Cover and table of contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

☑			ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2020

OR

☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			For the transition period from _______________ to _______________

Commission file number 001-13175

VALERO ENERGY CORPORATION

(Exact name of registrant as specified in its charter)

Delaware			74-1828067
(State or other jurisdiction of			(I.R.S. Employer
incorporation or organization)			Identification No.)

One Valero Way

San Antonio, Texas 78249

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (210) 345-2000

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

Title of each class						Trading Symbol(s)						Name of each exchange on which registered
Common stock						VLO						New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ☑ No ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes ☐ No ☑

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

			Large accelerated filer									☑						Accelerated filer												☐						Non-accelerated filer												☐
						Smaller reporting company															☐						Emerging growth company															☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☑

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

The aggregate market value of the voting and non-voting common stock held by non-affiliates was approximately $24.0 billion based on the last sales price quoted as of June 30, 2020 on the New York Stock Exchange, the last business day of the registrant’s most recently completed second fiscal quarter.

As of February 19, 2021, 408,562,891 shares of the registrant’s common stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

We intend to file with the Securities and Exchange Commission a definitive Proxy Statement for our Annual Meeting of Stockholders scheduled for April 29, 2021, at which directors will be elected. Portions of the 2021 Proxy Statement are incorporated by reference in Part III of this Form 10-K and are deemed to be a part of this report.

CROSS-REFERENCE SHEET

The following table indicates the headings in the 2021 Proxy Statement where certain information required in Part III of this Form 10-K may be found.

Form 10-K Item No. and Caption									Heading in 2021 Proxy Statement
10.			Directors, Executive Officers and Corporate Governance						Information Regarding the Board of Directors, Independent Directors, Audit Committee, Proposal No. 1 Election of Directors, Information Concerning Nominees and Other Directors, Identification of Executive Officers, and Governance Documents and Codes of Ethics
11.			Executive Compensation						Compensation Committee, Compensation Discussion and Analysis, Executive Compensation, Director Compensation, Pay Ratio Disclosure, and Certain Relationships and Related Transactions
12.			Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters						Beneficial Ownership of Valero Securities and Equity Compensation Plan Information
13.			Certain Relationships and Related Transactions, and Director Independence						Certain Relationships and Related Transactions and Independent Directors
14.			Principal Accountant Fees and Services						KPMG LLP Fees and Audit Committee Pre-Approval Policy

Copies of all documents incorporated by reference, other than exhibits to such documents, will be provided without charge to each person who receives a copy of this Form 10-K upon written request to Valero Energy Corporation, Attn: Secretary, P.O. Box 696000, San Antonio, Texas 78269-6000.

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CONTENTS

						PAGE
PART I						1
Items 1. & 2.			Business and Properties			1
			Overview			1
			Available Information			1
			Environmental Stewardship			2
			Valero’s Operations			3
			Government Regulations			10
			Human Capital			11
			Properties			13
Item 1A.			Risk Factors			13
Item 1B.			Unresolved Staff Comments			25
Item 3.			Legal Proceedings			26
Item 4.			Mine Safety Disclosures			26
PART II						27
Item 5.			Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities			27
Item 6.			Selected Financial Data			29
Item 7.			Management’s Discussion and Analysis of Financial Condition and Results of Operations			30
Item 7A.			Quantitative and Qualitative Disclosures About Market Risk			58
Item 8.			Financial Statements and Supplementary Data			61
Item 9.			Changes in and Disagreements with Accountants on Accounting and Financial Disclosure			139
Item 9A.			Controls and Procedures			139
Item 9B.			Other Information			139
PART III						139
Item 10.			Directors, Executive Officers and Corporate Governance			139
Item 11.			Executive Compensation			139
Item 12.			Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters			139
Item 13.			Certain Relationships and Related Transactions, and Director Independence			139
Item 14.			Principal Accountant Fees and Services			139
PART IV						140
Item 15.			Exhibits and Financial Statement Schedules			140
Signature						144

ii

The terms “Valero,” “we,” “our,” and “us,” as used in this report, may refer to Valero Energy Corporation, to one or more of its consolidated subsidiaries, or to all of them taken as a whole. In this Form 10-K, we make certain forward-looking statements, including statements regarding our plans, strategies, objectives, expectations, intentions, and resources under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. You should read our forward-looking statements together with our disclosures beginning on page 30 of this report under the heading: “CAUTIONARY STATEMENT FOR THE PURPOSE OF SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995.”

