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•	the constantly changing margin between the price we pay for crude oil and other refinery feedstocks as well as renewable identification numbers (“RINs”) and environmental credits, and the prices at which we are able to sell refined products;

•	changes in the expected value of and benefits derived from acquisitions and capital projects;

•	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;

•	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;

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

•	changes in the carrying costs of our inventory;

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

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

•	changes in our cash flow from operations;

•	earthquakes or other natural disasters affecting operations;

•	direct or indirect effects on our business resulting from actual or threatened terrorist incidents, cyber-security breaches or acts of war;

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

•	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, compliance costs or other factors beyond our control;

•	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;

•	changes in our credit profile;

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

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

•	seasonal variations in demand for refined products and natural gas;

•	risks related to labor relations and workplace safety; and

•	political developments.

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(a)	Throughput can exceed crude oil capacity due to the processing of other feedstocks in addition to crude oil. In December 2015, we updated our crude oil capacity from 850 Mbpd to 875 Mbpd.

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

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

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(a)	Also includes barrels that were gathered and then delivered into TLLP’s High Plains pipeline by truck.

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(a)	Capacity and throughput is measured in MMcf/d for processing complexes and barrels per day for the fractionation complex.

•	25 crude oil and refined products terminals and storage facilities in the western and midwestern U.S. that are supplied by Tesoro-owned and third-party pipelines, trucks and barges;

•	four marine terminals in California that load and unload vessels;

•	130 miles of pipelines, which transport products and crude oil from Tesoro’s refineries to nearby facilities in Salt Lake City and Los Angeles and a 50% fee interest in a 16-mile pipeline that transports jet fuel from our Los Angeles refinery to the Los Angeles International Airport;

•	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”);

•	a rail-car unloading facility in Washington that receives crude oil transported on unit trains leased by Tesoro;

•	a petroleum coke handling and storage facility in Los Angeles that handles and stores petroleum coke from Tesoro’s Los Angeles refinery; and

•	a regulated common carrier refined products pipeline system connecting our Kenai refinery to Anchorage, Alaska.

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(a)	Other brands include USA GasolineTM, Tesoro®, RebelTM and ThriftyTM.

(b)	Other states include Colorado, Iowa, New Mexico, Oregon, South Dakota, Wisconsin and Wyoming.

•	Our Martinez, Los Angeles and Anacortes refineries compete with several refiners in the U.S., Canada and throughout the Pacific Rim.

•	Our Kenai refinery competes with two 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.

•	Our mid-continent refineries in Mandan, North Dakota and Salt Lake City, Utah compete with supplies provided from refineries in surrounding states and pipeline supply from the Midwest and Gulf Coast regions.

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•	The U.S. Environmental Protection Agency (“EPA”) has promulgated multiple regulations to control greenhouse gas emissions under the Federal Clean Air Act. The first of these regulations, finalized on April 1, 2010, set 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.

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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 implemented the second renewable fuel standard (“RFS2”) through regulation and RFS2 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.

•	The EPA adopted a new rule in 2015 requiring further reductions in the National Ambient Air Quality Standard (“NAAQS”) for ozone.

•	The DOT issued new regulations in 2015 governing the design of rail cars used to transport petroleum and other materials.

•	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.

•	In California, the Board for the South Coast Air Quality Management District passed amendments to the Regional Clean Air Incentives Market (“RECLAIM”) on December 4, 2015. The RECLAIM Amendments become effective in 2016 and require a staged reduction of Nitrogen Oxides through 2022.

•	In California, pre-rulemaking is underway to implement the recommendations made in 2014 by the Governor’s Interagency Refinery Safety Working Group.

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•	production and availability of foreign and domestic crude oil and refined products;

•	production controls set and maintained by the members of the Organization of the Petroleum Exporting Countries (“OPEC”);

•	transportation infrastructure availability, local market conditions, operation levels of other refineries in our markets, and the import or export of crude and refined products;

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

•	domestic and foreign governmental regulations and taxes;

•	weather conditions, hurricanes or other natural disasters;

•	the price, availability and efficiency of competing energy sources; and

•	local, regional, national and worldwide economic conditions.

