new regulations governing the design of rail cars used to transport petroleum and other materials in November 2014.

•	The EPA is expected to propose a new rule requiring further reductions in the National Ambient Air Quality Standard (“NAAQS”) for ozone in December 2014.

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•	changes in the global economy and the level of foreign and domestic production of crude oil and refined products;

•	availability of crude oil and refined products and the infrastructure to transport crude oil and refined products;

•	local factors, including market conditions, the level of operations of other refineries in our markets, and the volume of refined products imported;

•	threatened or actual terrorist incidents, acts of war, and other global political conditions;

•	government regulations; and

•	weather conditions, hurricanes or other natural disasters.

•	the potential for unexpected costs, delays and challenges that may arise in integrating the assets acquired into our existing business;

•	challenges related to integrating significant operations that have a company culture that differs from our own;

•	environmental remediation obligations assumed by Tesoro costing significantly more than anticipated; and

•	discovery of previously unknown liabilities associated with the assets acquired for which we cannot receive reimbursement under applicable indemnification provisions.

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In California, AB32 created a statewide cap on greenhouse gas emissions and requires that the state return to 1990 emission levels by 2020. AB 32 also created a low carbon fuel standard, which requires a 10% reduction in the carbon intensity of fuels by 2020. Although a California court determined that this standard is unconstitutional in December 2011, the CARB has appealed the decision. On April 23, 2012, the U.S. 9th Circuit Court of Appeals stayed the lower court’s preliminary injunction of the CARB’s enforcement of the standard pending the appeal and we cannot predict the outcome of the pending appeal.

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The EPA proposed regulations in 2009, that would require the reduction of emissions of greenhouse gases from light trucks and cars, and would establish permitting thresholds for stationary sources that emit greenhouse gases and require emissions controls for those sources. Promulgation of the final rule on April 1, 2010, has resulted in a cascade of related rulemakings by the EPA pursuant to the Clean Air Act relative to controlling greenhouse gas emissions.

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In December 2007, the Energy Independence and Security Act was enacted into federal law, which created RFS2. This standard, based on current legislation, requires the total volume of renewable transportation fuels (including ethanol and advanced biofuels) sold or introduced in the U.S. to reach 18.2 billion gallons in 2014 and to increase to 36 billion gallons by 2022. However, the EPA has proposed to reduce the total renewable fuel and advanced biofuel requirement to 15.2 billion for 2014.

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•	damage to pipelines and facilities, related equipment and surrounding properties caused by earthquakes, floods, fires, severe weather, explosions and other natural disasters and acts of terrorism;

•	mechanical or structural failures;

•	curtailments of operations relative to severe weather; inadvertent damage to pipelines from construction, farm and utility equipment; and

•	other hazards.

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(a)	Assumes that the value of the investments in common stock and each index was $100 on December 31, 2008, and that all dividends were reinvested. Investment is weighted on the basis of market capitalization.

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(a)	Includes 1,501 shares acquired from employees during the fourth quarter of 2013 to satisfy tax withholding obligations in connection with the vesting of restricted stock issued to them.

(b)	In August 2012, our Board authorized a $500 million share repurchase program. In November 2013, our Board authorized an increase in this share repurchase program to $1.0 billion. Under the program, management is permitted to purchase Tesoro common stock at its discretion in the open market. The authorization has no time limit and may be suspended or discontinued at any time.

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(a)

Net earnings (loss) from continuing operations included the following pre-tax items that affect the comparability of the periods presented. During 2013, we received $54 million in refunds from a settlement of a rate proceeding from the California Public Utilities Commission (“CPUC”), and recorded $62 million of transaction and integration costs related to acquisitions completed during 2013. We recorded approximately $37 million from insurance recoveries and incurred a $51 million loss during 2011 related to the change in scope of a capital project at our Wilmington refinery. We recorded approximately $67 million from insurance recoveries and $27 million in charges during 2010 directly related to the April 2010 incident at our Washington refinery and a $48 million gain from the elimination of postretirement life insurance benefits for current and future retirees. During 2009, we incurred a $43 million goodwill write-off in our refining segment and reduced inventories resulting in a last-in-first-out (“LIFO”) liquidation or reduction in cost of sales of $69 million.

(b)	The assumed conversion of common stock equivalents produced anti-dilutive results for the years ended December 31, 2010 and 2009, and was not included in the dilutive calculation.

