Valero Energy (VLO) 10-K risk factor changes: FY2018 vs FY2017

[removed: While the current U.S. administration announced its intent to withdraw from the Paris Agreement in June 2017, there] [added: There] are no guarantees that [removed: it] [added: the agreement] will not be [removed: implemented] [added: re-implemented] in the U.S., or [added: re-implemented] in part by [added: specific] U.S. states or local governments.

Restrictions on emissions of methane or carbon dioxide that have been or may be imposed in various U.S. [removed: states or] [added: states,] at the U.S. federal [removed: level] [added: level,] or in other countries could adversely affect the oil and gas industry.

The U.S. [removed: EPA] [added: Environmental Protection Agency (EPA)] has implemented a Renewable Fuel Standard (RFS) pursuant to the Energy Policy Act of 2005 and the Energy Independence and Security Act of 2007.

[removed: The RFS program sets annual quotas for the quantity of renewable fuels (such as ethanol) that must be blended into] transportation fuels consumed in the U.S. A Renewable Identification Number (RIN) is assigned to each gallon of renewable fuel produced in or imported into the U.S. As a producer of petroleum-based transportation fuels, we are obligated to blend renewable fuels into the products we produce at a rate that is at least commensurate to the U.S. EPA’s quota and, to the extent we do not, we must purchase RINs in the open market to satisfy our obligation under the RFS program.

The current U.S. administration has questioned certain existing and proposed trade [removed: agreements, such as the North American Free Trade Agreement, and has withdrawn the U.S. from others such as the Trans-Pacific Partnership.][added: agreements.]

While there is currently a lack of certainty around the likelihood, timing, and details of any such policies and reforms, if the current U.S. administration takes action to withdraw from, or materially modify, existing [added: international trade agreements, our business, financial condition and results of operations could be adversely affected.]

We [removed: generally] use the services of third parties to transport feedstocks to our facilities and to transport the products we manufacture to market.

We do not believe [removed: recently adopted] [added: these orders and] rules will have a material impact on our financial position, results of operations, and liquidity, although further changes in law, regulations or industry standards could require us to incur additional costs to the extent they are applicable to us.

In addition, the cost and availability of debt and equity financing may [removed: be adversely impacted by unstable or illiquid market conditions.]

Significant interruptions in our refining system could also lead to increased volatility in prices for crude oil feedstocks and refined petroleum products, and could increase instability in [added: the financial and insurance markets, making it more difficult for us to access capital and to obtain insurance coverage that we consider adequate.]

Our information technology systems and network infrastructure may be subject to unauthorized access or attack, which could result in [added: (i)] a loss of intellectual property, proprietary [removed: information] [added: information,] or employee, customer or vendor data; [added: (ii)] public disclosure of sensitive information; [added: (iii)] increased costs to prevent, respond [removed: to] [added: to,] or mitigate cybersecurity [removed: events;] [added: events, such as deploying additional personnel and protection technologies, training employees, and engaging third-party experts and consultants; (iv)] systems interruption; [removed: or the] [added: (v)] disruption of our business [removed: operations.][added: operations; (vi) remediation costs for repairs of system damage; (vii) reputational damage that]

A breach may also result in legal claims or proceedings against us by our shareholders, employees, [removed: customers] [added: customers, vendors,] and [removed: vendors.][added: governmental authorities (U.S. and non-U.S.).]

Workers at some of our refineries are covered by collective bargaining [added: or similar] agreements.

In addition, future [removed: federal] [added: federal, state,] or [removed: state] [added: foreign] labor legislation could result in labor shortages and higher costs, especially during critical maintenance periods.

Among other things, Tax Reform reduces the U.S. corporate income tax rate from 35 percent to 21 percent [removed: (beginning in 2018)] and implements a new system of taxation for non-U.S. earnings, including by imposing a one-time tax on the deemed repatriation of undistributed earnings of non-U.S. subsidiaries.

[removed: Beginning in 2018,] Tax Reform also generally will (i) limit our annual deductions for interest expense to no more than 30 percent of our “adjusted taxable income” (plus 100 percent of our business interest income) for the year and (ii) permit us to offset only 80 percent (rather than 100 percent) of our taxable income with any net operating losses we generate after 2017.

[removed: While we are currently evaluating] [added: We have evaluated] the effects of Tax Reform, including the one-time deemed repatriation tax and the re-measurement of our deferred tax assets and liabilities, [removed: we do not expect that] [added: and] the provisions of Tax Reform, taken as a whole, [removed: will] [added: did not] have [removed: any] [added: an] adverse impact on our cash tax liabilities, results of operations, or financial condition.

[removed: In the absence of guidance on various uncertainties and ambiguities in the application of certain provisions of Tax Reform, we will use what we believe are] [added: We have used] reasonable interpretations and assumptions in applying Tax Reform, but it is possible that the Internal Revenue Service (IRS) could issue subsequent guidance or take positions on audit that differ from our prior interpretations and assumptions, which could adversely impact our cash tax liabilities, results of operations, and financial condition.

[removed: Liability resulting from such claims] [added: Disruption in the financial market] could have a material adverse effect on our financial position, results of operations, and liquidity.

For example, the International Maritime Organization (IMO) will be implementing a new regulation for a global sulphur cap for marine bunker fuels by the year 2020 (IMO 2020).

Under the IMO 2020 cap, vessels will be required to use marine fuels with a sulphur content of no more than 0.50 percent beginning in January 2020, versus the current sulphur limit of 3.50 percent.

While there are many uncertainties, IMO 2020 could affect our business by creating the continued need for new and updated process units necessary to produce the low sulphur marine fuel, and could increase the costs of our products.

While the current U.S. administration announced its intent to withdraw from the Paris Agreement in June 2017, under the agreement’s terms the earliest the U.S. can withdraw is 2020.

However, the Paris Agreement could still affect our operations in Canada, the U.K., Ireland, and Latin America.

The RFS program sets annual quotas for the quantity of renewable fuels (such as ethanol) that must be blended into

For example, the administration has withdrawn the U.S. from the Trans-Pacific Partnership, and has indicated that the administration may withdraw the U.S. from the North American Free Trade Agreement (NAFTA) in order to encourage the U.S. Congress to vote on ratification of the United States-Mexico-Canada Agreement (USMCA), which was signed in November 2018 and is intended to be the successor to NAFTA.

In addition, the administration has implemented and proposed various trade tariffs, which have resulted in foreign governments responding with tariffs on U.S. goods.

For example, in the past several years, the Department of Transportation, the Pipeline and Hazardous Materials Safety Administration, and the Federal Railroad Administration have issued orders and rules, pursuant to the Rail Safety Improvement Act of 2008, Fixing America’s Surface Transportation Act of 2015 and other statutory authorities, concerning such matters as enhanced tank car standards, operational controls, safety training programs, and notification requirements.

While some recent actions have provided some regulatory relief, the general trend has been toward greater regulation.

be adversely impacted by unstable or illiquid market conditions.

adversely affects customer or investor confidence; and (viii) damage to our competitiveness, stock price, and long-term stockholder value.

In addition, new laws and regulations governing data privacy and the unauthorized disclosure of confidential information, including the European Union General Data Protection Regulation and recent California legislation, pose increasingly complex compliance challenges and potentially elevate our costs.

Any failure by us to comply with these laws and regulations, including as a result of a security or privacy breach, could result in significant penalties and liabilities for us.

Additionally, if we acquire a company that has violated or is not in compliance with applicable data protection laws, we may incur significant liabilities and penalties as a result.

Changes in the method of determining the London Interbank Offered Rate (LIBOR), or the replacement of LIBOR with an alternative reference rate, may adversely affect interest rates.

On July 27, 2017, the Financial Conduct Authority (FCA) in the U.K. announced that it would phase out LIBOR as a benchmark by the end of 2021.

It is unclear whether new methods of calculating LIBOR will be established such that it continues to exist after 2021, or whether different benchmark rates used to price indebtedness will develop.

In the future, we may need to renegotiate our revolving credit facility (the Valero Revolver) or incur other indebtedness, and the phase-out of LIBOR may negatively impact the terms of such indebtedness.

In addition, the overall financial market may be disrupted as a result of the phase-out or replacement of LIBOR.

Changes in the U.K.’s economic and other relationships with the European Union could adversely affect us.

In June 2016, the U.K. elected to withdraw from the European Union in a national referendum (Brexit).

Withdrawal negotiations have yet to produce an overall structure for an ongoing relationship between the U.K. and the European Union following Brexit.

The ongoing uncertainty and potential imposition of border controls and customs duties on trade as a result of Brexit could negatively impact our competitive position, supplier and customer relationships, and financial performance.

The ultimate effects of Brexit will depend on the specific terms of any agreement reached by the U.K. and the European Union.

For example, the U.S. Environmental Protection Agency (EPA) recently adopted the Residual Risk and Technology Review Rule (RTR) adding new standards for air toxic emissions, among other requirements.

Emerging rules and permitting requirements implementing these revised standards may require us to install more stringent controls at our facilities, which may result in increased capital expenditures.

Governmental regulations regarding GHG emissions and low carbon fuel standards could result in increased compliance costs, additional operating restrictions or permitting delays for our business, and an increase in the cost of, and reduction in demand for, the products we produce, which could have a material adverse effect on our financial position, results of operations, and liquidity.

The current U.S. administration has also raised the possibility of greater restrictions on trade generally, and significant increases on tariffs on goods imported into the U.S.

international trade agreements, our business, financial condition and results of operations could be adversely affected.

For example, in May 2014, the U.S. Department of Transportation (DOT) issued an emergency order requiring rail carriers to provide certain notifications to state agencies along routes used by trains over a certain length carrying crude oil.

In addition, in November 2014, the Federal Railroad Administration (FRA) issued a final rule regarding safety training standards under the Rail Safety Improvement Act of 2008.

The rule required each railroad or contractor to develop and submit a training program to perform regular oversight and annual written reviews.

In May 2015, the Pipeline and Hazardous Materials Safety Administration (PHMSA), in coordination with the FRA, issued new final rules for enhanced tank car standards and operational controls for high-hazard flammable trains.

In August 2016, PHMSA adopted a final rule expanding the requirements and mandating additional controls for enhanced tank cars, as required by the Fixing America’s Surface Transportation (FAST) Act of 2015.

While some recent actions—including (1) a December 2017 statement that PHMSA intends to initiate rulemaking to rescind portions of its May 2015 rule; and (2) an April 2017 final rule from FRA that delays certain training-program requirements—have provided some regulatory relief, the general trend has been toward greater regulation.

the financial and insurance markets, making it more difficult for us to access capital and to obtain insurance coverage that we consider adequate.

One of our subsidiaries acts as the general partner of a publicly traded master limited partnership, VLP, which may involve a greater exposure to legal liability than our historic business operations.

One of our subsidiaries acts as the general partner of VLP, a publicly traded master limited partnership.

Our control of the general partner of VLP may increase the possibility of claims of breach of fiduciary duties, including claims of conflicts of interest, related to VLP.

You can identify our forward-looking statements by the words “anticipate,” “believe,” “expect,” “plan,” “intend,” [added: “scheduled,”] “estimate,” “project,” “projection,” “predict,” “budget,” “forecast,” “goal,” “guidance,” “target,” “could,” [added: “would,”] “should,” [added: “will,”] “may,” and similar expressions.

| • | legislative or regulatory action, including the introduction or enactment of legislation or rulemakings by governmental authorities, including [added: tariffs and] tax and environmental regulations, such as those implemented under the California cap-and-trade system (also known as AB [removed: 32), the Quebec cap-and-trade system, the Ontario cap-and-trade system,] [added: 32)] and [added: similar programs, and] the U.S. EPA’s regulation of GHGs, which may adversely affect our business or operations; |

| • | changes in currency exchange rates, including the value of the Canadian dollar, the pound sterling, the euro, [removed: and] the Mexican [removed: peso] [added: peso, and the Peruvian sol] relative to the U.S. dollar; |

These non-GAAP financial measures include adjusted net income attributable to Valero stockholders, adjusted operating income [removed: (loss),] [added: (including adjusted operating income for each of our reportable segments),] and refining and ethanol segment margin.

We have included these non-GAAP financial measures to help facilitate the comparison of operating results between [removed: periods.][added: years.]

See the accompanying financial tables in “RESULTS OF OPERATIONS” and note [removed: (d)] [added: (h)] to the [added: accompanying tables for reconciliations of]

[removed: accompanying tables for reconciliations of] these non-GAAP financial measures to the most directly comparable U.S. GAAP financial measures.

Also in note [removed: (d),] [added: (h),] we disclose the reasons why we believe our use of the non-GAAP financial measures provides useful information.

For [removed: 2017,] [added: 2018,] we reported net income attributable to Valero stockholders of [removed: $4.1] [added: $3.1] billion compared to [removed: $2.3] [added: $4.1] billion for [removed: 2016,] [added: 2017,] which represents [removed: an increase] [added: a decrease] of [removed: $1.8 billion.][added: $943 million.]

This [removed: increase] [added: decrease] is primarily due to a $1.9 billion [removed: income] tax benefit in 2017 resulting from [removed: the implementation of the provisions under] Tax Reform, which [removed: was enacted on December 22, 2017.][added: is discussed in Note 15 of Notes to Consolidated Financial Statements, partially offset by a $1.0 billion increase in income before income tax expense.]