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In California, Assembly Bill 32 requires the state to reduce its greenhouse gas (GHG) emissions to 1990 levels by 2020. Two regulations implemented to achieve this goal are Cap-and-Trade and the Low Carbon Fuel Standard (LCFS). In 2012, the California Air Resource Board implemented Cap-and-Trade. This program currently places a cap on GHGs and we are required to acquire a sufficient number of credits to cover emissions from our refineries and our in-state sales of gasoline, diesel, and some LPGs. In 2009, CARB adopted the LCFS, which requires a 10% reduction in the carbon intensity of gasoline and diesel by 2020. Compliance is demonstrated by blending lower carbon intensity biofuels into gasoline and diesel or by purchasing credits. Compliance with each of these programs is demonstrated through a market-based credit system. If we are unable to pass the costs of compliance on to our customers, sufficient credits are unavailable for purchase, we have to pay a significantly higher price for credits, or if we are otherwise unable to meet our compliance obligation, our financial condition and results of operations could be adversely affected.

•	In California, the Board for the South Coast Air Quality Management District (“SCAQMD”) passed amendments to the Regional Clean Air Incentives Market (“RECLAIM”) on December 4, 2015. The RECLAIM Amendments become effective in 2016 and require a staged reduction of NOx through 2022.

•	The EPA adopted a new rule in 2015 requiring further reductions in the National Ambient Air Quality Standard (“NAAQS”) for ozone.

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•	increasing our vulnerability to changing economic, regulatory and industry conditions;

•	limiting our ability to compete and our flexibility in planning for, or reacting to, changes in our business and the industry;

•	limiting our ability to pay dividends to our stockholders;

•	limiting our ability to borrow additional funds; and

•	requiring us to dedicate a substantial portion of our cash flow from operations to payments on our debt, thereby reducing funds available for working capital, capital expenditures, acquisitions and other purposes.

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(a)	Assumes that the value of the investments in common stock and each index was $100 on December 31, 2010, and that all dividends were reinvested. Investment is weighted on the basis of market capitalization.

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(a)	Includes 1,355 shares acquired from employees during the fourth quarter of 2015 to satisfy tax withholding obligations in connection with the vesting of restricted stock issued to them.

(b)

Our Board of Directors authorized a $1.0 billion share repurchase program in July 2014. Under the program, management is permitted to purchase Tesoro common stock at its discretion in the open market. On October 28, 2015, our Board authorized a new $1.0 billion share repurchase program to become effective upon the full completion of our current $1.0 billion share repurchase authorization. The authorization has no time limit and may be suspended or discontinued at any time.

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•	Operational Efficiency and Effectiveness - continuously improving safety, compliance, reliability, system improvements and cost leadership;

•	Value Chain Optimization - enhancing margin capture through our supply and trading activities, optimization of our integrated businesses and customer focus;

•	Financial Discipline - maintaining a strong financial position by exercising capital discipline and focusing on a balanced use of free cash flow;

•	Value-Driven Growth - extending our capabilities and growing earnings through growth in our logistics and marketing businesses and other strategic opportunities accretive to shareholder value; and

•	High Performing Culture - fostering a performance-based culture that is committed to building leadership at all levels of the organization and across our value chain with employees from diverse backgrounds and experiences who are accountable for delivering on our commitments.

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•	Benefited from Los Angeles improvements including:

◦	Crude optimizations from sourcing new crudes;

◦	Crude blending capabilities at the Carson crude terminal that resulted in higher throughput volumes;

◦	New cargo sharing with our Martinez refinery;

◦	Improved pipeline connectivity between the Los Angeles refinery sites; and

◦	West Coast integration of naphtha and gasoline blendstocks.

•	Re-distributed in-bound crude oil to our Kenai refinery during maintenance and turnaround activities at our Anacortes refinery to optimize our west coast system; and

•	Completed the second phase of the Salt Lake City Refinery Expansion project.

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•	Focusing on stable, fee-based business;

•	Optimizing our existing asset base;

•	Pursuing organic expansion opportunities; and

•	Continued growth through strategic acquisitions.

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•	expanded its assets on its gathering and transportation system, located in the Bakken Region (the “High Plains System”) in support of growing third-party demand for transportation services and Tesoro’s demand for Bakken crude oil in the mid-continent and west coast refining systems, including:

◦	further expanded capacity and capability of its common carrier pipeline in North Dakota and Montana;

◦	expanded its gathering footprint in the Bakken region, including crude oil, natural gas and water, to enhance and improve overall basin logistic efficiencies;

◦	added other origin and destination points on the High Plains System to increase volumes; and

◦	improved utilization of its proprietary truck fleet, which should generate cost and operating efficiencies.