(c)

During 2013, Tesoro Logistics LP (“TLLP”) issued $800 million in senior notes, which were primarily used to fund acquisitions. During 2012, we refinanced approximately $925 million of senior notes, redeemed our $299 million 6.250% Senior Notes and paid off $117 million of outstanding borrowings on the Tesoro Panama Company S.A. (“TPSA”) revolving credit facility (the “TPSA Revolving Credit Facility”). TLLP also issued $350 million in senior notes, which was primarily used to fund an acquisition and to pay down $118 million in outstanding borrowings on its credit facility. During 2011, TLLP borrowed $50 million on the TLLP Revolving Credit Facility, and Tesoro redeemed approximately $178 million of our senior notes and redeemed our $150 million Junior Subordinated Notes. During 2009, we issued $300 million in senior notes for general corporate purposes. Total debt includes capital lease obligations.

(d)	Excludes TLLP total debt of $1.2 billion, $354 million and $50 million and noncontrolling interest of $1.2 billion, $486 million and $310 million as of and for the years ended December 31, 2013, 2012 and 2011, respectively. TLLP’s debt is non-recourse to Tesoro, except for Tesoro Logistics GP.

(e)	Tesoro Stockholders’ Equity excludes $1.2 billion, $486 million and $310 million of equity related to noncontrolling interest for the years ended December 31, 2013, 2012 and 2011, respectively. There was no equity related to noncontrolling interest for the years ended December 31, 2010 and 2009.

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•	the constantly changing margin between the price we pay for crude oil and other refinery feedstocks as well as RINs and carbon credits, and the prices at which we are able to sell refined products;

•	the timing and extent of changes in commodity prices and underlying demand for our refined products;

•	changes in the expected value of and benefits derived from the assets acquired in the acquisition of BP’s integrated Southern California refining, marketing and logistics business;

•	changes in global economic conditions and the effects of the global economic downturn on our business, especially in California, and the business of our suppliers, customers, business partners and credit lenders;

•	the availability and costs of crude oil, other refinery feedstocks and refined products;

•	changes in fuel and utility costs for our facilities;

•	changes in the cost or availability of third-party vessels, pipelines and other means of transporting crude oil feedstocks and refined products;

•	actions of customers and competitors;

•	state and federal environmental, economic, health and safety, energy and other policies and regulations, including those related to climate change and any changes therein, and any legal or regulatory investigations, delays or other factors beyond our control;

•	regulatory and other requirements concerning the transportation of crude oil, particularly from the Bakken area;

•	adverse rulings, judgments, or settlements in litigation or other legal or tax matters, including unexpected environmental remediation costs in excess of any reserves;

•	operational hazards inherent in refining operations and in transporting and storing crude oil and refined products;

•	earthquakes or other natural disasters affecting operations;

•	changes in our cash flow from operations;

•	changes in capital requirements or in execution of planned capital projects;

•	changes in the carrying costs of our inventory;

•	disruptions due to equipment interruption or failure at our facilities or third-party facilities;

•	direct or indirect effects on our business resulting from actual or threatened terrorist incidents or acts of war;

•	weather conditions affecting our operations or the areas in which our refined products are marketed;

•	seasonal variations in demand for refined products;

•	risks related to labor relations and workplace safety; and

•	political developments.

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•	improve operational efficiency and effectiveness by focusing on safety and reliability, system improvements and cost leadership;

•	drive commercial excellence by strengthening our supply, trading and optimization activities to provide additional value to the business;

•	maintain our financial position by exercising capital discipline and focusing on a balanced use of free cash flow;

•	capture value-driven growth through a focus on our logistics assets, growing our marketing business and other strategic opportunities accretive to shareholder value; and

•	maintain a high performing culture by building leadership at all levels of the organization with employees from diverse backgrounds and experiences who are accountable for delivering on our commitments.

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•	delivering the improved California synergies, resulting from our acquisition and integration of the Southern California refining, marketing and logistics business;

•	enhancing gross margin through an increased focus on sourcing advantaged crude oil for our West Coast operations;

•	continuing to improve our base business by maintaining high refinery availability and utilization rates and continuing efforts to enhance productivity;

•	focusing on growing our logistics business and increasing third-party revenue; and

•	maintaining strong financial discipline by focusing on our capital position and a balanced use of our free cash flow.