The [removed: $779] [added: $931] million increase in adjusted operating income is primarily due to the following:

| • | Refining segment. Refining segment adjusted operating income increased [removed: by $942] [added: $961] million [added: primarily] due to [removed: higher margins on refined petroleum products and higher throughput volumes, partially offset by lower discounts on sour] [added: improved distillate margins, favorable] crude [removed: oils] [added: oil discounts,] and [removed: other feedstocks, higher cost] [added: lower costs] of biofuel credits, [removed: and higher operating expenses (excluding depreciation and amortization expense).] [added: partially offset by lower gasoline margins.] This is more fully described on pages [removed: 38] [added: 36] through [removed: 40.] [added: 37.] |

| • | Ethanol segment. Ethanol segment [removed: adjusted] operating income decreased by [removed: $118] [added: $90] million primarily due to lower ethanol [added: prices] and [added: higher] corn [added: prices, partially offset by higher corn] related co-products prices. This is more fully described on [removed: page 40.] [added: pages 37 through 38.] |

| • | VLP segment. VLP segment adjusted operating income increased by [removed: $74] [added: $50] million primarily due to incremental [removed: revenues] [added: revenues, partially offset by higher cost of sales,] generated from transportation and terminaling services [removed: provided to our refining segment] associated with [removed: terminals acquired in 2016] [added: a terminal] and [removed: 2017,] a product pipeline system acquired [added: by VLP] in [removed: 2017, and the acquisition] [added: November 2017 that were formerly a part] of [removed: an undivided interest in crude system assets in 2017.] [added: the refining segment.] This is more fully described on page [removed: 41.] [added: 38.] |

[removed: | • |] Corporate and [removed: eliminations. Corporate and] eliminations, which consists primarily of general and administrative expenses and related depreciation and amortization expense, increased [removed: by] $119 million [added: in 2017 compared to 2016] primarily due to higher employee related [removed: costs,] [added: costs of $50 million, an increase in] legal and environmental [removed: reserves,] [added: reserves of $21 million, expenses associated with the termination of certain assets from Plains of $16 million,] and [removed: other expenses, which are more fully described on page 38. |][added: an increase in charitable contributions of $10 million.]

Below are several factors that have impacted or may impact our results of operations during the first quarter of [removed: 2018:][added: 2019:]

| • | Medium and heavy sour crude oil discounts are expected to remain weaker than their five-year averages as supplies of sour crude oils [added: available] in the market remain suppressed. |

| • | Sweet crude [added: oil] discounts are expected to remain near current levels as export demand remains strong and [removed: increased supplies from] [added: freight costs continue to rise. U.S. inland sweet crude oil discounts are also expected to remain wide with higher production and limited pipeline capacity to transport crude oil out of] the Permian Basin [removed: are delivered into] [added: and other producing regions in the] U.S. [removed: Gulf Coast markets.] |

In note [removed: (d)] [added: (h)] to these tables, we disclose the reasons why we believe our use of non-GAAP financial measures provides useful information.

| [removed: Operating revenues:] [added: Revenues:] | | | | | | | | | | | | | | | | | | | |

| [removed: Operating revenues] [added: Revenues] from external customers | $ | 90,651 | | | $ | 3,324 | | | $ | — | | | $ | 5 | | | $ | 93,980 | |

| Total [removed: operating] revenues | 90,657 | | | | 3,500 | | | | 452 | | | | (629 | | ) | | 93,980 | | |

| Operating expenses (excluding depreciation and amortization expense reflected below) | [removed: 3,917] [added: 3,959] | | | | 443 | | | | 104 | | | | (2 | | ) | | [removed: 4,462] [added: 4,504] | | |

| Total cost of sales | [removed: 86,582] [added: 86,624] | | | | 3,328 | | | | 157 | | | | (634 | | ) | | [removed: 89,433] [added: 89,475] | | |

| Other operating expenses [removed: (a)] | [removed: 58] [added: 45] | | | | — | | | | [removed: 3] [added: —] | | | | — | | | | [removed: 61] [added: 45] | | |

| General and administrative expenses (excluding depreciation and amortization expense reflected below) [added: (b)] | — | | | | — | | | | — | | | | [removed: 835] [added: 925] | | | | [removed: 835] [added: 925] | | |

| Operating income by segment | $ | [removed: 4,017] [added: 3,975] | | | $ | 172 | | | $ | 292 | | | $ | [removed: (882] [added: (876] | ) | | [removed: 3,599] [added: 3,563] | | |

| Other income, net | | | | | | | | | | | | | | | | | [removed: 76] [added: 94] | | |

| Income before income tax [removed: benefit] [added: expense] | | | | | | | | | | | | | | | | | 3,207 | | |

| Income tax benefit [added: (d) (e)] | | | | | | | | | | | | | | | | | (949 | | ) |

See note references on pages [removed: 48] [added: 45] through [removed: 50.][added: 48.]

| | Year Ended December 31, [removed: 2016] | | | | | | | | | | | [removed: | | | | | | | |]

| [removed: Operating revenues] [added: Revenues] from external customers | $ | 71,968 | | | $ | 3,691 | | | $ | — | | | $ | — | | | $ | 75,659 | |

| Intersegment revenues | [removed: —] [added: 14] | | | | 210 | | | | [removed: 363] [added: 546] | | | | [removed: (573] [added: (770] | | ) | | — | | |

| Total [removed: operating] revenues | 71,968 | | | | 3,901 | | | | 363 | | | | (573 | | ) | | 75,659 | | |

| Operating expenses (excluding depreciation and amortization expense reflected below) | [removed: 3,696] [added: 3,740] | | | | 415 | | | | 96 | | | | — | | | | [removed: 4,207] [added: 4,251] | | |

| Depreciation and amortization expense | [removed: 1,734] [added: —] | | | | [removed: 66] [added: —] | | | | [removed: 46] [added: —] | | | | [removed: —] [added: 52] | | | | [removed: 1,846] [added: 52] | | |

| Lower of cost or market inventory valuation adjustment [removed: (b)] [added: (f)] | (697 | | ) | | (50 | | ) | | — | | | | — | | | | (747 | | ) |

| Total cost of sales | [removed: 68,138] [added: 68,182] | | | | 3,561 | | | | 142 | | | | (573 | | ) | | [removed: 71,268] [added: 71,312] | | |

| General and administrative expenses (excluding depreciation and amortization expense reflected below) | — | | | | — | | | | — | | | | [removed: 715] [added: 829] | | | | [removed: 715] [added: 829] | | |

The increase in income before income tax expense is primarily due to higher operating income between the years as described below.

Operating income was $4.6 billion for 2018 compared to $3.6 billion for 2017, which represents an increase of $1.0 billion.

| • | Corporate and eliminations. Adjusted corporate and eliminations decreased by $10 million primarily due to expenses in 2017 associated with the termination of the acquisition of certain assets from Plains All American Pipeline, L.P. (Plains). This is more fully described on page 38. |

| • | Our refining operations in the U.K. could be adversely affected by Brexit, which is currently scheduled to occur on March 29, 2019. The U.K. and the European Union have yet to finalize the terms of Brexit, and the U.K.’s exit from the European Union without an agreement on an overall structure for an ongoing relationship with the European Union could result in the imposition of border controls and customs duties on trade that could negatively impact the operations of our Pembroke Refinery. While we do not believe that Brexit will have a material impact on us, we are taking steps to minimize the impact of possible delays on importing certain materials critical to our refining operations. The ultimate effect of Brexit will depend on the specific terms of any agreement reached by the U.K. and the European Union. See Item 1A “Risk Factors”—Changes in the U.K.’s economic and other relationships with the European Union could adversely affect us. |

On January 10, 2019, we completed our acquisition of all the outstanding publicly held common units of VLP pursuant to the Merger Agreement with VLP as defined and discussed in Note 2 of Notes to Consolidated Financial Statements.

Upon completion of the Merger Transaction, VLP became an indirect wholly owned subsidiary of Valero.

2018 Compared to 2017

| Revenues from external customers | $ | 113,601 | | | $ | 3,428 | | | $ | — | | | $ | 4 | | | $ | 117,033 | |

| Total revenues | 113,615 | | | | 3,638 | | | | 546 | | | | (766 | | ) | | 117,033 | | |

| Cost of materials and other (a) | 102,489 | | | | 3,008 | | | | — | | | | (765 | | ) | | 104,732 | | |

| Total cost of sales | 108,451 | | | | 3,556 | | | | 201 | | | | (769 | | ) | | 111,439 | | |

| Operating income by segment | $ | 5,119 | | | $ | 82 | | | $ | 345 | | | $ | (974 | ) | | 4,572 | | |

| Revenues: | | | | | | | | | | | | | | | | | | | |

See note references on pages 45 through 48.

| | 2018 | | | | 2017 | | |

| Blender’s tax credit attributable to Valero Energy Corporation stockholders (a) | 90 | | | | — | | |

| Income tax expense related to the blender’s tax credit | (11 | | ) | | — | | |

| Blender’s tax credit attributable to Valero Energy Corporation stockholders, net of taxes | 79 | | | | — | | |

| Texas City Refinery fire expenses | (17 | | ) | | — | | |

| Income tax benefit related to Texas City Refinery fire expenses | 4 | | | | — | | |

| Texas City Refinery fire expenses, net of taxes | (13 | | ) | | — | | |

| Environmental reserve adjustments (b) | (108 | | ) | | — | | |

| Income tax benefit related to the environmental reserve adjustments | 24 | | | | — | | |

| Environmental reserve adjustments, net of taxes | (84 | | ) | | — | | |

| Loss on early redemption of debt (c) | (38 | | ) | | — | | |

| Income tax benefit related to the loss on early redemption of debt | 9 | | | | — | | |

| Loss on early redemption of debt, net of taxes | (29 | | ) | | — | | |

| Adjusted net income attributable to Valero Energy Corporation stockholders | $ | 3,157 | | | $ | 2,203 | |

See note references on pages 45 through 48.

| | Year Ended December 31, 2018 | | | | | | | | | | | | | | | | | | |

| Operating income by segment | $ | 5,119 | | | $ | 82 | | | $ | 345 | | | $ | (974 | ) | | $ | 4,572 | |

| Blender’s tax credit (a) | 170 | | | | — | | | | — | | | | — | | | | 170 | | |

| Environmental reserve adjustments (b) | — | | | | — | | | | — | | | | (108 | | ) | | (108 | | ) |

| Adjusted operating income | $ | 4,994 | | | $ | 82 | | | $ | 345 | | | $ | (866 | ) | | $ | 4,555 | |

| Reconciliation of operating income to adjusted operating income (h) | | | | | | | | | | | | | | | | | | | |

| Other operating expenses | (58 | | ) | | — | | | | (3 | | ) | | — | | | | (61 | | ) |

See note references on pages 45 through 48.

| | 2018 | | | | 2017 | | | | Change | | |

| Residuals | 232 | | | | 219 | | | | 13 | | |

| Other feedstocks | 127 | | | | 148 | | | | (21 | | ) |

See Note 14 of Notes to Consolidated Financial Statements for additional information about Tax Reform and the $1.9 billion benefit recorded by us.

Excluding the impact of Tax Reform, adjusted net income attributable to Valero stockholders in 2017 was $2.2 billion.

This compares to adjusted net income attributable to Valero stockholders of $1.7 billion in 2016, which has been adjusted for the amounts reflected in the table on page 34.

The $479 million increase in adjusted net income attributable to Valero stockholders was primarily due to a $779 million increase in adjusted operating income between the years net of the resulting increase in income tax expense.

Operating income was $3.6 billion in each of 2017 and 2016.

Excluding the amounts reflected in the tables on page 34 from both years, adjusted operating income was $3.7 billion in 2017 compared to $2.9 billion in 2016, which represents an increase of $779 million.

| • | Legislation authorizing the extension of the $1 per gallon biodiesel blender’s tax credit for biodiesel volumes blended in 2017 was passed and signed into law in February 2018. As a result, we will recognize a benefit to cost of materials and other in our refining segment results of operations for the first quarter of 2018 of approximately $170 million. The majority of this amount will be recognized by one of our consolidated variable interest entities (VIEs) in which we own a 50 percent interest; therefore, approximately one half of this amount (after taxes) will be excluded from net income attributable to Valero stockholders. |

Effective January 1, 2017, we revised our reportable segments to align with certain changes in how our chief operating decision maker manages and allocates resources to our business.

Accordingly, we created a new reportable segment — VLP.

The results of the VLP segment, which include the results of our majority-owned master limited partnership referred to by the same name, were transferred from the refining segment.

Our prior period segment information has been retrospectively adjusted to reflect our current segment presentation.

The narrative following these tables provides an analysis of our results of operations.

| Cost of materials and other | 63,405 | | | | 3,130 | | | | — | | | | (573 | | ) | | 65,962 | | |

Corporate and eliminations, which consists primarily of general and administrative expenses and related depreciation and amortization expense, increased by $119 million in 2017 compared to 2016 primarily due to higher employee related costs of $50 million, an increase in legal and environmental reserves of $21 million, expenses associated with the termination of an acquisition transaction of $16 million, and an increase in charitable contributions of $10 million.

Excluding this benefit, the effective tax rate for 2017 was 28 percent.

The resulting $1.2 billion increase in refining segment margin (as defined in note (d) on page 48) was partially offset by increases in other components of cost of sales between the years, resulting in an increase in operating income of $243 million, from $3.8 billion in 2016 to $4.0 billion in 2017.

The resulting $75 million decrease in ethanol segment margin (as defined in note (d) on page 48), along with increases in other components of cost of sales between the years, resulted in a decrease in operating income of $168 million, from $340 million in 2016 to $172 million in 2017.

Compared to this adjusted amount, operating income in 2017 decreased $118 million.

This increase in VLP segment revenues was partially offset by increases in components of cost of sales between the years, resulting in an increase in operating income of $71 million, from $221 million in 2016 to $292 million in 2017.