PART I

ITEMS 1. and 2. BUSINESS AND PROPERTIES

OVERVIEW

We are a Fortune 500 company based in San Antonio, Texas. Our corporate offices are at One Valero Way, San Antonio, Texas, 78249, and our telephone number is (210) 345-2000. We were incorporated in Delaware in 1981 under the name Valero Refining and Marketing Company. We changed our name to Valero Energy Corporation in 1997. Our common stock trades on the New York Stock Exchange (NYSE) under the trading symbol “VLO.”

We own 15 petroleum refineries that produce conventional gasolines, premium gasolines, reformulated gasoline, gasoline meeting the specifications of the California Air Resources Board (CARB), diesel, low-sulfur diesel, ultra-low-sulfur diesel, CARB diesel, other distillates, jet fuel, asphalt, petrochemicals, lubricants, and other refined petroleum products. We are also a joint venture partner in Diamond Green Diesel Holdings LLC (DGD)1, which owns a plant that produces renewable diesel. We also own 13 ethanol plants that produce ethanol and various co-products. Renewable diesel and ethanol are both low-carbon transportation fuels. We sell our products primarily in the United States (U.S.), Canada, the United Kingdom (U.K.), Ireland, and Latin America. See “VALERO’S OPERATIONS” for additional information about our operations and properties.

AVAILABLE INFORMATION

Our website address is www.valero.com. Information (including any presentation or report) on our website is not part of, and is not incorporated into, this report or any other report we may file with (or furnish to) the U.S. Securities and Exchange Commission (SEC), whether made before or after the date of this Annual Report on Form 10-K and irrespective of any general incorporation language therein. Furthermore, references to our website URLs are intended to be inactive textual references only. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and other reports, as well as any amendments to those reports, filed with (or furnished to) the U.S. SEC are available on our website (under Investors > Financials > SEC Filings) free of charge, soon after we file or furnish such material. Additionally, on our website (under Investors > ESG), we post our corporate governance guidelines and other governance policies, codes of ethics, and the charters of the committees of our board of directors. In this same location, we also publish our Environmental, Social and Governance (ESG) company overview, our Sustainability Accounting Standards Board (SASB) Report, our Stewardship and Responsibility Report, and our Review of Climate-Related Risks and Opportunities.

1 DGD is a joint venture with Darling Ingredients Inc. (Darling) and we consolidate DGD’s financial statements. See Note 13 of Notes to Consolidated Financial Statements, which is incorporated herein by reference, regarding our accounting for DGD.

These documents are available in print to any stockholder that makes a written request to Valero Energy Corporation, Attn: Secretary, P.O. Box 696000, San Antonio, Texas 78269-6000.

ENVIRONMENTAL STEWARDSHIP

Our Goals

We strive to manage our business to responsibly meet the world’s demand for reliable and affordable energy and have made multibillion-dollar investments to develop and grow our low-carbon renewable diesel and ethanol businesses. These renewable fuels businesses have made us one of the world’s largest renewable fuels producers. Even so, we continually seek to find ways to reduce the environmental impact of all of our operations and improve our ESG practices.

Renewable Fuels

We have invested over $3 billion2 to date in our renewable fuels businesses, and we expect additional growth opportunities in this area. For example, we expect to invest almost $2 billion3 over the next three years to complete the expansion of DGD’s existing renewable diesel plant located next to our St. Charles Refinery in Norco, Louisiana (the DGD Plant) and to build DGD’s second plant next to our Port Arthur Refinery in Port Arthur, Texas. See “VALERO’S OPERATIONS—RENEWABLE DIESEL” for additional information about the expansion of our renewable diesel business.

We believe that the growth of our renewable fuels businesses not only provides a good business opportunity, but it is also an opportunity for us to produce fuels that reduce carbon emissions. Renewable diesel and ethanol are low-carbon transportation fuels that have the potential to result in meaningful reductions in life cycle carbon emissions compared to traditional diesel and non-blended gasoline. Blending and credits with respect to renewable fuels may also help offset greenhouse gas (GHG) emissions. Additionally, many state, provincial, and national governments across the world have implemented, or are considering implementing, low-carbon fuel policies and stricter fuel efficiency standards to help reach GHG emissions reduction targets. This has helped, and should continue to help, drive the demand for both renewable diesel and ethanol, and we believe that our ability to supply these renewable fuels could play an important role in helping achieve such GHG emissions reduction targets.