•	increased its terminalling volumes by expanding capacity and growing its third-party services at certain of its terminals;

•	optimized Tesoro volumes and grow third-party volumes using its terminalling and transportation assets;

•	completed the integration, expanded and optimized its natural gas gathering and processing assets;

•	completed the Connolly Gathering System major growth project, which has a capacity of approximately 60 Mbpd; and

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closed the acquisition of crude oil and refined product storage and pipeline assets in Los Angeles, California (the "LA Storage and Handling Assets") owned by subsidiaries of Tesoro, for a total consideration of $500 million. TLLP acquired a crude oil, feedstock and refined product storage tank facility with combined capacity of 6.6 million barrels and a 50% interest in a 16-mile pipeline that transports jet fuel from Tesoro's Los Angeles refinery to the Los Angeles International Airport.

(a)	Represents distributions received from TLLP during the years ended December 31, 2015, 2014 and 2013 on common or subordinated units and general partner units held by Tesoro including incentive distribution rights.

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

(b)	Special items included in EBITDA but excluded for presentation of adjusted EBITDA consist of the following (in millions):

(c)

Transaction and integration costs for the years ended December 31, 2015 and 2014 primarily related to TLLP’s Rockies Natural Gas Business acquisition of $1 million and $19 million, respectively, and $62 million related to the assets we acquired on June 1, 2013 from BP West Coast Products, LLC and other affiliated sellers (the “Los Angeles Acquisition”) and TLLP acquisition of Chevron’s Northwest Products System (the “Northwest Products System”) for the year ended December 31, 2013.

(d)	We recorded charges of $359 million and $42 million for lower of cost or market adjustments related to our inventories at December 31, 2015 and 2014, respectively. The year ended December 31, 2015 also includes a benefit of $42 million for the reversal of the lower of cost or market inventory adjustment made in 2014.

(e)

During the years ended December 31, 2015 and 2014, TLLP invoiced QEPFS customers for deficiency payments. TLLP did not recognize $13 million and $10 million of revenue related to the billing period for the years ended December 31, 2015 and 2014, respectively, as it represented opening balance sheet assets for the acquisition of the Rockies Natural Gas Business; however, TLLP is entitled to cash receipt from such billings.

(f)

Includes a refund and settlement from a crude pipeline network rate case settlement of $59 million for the year ended December 31, 2014, partially offset by accruals of $15 million for the resolution of certain legal matters. A $16 million benefit related to the release of a legal reserve as a result of a favorable litigation settlement and $54 million in refunds from the settlement of a rate proceeding from the California Public Utilities Commission are included for the year ended December 31, 2013.

(g)	During the year ended December 31, 2015, we recorded a gain of $11 million as other income for insurance proceeds related to the settlement of claims associated with the Washington Refinery Fire.

(h)	Includes a gain of $5 million for the year ended December 31, 2014, resulting from TLLP’s sale of its Boise terminal.

(i)	Includes costs for detailed inspection and maintenance program on the Northwest Products System pipeline for the years ended December 31, 2014 and 2013. The purchase price of the Northwest Products System was reduced to compensate TLLP for assuming responsibilities to perform this work.

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(a)	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.

(b)	Average refined product sales price include all sales through our marketing segment as well as in bulk markets and exports through our refining segment. Average costs of sales and related sales margins include amounts recognized for the sale of refined products manufactured at our refineries along with the sale of refined products purchased from third parties to help fulfill supply commitments.

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•	Gross refining margin per barrel is calculated by dividing gross refining margin (revenues less costs of feedstocks, purchased refined products, transportation and distribution) by total refining throughput;

•	Manufacturing costs before depreciation and amortization expense (“Manufacturing Costs”) per barrel is calculated by dividing Manufacturing Costs by total refining throughput:

•	We calculate refined product sales margin per barrel by dividing refined product sales margin by total refined product sales (in barrels); and

•	Refined product sales margin represents refined product sales less refined product cost of sales.

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(a)	Refined product sales include intersegment sales to our marketing segment of $16.9 billion, $22.8 billion and $20.1 billion in 2015, 2014 and 2013, respectively.

(b)

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 included $2 million for the year ended December 31, 2015, and $5 million for both of the years ended December 31, 2014 and 2013. Gross refining margin includes the effect of intersegment sales to the marketing segment and services provided by TLLP. Gross refining margin approximates total refining throughput multiplied by the gross refining margin per barrel.

