Commitments – The following is a description of significant commitments at December 31, 2016:

Leases – Future minimum lease payments required by non-cancelable leases in effect at December 31, 2016 were as follows (in thousands):

Total rent expense during the years ended December 31, 2016, 2015 and 2014 was $13,644,000, $9,528,000 and $2,417,000, respectively.

Sales Commitments – At December 31, 2016, the Company had entered into sales contracts with its major customers to sell certain quantities of ethanol and co-products. The Company had open ethanol indexed-price contracts for 336,895,000 gallons of ethanol as of December 31, 2016 and open fixed-price ethanol sales contracts totaling $21,780,000 as of December 31, 2016. The Company had open fixed-price co-product sales contracts totaling $23,200,000 and open indexed-price co-product sales contracts for 92,000 tons as of December 31, 2016. These sales contracts are scheduled to be completed throughout 2017.

Purchase Commitments – At December 31, 2016, the Company had indexed-price purchase contracts to purchase 39,257,000 gallons of ethanol and fixed-price purchase contracts to purchase $14,200,000 of ethanol from its suppliers. The Company had fixed-price purchase contracts to purchase $18,947,000 of corn from its suppliers. These purchase commitments are scheduled to be satisfied throughout 2017. In addition, in September 2016, the Company signed an agreement to finance and construct a 5 megawatt solar project at its Madera facility. The amount financed is up to $10.0 million, to be amortized over twenty years as part of the facility’s property tax assessments. As of December 31, 2016, the Company had incurred $2.1 million in project costs, which is recorded in other liabilities in the accompanying consolidated balance sheets.

Other Commitments – At December 31, 2016, the Company had firm commitments for various capital and process improvement projects at the Company’s plants of approximately $4,710,000, which are expected to be completed in 2017.

Contingencies – The following is a description of significant contingencies at December 31, 2016:

Litigation – The Company is subject to various claims and contingencies in the ordinary course of its business, including those related to litigation, business transactions, employee-related matters, and others. When the Company is aware of a claim or potential claim, it assesses the likelihood of any loss or exposure. If it is probable that a loss will result and the amount of the loss can be reasonably estimated, the Company will record a liability for the loss. If the loss is not probable or the amount of the loss cannot be reasonably estimated, the Company discloses the claim if the likelihood of a potential loss is reasonably possible and the amount involved could be material. While there can be no assurances, the Company does not expect that any of its pending legal proceedings will have a material financial impact on the Company’s operating results.

The Company assumed certain legal matters which were ongoing at the date of its acquisition of Aventine Renewable Energy. Among them was a lawsuit between Aventine Renewable Energy, Inc. (now known as Pacific Ethanol Pekin, LLC, or “PE Pekin”) and Glacial Lakes Energy and Aberdeen Energy, together, the “Defendants,” in which PE Pekin sought damages for breach of termination agreements that wound down ethanol marketing arrangements between PE Pekin and the Defendants. In February 2017, the Company and the Defendants executed a settlement agreement, and the Defendants paid in cash to the Company $3.5 million in final resolution of these matters. The Company did not assign any value to the claim in the accounting for the Aventine acquisition. The Company recorded a gain, net of legal fees, of $3.2 million, upon receipt of the cash settlement. That payment having been received in February 2017, the Company expects to recognize the gain in the first quarter of 2017.

Pacific Ethanol, Inc., through a subsidiary acquired in its acquisition of Aventine, became involved in a pending lawsuit with Western Sugar Cooperative (“Western Sugar”) that pre-dated the Aventine acquisition.

On February 27, 2015, Western Sugar filed a complaint in the United States District Court for the District of Colorado (Case No. 1:15-cv-00415) naming Aventine Renewable Energy, Inc. (“ARE, Inc.”), one of Aventine’s subsidiaries, as defendant. Western Sugar amended its complaint on April 21, 2015. ARE, Inc. purchased surplus sugar through a United States Department of Agriculture program. Western Sugar was one of the entities that warehoused this sugar for ARE, Inc. The suit alleged that ARE, Inc. breached its contract with Western Sugar by failing to pay certain penalty rates for the storage of its sugar or alternatively failing to pay a premium rate for storage. Western Sugar alleged that the penalty rates applied because ARE, Inc. failed to take timely delivery or otherwise cause timely shipment of the sugar. Western Sugar claimed “expectation damages” in the amount of approximately $8.6 million. On December 29, 2016, Western Sugar and ARE, Inc. entered into a settlement pursuant to which ARE Inc. paid $1.7 million and Western Sugar filed a Stipulation of Dismissal with prejudice. As a result, the Company reduced its litigation reserve of $2.8 million and recognized the recovery of $1.1 million in selling, general and administrative expenses for the year ended December 31, 2016.