•	long-term fee-based contracts;

•	relationship with us;

•	assets positioned in the high demand Williston Basin; and

•	financial flexibility.

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•	world crude oil prices;

•	increased federal fuel efficiency standards for motor vehicles;

•	increased volumes of renewable fuels, mandated by the Energy Independence and Security Act;

•	various regulations of greenhouse gas emissions from stationary and mobile sources;

•	potential enactment of federal climate change legislation; and

•	possible promulgation of national regulations relative to gasoline composition and ozone standards.

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(a)	For a definition of Adjusted EBITDA, see discussion above.

•	a $5.92 per barrel decrease in gross refining margin per barrel, or 35%, in 2013 as compared to 2012, reflecting weaker industry gasoline and diesel margins in the Mid-Continent and Pacific Northwest markets and lower discounts on advantaged crude oil. This decrease in margin per barrel resulted in a $385 million decline in the gross refining margin; and

•	transaction and integration costs of $62 million related to the Los Angeles Acquisition and TLLP’s purchase of the Northwest Products System during 2013.

•	a refund from the settlement of a rate proceeding from the CPUC of $54 million during 2013;

•	expense of $28 million related to legal matters in 2012 compared to the release of a $16 million legal reserve as a result of the favorable settlement of litigation during 2013;

•	a decrease in stock-based compensation charges of $20 million primarily related to a smaller increase in Tesoro’s stock price during 2013 as compared to 2012; and

•	a decrease in interest and financing costs of $16 million primarily related to premiums paid and unamortized debt issuance costs associated with the debt refinancing during 2012.

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•	an increase in gross refining margins of $454 million driven by a strong margin environment and feedstock advantages in 2012;

•	a $51 million impairment charge in 2011 related to a change in scope of a capital project at our Wilmington refinery;

•	a $39 million increase in retail segment operating income during 2012 as a result of a 14% increase in fuel sales volumes, increased refining and marketing integration and improved market conditions during 2012; and

•	a $34 million decrease in manufacturing costs primarily related to lower energy costs during 2012.

•	a $168 million increase in income tax expense in 2012 as compared to 2011 as a result of higher earnings during the year;

•	a $59 million increase in stock and incentive-based compensation expense, primarily resulting from a significant increase in Tesoro’s stock price during 2012 as compared to 2011;

•	$37 million of property and business interruption insurance recoveries related to the Washington refinery incident collected in 2011;

•	expense of $28 million related to legal matters in 2012; and

•	transaction and integration costs of $13 million related to the Los Angeles Acquisition, TLLP’s purchase of the Northwest Products System and various acquisitions of assets by TLLP from us during 2012.

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(a)	Refined products sales includes intersegment sales to our retail segment, at prices which approximate market of $9.7 billion, $5.5 billion and $4.7 billion in 2013, 2012 and 2011, respectively.

(b)	We define heavy crude oil as crude oil with an American Petroleum Institute gravity of 24 degrees or less.

(c)

As of December 31, 2013, we began reporting the logistics assets and operations of TLLP, as a separate operating segment. In previous periods, TLLP’s assets and operations were presented within our refining operating segment. TLLP’s assets and operations include certain assets acquired from Tesoro and third parties. The TLLP financial and operational data presented include the historical results of all assets included in acquisitions from Tesoro prior to the acquisition dates. The historical results of operations of these assets have been retrospectively adjusted to conform to current presentation. These adjustments resulted in lower gross refining margins. The refining segment now includes costs for transportation and terminalling services provided by TLLP that were previously eliminated with consolidated reporting of TLLP revenues within our refining segment results.

(d)	Management uses various measures to evaluate performance and efficiency, and to compare profitability to other companies in the industry, including gross refining margin per barrel, manufacturing costs before depreciation and amortization expense (“Manufacturing Costs”) per barrel and refined products sales margin per barrel.

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Management uses gross refining margin per barrel to evaluate performance and compare profitability to other companies in the industry. There are a variety of ways to calculate gross refining margin per barrel; different companies may calculate it in different ways. We calculate gross refining margin per barrel by dividing gross refining margin (revenues less costs of feedstocks, purchased refined products, transportation and distribution) by total refining throughput.

•	Management uses Manufacturing Costs per barrel to evaluate the efficiency of refining operations. There are a variety of ways to calculate Manufacturing Costs per barrel; different companies may calculate it in different ways. We calculate Manufacturing Costs per barrel by dividing Manufacturing Costs by total refining throughput.