(c)

Our refining segment uses Renewable Identification Numbers (“RINs”) to satisfy its obligations under the Renewable Fuels Standard, in addition to physically blending required biofuels. At the end of 2014, given the price of RINs had become more transparent in the price of biofuels, we determined our intersegment pricing methodology should include the market value of RINs as a reduction to the price our marketing segment pays to our refining segment. We made this change effective January 1, 2015. We have not adjusted financial information presented for our refining and marketing segments for the years ended December 31, 2014 and 2013. Had we made this change effective January 1, 2013, operating income in our refining segment would have been reduced by $125 million and $116 million with a corresponding increase to operating income in our marketing segment for the years ended December 31, 2014 and 2013, respectively.

(d)

We recorded charges of $359 million and $42 million for lower of cost or market adjustments to our inventories at December 31, 2015 and 2014, respectively. The year ended December 31, 2015 also includes a benefit of $42 million for the reversal of the lower of cost or market inventory adjustment made in 2014. The gross refining margin per throughput barrel does not include these charges in the computation of the rate at a consolidated and regional level.

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(a)	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 continue to integrate the operations of our Wilmington and Carson facilities and refer to the combined facility as the Los Angeles refinery.

(b)

We recorded charges of $359 million and $42 million for lower of cost or market adjustments to our inventories at December 31, 2015 and 2014, respectively. The year ended December 31, 2015 also includes a benefit of $42 million for the reversal of the lower of cost or market inventory adjustment made in 2014. On a regional basis, gross refining margin reflects charges of $207 million, $76 million and $34 million for California, Pacific Northwest and Mid-Continent, respectively, for the year ended December 31, 2015. For the year ended December 31, 2014, the charges were $30 million, $8 million and $4 million for California, Pacific Northwest and Mid-Continent, respectively. The gross refining margin per throughput barrel on a consolidated and regional basis does not include these charges.

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(a)	TLLP commenced natural gas gathering and processing operations with the acquisition of the Rockies Natural Gas Business on December 2, 2014. Per day calculations only reflect the period of 2014 that TLLP owned the Rockies Natural Gas Business.

(b)	Includes historical results of TLLP’s Predecessors for the years ended December 31, 2014 and 2013. See additional information regarding TLLP’s Predecessors under “Items Impacting Comparability”.

(c)	We did not separately report transportation volumes on the pipeline assets located in southern California that TLLP acquired from one of our subsidiaries; therefore, the 2013 pipeline volumes have not been adjusted to include the activity from the date we acquired the assets on June 1, 2013 through December 31, 2013.

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(a)	Includes historical results of TLLP’s Predecessors for the years ended December 31, 2015, 2014 and 2013. See additional information regarding TLLP’s Predecessors under “Items Impacting Comparability”.

(b)	TLLP commenced natural gas gathering and processing operations with the acquisition of the Rockies Natural Gas Business on December 2, 2014.

(c)	TLLP segment revenues from services provided to our refining segment were $615 million, $497 million and $273 million for the years ended December 31, 2015, 2014 and 2013, 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. Amounts billed by Tesoro totaled $76 million, $52 million and $69 million for the years ended December 31, 2015, 2014 and 2013, respectively. Operating expenses also include imbalance gains and reimbursements of $42 million, $43 million and $12 million in the years ended December 31, 2015, 2014 and 2013, 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 $71 million, $39 million and $20 million for the years ended December 31, 2015, 2014 and 2013, respectively. These amounts are eliminated upon consolidation. TLLP segment third-party general and administrative expenses are reclassified to cost of sales in our statements of consolidated operations upon consolidation.

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(a)	In December 2014, we converted our company-operated retail stations to MSO retail stations. The impact of this change was not material to our marketing segment results.

(b)	Primarily includes rental income for the year ended December 31, 2015 and primarily merchandise revenue for the years ended December 31, 2014 and 2013.

(c)

Our refining segment uses RINs to satisfy its obligations under the Renewable Fuels Standard, in addition to physically blending required biofuels. At the end of 2014, given the price of RINs had become more transparent in the price of biofuels, we determined our intersegment pricing methodology should include the market value of RINs as a reduction to the price our marketing segment pays to our refining segment. We made this change effective January 1, 2015. We have not adjusted financial information presented for our refining and marketing segments for the years ended December 31, 2014 and 2013. Had we made this change effective January 1, 2013, operating income in our refining segment would have been reduced by $125 million and $116 million with a corresponding increase to operating income in our marketing segment for the years ended December 31, 2014 and 2013, respectively.

