Valero Energy (VLO) 10-K risk factor changes: FY2019 vs FY2018

[removed: Our] [added: Our] financial results are affected by volatile refining margins, which are dependent upon factors beyond our control, including the price of crude oil and the market price at which we can sell refined petroleum [removed: products.][added: products.]

[removed: Compliance] [added: Compliance] with and changes in environmental laws, including proposed climate change laws and regulations, could adversely affect our [removed: performance.][added: performance.]

Our operations are subject to extensive environmental laws and regulations, including those relating to the discharge of materials into the environment, waste management, [added: pollution prevention measures, greenhouse gas (GHG) emissions, and characteristics and composition of fuels, including gasoline and diesel.]

[removed: In addition,] [added: For example,] in 2015, the U.S., Canada, and the U.K. participated in the United Nations Conference on Climate Change, which led to the creation of the Paris Agreement.

There are no guarantees that the [removed: agreement] [added: Paris Agreement] will not be re-implemented in the [removed: U.S.,] [added: U.S.] or re-implemented in part by specific U.S. states or local governments.

[removed: However,] [added: Regardless,] the Paris Agreement could still affect our operations in Canada, the U.K., Ireland, and Latin America.

[removed: Severe] [added: Severe] weather events may have an adverse effect on our assets and [removed: operations.][added: operations.]

[removed: Some members] [added: Members] within the scientific community believe that [removed: the] [added: an] increasing [removed: concentrations] [added: concentration] of [removed: greenhouse gas] [added: GHG] emissions in the Earth’s [removed: atmosphere, among other reasons,] [added: atmosphere] may [removed: produce] [added: contribute to] climate changes that [added: can] have significant physical effects, [removed: such as] [added: including an] increased frequency and severity of [removed: storms, droughts and floods and other climatic] [added: these types of] events.

[removed: If any] [added: Severe weather events,] such [removed: climatic events were to occur, they] [added: as storms, droughts, or floods,] could have an adverse effect on our [removed: assets and] operations.

[removed: Compliance] [added: Compliance] with the U.S. Environmental Protection Agency [added: (EPA)] Renewable Fuel Standard [added: (RFS)] could adversely affect our [removed: performance.][added: performance.]

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

[added: The RFS program sets annual quotas for the quantity of renewable fuels (such as ethanol and diesel) 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.

If sufficient RINs are unavailable for [removed: purchase or] [added: purchase,] if we have to pay a significantly higher price for RINs, or if we are otherwise unable to meet the U.S. EPA’s RFS mandates, our results of operations and cash flows could be adversely affected.

[removed: Disruption] [added: Disruption] of our ability to obtain crude oil could adversely affect our [removed: operations.][added: operations*.*]

[removed: Any] [added: Any] attempt by the U.S. government to withdraw from or materially modify existing international trade agreements could adversely affect our business, financial [removed: condition] [added: condition,] and results of [removed: operations.][added: operations.]

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

Changes in U.S. social, political, [removed: regulatory] [added: regulatory,] and economic conditions or in laws and policies governing foreign trade, manufacturing, development and investment could adversely affect our business.

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 international trade agreements, our business, financial [removed: condition] [added: condition,] and results of operations could be adversely affected.

[removed: We] [added: We] are subject to interruptions and increased costs as a result of our reliance on third-party transportation of crude oil and the products that we [removed: manufacture.][added: manufacture.]

[removed: We] [added: We] may incur additional costs as a result of our use of rail cars for the transportation of crude oil and the products that we [removed: manufacture.][added: manufacture.]

Rail transportation is subject to a variety of federal, state, and local [removed: regulations.][added: regulations, as well as industry practices and customs.]

For example, in the past several years, the Department of [added: Transportation and various agencies within the Department of] Transportation, [added: including] the [added: Surface Transportation Board, the] Pipeline and Hazardous Materials Safety Administration, and the Federal Railroad [removed: Administration] [added: Administration,] have issued orders and [removed: rules,] [added: rules] pursuant to the [added: Federal Railroad Safety Act of 1970, the Interstate Commerce Commission Termination Act of 1995, the] Rail Safety Improvement Act of 2008, Fixing America’s Surface Transportation Act of 2015 and other statutory [removed: authorities,] [added: authorities] concerning such matters as enhanced tank car standards, [added: positive train control and other] operational controls, safety training programs, and notification requirements.

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

[removed: Competitors] [added: Competitors] that produce their own supply of feedstocks, own their own retail sites, have greater financial resources, or provide alternative energy sources may have a competitive [removed: advantage.][added: advantage.]

[removed: Uncertainty] [added: Uncertainty] and illiquidity in credit and capital markets can impair our ability to obtain credit and financing on acceptable terms, and can adversely affect the financial strength of our business [removed: partners.][added: partners.]

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

Specifically, if ratings agencies were to downgrade our long-term rating, particularly below investment grade, our borrowing costs [removed: would] [added: may] increase, which could adversely affect our ability to attract potential investors and our funding sources could decrease.

[removed: A] [added: A] significant interruption in one or more of our refineries could adversely affect our [removed: business.][added: business.]

[removed: A] [added: A] significant interruption related to our information technology systems could adversely affect our [removed: business.][added: business.]

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

Furthermore, the continuing and evolving threat of [removed: cyber-attacks] [added: cyberattacks] has resulted in increased regulatory focus on prevention.

[removed: Our] [added: Our] business may be negatively affected by work stoppages, slowdowns or strikes by our employees, as well as new labor legislation issued by [removed: regulators.][added: regulators.]

[removed: We] [added: We] are subject to operational risks and our insurance may not be sufficient to cover all potential losses arising from operating hazards.

Failure by one or more insurers to honor its coverage commitments for an insured event could materially and adversely affect our financial position, results of operations, and [removed: liquidity.][added: liquidity*.*]

[removed: Large] [added: Large] capital projects can take many years to complete, and market conditions could deteriorate over time, negatively impacting project [removed: returns.][added: returns.]

[removed: Compliance] [added: Compliance] with and changes in tax laws could adversely affect our [removed: performance.][added: performance.]

Among other things, Tax Reform [removed: reduces] [added: reduced] the U.S. corporate income tax rate from 35 percent to 21 percent and [removed: implements] [added: implemented] 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.

Tax Reform also generally [removed: will] (i) [removed: limit] [added: repealed the manufacturing deduction we previously were able to claim, (ii) resulted in a shift from a worldwide system of taxation to a territorial system of taxation, resulting in a minimum tax on the income of international subsidiaries (the GILTI tax) rather than a tax deferral on such earnings in certain circumstances, (iii) limits] 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 [removed: (ii) permit] [added: (iv) permits] us to offset only 80 percent (rather than 100 percent) of our taxable income with any net operating losses we generate after 2017.

[removed: We] [added: We] may incur losses and additional costs as a result of our forward-contract activities and derivative [removed: transactions.][added: transactions.]

[removed: Changes] [added: 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 [removed: rates.][added: rates.]

In November 2019, the current U.S. administration served notice on the United Nations that the U.S. would withdraw from the Paris Agreement in 2020.

Investor sentiment towards climate change, fossil fuels, and sustainability could adversely affect our business and our stock price.

There have been efforts in recent years aimed at the investment community, including investment advisors, sovereign wealth funds, public pension funds, universities and other groups, to promote the divestment of shares of energy companies, as well as to pressure lenders and other financial services companies to limit or curtail activities with energy companies.

If these efforts are successful, our stock price and our ability to access capital markets may be negatively impacted.

Members of the investment community are also increasing their focus on sustainability practices, including practices related to GHGs and climate change, in the energy industry.

As a result, we may face increasing pressure regarding our sustainability disclosures and practices.

Additionally, members of the investment community may screen companies such as ours for sustainability performance before investing in our stock.

If we are unable to meet the sustainability standards set by these investors, we may lose investors, our stock price may be negatively impacted and our reputation may be negatively affected.

For example, the administration withdrew the U.S. from the Trans-Pacific Partnership.

In addition, the administration has

The general trend has been toward greater regulation of rail transportation over recent years.

Increasing regulatory focus on privacy and security issues and expanding laws could expose us to increased liability, subject us to lawsuits, investigations and other liabilities and restrictions on our operations that could significantly and adversely affect our business.

Along with our own data and information in the normal course of our business, we and our partners collect and retain certain data that is subject to specific laws and regulations.

The transfer and use of this data both domestically and across international borders is becoming increasingly complex.

This data is subject to governmental regulation at the federal, state, international, national, provincial and local levels in many areas of our business, including data privacy and security laws such as the European Union (EU) General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA).

The GDPR applies to activities regarding personal data that may be conducted by us, directly or indirectly through vendors and subcontractors, from an establishment in the EU.

As interpretation and enforcement of the GDPR evolves, it creates a range of new compliance obligations, which could cause us to incur additional costs.

Failure to comply could result in significant penalties of up to a maximum of 4 percent of our global turnover that may materially adversely affect our business, reputation, results of operations, and cash flows.

The CCPA, which came into effect on January 1, 2020, gives California residents specific rights in relation to their personal information, requires that companies take certain actions, including notifications for security

incidents and may apply to activities regarding personal information that is collected by us, directly or indirectly, from California residents.

As interpretation and enforcement of the CCPA evolves, it creates a range of new compliance obligations, with the possibility for significant financial penalties for noncompliance that may materially adversely affect our business, reputation, results of operations, and cash flows.