Reports

We publish and make available on our website various climate-related reports and presentations. These include:

• our presentation providing an ESG overview of our company,

• our SASB Report, which aligns Valero’s performance data with the recommendations of the SASB framework in the Oil and Gas – Refining and Marketing industry standard,

• our Stewardship and Responsibility Report, and

2 Our investment to date in our renewable fuels businesses consists of $1.4 billion in capital investments to build our renewable diesel business and $1.7 billion to build our ethanol business. Capital investments in renewable diesel represent 100 percent of the capital investments made by DGD. DGD is our consolidated joint venture, which is described in “OVERVIEW” above. See also “MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS—LIQUIDITY AND CAPITAL RESOURCES—Capital Investments,” which is incorporated herein by reference for our definition of capital investments.

3 Represents 100 percent of DGD’s expected capital investments from January 1, 2021 through December 31, 2023 related to the expansion of its existing renewable diesel plant and the construction of its second plant. See footnote 2 above.

• our Review of Climate-Related Risks and Opportunities, which is aligned with the main principles outlined in the recommendations of the Financial Stability Board’s Task Force on Climate-related Financial Disclosure.

See “—AVAILABLE INFORMATION” above.

VALERO’S OPERATIONS

Our operations are managed through the following reportable segments:4

• our refining segment, which includes the operations of our petroleum refineries, the associated activities to market our refined petroleum products, and the logistics assets that support those operations;

• our renewable diesel segment, which includes the operations of DGD and the associated activities to market renewable diesel; and

• our ethanol segment, which includes the operations of our ethanol plants, the associated activities to market our ethanol and co-products, and the logistics assets that support those operations.

Financial information about these segments is presented in Note 18 of Notes to Consolidated Financial Statements, which is incorporated herein by reference.

4 We revised our reportable segments effective January 1, 2019 to align with certain changes in how our chief operating decision maker manages and allocates resources to our business. Accordingly, we created the renewable diesel segment because of the growth of renewable fuels in the market and the growth in our investments in renewable fuels production. The renewable diesel operations were transferred from the refining segment on January 1, 2019. At the same time, we combined our Valero Energy Partners LP (VLP) segment into our refining segment. This change was made because of the Merger Transaction with VLP, as defined and discussed in Note 3 of Notes to Consolidated Financial Statements, which is incorporated herein by reference, 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.

REFINING

Refineries

Overview

Our 15 petroleum refineries are located in the U.S., Canada, and the U.K., and they have a combined feedstock throughput capacity of approximately 3.2 million barrels per day (BPD). The following table presents the locations of these refineries and their feedstock throughput capacities as of December 31, 2020.

Refinery						Location						Throughput Capacity (a) (BPD)
U.S.
Benicia						California						170,000
Wilmington						California						135,000
Meraux						Louisiana						135,000
St. Charles						Louisiana						340,000
Ardmore						Oklahoma						90,000
Memphis						Tennessee						195,000
Corpus Christi (b)						Texas						370,000
Houston						Texas						255,000
McKee						Texas						200,000
Port Arthur						Texas						395,000
Texas City						Texas						260,000
Three Rivers						Texas						100,000
Canada
Quebec City						Quebec						235,000
U.K.
Pembroke						Wales						270,000
Total												3,150,000

---

(a)“Throughput capacity” represents estimated capacity for processing crude oil, intermediates, and other feedstocks. Total estimated crude oil capacity is approximately 2.6 million BPD.

(b)Represents the combined capacities of two refineries – the Corpus Christi East and Corpus Christi West Refineries.

California

• Benicia Refinery. Our Benicia Refinery is located northeast of San Francisco on the Carquinez Straits of San Francisco Bay. It processes sour crude oils into gasoline, diesel, jet fuel, and asphalt. Gasoline production is primarily California Reformulated Blendstock Gasoline for Oxygenate Blending (CARBOB), which meets CARB specifications when blended with ethanol. The refinery receives crude oil feedstocks via a marine dock and crude oil pipelines connected to a southern California crude oil delivery system. Most of the refinery’s products are distributed via pipeline and truck rack into northern California markets.