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Management uses refined product sales margin per barrel to evaluate the profitability of manufactured and purchased refined product sales. There are a variety of ways to calculate refined product sales margin per barrel; different companies may calculate it in different ways. We calculate refined product sales margin per barrel by dividing refined product sales and refined product cost of sales by total refining throughput, and subtracting refined product cost of sales per barrel from refined product sales per barrel.

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(e)

Consolidated gross refining margin combines gross refining margin for each of our regions adjusted for other amounts not directly attributable to a specific region. Other amounts resulted in increases of $6 million, $3 million and $6 million for the years ended December 31, 2013, 2012 and 2011, respectively. Gross refining margin includes the effect of intersegment sales to the retail segment at prices which approximate market and fees charged by TLLP for the transportation and terminalling of crude oil and refined products at prices which we believe are no less favorable to either party than those that could have been negotiated with unaffiliated parties with respect to similar services. Gross refining margin approximates total refining throughput multiplied by the gross refining margin per barrel.

(f)	Includes impairment charges related to the change in scope of a capital project at our Wilmington refinery of $51 million for the year ended December 31, 2011.

(g)	Sources of total refined product sales include refined products manufactured at our refineries and refined products purchased from third parties. Total refined product sales margins include margins on sales of manufactured and purchased refined products.

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(h)	We acquired the Carson refinery and related assets on June 1, 2013. The information presented includes the results of operations of these assets from the date of acquisition on June 1, 2013. We are integrating the operations of our Wilmington and Carson refineries and refer to the combined facility as the Los Angeles refinery.

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(a)	Includes historical results of TLLP’s Predecessors for the years ended December 31, 2013, 2012 and 2011. See additional information regarding TLLP’s Predecessors on page 43.

(b)

Management uses average revenue per barrel to evaluate performance and compare profitability to other companies in the industry. There are a variety of ways to calculate average revenue per barrel; different companies may calculate it in different ways. We calculate average revenue per barrel as revenue divided by the number of days in the period divided by throughput. Investors and analysts use this financial measure to help analyze and compare companies in the industry on the basis of operating performance. This financial measure should not be considered as an alternative to segment operating income, revenues and operating expenses or any other measure of financial performance presented in accordance with U.S. GAAP.

(c)	TLLP segment revenues from services provided to our refining segment were $265 million, $143 million and $77 million for the years ended December 31, 2013, 2012 and 2011, respectively. These amounts are eliminated upon consolidation.

(d)

TLLP segment operating expenses include amounts billed by Tesoro for services provided to TLLP under various operational contracts. These amounts totaled $27 million, $15 million and $27 million for the years ended December 31, 2013, 2012 and 2011, respectively. These amounts are eliminated upon consolidation. TLLP segment third-party operating expenses related to the transportation of crude oil and refined products are reclassified to cost of sales in our statements of consolidated operations upon consolidation.

(e)	TLLP segment general and administrative expenses include amounts charged by Tesoro for general and administrative services provided to TLLP under various operational and administrative contracts. These amounts totaled $18 million, $13 million and $8 million for the years ended December 31, 2013, 2012 and 2011, respectively. These amounts are eliminated upon consolidation.

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(a)	Reflects the acquisition of supply rights for approximately 835 dealer-operated and branded wholesale retail stations with the Los Angeles Acquisition in 2013, and 49 retail stations from SUPERVALU, Inc. and the transition of 174 retail stations from Thrifty Oil Co. during 2012.

(b)

Management uses fuel margin per gallon to compare profitability to other companies in the industry. There are a variety of ways to calculate fuel margin per gallon; different companies may calculate it in different ways. We calculate fuel margin per gallon by dividing fuel gross margin by fuel sales volumes. Investors and analysts use fuel margin per gallon to help analyze and compare companies in the industry on the basis of operating performance. This financial measure should not be considered an alternative to revenues, segment operating income or any other measure of financial performance presented in accordance with U.S. GAAP. Fuel margin and fuel margin per gallon include the effect of intersegment purchases from the refining segment at prices which approximate market.

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(a)	Borrowing base is the lesser of the amount of the periodically adjusted borrowing base or the agreement’s total capacity.