The GDPR and CCPA, as well as other data privacy laws that may become applicable to our business, pose increasingly complex compliance challenges and potentially elevate our costs.

Our investments in joint ventures and other entities decrease our ability to manage risk.

We conduct some of our operations through joint ventures in which we may share control over certain economic and business interests with our joint venture partners and in some entities in which we have no ownership or control.

Our joint venture partners may have economic, business or legal interests or goals that are inconsistent with our goals and interests or may be unable to meet their obligations.

Failure by us, or an entity in which we have a joint-venture interest, to adequately manage the risks associated with any acquisitions or joint ventures could have a material adverse effect on our, or our joint ventures’, financial position, results of operations, and liquidity.

will develop.

The U.K. withdrew from the EU on January 31, 2020, consistent with the terms of the EU-U.K. Withdrawal Agreement.

The terms of that agreement provide for a transition period, from January 31, 2020 to December 31, 2020, during which the trading relationship between the U.K. and the EU will remain the same while the U.K. and the EU try to negotiate an agreement regarding their future trading relationship.

The ultimate effects of Brexit will depend on whether an agreement is reached, or on the specific terms of any such agreement that is reached, either of which outcomes could adversely impact the ability to trade freely between the U.K. and the EU at the end of the transition period and could negatively impact our competitive position, supplier and customer relationships, and financial performance.

pollution prevention measures, greenhouse gas (GHG) emissions, and characteristics and composition of fuels, including gasoline and diesel.

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.

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.

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.

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.

[removed: CAUTIONARY] [added: CAUTIONARY] STATEMENT FOR THE PURPOSE OF SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF [removed: 1995][added: 1995]

| • | our anticipated level of capital investments, including deferred [removed: costs for refinery turnarounds] [added: turnaround] and [removed: catalyst,] [added: catalyst cost expenditures,] capital expenditures for environmental and other purposes, and joint venture investments, and the effect of those capital investments on our results of operations; |

| • | the effect of general economic and other conditions on refining, ethanol, and [removed: midstream] [added: renewable diesel] industry fundamentals. |

| • | demand for, and supplies of, refined petroleum products [removed: such] [added: (such] as gasoline, diesel, jet fuel, [removed: petrochemicals,] and [removed: ethanol;] [added: petrochemicals), ethanol, and renewable diesel;] |

| • | earthquakes, hurricanes, tornadoes, and irregular weather, which can unforeseeably affect the price or availability of natural gas, crude oil, grain and other feedstocks, [removed: and] refined petroleum [removed: products] [added: products, ethanol,] and [removed: ethanol;] [added: renewable diesel;] |

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

[removed: This report includes] [added: The discussions in “OVERVIEW AND OUTLOOK” and “RESULTS OF OPERATIONS” below include] references to financial measures that are not defined under U.S. generally accepted accounting principles (GAAP).

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

[added: See the tables in note (f) beginning on page 39 for reconciliations of] these non-GAAP financial measures to [removed: the] [added: their] most directly comparable U.S. GAAP financial measures.

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

[removed: OVERVIEW] [added: OVERVIEW] AND [removed: OUTLOOK][added: OUTLOOK]

[removed: Overview][added: Overview]

For [removed: 2018,] [added: 2019,] we reported net income attributable to Valero stockholders of [removed: $3.1] [added: $2.4] billion compared to [removed: $4.1] [added: $3.1] billion for [removed: 2017,] [added: 2018,] which represents a decrease of [removed: $943] [added: $700] million.

[removed: Excluding the adjustments to operating income reflected in the tables on page 32,] [added: Refining segment] adjusted operating income increased by [removed: $931] [added: $902] million in 2018 compared to 2017.

The [removed: $931 million increase] [added: $1.0 billion decrease] in adjusted operating income is primarily due to the following:

| • | [removed: Refining segment.] [added: *Refining segment.*] Refining segment adjusted operating income [removed: increased $961 million] [added: decreased by $1.1 billion] primarily due to [removed: improved distillate margins, favorable] [added: weaker discounts on] crude [removed: oil discounts,] [added: oils] and [added: other feedstocks and] lower [removed: costs of biofuel credits,] [added: throughput volumes,] partially offset by [removed: lower gasoline] [added: improved distillate] margins. This is more fully described on pages [removed: 36 through 37.] [added: 31 and 32.] |

| • | [removed: Ethanol segment.] [added: *Ethanol segment.*] Ethanol segment [added: adjusted] operating income decreased by [removed: $90] [added: $78] million primarily due to [removed: lower ethanol] [added: higher corn] prices and higher [removed: corn prices,] [added: operating expenses (excluding depreciation and amortization expense),] partially offset by higher [removed: corn related co-products] [added: ethanol] prices. This is more fully described on [removed: pages 37 through 38.] [added: page 33.] |

[removed: | • | Corporate and eliminations. Adjusted corporate and eliminations decreased by $10 million] [added: This increase was] primarily due to [added: environmental reserve adjustments of $108 million associated with certain non-operating sites in 2018, partially offset by] expenses [added: incurred] in 2017 associated with the termination of the acquisition of certain assets from Plains All American Pipeline, L.P. [removed: (Plains). This is more fully described on page 38. |][added: of $16 million.]

[removed: Outlook][added: Outlook]

Below are several factors that have impacted or may impact our results of operations during the first quarter of [removed: 2019:][added: 2020:]

| • | [removed: Refining and ethanol] [added: Renewable diesel segment] margins are expected to remain near current levels. |

[removed: RESULTS] [added: RESULTS] OF [removed: OPERATIONS][added: OPERATIONS]

The following [removed: tables] [added: tables, including the reconciliations of non-GAAP financial measures to their most directly comparable U.S. GAAP financial measures in note (f) beginning on page 39,] highlight our results of operations, our operating performance, and market reference prices that directly impact our operations.

[removed: In addition, these tables include] [added: | (f) | We use certain] financial measures [added: (as noted below)] that are not defined under U.S. GAAP and [removed: represent] [added: are considered to be] non-GAAP financial measures. [added: |]

[removed: 2018] [added: 2018] Compared to [removed: 2017][added: 2017]

[removed: Financial] [added: Financial] Highlights by Segment and Total [removed: Company][added: Company]

[removed: (millions] [added: (millions] of [removed: dollars)][added: dollars)]

| | [removed: Year] [added: Year] Ended December 31, [removed: 2018] [added: 2018] | | | | | | | | | | | | | | | | | | |

| | [removed: Refining] [added: Refining] | | | | [removed: Ethanol] [added: Ethanol] | | | | [removed: VLP] [added: Renewable Diesel] | | | | [removed: Corporate] [added: Corporate] and [removed: Eliminations] [added: Eliminations] | | | | [removed: Total] [added: Total] | | |

| Revenues from external customers | $ | [removed: 113,601] [added: 113,093] | | | $ | 3,428 | | | $ | [removed: —] [added: 508] | | | $ | 4 | | | $ | 117,033 | |

| Intersegment revenues | [removed: 14] [added: 25] | | | | 210 | | | | [removed: 546] [added: 170] | | | | [removed: (770] [added: (405] | | ) | | — | | |

| Total revenues | [removed: 113,615] [added: 113,118] | | | | 3,638 | | | | [removed: 546] [added: 678] | | | | [removed: (766] [added: (401] | | ) | | 117,033 | | |

| Cost of materials and other (a) | [removed: 102,489] [added: 101,866] | | | | 3,008 | | | | [removed: —] [added: 262] | | | | [removed: (765] [added: (404] | | ) | | 104,732 | | |

| Operating expenses (excluding depreciation and amortization expense reflected below) | [removed: 4,099] [added: 4,154] | | | | 470 | | | | [removed: 125] [added: 66] | | | | [removed: (4] [added: —] | | [removed: )] | | 4,690 | | |

| Depreciation and amortization expense | [removed: 1,863] [added: 1,910] | | | | 78 | | | | [removed: 76] [added: 29] | | | | — | | | | 2,017 | | |

| Total cost of sales | [removed: 108,451] [added: 107,930] | | | | 3,556 | | | | [removed: 201] [added: 357] | | | | [removed: (769] [added: (404] | | ) | | 111,439 | | |

| Other operating expenses [added: (b)] | [removed: 45] [added: 20] | | | | [removed: —] [added: 1] | | | | — | | | | — | | | | [removed: 45] [added: 21] | | |

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

| Operating income by segment | $ | [removed: 5,119] [added: 5,143] | | | $ | 82 | | | $ | [removed: 345] [added: 321] | | | $ | (974 | ) | | 4,572 | | |

| Other income, net [removed: (c)] [added: (d)] | | | | | | | | | | | | | | | | | 130 | | |

| • | future renewable diesel segment margins; |

NON-GAAP FINANCIAL MEASURES

This decrease is the result of a $569 million decrease in net income and a $131 million increase in net income attributable to noncontrolling interests.

The increase in net income attributable to noncontrolling interests is primarily due to a $279 million pre-tax increase in blender’s tax credits recognized in 2019 compared to 2018, of which 50 percent is attributable to the holder of the noncontrolling interest, as described in note (a) on page 38.

The decrease in net income is primarily due to a decrease of $736 million in operating income between the periods, net of the resulting $177 million decrease in income tax expense.