• Wilmington Refinery. Our Wilmington Refinery is located near Los Angeles. The refinery processes a blend of heavy and high-sulfur crude oils. The refinery produces CARBOB gasoline, diesel, CARB diesel, jet fuel, and asphalt. The refinery is connected by pipeline to marine terminals and associated dock facilities that move and store crude oil and other feedstocks.

Refined petroleum products are distributed via pipeline systems to various third-party terminals in Southern California, Nevada, and Arizona.

Louisiana

• Meraux Refinery. Our Meraux Refinery is located approximately 15 miles southeast of New Orleans along the Mississippi River. The refinery processes sour and sweet crude oils into gasoline, diesel, jet fuel, and high sulfur fuel oil. The refinery receives crude oil at its dock and has access to the Louisiana Offshore Oil Port. Finished products are shipped from the refinery’s dock and through the Colonial pipeline. The refinery is located about 40 miles from our St. Charles Refinery, allowing for integration of feedstocks and refined petroleum product blending.

• St. Charles Refinery. Our St. Charles Refinery is located approximately 25 miles west of New Orleans along the Mississippi River. The refinery successfully commissioned a new alkylation unit in the fourth quarter of 2020. The refinery processes sour crude oils and other feedstocks into gasoline and diesel. The refinery receives crude oil over docks and has access to the Louisiana Offshore Oil Port. Finished products are shipped over these docks and through our Parkway pipeline and the Bengal pipeline, which ultimately provide access to the Plantation and Colonial pipeline networks.

Oklahoma

• Ardmore Refinery. Our Ardmore Refinery is located approximately 100 miles south of Oklahoma City. It processes sweet and sour crude oils into gasoline and diesel. The refinery predominantly receives Permian Basin and Cushing-sourced crude oil via third-party pipelines. Refined petroleum products are transported via rail, trucks, and the Magellan pipeline system.

Tennessee

• Memphis Refinery. Our Memphis Refinery is located along the Mississippi River. It processes primarily sweet crude oils. Most of its production is gasoline, diesel, and jet fuels. Crude oil supply is primarily Cushing-sourced via the Diamond pipeline. Crude oil can also be received, along with other feedstocks, via the Dakota Access pipeline and barge. Most of the refinery’s products are distributed via truck rack and barges.

Texas

• Corpus Christi East and West Refineries. Our Corpus Christi East and West Refineries are located on the Texas Gulf Coast along the Corpus Christi Ship Channel. The East Refinery processes sour crude oil, and the West Refinery processes sweet crude oil, sour crude oil, and residual fuel oil. The feedstocks are delivered by tanker and barge via deepwater docking facilities along the Corpus Christi Ship Channel, and West Texas or South Texas crude oil is delivered via pipelines. The refineries’ physical locations allow for the transfer of various feedstocks and blending components between them. The refineries produce gasoline, aromatics, jet fuel, diesel, and asphalt. Truck racks service local markets for gasoline, diesel, jet fuels, liquefied petroleum gases, and asphalt. These and other finished products are also distributed by ship and barge across docks and third-party pipelines.

• Houston Refinery. Our Houston Refinery is located on the Houston Ship Channel. It processes sweet crude and intermediate oils into gasoline, jet fuel, and diesel. The refinery receives its feedstocks primarily by various interconnecting pipelines and also has waterborne-receiving capability at deepwater docking facilities along the Houston Ship Channel. The majority of its

finished products are delivered to local, mid-continent U.S., and northeastern U.S. markets through various pipelines, including the Colonial and Explorer pipelines.

• McKee Refinery. Our McKee Refinery is located in the Texas Panhandle. It processes primarily sweet crude oils into gasoline, diesel, jet fuels, and asphalt. The refinery has access to local and Permian Basin crude oil sources via third-party pipelines. Refined petroleum products are transported primarily via third-party pipelines and rail to markets in Texas, New Mexico, Arizona, Colorado, Oklahoma, and Mexico.

• Port Arthur Refinery. Our Port Arthur Refinery is located on the Texas Gulf Coast approximately 90 miles east of Houston. The refinery processes heavy sour crude oils and other feedstocks into gasoline, diesel, and jet fuel. The refinery receives crude oil by rail, marine docks, and pipelines. Finished products are distributed into the Colonial, Explorer, and other pipelines, and across the refinery docks into ships and barges.