The Company, through subsidiaries acquired in its acquisition of Aventine, became involved in various pending lawsuits with ACEC that pre-dated the Aventine acquisition.

On July 26, 2015, the Company settled all outstanding litigation with ACEC. The Company and ACEC agreed to dismiss all lawsuits with prejudice with no admission of fault or liability by the parties, and to release the alleged option held by ACEC to repurchase the land upon which the Company’s 110 million gallon ethanol production facility in Aurora, Nebraska is located (the “Aurora West Facility”). In addition, the parties agreed to terminate the grain supply, marketing and various other agreements between them or their subsidiaries. Under the terms of the settlement, the Company and ACEC will each bear its own costs and fees associated with the lawsuits and the settlement. The Company and ACEC agreed to continue to work together to amend or replace certain real property easements currently in place to ensure continued mutual access by both parties to a system of rails, rail switches, roads, electrical improvements, and utilities already constructed near the Aurora West Facility.

On May 24, 2013, GS CleanTech Corporation (“GS CleanTech”), filed a suit in the United States District Court for the Eastern District of California, Sacramento Division (Case No.: 2:13-CV-01042-JAM-AC), naming Pacific Ethanol, Inc. as a defendant. On August 29, 2013, the case was transferred to the United States District Court for the Southern District of Indiana and made part of the pre-existing multi-district litigation involving GS CleanTech and multiple defendants. The suit alleged infringement of a patent assigned to GS CleanTech by virtue of certain corn oil separation technology in use at one or more of the ethanol production facilities in which the Company has an interest, including Pacific Ethanol Stockton LLC (“PE Stockton”), located in Stockton, California. The complaint sought preliminary and permanent injunctions against the Company, prohibiting future infringement on the patent owned by GS CleanTech and damages in an unspecified amount adequate to compensate GS CleanTech for the alleged patent infringement, but in any event no less than a reasonable royalty for the use made of the inventions of the patent, plus attorneys’ fees. The Company answered the complaint, counterclaimed that the patent claims at issue, as well as the claims in several related patents, are invalid and unenforceable and that the Company is not infringing. Pacific Ethanol, Inc. does not itself use any corn oil separation technology and may seek a dismissal on those grounds.

On March 17 and March 18, 2014, GS CleanTech filed suit naming as defendants two Company subsidiaries: PE Stockton and Pacific Ethanol Magic Valley, LLC (“PE Magic Valley”). The claims were similar to those filed against Pacific Ethanol, Inc. in May 2013. These two cases were transferred to the multi-district litigation division in United States District Court for the Southern District of Indiana, where the case against Pacific Ethanol, Inc. was pending. Although PE Stockton and PE Magic Valley do separate and market corn oil, Pacific Ethanol, Inc., PE Stockton and PE Magic Valley strongly disagree that either of the subsidiaries use corn oil separation technology that infringes the patent owned by GS CleanTech. In a January 16, 2015 decision, the District Court for the Southern District of Indiana ruled in favor of a stipulated motion for partial summary judgment for Pacific Ethanol, Inc., PE Stockton and PE Magic Valley finding that all of the GS CleanTech patents in the suit were invalid and, therefore, not infringed. GS CleanTech has said it will appeal this decision when the remaining claim in the suit has been decided. The only remaining claim alleged that GS CleanTech inequitably conducted itself before the United States Patent Office when obtaining the patents at issue.

A trial in the District Court for the Southern District of Indiana was conducted in October 2015 on that single issue as well as whether GS CleanTech’s behavior during prosecution of the patents rendered this an “exceptional case” which would allow the District Court to award the Defendants reimbursement of their attorneys’ fees expended for defense of the case.

On September 15, 2016, the District Court issued an Order finding that GS CleanTech, the inventors and GS CleanTech’s counsel committed inequitable conduct in the prosecution of the GS CleanTech patents before the United States Patent and Trademark Office. As a result, the District Court issued a Final Judgment on September 15, 2016 dismissing with prejudice all of GS CleanTech’s cases against the Defendants, including Pacific Ethanol, Inc., PE Stockton and PE Magic Valley. The District Court’s ruling of inequitable conduct results in the unenforceability of the GS CleanTech patents against third parties, and also enables the Defendants to pursue reimbursement of their costs and attorneys’ fees from GS CleanTech and its counsel. GS Cleantech has asked the Court to reconsider its inequitable conduct decision, citing the existence of a recently issued patent which the patent examiner allowed despite the Court’s findings and the allowance of which the Court did not consider when making its decision of inequitable conduct. GS Cleantech has indicated it will eventually appeal the current rulings on inequitable conduct and/or invalidity if the Court’s reconsideration does not result in a change in its findings. The Court’s reconsideration has been stayed until April 10, 2017.

The Company has evaluated the above cases as well as other pending cases. The Company currently has not recorded a litigation contingency liability with respect to these cases.