VLP segment revenues increased $89 million in 2017 compared to 2016, as previously noted, primarily due to the following:

| • | Incremental throughput from acquired businesses and assets. VLP generated incremental terminaling revenues of $56 million from services provided to the refining segment by the McKee, Meraux, Three Rivers, and Port Arthur terminals. The McKee, Meraux, and Three Rivers Terminals were acquired in 2016 and the Port Arthur terminal was acquired in 2017. VLP also generated incremental pipeline revenues of $15 million from the Parkway pipeline and Red River crude system, which were acquired in 2017. The incremental revenues generated by these businesses and assets had a favorable impact to VLP’s operating revenues of $71 million. |

| • | Higher throughput volumes at systems owned or acquired prior to 2016. The refining segment shipped higher volumes of crude oil and refined petroleum products using VLP’s terminals and pipeline systems owned or acquired prior to 2016, which resulted in incremental revenues of $16 million in 2017. |

VLP segment operating expenses (excluding depreciation and amortization expense) and depreciation and amortization expense associated with our cost of sales increased $8 million and $7 million, respectively, primarily due to expenses associated with the Port Arthur terminal, the Parkway pipeline, and the Red River crude system, which were acquired in 2017.

| Operating revenues from external customers | $ | 84,521 | | | $ | 3,283 | | | $ | — | | | $ | — | | | $ | 87,804 | |

| Intersegment revenues | — | | | | 151 | | | | 244 | | | | (395 | | ) | | — | | |

| Total operating revenues | 84,521 | | | | 3,434 | | | | 244 | | | | (395 | | ) | | 87,804 | | |

| Cost of materials and other | 71,512 | | | | 2,744 | | | | — | | | | (395 | | ) | | 73,861 | | |

| Total cost of sales | 77,640 | | | | 3,292 | | | | 152 | | | | (395 | | ) | | 80,689 | | |

| Operating income by segment | $ | 6,881 | | | $ | 142 | | | $ | 92 | | | $ | (757 | ) | | 6,358 | | |

| | 2016 | | | | 2015 | | |

| Income tax expense related to the lower of cost or market inventory valuation adjustment | (168 | | ) | | 166 | | |

| Lower of cost or market inventory valuation adjustment, net of taxes | 579 | | | | (624 | | ) |

| Operating income by segment | $ | 6,881 | | | $ | 142 | | | $ | 92 | | | $ | (757 | ) | | $ | 6,358 | |

| Lower of cost or market inventory valuation adjustment (b) | (740 | | ) | | (50 | | ) | | — | | | | — | | | | (790 | | ) |

| Adjusted operating income | $ | 7,621 | | | $ | 192 | | | $ | 92 | | | $ | (757 | ) | | $ | 7,148 | |

| | 2016 | | | | 2015 | | | | Change | | |

| Residuals | 272 | | | | 274 | | | | (2 | | ) |

| Other feedstocks | 152 | | | | 140 | | | | 12 | | |

| Total feedstocks | 2,539 | | | | 2,488 | | | | 51 | | |

| Distillates | 1,066 | | | | 1,066 | | | | — | | |

To reduce the impact of price volatility on our results of operations and cash flows, we use commodity derivative instruments, including [removed: swaps, futures,] [added: futures] and options to manage the volatility of:

| • | inventories and firm commitments to purchase inventories generally for amounts by which our current year inventory levels (determined on a LIFO basis) differ from our previous year-end LIFO inventory [removed: levels] [added: levels;] and |

The following sensitivity analysis includes all [removed: positions at the end] of [removed: the reporting period] [added: our derivative instruments entered into for purposes other than trading] with which we have market risk (in millions):

| [added: |] December 31, [removed: 2017:] | | | | | | | [removed: |]

| 10% increase in underlying commodity prices | $ | [removed: (47] [added: 2] | [removed: )] | | $ | [removed: 4] [added: (43] | [added: )] |

| 10% decrease in underlying commodity prices | [removed: 47] [added: (6] | | [added: )] | | [removed: (2] [added: 45] | | [removed: )] |

See Note [removed: 19] [added: 20] of Notes to Consolidated Financial Statements for notional volumes associated with these derivative contracts as of December 31, [removed: 2017.][added: 2018.]

We are exposed to market risk related to the volatility in the price of [removed: biofuel] credits [removed: and GHG emission credits] needed to comply with various governmental and regulatory [added: environmental compliance] programs.

To manage [removed: these risks,] [added: this risk,] we enter into contracts to purchase these credits when prices are deemed favorable.

As of December 31, [added: 2018 and] 2017, [removed: there was an immaterial] [added: the] amount of gain or loss in the fair value of derivative instruments that would [removed: result] [added: have resulted] from a 10 percent increase or decrease in the underlying price of the [removed: contracts.][added: contracts was not material.]

See Note [removed: 19] [added: 20] of Notes to Consolidated Financial Statements for a discussion about these compliance programs.

| | [removed: 2017] [added: 2019] | | | | [removed: 2018] [added: 2020] | | | | [removed: 2019] [added: 2021] | | | | [removed: 2020] [added: 2022] | | | | [removed: 2021] [added: 2023] | | | | There- after | | | | Total (a) | | | | Fair Value | | |

| Average interest rate | — | | % | | [removed: —] [added: 6.1] | | % | | [removed: 9.4] [added: 5] | | % | | [removed: 6.1] [added: —] | | % | | — | | % | | [removed: 5.6] [added: 5.4] | | % | | [removed: 6.0] [added: 5.5] | | % | | | | |

| (b) | As of December 31, [removed: 2017] [added: 2018] and [removed: 2016,] [added: 2017,] we had an interest rate swap associated with [removed: $49] [added: $40] million and [removed: $51] [added: $49] million, respectively, of our floating rate debt resulting in an effective interest rate of 3.85 percent as of each of those reporting dates. The fair value of the swap was immaterial for all periods presented. |

As of December 31, [removed: 2017,] [added: 2018,] we had commitments to purchase [removed: $507] [added: $441] million of U.S. dollars.

Our market risk was minimal on these contracts, as all of them matured on or before January 31, [removed: 2018.][added: 2019.]

| | 2018 | | | | 2017 | | |

| | December 31, 2018 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Fixed rate | $ | — | | | $ | 850 | | | $ | 10 | | | $ | — | | | $ | — | | | $ | 7,474 | | | $ | 8,334 | | | $ | 8,737 | |

| Floating rate (b) | $ | 214 | | | $ | 5 | | | $ | 5 | | | $ | 5 | | | $ | 20 | | | $ | — | | | $ | 249 | | | $ | 249 | |

| Average interest rate | 4.6 | | % | | 4.7 | | % | | 4.7 | | % | | 4.7 | | % | | 4.7 | | % | | — | | % | | 4.6 | | % | | | | |

We use the futures markets for the available liquidity, which provides greater flexibility in transacting our price risk activities.

We use swaps primarily to manage our price exposure.

We also enter into certain commodity derivative instruments for trading purposes to take advantage of existing market conditions related to future results of operations and cash flows.

| | | | | | | | |

| | Derivative Instruments Held For | | | | | | |

| | Non-Trading Purposes | | | | Trading Purposes | | |

| Gain (loss) in fair value resulting from: | | | | | | | |

| December 31, 2016: | | | | | | | |

| 10% increase in underlying commodity prices | 61 | | | | (22 | | ) |

| 10% decrease in underlying commodity prices | (61 | | ) | | 11 | | |

| | December 31, 2016 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Fixed rate | $ | — | | | $ | — | | | $ | 750 | | | $ | 850 | | | $ | — | | | $ | 6,224 | | | $ | 7,824 | | | $ | 8,701 | |

| Floating rate (b) | $ | 105 | | | $ | 5 | | | $ | 5 | | | $ | 35 | | | $ | 5 | | | $ | 26 | | | $ | 181 | | | $ | 181 | |

| Average interest rate | 1.4 | | % | | 3.4 | | % | | 3.4 | | % | | 2.5 | | % | | 3.4 | | % | | 3.4 | | % | | 2.1 | | % | | | | |

We incorporate by reference into this Item our disclosures made in Part II, Item 8 of this report included in Note [removed: 9] [added: 1] of Notes to Consolidated Financial Statements under the caption [removed: “Litigation Matters.”][added: “Legal Contingencies.”]

We [removed: continue to work] [added: are working] with the EPA to resolve this matter.

We [removed: currently] have [removed: multiple] outstanding Violation Notices (VNs) issued by the BAAQMD from [removed: 2015] [added: 2017] to present.

We [removed: currently] have [removed: multiple] [added: outstanding] NOVs issued by the SCAQMD.

We [removed: continue to work] [added: are working] with the SCAQMD to resolve these NOVs.

[removed: In our annual report on Form 10-K for the year ended December 31, 2016, we reported that we had received] [added: We have] a proposed Agreed Order in the amount of $121,314 from the TCEQ as an administrative penalty for alleged excess emissions at our McKee Refinery.

We [removed: continue to work] [added: are working] with the TCEQ to resolve this matter.

We have an outstanding Notice of Violation (NOV) from the U.S. EPA related to violations from a 2015 Mobile Source Inspection.

We are working with the BAAQMD to resolve the VNs.

TCEQ (Port Arthur).

We have an outstanding Notice of Enforcement (NOE) from the TCEQ alleging unauthorized emissions associated with a November 18, 2017 release of crude oil from the 24-inch fill pipe of Tank T-285.

We are working with the TCEQ to resolve this matter.

TCEQ and Harris County Pollution Control Services Department (HCPCS) (Houston Terminal).

We have an outstanding NOE from the TCEQ and an outstanding VN from the HCPCS alleging excess emissions from Tank 003 that occurred during Hurricane Harvey.

We are working with the pertinent authorities to resolve these matters.

In our quarterly report on Form 10-Q for the quarter ended March 31, 2017, we reported that we had received a Notice of Violation (NOV) from the U.S. EPA related to violations from the Mobile Source Inspection of 2015, which we believe will result in penalties in excess of $100,000.

People of the State of Illinois, ex rel.

v.

The Premcor Refining Group Inc., et al., Third Judicial Circuit Court, Madison County (Case No. 03-CH-00459, filed May 29, 2003) (Hartford Refinery and terminal).

In our quarterly report on Form 10-Q for the quarter ended September 30, 2017, we reported that the Illinois EPA had filed suit against The Premcor Refining Group Inc. alleging violations of air and waste regulations at Premcor’s Hartford, Illinois terminal and closed refinery.

We have entered into a Partial Consent Order resolving various air and permitting violations.

Our litigation with other potentially responsible parties (PRPs) and the Illinois EPA continues.

We continue to assert our various defenses, limitations and potential rights for contribution from the other PRPs.

In the fourth quarter of 2017, we entered into an agreement with BAAQMD to resolve various VNs and continue to work with the BAAQMD to resolve the remaining VNs.

For the fiscal year ended December 31, [removed: 2017][added: 2018]

Indicate by check mark whether the registrant has submitted electronically [removed: and posted on its corporate Web site, if any,] every Interactive Data File required to be submitted [removed: and posted] pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit [removed: and post] such files).

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [added: o]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, [added: a] smaller reporting company, or an emerging growth company.

The aggregate market value of the voting and non-voting common stock held by non-affiliates was approximately [removed: $29.8] [added: $47.5] billion based on the last sales price quoted as of June [removed: 30, 2017] [added: 29, 2018] on the New York Stock Exchange, the last business day of the registrant’s most recently completed second fiscal quarter.

As of January 31, [removed: 2018, 433,176,258] [added: 2019, 417,614,487] shares of the registrant’s common stock were outstanding.

We intend to file with the Securities and Exchange Commission a definitive Proxy Statement for our Annual Meeting of Stockholders scheduled for [removed: May 3, 2018,] [added: April 30, 2019,] at which directors will be elected.

Portions of the [removed: 2018] [added: 2019] Proxy Statement are incorporated by reference in Part III of this Form 10-K and are deemed to be a part of this report.