• Texas City Refinery. Our Texas City Refinery is located southeast of Houston on the Houston Ship Channel. The refinery processes crude oils into gasoline, diesel, and jet fuel. The refinery receives its feedstocks by pipeline and by ship or barge via deepwater docking facilities along the Houston Ship Channel. The refinery uses ships and barges, as well as the Colonial, Explorer, and other pipelines for distribution of its products.

• Three Rivers Refinery. Our Three Rivers Refinery is located in South Texas between Corpus Christi and San Antonio. It primarily processes sweet crude oils into gasoline, distillates, and aromatics. The refinery receives crude oil from West Texas and South Texas by pipelines and trucks. The refinery distributes its refined petroleum products primarily through third-party pipelines.

Canada

• Quebec City Refinery. Our Quebec City Refinery is located in Lévis (near Quebec City). It processes sweet crude oils into gasoline, diesel, jet fuel, heating oil, and low-sulfur fuel oil. The refinery receives crude oil by ship at its deepwater dock on the St. Lawrence River and by pipeline and ship (via the St. Lawrence River from a crude terminal in Montreal) from western Canada. The refinery transports its products through our pipeline from Quebec City to our terminal in Montreal and to various other terminals throughout eastern Canada by rail, ships, trucks, and third-party pipelines.

U.K.

• Pembroke Refinery. Our Pembroke Refinery is located in the County of Pembrokeshire in South West Wales. The refinery processes primarily sweet crude oils into gasoline, diesel, jet fuel, heating oil, and low-sulfur fuel oil. The refinery receives all of its feedstocks and delivers some of its products by ship and barge via deepwater docking facilities along the Milford Haven Waterway, with its remaining products being delivered through our Mainline pipeline system and by trucks. The refinery’s new cogeneration project is expected to be completed in the third quarter of 2021.

Feedstock Supply

Our crude oil feedstocks are purchased through a combination of term and spot contracts. Our term supply contracts are at market-related prices and feedstocks are purchased directly or indirectly from various national oil companies as well as international and U.S. oil companies. The contracts generally

permit the parties to amend the contracts (or terminate them), effective as of the next scheduled renewal date, by giving the other party proper notice within a prescribed period of time (e.g., 60 days, 6 months) before expiration of the current term. The majority of the crude oil purchased under our term contracts is purchased at the producer’s official stated price (i.e., the “market” price established by the seller for all purchasers) and not at a negotiated price specific to us.

Marketing

Overview

We sell refined petroleum products in both the wholesale rack and bulk markets. These sales include refined petroleum products that are manufactured in our refining operations, as well as refined petroleum products purchased or received on exchange from third parties. Most of our refineries have access to marine transportation facilities, and they interconnect with common-carrier pipeline systems, allowing us to sell products in the U.S., Canada, the U.K., and other countries.

Wholesale Rack Sales

We sell our gasoline and distillate products, as well as other products, such as asphalt, lube oils, and natural gas liquids (NGLs), on a wholesale basis through an extensive rack marketing network. The principal purchasers of our refined petroleum products from terminal truck racks are wholesalers, distributors, retailers, and truck-delivered end users throughout the U.S., Canada, the U.K., Ireland, and Latin America.

The majority of our rack volume is sold through unbranded channels. The remainder is sold to distributors and dealers that are members of the Valero-brand family that operate branded sites in the U.S., Canada, the U.K., Ireland, and Latin America. These sites are independently owned and are supplied by us under multi-year contracts. Approximately 7,000 outlets carry our brand names. For branded sites, products are sold under the Valero®, Beacon®, Diamond Shamrock®, and Shamrock® brands in the U.S., the Ultramar® brand in Canada, the Texaco® brand in the U.K. and Ireland, and the Valero® brand in Latin America.

Bulk Sales

We also sell our gasoline and distillate products, as well as other products, such as asphalt, petrochemicals, and NGLs, through bulk sales channels in the U.S. and international markets. Our bulk sales are made to various oil companies, traders, and bulk end users, such as railroads, airlines, and utilities. Our bulk sales are transported primarily by pipelines, barges, and tankers to major tank farms and trading hubs.