While operating income decreased by $736 million in 2019 compared to 2018, adjusted operating income decreased by $1.0 billion.

| • | *Renewable diesel segment.* Renewable diesel segment adjusted operating income increased by $259 million primarily due to an increase in renewable diesel sales volumes and an increase in the benefit from the blender’s tax credit resulting from an increase in the volume of renewable diesel blended with petroleum-based diesel in 2019 compared to 2018. This is more fully described on pages 34 and 35. |

| • | Distillate margins are expected to begin improving due to an anticipated increase in global demand as trade war tensions ease and markets comply with the International Maritime Organization’s lower bunker fuel sulfur specifications, which were effective January 1, 2020. Gasoline margins are expected to remain near current levels. |

| • | Discounts for medium and heavy sour crude oils are expected to remain near current levels as compliance with the new bunker fuel sulfur specifications noted above is expected to reduce demand for high sulfur fuel oils, which compete with sour crude oils as a refining feedstock. |

| • | Ethanol margins are expected to decline as domestic inventory levels rise. |

| • | Our refining operations in the U.K. could be adversely affected by Brexit, which formally occurred on January 31, 2020. Although the legal relationship between the U.K. and the EU has changed, their ongoing relationship will continue to follow the EU’s rules during a transition period that is set to expire on December 31, 2020. During the transition period, the U.K. and the EU are expected to negotiate a new free trade agreement, which could negatively impact the operations of our Pembroke Refinery and our marketing operations in the U.K. and Ireland, as could the failure to reach any agreement. The ultimate effect of Brexit will depend on whether an agreement is reached, or on the specific terms of any agreement that is reached by the U.K. and the EU. See Item 1A “RISK FACTORS”—*Changes in the U.K.’s economic and other relationships with the EU could adversely affect us*. |

| • | Global concern about the coronavirus outbreak could result in lower demand for and consumption of transportation fuels, which would have a negative impact on our results of operations. |

Effective January 1, 2019, 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 — 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 DGD, which were transferred from the refining 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 described 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.

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

2019 Compared to 2018

| | Year Ended December 31, 2019 | | | | | | | | | | | | | | | | | | |

| Intersegment revenues | 18 | | | | 231 | | | | 247 | | | | (496 | | ) | | — | | |

| Total revenues | 103,764 | | | | 3,837 | | | | 1,217 | | | | (494 | | ) | | 108,324 | | |

| Cost of materials and other (a) | 93,371 | | | | 3,239 | | | | 360 | | | | (494 | | ) | | 96,476 | | |

| Total cost of sales | 99,722 | | | | 3,833 | | | | 485 | | | | (494 | | ) | | 103,546 | | |

| Operating income by segment | $ | 4,022 | | | $ | 3 | | | $ | 732 | | | $ | (921 | ) | | 3,836 | | |

| | 2019 | | | | 2018 | | | | Change | | |

| Refining | | | | | | | | | | | |

| Brent crude oil | $ | 64.18 | | | $ | 71.62 | | | $ | (7.44 | ) |

| Brent less West Texas Intermediate (WTI) crude oil | 7.15 | | | | 6.71 | | | | 0.44 | | |

| Brent less Alaska North Slope (ANS) crude oil | (0.86 | | ) | | 0.31 | | | | (1.17 | | ) |

| Brent less Argus Sour Crude Index (ASCI) crude oil | 3.56 | | | | 5.20 | | | | (1.64 | | ) |

| LLS crude oil | 62.71 | | | | 69.90 | | | | (7.19 | | ) |

| WTI crude oil | 57.03 | | | | 64.91 | | | | (7.88 | | ) |

| Conventional Blendstock of Oxygenate Blending (CBOB) gasoline less Brent | 4.37 | | | | 4.81 | | | | (0.44 | | ) |

| Propylene less Brent | (22.31 | | ) | | (2.86 | | ) | | (19.45 | | ) |

| ULS diesel less LLS | 16.37 | | | | 15.74 | | | | 0.63 | | |

| Propylene less LLS | (20.84 | | ) | | (1.14 | | ) | | (19.70 | | ) |

| ULS diesel less WTI | 22.77 | | | | 22.82 | | | | (0.05 | | ) |

| ULS diesel less Brent | 17.22 | | | | 16.29 | | | | 0.93 | | |

See the accompanying financial tables in “RESULTS OF OPERATIONS” and note (h) to the accompanying tables for reconciliations of

This decrease is primarily due to a $1.9 billion tax benefit in 2017 resulting from Tax Reform, which 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 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.

| • | VLP segment. VLP segment adjusted operating income increased by $50 million primarily due to incremental revenues, partially offset by higher cost of sales, generated from transportation and terminaling services associated with a terminal and a product pipeline system acquired by VLP in November 2017 that were formerly a part of the refining segment. This is more fully described on page 38. |

Additional details and analysis for the changes in operating income and adjusted operating income for our reportable business segments and other components of net income and adjusted net income attributable to Valero stockholders, including a reconciliation of non-GAAP financial measures used in this Overview to their most comparable measures reported under U.S. GAAP, are provided below under “RESULTS OF OPERATIONS”.

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

| • | Sweet crude oil discounts are expected to remain near current levels as export demand remains strong and 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 and other producing regions in the U.S. |

| • | 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. |

These non-GAAP financial measures are reconciled to their most comparable U.S. GAAP financial measures and include adjusted net income attributable to Valero stockholders, adjusted operating income, and refining and ethanol segment margin.

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

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.

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________________

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| | | | | | | | |

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

| | | | | | | | |

| Net income attributable to Valero Energy Corporation stockholders | $ | 3,122 | | | $ | 4,065 | |

| 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 | | ) | | — | | |

| 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 | | ) | | — | | |

| Income tax benefit from Tax Reform (d) | 12 | | | | 1,862 | | |

| Total adjustments | (35 | | ) | | 1,862 | | |

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

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

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

[removed: COMMODITY] [added: COMMODITY] PRICE [removed: RISK][added: RISK]

We are exposed to market risks related to the volatility in the price of crude oil, refined petroleum products (primarily gasoline and distillate), [added: renewable diesel,] grain (primarily corn), [removed: soybean oil,] [added: renewable diesel feedstocks,] and natural gas used in our operations.

| • | forecasted feedstock and refined petroleum product purchases, refined petroleum product sales, [added: renewable diesel sales, or] natural gas [removed: purchases, and corn] purchases to lock in the price of those forecasted transactions at existing market prices that we deem favorable. |

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

| 10% increase in underlying commodity prices | $ | [removed: 2] [added: (39] | [added: )] | | $ | [removed: (43] [added: 2] | [removed: )] |

| 10% decrease in underlying commodity prices | [removed: (6] [added: 38] | | [removed: )] | | [removed: 45] [added: (6] | | [added: )] |

See Note 20 of Notes to Consolidated Financial Statements for notional volumes associated with these derivative contracts as of December 31, [removed: 2018.][added: 2019.]

[removed: COMPLIANCE] [added: COMPLIANCE] PROGRAM PRICE [removed: RISK][added: RISK]

As of December 31, [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] the amount of gain or loss in the fair value of derivative instruments that would have resulted from a 10 percent increase or decrease in the underlying price of the contracts was not material.

[removed: INTEREST] [added: INTEREST] RATE [removed: RISK][added: RISK]

| | [removed: December] [added: December] 31, [removed: 2018] [added: 2018] | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| | [removed: Expected] [added: Expected] Maturity [removed: Dates] [added: Dates] | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

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

| Average interest rate | — | | % | | 6.1 | | % | | [removed: 5] [added: 5.0] | | % | | — | | % | | — | | % | | 5.4 | | % | | 5.5 | | % | | | | |

| Floating rate [removed: (b)] [added: (c)] | $ | 214 | | | $ | 5 | | | $ | 5 | | | $ | 5 | | | $ | 20 | | | $ | — | | | $ | 249 | | | $ | 249 | |

| | [removed: Expected] [added: Expected] Maturity [removed: Dates] [added: Dates] | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| | [removed: 2018] [added: 2020 (a)] | | | | [removed: 2019] [added: 2021] | | | | [removed: 2020] [added: 2022] | | | | [removed: 2021] [added: 2023] | | | | [removed: 2022] [added: 2024] | | | | [removed: There- after] [added: There- after] | | | | [removed: Total (a)] [added: Total (b)] | | | | [removed: Fair Value] [added: Fair Value] | | |

| [removed: (a)] [added: (b)] | Excludes unamortized discounts and debt issuance costs. |

| [removed: (b)] [added: (c)] | As of December 31, [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] we had an interest rate swap associated with [removed: $40] [added: $36] million and [removed: $49] [added: $40] 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. |

[removed: FOREIGN] [added: FOREIGN] CURRENCY [removed: RISK][added: RISK]

Our market risk was minimal on these contracts, as all of them matured on or before [removed: January 31, 2019.][added: February 15, 2020.]

| | 2019 | | | | 2018 | | |

| | December 31, 2019 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Fixed rate | $ | — | | | $ | 11 | | | $ | — | | | $ | — | | | $ | — | | | $ | 8,474 | | | $ | 8,485 | | | $ | 10,099 | |

| Average interest rate | — | | % | | 5.0 | | % | | — | | % | | — | | % | | — | | % | | 5.2 | | % | | 5.2 | | % | | | | |

| Floating rate (c) | $ | 453 | | | $ | 6 | | | $ | 6 | | | $ | 19 | | | $ | — | | | $ | — | | | $ | 484 | | | $ | 484 | |

| Average interest rate | 5.0 | | % | | 4.5 | | % | | 4.5 | | % | | 4.5 | | % | | — | | % | | — | | % | | 5.0 | | % | | | | |

| (a) | As of December 31, 2019 and 2018, our floating rate debt due in 2020 and 2019 includes $348 million and $109 million, respectively, associated with borrowings under the IEnova Revolver for the construction of terminals in Mexico by Central Mexico Terminals. The IEnova Revolver is only available to the operations of Central Mexico Terminals, and its creditors do not have recourse against us. |

