Phillips 66

From time to time, we may be involved in litigation and claims arising out of our operations in the normal course of business. Additionally, we have elected a $1 million threshold to disclose certain proceedings arising under federal, state or local environmental laws when a governmental authority is a party to the proceedings. Except as previously reported, we do not believe we are subject to any matters, individually or in the aggregate, that would have a material adverse effect on our business, financial condition, results of operations or cash flows. During the third quarter of 2026, there was one new matter and two material developments with respect to matters previously reported.

Further, our U.S. refineries are implementing two separate consent decrees, regarding alleged violations of the Federal Clean Air Act, with the EPA, five states and one local air pollution agency. Some of the requirements and limitations contained in the decrees provide for stipulated penalties for violations. Stipulated penalties under the decrees are not automatic but must be requested by one of the agency signatories. As part of periodic reports under the decrees or other reports required by permits or regulations, we occasionally report matters that could be subject to a request for stipulated penalties. If a specific request for stipulated penalties meeting the reporting threshold set forth in U.S. Securities and Exchange Commission rules is made pursuant to these decrees based on a given reported exceedance, we will separately report that matter and the amount of the proposed penalty.

New Matter

In 2024, the New Mexico Environment Department (NMED) issued two related Administrative Consent Orders to DCP concerning alleged violations occurring during 2019–2021. DCP has asserted that NMED did not follow its penalty policy in many instances. On September 17, 2026, NMED acknowledged certain of DCP’s assertions regarding the appropriate penalties, disputed others, and proposed to resolve the matter for a combined civil penalty above the Company’s elected environmental-proceeding disclosure threshold, together with certain injunctive terms. DCP is evaluating NMED’s counterproposal and expects negotiations to continue.

Matters Previously Reported (unresolved or resolved since the Quarterly Report on Form 10-Q for the quarter ended June 30, 2026)

As described further in the “Legal Proceedings” section of Note 12—Contingencies and Commitments, in the Notes to Consolidated Financial Statements, on February 17, 2022, Propel Fuels, Inc. (Propel Fuels) filed a lawsuit in the Superior Court of California, County of Alameda (the Propel Court), alleging that Phillips 66 Company misappropriated trade secrets related to Propel Fuels’ renewable fuels business during and after due diligence. On October 16, 2024, a jury returned a verdict against Phillips 66 Company for $604.9 million in compensatory damages. The Propel Court entered final judgment of $833 million against Phillips 66 Company on August 5, 2025, consisting of the jury verdict, exemplary damages, and accrued pre-judgment interest. From the date of final judgment, post-judgment interest of 10% is accruing. Phillips 66 Company filed its Notice of Appeal on November 14, 2025, and its opening brief with the California First District Court of Appeal on July 10, 2026. Phillips 66 Company denies any wrongdoing and intends to vigorously defend its position. While Phillips 66 Company believes the jury verdict is not legally or factually supported, there can be no assurances that such defense efforts will be successful. Until the final resolution of this matter, we may be exposed to losses in excess of the amount recorded, and such amounts may have a material adverse effect on our financial position.

Phillips 66 is engaged in discussions with the U.S. Department of Justice and EPA regarding a potential resolution of alleged violations of the Clean Air Act’s chemical accident prevention requirements, including Section 112(r) and the Risk Management Program regulations, at the Wood River, Borger, Ferndale, and Carson refineries. Phillips 66 expects that resolution of this matter will include a civil penalty above the Company’s elected environmental-proceeding disclosure threshold and requirements for certain injunctive relief. The parties have not finalized or lodged a consent decree.

See the “Dakota Access, LLC (Dakota Access) and Energy Transfer Crude Oil Company, LLC (ETCO)” section of Note 6—Investments, Loans and Long-Term Receivables and Note 11—Guarantees, in the Notes to Consolidated Financial Statements for additional information regarding Legal Proceedings and other regulatory actions.