Logistics

We own logistics assets (crude oil pipelines, refined petroleum product pipelines, terminals, tanks, marine docks, truck rack bays, and other assets) that support our refining operations.

RENEWABLE DIESEL

Our Relationship with DGD

DGD is a joint venture that we consolidate. We entered into the DGD joint venture in 2011. See Note 13 of Notes to Consolidated Financial Statements, which is incorporated herein by reference, regarding our accounting for DGD. We operate the DGD Plant and perform certain management functions for DGD as an independent contractor under an agreement with DGD.

Renewable Diesel Plant

The DGD Plant is located next to our St. Charles Refinery in Norco, Louisiana, and its production capacity is 290 million gallons of renewable diesel per year. Renewable diesel is a low-carbon transportation fuel that is interchangeable with diesel produced from petroleum and is produced from rendered and recycled materials, including animal fats, used cooking oils, and other vegetable oils.

DGD began an expansion of the DGD Plant in 2019, which is expected to increase its renewable diesel production by 400 million gallons per year; construction is expected to be completed in the fourth quarter of 2021. Additionally, in January 2021, we and our joint venture partner approved the construction of a new 470 million gallons per year renewable diesel plant to be located next to our Port Arthur Refinery in Port Arthur, Texas. The new plant is expected to increase DGD’s total renewable diesel production capacity to almost 1.2 billion gallons per year.

The DGD Plant receives rendered and recycled materials primarily by rail and trucks owned by third parties. DGD is party to a raw material supply agreement with Darling under which Darling is obligated to offer to DGD a portion of its feedstock requirements at competitive pricing, but DGD is not obligated to purchase all or any part of its feedstock from Darling. Therefore, DGD pursues the lowest cost feedstock supply available. See Item 1A, “RISK FACTORS”—Risks Related to Our Business, Industry, and Operations—Our investments in joint ventures and other entities decrease our ability to manage risk, and—Disruption of our ability to obtain crude oil, rendered and recycled materials, corn, and other feedstocks could adversely affect our operations, which are incorporated herein by reference.

Marketing

DGD’s renewable diesel is sold under the Diamond Green Diesel® brand primarily to refiners to be blended with petroleum-based diesel. Renewable diesel is also sold to end users for use in their operations. DGD sells renewable diesel domestically and exports renewable diesel into global markets, primarily Canada and Europe. Renewable diesel is distributed primarily by rail and ships owned by third parties. See Item 1A, “RISK FACTORS”—Risks Related to Our Business, Industry, and Operations—Developments with respect to low-carbon fuel policies and the market for alternative fuels may affect demand for our renewable fuels and could adversely affect our financial performance, which is incorporated herein by reference.

ETHANOL

Ethanol Plants

Our ethanol business began in 2009 with the purchase of our first ethanol plants. We have since grown the business by purchasing additional ethanol plants. Our 13 ethanol plants are located in the Mid-Continent region of the U.S., and they have a combined ethanol production capacity of 1.69 billion gallons per year. Our ethanol plants are dry mill facilities that process corn to produce ethanol and various co-products, including livestock feed (dry distillers grains, or DDGs, and syrup), and inedible corn oil.

The following table presents the locations of our ethanol plants, their annual production capacities for ethanol (in millions of gallons) and DDGs (in tons), and their annual corn processing capacities (in millions of bushels).

State						City						Ethanol Production Capacity						DDG Production Capacity						Corn Processing Capacity
Indiana						Bluffton						130						340,000						45
						Linden						135						355,000						47
						Mount Vernon						100						263,000						35
Iowa						Albert City						135						355,000						47
						Charles City						140						368,000						49
						Fort Dodge						140						368,000						49
						Hartley						140						368,000						49
						Lakota						110						289,000						38
Minnesota						Welcome						140						368,000						49
Nebraska						Albion						135						355,000						47
Ohio						Bloomingburg						135						355,000						47
South Dakota						Aurora						140						368,000						49
Wisconsin						Jefferson						110						352,000						41
Total												1,690						4,504,000						592

The foregoing table excludes data relating to our Riga, Michigan ethanol plant, which ceased operations in 2020.

We source our corn supply from local farmers and commercial elevators. We publish on our website a corn bid for local farmers and cooperative dealers to facilitate corn supply transactions. Our plants receive corn primarily by rail and truck.