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| --- | --- |

As of December 31, 2019, we had foreign currency contracts to purchase $739 million of U.S. dollars and $2.3 billion of U.S. dollar equivalent Canadian dollars.

| | 2018 | | | | 2017 | | |

| | December 31, 2017 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Fixed rate | $ | — | | | $ | 750 | | | $ | 850 | | | $ | — | | | $ | — | | | $ | 6,224 | | | $ | 7,824 | | | $ | 9,236 | |

| Average interest rate | — | | % | | 9.4 | | % | | 6.1 | | % | | — | | % | | — | | % | | 5.6 | | % | | 6.0 | | % | | | | |

| Floating rate (b) | $ | 106 | | | $ | 6 | | | $ | 416 | | | $ | 6 | | | $ | 6 | | | $ | 19 | | | $ | 559 | | | $ | 559 | |

| Average interest rate | 2.1 | | % | | 3.8 | | % | | 2.9 | | % | | 3.8 | | % | | 3.8 | | % | | 3.8 | | % | | 2.8 | | % | | | | |

As of December 31, 2018, we had commitments to purchase $441 million of U.S. dollars.

[removed: LITIGATION][added: LITIGATION]

[removed: ENVIRONMENTAL] [added: ENVIRONMENTAL] ENFORCEMENT [removed: MATTERS][added: MATTERS]

[removed: U.S. EPA] [added: *U.S. EPA*] (Fuels).

[removed: We have] [added: In our annual report on Form 10-K for the year ended December 31, 2018, we reported that we had] 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 [added: U.S.] EPA to resolve this matter.

[removed: Bay] [added: *Bay] Area Air Quality Management District [removed: (BAAQMD)] [added: (BAAQMD)* *and Solano County Department of Resource Management Certified Unified Program Agency (Solano County)*] (Benicia Refinery).

We are working with the [removed: BAAQMD] [added: Texas AG] to resolve [removed: the VNs.][added: this matter.]

[removed: South] [added: *South] Coast Air Quality Management District [removed: (SCAQMD)] [added: (SCAQMD*)] (Wilmington Refinery).

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

[removed: TCEQ] [added: *TCEQ*] (Port Arthur).

[removed: We have] [added: In our annual report on Form 10-K for the year ended December 31, 2018, we reported that we had] an outstanding [removed: Notice of Enforcement (NOE)] [added: 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 [removed: pertinent authorities] [added: Texas AG] to resolve [removed: these matters.][added: this matter.]

In the fourth quarter of 2019, we received a draft Consent Order from the U.S. EPA proposing penalties of $3.4 million.

*Attorney General of the State of Texas (Texas AG)* (Corpus Christi Asphalt Plant).

In our quarterly report on Form 10-Q for the quarter ended March 31, 2019, we reported that we had received a letter and draft Agreed Final Judgment from the Texas AG related to a contaminated water backflow incident that occurred at the Valero Corpus Christi Asphalt Plant.

The draft Agreed Final Judgment assesses proposed penalties in the amount of $1.3 million.

*Texas AG* (Port Arthur Refinery).

In our quarterly report on Form 10-Q for the quarter ended June 30, 2019, we reported that the Texas AG had filed suit against our Port Arthur Refinery in the 419th Judicial District Court of Travis County, Texas, Cause No. D-1-GN-19-004121, for alleged violations of the Clean Air Act seeking injunctive relief and penalties.

*Texas AG* (Houston Terminal).

In our annual report on Form 10-K for the year ended December 31, 2018, we reported that we had an outstanding Notice of Enforcement (NOE) from the Texas Commission on Environmental Quality (TCEQ), and an outstanding Violation Notice (VN) from the Harris County Pollution Control Services Department, both alleging excess emissions from Tank 003 that occurred during Hurricane Harvey.

On January 27, 2020, the Texas AG filed suit related to this incident against our Houston Terminal in the 419th Judicial District Court of Travis County, Texas, Cause No. D-1-GN-20-000516 seeking injunctive relief and penalties.

In our quarterly report on Form 10-Q for the quarter ended March 31, 2019, we reported that we had received multiple VNs issued by the BAAQMD related to an upset of the Flue Gas Scrubber (FGS) at our Benicia Refinery, and a draft Consent from Solano County related to the FGS incident proposing penalties of $242,840.

In our quarterly report on Form 10-Q for the quarter ended September 30, 2019, we reported that we had resolved the matter with Solano County.

We continue to work with the BAAQMD on a final resolution of the remaining VNs.

*BAAQMD* (Benicia Refinery).

In our annual report on Form 10-K for the year ended December 31, 2018, we reported that we had multiple outstanding VNs issued by the BAAQMD.

We continue to work with the BAAQMD to resolve these VNs.

In our annual report on Form 10-K for the year ended December 31, 2018, we reported that we had outstanding Notices of Violation (NOVs) issued by the SCAQMD.

We have outstanding Violation Notices (VNs) issued by the BAAQMD from 2017 to present.

We have outstanding NOVs issued by the SCAQMD.

Texas Commission on Environmental Quality (TCEQ) (McKee Refinery).

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.

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.

[removed: UNITED STATES][added: UNITED STATES]

[removed: SECURITIES] [added: SECURITIES] AND EXCHANGE [removed: COMMISSION][added: COMMISSION]

[removed: FORM 10-K][added: FORM 10-K]

| [removed: þ] [added: ☑] | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |

[removed: For] [added: For] the fiscal year [removed: ended December] [added: ended December] 31, [removed: 2018][added: 2019]

| [removed: o] [added: ☐] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |

[removed: Commission] [added: Commission] file [removed: number 1-13175][added: number 001-13175]

[removed: VALERO] [added: VALERO] ENERGY [removed: CORPORATION][added: CORPORATION]

| [removed: Delaware] [added: Delaware] | [removed: 74-1828067] [added: 74-1828067] |

[removed: | One] [added: One] Valero [removed: Way | | | |][added: Way]

[removed: | San Antonio, Texas | | 78249 | |][added: San Antonio, Texas 78249]

[removed: |] (Address of principal executive offices) [removed: | |] (Zip Code) [removed: | |]

[removed: | |] Registrant’s telephone number, including area code: [removed: (210) 345-2000 | | |][added: (210) 345-2000]

[removed: Securities] [added: Securities] registered pursuant to Section 12(g) of the [removed: Act:] [added: Act:] None.

Yes [removed: þ] [added: ☑] No [removed: o][added: ☐]

Yes [removed: o] [added: ☐] No [removed: þ][added: ☑]

Yes [removed: þ] [added: ☑] No [removed: o][added: ☐]

Yes [removed: þ] [added: ☑] No [removed: o][added: ☐]

| [added: |] Large accelerated filer [removed: þ] [added: | | | ☑ | |] Accelerated filer [removed: o] [added: | | | | ☐ | |] Non-accelerated filer [removed: o] | [added: | | | ☐ | |]

| [added: | |] Smaller reporting company [removed: o] [added: | | | | | ☐ | |] Emerging growth company [removed: o] | [added: | | | | ☐ | | | |]

Yes [removed: o] [added: ☐] No [removed: þ][added: ☑]

The aggregate market value of the voting and non-voting common stock held by non-affiliates was approximately [removed: $47.5] [added: $35.5] billion based on the last sales price quoted as of June [removed: 29, 2018] [added: 28, 2019] 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: 2019, 417,614,487] [added: 2020, 409,337,126] shares of the registrant’s common stock were outstanding.

[removed: DOCUMENTS] [added: DOCUMENTS] INCORPORATED BY [removed: REFERENCE][added: REFERENCE]

We intend to file with the Securities and Exchange Commission a definitive Proxy Statement for our Annual Meeting of Stockholders scheduled for April 30, [removed: 2019,] [added: 2020,] at which directors will be elected.

Portions of the [removed: 2019] [added: 2020] Proxy Statement are incorporated by reference in Part III of this Form 10-K and are deemed to be a part of this report.