The following table indicates the headings in the [removed: 2018] [added: 2019] Proxy Statement where certain information required in Part III of this Form 10-K may be found.

| Form 10-K Item No. and Caption | | | Heading in [removed: 2018] [added: 2019] Proxy Statement |

| [Items 1. & [removed: 2.](#s2DBCBE3030885C5EBC1F1DF106A3A4C6)] [added: 2.](#sB36CBA4128735483AE703B6F99CE84E6)] | [Business and [removed: Properties](#s2DBCBE3030885C5EBC1F1DF106A3A4C6)] [added: Properties](#sB36CBA4128735483AE703B6F99CE84E6)] | [removed: [1](#s2DBCBE3030885C5EBC1F1DF106A3A4C6)] [added: [1](#sB36CBA4128735483AE703B6F99CE84E6)] |

| | [Valero’s [removed: Operations](#sA31BDB3263DF581EBA7C5E4B5EA4E391)] [added: Operations](#s644ACB44A80F5A598660EDD92035937E)] | [removed: [3](#sA31BDB3263DF581EBA7C5E4B5EA4E391)] [added: [2](#s644ACB44A80F5A598660EDD92035937E)] |

| | [Environmental [removed: Matters](#sDA39D7B57A0F55878C6C99F7055DE1AB)] [added: Matters](#s4E86D387B0FD51048F45526E78DDF4F4)] | [removed: [15](#sDA39D7B57A0F55878C6C99F7055DE1AB)] [added: [13](#s4E86D387B0FD51048F45526E78DDF4F4)] |

| [Item [removed: 1A.](#s37E3F51EA10F556F91F3DCCAF93A7D6E)] [added: 1A.](#sFD7D2E2012DB54DD90E1016D609BEE9B)] | [Risk [removed: Factors](#s37E3F51EA10F556F91F3DCCAF93A7D6E)] [added: Factors](#sFD7D2E2012DB54DD90E1016D609BEE9B)] | [removed: [16](#s37E3F51EA10F556F91F3DCCAF93A7D6E)] [added: [14](#sFD7D2E2012DB54DD90E1016D609BEE9B)] |

| [Item [removed: 1B.](#s211A23F126915237858A48C7F1746F71)] [added: 1B.](#sD4A1B439E2C45682AA39AAFA2466AC0C)] | [Unresolved Staff [removed: Comments](#s211A23F126915237858A48C7F1746F71)] [added: Comments](#sD4A1B439E2C45682AA39AAFA2466AC0C)] | [removed: [23](#s211A23F126915237858A48C7F1746F71)] [added: [21](#sD4A1B439E2C45682AA39AAFA2466AC0C)] |

| [Item [removed: 3.](#s51B9CB774609590BA19A095B07E117E5)] [added: 3.](#s1A8FBA2279BF5C40BF3E39FA53637D86)] | [Legal [removed: Proceedings](#s51B9CB774609590BA19A095B07E117E5)] [added: Proceedings](#s1A8FBA2279BF5C40BF3E39FA53637D86)] | [removed: [23](#s51B9CB774609590BA19A095B07E117E5)] [added: [21](#s1A8FBA2279BF5C40BF3E39FA53637D86)] |

| [Item [removed: 4.](#s1C1FC0FC58E35A5B81ED3A332DBA8737)] [added: 4.](#sD5EC57C0142251C589E8F2AB31BC584C)] | [Mine Safety [removed: Disclosures](#s1C1FC0FC58E35A5B81ED3A332DBA8737)] [added: Disclosures](#sD5EC57C0142251C589E8F2AB31BC584C)] | [removed: [24](#s1C1FC0FC58E35A5B81ED3A332DBA8737)] [added: [22](#sD5EC57C0142251C589E8F2AB31BC584C)] |

| [Item [removed: 5.](#s338ED6539CA05F9999FFEA6615FDAC8C)] [added: 5.](#s2B1026758AEA5E80A52FFC886C3B75CE)] | [Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#s338ED6539CA05F9999FFEA6615FDAC8C)] [added: Securities](#s2B1026758AEA5E80A52FFC886C3B75CE)] | [removed: [24](#s338ED6539CA05F9999FFEA6615FDAC8C)] [added: [22](#s2B1026758AEA5E80A52FFC886C3B75CE)] |

| [Item [removed: 6.](#s2C532D1BA5A458709B1FFE32977DC2FA)] [added: 6.](#sB139E4D37BBF5F16BE98E353BD8FD5C8)] | [Selected Financial [removed: Data](#s2C532D1BA5A458709B1FFE32977DC2FA)] [added: Data](#sB139E4D37BBF5F16BE98E353BD8FD5C8)] | [removed: [27](#s2C532D1BA5A458709B1FFE32977DC2FA)] [added: [24](#sB139E4D37BBF5F16BE98E353BD8FD5C8)] |

| [Item [removed: 7.](#s740863B10E795D0E9F668C7134345EA6)] [added: 7.](#s5CD606647BB0520BAD26EED6E02EC4B8)] | [Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations](#s740863B10E795D0E9F668C7134345EA6)] [added: Operations](#s5CD606647BB0520BAD26EED6E02EC4B8)] | [removed: [28](#s740863B10E795D0E9F668C7134345EA6)] [added: [25](#s5CD606647BB0520BAD26EED6E02EC4B8)] |

| [Item [removed: 7A.](#sFD1113C9A4F95DF7AFA3A50342AF6153)] [added: 7A.](#sAB7BFB20A50D59269DF38CDEC2C13F09)] | [Quantitative and Qualitative Disclosures About Market [removed: Risk](#sFD1113C9A4F95DF7AFA3A50342AF6153)] [added: Risk](#sAB7BFB20A50D59269DF38CDEC2C13F09)] | [removed: [62](#sFD1113C9A4F95DF7AFA3A50342AF6153)] [added: [60](#sAB7BFB20A50D59269DF38CDEC2C13F09)] |

| [Item [removed: 8.](#s981F5AF24A915D14A413CE2342929DC9)] [added: 8.](#s0FF8D55F656958239C01941937695EC4)] | [Financial Statements and Supplementary [removed: Data](#s981F5AF24A915D14A413CE2342929DC9)] [added: Data](#s0FF8D55F656958239C01941937695EC4)] | [removed: [65](#s981F5AF24A915D14A413CE2342929DC9)] [added: [62](#s0FF8D55F656958239C01941937695EC4)] |

| [Item [removed: 9.](#s02B54F6E07A957A48A7EEB3E82743674)] [added: 9.](#s54EE31FF0D2E5F989FCA4F4626FBFEDA)] | [Changes in and Disagreements with Accountants on Accounting [removed: and Financial Disclosure](#s02B54F6E07A957A48A7EEB3E82743674)] [added: and](#s54EE31FF0D2E5F989FCA4F4626FBFEDA) [Financial Disclosure](#s54EE31FF0D2E5F989FCA4F4626FBFEDA)] | [removed: [138](#s02B54F6E07A957A48A7EEB3E82743674)] [added: [139](#s54EE31FF0D2E5F989FCA4F4626FBFEDA)] |

| [Item [removed: 9A.](#s05DD5E1F648A50FCB6C92F9219AC020C)] [added: 9A.](#s58DA0A51C98C54BCA2932E0CBF65E601)] | [Controls and [removed: Procedures](#s05DD5E1F648A50FCB6C92F9219AC020C)] [added: Procedures](#s58DA0A51C98C54BCA2932E0CBF65E601)] | [removed: [138](#s05DD5E1F648A50FCB6C92F9219AC020C)] [added: [139](#s58DA0A51C98C54BCA2932E0CBF65E601)] |

| [Item [removed: 9B.](#sC1DF4524CC37578E969954F0C01BA085)] [added: 9B.](#s00AD3F17E9F05B95AFA09BCF236B396F)] | [Other [removed: Information](#sC1DF4524CC37578E969954F0C01BA085)] [added: Information](#s00AD3F17E9F05B95AFA09BCF236B396F)] | [removed: [138](#sC1DF4524CC37578E969954F0C01BA085)] [added: [139](#s00AD3F17E9F05B95AFA09BCF236B396F)] |

| [Item [removed: 10.](#s375DBE0CE60D5BCEB3B58007A6A13F6D)] [added: 10.](#s7CBCAA83F1E05351B9D7D082A3B2F26B)] | [Directors, Executive Officers and Corporate [removed: Governance](#s375DBE0CE60D5BCEB3B58007A6A13F6D)] [added: Governance](#s7CBCAA83F1E05351B9D7D082A3B2F26B)] | [removed: [138](#s375DBE0CE60D5BCEB3B58007A6A13F6D)] [added: [139](#s7CBCAA83F1E05351B9D7D082A3B2F26B)] |

| [Item [removed: 11.](#s375DBE0CE60D5BCEB3B58007A6A13F6D)] [added: 11.](#s7CBCAA83F1E05351B9D7D082A3B2F26B)] | [Executive [removed: Compensation](#s375DBE0CE60D5BCEB3B58007A6A13F6D)] [added: Compensation](#s7CBCAA83F1E05351B9D7D082A3B2F26B)] | [removed: [138](#s375DBE0CE60D5BCEB3B58007A6A13F6D)] [added: [139](#s7CBCAA83F1E05351B9D7D082A3B2F26B)] |

| [Item [removed: 12.](#s375DBE0CE60D5BCEB3B58007A6A13F6D)] [added: 12.](#s7CBCAA83F1E05351B9D7D082A3B2F26B)] | [Security Ownership of Certain Beneficial Owners and Management [removed: and Related] [added: and](#s7CBCAA83F1E05351B9D7D082A3B2F26B) [Related] Stockholder [removed: Matters](#s375DBE0CE60D5BCEB3B58007A6A13F6D)] [added: Matters](#s7CBCAA83F1E05351B9D7D082A3B2F26B)] | [removed: [138](#s375DBE0CE60D5BCEB3B58007A6A13F6D)] [added: [139](#s7CBCAA83F1E05351B9D7D082A3B2F26B)] |

| [Item [removed: 13.](#s375DBE0CE60D5BCEB3B58007A6A13F6D)] [added: 13.](#s7CBCAA83F1E05351B9D7D082A3B2F26B)] | [Certain Relationships and Related Transactions, and Director [removed: Independence](#s375DBE0CE60D5BCEB3B58007A6A13F6D)] [added: Independence](#s7CBCAA83F1E05351B9D7D082A3B2F26B)] | [removed: [138](#s375DBE0CE60D5BCEB3B58007A6A13F6D)] [added: [139](#s7CBCAA83F1E05351B9D7D082A3B2F26B)] |

| [Item [removed: 14.](#s375DBE0CE60D5BCEB3B58007A6A13F6D)] [added: 14.](#s7CBCAA83F1E05351B9D7D082A3B2F26B)] | [Principal Accountant Fees and [removed: Services](#s375DBE0CE60D5BCEB3B58007A6A13F6D)] [added: Services](#s7CBCAA83F1E05351B9D7D082A3B2F26B)] | [removed: [138](#s375DBE0CE60D5BCEB3B58007A6A13F6D)] [added: [139](#s7CBCAA83F1E05351B9D7D082A3B2F26B)] |

| [PART [removed: IV](#sD2CD35BCCE06572A81817D1BCBD9F026)] [added: III](#s561ED45EC01A5EEDBE7F913E4B51A2A8)] | | [removed: [139](#sD2CD35BCCE06572A81817D1BCBD9F026)] [added: [139](#s561ED45EC01A5EEDBE7F913E4B51A2A8)] |

| [Item [removed: 15.](#sA21C9BA2247D5A2198BAE5F2D3265EF1)] [added: 15.](#s91D7FB9BC5EE577393C89C1EE714173E)] | [Exhibits and Financial Statement [removed: Schedules](#sA21C9BA2247D5A2198BAE5F2D3265EF1)] [added: Schedules](#s91D7FB9BC5EE577393C89C1EE714173E)] | [removed: [139](#sA21C9BA2247D5A2198BAE5F2D3265EF1)] [added: [140](#s91D7FB9BC5EE577393C89C1EE714173E)] |

The terms “Valero,” “we,” “our,” and “us,” as used in this report, may refer to Valero Energy Corporation, to one or more of [removed: our] [added: its] consolidated subsidiaries, or to all of them taken as a whole.

You should read our forward-looking statements together with our disclosures beginning on page [removed: 28] [added: 25] of this report under the heading: “CAUTIONARY STATEMENT FOR THE PURPOSE OF SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995.”

Our common stock trades on the New York Stock Exchange (NYSE) under the [added: trading] symbol “VLO.” On January 31, [removed: 2018,] [added: 2019,] we had [removed: 10,015] [added: 10,261] employees.

We own 15 petroleum refineries located in the United States (U.S.), Canada, and the United Kingdom (U.K.) with a combined throughput capacity of approximately 3.1 million barrels per [removed: day.][added: day (BPD).]

We sell our refined petroleum products in both the wholesale rack and bulk markets, and approximately [removed: 7,400] [added: 7,000] outlets carry our brand names in the U.S., Canada, the U.K., and Ireland.

We also own [removed: 11] [added: 14] ethanol plants in the Mid-Continent region of the U.S. with a combined production capacity of approximately [removed: 1.45] [added: 1.73] billion gallons per year.

We sell our ethanol in the wholesale bulk [removed: market, and some of our logistics assets support our ethanol operations.][added: market.]

Our annual reports on Form 10-K, quarterly reports on Form 10-Q, [removed: and] current reports on Form 8-K, and [added: other reports, as well as] any amendments to those reports, filed with (or furnished to) the U.S. Securities and Exchange Commission (SEC) are available on our website (under “Investors”) free of charge, soon after we file or furnish such material.

10-K 1 vloform10-kx12312018.htm 10-K

| [PART I](#s6C7A0BB100055861A0C461056AC06694) | | [1](#s6C7A0BB100055861A0C461056AC06694) |

| | [Overview](#s5321f7100f534e368a573f58c9fc3a56) | [1](#s5321f7100f534e368a573f58c9fc3a56) |

| | [Available Information](#s491af1bb316445358653a28566fc7c55) | [1](#s491af1bb316445358653a28566fc7c55) |

| | [Properties](#s378C3F3392E55D33ACAC51BA2013C42E) | [13](#s378C3F3392E55D33ACAC51BA2013C42E) |

| [PART II](#s3CB8C39CA6EB5792BD869A0AE1E1CC4D) | | [22](#s3CB8C39CA6EB5792BD869A0AE1E1CC4D) |

| [PART IV](#s14EBBD1BF61653069AC5EF4DD3DAB1E6) | | [140](#s14EBBD1BF61653069AC5EF4DD3DAB1E6) |

| [Signature](#s3201FDE2D3AA5AB89E738DE87EEABEC0) | | [144](#s3201FDE2D3AA5AB89E738DE87EEABEC0) |

On January 10, 2019, we completed our acquisition of all of the outstanding publicly held common units of Valero Energy Partners LP (VLP) as described in Note 2 of Notes to Consolidated Financial Statements, which is incorporated herein by reference.

Accordingly, we created a new reportable segment — renewable diesel — because of the growing importance of renewable fuels in the market and the growth of our investments in renewable fuels production.

The renewable diesel segment includes the operations of Diamond Green Diesel Holdings LLC (DGD), our consolidated joint venture as discussed in Note 12 of Notes to Consolidated Financial Statements.