Marketing

We sell our ethanol primarily to refiners and gasoline blenders under term and spot contracts in bulk markets such as New York, Chicago, the U.S. Gulf Coast, Florida, and the U.S. West Coast. We also export our ethanol into the global markets. We distribute our ethanol primarily by rail (including some railcars owned by us) and third-party trucks, barges, and vessels. We sell DDGs primarily to animal feed customers in the U.S., Mexico, and Asia, which are transported primarily by third-party rail, trucks, and vessels.

SEASONALITY

Demand for gasoline, diesel, and asphalt is higher during the spring and summer months than during the winter months in most of our markets, primarily due to seasonal increases in highway traffic and construction. The demand for renewable diesel has not significantly fluctuated by season. Ethanol is primarily blended into gasoline, and as a result, ethanol demand typically moves in line with the demand for gasoline.

GOVERNMENT REGULATIONS

We incorporate by reference into this Item the disclosures on government regulations, including environmental regulations, contained in the following sections of this report:

• Item 1A, “RISK FACTORS”—Risks Related to Our Business, Industry, and Operations—Legal, technological, and political developments and evolving market sentiment regarding fuel efficiency and low-carbon fuel standards may decrease the demand for our products and could adversely affect our performance;

*•*Item 1A, “RISK FACTORS”—Legal, Governmental, and Regulatory Risks; and

• Item 3, “LEGAL PROCEEDINGS”—ENVIRONMENTAL ENFORCEMENT MATTERS.

Capital Expenditures Attributable to Compliance with Government Regulations. In 2020, our capital expenditures attributable to compliance with environmental regulations were $27 million, and they are currently estimated to be $13 million for 2021 and $24 million for 2022. The estimates for 2021 and 2022 do not include amounts related to capital investments at our refineries and plants that management has deemed to be strategic investments. These amounts could materially change as a result of governmental and regulatory actions. We have incurred significant capital expenditures in prior years to comply with government regulations; however, we do not believe that compliance with government regulations, including environmental regulations, had a material effect on our capital expenditures in 2020, and we currently do not expect that compliance with these regulations will have material effects on our capital expenditures in 2021.

Other. Because our business is heavily regulated, our costs for compliance with government regulations are significant, especially costs associated with environmental compliance programs, which are further disclosed in Notes 20 and 21 of Notes to Consolidated Financial Statements, which are incorporated herein by reference.

HUMAN CAPITAL

We believe that our employees provide a competitive advantage for our success. We seek to foster a culture that supports diversity and inclusion, and we strive to provide a safe, healthy, and rewarding work environment with opportunities for professional growth and long-term financial stability.

Headcount

On January 31, 2021, we had 9,964 employees. These employees were located in the following countries:

Country						Number of Employees
U.S.						8,326
Canada						642
U.K. and Ireland						855
Mexico and Peru						141
Total						9,964

Of our total employees as of January 31, 2021, 1,768 were covered by collective bargaining or similar agreements, and 9,803 were in permanent full-time positions. See also Item 1A, “RISK FACTORS”—General Risk Factors*—Our business may be negatively affected by work stoppages, slowdowns, or strikes by our employees, as well as new labor legislation issued by regulators*.

Safety

We believe that safety and reliability are extremely important, not only to the cultural values we aspire to as a company, but also for operational success, as a decrease in the number of employee safety events and process safety events should generally reduce unplanned shutdowns and increase the operational reliability of our plants. This, in turn, should also translate into fewer environmental incidents, a safer workplace, lower environmental impacts, and better community relations. We strive to improve safety and reliability by offering year-round safety training programs for our employees and contractors and by seeking to promote the same expectations and culture of safety among all of our workers. We also seek to enhance our safety compliance by conducting audits, quality assurance visits, and comprehensive risk assessments.

In assessing safety performance, we measure our annual total recordable incident rate (TRIR), which includes data with respect to our employees and contractors and is defined as the number of recordable injuries per 200,000 working hours. We also annually measure our Tier 1 Process Safety Event Rate, which is a metric defined by the American Petroleum Institute that looks at process safety events per 200,000 total employee and contractor working hours. We use these measures and believe they are helpful in assessing our safety performance because they evaluate performance relative to the numbers of hours being worked. These metrics are also used by others in our industry, which allows for a more objective comparison of our performance. In 2020, our employee and contractor TRIR was 0.34 and 0.15, respectively, and our Tier 1 Process Safety Event Rate was 0.06. As a result, in 2020 we had one of our best years ever in terms of safety performance.