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(a)	The unamortized issuance costs for TLLP were $39 million, including an unamortized premium of $4 million.

(b)	TLLP can elect the interest rate to apply to the TLLP Unsecured Term Loan 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 borrowing.

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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 of $3.0 billion.

(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 our 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. Letters of credit outstanding under the TLLP Revolving Credit Facility incur fees at the Eurodollar margin rate.

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(a)	Tesoro capital expenditures exclude TLLP.

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(a)	The expansion project at the Salt Lake City refinery improved yields of gasoline and diesel, improved the flexibility of processing crude feedstocks and increased throughput capacity by 4 Mbpd. The expansion project increased potential waxy crude oil processing capabilities up to 26 Mbpd. We completed the work in the second quarter of 2015.

(b)	TLLP substantially completed the construction of a pipeline gathering system (the “Connolly Gathering System”) to gather crude oil from various points in Dunn County, North Dakota for delivery at its existing Connolly Station with an expected capacity of approximately 60 Mbpd.

(d)

The Clean Product Upgrade Project at our Anacortes, Washington refinery enables compliance with Tier 3 gasoline sulfur reduction; reduction of gasoline production costs; extraction of existing mixed xylene from gasoline and logistics capability for its export to manufacturers of polyester fibers and films used in clothing, food packaging and beverage containers. The project was approved by our Board in February 2015 with approximately $25 million approved for the first phase of the project. The project remains subject to regulatory approval, which we expect to obtain in 2016.

(e)	The regulatory and compliance project for the Avon Wharf in Martinez, California is required under the California building code for Marine Oil Terminal Engineering and Maintenance Standards (“MOTEMS”). The project will replace the existing berth with a MOTEMS compliant structure that will improve clean product movements and has received all regulatory approval and permits.

(f)

The integration project at the Los Angeles refinery is designed to improve the flexibility of gasoline and diesel yields and reduce carbon dioxide emissions. The proposed project, subject to final Board approval, project scoping, engineering and regulatory approval, includes decommissioning the fluid catalytic cracking unit at our Wilmington refinery. Of the total expected capital expenditure related to this project, a portion will be incurred and paid by TLLP.

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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. Interest payments assume the interest rate in effect as of December 31, 2015.

(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 long-term contractual purchase commitments for crude oil, having initial or remaining terms in excess of one year. At December 31, 2015, these agreements have remaining terms ranging from one month to six 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, 2015, with prices ranging from $30 per barrel to $50 per barrel, and volumes based on the contract’s minimum purchase requirements over the term of the contract. 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, refined products and NGLs 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

•	implement key indicators to 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 to retire or dispose of these assets;

•	we plan on extending the assets’ estimated economic lives through scheduled maintenance projects 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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•	25 crude oil and refined products and storage facilities in the western and midwestern U.S. that are supplied by Tesoro-owned and third-party pipelines, trucks and barges;

•	130 miles of pipelines, which transport products and crude oil from Tesoro’s refineries to nearby facilities in Salt Lake City and Los Angeles and a 50% fee interest in a 16-mile pipeline that transports jet fuel from Tesoro’s Los Angeles refinery to the Los Angeles International Airport;

•	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”);

•	a rail car unloading facility in Washington that receives crude oil transported on unit trains leased by Tesoro;

•	a petroleum coke handling and storage facility in Los Angeles that handles and stores petroleum coke from Tesoro’s Los Angeles refinery; and

•	a regulated common carrier refined products pipeline system connecting our Kenai refinery terminals to terminals in Anchorage, Alaska.

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(a)	Other noncurrent assets include $121 million of goodwill.

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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 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)	Includes charges totaling $6 million and $42 million for December 31, 2015 and 2014, respectively, related to regulatory improvements we are obligated to make at the at the Hawaii refinery to resolve the Clean Air Act matters discussed in Note 17.

(b)	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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(a)	Allowances for doubtful accounts of $13 million and $14 million at December 31, 2015 and 2014, respectively, relate to estimated uncollectible amounts on our trade receivables.

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(a)

In connection with the Rockies Natural Gas Business acquisition, TLLP recognized $1.0 billion of customer relationships associated with the acquired natural gas processing and gathering operations. The value for the identified customer relationships consists of cash flows expected from existing contracts and future arrangements from the existing customer base. The amounts and useful lives associated with these customer relationships were finalized within TLLP’s measurement period of the purchase price allocation.