The operations of DGD have been included in the refining segment through December 31, 2018, but were transferred from that segment on January 1, 2019.

Also effective January 1, 2019, we no longer have a VLP segment, and we include the operations of VLP in our refining segment.

This change was made because of the Merger Transaction with VLP, as defined and discussed in Note 2 of Notes to Consolidated Financial Statements, and the resulting change in how we manage VLP’s operations.

We no longer manage VLP as a business but as logistics assets that support the operations of our refining segment.

| | | | | 1,850,000 | |

current term.

We also export our ethanol into the global markets.

| Indiana | | Bluffton(c) | | 115 | | 302,000 | | 40 |

| | | Lakota(c) | | 110 | | 289,000 | | 38 |

| Michigan | | Riga(c) | | 55 | | 145,000 | | 19 |

| Total | | | | 1,730 | | 4,611,000 | | 606 |

________________________

| (c) | The Bluffton, Lakota, and Riga plants were acquired from two subsidiaries of Green Plains Inc. in November 2018. The annual ethanol, DDG production, and corn processing capacities for these ethanol plants were only applicable for November and December of 2018. |

See notes on page 12.

| ______________ | | | | | | | | | | |

| See notes on page 12. | | | | | | | | | | |

| Diamond Green Diesel tank | | 180 | | | | renewable diesel | | n/a | | n/a |

____________________________

| | |

| --- | --- |

10-K 1 vloform10-kx12312017.htm 10-K

| [PART I](#s2AF6C96600B655C1B6466E263DCEDDEA) | | [1](#s2AF6C96600B655C1B6466E263DCEDDEA) |

| | [Segments](#s32902C7871F85FCB984A72B9AF035D27) | [2](#s32902C7871F85FCB984A72B9AF035D27) |

| | [Properties](#s50123C5667FB53848E57539A82C29D10) | [15](#s50123C5667FB53848E57539A82C29D10) |

| [PART II](#sDDA284C3B01B5386ABC0792041227298) | | [24](#sDDA284C3B01B5386ABC0792041227298) |

| [PART III](#s5E6D2476BF8650AA9BE52241F30792EF) | | [138](#s5E6D2476BF8650AA9BE52241F30792EF) |

| [Signature](#s05535828E18751FCBF80E6B56EB6911C) | | [143](#s05535828E18751FCBF80E6B56EB6911C) |

Most of our logistics assets support our refining operations, and some of these assets are owned by Valero Energy Partners LP (VLP), a midstream master limited partnership majority owned by us.

SEGMENTS

Accordingly, we created a new reportable segment — VLP.

The results of the VLP segment, which include the results of our majority-owned master limited partnership referred to by the same name, were transferred from the refining segment.

The segment information included herein has been retrospectively adjusted for the segment changes described above.

| | | | | 1,835,000 | |

| | sweet crude oil | 7 | % |

Our bulk sales are made to

| Total | | | | 1,450 | | 3,875,000 | | 509 |

VLP is a publicly traded master limited partnership formed by us in July 2013 to own, operate, develop, and acquire crude oil and refined petroleum products pipelines, terminals, and other transportation and logistics assets.

VLP’s common units, representing limited partner interests, are traded on the NYSE under the symbol “VLP.” VLP is discussed more fully in Note 11 of Notes to Consolidated Financial Statements.

_______________________

| ____________________________ | | | | | | | | | | |

| See footnotes on page 14. | | | | | | | | | | |

Our common stock trades on the NYSE under the [added: trading] symbol “VLO.”

As of January 31, [removed: 2018,] [added: 2019,] there were [removed: 5,483] [added: 5,271] holders of record of our common stock.

The following table discloses purchases of shares of our common stock made by us or on our behalf during the fourth quarter of [removed: 2017.][added: 2018.]

| (a) | The shares reported in this column represent purchases settled in the fourth quarter of [removed: 2017] [added: 2018] relating to (i) our purchases of shares in open-market transactions to meet our obligations under stock-based compensation [removed: plans,] [added: plans] and (ii) our purchases of shares from our employees and non-employee directors in connection with the exercise of stock options, the vesting of restricted stock, and other stock compensation transactions in accordance with the terms of our stock-based compensation plans. |

| (b) | On [removed: September 21, 2016,] [added: January 23, 2018,] we announced that our board of directors authorized our purchase of up to $2.5 billion of our outstanding common stock (the [removed: 2016 program)] [added: 2018 Program),] with no expiration [removed: date.] [added: date, which was in addition to the remaining amount available under a $2.5 billion program authorized on September 21, 2016 (the 2016 Program). During the fourth quarter of 2018, we completed our purchases under the 2016 Program.] As of December 31, [removed: 2017,] [added: 2018,] we had [removed: $1.2] [added: $2.2] billion remaining available for purchase under the [removed: 2016 program. On January 23, 2018, we announced that our board of directors authorized our purchase of up to an additional $2.5 billion of our outstanding common stock with no expiration date.] [added: 2018 Program.] |

The following line graph compares the cumulative total return(a) on an investment in our common stock against the cumulative total return of the S&P 500 Composite Index and an index of peer companies (that we selected) for the five-year period commencing December 31, [removed: 2012] [added: 2013] and ending December 31, [removed: 2017.][added: 2018.]

Our peer group comprises the following [removed: nine] [added: eight] companies: [removed: Andeavor;] BP plc; CVR Energy, Inc.; Delek US Holdings, Inc.; HollyFrontier Corporation; Marathon Petroleum Corporation; PBF Energy Inc.; Phillips 66; and Royal Dutch Shell plc.

[removed: ][added: ]

| | [removed: 2012 | | | |] 2013 | | | | 2014 | | | | 2015 | | | | 2016 | | | | 2017 | | | [added: | 2018 | | |]

| (a) | Assumes that an investment in Valero common stock and each index was $100 on December 31, [removed: 2012.] [added: 2013.] “Cumulative total return” is based on share price appreciation plus reinvestment of dividends from December 31, [removed: 2012] [added: 2013] through December 31, [removed: 2017.] [added: 2018.] |

| October 2018 | | 939,957 | | | $ | 87.23 | | | 8,826 | | | 931,131 | | | $2.7 billion |

| November 2018 | | 3,655,945 | | | $ | 87.39 | | | 216,469 | | | 3,439,476 | | | $2.4 billion |

| December 2018 | | 3,077,364 | | | $ | 73.43 | | | 4,522 | | | 3,072,842 | | | $2.2 billion |

| Total | | 7,673,266 | | | $ | 81.77 | | | 229,817 | | | 7,443,449 | | | $2.2 billion |

| Valero Common Stock | $ | 100.00 | | | $ | 100.24 | | | $ | 147.15 | | | $ | 148.30 | | | $ | 207.60 | | | $ | 174.97 | |

| S&P 500 | 100.00 | | | | 113.69 | | | | 115.26 | | | | 129.05 | | | | 157.22 | | | | 150.33 | | |

| Peer Group | 100.00 | | | | 91.36 | | | | 80.82 | | | | 97.00 | | | | 122.98 | | | | 114.59 | | |

The following table shows the high and low sales prices of and dividends declared on our common stock for each quarter of 2017 and 2016.

| | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | Sales Prices of the Common Stock | | | | | | | | Dividends Per Common Share | | |

| Quarter Ended | | High | | | | Low | | | | | | |

| 2017: | | | | | | | | | | | | |

| December 31 | | $ | 93.18 | | | $ | 75.84 | | | $ | 0.70 | |

| September 30 | | 77.77 | | | | 64.22 | | | | 0.70 | | |

| June 30 | | 68.39 | | | | 60.69 | | | | 0.70 | | |

| March 31 | | 71.40 | | | | 64.45 | | | | 0.70 | | |

| 2016: | | | | | | | | | | | | |

| December 31 | | $ | 69.85 | | | $ | 52.51 | | | $ | 0.60 | |

| September 30 | | 58.08 | | | | 46.88 | | | | 0.60 | | |

| June 30 | | 64.06 | | | | 49.91 | | | | 0.60 | | |

| March 31 | | 72.49 | | | | 52.55 | | | | 0.60 | | |

On January 23, 2018, our board of directors declared a quarterly cash dividend of $0.80 per common share payable March 6, 2018 to holders of record at the close of business on February 13, 2018.

| October 2017 | | 515,762 | | | $ | 77.15 | | | 292,145 | | | 223,617 | | | $1.6 billion |

| November 2017 | | 2,186,889 | | | $ | 81.21 | | | 216,415 | | | 1,970,474 | | | $1.4 billion |

| December 2017 | | 2,330,263 | | | $ | 87.76 | | | 798 | | | 2,329,465 | | | $1.2 billion |

| Total | | 5,032,914 | | | $ | 83.83 | | | 509,358 | | | 4,523,556 | | | $1.2 billion |

| Valero Common Stock | $ | 100.00 | | | $ | 165.00 | | | $ | 165.40 | | | $ | 242.80 | | | $ | 244.71 | | | $ | 342.54 | |

| S&P 500 | 100.00 | | | | 132.39 | | | | 150.51 | | | | 152.59 | | | | 170.84 | | | | 208.14 | | |

| Peer Group | 100.00 | | | | 121.56 | | | | 111.98 | | | | 100.82 | | | | 119.45 | | | | 151.71 | | |

The selected financial data for the five-year period ended December 31, [removed: 2017] [added: 2018] was derived from our audited financial statements.

| | [added: 2018 | | | |] 2017 (a) | | | | 2016 (b) | | | | 2015 (c) | | | | 2014 | | | [removed: | 2013 (d) | | |]

| [removed: Operating revenues] [added: Revenues] | $ | [removed: 93,980] [added: 117,033] | | | $ | [removed: 75,659] [added: 93,980] | | | $ | [removed: 87,804] [added: 75,659] | | | $ | [removed: 130,844] [added: 87,804] | | | $ | [removed: 138,074] [added: 130,844] | |

| Income from continuing operations | [removed: 4,156] [added: 3,353] | | | | [removed: 2,417] [added: 4,156] | | | | [removed: 4,101] [added: 2,417] | | | | [removed: 3,775] [added: 4,101] | | | | [removed: 2,722] [added: 3,775] | | |

| Earnings per common share from continuing operations – assuming dilution | [removed: 9.16] [added: 7.29] | | | | [removed: 4.94] [added: 9.16] | | | | [removed: 7.99] [added: 4.94] | | | | [removed: 6.97] [added: 7.99] | | | | [removed: 4.96] [added: 6.97] | | |

| Dividends per common share | [removed: 2.80] [added: 3.20] | | | | [removed: 2.40] [added: 2.80] | | | | [removed: 1.70] [added: 2.40] | | | | [removed: 1.05] [added: 1.70] | | | | [removed: 0.85] [added: 1.05] | | |

| Total assets | [removed: 50,158] [added: 50,155] | | | | [removed: 46,173] [added: 50,158] | | | | [removed: 44,227] [added: 46,173] | | | | [removed: 45,355] [added: 44,227] | | | | [removed: 46,957] [added: 45,355] | | |

| Debt and capital lease obligations, less current portion | [removed: 8,750] [added: 8,871] | | | | [removed: 7,886] [added: 8,750] | | | | [removed: 7,208] [added: 7,886] | | | | [removed: 5,747] [added: 7,208] | | | | [removed: 6,224] [added: 5,747] | | |

| (a) | Includes the impact of Tax Reform that was enacted on December 22, 2017 and resulted in a net income tax benefit of $1.9 billion [removed: ($4.26 per share – assuming dilution)] as [removed: further] described in Note [removed: 14] [added: 15] of Notes to Consolidated Financial Statements. |

| (b) | Includes a noncash lower of cost or market inventory valuation reserve adjustment that resulted in a net benefit to our results of operations of $747 million as described in Note [removed: 4] [added: 5] of Notes to Consolidated Financial Statements. |

| | |

| --- | --- |

| (d) | Includes the operations of our retail business prior to its separation from us on May 1, 2013. |

Our management evaluated the effectiveness of Valero’s internal control over financial reporting as of December 31, [removed: 2017.][added: 2018.]

Management believes that as of December 31, [removed: 2017,] [added: 2018,] our internal control over financial reporting was effective based on those criteria.

Our independent registered public accounting firm has issued an attestation report on the effectiveness of our internal control over financial reporting, which begins on page [removed: 67] [added: 64] of this report.