[removed: CROSS-REFERENCE SHEET][added: CROSS-REFERENCE SHEET]

The following table indicates the headings in the [removed: 2019] [added: 2020] Proxy Statement where certain information required in Part III of this Form 10-K may be found.

| [removed: Form] [added: Form] 10-K Item No. and [removed: Caption] [added: Caption] | | | [removed: Heading] [added: Heading] in [removed: 2019] [added: 2020] Proxy [removed: Statement] [added: Statement] |

| 10. | Directors, Executive Officers and Corporate Governance | | [removed: Information] [added: *Information] Regarding the Board of Directors, Independent Directors, Audit Committee, Proposal No. 1 Election of [removed: Directors, Information] [added: Directors*, *Information] Concerning Nominees and Other [removed: Directors, Identification] [added: Directors,* *Identification] of Executive [removed: Officers, Section 16(a) Beneficial Ownership Reporting Compliance,] [added: Officers,*] and [removed: Governance] [added: *Governance] Documents and Codes of [removed: Ethics] [added: Ethics*] |

| 11. | Executive Compensation | | [removed: Compensation] [added: *Compensation] Committee, Compensation Discussion and Analysis, Executive Compensation, Director Compensation, Pay Ratio [removed: Disclosure,] [added: Disclosure,*] and [removed: Certain] [added: *Certain] Relationships and Related [removed: Transactions] [added: Transactions*] |

| 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | | [removed: Beneficial] [added: *Beneficial] Ownership of Valero [removed: Securities] [added: Securities*] and [removed: Equity] [added: *Equity] Compensation Plan [removed: Information] [added: Information*] |

| 13. | Certain Relationships and Related Transactions, and Director Independence | | [removed: Certain] [added: *Certain] Relationships and Related [removed: Transactions] [added: Transactions*] and [removed: Independent Directors] [added: *Independent Directors*] |

| 14. | Principal Accountant Fees and Services | | [removed: KPMG] [added: *KPMG] LLP [removed: Fees] [added: Fees*] and [removed: Audit] [added: *Audit] Committee Pre-Approval [removed: Policy] [added: Policy*] |

[removed: CONTENTS][added: CONTENTS]

| | | [removed: PAGE] [added: PAGE] |

[removed: | [PART I](#s6C7A0BB100055861A0C461056AC06694) | | [1](#s6C7A0BB100055861A0C461056AC06694) |][added: PART I]

| [Items 1. & [removed: 2.](#sB36CBA4128735483AE703B6F99CE84E6)] [added: 2.](#sACAB6E51D3815E0E938968873946967E)] | [Business and [removed: Properties](#sB36CBA4128735483AE703B6F99CE84E6)] [added: Properties](#sACAB6E51D3815E0E938968873946967E)] | [removed: [1](#sB36CBA4128735483AE703B6F99CE84E6)] [added: [1](#sACAB6E51D3815E0E938968873946967E)] |

[removed: | | [Overview](#s5321f7100f534e368a573f58c9fc3a56) | [1](#s5321f7100f534e368a573f58c9fc3a56) |][added: OVERVIEW]

[removed: | | [Available Information](#s491af1bb316445358653a28566fc7c55) | [1](#s491af1bb316445358653a28566fc7c55) |][added: AVAILABLE INFORMATION]

Securities registered pursuant to Section 12(b) of the Act:

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| Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |

| Common stock | | VLO | | New York Stock Exchange |

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| [PART II](#s15D1443C67275265A909CD61D4C38D57) | | [20](#s15D1443C67275265A909CD61D4C38D57) |

| [PART III](#s30898A3D34AB5F6C8BC9889FA21C1B8A) | | [146](#s30898A3D34AB5F6C8BC9889FA21C1B8A) |

| [PART IV](#sE016B2CFD40A5823AD5EAC0EB74F1AF9) | | [147](#sE016B2CFD40A5823AD5EAC0EB74F1AF9) |

| [Signature](#s128F51ACC4935697AF44A686F2E0712F) | | [151](#s128F51ACC4935697AF44A686F2E0712F) |

We are also a joint venture partner in Diamond Green Diesel Holdings LLC (DGD), which owns and operates a renewable diesel plant in Norco, Louisiana.

Approximately 7,000 outlets carry our brand names.

| U.S. | | | | | |

| Canada | | | | | |

| U.K. | | | | | |

*California*

*Benicia Refinery*.

*Wilmington Refinery*.

*Louisiana*

*Meraux Refinery*.

*Oklahoma*

*Ardmore Refinery*.

*Tennessee*

*Memphis Refinery*.

*Texas*

*Houston Refinery*.

The refinery successfully commissioned a new alkylation unit in 2019.

*McKee Refinery*.

*Canada*

*U.K.*

*Pembroke Refinery*.

Our bulk sales are made to

RENEWABLE DIESEL

Our renewable segment includes the operations of DGD, which owns and operates a biomass-based diesel plant (the DGD Plant) that processes animal fats, used cooking oils, and other vegetable oils into renewable diesel.

The DGD Plant is located next to our St. Charles Refinery in Norco, Louisiana.

During 2019, the DGD Plant’s capacity was approximately 18,000 BPD.

The DGD Plant is capable of annually converting approximately 2.3 billion pounds of rendered and recycled material into more than 275 million gallons of renewable diesel.

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

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Securities registered pursuant to Section 12(b) of the Act: Common stock, $0.01 par value per share listed on the New York Stock Exchange.

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. o

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

| [PART III](#s561ED45EC01A5EEDBE7F913E4B51A2A8) | | [139](#s561ED45EC01A5EEDBE7F913E4B51A2A8) |

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

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

We sell our ethanol in the wholesale bulk market.

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| | |

| --- | --- |

| • | VLP segment includes the operations of VLP, which is a limited partnership that owns logistics assets that provide transportation and terminaling services to our refining segment. |

| | | | | | |

| | | | | | |

[removed: PART II][added: PART II]

As of January 31, [removed: 2019,] [added: 2020,] there were [removed: 5,271] [added: 5,082] 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: 2018.][added: 2019.]

| [removed: Period] [added: Period] | | [removed: Total Number of Shares Purchased] [added: Total Number of Shares Purchased] | | | [removed: Average Price Paid per Share] [added: Average Price Paid per Share] | | | | [removed: Total] [added: Total] Number [removed: of Shares Not Purchased] [added: of Shares Not Purchased] as Part [removed: of Publicly Announced Plans] [added: of Publicly Announced Plans] or Programs [removed: (a)] [added: (a)] | | | [removed: Total] [added: Total] Number [removed: of Shares] [added: of Shares] Purchased [removed: as Part] [added: as Part] of [removed: Publicly Announced] [added: Publicly Announced] Plans [removed: or Programs] [added: or Programs] | | | [removed: Approximate Dollar Value] [added: Approximate Dollar Value] of Shares [removed: that May] [added: that May] Yet Be [removed: Purchased Under] [added: Purchased Under] the Plans [removed: or Programs (b)] [added: or Programs (b)] |

| (a) | The shares reported in this column represent purchases settled in the fourth quarter of [removed: 2018] [added: 2019] relating to (i) our purchases of shares in open-market transactions to meet our obligations under stock-based compensation 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 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 2018 Program), with no expiration [removed: 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.] [added: date.] As of December 31, [removed: 2018,] [added: 2019,] we had [removed: $2.2] [added: $1.5] billion remaining available for purchase under the 2018 Program. |

[removed: The] [added: *The] following performance graph is not “soliciting material,” is not deemed filed with the SEC, and is not to be incorporated by reference into any of [removed: Valero’s] [added: Valero*’*s] filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, as amended, [removed: respectively.][added: respectively*.]

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: 2013] [added: 2014] and ending December 31, [removed: 2018.][added: 2019.]

[removed: COMPARISON] [added: COMPARISON] OF 5 YEAR CUMULATIVE TOTAL [removed: RETURN(a)][added: RETURN(a)]

[removed: ][added: ]

| | [removed: As] [added: As] of December [removed: 31,] [added: 31,] | | | | | | | | | | | | | | | | | | | | | | |

| | [removed: 2013] [added: 2014] | | | | [removed: 2014] [added: 2015] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2016] [added: 2017] | | | | [removed: 2017] [added: 2018] | | | | [removed: 2018] [added: 2019] | | |

| (a) | Assumes that an investment in Valero common stock and each index was $100 on December 31, [removed: 2013.] [added: 2014.] “Cumulative total return” is based on share price appreciation plus reinvestment of dividends from December 31, [removed: 2013] [added: 2014] through December 31, [removed: 2018.] [added: 2019.] |

| October 2019 | | 332,704 | | | $ | 88.06 | | | 98,396 | | | 234,308 | | | $1.6 billion |

| November 2019 | | 1,565,500 | | | $ | 99.21 | | | 107,914 | | | 1,457,586 | | | $1.5 billion |

| December 2019 | | 393,694 | | | $ | 94.61 | | | 6,984 | | | 386,710 | | | $1.5 billion |

| Total | | 2,291,898 | | | $ | 96.80 | | | 213,294 | | | 2,078,604 | | | $1.5 billion |

| Valero Common Stock | $ | 100.00 | | | $ | 146.79 | | | $ | 147.94 | | | $ | 207.10 | | | $ | 174.54 | | | $ | 227.53 | |

| S&P 500 | 100.00 | | | | 101.38 | | | | 113.51 | | | | 138.29 | | | | 132.23 | | | | 173.86 | | |

| Peer Group | 100.00 | | | | 88.46 | | | | 106.16 | | | | 134.53 | | | | 125.35 | | | | 137.49 | | |

____________________________________

| 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 selected financial data for the five-year period ended December 31, [removed: 2018] [added: 2019] was derived from our audited financial statements.