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(b)

We can elect the interest rate to apply to the facility between a base rate plus the base rate margin, or a Eurodollar rate, for the applicable term, plus the Eurodollar margin at the time of the borrowing. The applicable margin on the Revolving Credit Facility varies primarily based upon its credit ratings. Letters of credit outstanding under the Revolving Credit Facility incur fees at the Eurodollar margin rate.

(c)

TLLP has the option to elect if the borrowings will bear interest at either, a base rate plus the base rate margin or a Eurodollar rate, for the applicable period, plus the Eurodollar margin at the time of the borrowing. The applicable margin varies based upon a certain leverage ratio, as defined by the TLLP Revolving Credit Facility. TLLP incurs commitment fees for the unused portion of the TLLP Revolving Credit Facility. Letters of credit outstanding under the Revolving Credit Facility incur fees at the Eurodollar margin rate.

•	pay dividends and make other distributions with respect to our capital stock and purchase, redeem or retire our capital stock;

•	incur additional indebtedness and issue preferred stock;

•	make voluntary prepayments of subordinate debt;

•	sell assets unless the proceeds from those sales are used to repay debt or are reinvested in our business;

•	incur liens on assets to secure certain debt;

•	engage in certain business activities;

•	make certain payments and distributions from our subsidiaries;

•	engage in certain mergers or consolidations and transfers of assets; and

•	enter into certain transactions with affiliates.

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•	incur additional indebtedness and incur liens on assets to secure certain debt;

•	pay and make certain restricted payments;

•	make distributions from its subsidiaries;

•	dispose of assets in excess of an annual threshold amount;

•	in the case of the TLLP Revolving Credit Facility, make certain amendments, modifications or supplements to organization documents and material contracts;

•	in the case of the TLLP Revolving Credit Facility, engage in certain business activities;

•	engage in certain mergers or consolidations and transfers of assets; and

•	enter into certain transactions with affiliates.

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(a)	The cost estimates for capital expenditures exclude estimates for capitalized interest and labor costs.

(b)	2013 actual capital expenditure disclosures include capitalized interest and labor costs associated with the project.

(c)	The expansion project at the Utah refinery is designed to improve yields of gasoline and diesel, improve the flexibility of processing crude feedstocks and increase throughput capacity by 4 Mbpd. The first phase of this project was completed in the second quarter of 2013 and the second phase is expected to be completed in 2015.

(d)	The integration project at the Los Angeles refinery is designed to improve the flexibility of gasoline and diesel yields and reduce carbon dioxide emissions.

(e)	The expansion of the diesel desulfurization unit increased the capacity of the unit from 17 Mbpd to 22 Mbpd and improved diesel fuel yield at the North Dakota refinery.

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(a)	Includes $24 million of TLLP environmental liabilities at December 31, 2013. There were no environmental liabilities recorded for TLLP at December 31, 2012.

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(a)	Includes maturities of principal and interest payments, excluding capital lease obligations. Amounts and timing may be different from our estimated commitments due to potential voluntary debt prepayments and borrowings.

(b)	Capital lease obligations include amounts classified as interest. Operating lease obligations primarily represent our future minimum noncancellable lease commitments. Operating lease obligations primarily include lease arrangements with initial or remaining noncancellable terms in excess of one year and are not reduced by minimum rentals to be received by us under subleases.

(c)

Represents an estimate of our short-term and long-term contractual purchase commitments for crude oil, with remaining terms ranging from three months to seven years. Prices under these term agreements fluctuate due to market-responsive pricing provisions. To estimate our annual commitments under these contracts, we estimated crude oil prices using exchange-traded crude future prices by crude oil type as of December 31, 2013, with prices ranging from $67 per barrel to $105 per barrel, and volumes based on the contract’s minimum purchase requirements. We also purchase additional crude oil under short-term renewable contracts and in the spot market, which are not included in the table above.

(d)	Represents long-term commitments primarily for the transportation of crude oil and refined products as well as to purchase industrial gases, chemical processing services and utilities at our refineries. These purchase obligations are based on the contract’s minimum volume requirements.

(e)	Minimum contractual spending requirements for certain capital projects.

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•	create and maintain a comprehensive risk management policy;

•	provide for authorization by the appropriate levels of management;

•	provide for segregation of duties;

•	maintain an appropriate level of knowledge regarding the execution of and the accounting for derivative instruments; and

•	have key performance indicators in place to adequately measure the performance of its hedging activities.