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Watson Cogeneration Company (“Watson”) - As part of the Los Angeles Acquisition in 2013, we acquired a 51% interest in Watson, which produces steam and electricity at a facility located at our Los Angeles refinery. Our transactions with Watson, which do not have intra-entity profits requiring elimination, consist of sales of fuel gas and water, purchases of steam and electricity and charges for general and administrative support.

•	Vancouver Energy - We entered into a 50% owned joint venture in 2013 with Savage Companies to construct, own and operate a unit train unloading and marine loading terminal at Port of Vancouver, USA (the “Vancouver Energy” terminal) with a total capacity of 360 Mbpd allowing for the delivery of cost-advantaged North American crude oil to the U.S. West Coast.

•	Three Rivers Gathering, L.L.C. (“TRG”) - TLLP acquired a 50% interest in TRG as part of its Rockies Natural Gas Business acquisition. TRG operates natural gas gathering assets within the southeastern Uinta Basin and is primarily supported by long-term, fee-based gas gathering agreements with minimum volume commitments.

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Uintah Basin Field Services, L.L.C. (“UBFS”) - TLLP acquired a 38% interest in UBFS as part of its Rockies Natural Gas Business acquisition. UBFS was originally formed to allow the partners to jointly develop the natural gas gathering infrastructure within a defined area of mutual interest located in the southeastern Uinta Basin and is supported by long-term, fee-based gas gathering agreements that contain firm throughput commitments, which generate fees whether or not the capacity is used, and is operated by TLLP.

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(a)	The carrying amount of our investments in Watson, TRG and UBFS exceeded the underlying equity in net assets by $68 million, $17 million, and $8 million, respectively, at December 31, 2015 and by $70 million, $15 million, and $7 million, respectively, at December 31, 2014.

(b)	Includes the final fair value adjustment resulting from measurement period changes related to TLLP’s Rockies Natural Gas Business in 2015 and the Los Angeles Acquisition in 2014.

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•	price risks associated with the purchase or sale of feedstocks, refined products and energy supplies to or from our refineries, terminals, marketing operations and customers;

•	price risks associated with inventories above or below our target levels;

•	future emission credit requirements; and

•	exchange rate fluctuations on our purchases of Canadian crude oil.

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(a)

Certain of our derivative contracts, under master netting arrangements, include both asset and liability positions. We offset both the fair value amounts and any related cash collateral amounts recognized for multiple derivative instruments executed with the same counterparty when there is a legally enforceable right and an intention to settle net or simultaneously. As of December 31, 2015, we had provided cash collateral amounts of $12 million related to our unrealized derivative positions. As of December 31, 2014, our counterparties had provided cash collateral of $112 million related to our unrealized derivative positions. Cash collateral amounts are netted with mark-to-market derivative assets.

(b)	Losses for our foreign currency forward contracts are located in other income, net in our statements of consolidated operations.

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(a)

Certain of our derivative contracts, under master netting arrangements, include both asset and liability positions. We offset both the fair value amounts and any related cash collateral amounts recognized for multiple derivative instruments executed with the same counterparty when there is a legally enforceable right and an intention to settle net or simultaneously. At December 31, 2015, we had provided cash collateral amounts of $12 million related to our unrealized derivative positions. As of December 31, 2014, our counter parties had provided cash collateral of $112 million related to our unrealized derivative positions. Cash collateral amounts are netted with mark-to-market derivative assets.

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(a)	Unamortized premiums of $4 million and $5 million associated with these senior notes are included in unamortized issuance costs at December 31, 2015 and 2014, respectively.

(b)	Unamortized debt issuance costs of $78 million and $93 million are recorded as a reduction to debt on the balance sheet at December 31, 2015 and 2014, respectively. The Company adopted ASU 2015-03 in 2015 and applied changes retrospectively to the prior period presented. See Note 1 for further discussion.

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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 of $3.0 billion.

(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 borrowing. The applicable margin on the Revolving Credit Facility varies primarily based upon our 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. Letters of credit outstanding under the TLLP Revolving Credit Facility incur fees at the Eurodollar margin rate.