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

| | [removed: 2018] [added: 2019] | | | | [removed: 2017 (a)] [added: 2018] | | | | [removed: 2016 (b)] [added: 2017 (a)] | | | | [removed: 2015 (c)] [added: 2016 (b)] | | | | [removed: 2014] [added: 2015 (c)] | | |

| Revenues | $ | [removed: 117,033] [added: 108,324] | | | $ | [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: Income from continuing operations] [added: Net income] | [removed: 3,353] [added: 2,784] | | | | [removed: 4,156] [added: 3,353] | | | | [removed: 2,417] [added: 4,156] | | | | [removed: 4,101] [added: 2,417] | | | | [removed: 3,775] [added: 4,101] | | |

| Earnings per common share [removed: from continuing operations] – assuming dilution | [removed: 7.29] [added: 5.84] | | | | [removed: 9.16] [added: 7.29] | | | | [removed: 4.94] [added: 9.16] | | | | [removed: 7.99] [added: 4.94] | | | | [removed: 6.97] [added: 7.99] | | |

| Dividends per common share | [removed: 3.20] [added: 3.60] | | | | [removed: 2.80] [added: 3.20] | | | | [removed: 2.40] [added: 2.80] | | | | [removed: 1.70] [added: 2.40] | | | | [removed: 1.05] [added: 1.70] | | |

| Total assets | [removed: 50,155] [added: 53,864] | | | | [removed: 50,158] [added: 50,155] | | | | [removed: 46,173] [added: 50,158] | | | | [removed: 44,227] [added: 46,173] | | | | [removed: 45,355] [added: 44,227] | | |

| Debt and [removed: capital] [added: finance] lease obligations, less current portion | [removed: 8,871] [added: 9,178] | | | | [removed: 8,750] [added: 8,871] | | | | [removed: 7,886] [added: 8,750] | | | | [removed: 7,208] [added: 7,886] | | | | [removed: 5,747] [added: 7,208] | | |

| (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 [removed: million as described in Note 5 of Notes to Consolidated Financial Statements.] [added: million.] |

_________________________________________________

_________________________________________________

[removed: MANAGEMENT’S] [added: MANAGEMENT’S] REPORT ON INTERNAL CONTROL OVER FINANCIAL [removed: REPORTING][added: REPORTING]

Our management evaluated the effectiveness of Valero’s internal control over financial reporting as of December 31, [removed: 2018.][added: 2019.]

In its evaluation, management used the criteria established in [removed: Internal] [added: *Internal] Control – Integrated Framework [removed: (2013)] [added: (2013)*] issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Management believes that as of December 31, [removed: 2018,] [added: 2019,] 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: 64] [added: 62] of this report.

[removed: REPORT] [added: REPORT] OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING [removed: FIRM][added: FIRM]

Valero Energy [removed: Corporation and subsidiaries:][added: Corporation:]

[removed: Opinion] [added: *Opinion] on the Consolidated Financial [removed: Statements][added: Statements*]

We have audited the accompanying consolidated balance sheets of Valero Energy Corporation and subsidiaries (the Company) as of December 31, [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] 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: 2018,] [added: 2019,] 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: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, [removed: 2018,] [added: 2019,] 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: 2018,] [added: 2019,] based on criteria established in [removed: Internal] [added: *Internal] Control – Integrated Framework [removed: (2013)] [added: (2013)*] issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February [removed: 28, 2019] [added: 26, 2020] expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

[removed: Basis] [added: *Basis] for [removed: Opinion][added: Opinion*]

[removed: REPORT] [added: REPORT] OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING [removed: FIRM][added: FIRM]

Valero Energy [removed: Corporation and subsidiaries:][added: Corporation:]

[removed: Opinion] [added: *Opinion] on Internal Control Over Financial [removed: Reporting][added: Reporting*]

We have audited Valero Energy Corporation’s [added: and subsidiaries’] (the Company) internal control over financial reporting as of December 31, [removed: 2018,] [added: 2019,] based on criteria established in [removed: Internal] [added: *Internal] Control – Integrated Framework [removed: (2013)] [added: (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: 2018,] [added: 2019,] based on criteria established in [removed: Internal] [added: *Internal] Control – Integrated Framework [removed: (2013)] [added: (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: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] 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: 2018,] [added: 2019,] and the related notes (collectively, the consolidated financial statements), and our report dated February [removed: 28, 2019] [added: 26, 2020] expressed an unqualified opinion on those consolidated financial statements.

[removed: Basis] [added: *Basis] for [removed: Opinion][added: Opinion*]

[removed: Definition] [added: *Definition] and Limitations of Internal Control Over Financial [removed: Reporting][added: Reporting*]

[removed: VALERO] [added: VALERO] ENERGY [removed: CORPORATION][added: CORPORATION]

[removed: CONSOLIDATED] [added: CONSOLIDATED] BALANCE [removed: SHEETS][added: SHEETS]

[removed: (millions] [added: (millions] of dollars, except par [removed: value)][added: value)]

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

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

| [removed: ASSETS] [added: ASSETS] | | | | | | | |

| Cash and cash equivalents | $ | [removed: 2,982] [added: 2,583] | | | $ | [removed: 5,850] [added: 2,982] | |

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

| Inventories | [added: — | | | | — | | | |] 6,532 | | | | [removed: 6,384] [added: —] | | | [added: | 6,532 | | |]

| Prepaid expenses and other | [removed: 816] [added: 469] | | | | [removed: 156] [added: 816] | | |

| Total current assets | [removed: 17,675] [added: 18,969] | | | | [removed: 19,312] [added: 17,675] | | |

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

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

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

| Deferred charges and other assets, net | [removed: 3,632] [added: 5,631] | | | | [removed: 3,366] [added: 3,632] | | |

| Total assets | $ | [removed: 50,155] [added: 53,864] | | | $ | [removed: 50,158] [added: 50,155] | |

| [removed: LIABILITIES] [added: LIABILITIES] AND [removed: EQUITY] [added: EQUITY] | | | | | | | |

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

| Accounts payable | [removed: 8,594] [added: 10,205] | | | | [removed: 8,348] [added: 8,594] | | |

| Accrued expenses | [removed: 630] [added: 949] | | | | [removed: 712] [added: 630] | | |

*Critical Audit Matter*

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgment.

The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

*Assessment of gross unrecognized tax benefits*

As discussed in Note 15 to the consolidated financial statements, as of December 31, 2019, the Company has gross unrecognized tax benefits, excluding related interest and penalties, of $897 million.

The Company’s tax positions are subject to examination by local taxing authorities and the resolution of such examinations may span multiple years.

Due to the complexities inherent in the interpretation of income tax laws in domestic and international jurisdictions, it is uncertain whether some of the Company’s income tax positions will be sustained upon examination.

We identified the assessment of the Company’s gross unrecognized tax benefits as a critical audit matter because complex auditor judgment was required in evaluating the Company’s interpretation of income tax laws and assessing the Company’s estimate of the ultimate resolution of its income tax positions.

The primary procedures we performed to address this critical audit matter included the following.

We tested certain internal controls over the Company’s income tax process, including controls to evaluate which of the Company’s income tax positions may not be sustained upon examination and estimate the gross unrecognized tax benefits.

We involved domestic and international income tax professionals with specialized skills and knowledge, who assisted in:

| • | Obtaining an understanding and evaluating the Company’s income tax positions as filed or intended to be filed; |

| • | Evaluating the Company’s interpretation of income tax laws by developing an independent assessment of the Company’s income tax positions and comparing the results to the Company’s assessment; |

| • | Inspecting settlements with applicable taxing authorities; and |

| • | Assessing the expiration of applicable statutes of limitations. |

In addition, we evaluated the Company’s ability to estimate its gross unrecognized tax benefits by comparing historical uncertain income tax positions, including the gross unrecognized tax benefits, to actual results upon conclusion of tax examinations.

February 26, 2020

February 26, 2020

| | 2019 | | | | 2018 | | |

| Current portion of debt and finance lease obligations | $ | 494 | | | $ | 238 | |

| Taxes other than income taxes payable | 1,304 | | | | 1,213 | | |

| Income taxes payable | 208 | | | | 49 | | |

| Total cost of sales | 103,546 | | | | 111,439 | | | | 89,475 | | |

| Net gain (loss) on pension and other postretirement benefits | (234 | | ) | | 49 | | | | (65 | | ) |

| Net loss on cash flow hedges | (8 | | ) | | — | | | | — | | |

| Net income | — | | | | — | | | | — | | | | 2,422 | | | | — | | | | 2,422 | | | | 362 | | | | 2,784 | | |

| Acquisition of Valero Energy Partners LP publicly held common units | — | | | | (328 | | ) | | — | | | | — | | | | — | | | | (328 | | ) | | (622 | | ) | | (950 | | ) |

| Balance as of December 31, 2019 | $ | 7 | | | $ | 6,821 | | | $ | (15,648 | ) | | $ | 31,974 | | | $ | (1,351 | ) | | $ | 21,803 | | | $ | 733 | | | $ | 22,536 | |

| Capital expenditures of VIEs: | | | | | | | | | | | |

| Diamond Green Diesel Holdings LLC (DGD) | (142 | | ) | | (165 | | ) | | (84 | | ) |

| Other VIEs | (225 | | ) | | (124 | | ) | | (26 | | ) |

| Deferred turnaround and catalyst cost expenditures (excluding VIEs) | (762 | | ) | | (888 | | ) | | (519 | | ) |

| Deferred turnaround and catalyst cost expenditures of DGD | (18 | | ) | | (27 | | ) | | (4 | | ) |

| Proceeds from borrowings of VIEs | 239 | | | | 109 | | | | — | | |

| Repayments of debt and finance lease obligations (excluding VIEs) | (1,805 | | ) | | (1,353 | | ) | | (15 | | ) |

| Repayments of debt of VIEs | (6 | | ) | | (6 | | ) | | (6 | | ) |

We are an international manufacturer and marketer of transportation fuels and petrochemical products.

The petroleum refineries are located in the United States (U.S.), Canada, and the United Kingdom (U.K.), and the ethanol plants are located in the Mid-Continent region of the U.S. We are also a joint venture partner in DGD, which owns and operates a renewable diesel plant in Norco, Louisiana.

Approximately 7,000 outlets carry our brand names.