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hazardous materials disposal (such as petroleum manufacturing by-products, chemical catalysts, and sealed insulation material containing asbestos), and removal or dismantlement requirements associated with the closure of our refining facilities, terminal facilities or pipelines, including the demolition or removal of certain major processing units, buildings, tanks, pipelines or other equipment; and

•	removal of underground storage tanks at our owned retail stations at or near the time of closure.

•	there are no plans or expectations of plans to retire or dispose of these assets;

•	we plan on extending the assets’ estimated economic lives through scheduled maintenance projects at our refineries and other normal repair and maintenance and by continuing to make improvements based on technological advances;

•	we have rarely retired similar assets in the past; and

•	industry practice for similar assets has historically been to extend the economic lives through regular repair and maintenance and implementation of technological advances.

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•	the Anacortes rail car unloading facility assets (collectively, the “Anacortes Rail Facility”) effective November 15, 2012 (the “Anacortes Rail Facility Acquisition”) for total consideration of $180 million;

•	the Long Beach marine terminal and related short-haul pipelines, including the Los Angeles short-haul pipelines (collectively, the “Long Beach Assets”) effective September 14, 2012 (the “Long Beach Assets Acquisition”) for total consideration of $210 million; and

•	the Martinez crude oil marine terminal assets (collectively, the “Martinez Crude Oil Marine Terminal”) effective April 1, 2012 (the “Martinez Marine Terminal Acquisition”) for total consideration of $75 million.

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•	Non-compete clause between us and TLLP effective under certain circumstances;

•	Right of first offer to TLLP for certain of our retained logistics assets, including certain terminals, pipelines, docks, storage facilities and other related assets located in California, Alaska and Washington;

•	Payment of an annual fee to us, currently $6 million, for the provision of various general and administrative services;

•	Reimbursement to TLLP for certain maintenance and expansion capital expenditures; and

•	Indemnification to TLLP for certain matters, including pre-Initial Offering environmental, title and tax matters.

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(a)	Gain on sale of the Hawaii Business includes a $17 million curtailment gain related to the remeasurement of our pension and other postretirement benefit obligations recognized during 2013.

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•	level 1 - valued based on quoted prices in active markets for identical assets and liabilities;

•	level 2 - valued based on quoted prices for similar assets and liabilities in active markets, and inputs other than quoted prices that are observable for the asset or liability; and

•	level 3 - valued based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

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(a)	Represents the impact of netting assets, liabilities and cash collateral when a legal right of offset exists. As of December 31, 2013 and 2012, cash collateral amounts of $65 million and $27 million, respectively, are netted with mark-to-market derivative assets.

•	the short-term duration of the instruments (less than one percent of our trade receivables and payables are outstanding for greater than 90 days); and

•	the expected future insignificance of bad debt expense, which includes an evaluation of counterparty credit risk.

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(a)	As of December 31, 2013 and 2012, cash collateral amounts of $65 million and $27 million, respectively, are netted with mark-to-market derivative assets.

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(a)	Borrowing base is the lesser of the amount of the periodically adjusted borrowing base or the agreement’s total capacity.

(b)

We can elect the interest rate to apply to the facility between a base rate plus the base rate margin, or a Eurodollar rate, for the applicable term, plus the Eurodollar margin at the time of the borrowing. The applicable margin on the Revolving Credit Facility varies primarily based upon its credit ratings. Letters of credit outstanding under the Revolving Credit Facility incur fees at the Eurodollar margin rate.

(c)

TLLP has the option to elect if the borrowings will bear interest at either, a base rate plus the base rate margin or a Eurodollar rate, for the applicable period, plus the Eurodollar margin at the time of the borrowing. The applicable margin varies based upon a certain leverage ratio, as defined by the TLLP Revolving Credit Facility. TLLP incurs commitment fees for the unused portion of the TLLP Revolving Credit Facility. Letters of credit outstanding under the Revolving Credit Facility incur fees at the Eurodollar margin rate.

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•

The funded qualified employee retirement plan provides benefits to all eligible employees. Benefits are determined based on final average compensation and years of service through December 31, 2010, and a cash balance account based formula for service beginning January 1, 2011. Although our funded employee retirement plan fully meets all of the funding requirements under applicable laws and regulations, we contributed $48 million each year during 2013 and 2012 to improve the plan’s funded status.

•	The unfunded nonqualified restoration retirement plan provides for the restoration of retirement benefits to certain senior level employees that are not provided under the qualified retirement plan due to limits imposed by the Internal Revenue Code.