Compensation and Benefits

We believe that it is important to provide our employees with competitive compensation and benefits. The benefits we offer to employees, depending on work location and eligibility status, include, among others, healthcare plans that are generally available to all employees, extended sick leave, new-parent leave, access to financial planning, programs to support dual working parents at different stages of their careers,

caregiver support networks (including an on-site child care center at our headquarters) and support for children and parents with disabilities, a company 401(k) matching program, a company-sponsored pension plan, on-site employee wellness centers (also available to eligible dependents at our headquarters), tuition reimbursement programs, fitness center access or a stipend, and employee recognition programs.

We believe that it is important to reward employee performance and have an annual bonus program that rewards achievements of various operational, financial, and strategic objectives. While such objectives include more typical financial performance metrics such as earnings per share and cash operating expenses, we believe ESG performance is also important and our annual bonus program rewards achievements in areas such as sustainability, diversity and inclusion, compliance, and corporate citizenship.

Training and Development

We offer a comprehensive training and development program for our employees in subjects ranging from engineering and technical excellence, safety, maintenance and machinery/equipment repair to ethics, leadership, and employee performance. Our employee development initiatives include customized professional and technical curriculums, efforts to engage our leadership in the employee’s development process, and providing employee performance discussions.

Wellness

We strive to promote the health and well-being of our employees and their families. Our Total Wellness Program serves as the umbrella program for all aspects of employee wellness and is the program through which many of the benefits referenced above are provided. The heart of our Total Wellness Program is the annual wellness assessment, which is intended to provide a detailed picture of an employee’s current health that may educate and inform health decisions by highlighting risk factors and providing information that can help save lives. A few of the many resources provided with this annual assessment may include a body composition analysis, an online nutritional analysis, lab work, and a sleep analysis. Under our Total Wellness Program, educational sessions are also scheduled throughout the year on a variety of topics on health and finances.

We are also proud to offer no-cost assistance and a wide range of support through our confidential employee assistance program, helping employees and their families manage relationship challenges, counseling needs, substance abuse and recovery, as well as self-care programs for various behavioral health challenges. In addition, during times of crisis (such as the COVID-19 pandemic), certain of our benefit partners offer toll-free, 24-hour access to emotional support help lines.

Diversity, Equality, and Inclusion

We believe that having a diverse workforce and inclusive teams provides strengths and advantages for our success, and our board of directors and management team strive to promote and improve diversity and inclusion. As of January 31, 2021, approximately 29 percent of our professional employees were female, 11 percent of our hourly employees were female, and 19 percent of total employees were female. Approximately 35 percent of our U.S. employees have self-identified as Hispanic or Latino, Black or African American, Asian, American Indian or Alaskan Native, Native Hawaiian or Other Pacific Islander, or of two or more races. We strive to recruit and retain a diverse workforce and foster a culture of inclusion through various efforts, including targeted recruiting strategies aimed at improving our outreach to underrepresented groups and educational and training programs on topics such as objective hiring and the advantages of a diverse workforce.

PROPERTIES

Our principal properties are described above under the caption “VALERO’S OPERATIONS,” and that information is incorporated herein by reference. We believe that our properties are generally adequate for our operations and that our refineries and plants are maintained in a good state of repair. As of December 31, 2020, we were the lessee under a number of cancelable and noncancelable leases for certain properties. Our leases are discussed in Note 6 of Notes to Consolidated Financial Statements, which is incorporated herein by reference. Financial information about our properties is presented in Note 7 of Notes to Consolidated Financial Statements, which is incorporated herein by reference.

Our patents relating to our refining operations are not material to us as a whole. The trademarks and tradenames under which we conduct our branded wholesale business — Valero®, Diamond Shamrock®, Shamrock®, Ultramar®, Beacon®, and Texaco®— and other trademarks employed in the marketing of refined petroleum products are integral to our wholesale rack marketing operations. The trademark and tradename under which DGD sells its renewable diesel — Diamond Green Diesel® — is integral to the sales of our renewable diesel segment.