We have audited the accompanying consolidated balance sheets of Valero Energy Corporation and subsidiaries (the Company) as of December 31, [removed: 2017] [added: 2018] and [removed: 2016,] [added: 2017,] the related consolidated statements of income, comprehensive income, equity, and cash flows for each of the years in the three-year period ended December 31, [removed: 2017,] [added: 2018,] and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, [removed: 2017] [added: 2018] and [removed: 2016,] [added: 2017,] and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, [removed: 2017,] [added: 2018,] in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, [removed: 2017,] [added: 2018,] based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 28, [removed: 2018] [added: 2019] expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

We have audited Valero Energy Corporation’s (the Company) internal control over financial reporting as of December 31, [removed: 2017,] [added: 2018,] based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, [removed: 2017,] [added: 2018,] based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, [removed: 2017] [added: 2018] and [removed: 2016,] [added: 2017,] the related consolidated statements of income, comprehensive income, equity, and cash flows for each of the years in the three-year period ended December 31, [removed: 2017,] [added: 2018,] and the related notes (collectively, the consolidated financial statements), and our report dated February 28, [removed: 2018] [added: 2019] expressed an unqualified opinion on those consolidated financial statements.

| | [added: 2018 | | | |] 2017 | | | | 2016 | | |

| Cash and [removed: temporary] cash [removed: investments | $] [added: equivalents at beginning of year] | 5,850 | | | [removed: $] | 4,816 | | [added: | | 4,114 | | |]

| Receivables, net | [removed: 6,922] [added: 7,345] | | | | [removed: 5,901] [added: 6,922] | | |

| Inventories | [removed: 6,384] [added: 6,532] | | | | [removed: 5,709] [added: 6,384] | | |

| Prepaid expenses and other | [removed: 156] [added: 816] | | | | [removed: 374] [added: 156] | | |

| Total current assets | [removed: 19,312] [added: 17,675] | | | | [removed: 16,800] [added: 19,312] | | |

| Property, plant, and equipment, at cost | [removed: 40,010] [added: 42,473] | | | | [removed: 37,733] [added: 40,010] | | |

| Accumulated depreciation | [removed: (12,530] [added: (13,625] | | ) | | [removed: (11,261] [added: (12,530] | | ) |

| Property, plant, and equipment, net | [removed: 27,480] [added: 28,848] | | | | [removed: 26,472] [added: 27,480] | | |

| Deferred charges and other assets, net | [removed: 3,366] [added: 3,632] | | | | [removed: 2,901] [added: 3,366] | | |

| Total assets | $ | [removed: 50,158] [added: 50,155] | | | $ | [removed: 46,173] [added: 50,158] | |

| Current portion of debt and capital lease obligations | $ | [removed: 122] [added: 238] | | | $ | [removed: 115] [added: 122] | |

| Accounts payable | [removed: 8,348] [added: 8,594] | | | | [removed: 6,357] [added: 8,348] | | |

| Accrued expenses | [removed: 712] [added: 630] | | | | [removed: 694] [added: 712] | | |

| Taxes other than income taxes payable | [removed: 1,321] [added: 1,213] | | | | [removed: 1,084] [added: 1,321] | | |

| Income taxes payable | [removed: 568] [added: 49] | | | | [removed: 78] [added: 568] | | |

| Total current liabilities | [removed: 11,071] [added: 10,724] | | | | [removed: 8,328] [added: 11,071] | | |

| Debt and capital lease obligations, less current portion | [removed: 8,750] [added: 8,871] | | | | [removed: 7,886] [added: 8,750] | | |

| Deferred income tax liabilities | [removed: 4,708] [added: 4,962] | | | | [removed: 7,361] [added: 4,708] | | |

| Other long-term liabilities | [removed: 2,729] [added: 2,867] | | | | [removed: 1,744] [added: 2,729] | | |

| Additional paid-in capital | [removed: 7,039] [added: 7,048] | | | | [removed: 7,088] [added: 7,039] | | |

| Treasury stock, at cost; [removed: 239,603,534] [added: 255,905,051] and [removed: 222,000,024] [added: 239,603,534] common shares | [removed: (13,315] [added: (14,925] | | ) | | [removed: (12,027] [added: (13,315] | | ) |

| Retained earnings | [removed: 29,200] [added: 31,044] | | | | [removed: 26,366] [added: 29,200] | | |

| Accumulated other comprehensive loss | [removed: (940] [added: (1,507] | | ) | | [removed: (1,410] [added: (940] | | ) |

| Total Valero Energy Corporation stockholders’ equity | [removed: 21,991] [added: 21,667] | | | | [removed: 20,024] [added: 21,991] | | |

| Noncontrolling interests | [removed: 909] [added: 1,064] | | | | [removed: 830] [added: 909] | | |

| Total equity | [removed: 22,900] [added: 22,731] | | | | [removed: 20,854] [added: 22,900] | | |

| Total liabilities and equity | $ | [removed: 50,158] [added: 50,155] | | | $ | [removed: 46,173] [added: 50,158] | |

| | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | |

| [removed: Operating revenues] [added: Revenues] (a) | $ | [removed: 93,980] [added: 117,033] | | | $ | [removed: 75,659] [added: 93,980] | | | $ | [removed: 87,804] [added: 75,659] | |

| Cost of materials and other | [removed: 83,037] [added: 104,732] | | | | [removed: 65,962] [added: 83,037] | | | | [removed: 73,861] [added: 65,962] | | |

February 28, 2019

February 28, 2019

| | 2018 | | | | 2017 | | |

| Cash and cash equivalents | $ | 2,982 | | | $ | 5,850 | |

| Total cost of sales | 111,439 | | | | 89,475 | | | | 71,312 | | |

| Reclassification of stranded income tax effects of Tax Reform per ASU 2018-02 (see Note 1) | — | | | | — | | | | — | | | | 91 | | | | (91 | | ) | | — | | | | — | | | | — | | |

| Net income | — | | | | — | | | | — | | | | 3,122 | | | | — | | | | 3,122 | | | | 231 | | | | 3,353 | | |

| Dividends on common stock ($3.20 per share) | — | | | | — | | | | — | | | | (1,369 | | ) | | — | | | | (1,369 | | ) | | — | | | | (1,369 | | ) |

| Balance as of December 31, 2018 | $ | 7 | | | $ | 7,048 | | | $ | (14,925 | ) | | $ | 31,044 | | | $ | (1,507 | ) | | $ | 21,667 | | | $ | 1,064 | | | $ | 22,731 | |

| Net income | $ | 3,353 | | | $ | 4,156 | | | $ | 2,417 | |

| Asset impairment loss | — | | | | — | | | | 56 | | |

| Peru Acquisition, net of cash acquired | (468 | | ) | | — | | | | — | | |

| Acquisition of ethanol plants | (320 | | ) | | — | | | | — | | |

| Acquisitions of undivided interests | (212 | | ) | | (72 | | ) | | — | | |

| Minor acquisitions | (88 | | ) | | — | | | | — | | |

| Proceeds from borrowings of certain VIEs | 109 | | | | — | | | | — | | |

This resulted in an increase of $42 million and $44 million in operating expenses (excluding depreciation and amortization expense) and a decrease of $6 million and $6 million in general and administrative expenses (excluding depreciation and amortization expense) for the years ended December 31, 2017 and 2016, respectively.

consolidation.

Cash Equivalents

We maintain a

| • | intangible assets; and |

| • | goodwill. |

Legal Contingencies

We accrue losses associated with legal claims when such losses are probable and reasonably estimable.

If we determine that a loss is probable and cannot estimate a specific amount for that loss but can estimate a range of loss, the best estimate within the range is accrued.

If no amount within the range is a better estimate than any other, the minimum amount of the range is accrued.

Estimates are adjusted as additional information becomes available or circumstances change.

Legal defense costs associated with loss contingencies are expensed in the period incurred.

Generally, our international subsidiaries use their local currency as their functional currency.

Income statement amounts are translated into U.S. dollars using the exchange rates in effect at the time the underlying transactions occur.

Our revenues are primarily generated from contracts with customers.

We generate revenue from contracts with customers from the sale of products by our refining and ethanol segments.

The customer is able to direct the use of, and obtain substantially all of the benefits from, the products at the point of shipment or delivery.

As a result, we consider control to have transferred upon shipment or delivery because we have a present right to payment at that time, the customer has legal title to the asset, we have transferred physical possession of the asset, and the customer has significant risks and rewards of ownership of the asset.

Our contracts with customers state the final terms of the sale, including the description, quantity, and price for goods sold.

Payment is typically due in full within two to ten days of delivery.

In the normal course of business, we generally do not accept product returns.

The transaction price is the consideration that we expect to be entitled to in exchange for our products.

The transaction price for substantially all of our contracts is generally based on commodity market pricing (i.e., variable consideration).

As such, this market pricing may be constrained (i.e., not estimable) at the inception of the contract but will be recognized based on the applicable market pricing, which will be known upon transfer of the goods to the customer.

February 28, 2018

| Total cost of sales | 89,433 | | | | 71,268 | | | | 80,689 | | |

| Balance as of December 31, 2014 | $ | 7 | | | $ | 7,116 | | | $ | (8,125 | ) | | $ | 22,046 | | | $ | (367 | ) | | $ | 20,677 | | | $ | 567 | | | $ | 21,244 | |

| Net income | — | | | | — | | | | — | | | | 3,990 | | | | — | | | | 3,990 | | | | 111 | | | | 4,101 | | |

| Issuance of Valero Energy Partners LP common units | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 189 | | | | 189 | | |

| Dividends on common stock | — | | | | — | | | | — | | | | (1,111 | | ) | | — | | | | (1,111 | | ) | | — | | | | (1,111 | | ) |

| Acquisition of undivided interest | (72 | | ) | | — | | | | — | | |

| Proceeds from the exercise of stock options | 10 | | | | 6 | | | | 34 | | |

| Common stock dividends | (1,242 | | ) | | (1,111 | | ) | | (848 | | ) |

| Proceeds from issuance of Valero Energy Partners LP common units | 36 | | | | 10 | | | | 189 | | |

| Cash and temporary cash investments at beginning of year | 4,816 | | | | 4,114 | | | | 3,689 | | |

| | |

| --- | --- |

Effective January 1, 2017, we revised our reportable segments to reflect a new reportable segment — VLP.

The results of the VLP segment include the results of VLP, our majority-owned master limited partnership.

Our prior period segment information has been retrospectively adjusted to reflect our current segment presentation.

See Note 16 for additional information.

The changes were primarily due to the separate presentation of depreciation and amortization expense related to operating expenses and general and administrative expenses.

Temporary Cash Investments

We design improvements to our

| • | intangible assets. |

In addition, we have asset retirement obligations with respect to our ethanol plants and certain of our logistics assets that require us to perform under law or contract once the asset is retired from service.

The functional currency of each of our international operations is the respective local currency, which includes the Canadian dollar, the pound sterling, the euro, and the Mexican peso.

Revenue and expense accounts are translated using the weighted-average exchange rates during the year presented.

Revenues for products sold by our refining and ethanol segments are recorded upon delivery and transfer of title to the products to our customers and when payment has either been received or collection is reasonably assured.

Our VLP segment generates revenues by providing fee-based transportation and terminaling services

to transport and store crude oil and refined petroleum products using its pipelines and terminals under long-term commercial agreements.

VLP segment revenues are recognized upon completion of the transportation or terminaling service.

We present excise taxes on sales by certain of our international operations on a gross basis in revenues.

All other excise taxes are presented on a net basis.

concerning various GHG emission programs, including cap-and-trade systems.

Earnings per common share – assuming dilution reflects the potential dilution arising from our outstanding stock options and nonvested shares granted to employees in connection with our stock-based compensation plans.

income.

We also enter into certain commodity derivative instruments for trading purposes.

Business Combinations

Effective January 1, 2017, we adopted the provisions of Accounting Standards Update (ASU) No. 2017-01, “Business Combinations (Topic 805),” that was issued by the Financial Accounting Standards Board (FASB) in January 2017.

This ASU provides a more robust framework to evaluate whether transactions should be accounted for as acquisitions (dispositions) of assets or businesses.

However, more of our future acquisitions may be accounted for as acquisitions of assets in accordance with this ASU.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606),” to clarify the principles for recognizing revenue.

We adopted this standard on January 1, 2018 and it will not materially change the amount or timing of revenues recognized by us, nor will it materially affect our financial position.

Our management has evaluated, with the participation of our principal executive officer and principal financial officer, the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report, and has concluded that our disclosure controls and procedures were effective as of December 31, [removed: 2017.][added: 2018.]

The management report on Valero’s internal control over financial reporting required by Item 9A appears in Item 8 on page [removed: 65] [added: 62] of this report, and is incorporated herein by reference.

KPMG LLP’s report on Valero’s internal control over financial reporting appears in Item 8 beginning on page [removed: 67] [added: 64] of this report, and is incorporated herein by reference.

[removed: We expect that there will be] [added: As a result, we have made] changes affecting our internal control over financial reporting in conjunction with [removed: adopting] [added: the adoption of] this standard.

[removed: The most significant changes we expect relate to the implementation of a lease evaluation system and a lease accounting system, including the integration of] [added: We have integrated] our lease accounting system with our general ledger and [removed: modifications to the] [added: modified our] related procurement and payment processes.

On January 1, 2019, we adopted Topic 842, which we discuss in Note 1 of Notes to Consolidated Financial Statements.

We enhanced our contracting and lease evaluation systems and related processes, and we developed a new lease accounting system to capture our leases and support the required disclosures.

We continue the implementation process to prepare for the adoption of ASU No. 2016-02, “Leases (Topic 842),” which we discuss more fully in Note 1 of Notes to Consolidated Financial Statements.

The information required by Items 10 through 14 of Form 10-K is incorporated herein by reference to the definitive proxy statement for our [removed: 2018] [added: 2019] annual meeting of stockholders.