•	The unfunded nonqualified executive security plan provides certain executive officers and other key personnel with supplemental pension benefits. These benefits are provided by a nonqualified, noncontributory plan and are based on years of service and compensation. We made payments of $5 million and $2 million during 2013 and 2012, respectively, for current retiree obligations under the plan.

•	The unfunded nonqualified supplemental executive retirement plan provides eligible senior level executives a supplemental pension benefit in excess of those earned under the qualified retirement plan. This plan was approved and adopted by the Compensation Committee in January 2011.

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(a)	Fixed income assets represent securities primarily invested in corporate, government-related, mortgage and asset-backed debt obligations with a primary focus on long duration securities. Individual fixed income securities are typically priced on the basis of evaluated prices from independent pricing services. All fixed income securities are classified as level 2 investments.

(b)

Mutual funds that invest primarily in domestic and international equity and fixed income securities. Fair values are based on market quotations from national securities exchanges. Absolute return and real return mutual funds consist of investments in mutual funds that invest in a broad set of asset classes designed to provide a target return regardless of market conditions or the potential for real returns in excess of U.S. inflation, respectively. The fixed income mutual fund consists of a fund which is part of a trust managed by a registered investment company. Fair value for the fixed income mutual fund reflects the net asset value per share as determined by the investment manager and derived from the quoted prices in active markets of the underlying securities. Absolute and real return mutual funds and a U.S. equity mutual fund are categorized as level 1 investments and the fixed income mutual fund is categorized as a level 2 investment.

(c)	Common/collective trust funds that invest in primarily equity and fixed income securities. Fair values reflect the net asset value per share, as determined by the investment manager and derived from the quoted prices in active markets of the underlying securities. Common/collective trust funds are classified as level 2 investments.

(d)	The short-term investment funds provide for safety of principal and daily liquidity and is valued using the net asset value per share. These assets are classified as level 2 investments.

(e)

The limited partnership asset represents an interest in the Platte River Fund, L.P. (the “Platte River Fund Partnership”) which invests primarily in domestic equity securities that are considered undervalued. The Platte River Fund Partnership may also invest in equity securities of American Depository Receipts or mutual funds. Fair value is based on the limited partner account balance comprised of all contributions and withdrawals made along with its interest in net income realized and unrealized by the Platte River Fund Partnership. The limited partnership investment is classified as a level 2 investment.

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(a)	We determine the discount rate primarily by reference to the effective yields on high quality corporate bonds that have a comparable cash flow pattern to the expected payments to be made under our plans.

(b)	As a result of the Los Angeles Acquisition and the sale of the Hawaii Business, we remeasured our pension and other postretirement benefit obligations during the second quarter of 2013. The discount rates used to determine the pension and postretirement obligations, and the related net periodic benefit costs, for the remaining period of 2013 were 4.65% and 3.01%, respectively.

(c)	The expected return on plan assets reflects the weighted-average of the expected long-term rates of return for the broad categories of investments held in the plans. The expected long-term rate of return is adjusted when there are fundamental changes in expected returns on the plan’s investments.

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(a)	Includes $24 million of TLLP environmental liabilities at December 31, 2013. There were no environmental liabilities recorded for TLLP at December 31, 2012.

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•

The 2011 Plan permits the grant of options, SARs, restricted common stock, restricted stock units, and incentive bonuses (which may be paid in cash, stock, or a combination thereof), any of which may be performance-based. The 2011 Plan became effective in May 2011 and no awards may be granted under the 2011 Plan on or after February 2021. Stock options may be granted at exercise prices not less than the fair market value on the date the options are granted.

•

The 2006 Plan permits the grant of options, restricted common stock, deferred stock units, performance stock awards, other stock-based awards and cash-based awards. The 2006 Plan became effective in May 2006. Stock options may be granted at exercise prices not less than the fair market value on the date the options are granted. Options granted become exercisable after one year in 33% annual increments and expire ten years from the date of grant. No further awards may be granted under this plan.

•	The Amended and Restated Executive Long-Term Incentive Plan, which expired in May 2006, allowed grants in a variety of forms, including restricted stock, nonqualified stock options, SARs, performance share and performance unit awards.