Effective January 1, 2019, we revised our reportable segments to reflect a new reportable segment — renewable diesel.

February 28, 2019

February 28, 2019

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

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

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

| Lower of cost or market inventory valuation adjustment | — | | | | — | | | | (747 | | ) |

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

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

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

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

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

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

| Balance as of December 31, 2015 | $ | 7 | | | $ | 7,064 | | | $ | (10,799 | ) | | $ | 25,188 | | | $ | (933 | ) | | $ | 20,527 | | | $ | 827 | | | $ | 21,354 | |

| Net income | — | | | | — | | | | — | | | | 2,289 | | | | — | | | | 2,289 | | | | 128 | | | | 2,417 | | |

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

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

| Lower of cost or market inventory valuation adjustment | — | | | | — | | | | (747 | | ) |

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

| Capital expenditures | (1,628 | | ) | | (1,353 | | ) | | (1,278 | | ) |

We are an independent petroleum refiner and ethanol producer.

Most of our logistics assets support our refining operations, and some of these assets are owned by Valero Energy Partners LP (VLP).

See Note 12 for further information about VLP.

We also own 14 ethanol plants in the Mid-Continent region of the U.S. with a combined production capacity of approximately 1.73 billion gallons per year as of December 31, 2018.

We sell our ethanol in the wholesale bulk market, and some of our logistics assets support our ethanol operations.

Certain prior year amounts have been reclassified to conform to the 2018 presentation.

The changes were primarily due to our retrospective adoption on January 1, 2018 of Accounting Standards Update (ASU) No. 2017-07, “Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.” This ASU requires employers to report the service cost component of net periodic pension cost and net periodic postretirement benefit cost in the same line item as other compensation costs arising from services rendered by the pertinent employees during the period.

It also requires the other components of net periodic pension cost and net periodic postretirement benefit cost (non-service cost components) to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations.

The adoption of this ASU did not affect our financial position or results of operations, but resulted in the reclassification of the non-service components of pension and postretirement benefit costs from operating expenses (excluding depreciation and amortization expense) and general and administrative expenses (excluding depreciation and amortization expense) to other income, net.

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.

We maintain a

Assets acquired under capital leases are amortized on a straight-line basis over (i) the lease term if transfer of ownership does not occur at the end of the lease term or (ii) the estimated useful life of the asset if transfer of ownership does occur at the end of the lease term.

| • | investments in joint ventures accounted for under the equity method; |

| • | intangible assets; and |

Our VLP segment generates intersegment revenues from transportation and terminaling activities provided to our refining segment that are eliminated in consolidation.

that require us to blend a certain percentage of biofuels into the products we produce.

The estimated fair

Topic 606

This standard clarifies the principles for recognizing revenue and supersedes previous revenue recognition requirements under “Revenue Recognition (Topic 605).” We adopted the provisions of Topic 606 using the modified retrospective method of adoption as permitted by the standard.

Under this method, the cumulative effect of initially applying the standard is recognized as an adjustment to the opening balance of retained earnings, and revenues reported in the periods prior to the date of adoption are not changed.

[removed: Disclosure] [added: Disclosure] Controls and [removed: Procedures.][added: Procedures.]

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: 2018.][added: 2019.]

[added: *(c) Changes in] Internal Control over Financial [removed: Reporting.][added: Reporting.*]

[removed: (a) Management’s] [added: *(a) Management*’*s] Report on Internal Control over Financial [removed: Reporting.][added: Reporting.*]

The management report on Valero’s internal control over financial reporting required by Item 9A appears in Item 8 on page [removed: 62] [added: 59] of this report, and is incorporated herein by reference.

[removed: (b)] [added: *(b)] Attestation Report of the Independent Registered Public Accounting [removed: Firm.][added: Firm.*]

KPMG LLP’s report on Valero’s internal control over financial reporting appears in Item 8 beginning on page [removed: 64] [added: 62] of this report, and is incorporated herein by reference.

[removed: (c) Changes in Internal] [added: Internal] Control over Financial [removed: Reporting.][added: Reporting.]

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

As a result, we have made changes affecting our internal control over financial reporting in conjunction with the adoption of this standard.

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 have integrated our lease accounting system with our general ledger and modified our related procurement and payment processes.

[removed: PART III][added: PART III]

[removed: ITEMS 10-14.][added: ITEMS 10-14.]

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: 2019] [added: 2020] annual meeting of stockholders.

We [removed: will] [added: expect to] file the proxy statement with the SEC on or before March 31, [removed: 2019.][added: 2020.]

[removed: PART IV][added: PART IV]

| | [removed: Page] [added: Page] |

| [Management’s report on internal control over financial [removed: reporting](#s38E74D6BA467579393F007075B6DBD93)] [added: reporting](#s4B6F5C9EEA77515C8B0B2634E2A3567F)] | [removed: [62](#s38E74D6BA467579393F007075B6DBD93)] [added: [59](#s4B6F5C9EEA77515C8B0B2634E2A3567F)] |

| [Reports of independent registered public accounting [removed: firm](#s21598B79671E5E9E89AD2FF6729A67DA)] [added: firm](#sE4E45A80AB7A5E57ADED69996154109E)] | [removed: [63](#s21598B79671E5E9E89AD2FF6729A67DA)] [added: [60](#sE4E45A80AB7A5E57ADED69996154109E)] |

| [Consolidated balance sheets as of December 31, [removed: 2018] [added: 2019] and [removed: 2017](#sCA8F779AFF5452B7996AF9C8FC847B2C)] [added: 2018](#s3322274D54C55E999865AFB360AC6331)] | [removed: [66](#sCA8F779AFF5452B7996AF9C8FC847B2C)] [added: [64](#s3322274D54C55E999865AFB360AC6331)] |

| [Consolidated statements of income for the years ended December 31, [added: 2019,] 2018, [removed: 2017,] and [removed: 2016](#s95FA405EFDCD5853A380A4C055BC66F4)] [added: 2017](#s494D9F66212D5A6298206EF7002EFC52)] | [removed: [67](#s95FA405EFDCD5853A380A4C055BC66F4)] [added: [65](#s494D9F66212D5A6298206EF7002EFC52)] |

| [Consolidated statements of comprehensive income for the years ended December 31, [added: 2019,] 2018, [removed: 2017,] and [removed: 2016](#sF306B362DF935F40B096EBAACEA90B6D)] [added: 2017](#s1C34183285C754AC999D872D5CC74B90)] | [removed: [68](#sF306B362DF935F40B096EBAACEA90B6D)] [added: [66](#s1C34183285C754AC999D872D5CC74B90)] |

| [Consolidated statements of equity for the years ended December 31, [added: 2019,] 2018, [removed: 2017,] and [removed: 2016](#s5F720346366C5A1EBD9B5092C2AC165A)] [added: 2017](#s0BDDFE1FACF059B3A339DBEBED47193D)] | [removed: [69](#s5F720346366C5A1EBD9B5092C2AC165A)] [added: [67](#s0BDDFE1FACF059B3A339DBEBED47193D)] |

| [Consolidated statements of cash flows for the years ended December 31, [added: 2019,] 2018, [removed: 2017,] and [removed: 2016](#sF7FEFC0A78AE5CB38537E1A0D6A9582F)] [added: 2017](#s99800BA6BA955BECB4956D8BF9A05F1A)] | [removed: [70](#sF7FEFC0A78AE5CB38537E1A0D6A9582F)] [added: [68](#s99800BA6BA955BECB4956D8BF9A05F1A)] |

| [Notes to consolidated financial [removed: statements](#s278CA88CA05C5BBDAFC33A2B7CFCFF6C)] [added: statements](#s0A2CD11E1C1151D8B02613D0F280009E)] | [removed: [71](#s278CA88CA05C5BBDAFC33A2B7CFCFF6C)] [added: [69](#s0A2CD11E1C1151D8B02613D0F280009E)] |

Financial Statement Schedules and Other Financial [removed: Information.][added: Information.]

| [removed: [4.05](http://www.sec.gov/Archives/edgar/data/1583103/000119312516780536/d301629dex41.htm)] [added: [4.06](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) |

| [removed: [4.06](http://www.sec.gov/Archives/edgar/data/1035002/000114036119000669/s002623x2_ex4-2.htm)] [added: [4.07](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) |

| [removed: [4.07](http://www.sec.gov/Archives/edgar/data/1035002/000095012904004177/h16034exv4w1.txt)] [added: [4.08](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: [*+10.11](https://www.sec.gov/Archives/edgar/data/1035002/000103500219000008/vloexh1011-12312018.htm)] [added: [+10.11](http://www.sec.gov/Archives/edgar/data/1035002/000103500219000008/vloexh1011-12312018.htm)] | — | [Schedule of Tier II-A Change of Control [removed: Agreements](https://www.sec.gov/Archives/edgar/data/1035002/000103500219000008/vloexh1011-12312018.htm).] [added: Agreements–incorporated by reference to Exhibit 10.11 to Valero’s Annual Report on Form 10-K for the year ended December 31, 2018 (SEC File No. 1-13175).](http://www.sec.gov/Archives/edgar/data/1035002/000103500219000008/vloexh1011-12312018.htm)] |

| [removed: [+10.13](http://www.sec.gov/Archives/edgar/data/1035002/000103500218000010/vloexh1018-12312017.htm)] [added: [*+10.13](https://www.sec.gov/Archives/edgar/data/1035002/000103500220000007/vloexh1013-12312019.htm)] | — | [Form of Performance Share Award Agreement pursuant to the Valero Energy Corporation 2011 Omnibus Stock Incentive [removed: 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)] [added: Plan.](https://www.sec.gov/Archives/edgar/data/1035002/000103500220000007/vloexh1013-12312019.htm)] |