We will file the proxy statement with the SEC on or before March 31, [removed: 2018.][added: 2019.]

| [Management’s report on internal control over financial [removed: reporting](#s7E7D3A0F86B25CF1AA7DF21AFA8F4467)] [added: reporting](#s38E74D6BA467579393F007075B6DBD93)] | [removed: [65](#s7E7D3A0F86B25CF1AA7DF21AFA8F4467)] [added: [62](#s38E74D6BA467579393F007075B6DBD93)] |

| [Reports of independent registered public accounting [removed: firm](#s51FBCC8E68C5504E99116CF397129B84)] [added: firm](#s21598B79671E5E9E89AD2FF6729A67DA)] | [removed: [66](#s51FBCC8E68C5504E99116CF397129B84)] [added: [63](#s21598B79671E5E9E89AD2FF6729A67DA)] |

| [Consolidated balance sheets as of December 31, [removed: 2017] [added: 2018] and [removed: 2016](#s9A951D2AB080531A9E18E310D5D771A2)] [added: 2017](#sCA8F779AFF5452B7996AF9C8FC847B2C)] | [removed: [69](#s9A951D2AB080531A9E18E310D5D771A2)] [added: [66](#sCA8F779AFF5452B7996AF9C8FC847B2C)] |

| [Consolidated statements of income for the years ended December 31, [added: 2018,] 2017, [removed: 2016,] and [removed: 2015](#s73AF0CEC6DD6543599379FCCE28ED007)] [added: 2016](#s95FA405EFDCD5853A380A4C055BC66F4)] | [removed: [70](#s73AF0CEC6DD6543599379FCCE28ED007)] [added: [67](#s95FA405EFDCD5853A380A4C055BC66F4)] |

| [Consolidated statements of comprehensive income for the years ended December 31, [added: 2018,] 2017, [removed: 2016,] and [removed: 2015](#s86F4A76B542B5FA4B9BC27CBBE546933)] [added: 2016](#sF306B362DF935F40B096EBAACEA90B6D)] | [removed: [71](#s86F4A76B542B5FA4B9BC27CBBE546933)] [added: [68](#sF306B362DF935F40B096EBAACEA90B6D)] |

| [Consolidated statements of equity for the years ended December 31, [added: 2018,] 2017, [removed: 2016,] and [removed: 2015](#sD041F2E540C2525FAE118F2374F25280)] [added: 2016](#s5F720346366C5A1EBD9B5092C2AC165A)] | [removed: [72](#sD041F2E540C2525FAE118F2374F25280)] [added: [69](#s5F720346366C5A1EBD9B5092C2AC165A)] |

| [Consolidated statements of cash flows for the years ended December 31, [added: 2018,] 2017, [removed: 2016,] and [removed: 2015](#s35C9ED5654F45E33988170A1C2F5979A)] [added: 2016](#sF7FEFC0A78AE5CB38537E1A0D6A9582F)] | [removed: [73](#s35C9ED5654F45E33988170A1C2F5979A)] [added: [70](#sF7FEFC0A78AE5CB38537E1A0D6A9582F)] |

| [Notes to consolidated financial [removed: statements](#s22310909DD2B5EB6855EDF8EC034B464)] [added: statements](#s278CA88CA05C5BBDAFC33A2B7CFCFF6C)] | [removed: [74](#s22310909DD2B5EB6855EDF8EC034B464)] [added: [71](#s278CA88CA05C5BBDAFC33A2B7CFCFF6C)] |

| [removed: [4.05](http://www.sec.gov/Archives/edgar/data/1035002/000095012904004177/h16034exv4w1.txt)] [added: [4.07](http://www.sec.gov/Archives/edgar/data/1035002/000095012904004177/h16034exv4w1.txt)] | — | [Specimen Certificate of Common Stock–incorporated by reference to Exhibit 4.1 to Valero’s Registration Statement on Form S-3 (SEC File No. 333-116668) filed June 21, 2004.](http://www.sec.gov/Archives/edgar/data/1035002/000095012904004177/h16034exv4w1.txt) |

| [removed: [*+10.01](https://www.sec.gov/Archives/edgar/data/1035002/000103500218000010/vloexh1001-12312017.htm)] [added: [+10.01](http://www.sec.gov/Archives/edgar/data/1035002/000103500218000010/vloexh1001-12312017.htm)] | — | [Valero Energy Corporation Annual Bonus Plan, amended and restated as of February 28, [removed: 2018.](https://www.sec.gov/Archives/edgar/data/1035002/000103500218000010/vloexh1001-12312017.htm)] [added: 2018–incorporated by reference to Exhibit 10.01 to Valero’s Annual Report on Form 10-K for the year ended December 31, 2017 (SEC File No. 1-13175).](http://www.sec.gov/Archives/edgar/data/1035002/000103500218000010/vloexh1001-12312017.htm)] |

| [removed: [+10.02](http://www.sec.gov/Archives/edgar/data/1035002/000119312512081439/d307449dex101.htm)] [added: [+10.10](http://www.sec.gov/Archives/edgar/data/1035002/000103500216000120/a1002changeofctrlseverance.htm)] | — | [removed: [Valero] [added: [Form of Change of Control Severance Agreement (Tier II-A) between Valero] Energy Corporation [removed: Annual Incentive Plan for Named Executive Officers–incorporated] [added: and executive officer–incorporated] by reference to Exhibit [removed: 10.01] [added: 10.02] to Valero’s Current Report on Form 8-K dated [removed: February 22, 2012,] [added: November 2, 2016,] and filed [removed: February 27, 2012] [added: November 7, 2016] (SEC File No. [removed: 1-13175).](http://www.sec.gov/Archives/edgar/data/1035002/000119312512081439/d307449dex101.htm)] [added: 1-13175).](http://www.sec.gov/Archives/edgar/data/1035002/000103500216000120/a1002changeofctrlseverance.htm)] |

| [removed: [+10.03](http://www.sec.gov/Archives/edgar/data/1035002/000095012310018097/d70408exv10w2.htm)] [added: [+10.02](http://www.sec.gov/Archives/edgar/data/1035002/000095012310018097/d70408exv10w2.htm)] | — | [Valero Energy Corporation 2005 Omnibus Stock Incentive Plan, amended and restated as of October 1, 2005–incorporated by reference to Exhibit 10.02 to Valero’s Annual Report on Form 10-K for the year ended December 31, 2009 (SEC File No. 1-13175).](http://www.sec.gov/Archives/edgar/data/1035002/000095012310018097/d70408exv10w2.htm) |

| [removed: [+10.04](http://www.sec.gov/Archives/edgar/data/1035002/000103500216000069/vloexh1004-12312015.htm)] [added: [+10.03](http://www.sec.gov/Archives/edgar/data/1035002/000103500216000069/vloexh1004-12312015.htm)] | — | [Valero Energy Corporation 2011 Omnibus Stock Incentive Plan, amended and restated February 25, 2016–incorporated by reference to Exhibit 10.04 to Valero’s Annual Report on Form 10-K for the year ended December 31, 2015 (SEC File No. 1-13175).](http://www.sec.gov/Archives/edgar/data/1035002/000103500216000069/vloexh1004-12312015.htm) |

| [removed: [+10.05](http://www.sec.gov/Archives/edgar/data/1035002/000095013409003971/d66469exv10w04.htm)] [added: [+10.04](http://www.sec.gov/Archives/edgar/data/1035002/000095013409003971/d66469exv10w04.htm)] | — | [Valero Energy Corporation Deferred Compensation Plan, amended and restated as of January 1, 2008–incorporated by reference to Exhibit 10.04 to Valero’s Annual Report on Form 10-K for the year ended December 31, 2008 (SEC File No. 1-13175).](http://www.sec.gov/Archives/edgar/data/1035002/000095013409003971/d66469exv10w04.htm) |

| [removed: [+10.06](http://www.sec.gov/Archives/edgar/data/1035002/000095013409003971/d66469exv10w08.htm)] [added: [+10.05](http://www.sec.gov/Archives/edgar/data/1035002/000095013409003971/d66469exv10w08.htm)] | — | [Valero Energy Corporation Amended and Restated Supplemental Executive Retirement Plan, amended and restated as of November 10, 2008–incorporated by reference to Exhibit 10.08 to Valero’s Annual Report on Form 10-K for the year ended December 31, 2008 (SEC File No. 1-13175).](http://www.sec.gov/Archives/edgar/data/1035002/000095013409003971/d66469exv10w08.htm) |

| [removed: [+10.07](http://www.sec.gov/Archives/edgar/data/1035002/000103500212000008/a2011ex1010.htm)] [added: [+10.06](http://www.sec.gov/Archives/edgar/data/1035002/000103500212000008/a2011ex1010.htm)] | — | [Valero Energy Corporation Excess Pension Plan, as amended and restated effective December 31, 2011–incorporated by reference to Exhibit 10.10 to Valero’s Annual Report on Form 10-K for the year ended December 31, 2011 (SEC File No. 1-13175).](http://www.sec.gov/Archives/edgar/data/1035002/000103500212000008/a2011ex1010.htm) |

| [removed: [+10.09](http://www.sec.gov/Archives/edgar/data/1035002/000103500216000069/vloexh1012-12312015.htm)] [added: [99.01](http://www.sec.gov/Archives/edgar/data/1035002/000103500218000010/vloexh9901-12312017.htm)] | — | [removed: [Schedule of Indemnity Agreements–incorporated] [added: [Audit Committee Pre-Approval Policy–incorporated] by reference to Exhibit [removed: 10.12] [added: 99.01] to Valero’s Annual Report on Form 10-K for the year ended December 31, [removed: 2015] [added: 2017] (SEC File No. [removed: 1-13175).](http://www.sec.gov/Archives/edgar/data/1035002/000103500216000069/vloexh1012-12312015.htm)] [added: 1-13175).](http://www.sec.gov/Archives/edgar/data/1035002/000103500218000010/vloexh9901-12312017.htm)] |

| [removed: [+10.10](http://www.sec.gov/Archives/edgar/data/1035002/000103500212000008/a2011ex1015.htm)] [added: [+10.07](http://www.sec.gov/Archives/edgar/data/1035002/000103500212000008/a2011ex1015.htm)] | — | [Form of Change of Control Severance Agreement (Tier I) between Valero Energy Corporation and executive officer–incorporated by reference to Exhibit 10.15 to Valero’s Annual Report on Form 10-K for the year ended December 31, 2011 (SEC File No. 1-13175).](http://www.sec.gov/Archives/edgar/data/1035002/000103500212000008/a2011ex1015.htm) |

| [removed: [+10.11](http://www.sec.gov/Archives/edgar/data/1035002/000103500216000069/vloexh1014-12312015.htm)] [added: [+10.08](http://www.sec.gov/Archives/edgar/data/1035002/000103500214000008/vloexh1016-12312013.htm)] | — | [removed: [Schedule] [added: [Form] of [removed: Tier I] Change of Control Severance [removed: Agreements–incorporated] [added: Agreement (Tier II) between Valero Energy Corporation and executive officer–incorporated] by reference to Exhibit [removed: 10.14] [added: 10.16] to Valero’s Annual Report on Form 10-K for the year ended December 31, [removed: 2015] [added: 2013] (SEC File No. [removed: 1-13175).](http://www.sec.gov/Archives/edgar/data/1035002/000103500216000069/vloexh1014-12312015.htm)] [added: 1-13175).](http://www.sec.gov/Archives/edgar/data/1035002/000103500214000008/vloexh1016-12312013.htm)] |

| [removed: [+10.12](http://www.sec.gov/Archives/edgar/data/1035002/000103500214000008/vloexh1016-12312013.htm)] [added: [+10.16](http://www.sec.gov/Archives/edgar/data/1035002/000103500213000008/a2012ex1025.htm)] | — | [Form of [removed: Change of Control Severance] [added: Restricted Stock] Agreement [removed: (Tier II) between] [added: pursuant to the] Valero Energy Corporation [removed: and executive officer–incorporated] [added: 2011 Omnibus Stock Incentive Plan–incorporated] by reference to Exhibit [removed: 10.16] [added: 10.25] to Valero’s Annual Report on Form 10-K for the year ended December 31, [removed: 2013] [added: 2012] (SEC File No. [removed: 1-13175).](http://www.sec.gov/Archives/edgar/data/1035002/000103500214000008/vloexh1016-12312013.htm)] [added: 1-13175).](http://www.sec.gov/Archives/edgar/data/1035002/000103500213000008/a2012ex1025.htm)] |

| [removed: [+10.13](http://www.sec.gov/Archives/edgar/data/1035002/000103500216000069/vloexh1016-12312015.htm)] [added: [+10.09](http://www.sec.gov/Archives/edgar/data/1035002/000103500213000008/a2012ex1017.htm)] | — | [removed: [Schedule] [added: [Form] of [removed: Tier II] [added: Amendment (dated January 7, 2013) to] Change of Control Severance [removed: Agreements–incorporated] [added: Agreements (to eliminate excise tax gross-up benefit)–incorporated] by reference to Exhibit [removed: 10.16] [added: 10.17] to Valero’s Annual Report on Form 10-K for the year ended December 31, [removed: 2015] [added: 2012] (SEC File No. [removed: 1-13175).](http://www.sec.gov/Archives/edgar/data/1035002/000103500216000069/vloexh1016-12312015.htm)] [added: 1-13175).](http://www.sec.gov/Archives/edgar/data/1035002/000103500213000008/a2012ex1017.htm)] |

| [removed: [+10.14](http://www.sec.gov/Archives/edgar/data/1035002/000103500213000008/a2012ex1017.htm)] [added: [+10.12](http://www.sec.gov/Archives/edgar/data/1035002/000103500217000002/exhibit1001formofamendment.htm)] | — | [Form of Amendment (dated January [removed: 7, 2013)] [added: 17, 2017)] to Change of Control Severance [removed: Agreements (to eliminate excise tax gross-up benefit)–incorporated] [added: Agreements, amending Section 9 thereof–incorporated] by reference to Exhibit [removed: 10.17] [added: 10.01] to Valero’s [removed: Annual] [added: Current] Report on Form [removed: 10-K for the year ended December 31, 2012] [added: 8-K dated and filed January 17, 2017] (SEC File No. [removed: 1-13175).](http://www.sec.gov/Archives/edgar/data/1035002/000103500213000008/a2012ex1017.htm)] [added: 1-13175).](http://www.sec.gov/Archives/edgar/data/1035002/000103500217000002/exhibit1001formofamendment.htm)] |