•

The 1995 Non-Employee Director Stock Option Plan provided for the grant of nonqualified stock options over the life of the plan to eligible non-employee directors of Tesoro. These automatic, non-discretionary stock options were granted at an exercise price equal to the fair market value per share of Tesoro’s common stock at the date of grant. The term of each option is ten years, and an option becomes exercisable six months after it is granted. The plan expired in February 2010 and no further options may be granted under this plan.

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(a)	Includes a $90 million deposit paid in connection with the Los Angeles Acquisition and a $40 million deposit paid related to TLLP’s acquisition of the Northwest Products System, both of which were paid during 2012.

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(a)	Federal and state motor fuel taxes on sales by our retail segment are included in both revenues and cost of sales in our statements of consolidated operations. These taxes totaled $567 million, $467 million and $352 million for the years ended December 31, 2013, 2012 and 2011, respectively.

(b)

Includes impairment charges related to the change in scope of a capital project at our Wilmington refinery of $51 million for the year ended December 31, 2011. The loss on asset disposals and impairments is included in refining segment operating income. Includes business interruption recoveries of $16 million and $32 million for the years ended December 31, 2013 and 2011, and property damage insurance recoveries of $5 million for the year ended December 31, 2011, related to the April 2010 incident at our Washington refinery.

(c)

Includes stock-based compensation expense of $79 million, $99 million and $51 million for the years ended December 31, 2013, 2012 and 2011, respectively. The significant impact to stock-based compensation expense during the year ended December 31, 2013 compared to the prior years is primarily a result of changes in Tesoro’s stock price. Also includes transaction costs related to the Los Angeles Acquisition of $14 million and $6 million for the years ended December 31, 2013 and 2012.

(d)

Includes $54 million in refunds from a settlement of a rate proceeding from the CPUC, and the release of a $16 million legal reserve as a result of the favorable settlement of litigation for the year ended December 31, 2013. Also includes accruals related to certain legal matters partially offset by receipts associated with the settlement of a pipeline rate proceeding for the year ended December 31, 2012.

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(a)	The income tax expense (benefit) reflected in each column does not include any tax effect of the equity in earnings from corporate subsidiaries, but does include the tax effect of the corporate partners’ share of partnership income.

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(a)	The income tax expense (benefit) reflected in each column does not include any tax effect of the equity in earnings from corporate subsidiaries, but does include the tax effect of the corporate partners’ share of partnership income.

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(a)	The income tax expense (benefit) reflected in each column does not include any tax effect of the equity in earnings from corporate subsidiaries, but does include the tax effect of the corporate partners’ share of partnership income.

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(a)	The amounts shown above may differ from those previously reported in our quarterly reports on Form 10-Q for the quarter ended March 31, 2013 due to the sale of the Hawaii Business in September 2013 as discussed in Note D. The results of operations of the Hawaii Business have been presented as discontinued operations for all periods presented.

(b)	The sum of four quarters may not equal annual results due to rounding or the quarterly number of shares outstanding.

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(a)	Includes only the exercise price for options to purchase common stock. No value is included in column (a) of the table for restricted stock units, performance share awards or market stock units since they do not have an exercise, or strike, price.

(b)	For illustrative purposes, a maximum payout (i.e., a 200% ratio) has been assumed for vesting and payout of outstanding performance share award and market stock unit grants.

(c)

The number of securities to be issued upon exercise under these approved plans include 1,258,235 options to purchase common stock, 24,779 restricted stock units, 1,609,430 performance share awards, and 2,783,096 market stock units. Each performance share award and market stock unit shown in the table represents a right to receive (upon vesting and payout) a specified number of our common shares. Vesting and payout may be conditioned upon achievement of pre-determined performance objectives or only upon continued service with us and our affiliates. For illustrative purposes, the maximum payout (i.e., a 200% ratio) provided by the provisions of the award agreements has been assumed for vesting and payout of performance share awards and market share awards. Payout at target levels (i.e., a 100% ratio) would result in 3,479,277 securities to be issued and 6,190,225 securities remaining available for future issuance under equity compensation plans.

(d)	Stock options granted in connection with the inducement awards of the CEO Agreement were not granted under an equity compensation plan.

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*	Filed herewith.

**	Submitted electronically herewith.

†	Compensatory plan or arrangement.

#	Confidential treatment has been granted for certain portions of this Exhibit pursuant to a confidential treatment order granted by the Securities Exchange Commission. Such portions have been omitted and filed separately with the Securities Exchange Commission.

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