| [removed: [10.17](http://www.sec.gov/Archives/edgar/data/1035002/000119312515377191/d98152dex101.htm)] [added: [10.20](http://www.sec.gov/Archives/edgar/data/1035002/000119312519079633/d722386dex101.htm)] | — | [removed: [$3,000,000,000 5-Year Third] [added: [Fourth] Amended and Restated Revolving Credit Agreement, dated as of [removed: November 12, 2015,] [added: March 19, 2019,] 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 [removed: November 12, 2015,] [added: March 19, 2019,] and filed [removed: November 13, 2015] [added: March 19, 2019] (SEC File No. [removed: 1-13175).](http://www.sec.gov/Archives/edgar/data/1035002/000119312515377191/d98152dex101.htm)] [added: 1-13175).](http://www.sec.gov/Archives/edgar/data/1035002/000119312519079633/d722386dex101.htm)] |

| [removed: [*21.01](https://www.sec.gov/Archives/edgar/data/1035002/000103500219000008/vloexh2101-12312018.htm)] [added: [*21.01](https://www.sec.gov/Archives/edgar/data/1035002/000103500220000007/vloexh2101-12312019.htm)] | — | [Valero Energy Corporation [removed: subsidiaries.](https://www.sec.gov/Archives/edgar/data/1035002/000103500219000008/vloexh2101-12312018.htm)] [added: subsidiaries.](https://www.sec.gov/Archives/edgar/data/1035002/000103500220000007/vloexh2101-12312019.htm)] |

| [removed: [*23.01](https://www.sec.gov/Archives/edgar/data/1035002/000103500219000008/vloexh2301-12312018.htm)] [added: [*23.01](https://www.sec.gov/Archives/edgar/data/1035002/000103500220000007/vloexh2301-12312019.htm)] | — | [Consent of KPMG LLP dated February [removed: 28, 2019.](https://www.sec.gov/Archives/edgar/data/1035002/000103500219000008/vloexh2301-12312018.htm)] [added: 26, 2020.](https://www.sec.gov/Archives/edgar/data/1035002/000103500220000007/vloexh2301-12312019.htm)] |

| [removed: [*24.01](#s3201FDE2D3AA5AB89E738DE87EEABEC0)] [added: [*24.01](#s128F51ACC4935697AF44A686F2E0712F)] | — | [Power of Attorney dated February [removed: 28, 2019] [added: 26, 2020] (on the signature page of this Form [removed: 10-K).](#s3201FDE2D3AA5AB89E738DE87EEABEC0)] [added: 10-K).](#s128F51ACC4935697AF44A686F2E0712F)] |

| [removed: [*31.01](https://www.sec.gov/Archives/edgar/data/1035002/000103500219000008/vloexh3101-12312018.htm)] [added: [*31.01](https://www.sec.gov/Archives/edgar/data/1035002/000103500220000007/vloexh3101-12312019.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/1035002/000103500219000008/vloexh3101-12312018.htm)] [added: officer.](https://www.sec.gov/Archives/edgar/data/1035002/000103500220000007/vloexh3101-12312019.htm)] |

| [removed: [*31.02](https://www.sec.gov/Archives/edgar/data/1035002/000103500219000008/vloexh3102-12312018.htm)] [added: [*31.02](https://www.sec.gov/Archives/edgar/data/1035002/000103500220000007/vloexh3102-12312019.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/1035002/000103500219000008/vloexh3102-12312018.htm)] [added: officer.](https://www.sec.gov/Archives/edgar/data/1035002/000103500220000007/vloexh3102-12312019.htm)] |

| [removed: [32.01](https://www.sec.gov/Archives/edgar/data/1035002/000103500219000008/vloexh3201-12312018.htm)] [added: [32.01](https://www.sec.gov/Archives/edgar/data/1035002/000103500220000007/vloexh3201-12312019.htm)] | — | [Section 1350 Certifications (under Section 906 of the Sarbanes-Oxley Act of [removed: 2002).](https://www.sec.gov/Archives/edgar/data/1035002/000103500219000008/vloexh3201-12312018.htm)] [added: 2002).](https://www.sec.gov/Archives/edgar/data/1035002/000103500220000007/vloexh3201-12312019.htm)] |

[removed: SIGNATURE][added: SIGNATURE]

| | [removed: VALERO] [added: VALERO] ENERGY [removed: CORPORATION] [added: CORPORATION] (Registrant) | |

| | | [removed: (Joseph] [added: *(Joseph] W. [removed: Gorder)] [added: Gorder)*] |

| | | [removed: Chairman] [added: *Chairman] of the [removed: Board, President, and] [added: Board* *and] Chief Executive [removed: Officer] [added: Officer*] |

Date: February [removed: 28, 2019][added: 26, 2020]

[removed: POWER] [added: POWER] OF [removed: ATTORNEY][added: ATTORNEY]

[removed: KNOW] [added: KNOW] ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Joseph W.

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 [removed: hereof.][added: hereof.]

[removed: Pursuant] [added: Pursuant] to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates [removed: indicated.][added: indicated.]

| [removed: Signature] [added: Signature] | | [removed: Title] [added: Title] | | [removed: Date] [added: Date] |

| /s/ Joseph W. Gorder | | Chairman of the [removed: Board, President,] [added: Board] and Chief Executive Officer (Principal Executive Officer) | | February [removed: 28, 2019] [added: 26, 2020] |

| /s/ Donna M. Titzman | | Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) | | February [removed: 28, 2019] [added: 26, 2020] |

| /s/ H. Paulett Eberhart | | Director | | February [removed: 28, 2019] [added: 26, 2020] |

| /s/ Kimberly S. Greene | | Director | | February [removed: 28, 2019] [added: 26, 2020] |

| /s/ Deborah P. Majoras | | Director | | February [removed: 28, 2019] [added: 26, 2020] |

| /s/ Donald L. Nickles | | Director | | February [removed: 28, 2019] [added: 26, 2020] |

| /s/ Philip J. Pfeiffer | | Director | | February [removed: 28, 2019] [added: 26, 2020] |

| /s/ Robert A. Profusek | | Director | | February [removed: 28, 2019] [added: 26, 2020] |

(a) 1.

Financial Statements.

2.

3.

Exhibits.

| [4.05](http://www.sec.gov/Archives/edgar/data/1035002/000119312515084401/d889732dex41.htm) | — | [Indenture dated as of March 10, 2015 between Valero Energy Corporation and U.S. Bank National Association, as trustee-incorporated by reference to Exhibit 4.1 to Valero’s Registration Statement on Form S-3 (SEC File No. 333-202635) filed March 10, 2015.](http://www.sec.gov/Archives/edgar/data/1035002/000119312515084401/d889732dex41.htm) |

| [*4.09](https://www.sec.gov/Archives/edgar/data/1035002/000103500220000007/vloexh409-12312019.htm) | — | [Description of Valero Energy Corporation common stock, $0.01 par value.](https://www.sec.gov/Archives/edgar/data/1035002/000103500220000007/vloexh409-12312019.htm) |

| [*+10.17](https://www.sec.gov/Archives/edgar/data/1035002/000103500220000007/vloexh1017-12312019.htm) | — | [Long-Term Incentive Agreement dated as of December 18, 2019, between Valero Energy Corporation and R. Lane Riggs.](https://www.sec.gov/Archives/edgar/data/1035002/000103500220000007/vloexh1017-12312019.htm) |

| [+10.18](http://www.sec.gov/Archives/edgar/data/1035002/000119312519132506/d714915dex1001.htm) | — | [Form of Stock Unit Award Agreement for Non-Employee Directors (standard)-incorporated by reference to Exhibit 10.01 to Valero’s Current Report on Form 8-K dated April 30, 2019, and filed May 1, 2019 (SEC File No. 1-13175).](http://www.sec.gov/Archives/edgar/data/1035002/000119312519132506/d714915dex1001.htm) |

| [+10.19](http://www.sec.gov/Archives/edgar/data/1035002/000119312519132506/d714915dex1002.htm) | — | [Form of Stock Unit Award Agreement for Non-Employee Directors (with one-year hold provision)-incorporated by reference to Exhibit 10.02 to Valero’s Current Report on Form 8-K dated April 30, 2019, and filed May 1, 2019 (SEC File No. 1-13175).](http://www.sec.gov/Archives/edgar/data/1035002/000119312519132506/d714915dex1002.htm) |

| | | |

| | | |

| | | |

| | | |

| | | |

| *101.INS | — | Inline XBRL Instance Document–the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |

| | | |

| *101.SCH | — | Inline XBRL Taxonomy Extension Schema Document. |

| | | |

| *101.CAL | — | Inline XBRL Taxonomy Extension Calculation Linkbase Document. |

| | | |

| *101.DEF | — | Inline XBRL Taxonomy Extension Definition Linkbase Document. |

| | | |

| *101.LAB | — | Inline XBRL Taxonomy Extension Label Linkbase Document. |

| | | |

| *101.PRE | — | Inline XBRL Taxonomy Extension Presentation Linkbase Document. |

| | | |

| *104 | — | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |

| | | |

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

| | | |

(a) 1.

Financial Statements.

2.

3.

Exhibits.

| *101 | — | Interactive Data Files |