•	an extension of the revolving facility maturity date to November 18, 2019;

•	total available revolving capacity of $3.0 billion, or lower based on the periodically adjusted borrowing base, and the removal of previously included required revolving loan commitment decreases;

•	a reduction in the minimum consolidated tangible net worth requirement beginning with the fiscal year ending December 31, 2014;

•	revisions to the covenants to provide additional flexibility for making restricted payments, dispositions and entering into certain investments; and

•	a backstop guarantee by Tesoro of certain swap obligations.

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(a)	TLLP can elect the interest rate to apply to the TLLP Unsecured Term Loan 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 borrowing.

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•

The funded qualified employee retirement plan (the “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 $60 million during both 2015 and 2014, and $48 million in 2013 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 $1 million during 2015, and $5 million in both 2014 and 2013 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. Effective January 1, 2015, this plan was frozen to new participants.

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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 pension and other postretirement benefit payments to be made.

(b)	We remeasured our pension and other postretirement benefit obligations during the second quarter of 2013 due to the Los Angeles Acquisition and the sale of the Hawaii Business. 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 for the Retirement Plan. The expected long-term rate of return is adjusted when there are fundamental changes in expected returns on the Retirement Plan’s investments.

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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 that 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.

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(a)	Includes $33 million and $32 million of TLLP environmental liabilities at December 31, 2015 and 2014, respectively.

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(a)	As a result of our finalization of the purchase price allocation of TLLP’s Rockies Natural Gas Business Acquisition, we determined that majority of the AROs initially recognized were not estimable. See Note 3 for further discussion of the purchase price allocation.

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(a)	Includes operating leases having initial or remaining noncancellable lease terms in excess of one year.

(b)

Prices under the 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, 2015, with prices ranging from $30 per barrel to $50 per barrel, and volumes based on the contract’s minimum purchase requirements over the term of the contract.

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(a)	Represents the fair value of noncontrolling interest related to TLLP subsidiaries that were recognized as part TLLP’s purchase price allocation for the Rockies Natural Gas Business acquisition.

(b)

Includes the net impact of $44 million and $43 million for the years ended December 31, 2015 and 2014, respectively, to noncontrolling interest for ownership changes occurring a result of TLLP’s issuance of equity under its ATM program in 2015, its 2014 October Equity Offering, and the issuance of TLLP common units to Tesoro for TLLP’s November 2015 acquisition of crude oil and refined product storage and pipeline assets in Los Angeles, California.

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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.

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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 10 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. As of December 31, 2015, we no longer have outstanding awards in this plan, although there were awards outstanding during 2015.

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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 10 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 marketing segment are included in both revenues and cost of sales in our statements of consolidated operations. These taxes totaled $561 million, $581 million and $567 million for the years ended December 31, 2015, 2014 and 2013, respectively.

(b)

Our refining segment uses RINs to satisfy its obligations under the Renewable Fuels Standard, in addition to physically blending required biofuels. Effective April 1, 2013, we changed our intersegment pricing methodology and no longer reduced the amount marketing pays for the biofuels by the market value of the RINs due to significant volatility in the value of RINs. At the end of 2014, given the price of RINs had become more transparent in the price of biofuels, we determined our intersegment pricing methodology should include the market value of RINs as a reduction to the price our marketing segment pays to our refining segment. We made this change effective January 1, 2015. We have not adjusted financial information presented for our refining and marketing segments for the years ended December 31, 2014 and 2013. Had we made this change effective January 1, 2013, operating income in our refining segment would have been reduced by $125 million and $116 million with a corresponding increase to operating income in our marketing segment for the years ended December 31, 2014 and 2013, respectively.

(c)	We present TLLP’s segment operating income net of general and administrative expenses totaling $54 million, $39 million and $17 million representing TLLP’s corporate costs for the years ended December 31, 2015, 2014 and 2013, respectively, that are not allocated to TLLP’s operating segments.

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(a)	Includes earnings attributable to Tesoro from continuing and discontinued operations. 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)	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)	Revised to conform to current period presentation of equity in earnings of subsidiaries that reflects equity in earnings of subsidiaries within the guarantor and non-guarantor columns net of intercompany amounts.

(b)	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)	Revised to conform to current period presentation that reflects investment in subsidiary and equity amounts within the guarantor and non-guarantor columns net of intercompany amounts.

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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 includes 192,855 options to purchase common stock, 31,869 restricted stock units, 862,540 performance share awards, and 2,270,158 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 1,791,073 securities to be issued and 5,051,278 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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