| [removed: [+10.15](http://www.sec.gov/Archives/edgar/data/1035002/000103500216000120/a1002changeofctrlseverance.htm)] [added: [++2.01](http://www.sec.gov/Archives/edgar/data/1035002/000119312518302059/d636934dex21.htm)] | — | [removed: [Form] [added: [Agreement and Plan] of [removed: Change] [added: Merger, dated as] of [removed: Control Severance Agreement (Tier II-A) between] [added: October 18, 2018, by and among] Valero Energy [removed: Corporation] [added: Corporation; Forest Merger Sub, LLC; Valero Energy Partners LP;] and [removed: executive officer–incorporated] [added: Valero Energy Partners GP LLC–incorporated] by reference to Exhibit [removed: 10.02] [added: 2.1] to Valero’s Current Report on Form 8-K dated [removed: November 2, 2016,] and filed [removed: November 7, 2016] [added: October 18, 2018] (SEC File No. [removed: 1-13175).](http://www.sec.gov/Archives/edgar/data/1035002/000103500216000120/a1002changeofctrlseverance.htm)] [added: 1-13175).](http://www.sec.gov/Archives/edgar/data/1035002/000119312518302059/d636934dex21.htm)] |

| [removed: [+10.16](http://www.sec.gov/Archives/edgar/data/1035002/000103500217000009/vloexh1019-12312016.htm)] [added: [+10.14](http://www.sec.gov/Archives/edgar/data/1035002/000103500212000008/a2011ex1021.htm)] | — | [removed: [Schedule of Tier II-A Change] [added: [Form] of [removed: Control Severance Agreements–incorporated] [added: Stock Option Agreement pursuant to the Valero Energy Corporation 2011 Omnibus Stock Incentive Plan–incorporated] by reference to Exhibit [removed: 10.19] [added: 10.21] to Valero’s Annual Report on Form 10-K for the year ended December 31, [removed: 2016] [added: 2011] (SEC File No. [removed: 1-13175).](http://www.sec.gov/Archives/edgar/data/1035002/000103500217000009/vloexh1019-12312016.htm)] [added: 1-13175).](http://www.sec.gov/Archives/edgar/data/1035002/000103500212000008/a2011ex1021.htm)] |

| [removed: [*+10.18](https://www.sec.gov/Archives/edgar/data/1035002/000103500218000010/vloexh1018-12312017.htm)] [added: [+10.13](http://www.sec.gov/Archives/edgar/data/1035002/000103500218000010/vloexh1018-12312017.htm)] | — | [Form of Performance Share Award Agreement pursuant to the Valero Energy Corporation 2011 Omnibus Stock Incentive [removed: Plan.](https://www.sec.gov/Archives/edgar/data/1035002/000103500218000010/vloexh1018-12312017.htm)] [added: Plan–incorporated by reference to Exhibit 10.18 to Valero’s Annual Report on Form 10-K for the year ended December 31, 2017 (SEC File No. 1-13175).](http://www.sec.gov/Archives/edgar/data/1035002/000103500218000010/vloexh1018-12312017.htm)] |

| [removed: [+10.19](http://www.sec.gov/Archives/edgar/data/1035002/000103500212000008/a2011ex1021.htm)] [added: [+10.15](http://www.sec.gov/Archives/edgar/data/1035002/000103500213000008/a2012ex1021.htm)] | — | [Form of [added: Performance] Stock Option Agreement pursuant to the Valero Energy Corporation 2011 Omnibus Stock Incentive Plan–incorporated by reference to Exhibit 10.21 to Valero’s Annual Report on Form 10-K for the year ended December 31, [removed: 2011] [added: 2012] (SEC File No. [removed: 1-13175).](http://www.sec.gov/Archives/edgar/data/1035002/000103500212000008/a2011ex1021.htm)] [added: 1-13175).](http://www.sec.gov/Archives/edgar/data/1035002/000103500213000008/a2012ex1021.htm)] |

| [removed: [10.22](http://www.sec.gov/Archives/edgar/data/1035002/000119312515377191/d98152dex101.htm)] [added: [10.17](http://www.sec.gov/Archives/edgar/data/1035002/000119312515377191/d98152dex101.htm)] | — | [$3,000,000,000 5-Year Third Amended and Restated Revolving Credit Agreement, dated as of November 12, 2015, among Valero Energy Corporation, as Borrower; JPMorgan Chase Bank, N.A., as Administrative Agent; and the lenders named therein–incorporated by reference to Exhibit 10.1 to Valero’s Current Report on Form 8-K dated November 12, 2015, and filed November 13, 2015 (SEC File No. 1-13175).](http://www.sec.gov/Archives/edgar/data/1035002/000119312515377191/d98152dex101.htm) |

| [removed: [*21.01](https://www.sec.gov/Archives/edgar/data/1035002/000103500218000010/vloexh2101-12312017.htm)] [added: [*21.01](https://www.sec.gov/Archives/edgar/data/1035002/000103500219000008/vloexh2101-12312018.htm)] | — | [Valero Energy Corporation [removed: subsidiaries.](https://www.sec.gov/Archives/edgar/data/1035002/000103500218000010/vloexh2101-12312017.htm)] [added: subsidiaries.](https://www.sec.gov/Archives/edgar/data/1035002/000103500219000008/vloexh2101-12312018.htm)] |

| [removed: [*23.01](https://www.sec.gov/Archives/edgar/data/1035002/000103500218000010/vloexh2301-12312017.htm)] [added: [*23.01](https://www.sec.gov/Archives/edgar/data/1035002/000103500219000008/vloexh2301-12312018.htm)] | — | [Consent of KPMG LLP dated February 28, [removed: 2018.](https://www.sec.gov/Archives/edgar/data/1035002/000103500218000010/vloexh2301-12312017.htm)] [added: 2019.](https://www.sec.gov/Archives/edgar/data/1035002/000103500219000008/vloexh2301-12312018.htm)] |

| [removed: [*24.01](#s05535828E18751FCBF80E6B56EB6911C)] [added: [*24.01](#s3201FDE2D3AA5AB89E738DE87EEABEC0)] | — | [Power of Attorney dated February 28, [removed: 2018] [added: 2019] (on the signature page of this Form [removed: 10-K).](#s05535828E18751FCBF80E6B56EB6911C)] [added: 10-K).](#s3201FDE2D3AA5AB89E738DE87EEABEC0)] |

| [removed: [*31.01](https://www.sec.gov/Archives/edgar/data/1035002/000103500218000010/vloexh3101-12312017.htm)] [added: [*31.01](https://www.sec.gov/Archives/edgar/data/1035002/000103500219000008/vloexh3101-12312018.htm)] | — | [Rule 13a-14(a) Certification (under Section 302 of the Sarbanes-Oxley Act of 2002) of principal executive [removed: officer.](https://www.sec.gov/Archives/edgar/data/1035002/000103500218000010/vloexh3101-12312017.htm)] [added: officer.](https://www.sec.gov/Archives/edgar/data/1035002/000103500219000008/vloexh3101-12312018.htm)] |

| [removed: [*31.02](https://www.sec.gov/Archives/edgar/data/1035002/000103500218000010/vloexh3102-12312017.htm)] [added: [*31.02](https://www.sec.gov/Archives/edgar/data/1035002/000103500219000008/vloexh3102-12312018.htm)] | — | [Rule 13a-14(a) Certification (under Section 302 of the Sarbanes-Oxley Act of 2002) of principal financial [removed: officer.](https://www.sec.gov/Archives/edgar/data/1035002/000103500218000010/vloexh3102-12312017.htm)] [added: officer.](https://www.sec.gov/Archives/edgar/data/1035002/000103500219000008/vloexh3102-12312018.htm)] |

| [removed: [32.01](https://www.sec.gov/Archives/edgar/data/1035002/000103500218000010/vloexh3201-12312017.htm)] [added: [32.01](https://www.sec.gov/Archives/edgar/data/1035002/000103500219000008/vloexh3201-12312018.htm)] | — | [Section 1350 Certifications (under Section 906 of the Sarbanes-Oxley Act of [removed: 2002).](https://www.sec.gov/Archives/edgar/data/1035002/000103500218000010/vloexh3201-12312017.htm)] [added: 2002).](https://www.sec.gov/Archives/edgar/data/1035002/000103500219000008/vloexh3201-12312018.htm)] |

Date: February 28, [removed: 2018][added: 2019]

[removed: Browning,] [added: Fraser,] or any of them, each with power to act without the other, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any or all subsequent amendments and supplements to this Annual Report on Form 10-K, and to file the same, or cause to be filed the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto each said attorney-in-fact and agent full power to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby qualifying and confirming all that said attorney-in-fact and agent or his substitute or substitutes may lawfully do or cause to be done by virtue hereof.

| /s/ Joseph W. Gorder | | Chairman of the Board, President, and Chief Executive Officer (Principal Executive Officer) | | February 28, [removed: 2018] [added: 2019] |

| /s/ [removed: Michael S. Ciskowski] [added: Donna M. Titzman] | | Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) | | February 28, [removed: 2018] [added: 2019] |

| /s/ H. Paulett Eberhart | | Director | | February 28, [removed: 2018] [added: 2019] |

| /s/ Kimberly S. Greene | | Director | | February 28, [removed: 2018] [added: 2019] |

| /s/ Deborah P. Majoras | | Director | | February 28, [removed: 2018] [added: 2019] |

| [4.05](http://www.sec.gov/Archives/edgar/data/1583103/000119312516780536/d301629dex41.htm) | — | [Indenture, dated as of November 30, 2016, between Valero Energy Partners LP, as issuer, and U.S. Bank National Association, as trustee–incorporated by reference to Exhibit 4.1 to Valero Energy Partners LP’s Post-Effective Amendment No. 1 to Registration Statement on Form S-3 (Registration File No. 333-208052) filed November 30, 2016.](http://www.sec.gov/Archives/edgar/data/1583103/000119312516780536/d301629dex41.htm) |

| [4.06](http://www.sec.gov/Archives/edgar/data/1035002/000114036119000669/s002623x2_ex4-2.htm) | — | [First Supplemental Indenture (with Parent Guarantee), dated as of January 10, 2019, among Valero Energy Partners LP, as issuer; Valero Energy Corporation, as parent guarantor; and U.S. Bank National Association, as trustee–incorporated by reference to Exhibit 4.2 to Valero’s Current Report on Form 8-K dated and filed January 10, 2019 (SEC File No. 1-13175).](http://www.sec.gov/Archives/edgar/data/1035002/000114036119000669/s002623x2_ex4-2.htm) |

| [*+10.11](https://www.sec.gov/Archives/edgar/data/1035002/000103500219000008/vloexh1011-12312018.htm) | — | [Schedule of Tier II-A Change of Control Agreements](https://www.sec.gov/Archives/edgar/data/1035002/000103500219000008/vloexh1011-12312018.htm). |

| | |

| --- | --- |

| ++ | Certain schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The registrant agrees to furnish supplementally a copy of any such omitted schedule to the SEC upon request. |

Gorder, Donna M.

Titzman, and Jason W.

| (Donna M. Titzman) | | | | |

| | | |

| +10.08 | — | Form of Indemnity Agreement between Valero Energy Corporation (formerly known as Valero Refining and Marketing Company) and certain officers and directors–incorporated by reference to Exhibit 10.8 to Valero’s Registration Statement on Form S-1 (SEC File No. 333-27013) filed May 13, 1997. |

| [+10.17](http://www.sec.gov/Archives/edgar/data/1035002/000103500217000002/exhibit1001formofamendment.htm) | — | [Form of Amendment (dated January 17, 2017) to Change of Control Severance Agreements, amending Section 9 thereof–incorporated by reference to Exhibit 10.01 to Valero’s Current Report on Form 8-K dated and filed January 17, 2017 (SEC File No. 1-13175).](http://www.sec.gov/Archives/edgar/data/1035002/000103500217000002/exhibit1001formofamendment.htm) |

| [+10.20](http://www.sec.gov/Archives/edgar/data/1035002/000103500213000008/a2012ex1021.htm) | — | [Form of Performance Stock Option Agreement pursuant to the Valero Energy Corporation 2011 Omnibus Stock Incentive Plan–incorporated by reference to Exhibit 10.21 to Valero’s Annual Report on Form 10-K for the year ended December 31, 2012 (SEC File No. 1-13175).](http://www.sec.gov/Archives/edgar/data/1035002/000103500213000008/a2012ex1021.htm) |

| [+10.21](http://www.sec.gov/Archives/edgar/data/1035002/000103500213000008/a2012ex1025.htm) | — | [Form of Restricted Stock Agreement pursuant to the Valero Energy Corporation 2011 Omnibus Stock Incentive Plan–incorporated by reference to Exhibit 10.25 to Valero’s Annual Report on Form 10-K for the year ended December 31, 2012 (SEC File No. 1-13175).](http://www.sec.gov/Archives/edgar/data/1035002/000103500213000008/a2012ex1025.htm) |

| [*12.01](https://www.sec.gov/Archives/edgar/data/1035002/000103500218000010/vloexh1201-12312017.htm) | — | [Statements of Computations of Ratios of Earnings to Fixed Charges.](https://www.sec.gov/Archives/edgar/data/1035002/000103500218000010/vloexh1201-12312017.htm) |

| [*99.01](https://www.sec.gov/Archives/edgar/data/1035002/000103500218000010/vloexh9901-12312017.htm) | — | [Audit Committee Pre-Approval Policy.](https://www.sec.gov/Archives/edgar/data/1035002/000103500218000010/vloexh9901-12312017.htm) |

Gorder, Michael S.

Ciskowski, and Jay D.

| | | | | |

| (Michael S. Ciskowski) | | | | |

| /s/ Susan Kaufman Purcell | | Director | | February 28, 2018 |

| (Susan Kaufman Purcell) | | | | |